Exhibit 10.15
COMMUTATION AND RELEASE AGREEMENT
As of the Effective Date, this Commutation and Release Agreement (this
"Commutation Agreement") is made and entered into by and between AMERISAFE,
Inc., (also known as Amerisafe Insurance Group of DeRidder, Louisiana) on behalf
of itself and all of its Affiliated (as defined herein) and/or subsidiary
companies, including, but not limited to, American Interstate Insurance Company
and Silver Oak Casualty, Inc., and Converium Reinsurance (North America) Inc.
(formerly known as Zurich Reinsurance (North America), Inc.) of Stamford,
Connecticut.
WHEREAS, Company (as defined herein) and Reinsurer (as defined herein) have
entered into the Reinsurance Agreements (as defined herein) pursuant to which
Company ceded to Reinsurer, and Reinsurer assumed from Company, certain
liabilities arising out of policies of insurance written by Company; and
WHEREAS, Company and Reinsurer wish to terminate and extinguish the Reinsurance
Agreements and to fully and finally settle, resolve and commute, by means of the
payment described herein, all their rights, privileges, duties, liabilities and
obligations under the Reinsurance Agreements; and
WHEREAS, Company and Reinsurer understand and acknowledge that Reinsurer's
liabilities and obligations to Company under the Reinsurance Agreements include
paid and outstanding losses and loss adjustment expenses, as well as losses
incurred but not reported, and therefore can be estimated but cannot presently
be determined in an amount certain; and
WHEREAS, Company and Reinsurer intend by this Commutation Agreement to fully and
forever release and discharge each other from their respective existing and
future liabilities and obligations, including contingent and uncertain
liabilities, under the Reinsurance Agreements; and
WHEREAS, Company and Reinsurer agree that it is in each of their best interests
to freely and voluntarily enter into this Commutation Agreement and to
compromise, resolve and settle all amounts due, or which may become due, between
each other.
NOW, THEREFORE, and in consideration of the premises and mutual covenants and
conditions set forth herein and the payment to be made hereunder, and intending
to be legally bound, Company and Reinsurer agree as follows:
ARTICLE I - DEFINITIONS
A. "Affiliate" or "Affiliated" means that the person in question is an
"affiliate" of, or a person "affiliated" with a specified person, if the
person in question is a person that directly, or indirectly, through one
or more intermediaries, controls, or is controlled by, or is under common
control with, such specified person.
B. "Company" means AMERISAFE, Inc., (also known as Amerisafe Insurance Group
of DeRidder, Louisiana) and its predecessors, successors and assigns, and
all Affiliated and/or subsidiary insurers that are presently, or were at
one time, parties to any Reinsurance Agreement, including, but not
limited to, the following persons: American Interstate Insurance Company
and Silver Oak Casualty, Inc.
C. "Closing Date" is July 27, 2005
D. "Effective Date" is June 30, 2005.
E. "Reinsurer" is Converium Reinsurance (North America) Inc. (formerly known
as Zurich Reinsurance (North America), Inc.) and its predecessors,
successors and assigns.
F. "Reinsurance Agreements" are: (i) the specific treaty reinsurance
agreements, including all amendments, endorsements and addenda thereto,
entered into by and between Company and Reinsurer as follows: (CRNA ref.
no. WC3080A) First Casualty Excess of Loss Reinsurance Agreement -
A20500-221 99-0101 A4, (CRNA ref. no. WC3080B) Second Casualty Excess of
Loss Reinsurance Agreement- A20500-222 99-0101 A4, (CRNA ref. no. WC3080C)
Third Casualty Excess of Loss Reinsurance Agreement - A20500-223 99-01-01
A4; and (ii) also any and all other insurance or reinsurance agreements
that are not identified specifically in this paragraph (F) and that are
agreements pursuant to which Reinsurer assumes or has assumed from Company
liabilities or obligations arising out of insurance written and/or
reinsurance assumed by Company with the exception of the following
treaties that are excluded from the scope of this Commutation Agreement
and shall remain in full force and effect: (CRNA ref. no. WC3080D) Fourth
Casualty Excess of Loss Reinsurance Agreement - A20500-224 99-01-01 A4,
(CRNA ref. no. WC3080E) Fifth Casualty Excess of Loss Reinsurance
Agreement - A20500-225 99-01-01 A4.
