EXECUTION COPY
7/8/97
INTERIM REINSURANCE AGREEMENT
by and among
ZENITH INSURANCE COMPANY
and
RISCORP INSURANCE COMPANY
and
RISCORP PROPERTY & CASUALTY INSURANCE COMPANY
Dated as of June 18, 1997
INTERIM REINSURANCE AGREEMENT
This Interim Reinsurance Agreement (this "Agreement"), dated as of
12:01 a.m. Eastern Daylight Savings Time on June 18, 1997 (the "Effective
Date"), is made by and among Zenith Insurance Company, a stock insurance
company organized under the laws of the State of California ("Zenith"), and
RISCORP Insurance Company, a stock insurance company organized under the laws
of the State of Florida ("RIC"), and RISCORP Property & Casualty Insurance
Company, a stock insurance company organized under the laws of the State of
Florida ("RP&C"), (RIC and RP&C being sometimes hereinafter referred to
individually as an "Insurance Subsidiary" and collectively as the "Insurance
Subsidiaries").
WHEREAS, Zenith and the Insurance Subsidiaries are entering into
this Agreement pursuant to the Purchase Agreement (as defined below);
WHEREAS, the Insurance Subsidiaries have agreed to cede to Zenith,
and Zenith has agreed to assume, certain liabilities and obligations of the
Insurance Subsidiaries under the Insurance Contracts (as defined below) on
the terms set forth herein; and
WHEREAS, the Florida Department of Insurance has approved this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
promises and upon the terms and conditions set forth herein, the parties
hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Capitalized terms used herein and not otherwise
defined in this Agreement shall have the meanings given to them in the
Purchase Agreement. As used in this Agreement, the following terms shall have
the following meanings:
"AAA" shall have the meaning set forth in Section 10.1 hereof.
"EFFECTIVE DATE" means the date specified in the first paragraph
hereof.
"ENDORSEMENT" means an endorsement in the form of Exhibit A.
"EXPECTED AMOUNT" means an aggregate of $51 million of direct gross
premiums written by both Insurance Subsidiaries on and after the Effective
Date with respect to the Insurance Contracts.
"INSURANCE COMMISSIONER" means the Insurance Commissioner of the
State of Florida.
"INSURANCE CONTRACTS" means the treaties, policies, binders, slips
and other agreements of workers' compensation and employers liability
insurance written by the Insurance Subsidiaries for
their own account (including all supplements, endorsements, riders and
ancillary agreements in connection therewith) covering risks in the State of
Florida to the extent that the foregoing are (i) in force on the Effective
Date or (ii) issued by an Insurance Subsidiary in compliance with the written
underwriting guidelines attached hereto as Exhibit B on or after the
Effective Date and prior to the earlier of (A) the Closing Date and (B) the
date of termination of the Purchase Agreement pursuant to its terms.
"INSURANCE LIABILITIES" means (i) all liabilities and obligations of
the Insurance Subsidiaries to policyholders under the Insurance Contracts, to
the extent the same arise from losses occurring on or after the Effective
Date, before any deduction for reinsurance ceded and (ii) all amounts payable
for returns or refunds of premiums under the Insurance Contracts.
"PURCHASE AGREEMENT" means the Asset Purchase Agreement, dated as of
June 17, 1997, among Zenith, the Insurance Subsidiaries, RISCORP, Inc.,
RISCORP of Florida, Inc., RISCORP Management Services, Inc., RISCORP Managed
Care Services, Inc., RISCORP Insurance Services, Inc., CompSource, Inc.,
RISCORP of Illinois, Inc., Independent Association Administrators
Incorporated, RISCORP Real Estate Holdings, Inc., RISCORP Acquisition, Inc.,
RISCORP West, Inc., RISCORP Services, Inc., RISCORP Staffing Solutions
Holdings, Inc., RISCORP Staffing Solutions, Inc. I and RISCORP Staffing
Solutions, Inc. II.
"SAP" means statutory accounting principles prescribed or permitted
by the Insurance Commissioner.
"TRUST ACCOUNT" means the Trust Account as defined in the relevant
Trust Agreement.
"TRUST AGREEMENTS" mean the Trust Agreements among Zenith, each
Insurance Subsidiary, and the Trustee, which are substantially in the form of
Exhibit C hereto.
"TRUSTEE" means the trustee named in the Trust Agreements and any
successor trustee appointed as such pursuant to the terms of the Trust
Agreements.
ARTICLE II.
BUSINESS REINSURED
Section 2.1. INDEMNITY REINSURANCE. Each of the Insurance
Subsidiaries hereby cedes, and Zenith hereby accepts and assumes, and agrees
to indemnify each of the Insurance Subsidiaries for, one hundred percent
(100%) of the Insurance Liabilities under the Insurance Contracts issued by
such Insurance Subsidiary in the event that such Insurance Subsidiary shall
be declared insolvent under applicable insurance law pursuant to court order;
PROVIDED, HOWEVER, that the amount due from Zenith shall be limited to the
portion of the Insurance Liabilities remaining unpaid under the terms and
conditions of such Insurance Contracts.
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Section 2.2. CONDITIONS; PRESERVATION OF DEFENSES. All Insurance
Liabilities for which Zenith shall assume liability hereunder are subject in
all respects to the same written terms, conditions, waivers, modifications,
alterations and cancellations as the Insurance Contracts. Zenith accepts and
assumes the Insurance Liabilities in accordance with the terms of this
Agreement and subject to all defenses, setoffs and counterclaims to which the
Insurance Subsidiaries would be entitled with respect to the Insurance
Contracts. The parties agree that no such defenses, setoffs or counterclaims
are waived under this Agreement and that as of the Effective Date, Zenith
shall be fully subrogated to all such defenses, setoffs and counterclaims and
be entitled to the full benefits thereof.
Section 2.3. REINSURANCE ENDORSEMENTS. Zenith shall promptly issue
an Endorsement to each holder of an Insurance Contract, as an endorsement to
this Agreement for the benefit of such holder.
ARTICLE III.
CONSIDERATION
Section 3.1. INITIAL CONSIDERATION. In consideration of Zenith's
assumption of the Insurance Liabilities hereunder, each of the Insurance
Subsidiaries hereby transfers (i) to Zenith an initial reinsurance premium
equal to one percent (1%) of the gross unearned premium reserve of such
Insurance Subsidiary as of the Effective Date with respect to such Insurance
Subsidiary's Insurance Contracts calculated in accordance with SAP and (ii)
to the Trustee for deposit in the appropriate Trust Account an amount equal
to the sum of (A) thirty-three percent (33%) of such gross unearned premium
reserve as of the Effective Date and (B) (1) $12 million, in the case of RIC,
and (2) $5 million, in the case of RP&C.
Section 3.2. FUTURE CONSIDERATION. As additional consideration for
Zenith's assumption of the Insurance Liabilities hereunder, each of the
Insurance Subsidiaries shall transfer (i) to Zenith as additional reinsurance
premiums an amount equal to one percent (1%) of the direct gross premiums
written by such Insurance Subsidiary on or after the Effective Date with
respect to such Insurance Subsidiary's Insurance Contracts and (ii) to the
Trustee for deposit in the appropriate Trust Account thirty-three percent
(33%) of any direct gross premiums written in excess of the Expected Amount
by such Insurance Subsidiary on or after the Effective Date with respect to
the Insurance Contracts.
Section 3.3. ADDITIONAL REINSURANCE PREMIUM. In the event that
Zenith pays any amount of Insurance Liabilities pursuant to this Agreement,
the applicable Insurance Subsidiary shall pay to Zenith, as additional
reinsurance premium, an amount equal to such Insurance Liabilities so paid.
Section 3.4. RETURN OF REINSURANCE PREMIUM. Upon the termination of
the Purchase Agreement pursuant to its terms, Zenith shall cause the Trustee
to remit to the Insurance Subsidiaries the amount (if any) by which (i) $17
million exceeds (ii) thirty-three percent (33%) of the aggregate
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direct gross premiums written by both Insurance Subsidiaries on and after the
Effective Date with respect to the Insurance Contracts.
ARTICLE IV.
