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Exhibit 10.30
NOVATION AGREEMENT
THIS AGREEMENT is made effective as of the 31st day of March, 1998 by and among
The Travelers Indemnity Company of Hartford, Connecticut and each of its
property, casualty insurance subsidiaries and affiliates, but only to the extent
such companies have issued policies or are performing services under the
Agreement Letters (hereinafter referred to as "Travelers"). Xxxxxx Holding
Company (Pa.), Inc. and its subsidiaries of Greenville, Pennsylvania
(hereinafter referred to as "Xxxxxx") and National Union Fire Insurance Company
of Pittsburgh, Pennsylvania (hereinafter referred to as "National Union").
WHEREAS, Travelers and Xxxxxx have entered into one or more Agreement Letters as
listed in "Exhibit A", attached hereto and incorporated by reference
(hereinafter referred to as the "Agreement Letters"), which Agreement letters
reference Insurance Policies issued by Travelers to Xxxxxx (hereinafter
referred to as "Policies"); and
WHEREAS, the parties wish to contemporaneously substitute National Union in
place of Xxxxxx as a party under the Agreement Letters and to discharge and
release Xxxxxx from its obligations under the said Agreement Letters; and
WHEREAS, in consideration for National Union entering into this Agreement,
Xxxxxx has agreed to pay National Union on March 31, 1998, the amount of
$4,202,641.00.
NOW, THEREFORE, in consideration of the covenants set forth herein, the parties
agree as follows:
Article 1. NOVATION
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Contemporaneously with the discharge and release of Xxxxxx under Article 3.
herein, National Union shall be substituted in all respects and for all
purposes in place and stead of Xxxxxx as party to the Agreement Letters and
National Union shall thereby assume all the rights, liabilities and Obligations
of Xxxxxx arising under or related to the Agreement Letters as if such
Agreement Letters had been originally entered into with National Union,
provided that all monies due and owing from National Union to Travelers under
the Agreement Letters will be payable pursuant to the Interim Funding Program
(Exhibit B) and the Electronic Funding Program (Exhibit C), both attached
hereto and incorporated by reference. Nothing herein shall operate to amend or
modify any other term or condition of the Agreement Letters with the exception
of how the claim handling charges will be paid. These charges will be
collected and calculated as described in Article 2.C. "Obligations" is defined
in this Agreement in the same way as it is in the Agreement Letters.
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Article 2. OTHER CONDITIONS TO RELEASE
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A. On or before the date first above written, National Union agrees to
provide Travelers with a Letter of Credit naming Travelers as
beneficiary, which is satisfactory to Travelers in form, content and
issuer, and which otherwise meets all the requirements of the Agreement
Letters. The Letter of Credit will be in the initial amount of
$1,000,000, and will secure all Obligations of Xxxxxx to Travelers under
the Agreement Letters which are being assumed by National Union.
X. Xxxxxx will pay to Travelers the outstanding Obligations under the
Agreement Letters which are, or will be, due and owing on the effective
date first above written. Travelers will calculate the amount of such
outstanding Obligations no later than April 6, 1998, and payment will be
made by Xxxxxx to Travelers via wire transfer, within one (1) day of the
date Travelers notifies Xxxxxx of the amount of the outstanding
Obligations.
C. On or before the date first above written National Union agrees to pay
Travelers $500,000 for claim handling charges. Travelers will not xxxx
National Union for additional claim handling charges until the aggregate
paid losses portion of Obligations for all policies listed in Exhibit A
exceed $14,500,000, with each paid loss limited to $250,000. If and
when this occurs, Travelers will xxxx and National Union will pay a 12.7%
claim handling factor for any paid loss excess of $14,500,000, applicable
to the first $250,000 of each loss. These additional claim handling
charges will be collected under the Electronic Funding Program as set
forth in Exhibit C.
Article 3. RELEASE
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In consideration of the substitution of National Union and the mutual covenants
contained herein, and once the contingencies referenced in Article 2 above have
been met and this Agreement has been executed, Travelers agrees that Xxxxxx'x
duty to pay and perform any of its liabilities and Obligations, including, but
not limited to, any Deductible Losses, Deductible Administrative Expense
Reimbursement amounts, premiums, premium taxes, assigned risk overburden charges
and miscellaneous charges of whatever nature and kind, pursuant to the Agreement
Letters, shall erase and terminate.