ARTICLE II - PAYMENT
A. Reinsurer shall pay to Company the sum of USD $61,296,796.68 (the
"Commutation Amount").
B. Reinsurer shall remit payment of 81% of the Commutation Amount via direct
wire transfer, in immediately available funds, to the account designated
by Company in Exhibit A (that is attached hereto and incorporated herein
by reference) within two (2) business days of the Closing Date. Reinsurer
shall remit payment of the remaining 19% of the Commutation Amount via
direct wire transfer, in immediately available funds, to the account
designated by Company in Exhibit A within eight (8) business days of the
Closing Date.
ARTICLE III - RELEASE
As of the Effective Date, the Reinsurance Agreements shall be terminated and
commuted in full and the parties agree as follows:
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A. In consideration for Reinsurer's payment of the Commutation Amount,
Company, on behalf of itself, its Affiliates, and its successors and
assigns, hereby fully and unconditionally releases and forever discharges
Reinsurer and its Affiliates, its successors and assigns, and their
officers, directors, shareholders, employees, representatives and
attorneys and their heirs, executors and assigns from any and all
liabilities and obligations arising out of, in respect of, or relating to
the Reinsurance Agreements, including, but not limited to, any and all
premiums, losses, claims, liabilities, damages, judgments, debts, duties,
sums of money, covenants, errors, omissions, counter-claims, suits,
accounts, contributions, indemnifications, promises, interest credit,
ultimate net loss amounts, return premium amounts, funds withheld account
balance amounts (whether such balance amounts are positive or negative as
of the Effective Date), experience refund amounts, dividends, expenses,
costs, offsets, attorney's fees, and all other causes of action and
demands whatsoever, whether in law, in equity, or otherwise, whether known
or unknown, vested or contingent, liquidated or unliquidated, matured or
unmatured, reported or unreported, disputed or undisputed, quantified or
not quantified and whether currently existing or arising in the future.
Company acknowledges that its receipt of the Commutation Amount effects a
complete discharge, release, accord, satisfaction, settlement and
commutation of all of the past, present and future liabilities and
obligations of Reinsurer arising out of, in respect of, or relating to the
Reinsurance Agreements.
B. Effective simultaneously with Company's release of Reinsurer as provided
in Paragraph A herein, Reinsurer on behalf of itself, its Affiliates, and
its successors and assigns, hereby fully and unconditionally releases and
forever discharges Company and its Affiliates, its successors and assigns,
and their officers, directors, shareholders, employees, representatives
and attorneys and their heirs, executors and assigns from any and all
liabilities and obligations arising out of, in respect of, or relating to
the Reinsurance Agreements, including, but not limited to, any and all
premiums, losses, claims, liabilities, damages, judgments, debts, duties,
sums of money, covenants, errors, omissions, counter-claims, suits,
accounts, contributions, indemnifications, promises, interest credit,
ultimate net loss amounts, return premium amounts, funds withheld account
balance amounts (whether such balance amounts are positive or negative as
of the Effective Date), experience refund amounts, dividends, expenses,
costs, offsets, attorney's fees, and all other causes of action and
demands whatsoever, whether in law, in equity, or otherwise, whether known
or unknown, vested or contingent, liquidated or unliquidated, matured or
unmatured, reported or unreported, disputed or undisputed, quantified or
not quantified and whether currently existing or arising in the future, it
being the intention of the parties that this Commutation Agreement
operates as a full and final settlement of any and all of the parties'
respective obligations and liabilities related to the Reinsurance
Agreements.