ASSIGNMENT OF CEDED REINSURANCE AGREEMENTS
Section 4.1. ASSIGNMENT. As of the Effective Date, each of the
Insurance Subsidiaries hereby transfers, sets over, assigns and conveys to
Zenith all of such Insurance Subsidiary's right, title and interest under the
reinsurance agreements set forth on Schedule A hereto to the extent that any
such agreement relates to Insurance Liabilities actually paid by Zenith
pursuant to this Agreement (collectively, the "Subsidiaries' Reinsurance
Agreements"), including (i) amounts held by or which may become due from
assuming reinsurers with respect to any Subsidiaries' Reinsurance Agreement,
and (ii) letters of credit, trust funds and other security mechanisms
outstanding for the benefit of the Insurance Subsidiaries pursuant to the
terms of any of the Subsidiaries' Reinsurance Agreements.
The Insurance Subsidiaries shall reasonably cooperate with Zenith in
obtaining the consent of reinsurers under the Subsidiaries' Reinsurance
Agreements to such assignment.
Section 4.2. CEDED REINSURANCE COLLATERAL. To the extent necessary
to effect transfer of any Subsidiaries' Reinsurance Agreement, each Insurance
Subsidiary hereby appoints Zenith as attorney-in-fact for such Insurance
Subsidiary to act for and on behalf of it with respect to letters of credit,
trust funds and other security mechanisms outstanding for the benefit of such
Insurance Subsidiary pursuant to the terms of any of the Subsidiaries'
Reinsurance Agreements, and such Insurance Subsidiary shall execute and
deliver to Zenith such additional instruments as Zenith may reasonably
request to give effect to such appointment as attorney-in-fact, and to
provide appropriate evidence that the Insurance Subsidiaries have assigned to
Zenith all of their rights under the Subsidiaries' Reinsurance Agreements
with respect to any such letters of credit, trust funds or other accounting
mechanism.
ARTICLE V.
ADMINISTRATION
Section 5.1. ADMINISTRATION. Notwithstanding anything to the contrary
in this Agreement, the Insurance Subsidiaries shall not, without the prior
written consent of Zenith (a) settle any claims relating to the Insurance
Contracts, other than in the ordinary course of business and consistent with
past practice, or (b) settle any litigation relating to the Insurance
Contracts for more than $100,000.
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ARTICLE VI.
GENERAL PROVISIONS
Section 6.1. INSPECTION. Zenith and the Insurance Subsidiaries,
or their designated representatives, may inspect, at the place where such
records are located, any and all books and records of the other parties
hereto reasonably relating to this Agreement, during normal business hours
and upon reasonable notice. The rights of the parties under this Section 6.1
shall survive termination of this Agreement.
Section 6.2. MISUNDERSTANDINGS AND OVERSIGHTS. Any delay,
omission, error or failure to pay amounts due or to perform any other act
required by this Agreement that is unintentional and caused by
misunderstanding or oversight shall not be held to relieve either party to
this Agreement from any obligation hereunder if such delay, omission, error
or failure is corrected within 20 Business Days of receipt of notice of such
delay, omission, error or failure and neither party shall have been
prejudiced.
Section 6.3. ADJUSTMENTS. If the liability of any of the
Insurance Subsidiaries under any of the Insurance Contracts is changed as a
result of a change required by law or regulation or any other reason, Zenith
will share in the change proportionately to the amount reinsured hereunder.
Section 6.4. COMMUNICATIONS RELATING TO THE INSURANCE CONTRACTS.
After the Effective Date, the Insurance Subsidiaries and Zenith each shall
forward promptly to the other copies of all notices and other written
communications it receives relating to the Insurance Contracts (including,
without limitation, all inquiries and complaints from state insurance
regulators, brokers and other service providers and reinsurers and all
notices of claims, suits and actions for which it receives service of
process).
Section 6.5. DUTY OF COOPERATION. The Insurance Subsidiaries and
Zenith shall cooperate fully with the other in all reasonable respects in
order to accomplish the objectives of this Agreement.
Section 6.6. SUBROGATION. Zenith shall be subrogated, as respects
any loss for which Zenith shall actually pay or become liable, but only to
the extent of the amount of payment by or the amount of liability to Zenith,
to all the rights of the applicable Insurance Subsidiary against any person
or other entity who may be legally responsible in damages for said loss. In
addition, in such event, Zenith shall have all of the rights of the Insurance
Subsidiaries to any collateral that secures obligations arising out of the
applicable Insurance Contract. Zenith is hereby authorized and empowered to
bring any appropriate action in the name of the such Insurance Subsidiary or
otherwise to enforce such rights. Zenith's obligation to make payment of any
Insurance Liabilities shall also be conditioned on the agreement of the
policyholder under each applicable Insurance Contract that Zenith shall be
subrogated to all rights of such policyholder against the applicable
Insurance Subsidiary and/or any applicable guarantee funds.
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Section 6.7 INDEMNIFICATION. The Insurance Subsidiaries' sole and
exclusive remedy with respect to a breach of this Agreement shall be the
indemnities provided by Section 9.02 of the Purchase Agreement, except that
any dispute between the parties arising hereunder for which such indemnities
are being sought shall be subject to arbitration pursuant to Article X hereof.
ARTICLE VII.
ACCOUNTING
Section 7.1. ACCOUNTING REPORTS. On or before the last day of
each month following the Effective Date, each of the Insurance Subsidiaries
will render a written statement of account to Zenith and the Insurance
Commissioner showing reinsurance premium due Zenith with respect to the prior
month and amounts to be deposited in the Trust Account established by it.
Concurrent with the delivery of the statement of account for each month, each
Insurance Subsidiary shall remit to the Trustee any amounts due under such
account.
In the event of any dispute between Zenith and any Insurance
Subsidiary, the undisputed portion of the amount due shall be paid
immediately. The parties will promptly clarify the amount of difference, and
the difference shall be paid promptly thereafter.
Section 7.2. REPORTS TO INSURANCE DEPARTMENTS. During the term of
this Agreement, Zenith and the Insurance Subsidiaries will promptly furnish
to the other, copies of any and all filings with, and reports or
communications received from, any regulatory authority which relate directly
and materially to the Insurance Contracts.
Section 7.3. UNDERWRITING REPORTS. Concurrent with the delivery of
the reports delivered pursuant to Section 7.1 of this Agreement, each of the
Insurance Subsidiaries will render to Zenith and the Insurance Commissioner a
written report showing the number of Insurance Contracts issued by such
Insurance Subsidiary during the prior month and the premium charged with
respect to each such Insurance Contract; PROVIDED, HOWEVER, that with respect
to Insurance Contracts subject to any retrospective premium adjustment, such
reports shall be delivered weekly, on or before Friday of each week with
respect to Insurance Contracts issued during the prior week. In addition,
such Insurance Subsidiary shall concurrently with each weekly report deliver
a certificate signed by a duly authorized officer of such Insurance
Subsidiary, certifying that each such Insurance Contract was issued in
compliance with the underwriting guidelines attached as Exhibit B hereto.
ARTICLE VIII.
TERMINATION
Section 8.1. TERMINATION. Except as mutually agreed by the
Insurance Subsidiaries and Zenith following 60 days advance written notice by
the Insurance Subsidiaries and Zenith to the Insurance Commissioner of an
intent to terminate this Agreement, this Agreement shall terminate
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when all Insurance Contracts expire and Zenith shall remain liable for losses
occurring subsequent to the natural expiry of the Insurance Contracts.
ARTICLE IX.
INSOLVENCY
Section 9.1. PAYMENTS BY ZENITH. In the event that any Insurance
Subsidiary shall be declared insolvent under applicable insurance law
pursuant to court order, Zenith will pay to each policyholder or other
claimant under an Insurance Contract that is identified in an Endorsement
issued pursuant to Section 2.3 hereof, as a direct beneficiary of this
Agreement, the remaining unpaid Insurance Liabilities due under such
Insurance Contract as the direct obligation of Zenith. A list of the initial
insureds to be issued an Endorsement is attached hereto as Schedule B. Such
Schedule shall be deemed amended automatically as to any Endorsements that
are issued pursuant to this Agreement with respect to Insurance Contracts
issued on or after the Effective Date.
ARTICLE X.
