Exhibit 2.3
MULTIPLE PERIL CROP INSURANCE (MPCI)
QUOTA SHARE AGREEMENT
(hereinafter referred to as "Agreement")
Effective: July 1, 1997
issued to
IGF Insurance Company
and its Affiliated Companies
(hereinafter referred to as "IGF")
by
Continental Casualty Company
Chicago, Illinois
(hereinafter referred to as "CNA")
ARTICLE 1 - TERM
This Agreement shall cover losses occurring on crops insured during the MPCI
crop year commencing at 12:01 a.m., Central Standard Time, July 1, 1997,
including such policies written or renewed for the 1998 crop year as defined in
the Standard Reinsurance Agreement (SRA) of the Federal Crop Insurance
Corporation (FCIC) and each succeeding crop year beginning at July 1, until
terminated as provided below.
Termination shall take place immediately and automatically upon the exercise of
a Put Right or Call Right as defined under the Strategic Alliance Agreement
(hereinafter "SAA") between Continental Casualty Company and IGF Holdings, Inc.
and its Affiliated Companies, to which this Agreement is attached and made a
part of. Upon termination, a full commutation and release of all CNA liability
shall be provided to CNA for the then current Crop Year with no amounts due or
owing for such year. IGF shall have the right to 100% of the premiums associated
with the liability so released. If any payments have been made by CNA to IGF for
its share of loss payments required by FCIC prior to the date of exercise, such
payments shall be reimbursed to CNA. As an example, if a Call Right is exercised
on March 2, 2002, said termination shall cause no balance to be due hereunder
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MPCI Quota Share
IGF / CCC
for the 2002 Crop Year (July 1, 2001 - June 30, 2002) and any share of losses
paid to FCIC on 2002 Crop Year Policies by CNA shall be reimbursed to CNA; all
balances and adjustments under the 2001 Crop Year shall be due and payable and
settled in due course. If a Put Right or Call Right is exercised the result
shall be the same.
ARTICLE 2 - BUSINESS COVERED
The IGF agrees to cede and the CNA agrees to accept by way of reinsurance, for
each Agreement Year covered hereunder, as follows:
All of CNA's and IGF's MPCI business shall be pooled for 1998 and thereafter,
whether written under the CNA's SRA, the IGF's SRA, or Producers Lloyds
Insurance Company's ( hereinafter Producers Lloyds) SRA. CNA will then receive
as its share (as defined in items 4 through 7 [inclusive]), an annual
reinsurance cession equal to 70% of the MPCI Underwriting Gain (Loss) (as
defined). The annual reinsurance cession will be payable in perpetuity, unless
the Put Right or Call Right is triggered.
If Producers Lloyds elects to terminate its relationship with CNA or not to
enter into a relationship with IGF or to terminate such relationship after the
closing date of the transaction between IGF and CNA, then if such relationship
terminates prior to July 1, 2000, all of the Producers Lloyds' business will be
removed from reimbursement and profit-sharing formulas in calculating any
payments to be made under this Agreement after such termination. If Producers
Lloyds elects to terminate its relationship with CNA or IGF, as the case may be,
on or after July 1, 2000, then the dollar amount of CNA's line for Producers
Lloyds shall be the same in the crop year in which Producers Lloyds terminates
its relationship as it was in the immediate crop year prior to the termination
and there shall be no adjustment to reimbursement and profit-sharing formulas
under this Agreement with respect to any crop years prior to such termination.
MPCI Underwriting Gain (Loss) shall be defined as (i) the CNA MPCI Proportion
(as defined) multiplied by (ii) the combined net underwriting gain (loss) on the
MPCI business of CNA and IGF plus the net gain (loss) from assumed Producers
Lloyd MPCI business. This combined net underwriting gain (loss) shall be reduced
(increased) by any gain (loss) shared under any third party profit sharing
agreements such as with NACU and other producers but excluding third party
reinsurance agreements.