C. Nothing in this Commutation Agreement shall be construed as releasing any
claims that Company or Reinsurer may have against any person that is not a
person (or category or subset of persons) that is included within the
scope of the general release language set forth in Paragraph A and
Paragraph B herein,
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including but not limited to, any claims or potential claims that
Reinsurer may have against its retrocessionaires that arise out of or are
related to one or more of the Reinsurance Agreements. This Commutation
Agreement shall not confer any rights or benefits upon any third party,
except as may be expressly provided herein.
D. Company and Reinsurer expressly assume the risk that acts, omissions,
matters, causes or things may have occurred which are not known or are not
expected to exist by either of them. To the fullest extent permitted by
law, Company and Reinsurer hereby waive, and shall not seek the protection
of the terms and provisions of any statute, rule or doctrine of common law
which:
(i) narrowly construes releases that purport by their terms to
release claims based upon, relating to or arising out of such
acts, omissions, matters, causes or things referred to above
in this Paragraph D, or
(ii) restricts or prohibits the release of such claims.
ARTICLE IV - NON-RELIANCE
A. This Commutation Agreement fully and finally resolves the rights, duties
and obligations of Company and Reinsurer under the Reinsurance Agreements,
and neither party shall:
(i) have any remedy in respect of any representation, warranty or
undertaking of the other that is not specifically set forth in
this Commutation Agreement, whether or not relied upon by the
other party, or
(ii) seek to reopen or set aside this Commutation Agreement or any
of the Reinsurance Agreements on any basis whatsoever,
including, without limitation, that this Commutation Agreement
or any of the Reinsurance Agreements is void or voidable due
to a mistake or change in law or mistake of fact in any way
related to this Commutation Agreement or any of the
Reinsurance Agreements.
B. Each of Company and Reinsurer has entered voluntarily into this
Commutation Agreement based upon its own independent assessment of the
relevant facts and its rights and obligations under the Reinsurance
Agreements and not based upon any representations that were made or
disclosures that were not made by the other party, its Affiliates,
officers, directors, shareholders, employees, representatives, agents,
attorneys or their respective heirs, administrators, predecessors,
successors and assigns. Company and Reinsurer acknowledge that each has
had a full and fair opportunity to consult with, and seek the advice and
recommendations of, its counsel prior to its execution of this Commutation
Agreement.
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ARTICLE V - OTHER
A. Each of Company and Reinsurer represents and warrants to the other that:
(i) it is authorized to enter into this Commutation Agreement;
(ii) the persons executing this Commutation Agreement on behalf of
the party have the necessary and appropriate authority to do
so and that this Commutation Agreement has been duly and
validly executed by such party;
(iii) this Commutation Agreement constitutes the valid and binding
obligation of such party and is enforceable according to its
terms;
(iv) there are no pending or existing agreements, transactions, or
negotiations to which either party is a party that would
render this Commutation Agreement, or any part thereof, void,
voidable or unenforceable;
(v) it has obtained all authorizations, consents or approvals of
any governmental or regulatory entity required to make this
Commutation Agreement valid and binding; and
(vi) no claim or loss being released by this Commutation Agreement
has been assigned, transferred or sold to any other person or
entity.
B. Company represents and warrants to Reinsurer the following: (i) all
Affiliated insurers that are presently, or were at one time, parties to
any Reinsurance Agreement are listed specifically in the definition of
"Company" in this Commutation Agreement; and (ii) there are no insurers
that were formerly Affiliated with Company and that are presently, or were
at one time, parties to any Reinsurance Agreement that are now controlled
by a person that is not Affiliated with Company.
C. This Commutation Agreement may not be modified except by written amendment
executed by both Company and Reinsurer.
D. This Commutation Agreement, and the rights, duties and obligations set
forth herein, shall inure to the benefit of, and be binding upon,
Company's and Reinsurer's officers, directors, employees, affiliates,
stockholders, predecessors, successors, assigns and, to the extent
permitted by law, liquidators, rehabilitators, receivers and other
statutory successors.