ARBITRATION
Section 10.1. APPOINTMENT OF ARBITRATORS. Any dispute or
difference arising under this Agreement that cannot be resolved by agreement
among the parties hereto shall be decided by arbitration in accordance with
this Article X. Any such arbitration shall be conducted expeditiously and
confidentially in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA") as such rules shall be in effect on
the date of delivery of demand for arbitration. Any such arbitration shall
be heard and conducted in New York, New York. Notwithstanding the rules of
the AAA, the arbitration panel in any such arbitration shall consist of three
persons who must be disinterested current or retired officers of insurance or
reinsurance companies other than the parties to this Agreement or their
affiliates. Within twenty days of delivery of any demand for arbitration
hereunder, the applicable Insurance Subsidiary and Zenith shall each appoint
one arbitrator, and the two arbitrators so selected shall appoint the third
arbitrator within twenty days of their appointment. In the event the two
selected arbitrators are unable to agree upon the selection of a third
arbitrator after reasonable efforts, a panel of seven qualified persons shall
be requested from the AAA. The parties shall alternately strike one person
with the last remaining person being the third designated arbitrator. Each
party shall pay the fees of its own attorneys, expenses of witnesses and all
other expenses connected with the presentation of such party's case.
One-half of any remaining costs of any arbitration, including the cost of the
record or transcripts thereof, if any, administrative fees and all other fees
involved shall be paid by Zenith, and the remaining one-half shall be paid by
the applicable Insurance Subsidiary.
Section 10.2. DECISION. The arbitrators shall consider customary
and standard practices in the insurance business. They shall decide by a
majority vote of the arbitrators. All decisions of the arbitrators shall be
made in accordance with the laws of the State of Florida without
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regard to conflict of laws principles. Any award rendered by the arbitrators
shall be accompanied by a written opinion setting forth the findings of fact
and conclusions of law relied upon in reaching their decision. There shall
be no appeal from their written decision. Judgment may be entered on the
decision of the arbitrators by any court having jurisdiction.
Section 10.3. CONFIDENTIALITY. Zenith and each of the Insurance
Subsidiaries agree that the existence, conduct and content of any arbitration
shall be kept confidential and no party shall disclose to any person any
information about such arbitration, except as may be required by law or for
financial reporting purposes in each party's financial statements.
Section 10.4. SURVIVAL OF ARTICLE. This Article X shall survive
termination of this Agreement.
Section 10.5. OTHER ACTIONS. Submission of a matter to arbitration
shall be a condition precedent to any right to institute a proceeding at law
or in equity concerning such matter, except for injunctive or other
provisional relief pending the arbitration of a matter subject to arbitration
pursuant to this Agreement.
ARTICLE XI.
TRUST ACCOUNTS
Section 11.1. TRUST AGREEMENTS. To provide for the prompt, due and
complete payment of the obligations of each Insurance Subsidiary to pay
reinsurance premiums to Zenith under this Agreement, each Insurance
Subsidiary shall establish, pursuant to a Trust Agreement, and maintain, for
the benefit of Zenith, a Trust Account into which certain assets are
transferred, conveyed and deposited into trust pursuant to the Trust
Agreement.
Section 11.2. TRUST ACCOUNTS. (a) Zenith and each of the Insurance
Subsidiaries agree that the assets in the Trust Accounts may be withdrawn by
Zenith in accordance with the procedures set forth in the Trust Agreements,
PROVIDED such assets are applied and utilized by Zenith (or any successor of
Zenith by operation of law, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of Zenith) without diminution because
of the insolvency of Zenith or any Insurance Subsidiary, to satisfy the
obligations of an Insurance Subsidiary to pay to Zenith any reinsurance
premium due to Zenith from such Insurance Subsidiary pursuant to this
Agreement.
(b) Zenith and each of the Insurance Subsidiaries agree that the
assets in the Trust Accounts may not be withdrawn by or for the benefit of
the Insurance Subsidiaries except as provided in the Trust Agreements.
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ARTICLE XII.
REPRESENTATIONS AND WARRANTIES OF INSURANCE SUBSIDIARIES
The Insurance Subsidiaries hereby represent and warrant to Zenith
that the following statements are true and correct as of the date hereof or
such other time as may be specified in such statements.
Section 12.1. SOLVENCY. After giving effect to the transactions
contemplated by this Agreement, the Insurance Subsidiaries, individually and
on a consolidated basis, are solvent, able to pay their debts as they mature,
have capital sufficient to carry on their businesses and all businesses in
which they are about to engage, and:
(i) the assets of the Insurance Subsidiaries, individually and on
a consolidated basis, at a fair evaluation, exceed the total
liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities other than any such liabilities
arising pursuant to Article IX of the Purchase Agreement) of
the Insurance Subsidiaries;
(ii) current projections which are based on underlying assumptions
which provide a reasonable basis for the projections and
which reflect the Insurance Subsidiaries' judgment based on
present circumstances, the most likely set of conditions and
the Insurance Subsidiaries most likely course of action for
the period projected, demonstrate that the Insurance
Subsidiaries, individually and on a consolidated basis, will
have sufficient cash flow to enable them to pay their debts
as they mature or the Insurance Subsidiaries are reasonably
satisfied that they will be able to refinance such debt at or
prior to maturity on commercial reasonable terms; and
(iii) the Insurance Subsidiaries, individually and on a
consolidated basis, do not have unreasonably small capital
base with which to engage in their anticipated businesses.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
Section 13.1. HEADINGS. Headings used herein are not a part of
this Agreement and shall not affect the terms hereof.
Section 13.2. NOTICES. All notices and communications hereunder
shall be in writing and shall be deemed given if delivered personally or sent
by overnight delivery service (providing for proof of delivery). All notices
or communications with Zenith under this Agreement shall be directed to:
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Zenith Insurance Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇
with copies to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
and
Florida Department of Insurance
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
All notices and communications with the Insurance Subsidiaries under this
Agreement shall be directed to:
RISCORP, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
with copies to:
▇▇▇▇▇▇ & Bird
One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Polsinelli, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
and
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Florida Department of Insurance
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Section 13.3. SEVERABILITY. If any term or provision of this
Agreement shall be held void, illegal or unenforceable, the validity of the
remaining portions or provisions shall not be affected thereby.
Section 13.4. SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned by either party without the prior written consent of the other. The
provisions of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors
and assigns as permitted herein.
Section 13.5. INTERPRETATION. For purposes of this Agreement, the
words "hereof," "herein," "hereby" and other words of similar import refer to
this Agreement as a whole unless otherwise indicated. Whenever the words
"include", "includes", or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation". Whenever the
singular is used herein, the same shall include the plural, and whenever the
plural is used herein. the same shall include the singular, where appropriate.
Section 13.6. EXECUTION IN COUNTERPARTS. This Agreement may be
executed by the parties hereto in any number of counterparts and by each of
the parties hereto in separate counterparts, each of which counterparts, when
so executed and delivered, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 13.7. AMENDMENTS; ENTIRE AGREEMENT. This Agreement may be
amended only by written agreement of the parties. This Agreement, together
with the Purchase Agreement and the Ancillary Agreements, supersedes all
prior discussions and written and oral agreements and constitutes the sole
and entire agreement between the parties with respect to the subject matter
hereof.
Section 13.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the date first
above written.
ZENITH INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chairman & President
RISCORP INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
RISCORP PROPERTY & CASUALTY
INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
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SCHEDULE A
REINSURANCE AGREEMENTS
1. Workers Compensation Quota Share Reinsurance Agreement (No. 2078-0001)
between RISCORP Insurance Company, RISCORP Property and Casualty
Insurance Company and American Re-Insurance Company effective as of
12:01 a.m. January 1, 1995.
2. Reinsurance Agreement between RISCORP Insurance Company, RISCORP
Property and Casualty Insurance Company and CNA.
SCHEDULE B
INITIAL INSUREDS
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[RISCORP TO PROVIDE]
EXHIBIT A
ENDORSEMENT
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This Endorsement is issued by Zenith Insurance Company, a California
stock insurance company (hereinafter "Reinsurer"), for the benefit of [ ]
(hereinafter "Payee"). This Endorsement is part of and shall attach to the
Interim Reinsurance Agreement by and among Reinsurer, RISCORP Insurance
Company and RISCORP Property & Casualty Insurance Company, effective as of
June 18, 1997 (hereinafter, "Reinsurance Agreement").