For 1998, the CNA MPCI Proportion shall be equal to (i) the amount of
business written by the CNA SRA and Producers Lloyds' SRA for 1998, divided by
(ii) the combined amount of business written by the CNA's, IGF's and Producers
Lloyds' SRA for 1998.
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MPCI Quota Share
IGF / CCC
For 1999, the CNA MPCI Proportion shall be equal to (i) the amount of
business written by the CNA SRA for 1998 multiplied by one plus the percentage
growth or reduction in industry MPCI gross premiums from 1998 to 1999 as
acknowledged by the FCIC plus (ii) the amount of business assumed under the
Producers Lloyds reinsurance agreement for 1999, subject to item 2 above, with
the resulting product of (i) and (ii) then divided by (iii) the combined amount
of business written by the CNA, assumed from Producer Lloyds and IGF SRA for
1999.
For 2000, the CNA MPCI Proportion shall be equal to (i) the amount of
business written by the CNA SRA for 1998 multiplied by one plus the percentage
growth or reduction in industry MPCI gross premiums from 1998 to 2000 as
acknowledged by the FCIC plus (ii) the amount of business assumed under the
Producers Lloyds reinsurance agreement for 2000, subject to item 2 above, with
the resulting product of(i) and (ii) then divided by (iii) the combined amount
of business written by CNA, assumed from Producers Lloyds and IGF SRA for 2000.
The CNA MPCI Proportion shall continue to adjust for years 2001 and beyond in
a manner consistent with the formula for 1999 and 2000.
Any and all funds held and/or carried forward by FCIC/RMA for the 1997 Crop
Year and all previous crop years shall be the exclusive property of CNA and will
not be considered part of the underwriting gain for purposes of this Agreement.
Beginning with the 1998 Crop Year, any payout offset against losses by the
FCIC/RMA of previously retained CNA funds shall be wired to CNA within five days
of receipt based on its proportional share under this Agreement.
MPCI premiums will include premiums from all products falling within the
Standard Reinsurance Agreement.
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MPCI Quota Share
IGF / CCC
ARTICLE 3 - TERRITORY
This Agreement applies to the territory of the business covered hereunder.
ARTICLE 4- ORIGINAL CONDITIONS
All amounts ceded hereunder shall be subject to the same gross rating and to the
same clauses, conditions, exclusions and modifications of the policies reinsured
hereunder, subject to the limits, terms and conditions of this Agreement.
Except as specifically and expressly provided for in the Insolvency Article, the
provisions of this Agreement are intended solely for the benefit of the parties
to and executing this Agreement, and nothing in this Agreement shall in any
manner create, or be construed to create, any obligations to or establish any
rights against any party to this Agreement in favor of any third parties or
other persons not parties to and executing this Agreement.
ARTICLE 5 - LOSSES
The IGF alone and at its full discretion shall adjust, settle or compromise all
claims and losses. All such adjustments, settlements and compromises, including
ex-gratia payments, shall be binding on the CNA in proportion to its
participation. The IGF shall likewise at its sole discretion commence, continue,
defend, compromise, settle or withdraw from actions, suits or proceedings and
generally do all such matters and things relating to any claim or loss as in its
judgment may be beneficial or expedient; and all loss payments made shall be
shared by the CNA proportionately. CNA shall, on the other hand, benefit
proportionately from all reductions of losses by salvage, compromise or
otherwise.
ARTICLE 6 - EXCESS OF ORIGINAL POLICY LIMITS
This Agreement shall protect the IGF as provided in Article 2 - Business Covered
in connection with loss in excess of the limit of the original policy.
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MPCI Quota Share
IGF / CCC
However, this Article shall not apply where the loss has been incurred due to
fraud by a member of the Board of Directors or a corporate officer of the IGF
acting individually or collectively or in collusion with any individual or
corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
For the purpose of this Article, the word "loss" shall mean any amounts for
which the IGF would have been contractually liable to pay had it not been for
the limit of the original policy.