E. Company and Reinsurer each intend and agree that the existence of this
Commutation Agreement, and the terms hereof, shall remain strictly
confidential. Neither Company nor Reinsurer (including their respective
attorneys, agents, representatives and/or Affiliates) shall disclose or
disseminate in any way the facts or terms related to this Commutation
Agreement, except as may be
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necessary or appropriate to parent companies and/or Affiliates,
retrocessionaires, auditors, reinsurance intermediaries, rating agencies,
governmental or regulatory authorities, in filings with the Securities and
Exchange Commission, or as may be required by legal or regulatory process
or for any purpose relating to or arising from such filings.
F. This Commutation Agreement may be executed and delivered in multiple
counterparts, each of which, when so executed and delivered, shall
constitute an original, and all of which taken together shall constitute
one instrument. This Commutation Agreement may be executed and transmitted
by facsimile provided that an original executed copy shall be exchanged
promptly and be substituted for copies executed and transmitted by
facsimile.
G. This Commutation Agreement shall be construed and governed by the laws of
the State of Louisiana, without regard for the State of Louisiana's
conflicts of law provision, and any action brought to enforce the terms of
this Commutation Agreement shall be brought solely in the State or Federal
Courts for the State of Louisiana. In any such action, the Parties consent
to the jurisdiction of the State or Federal Courts for the State of
Louisiana and waive any right to argue that the State or Federal Courts
for the State of Louisiana are an inappropriate or inconvenient forum.
H. The parties, as between and among themselves, understand that they may
have sustained damages or incurred obligations that may not yet be
manifest and that are presently unknown, but nevertheless, the parties
deliberately intend and do hereby fully release one another as provided in
this Commutation Agreement. Furthermore, the parties expressly accept and
assume the risk that the factual or legal assumptions made by either party
in connection with this Commutation Agreement may be found hereafter to be
different from the true facts or law, and the parties agree that this
Commutation Agreement (including the release of claims contemplated
thereby) shall be and remain in full force and effect notwithstanding such
differences in facts or law.
I. The parties specifically agree and acknowledge that Reinsurer's payment of
the value of the Commutation Amount is being paid in good faith and
constitutes fair consideration for the discharge of amounts allegedly
owing now or potentially owing in the future by either party in respect of
the Reinsurance Agreements.
J. Each party has had the opportunity to negotiate the terms and modify the
draftsmanship of this Commutation Agreement. Therefore, the terms of this
Commutation Agreement shall be considered and interpreted without any
presumption, inference or rule requiring construction or interpretation of
any provision of this Commutation Agreement against the interest of the
drafter of the Commutation Agreement.
K. The failure of the parties to enforce any provision of this Commutation
Agreement shall not be construed as a waiver of such provision or any
other provision of this Commutation Agreement. No waiver of any provision
of this
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Commutation Agreement shall be deemed a waiver of any of its other terms,
nor shall such waiver constitute a continuing waiver.
L. The Parties agree that in the event payment of the Commutation Amount by
Reinsurer, as described in Article II herein, is not received by Company,
then this Commutation Agreement shall be considered null and void ab
initio. Moreover, if any court of competent jurisdiction issues an order,
decision or ruling in accordance with applicable law declaring this
Commutation Agreement, any of the provisions contained in Article III(A)
or Article III(B) herein, or the payment of the Commutation Amount made
under Article II herein to be null, void, illegal, avoided or otherwise
unenforceable or rescinded ab initio and such order, decision or ruling
becomes final and unappealable with no appeal or stay pending (the "Final
Order"), then this Commutation Agreement shall be rescinded immediately
and be declared null and void ab initio, each of Reinsurer and Company
shall be restored to the position they were in just prior to the execution
of this Commutation Agreement and the Reinsurance Agreements shall be in
full force and effect as if this Commutation Agreement had never existed.