The Reinsurer and [ ], a Florida stock insurance company
(hereinafter, "Company"), have entered into the Reinsurance Agreement with
respect to the loss payment obligations under the Company's Policy Number
[ ](hereinafter "Policy") to the extent that such obligations relate to
losses occurring on or after June 18, 1997 ("reinsured losses"). Pursuant to
the Reinsurance Agreement, the Company and the Reinsurer have agreed as
follows:
1. In the event that the Company is declared insolvent under applicable
insurance law pursuant to court order, the Reinsurer shall become
liable to pay 100% of the reinsured losses directly to the Payee, or
other claimant under the Policy, as a direct beneficiary under the
Reinsurance Agreement. In addition, in such event, the Reinsurer shall
become liable to pay 100% of any return premiums due under the Policy.
2. The Reinsurer's obligation to make payments directly to the Payee or
other claimant pursuant to this Endorsement and the Reinsurance
Agreement shall be limited by the Company's liability under the terms,
limits and conditions contained in the Policy.
3. The Reinsurer's obligation to make payment directly to the Payee or
other claimant pursuant to this Endorsement and the Reinsurance
Agreement shall be conditioned on the Payee's agreement that the
Reinsurer shall be entitled to all rights of the Company under the
Policy, including but not limited to subrogation rights and any rights
the Company may have to collateral securing obligations arising under
the Policy. The Reinsurer's obligation to make such payment shall also
be conditioned on the Payee's agreement that the Reinsurer shall be
subrogated to all rights of the Payee against the Company and/or any
applicable guarantee funds.
4. The application of this Endorsement to the Reinsurance Agreement shall
terminate upon the cancellation of the Policy. In the event the
Reinsurance Agreement is terminated, this Endorsement shall survive
until the end of the Policy period in which the Endorsement was issued.
IN WITNESS WHEREOF Zenith Insurance Company has issued this
Endorsement on this day of , 1997.
ZENITH INSURANCE COMPANY
By:
-------------------------------
Name:
Title:
EXHIBIT B
UNDERWRITING GUIDELINES
-----------------------
Accounts with one or more of the following characteristics should not be
written without prior approval from Zenith.
1. Current year Loss Ratio in excess of 150%.
2. Two years of preceding 3 years with Loss Ratios in excess of 100%.
3. Gaps in coverage during the past 3 years.
4. Debtor in Possession (Chapter 11).
5. New Venture or Material Change in Ownership during past 12 months.
6. Level of Exposure not contemplated by classification.
7. More than 25% of Gross Receipts paid to Sub-Contractors.
8. Engage in the providing of Temporary Help to others or Employee Leasing.
9. Engaged in Interstate Trucking.
10. New and Renewal Retrospectively Rated Policies other than those in
accordance with agreed parameters and reported weekly to Zenith
11. New & Renewal Participating Policies other than those in accordance with
agreed parameters and reported weekly to Zenith.
12. New & Renewal Deferred Premium Plans other than those in accordance with
agreed parameters and reported weekly to Zenith.
13. New & Renewal Policies with Commissions greater than 10%.
14. New & Renewal Policies with Deposit Premiums of less than:
10% (if subsequent ▇▇▇▇▇▇▇▇ are monthly)
30% (if subsequent ▇▇▇▇▇▇▇▇ are quarterly)
60% (if subsequent billing is semi-annual)
100% (if no interim ▇▇▇▇▇▇▇▇)
EXECUTION COPY
7/8/97
==============================================================================
TRUST AGREEMENT
by and among
RISCORP INSURANCE COMPANY, as grantor,
and
ZENITH INSURANCE COMPANY, as beneficiary,
and
FIRST UNION NATIONAL BANK, as trustee
Dated as of June 18, 1997
==============================================================================
TRUST AGREEMENT
THIS TRUST AGREEMENT (this "Agreement"), dated as of June 18, 1997,
is entered into by and among RISCORP INSURANCE COMPANY, a stock insurance
company organized under the laws of the State of Florida ("Riscorp"), as
grantor, and ZENITH INSURANCE COMPANY, a stock insurance company organized
under the laws of the State of California ("Zenith"), as beneficiary, and
First Union National Bank, as trustee, a national banking association
organized and existing under the laws of the United States of America
("Trustee").
W I T N E S S E T H
WHEREAS, Zenith and Riscorp have entered into an Interim Reinsurance
Agreement dated as of June 18, 1997 (the "Reinsurance Agreement"), pursuant
to which Zenith has agreed to accept reinsurance ceded by Riscorp;
WHEREAS, Riscorp desires to establish a trust account hereunder and
deliver certain assets into trust for the benefit of Zenith to assure that
Zenith will have access to sufficient assets in the event that Riscorp
becomes unable to meet its obligations under the Reinsurance Agreement to pay
reinsurance premiums to Zenith;
WHEREAS, Trustee is willing to act as trustee of the trust account
to be established hereunder; and
WHEREAS, the Florida Department of Insurance (the "Department") has
approved this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and upon the terms and conditions set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the respective meanings set forth
below throughout the Agreement:
"AFFILIATE" means, with respect to any Person, at the time in
question, any other Person controlling, controlled by or under common control
with such Person.
"ASSETS" shall mean the assets of Riscorp, title to which is
transferred and delivered by Riscorp to the Trustee to be maintained by the
Trustee in the Trust Account, and held in trust for the sole and exclusive
benefit of Zenith, pursuant to this Agreement, and in which Riscorp has a
reversionary interest upon termination of this Agreement.
"AUTHORIZED INVESTMENTS" shall have the meaning set forth in Section
2.03 hereof.
"BOOK-ENTRY SYSTEM" shall mean a book-entry system for Authorized
Investments maintained at a clearing corporation (as defined in the Uniform
Commercial Code).
"BUSINESS DAY," for purposes of this Agreement, shall mean any day
which is not a Saturday, Sunday or other day on which banks located in the
State of Florida are authorized or required by law to remain closed. Any
payment due hereunder on a day that is not a Business Day shall be due and
payable on the next succeeding Business Day.
"CASH EQUIVALENTS" means, as of any particular date, money market
funds, marketable obligations issued or guaranteed by the United States
Government, certificates of deposit (not exceeding $100,000), bankers'
acceptances and other similar liquid investments, in each case with a
maturity date of not more than 90 days from the date on which any such
instrument is transferred pursuant to the terms of this Agreement, the market
value of which on the date of transfer will be counted as equivalent to cash
for purposes of satisfying the aggregate amount of cash and Cash Equivalents
required to be transferred as described in Section 2.01 hereof.
"CREDITED TO THE TRUST ACCOUNT" means: (a) in the case of
securities, (i) the making by the Trustee of an appropriate recordation on
the pertinent books and records of the Trustee that the Assets constituting
securities that are Delivered from time to time are being held in the Trust
Account, for the benefit of Zenith, and (ii) the sending by the Trustee, to
Zenith, of a written confirmation of the Delivery clearly identifying the
Delivered Assets by types, issuers, numbers, amounts, maturities and other
descriptions customary in the banking and securities industries; and (b) in
the case of cash, the deposit of cash Assets into the Trust Account. The
confirmation described in (a)(ii) above shall be forwarded to Zenith within
one (1) Business Day of the Delivery by the Trustee of Delivered Assets to
the Trust Account.
"DELIVER" means (A) in the case of Assets in the form of cash, to
transfer by wire to the Trustee, without any offset and free and clear of all
liens, claims and interests (other than any interest created by this
Agreement); and (B) in the case of Assets in the form of Authorized
Investments, the ownership of which is transferred by possession of a
physical certificate, delivery, free and clear of all liens, claims and
interests (other than the interest created by this Agreement) of a physical
certificate or certificates representing such Assets in suitable form for
delivery and transfer, either registered in the name of the party to whom
Delivery is effected, its nominee or accompanied by duly executed instruments
of transfer or assignment in blank, and, in any case, accompanied by any
required transfer tax stamps, or (C) in the case of Authorized Investments in
book-entry form, (i) the issuance by Riscorp or any other person of
entitlement orders or instructions appropriate to cause such Assets to be
credited by a clearing corporation, including, where appropriate, any Federal
Reserve Bank, to a securities account of the Trustee at such clearing
corporation; (ii) by the making by the relevant clearing corporation of an
appropriate recordation that such Assets have been credited to a securities
account of the Trustee at such clearing corporation; and (iii) the sending of
an appropriate confirmation from such clearing corporation to the Trustee
that it holds such Assets in such securities account. The terms "Delivery"
used as a noun or "Delivered" used as an adjective or participle have a
corresponding meaning.
