EXHIBIT 10.7
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EXECUTION COPY
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UNDERWRITING SUPPORT SERVICES AGREEMENT
This Agreement (this "Agreement") is made and entered into as of October 1,
1998 by and among LaSalle Re Limited, an insurance company incorporated and
organized under the laws of Bermuda ("LASALLE"), CNA Re Services Company, a
company incorporated and organized under the laws of the State of Illinois
("CRSC"), and CNA (Bermuda) Services Limited, a company incorporated and
organized under the laws of Bermuda ("CNA BERMUDA").
WHEREAS, pursuant to that certain Amended and Restated Underwriting Services
Agreement entered into on September 21, 1995 by and between LASALLE and CNA
BERMUDA, as amended by the First Amendment thereto dated as of July 1, 1996
(such Amended and Restated Underwriting Services Agreement as thus amended being
hereinafter referred to as the "Underwriting Services Agreement"), CNA BERMUDA
has provided underwriting and marketing services and has underwritten all
classes of insurance and reinsurance as agent for LASALLE;
WHEREAS, the parties hereto have agreed that the underwriting and marketing
services heretofore performed by CNA BERMUDA on behalf of LASALLE shall
henceforth be performed by LASALLE directly, with CRSC, through itsself and its
affiliates, providing certain underwriting support services as requested by
LASALLE;
WHEREAS, the parties hereto also desire to reaffirm the strategic alliance and
community of interest between LASALLE and the CNA Insurance Group ("CNA"), which
has been an important component of LASALLE's success since its formation, and in
light of CNA's desire to continue to provide support and bring business
opportunities to LASALLE in the form of quota share reinsurance business, joint
ventures and otherwise; and
WHEREAS, the parties hereto accordingly desire to terminate the Underwriting
Services Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
I. TERMINATION OF UNDERWRITING SERVICES AGREEMENT.
The parties agree that the Underwriting Services Agreement shall
terminate as of the close of business on September 30, 1998, subject to
the following provisions:
A. LASALLE's payment obligations under Section III of the
Underwriting Services Agreement shall continue, subject to the
following modifications:
(1) For purposes of this Section I(A), the term "Underwriting
Year" shall have the meaning set forth in Section III(A)(1)
of the Underwriting Services Agreement and the term "1998
Underwriting Year" shall mean the Underwriting Year
beginning on January 1, 1998 and ending on December 31,
1998.
(2) No payments shall be due pursuant to Section III(B)(1) of
the Underwriting Services Agreement with respect to any
gross premium written after September 30, 1998.
(3) No payments shall be due pursuant to Section III(B)(2) or
Section III(C) of the Underwriting Services Agreement with
respect to any Underwriting Year that begins after December
31, 1998.
(4) All calculations of payments due pursuant to Section
III(B)(2) or Section III(C) of the Underwriting Services
Agreement with respect to the 1998 Underwriting Year shall
be multiplied by .75 in order to take account of the fact
that the Underwriting Services Agreement was in effect for
only 9 months of the 1998 Underwriting Year.
B. The provisions of Section VII(D) of the Underwriting Services
Agreement shall not be applicable, but the provisions of Section
VII(E) of the Underwriting Services Agreement shall continue in
effect until payment in full is made thereunder.
II. TERM.
This Agreement shall be effective as of the date hereof (the "Effective
Date") and shall terminate at the close of business on September 30, 2001
unless terminated earlier pursuant to Section V hereof.
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III. DUTIES OF CRSC AND CNA BERMUDA.
A. CNA BERMUDA agrees that it shall use its best efforts to
facilitate a smooth transition in the carrying on of LASALLE's
underwriting operations, including taking all steps necessary to
enable all employees of CNA BERMUDA who have performed services
for LASALLE pursuant to the Underwriting Services Agreement to
become employees of LASALLE on the Effective Date.