ARTICLE 7 - EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall protect the IGF as provided in Article 2 - Business Covered
where the loss includes any extra contractual obligations.
The term "Extra Contractual Obligations" is defined as those liabilities not
covered under any other provision of this Agreement and which arise from the
handling of any claim on business covered hereunder, such liabilities arising
because of, but not limited to, the following: failure by the IGF to settle
within the policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in preparation of the defense
or in trial of any action against its insured or reinsured or in the preparation
or prosecution of an appeal consequent upon such action.
The date on which any Extra Contractual Obligation loss is incurred by the IGF
shall be deemed, in all circumstances, to be the date of the original
occurrence, or the date the original claim is first made, whichever is
applicable.
However, this Article shall not apply where the loss has been incurred due to
fraud by a member of the Board of Directors or a corporate officer of the IGF
acting individually or collectively or in collusion with any individual or
corporation or any other organization or party involved in the presentation,
defense or settlement of any loss covered hereunder.
ARTICLE 8 - CURRENCY
Where the word "dollars" and/or the sign "$" appear in this Agreement, they
shall mean United States dollars.
For purposes of this Agreement, where the IGF receives premiums or pays losses
in currencies other than United States currency, such premiums or losses shall
be converted
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MPCI Quota Share
IGF / CCC
in to United States dollars at the actual rates of exchange at which these
premiums or losses are entered in the IGF's books.
ARTICLE 9 - ACCOUNTS, REPORTS AND PAYMENTS
As soon as practicable after the end of each month, for each Agreement Year for
which coverage applies under this Agreement, the IGF shall furnish to the CNA
the FCIC reinsurance accounting report (RoRecap) which shall include but not be
limited to the following:
Gross liability, premiums and losses paid, by state, before deducting the
amount of reinsurance ceded to the FCIC SRA.
Net premiums and losses paid, after recoveries from the FCIC SRA.
Calculation of gain or loss between the IGF and the FCIC as set out by the FCIC
and after recoveries from the SRA
As soon as practicable after the first February following each Agreement Year,
the IGF shall furnish to the CNA the FCIC reinsurance accounting report
(RoRecap) which shall include but not be limited to the following:
Gross liability, premiums and losses paid, by state, before deducting the
amount of reinsurance ceded to the FCIC SRA.
Net premiums and losses paid, after recoveries from the FCIC SRA.
Calculation of underwriting gain or loss between the IGF and the FCIC after
recoveries from the SRA underwriting gain as stated by the FCIC each year for
final accounting of the crop year.
Any balance due one party from the other shall be payable upon receipt of the
above report. However, if at any time during the term of this Agreement the IGF
is required to reimburse the FCIC for a net underwriting loss after recoveries
from the SRA for the Agreement Year under consideration, the CNA shall pay its
proportional share of the net underwriting loss amount to the IGF by the date
due to the FCIC. Adjustments shall continue until final settlement is reached
with the FCIC on all policies reinsured for each Agreement Year unless such
earlier definitive date is agreed to be the parties to this Agreement.
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MPCI Quota Share
IGF / CCC
As soon as possible after the conclusion of each calendar quarter and Agreement
Year the IGF will provide any other information the CNA may require for its
Convention Statement which may be reasonably available to the IGF.
ARTICLE 10 - DEFINITIONS
The term "Standard Reinsurance Agreement (SRA) of the FCIC" as used herein shall
mean the Reinsurance Agreement between the Federal Crop Insurance Corporation
and the entity so named including all amendments applicable to the agreement
during the term of this Agreement.
ARTICLE 11 - OFFSET
The IGF or the CNA shall have the right to offset any balance or amounts due
from one party to the other under the terms of this Agreement. The party
asserting the right of offset may exercise such right at any time whether the
balances due are on account of premiums or losses.