"LIENS" shall mean any security interest, mortgage, pledge, charge,
hypothecation, assignment, encumbrance, lien (statutory or other), or
preference, priority or other security
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arrangement of any kind or nature whatsoever, and the filing of any financing
statement or similar instrument under the Uniform Commercial Code, the common
law or other applicable law of any jurisdiction, domestic foreign.
"PROCEEDS" shall mean, collectively: (a) any cash, instruments,
securities or other rights or property received from the sale, lease,
exchange or other disposition of any Assets, (b) any cash, instruments,
securities or other property collected on or with respect to any Assets,
whether in the ordinary course of business, upon realization on any Assets or
otherwise, including, without limitation, any payments of principal,
interest, premium or dividends with respect to the Assets, and (c) any
proceeds of any guaranty, indemnity, hold-harmless arrangement, letter of
credit, insurance, co-insurance or re-insurance covering all or any portion
of the Assets.
"REINSURANCE AGREEMENT" has the meaning set forth in the first
recital hereof.
"REINSURANCE OBLIGATIONS" shall mean all of Riscorp's now existing
and hereafter arising or assumed actual and contingent obligations and
liabilities to Zenith under the Transaction Documents, as the same may be
amended, modified, extended, supplemented and/or restated or novated from
time to time.
"RISCORP" shall have meaning set forth in the introductory paragraph.
"SECURITIES" means corporate securities with a rating of AA or
better by Standard & Poors Corporation, and any and all related security
entitlements. In determining whether any corporate securities are rated AA or
better by Standard & Poors Corporation, the Trustee shall be fully protected
in relying on any written advice of Zenith.
"TERMINATION CERTIFICATE" shall have the meaning set forth in
Section 6.02 hereof.
"TRANSACTION DOCUMENTS" shall mean, collectively this Agreement and
the Reinsurance Agreement.
"TREASURIES" means security entitlements in and to debt obligations,
having a maturity of not more than two years, of the United States Department
of the Treasury.
"TRUST ACCOUNT" shall have the meaning set forth in Section 2.01
hereof.
"TRUSTEE" shall have the meaning set forth in the introductory
paragraph hereof.
"WRITTEN NOTIFICATIONS" shall have the meaning set forth in Section
3.04 hereof.
"ZENITH" shall have the meaning set forth in the introductory
paragraph and in Section 6.05 hereof.
"ZENITH'S BENEFICIAL INTEREST" shall mean Zenith's beneficial
interest in the Assets, as set forth and limited herein.
-3-
ARTICLE II
PROVISIONS RELATING TO THE TRUST ACCOUNT
----------------------------------------
Section 2.01. ESTABLISHMENT OF TRUST ACCOUNT; INITIAL DELIVERY OF
ASSETS. The Trustee shall establish a trust account (the "Trust Account") in
the name of the Trustee, as trustee for the benefit of Zenith and such Trust
Account shall bear the designation "First Union National Bank, as trustee,
for the benefit of Zenith Insurance Company." Pursuant to the Reinsurance
Agreement and in accordance with the terms thereof, Riscorp agrees to Deliver
to the Trustee on the Business Day following the date of execution of this
Agreement and the Reinsurance Agreement cash, Cash Equivalents, Treasuries
and Securities with a market value of at least $35 million, and the Trustee
shall cause to be Credited to the Trust Account such amount. Riscorp hereby
transfers, assigns and conveys to the Trustee, for the benefit of Zenith, all
right, title and interest of Riscorp in the Assets in the Trust Account.
Section 2.02. AUTHORIZATION AND POWER OF TRUSTEE. Trustee and its
lawfully appointed successors are authorized and shall have the power to (a)
receive such additional Assets as Riscorp from time to time may transfer or
remit to or vest in Trustee or place in Trustee's hands or under Trustee's
control or such additional Assets as are otherwise deposited in the Trust
Account and (b) hold, invest, reinvest, manage and dispose of the same for
the uses and purposes and in the manner and according to the provisions
hereinafter set forth. All such Assets at all times shall be maintained as a
trust account, separate and distinct from all other assets of the Trustee and
Riscorp, and all Assets shall be continuously kept in a safe place at
Trustee's office within the United States of America.
Section 2.03. AUTHORIZED INVESTMENTS. Assets initially credited to
the Trust Account shall consist only of cash, Cash Equivalents, Treasuries
and Securities, and any investments and reinvestments thereof shall consist
only of cash, Cash Equivalents and Treasuries (the "Authorized Investments").
Section 2.04. ASSIGNMENTS AND ENDORSEMENTS. Zenith and Riscorp
shall, upon execution of this Agreement and from time to time thereafter as
required, execute assignments or endorsements in blank of all securities, or
other property, standing in the name of Riscorp, as appropriate which are
delivered to Trustee to form a part of the Trust Account so that, whenever
necessary, Assets held in the Trust Account can be negotiated as provided
herein without the consent or signature of Riscorp, or of any other person or
entity. Any Assets received by Trustee which are not in such proper
negotiable form shall not be accepted by Trustee and shall be returned to
Riscorp as unacceptable. In addition, Trustee may hold Assets of the Trust
Account in bearer form or in its own name or that of a nominee.
Section 2.05. REINVESTMENT OF PROCEEDS OF AUTHORIZED INVESTMENTS.
All proceeds, including payments of interest, dividends and, upon maturity,
principal actually received in respect of Assets in the Trust Account shall
be reinvested by the Trustee, at the direction of Riscorp, in cash, Cash
Equivalents and Treasuries, and Credited to the Trust Account.
-4-
Section 2.06. WITHDRAWALS. (a) Withdrawals from the Trust Account
may be made by or at the direction of Zenith at any time and from time to
time, with concurrent notice to, but without the necessity for any consent
of, Riscorp and the Department, solely for the purpose of paying reinsurance
premiums pursuant to the Reinsurance Agreement, upon the issuance by Zenith
of a written instruction to the Trustee. No other statements or documents
need be presented by Zenith in order to withdraw or direct the withdrawal of
Assets, except that, prior to the initial withdrawal, Zenith agrees that it
will present to the Trustee a certified copy of an order or other appropriate
document issued by a court or the Department declaring Riscorp insolvent
under applicable insurance law, and Zenith may be required by Trustee to
acknowledge receipt of withdrawn Assets. Upon receipt of an instruction from
Zenith directing a withdrawal, Trustee shall immediately take any and all
necessary steps to transfer absolutely and unequivocally to Zenith or as
otherwise directed by Zenith all right, title and interest in the Assets
being withdrawn, and to deliver the custody thereof to Zenith or as otherwise
directed by Zenith. Trustee shall be protected in relying upon any
instruction by Zenith for withdrawal of Assets.
(b) No withdrawals from the Trust Account may be made by, for
the benefit of, or at the direction of Riscorp, except upon the termination
of this Trust Agreement or, at the direction of Zenith, in accordance with
Section 3.04 of the Reinsurance Agreement.
Section 2.07. ACCOUNTINGS AND NOTICES. Trustee shall furnish to
Zenith and Riscorp an accounting of all Assets in the Trust Account upon its
inception and thereafter at intervals no less frequent than as of the end of
each month, valued in accordance with their current market value. Such
accounting shall be given as soon as practicable, but in no event later than
30 days after such date.
Section 2.08. CREDIT FOR ASSETS. Riscorp and Zenith agree that, so
long as Riscorp shall not be declared insolvent under applicable insurance
law pursuant to court order, the Assets shall be admitted assets of Riscorp.
ARTICLE III
PROVISIONS RELATING TO TRUSTEE
------------------------------
Section 3.01. QUALIFICATIONS. The Trustee shall be a bank or trust
company which is a member of the Federal Reserve System of the United States
of America with capital and surplus in excess of $1,000,000,000 and shall not
be an Affiliate of Zenith or Riscorp.
Section 3.02. COMPENSATION. The Trustee shall be entitled to
receive, as compensation for its services hereunder, an annual fee, computed
and payable quarterly in advance, at such rate as may be agreed from time to
time in writing between the Trustee and Riscorp. Riscorp shall be solely
responsible for the payment of the fee of the Trustee and all reasonable
expenses of the Trustee, including reasonable fees of counsel. The Trust
Account shall not be utilized for the payment of such fees and expenses
except in the event that Riscorp shall fail to pay such fees or expenses.