B. Beginning on the Effective Date and continuing throughout the term
of this Agreement, CRSC and CNA BERMUDA (together, the "CNA
Parties") shall provide such underwriting support services to
LASALLE as LASALLE may reasonably request. Underwriting support
services shall include:
(1) assigning underwriting personnel to assist LASALLE's
underwriting staff on a temporary basis as reasonably
requested by LASALLE;
(2) assisting LASALLE with actuarial, financial and statistical
analysis and reporting;
(3) providing support to LASALLE on data processing and other
technical matters;
(4) providing LASALLE with access to the CNA Parties'
reinsurance underwriting database and technology as
pertinent to LASALLE's business;
(5) advising LASALLE on insurance industry customs and
practices;
(6) providing advice to LASALLE's human resources department;
and
(7) any other services reasonably requested by LASALLE.
C. For services rendered hereunder, LASALLE shall pay CNA BERMUDA,
for each Fiscal Year (as hereinafter defined) that this Agreement
shall be in effect, an annual retainer of $US 333,333.33. Such
retainer shall be paid quarterly in arrears throughout the term of
this Agreement and shall be credited against CRSC's charges for
consulting services rendered hereunder (at a competitive
commercial daily or hourly rate to be agreed to between the
parties hereto) and CRSC's reasonable associated travel expenses.
In the event that the foregoing charges and expenses exceed the
sum of said retainer in any Fiscal Year, LASALLE shall pay CNA
BERMUDA, within 60
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days after the end of such Fiscal Year, the total amount of such
excess.
D. The CNA Parties agree to act in good faith and to put forward
their best efforts to perform their duties hereunder in a
competent and professional manner.
IV. PROFIT COMMISSION.
A. For purposes of this Agreement,
(1) "Fiscal Year" shall mean the 12-month period which begins
on October 1 of a calendar year and ends on September 30 of
the following calendar year.
(2) "Net Underwriting Profit" shall mean an amount equal to (i)
net earned premiums, less (ii) commissions, brokerage and
other acquisition costs, less (iii) excise tax, less (iv)
actual administrative expenses, less (v) underwriting
expenses (including but not limited to any amounts payable
pursuant to Section III(C) hereof, less (vi) actual general
corporate expenses of LASALLE, less (vii) incurred losses;
in all cases, as determined in accordance with the
consolidated financial statements of LaSalle Re Holdings
Limited, as filed with the United States Securities and
Exchange Commission (the "LaSalle Financial Statements").
(3) "Nominal Profit Share Deficit" shall be equal to zero at
the inception of this Agreement. Thereafter, for purposes
of carrying over to each succeeding Fiscal Year, Nominal
Profit Share Deficit shall be the greater of (a) zero and
(b) the Nominal Profit Share Deficit at the beginning of
the Fiscal Year plus incurred losses for that year minus
70% of LASALLE's earned premium for that year.
B. In consideration for all the obligations and services to be
performed by the CNA Parties under this Agreement, LASALLE agrees,
with respect to each Fiscal Year during the term of this
Agreement, to pay CNA BERMUDA, if for any Fiscal Year the sum of
incurred losses and the Nominal Profit Share Deficit at the
beginning of the Fiscal Year is equal to or less than 70% of
LASALLE's earned premium, an underwriting profit commission (the
"Underwriting Profit Commission") equal to 1.67% of the Net
Underwriting Profit of LASALLE during the period beginning after
the end of the Fiscal Year for which
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CNA BERMUDA last received an Underwriting Profit Commission
pursuant to this Agreement and ending at the end of the Fiscal
Year for which the calculation is being made.
C. Calculations of Net Underwriting Profit, Underwriting Profit
Commission and Nominal Profit Share Deficit hereunder shall be
made each year in connection with the LaSalle Financial
Statements, and payment with respect to Section IV(B) hereof will
be made within 30 days after completion of such calculation.
V. TERMINATION.
A. For purposes of this Section V, (i) in any reference to CRSC's or
CNA BERMUDA's termination rights, the term "other party" shall
mean LASALLE and (ii) in any reference to LASALLE's termination
rights, the term "other party" shall mean either CRSC or CNA
BERMUDA.