ARTICLE 12 - WARRANTY
For business covered hereunder it is agreed that all terms and agreements of the
FCIC are applied.
ARTICLE 13 - ACCESS TO RECORDS
Upon reasonable notice, the CNA, or its designated representative, shall have
access at any reasonable time to inspect and audit the books and records of the
IGF which pertain in any way to this reinsurance and it may make copies of any
records pertaining thereto.
This right of inspection, audit and information shall survive termination of
this Agreement and shall run to the natural expiry of all liabilities under the
policies reinsured.
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MPCI Quota Share
IGF / CCC
ARTICLE 14 - TAXES
In consideration of the terms under which this Agreement is issued, IGF
undertakes not to claim any deduction of the premium hereon when making tax
returns, other than Income or Profits Tax returns, to any state or territory of
the United States of America or to the District of Columbia.
ARTICLE 15 - ERRORS AND OMISSIONS
Any inadvertent error, omission or delay in complying with the terms and
conditions of this Agreement shall not be held to relieve either party hereto
from any liability which would attach to it hereunder if such error, omission or
delay had not been made, provided such error, omission or delay is rectified
immediately upon discovery.
ARTICLE 16 - AMENDMENTS
This Agreement may be altered or amended in any of its terms and conditions by
mutual consent of the IGF and the CNA by an Endorsement hereto. Such Endorsement
will then constitute a part of this Agreement.
ARTICLE 17 - LOSS FUNDING
This Article is only applicable to CNA if it cannot qualify for credit by the
State, meaning the state, province or Federal authority having jurisdiction over
IGF's loss reserves.
As regards policies issued by the IGF coming within the scope of this Agreement,
the IGF agrees that when it shall file with the insurance department or set up
on its books reserves for losses covered hereunder which it shall be required to
set up by law it will forward to the CNA a statement showing the proportion of
such loss reserves which is applicable to them.
The CNA hereby agrees that it will apply for and secure delivery to the IGF a
clean irrevocable and unconditional Letter of Credit issued by a bank chosen by
the CNA and acceptable to the appropriate insurance authorities, in an amount
equal to the CNA's proportion of the loss reserves in respect of known
outstanding losses that have been reported to the CNA and allocated loss
expenses relating thereto as shown in the statement prepared by the IGF. Under
no circumstances shall any amount relating to reserves in
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IGF / CCC
respect of losses or loss expenses Incurred But Not Reported be included in the
amount of the Letter of Credit.
The Letter of Credit shall be "Evergreen" and shall be issued for a period of
not less than one year, and shall be automatically extended for one year from
its date of expiration or any future expiration date unless thirty (30) days
prior to any expiration date, the bank shall notify the IGF by certified or
registered mail that it elects not to consider the Letter of Credit extended for
any additional period.
The IGF, or its successors in interest, undertakes to use and apply any amounts
which it may draw upon such Credit pursuant to the terms of the Agreement under
which the Letter of Credit is held, and for the following purposes only:
To pay CNA's share or to reimburse IGF for CNA's share of any liability for
loss reinsured by this Agreement, the payment of which has been agreed by CNA
and which has not otherwise been paid.
To make refund of any sum which is in excess of the actual amount required
to pay CNA's share of any liability reinsured by this Agreement.
In the event of expiration of the Letter of Credit as provided for above,
to establish deposit of CNA's share of known and reported outstanding losses and
allocated loss expenses relating thereto under this Agreement. Such cash deposit
shall be held in an interest bearing account separate from IGF's other assets,
and interest thereon shall accrue to the benefit of CNA. It is understood and
agreed that this procedure will be implemented only in exceptional circumstances
and that, if it is implemented, IGF will ensure that a rate of interest is
obtained for CNA on such a deposit account that is at least equal to the rate
which would have been paid by Citibank N.A. in New York, and further that IGF
will account to CNA on an annual basis for all interest accruing on the cash
deposit account for the benefit of CNA.