-5-
Section 3.03. FIDUCIARY RELATIONSHIP; LIABILITY. The Trustee shall
receive and hold all Assets transferred to it in a fiduciary capacity. The
Trustee shall be liable for the safekeeping of the Assets and administration
of the Trust Account in accordance with provisions of this Agreement. The
Trustee shall not be liable nor responsible for any loss to the Trust Account
unless such loss shall be caused by its own negligence, wilful misconduct or
lack of good faith or failure to comply with its obligations under this
Agreement.
Section 3.04. RELIANCE ON WRITTEN NOTIFICATIONS. Subject to its
obligations under Section 3.03 hereof, the Trustee shall be protected in
acting upon any Termination Certificate, statement, instruction, direction,
notice, resolution, request, consent, order, certificate, report, appraisal,
opinion, telegram, telex, letter or other paper or document (collectively,
"Written Notifications") believed by the Trustee to be genuine and to have
been signed, sent or presented by the proper party or parties. All Written
Notifications to the Trustee (unless otherwise provided therein) shall be
deemed to be effective when received by the Trustee.
Section 3.05. PROOF OF CERTAIN MATTERS. Whenever the Trustee, in
the administration of the Trust Account created by this Agreement, shall deem
it necessary or desirable that a matter be proved or established prior to
taking, suffering or omitting any action thereunder, such matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a Written Notification
signed by or on behalf of Zenith or Riscorp, as appropriate, and delivered to
the Trustee, and said Written Notification shall be full warrant to the
Trustee for any action taken, suffered or omitted by it on the faith thereof;
however, in its discretion, the Trustee may in lieu thereof accept other
evidence of the fact or matter or may require such other or additional
evidence as it may deem reasonable.
Section 3.06. DESIGNATION OF AUTHORIZED OFFICERS. Except when
otherwise expressly provided in this Agreement, any Written Notification to
be delivered or furnished by Zenith or Riscorp shall be sufficiently executed
if executed in the name of Zenith or Riscorp by such officer or officers of
Zenith or Riscorp or by such other agent or agents of Zenith or Riscorp as
may be designated in a resolution certified, or a letter of advice executed,
by an authorized officer of Zenith or Riscorp. Written notice of such
designation by Zenith or Riscorp shall be filed with the Trustee. The
Trustee shall be protected in acting upon any Written Notification made by
such officer or agent of Zenith or Riscorp with respect to the authority
conferred on him.
Section 3.07. RECORDS. The Trustee shall keep full and complete
records of the administration of the Trust Account. Zenith and/or Riscorp
may examine such records at any time during business hours. Such
examinations may be made by any person or persons duly authorized in writing
by Zenith or Riscorp.
Section 3.08. ACCEPTANCE OF TRUST; RESIGNATION. (a) The Trustee
hereby accepts the trust herein created and declared upon the terms herein
expressed.
(b) The Trustee may resign, by written resignation, effective
not less than 90 days after receipt thereof by Zenith and Riscorp, and Zenith
and Riscorp may remove the Trustee at any time, without assigning any cause
therefor, by the delivery to the Trustee of a written notice of removal
(executed by Zenith and Riscorp), effective not less than 90 days after
receipt by the
-6-
Trustee of the notice, provided that no such resignation or removal shall be
effective until a successor trustee has been appointed by Zenith and Riscorp
and has accepted such appointment and all Assets in the Trust Account have
been duly transferred to such successor trustee. In case of the appointment
of a successor trustee, all of the powers, rights and duties of Trustee named
herein shall survive and continue in the successor Trustee and every
successor Trustee shall succeed to, take and have all the estate, powers,
rights and duties which belonged to or were held by its predecessor. In the
case of the resignation or removal of a Trustee, such Trustee shall have the
right to a final accounting with respect to the Trust Account.
Section 3.09. ACKNOWLEDGMENT OF TRUST AND REPRESENTATIONS OF THE
TRUSTEE. The Trustee acknowledges receipt of notice of Zenith's Beneficial
Interest in the Assets, and the Trustee will ▇▇▇▇ its records, by book-entry
or otherwise, to indicate Zenith's Beneficial Interest in the Assets.
Without limiting the foregoing, the Trustee agrees to so ▇▇▇▇ its records
relating to the Trust Account and the securities and other investment
property and Assets Credited to the Trust Account. As of the date hereof:
(a) Zenith's Beneficial Interest in the Assets is identified on the books and
records of the Trustee, by book-entry or otherwise; (b) the Trustee has not
confirmed an interest in the Trust Account or the Assets Credited to the
Trust Account to any person other than to Zenith; and (c) the Trustee's
records do not indicate any claim to the Trust Account or the Assets Credited
to the Trust Account adverse to that of Zenith nor do they indicate any
person, other than Riscorp and Zenith, as having any interest in such Assets
or authority to issue instructions or entitlement orders with respect to such
Assets or the Trust Account. The Trustee will not take any action to permit
anyone other than Zenith simultaneously or subsequently to create or perfect
a security interest in the Assets or the Trust Account except as expressly
provided in Section 5.02 hereof. The Trustee also hereby subordinates in
favor of Zenith any contractual or statutory security interest or lien that
the Trustee may acquire with respect to the Assets or the Trust Account. In
connection with any investment or reinvestment of any amounts hereunder in
Authorized Investments to be held in the Trust Account, Riscorp and the
Trustee will take all steps necessary to ensure that such Authorized
Investments are Delivered to the Trustee and Credited to the Trust Account.
Pursuant to Zenith's agreement with Riscorp, under which, as between Zenith
and Riscorp, Zenith agrees that withdrawals may only be made to pay
reinsurance premiums due pursuant to the Reinsurance Agreement, the Trustee
is authorized and directed by Riscorp, and the Trustee hereby agrees with
Riscorp, to comply with and follow (without the necessity of obtaining
Riscorp's further consent) any instructions and entitlement orders that
Zenith may give with respect to the Trust Account or the Assets Credited to
the Trust Account. Until the Trustee receives written instructions from
Zenith to the contrary, the Trustee agrees not to permit or allow Riscorp to
redeem or to withdraw any of the Assets, or any income or proceeds derived or
to be derived therefrom.
Section 3.10. RELIANCE ON COUNSEL. The Trustee shall be fully
protected in relying on any written advice of counsel rendered in conjunction
with its duties hereunder.
-7-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RISCORP
-----------------------------------------
Section 4.01. FURTHER ASSURANCES. (a) Riscorp will give notice to
the Trustee and Zenith of, and defend the Assets against, any suit, action
or proceeding against the Assets or which could adversely affect the interest
of the Trustee or Zenith's Beneficial Interest therein.
(b) Riscorp hereby waives any and all rights of offset, recoupment
and counterclaim that it may now or hereafter have against any of the
Reinsurance Obligations.
(c) At any time and from time to time, upon the request of Zenith,
and at the sole expense of Riscorp, Riscorp will promptly and duly execute
and deliver any and all such further instruments, endorsements, powers of
attorney and other documents, make such filings, give such notices and take
such further action as Zenith may reasonably deem desirable in obtaining the
full benefits of the Transaction Documents and of the rights, remedies and
powers herein granted, including, without limitation, the following:
(i) the filing of any financing statements, in a form acceptable
to Zenith under the Uniform Commercial Code in effect in any
jurisdiction, with respect to the interests granted hereby. Riscorp
also hereby authorizes Zenith to file any such financing statement
without the signature of Riscorp to the extent permitted by applicable
law. A photocopy or other reproduction of this Agreement shall be
sufficient as a financing statement and may be filed in lieu of the
original to the extent permitted by applicable law. Riscorp will pay
or reimburse Zenith for all filing fees and related expenses;
(ii) making (or reimbursing Zenith upon demand for making) all
searches deemed necessary by Zenith to establish and determine the
priority of Zenith's Beneficial Interest or to determine the presence
or priority of other secured parties; and
(iii) furnishing to Zenith from time to time statements and
schedules further identifying and describing the Assets and such other
reports in connection with the Assets as Zenith may reasonably
request, all in reasonable detail and in form satisfactory to Zenith.
(d) Riscorp will not take or permit to be taken any action which
could impair Zenith's Beneficial Interest in the Assets.
(e) Riscorp will not create, incur or permit to exist, will defend
the Assets against, and will take such other action as is necessary to
remove, any Lien or claim on or to the Assets, other than the interests
created hereby and will defend the right, title and interest of the Trustee,
and Zenith in and to any of the Assets against the claims and demands of all
Persons whomsoever.