B. For purposes of this Section V,
(1) "Change in Control" of an entity (the "Subject Company")
shall mean the earlier to occur of (a) the date of a public
announcement that a Person or group of affiliated Persons
(an "Acquiring Person") has acquired, or has obtained the
right to acquire, legal or beneficial ownership of more
than 50% of the voting power of the issued and outstanding
shares of the Subject Company, (b) the date of any
amalgamation, consolidation or merger of the Subject
Company with, or the transfer of all or substantially all
of the Subject Company's assets to, any Acquiring Person or
(c) any reorganization, recapitalization or other
transaction as a result of which either (i) 40% or more in
value of the Subject Company is beneficially owned,
directly or indirectly, by Persons who were not holders of
the voting shares of capital stock of the Subject Company
immediately prior to such reorganization, recapitalization
or other transaction or (ii) those persons who immediately
prior to such reorganization, recapitalization or other
transaction constituted the board of directors of, as
applicable, LaSalle Re Holdings Limited or CNA Financial
Corporation cease to consitute a majority of such board of
directors. For purposes hereof, the term "Acquiring
Person" shall not include the Subject Company, any of its
affiliates or any employee benefit plan
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(or related trust) sponsored or maintained by the Subject
Company or any of its affiliates.
(2) "Early Termination Fee" shall mean an amount equal to the
net present value, using a discount rate of 10%, on the
date as of which LASALLE elects to terminate this Agreement
pursuant to Section V(F) hereof, of a payment on September
30, 2001 of an amount equal to the difference between $US
4,000,000 and the aggregate of Underwriting Profit
Commissions previously paid by LASALLE to CNA BERMUDA
pursuant to Section IV(B) hereof.
(3) "Person" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and
shall include any successor (by merger or otherwise) of
such entity.
X. XXXXXXX, CRSC or CNA BERMUDA may terminate this Agreement
immediately if the other party (i) is placed in receivership,
makes an assignment for the benefit of creditors, is placed in a
proceeding for the purpose of winding up or liquidating its
business affairs or is the subject of any proceeding based upon
its insolvency or (ii) loses any license or permit which is then
required in order to engage in the business contemplated by this
Agreement.
X. XXXXXXX, CRSC or CNA BERMUDA may terminate this Agreement
immediately upon written notice based upon (i) fraud upon the
terminating party by the other party or (ii) a material breach of
this Agreement by the other party which has not been corrected
after thirty days' written notice.
X. XXXXXXX, CRSC or CNA BERMUDA may terminate this Agreement upon
ninety days' written notice to the other party in the event that
there has been a Change in Control of the other party.
F. In the event that there has been a Change in Control of LASALLE,
LASALLE (or its successor) may terminate this Agreement as of any
date on which LASALLE pays the Early Termination Fee to CNA
BERMUDA. Notwithstanding any other provision of this Agreement,
upon payment of the Early Termination Fee pursuant to this Section
V(F), LASALLE shall have no further obligation to pay Underwriting
Profit Commissions pursuant to Section IV(B) hereof.
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G. Termination of this Agreement shall not relieve either party of
its liability for performance under the Agreement to the date of
termination. Following any termination, the parties will cooperate
with each other to provide a smooth transition of services and to
satisfy any reasonable requests for information concerning actions
taken during the term of this Agreement.
VI. CONFIDENTIALITY.
A. The CNA Parties agree that they will not disclose or use for any
purpose outside the scope of this Agreement proprietary or
confidential information provided to it by LASALLE unless and
until such information (i) becomes public knowledge other than
through disclosure by either of the CNA Parties or (ii) is
subpoenaed or otherwise required by an authorized governmental
authority. In the event that either of the CNA Parties determines
that it is required to provide any such information, it shall
promptly provide notice to LASALLE.
X. XXXXXXX agrees that it will not disclose or use for any purpose
outside the scope of this Agreement proprietary or confidential
information provided to it by either of the CNA Parties unless and
until such information (i) becomes public knowledge other than
through disclosure by LASALLE or (ii) is subpoenaed or otherwise
required by an authorized governmental authority. In the event
that LASALLE determines that it is required to provide any such
information, it shall promptly provide notice to the CNA Parties.
C. The obligations of the parties hereto under this Section VI shall
continue after this Agreement terminates.