Any Letters of Credit previously provided to Travelers by Xxxxxx to secure
Obligations under the Agreement Letters will be returned to the bank which
issued the Letters of Credit within five (5) business days of the date the
Agreement is executed by all parties, or of the date that Travelers receives
from National Union the Letter of Credit referenced in Article 2, whichever is
later. All prepaid premium, deductible deposits and other similar escrow-type
accounts provided by Xxxxxx to Travelers pursuant to the Agreement
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Letters will be returned to Xxxxxx within five (5) business days of receipt by
Travelers of the deposit amount referenced in Exhibit B from National Union.
Upon return of the Letters of Credit to the issuing bank, and upon return of
the escrows to Xxxxxx, and once this Agreement has been executed, Xxxxxx agrees
that all premiums, premium taxes, assigned risk overburden charges, and
miscellaneous charges of whatever nature or kind (whether actual or estimated)
previously paid by or on behalf of Xxxxxx in respect of the Agreement Letters,
shall be deemed to be, and Xxxxxx hereby agrees that such charges are earned,
and that Travelers shall have no further obligation to account for or return
such premiums and other payments to Xxxxxx.
After all of the above has taken place, Travelers and Xxxxxx each mutually
release and forever discharge the other, their successors, assigns, agents,
officers, affiliates, employees, directors and attorneys from any and all
claims, demands, causes of action, judgments, suits, debts, covenants,
contracts, controversies, agreements, provisions, awards, proceedings, costs,
fees and expenses, whether or not now known or unknown, suspected or
unsuspected, or claimed, which they ever had, now have or claim to have had
against the other from the beginning of the world to the date of this Agreement
related in any way to the Agreement Letters, including, but not limited to, any
claim or dispute relating to any prior billing or calculation of Obligations or
any insurance claim paid pursuant to the Policies prior to the date of this
Agreement, provided that, Travelers continues to have a duty to defend and pay
on behalf of Xxxxxx, up to the applicable limits of liability of the Policies,
and Xxxxxx continues to have a duty to cooperate with Travelers in the exercise
of Travelers aforementioned duty to defend and to pay on behalf of Xxxxxx.
Article 4. GENERAL
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A. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
B. This Agreement shall constitute the entire agreement between the parties
hereto related to the subject matter hereof, and may not be amended,
except by written amendment executed by each of the parties.
C. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Connecticut and the parties hereto do
irrevocably submit to the non-exclusive jurisdiction of the State of
Connecticut. To the extent permitted by law, the parties expressly
waive all rights to challenge or otherwise limit such jurisdiction.
D. All disputes or differences arising out of the interpretation of this
Agreement shall be submitted to the binding decision of two (2)
Arbitrators, one to be chosen by each party, and in the event the
Arbitrators fail to agree, to the decision of an Umpire to be chosen by the
Arbitrators. The Arbitrators and Umpire shall be
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disinterested active or retired executive officials of Fire or Casualty
Insurance or Reinsurance Companies. If either of the parties fails to
appoint an Arbitrator within one (1) month after being required by the
other party in writing to do so, or if the Arbitrators fail to appoint an
Umpire, within one (1) month of receipt of a request in writing by either
of them to do so, such Arbitrator or Umpire, as the case may be, shall at
the request of either party be appointed by a Judge or a state court of
Connecticut.
The Arbitration proceedings shall take place in Stamford, Connecticut.
The applicant shall submit its case within one (1) month after the
appointment of the Court of Arbitration, and the respondent shall submit
his reply within one (1) month after receipt of a claim. The Arbitrators
and Umpire are relieved from all judicial formality and may abstain from
following the strict rules of law.
The Arbitrators and the Umpire shall not aware punitive damages. They
shall settle any dispute under this Agreement according to an equitable
rather than a strictly legal interpretation of its terms and their
decision shall be provided to the parties in writing and shall be final
and not subject to appeal. Judgment may be entered upon the award of the
Arbitrators in any court having jurisdiction thereof.