The bank chosen for the issuance of the Letter of Credit shall have no
responsibility whatsoever in connection with the propriety of withdrawals made
by IGF or the disposition of funds withdrawn, except to ensure that withdrawals
are made only upon the order of properly authorized representatives of IGF.
At annual intervals, or more frequently as agreed but never more frequently than
semiannually, IGF shall prepare a specific statement, for the sole purpose of
amending the Letter of Credit, of CNA's share of known and reported outstanding
losses and allocated loss expenses relating thereto. If the statement shows that
CNA's share of such losses and allocated loss expenses exceeds the balance of
credit as of the statement date, CNA shall,
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IGF / CCC
within thirty (30) days after receipt of notice of such excess, secure delivery
to IGF of an amendment of the Letter of Credit increasing the amount of credit
by the amount of such difference. If, however, the statement shows that CNA's
share of known and reported outstanding losses plus allocated loss expenses
relating thereto is less than the balance of credit as of the statement date,
IGF shall, within thirty (30) days after receipt of written request from CNA,
release such excess credit by agreeing to secure an amendment to the Letter of
Credit reducing the amount of credit available by the amount of such excess
credit.
ARTICLE 18 - INSOLVENCY
This reinsurance shall be payable by CNA on the basis of the liability of IGF
under Policy or Policies reinsured without diminution, because of the insolvency
of IGF, to IGF or its liquidator, receiver, or statutory successor.
In the event of insolvency of IGF, the liquidator or receiver or statutory
successor of the IGF shall give written notice to CNA of the pendency of a claim
filed against IGF on the Policy or Policies reinsured within a reasonable time
after such claim is filed in the insolvency proceeding. During the pendency of
such claim CNA may investigate such claim and interpose, at its own expense, in
the proceeding where such claim is to be adjudicated, any defense or defenses
which it may deem available to IGF or its liquidator or receiver or statutory
successor. The expenses thus incurred by CNA shall be chargeable, subject to
court approval, against IGF as part of the expense of liquidation to the extent
of a proportionate share of the benefits which may accrue to IGF solely as a
result of the defense so undertaken by CNA.
Should IGF go into liquidation or should a receiver be appointed, CNA shall be
entitled to deduct from any sums which may be or may become due to IGF under
this reinsurance Agreement, any sums which are due to CNA by IGF under this
Agreement and which are payable at a fixed or stated date, as well as any other
sums due to CNA which are permitted to be offset under applicable law.
It is further understood and agreed that, in the event of the insolvency of IGF,
the reinsurance under this Agreement shall be payable directly by CNA to IGF or
to its liquidator, receiver or statutory successor, except a) where this
Agreement specifically provides another payee of such reinsurance in the event
of the insolvency of IGF and b) where CNA with the consent of the direct insured
or insureds has assumed such policy obligations of IGF as direct obligations of
CNA to the payees under such policies and in substitution for the obligations of
IGF to such payees.
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MPCI Quota Share
IGF / CCC
In no event shall anyone other than the parties to this Agreement or, in the
event of IGF's insolvency, its liquidator, receiver, or statutory successor,
have any rights under this Agreement.
ARTICLE 19 - ARBITRATION
As a condition precedent to any right of action hereunder, any dispute arising
out of the interpretation, performance or breach of this Agreement, including
the formation or validity thereof, shall be submitted for decision to a panel of
three arbitrators. Notice requesting arbitration will be in writing and sent
certified mail, return receipt requested.
One arbitrator shall be chosen by each party and the two arbitrators shall,
before instituting the hearing, choose an impartial third arbitrator who shall
preside at the hearing. If either party fails to appoint its arbitrator within
thirty (30) days after being requested to do so by the other party, the latter,
after ten (10) days notice by certified mail of its intention to do so, may
appoint the second arbitrator.