Company shall return the Commutation Amount plus an Investment Credit
Amount (as defined herein) within ten (10) business days of the date of
such Final Order, subject to deduction and/or offset by Company for
amounts that would have become due and owing under the Reinsurance
Agreements during the period commencing with the Effective Date and ending
with the date of the Final Order. In the event that Company wrongfully
fails to return the Commutation Amount plus the Investment Credit Amount
within ten (10) business days of such Final Order (subject to deduction
and/or offset by Company for amounts that Reinsurer would have paid to
Company under the Reinsurance Agreements had this Commutation Agreement
not been in effect) and Reinsurer institutes legal proceedings against
Company to enforce its rights under this Commutation Agreement, Company
shall pay all of Reinsurer's reasonable and necessary expenses and costs,
including, but not limited to, Reinsurer's reasonable attorneys' fees,
associated with such legal proceedings. The "Investment Credit Amount"
shall be defined as the sum of all Quarterly Investment Credits (as
defined herein) for each calendar quarter from the date that the
Commutation Amount was paid by Reinsurer to the date that Reinsurer
receives payment in full pursuant to this paragraph L. The "Quarterly
Investment Credit" shall be calculated quarterly, commencing with the
calendar quarter following the date that the Commutation Amount was paid
by Reinsurer, by applying the coupon rate on a 10-Year U.S. Treasury Bond
as of the last business day of each calendar quarter, divided by 4, to the
Remaining Balance (as defined herein) as of the end of each calendar
quarter. If Reinsurer is repaid at other than quarter-end, the final
Quarterly Investment Credit will be pro-rated accordingly. The "Remaining
Balance" shall be defined as the Commutation Amount less all amounts that
would have been paid to Company under the Reinsurance Agreements if this
Commutation Agreement had never existed. In the event of a Final Order,
Reinsurer expressly reserves all rights it has to challenge any claims
billed to it by Company under the Reinsurance Agreements and the parties
each reserve all rights to setoff, recoupment, counterclaim and defenses
that it may have. Company agrees that neither the foregoing provision nor
any other provision in this paragraph is intended to be and shall not be
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deemed or argued to constitute a waiver by Reinsurer of any and all rights
that it may have to audit, question, challenge, or dispute any claims
deducted or offset from the Commutation Amount by Company under this
paragraph, and Reinsurer expressly reserves all such rights. In the event
that any part of this Commutation Agreement (except for any of the
provisions contained in Article III(A) or Article III(B) herein or the
payment of the Commutation Amount made under Article II) should for any
reason become or be found to be null, void, illegal or otherwise
unenforceable, it shall be struck out to the extent that it is so null,
void, illegal or unenforceable, and the remaining provisions of this
Commutation Agreement shall remain in full force and effect.
M. This Commutation Agreement constitutes the entire agreement between
Company and Reinsurer and supersedes all prior and contemporaneous oral
and/or written agreements and understandings between the parties relating
to the Reinsurance Agreements.
N. Company and Reinsurer absolutely and unconditionally covenant and agree
with each other, and their respective successors and assigns, that
subsequent to the Closing Date of this Commutation Agreement, neither
party will hereafter for any reason whatsoever, demand, claim, file suit
or initiate arbitration, mediation, litigation or other legal proceedings
against the other in respect of any matters relating to the Reinsurance
Agreements, except for a legal proceeding to enforce rights and/or
remedies that are provided for expressly pursuant to this Commutation
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Commutation Agreement by
their respective duly authorized officers.
AMERISAFE, INC. (ALSO KNOWN AS AMERISAFE INSURANCE GROUP) ON BEHALF OF ITSELF
AND ALL OF ITS AFFILIATED AND/OR SUBSIDIARY COMPANIES, INCLUDING, BUT NOT
LIMITED TO, AMERICAN INTERSTATE INSURANCE COMPANY AND SILVER OAK CASUALTY, INC.
By: /s/ C Allen Bradley, Jr.
----------------------------------------------------
Title: President and Chief Executive Officer
CONVERIUM REINSURANCE (NORTH AMERICA) INC.
(FORMERLY KNOWN AS ZURICH REINSURANCE (NORTH AMERICA), INC.)
By: /s/ Raymond Dowling
--------------------------------------------------
Raymond Dowling
_______________________________________________
Title: Senior Vice President and Chief Reinsurance
Officer
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