-8-
(f) Riscorp will not sell, transfer, lease or otherwise dispose of
any of the Assets, or attempt, offer or contract to do so, except as provided
hereunder.
(g) Riscorp will advise Zenith promptly, in reasonable detail, in
accordance with the provisions hereof: (i) of any Lien on, or claim asserted
against, any of the Assets and (ii) of the occurrence of any other event
which could reasonably be expected to have a material adverse effect on the
aggregate value of the Assets or on Zenith's Beneficial Interest created
hereunder.
Section 4.02 RECOURSE. Riscorp shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Assets are
insufficient to satisfy the Reinsurance Obligations. Riscorp shall also be
liable for all expenses of Zenith incurred in connection with collecting such
deficiency, including, without limitation, the fees and disbursements of any
attorneys employed by Zenith to collect such deficiency.
ARTICLE V
INDEMNITY
---------
Section 5.01. INDEMNITY. (a) Riscorp agrees to indemnify,
reimburse and hold the Trustee and Zenith, and their respective officers,
directors, employees, representatives and agents (hereinafter in this Section
referred to individually as "Indemnitee" and collectively as "Indemnitees")
harmless from any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, suits, and reasonable costs and
expenses, including reasonable fees of counsel) (for the purposes of this
Section the foregoing are collectively called "expenses") for whatsoever kind
or nature which may be imposed on, asserted against or incurred by any of the
Indemnitees in any way relating to or arising out of this Agreement or the
documents executed in connection herewith or in any other way connected with
the administration of the transactions contemplated hereby or the enforcement
of any of the terms of or the preservation of any rights hereunder, or in any
way relating to or arising out of the ownership, delivery, control,
acceptance, possession or other disposition of the Assets, the violation of
the laws of any country, state or other governmental body or unit, any tort
or any contract claim; provided, that Riscorp shall have no obligation to
reimburse Zenith for expenses of Zenith's counsel in connection with the
preparation and negotiation of this Agreement; provided, further, that no
indemnitee shall be indemnified pursuant to this Section for expenses to the
extent caused by the negligence or wilful misconduct of such Indemnitee.
Riscorp agrees that upon written notice by any Indemnitee of any assertion
that could give rise to an expense, Riscorp shall assume full responsibility
for the defense thereof. Each Indemnitee agrees to use its best efforts to
promptly notify Riscorp of any such assertion of which such Indemnitee has
knowledge. The indemnity provided by this Section shall survive the
termination of this Agreement.
(b) Without limiting the application of clause (a) of this Section,
Riscorp agrees to pay, or reimburse Zenith for any and all fees, costs and
expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection for Zenith's Beneficial Interest in, the
Assets, including, without limitation, all fees and taxes in connection with
the recording or filing of instruments and documents in public offices,
payment or discharge of any taxes or Liens upon or in respect of the Assets,
premiums for insurance with respect to the Assets and all other fees, costs
and expenses in connection with protection, maintaining or preserving the
Assets and Zenith's Beneficial
-9-
Interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of or
relating to the Assets.
(c) Without limiting the application of clauses (a) and (b) of this
Section, Riscorp agrees to pay, indemnify and hold each Indemnitee harmless
from and against any expenses which such Indemnitee may suffer, expend or
incur in consequence of or growing out of any misrepresentation by Riscorp in
this Agreement or in any statement or writing contemplated by or made or
delivered pursuant to or in connection with this Agreement.
(d) if and to the extent that the obligations of Riscorp under this
Section are unenforceable for any reason, Riscorp hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
Section 5.02. INDEMNITY OBLIGATIONS SECURED BY ASSETS; SURVIVAL.
Any amounts paid by any Indemnitee as to which such Indemnitee has the right
to reimbursement shall constitute obligations of Riscorp secured by the
Assets. The indemnity obligations of Riscorp contained in this Article shall
continue in full force and effect notwithstanding the full payment and
performance of the Reinsurance Obligations and notwithstanding the discharge
thereof.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.01. NOTICES. Any notice required or permitted hereunder
shall be in writing and shall be delivered personally (by courier or
otherwise), telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid. Any such notice
shall be deemed given when so delivered personally, telegraphed, telexed or
sent by facsimile transmission or, if mailed, three days after the date of
deposit in the United States mails, as follows:
(1) If to Zenith to:
Zenith Insurance Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
-10-
(2) If to Trustee to:
First Union National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a concurrent copy to:
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, Towers, Bailey, ▇▇▇▇▇ & Gay
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇)-▇▇▇-▇▇▇▇
(3) If to Riscorp to:
RISCORP, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
▇▇▇▇▇▇ & Bird
One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Polsinelli, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by notice given in accordance with this Agreement to
the other parties, designate another address or person for receipt of notices
hereunder.
-11-
Section 6.02. TERMINATION. This Agreement shall be terminated upon
Trustee's receipt of a certificate substantially in the form of Exhibit A
hereto (a "Termination Certificate") signed by a duly authorized officer of
Zenith and a duly authorized officer of Riscorp. Within 10 days of the
termination of this Agreement, Trustee shall transfer, pay over and deliver
to Zenith or Riscorp, as applicable, all right, title and interest in the
remaining assets of the Trust Account in exchange for a written receipt from
the receiving party. The Department shall, not less than 30 days prior to
Zenith's delivery of a Termination Certificate to the Trustee, be provided
with a copy of such Termination Certificate and notified in writing by Zenith
of its intention regarding termination of the Trust Account.
Section 6.03. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA AND, WITH RESPECT TO ANY
ASSETS CONSISTING OF AUTHORIZED INVESTMENTS THAT ARE SUBJECT TO FEDERAL "BOOK
ENTRY" REGULATIONS, BY FEDERAL LAW, WHICH INCORPORATES REVISED ARTICLE 8 OF
THE UNIFORM COMMERCIAL CODE.
Section 6.04. AMENDMENT. This Agreement may be amended at any time
by written agreement signed by Zenith and Riscorp and delivered to Trustee;
PROVIDED, HOWEVER, that no such amendment shall affect the powers, rights or
duties of Trustee without Trustee's written consent.
Section 6.05. AGREEMENT FOR BENEFIT OF ZENITH. This Agreement
shall be for the sole use and benefit of Zenith and the Trustee. The powers
conferred on Zenith hereunder are solely to protect Zenith's Beneficial
Interest in the Assets and shall not impose any duty upon Zenith to exercise
any such powers. Zenith shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither
Zenith nor any of its officers, directors, employees or agents shall be
responsible to Riscorp for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct. As used herein, the term
"Zenith" shall include any successor to Zenith by operation of law,
including, without limit, any liquidator, rehabilitator, receiver or
conservator.
Section 6.06. LIMITATION ON DUTIES REGARDING PRESERVATION OF ASSETS.
The sole duty of the Trustee with respect to the custody, safekeeping and
physical preservation of the Assets in its possession shall be to deal with
it in the same manner as the Trustee with similar property for its own
account. The Trustee shall not have any obligation to take any steps to
preserve rights against prior parties to any Assets. Neither the Trustee,
nor any of its respective directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon all or any part of the
Assets or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Assets upon the request of Riscorp or otherwise.
Section 6.07. WAIVER OF CLAIMS. Except as otherwise provided in this
Agreement, RISCORP HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE AND JUDICIAL HEARING IN CONNECTION WITH ZENITH'S TAKING POSSESSION OR
ZENITH'S DISPOSITION OF ANY OF THE ASSETS, INCLUDING, WITHOUT LIMITATION, ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY
-12-
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH RISCORP WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE STATES OR OF ANY
STATE, AND RISCORP HEREBY FURTHER WAIVES, TO THE EXTENT PERMITTED BY LAW:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the negligence or willful misconduct
of the Trustee or Zenith;
(b) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the rights of Zenith
hereunder;
(c) demand of performance or other demand, notice of intent to
demand or accelerate, notice of acceleration presentment, protest,
advertisement or notice of any kind to or upon Riscorp or any other Person;
and
(d) all rights of redemption, appraisement, valuation, diligence,
stay, extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement, the
absolute sale of the Assets or any portion thereof, and Riscorp, for itself
and all who may claim under it, insofar as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws.