If the two arbitrators are unable to agree upon the third arbitrator within
thirty (30) days of their appointment, each of them shall name two, of whom the
other shall decline one and the decision shall be made by drawing lots. All
arbitrators shall be disinterested active or retired executive officers of
insurance or reinsurance companies s, Underwriters at Lloyd's London not under
the control of either party to this Contract, or a qualified arbitrator supplied
by the AAA..
Within thirty (30) days after notice of appointment of all arbitrators, the
panel shall meet and determine timely periods for briefs, discovery procedures
and schedules for hearings.
The panel shall be relieved of all judicial formality and shall not be bound by
the strict rules of procedure and evidence. Arbitration shall take place in Des
Moines, Iowa. Insofar as the arbitration panel looks to substantive law, it
shall consider the law of the State of Illinois. The decision of any two
arbitrators when rendered in writing shall be final and binding. The panel is
empowered to grant interim relief as it may deem appropriate.
The panel shall make its decision considering the custom and practice of the
applicable insurance and reinsurance business as promptly as possible following
the termination of the hearings. Judgment upon the award may be entered in any
court having jurisdiction thereof.
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IGF / CCC
Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the cost of the third arbitrator. The
remaining costs of the arbitration shall be allocated by the panel. The panel
may, at its discretion, award such further costs and expenses as it considers
appropriate, including but not limited to attorneys fees, to the extent
permitted by law. The panel is prohibited from awarding punitive, exemplary or
treble damages, of whatever nature, in connection with any arbitration
proceeding concerning this Agreement.
ARTICLE 20 - CHOICE OF LAW
This Agreement, including all matters relating to formation, validity and
performance thereof, shall be interpreted in accordance with the law of the
State of Illinois.
ARTICLE 21 - ENTIRE CONTRACT
This Agreement and that certain Strategic Alliance Agreement, the Ancillary
Agreements, Crop Hail Insurance Services and Indemnity Agreement, MPCI Insurance
Services and Indemnity Agreement, Multiple Peril Crop Insurance Quota Share
Contract - effective July 1, 1997, Crop Hail Quota Share Reinsurance Contract -
effective January 1, 1998, and the Crop Hail Quota Share Agreement - effective
January 1, 1998, between the parties, represent the entire agreement and
understanding among the parties. No other oral or written agreements or
contracts relating to the risks reinsured hereunder currently exist and/or are
contemplated between the parties.
ARTICLE 22 - SEVERABILITY
If any law or regulation of any Federal, State, or Local Government of the
United States of America or the provinces of Canada or the ruling officials of
any supervision over insurance companies, should render illegal this Agreement,
or any portion thereof, as to risks or properties located in the jurisdiction of
such authority, either the IGF or the CNA may upon written notice to the other
suspend, abrogate, or amend this Agreement insofar as it relates to risks or
properties located within such jurisdiction to such extent as may be necessary
to comply with such law, regulations or ruling.
Such illegality, suspension, abrogation, or amendment of a portion of this
Agreement shall in no way affect any other portion thereof.
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IGF / CCC
ARTICLE 22 - ILLUSTRATION
IGF and CNA have agreed to append Schedule 1 as an attachment hereto to
illustrate their understanding of the operation of this Agreement.
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IGF / CCC
IN WITNESS WHEREOF the parties acknowledge that no intermediary is involved in
or brought about this transaction, and the parties hereto, by their authorized
representatives, have executed this Agreement:
on this day of 1998
IGF INSURANCE COMPANY
and its AFFILIATED COMPANIES
By: ________________________________________________
Attested by: _________________________________________
and on this day of 1998
CONTINENTAL CASUALTY COMPANY
By: ________________________________________________
Attested by:__________________________________________
MULTIPLE PERIL CROP INSURANCE (MPCI)
QUOTA SHARE AGREEMENT
(referred to as the "Agreement")
Effective: July 1, 1997
issued to
IGF Insurance Company
and its Affiliated Companies
(referred to as "IGF")
by
Continental Casualty Company
(referred to as "CNA")
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IGF / CCC