VII. INDEPENDENT CONTRACTOR.
Each of the CNA Parties shall act as an independent contractor.
Nothing contained herein shall be construed to create the relation
of partners or employer and employee between LASALLE and either of
the CNA Parties.
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VIII. NON-EXCLUSIVITY.
This Agreement shall not in any way prevent the CNA Parties from
performing for other insurers services of the type described
herein, provided that the CNA Parties faithfully perform their
obligations under this Agreement and that the performance of
services for others does not create any conflict of interest. The
CNA Parties agree, however, that they shall promptly notify
LASALLE in writing, as soon as reasonably practicable but in any
event prior to execution, of any arrangement entered into by
either of them involving the performance by such party for another
Bermuda-based insurer of services similar to those to be performed
by the CNA Parties for LASALLE under this Agreement.
IX. ASSIGNMENT.
A. Except as is otherwise specifically provided hereinabove, LASALLE
may not assign, pledge, hypothecate, transfer, delegate or
subcontract this Agreement or any of its rights, benefits or
obligations hereunder, in whole or in part, whether by operation
of law or otherwise, without the prior written consent of the CNA
Parties.
B. Except as is otherwise specifically provided hereinabove, neither
of the CNA Parties may assign, pledge, hypothecate, transfer,
delegate or subcontract this Agreement or any of its rights,
benefits or obligations hereunder, in whole or in part, whether by
operation of law or otherwise, without the prior written consent
of LASALLE.
X. SUCCESSORS.
This Agreement shall be binding upon the successors, legal
representatives or assigns of the parties hereto.
XI. NO WAIVER.
The failure of any party at any time to require another party's strict
performance of any particular obligation under this Agreement shall not
affect such party's right to require strict performance of that
obligation in the future. Any waiver by any party of any breach of any
provision hereof shall not be construed as a waiver of any continuing or
succeeding breach of such provision, or a waiver or modification of the
provision itself, or a waiver or modification of any other right under
this Agreement.
XII. CAPTIONS.
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The captions of the several sections of this Agreement are inserted
solely for convenience of reference, and are neither a part of nor
intended to govern, limit or aid in the construction of any term or
provision hereof.
XIII. AMENDMENTS AND CHOICE OF LAW.
A. This Agreement may be amended only by an instrument in writing and
executed by the parties to this Agreement.
B. This Agreement shall be construed according to the laws of
Bermuda.
XIV. NOTICES.
Any notice required under this Agreement shall be sent, in writing, by
certified or registered mail, postage prepaid, return receipt requested,
by facsimile, by courier service or shall be hand delivered to the
respective parties as follows:
If to LASALLE:
LaSalle Re Limited
Attention: Xxxxxx X. Xxxxx
00 Xxxxxx Xxxxxx
P.O. Box HM 1502
Xxxxxxxx XX FX, Bermuda
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
If to CRSC:
CNA Re Services Company
Attention: Xxxxxxx X. Xxxxxxx, Xx.
000 Xxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Group Vice President & Deputy General Counsel
XXX
XXX Xxxxx
Xxxxxxx, Xxxxxxxx 00000
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If to CNA BERMUDA:
CNA (Bermuda) Services Ltd.
Attention: Xxxxxxx X. Xxxxxxx, Xx.
00 Xxxxxx Xxxxxx
P.O. Box HM 1502
Xxxxxxxx XX FX, Bermuda
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Group Vice President & Deputy General Counsel
CNA
CNA Plaza
Xxxxxxx, Xxxxxxxx 00000
XV. COMPLETE AGREEMENT.
This Agreement sets forth the entire agreement and understanding of the
parties hereto with respect to the subject matter hereof and supersedes
any and all prior agreements, arrangements and understandings among the
parties relating to the subject matter hereof.
XVI. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and
the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
CNA (BERMUDA) SERVICES LIMITED
By: /s/ X. X. Xxxxxxx
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CNA RE SERVICES COMPANY
By: /s/ X. X. Xxxxxxx
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LASALLE RE LIMITED
By: /s/ Xxxxxx X. Xxxxx
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