Each party shall bear the expenses of its Arbitrator and shall jointly
and equally share with the other the expense of the Umpire and of the
Arbitration.
This Article shall survive the termination of this Agreement.
E. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any statute, law,
ordinance or regulation contrary to which the parties hereto have no
legal right to contract, the latter shall prevail; provided, that in such
event the provision of this Agreement so affected shall be curtailed and
limited only to the extent necessary to permit compliance with the
minimum legal requirement, and no other provisions of this Agreement
shall be affected thereby, and all such other provisions of this
Agreement shall continue in full force and effect. In the event this
provision of the Agreement is invoked, and any money is required to be
paid or returned by either Travelers or Xxxxxx to the other which was not
contemplated by this Agreement, then that paying or returning party may
void the mutual releases by and between Travelers and Xxxxxx set forth
herein.
F. This Agreement may be executed and delivered in 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.
[Remainder of page intentionally blank. Next page is signature page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement by their
respective authorized offices.
THE TRAVELERS INDEMNITY COMPANY
By: /s/ ?????
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Title: Executive Vice President
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XXXXXX HOLDING COMPANY (PA.), INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Title: CFO
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NATIONAL UNION FIRE INSURANCE COMPANY
By: /s/ Xxxxxx ???????
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Title: Vice President
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EXHIBIT A
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AGREEMENT LETTERS AND POLICY NUMBERS
Agreement Letter Date Policy Period Policy #s Type of Policy
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August 22, 1997 5/1/97 - 98 UC4J-UB-844G752-8 Workers Comp
UDC2JUB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UC2J-UE-844G751-6 Workers Comp
July 25, 1996 5/1/96 - 97 UC4J-UB-844G752-8 Workers Comp
UC2J-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UC2J-UB-844G751-6 Workers Comp
December 4, 1995 5/1/95 - 96 UC4J-UB-844G752-8 Workers Comp
UC2J-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UC2J-UB-844G751-6 Workers Comp
November 18, 1994 5/1/94 - 95 UDSJ-UB-844G752-8 Workers Comp
UC2J-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
UCJ2-UB-844G751-6 Workers Comp
February 21, 1994 5/1/93 - 94 UDSJ-UB-844G752-8 Workers Comp
UDRJ-UB-844G753-A Workers Comp
UDRJUB-844G756-5 Workers Comp
URLJ-UB-844G758-9 Workers Comp
UC2J-UB-844G751-6 Workers Comp
UC2EE-UB-844G757-7 Workers Comp
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EXHIBIT B
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Interim Payment Terms
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1. National will pay Travelers $36,000 per week, commencing as of April 3,
1998 and each succeeding Friday thereafter, until the Electronic Funding
Program in Exhibit C is established and is operational, at which point the
payments of $36,000 per week will be terminated immediately. Travelers
will use this money to pay all Losses (defined as it is in Exhibit C), plus
Allocated Loss Adjustment Expenses, times the applicable Claims Handling
Factor. These weekly payments will continue to be made without regard to
the monthly adjustments referenced in 3. below.
2. Travelers shall require prepaid Losses and Allocated Loss Adjustment
Expenses in the amount of $58,000 ("Escrow Deposit"), such amount to be
paid by National Union to Travelers on or prior to the "as of" date at the
inception of this Agreement. This amount represents Travelers estimate of
Losses and Allocated Loss Adjustment Expenses for eight days. Travelers
reserves the right to increase the amount of prepaid Losses and Allocated
Loss Adjustment Expenses if its actuarial estimates indicate that such an
increase in necessary. Any such increase shall be based on Travelers'
actuarial estimate of eight (8) days worth of Losses and Allocated Loss
Adjustment Expenses. National Union shall provide such additional prepaid
Losses and Allocated Loss Adjustment Expenses to Travelers, in accordance
with the terms of Travelers notice that such additional payments are
required.
3. On the first business day after monthly Loss information is available, and
monthly thereafter, Travelers will compare the amounts paid by National
Union pursuant to paragraphs 1. and 2. above with amounts paid by Travelers
as Losses, plus Allocated Loss Adjustment Expenses. If the former amount is
greater than the latter, Travelers will return the difference to National
Union. If the former amount is less than the latter, National Union will
pay the shortfall to Travelers. Such payments will be made within three (3)
business days of the calculation being performed. Such monthly calculation
will continue until the Electronic Funding Program in Exhibit C is
established and is operational.
4. These payment terms under this Exhibit B will remain in place until the
Electronic Funding Program in Exhibit C is established and is operational.
As of that date, this Agreement will be governed by the payment procedures
set forth in Exhibit C of this Agreement. Travelers will, as of that date,
compare any remaining prepaid Losses and Allocated Loss Adjustment Expenses
collected under this Exhibit, after payment of Losses and Allocated Loss
Adjustment Expenses, with the deposit amount required under Exhibit C. If
the former amount is greater than the latter, Travelers will return the
difference to National Union within three (3)
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business days. If the former amount is less than the latter, National Union
will pay the shortfall to Travelers within three (3) business days.
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EXHIBIT C
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Electronic Funding Program
The following is a description of the terms and procedures under which The
Travelers Electronic Funding Program with National Union is established and
operated.
Travelers will make payment of retrospectively-rated and Deductible Losses,
as defined in the Agreement Letters (hereinafter referred to as "Losses") on
National Union's behalf under the insurance program with Xxxxxx utilizing
checks drawn against a bank account of The Travelers Indemnity Co. or one of
its affiliates.
In order to facilitate the weekly funding process, National Union will specify
a bank and account ("Source Account") against which weekly Automated Clearing
House ("ACH") debits will be drawn by a bank selected by Travelers ("Processing
Bank") in payment of Losses. National Union will also provide authorization to
The Travelers to direct its Processing Bank to draw ACH debit transactions
against National Union's Source Account for this payment. Travelers will provide
National Union with a sample authorization letter to be signed by National
Union which authorizes Travelers to direct its Processing Bank to draw ACH
debit transactions against National Union's Source Account. Travelers will also
provide National Union with an example of the banking industry form to be
provided by National Union to Travelers' Processing Bank to identify the Source
Account codes and the Source Account's bank ABA code.
Each week Travelers will be notified of the total Losses which have been paid.
In addition Travelers Loss systems will generate charges for Allocated Loss
Adjustment Expenses and the applicable Claims Handling Factor charges (which
Claims Handling Factor charges will be collected pursuant to Article 2.C. of
this Agreement), as well as corrections as a result of edits on each Loss
payment. This data will be processed through Travelers TRACER system to
determine the resulting charge for the week based upon the Xxxxxx Insurance
program and such data will be simultaneously delivered to National Union. Once
determined this charge will be sent electronically to Travelers Processing Bank
with instructions to draw an ACH debit on National Union's Source Account. The
draw on the ACH debit account by Travelers shall not occur more frequently
than once per week without the written permission of National Union.
Travelers shall produce and provide to National Union, a quarterly report
identifying Losses and reserves plus applicable Allocated Loss Adjustment
Expenses by claim. In addition, at the end of each month Travelers will produce
reports that will identify the claim charges and Travelers will provide these
reports to National Union by the sixth (6th) business day of the following
month.
For the Electronic Funding Program Travelers requires that National Union
deposit with Travelers at the inception of this Agreement an amount equal to
eight days worth of
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Losses and Allocated Loss Adjustment Expenses for National Union's program with
Travelers (currently estimated at $58,000). Periodically Travelers will perform
an analysis of Loss activity, based upon data from the TRACER system, in order
to determine the adequacy of the deposit amount. In the event that any such
analysis indicates that an increase in the deposit is required, Travelers will
provide National Union with documentation of the analysis and notification of
the amount of increase in the deposit, which increase shall also be based on
Travelers actuarial estimate of eight (8) days worth of Losses and Allocated
Loss Adjustment Expenses. Three business days after National Union is notified
Travelers will instruct its Processing Bank to draw an additional ACH debit
against National Union's Source Account and transfer this amount to Travelers
which will be added to National Union's deposit balance.
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