Section 6.08. ENTIRE AGREEMENT. This Agreement is not subject to
any conditions or qualifications outside this Agreement. This Agreement
constitutes the entire agreement of the parties and no other documents will
be referred to or apply.
Section 6.09. COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed shall
be an original, but all such counterparts shall together constitute one and
the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the
parties hereto.
Section 6.10. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the successors and assigns of the parties hereto.
-13-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
ZENITH INSURANCE COMPANY, as beneficiary
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chairman & President
RISCORP INSURANCE COMPANY, as grantor
By /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
FIRST UNION NATIONAL BANK, as trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
-14-
Exhibit A
TERMINATION CERTIFICATE
Each of the undersigned, the [insert position] and a duly authorized
officer of Zenith Insurance Company ("Zenith"), the [insert position] and a
duly authorized officer of RISCORP Insurance Company ("RIC"), do hereby
certify as follows:
(1) The Interim Reinsurance Agreement dated as of June 18, 1997 by and
among Zenith and RIC and RISCORP Property & Casualty Insurance Company
has been terminated in accordance with the provisions thereof.
(2) The Trustee is directed to transfer all assets remaining in the Trust
Account as follows: [wire transfer instructions]
This Certificate is a "Termination Certificate" within the meaning of
Section 6.02 of the Trust Agreement dated as of June 18, 1997 entered into by
and among Zenith, RIC and First Union National Bank, as a trustee.
Dated:
------------------ ---------------------------------------
Name:
Title:
Zenith Insurance Company
Dated:
------------------ ---------------------------------------
Name:
Title:
RISCORP Insurance Company
EXECUTION COPY
7/10/97
=============================================================================
AMENDMENT NO. 1
to
TRUST AGREEMENT
by and among
RISCORP INSURANCE COMPANY, as grantor
and
ZENITH INSURANCE COMPANY, as beneficiary,
and
FIRST UNION NATIONAL BANK, as trustee
Dated as of June 18, 1997
=============================================================================
AMENDMENT NO. 1
to
TRUST AGREEMENT
---------------
THIS AMENDMENT NO. 1 TO TRUST AGREEMENT (this "Amendment No. 1"), dated
as of June 18, 1997, is entered into by and among RISCORP INSURANCE COMPANY,
a stock insurance company organized under the laws of the State of Florida
("Riscorp"), as grantor, and ZENITH INSURANCE COMPANY, a stock insurance
company organized under the laws of the State of California ("Zenith"), as
beneficiary, and FIRST UNION NATIONAL BANK, as trustee, a national banking
association organized and existing under the laws of United States of
America ("Trustee").
W I T N E S S E T H
-------------------
WHEREAS, Zenith and Riscorp have entered into an Interim Reinsurance
Agreement dated as of June 18, 1997 (the "Reinsurance Agreement"), pursuant
to which Zenith has agreed to accept reinsurance ceded by Riscorp.
WHEREAS, Zenith, Riscorp and Trustee have entered into a Trust Agreement
dated as of June 18, 1997 (the "Trust Agreement"), in order to establish a
trust account for the benefit of Zenith to assure that Zenith will have
access to sufficient assets in the event that Riscorp becomes unable to meet
its obligations under the Reinsurance Agreement to pay reinsurance premiums
to Zenith; and
WHEREAS, Zenith, Riscorp and Trustee desire to amend the Trust Agreement
as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and upon the terms and conditions set forth herein, the
parties hereto agree as follows:
ARTICLE I
AMENDMENTS
----------
Section 1.01. Article I of the Trust Agreement is hereby amended by
deleting the definition of "Securities" in its entirety and, in lieu thereof,
replacing it with the following definition of "Securities":
"SECURITIES" means securities with a rating of AA or better by Standard
& Poors Corporation, and any and all related security entitlements. In
determining whether any securities are rated AA or better by Standard & Poors
Corporation, the Trustee shall be fully protected in relying on any written
advice of Zenith.
Section 1.02. Article II, Section 2.01 of the Trust Agreement is hereby
amended by adding the word "second" on the sixth line thereof before the
words "Business Day."
ARTICLE II
MISCELLANEOUS
-------------
2.01. OTHER TERMS AND CONDITIONS RATIFIED AND CONFIRMED. Except as
amended in Article I above, all other terms and conditions of the Trust
Agreement are hereby ratified and confirmed by Zenith, Riscorp, and
Trustee, and shall remain in full force and effect.
2.02. COUNTERPARTS. This Amendment No. 1 may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be an
original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ZENITH INSURANCE COMPANY, as beneficiary
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chairman & President
RISCORP INSURANCE COMPANY, as grantor
By /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
FIRST UNION NATIONAL BANK, as trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
-2-
EXECUTION COPY
7/8/97
=============================================================================
TRUST AGREEMENT
by and among
RISCORP PROPERTY & CASUALTY INSURANCE COMPANY, as grantor,
and
ZENITH INSURANCE COMPANY, as beneficiary,
and
FIRST UNION NATIONAL BANK, as trustee
Dated as of June 18, 1997
===============================================================================
TRUST AGREEMENT
THIS TRUST AGREEMENT (this "Agreement"), dated as of June 18, 1997,
is entered into by and among RISCORP PROPERTY & CASUALTY INSURANCE COMPANY, a
stock insurance company organized under the laws of the State of Florida
("Riscorp"), as grantor, and ZENITH INSURANCE COMPANY, a stock insurance
company organized under the laws of the State of California ("Zenith"), as
beneficiary, and First Union National Bank, as trustee, a national banking
association organized and existing under the laws of the United States of
America ("Trustee").
W I T N E S S E T H
WHEREAS, Zenith and Riscorp have entered into an Interim Reinsurance
Agreement dated as of June 18, 1997 (the "Reinsurance Agreement"), pursuant
to which Zenith has agreed to accept reinsurance ceded by Riscorp;
WHEREAS, Riscorp desires to establish a trust account hereunder and
deliver certain assets into trust for the benefit of Zenith to assure that
Zenith will have access to sufficient assets in the event that Riscorp
becomes unable to meet its obligations under the Reinsurance Agreement to pay
reinsurance premiums to Zenith;
WHEREAS, Trustee is willing to act as trustee of the trust account
to be established hereunder; and
WHEREAS, the Florida Department of Insurance (the "Department") has
approved this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and upon the terms and conditions set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the respective meanings set forth
below throughout the Agreement:
"AFFILIATE" means, with respect to any Person, at the time in
question, any other Person controlling, controlled by or under common control
with such Person.
"ASSETS" shall mean the assets of Riscorp, title to which is
transferred and delivered by Riscorp to the Trustee to be maintained by the
Trustee in the Trust Account, and held in trust for the sole and exclusive
benefit of Zenith, pursuant to this Agreement, and in which Riscorp has a
reversionary interest upon termination of this Agreement.
"AUTHORIZED INVESTMENTS" shall have the meaning set forth in Section
2.03 hereof.
"BOOK-ENTRY SYSTEM" shall mean a book-entry system for Authorized
Investments maintained at a clearing corporation (as defined in the Uniform
Commercial Code).
"BUSINESS DAY," for purposes of this Agreement, shall mean any day
which is not a Saturday, Sunday or other day on which banks located in the
State of Florida are authorized or required by law to remain closed. Any
payment due hereunder on a day that is not a Business Day shall be due and
payable on the next succeeding Business Day.
"CASH EQUIVALENTS" means, as of any particular date, money market
funds, marketable obligations issued or guaranteed by the United States
Government, certificates of deposit (not exceeding $100,000), bankers'
acceptances and other similar liquid investments, in each case with a
maturity date of not more than 90 days from the date on which any such
instrument is transferred pursuant to the terms of this Agreement, the market
value of which on the date of transfer will be counted as equivalent to cash
for purposes of satisfying the aggregate amount of cash and Cash Equivalents
required to be transferred as described in Section 2.01 hereof.
"CREDITED TO THE TRUST ACCOUNT" means: (a) in the case of
securities, (i) the making by the Trustee of an appropriate recordation on
the pertinent books and records of the Trustee that the Assets constituting
securities that are Delivered from time to time are being held in the Trust
Account, for the benefit of Zenith, and (ii) the sending by the Trustee, to
Zenith, of a written confirmation of the Delivery clearly identifying the
Delivered Assets by types, issuers, numbers, amounts, maturities and other
descriptions customary in the banking and securities industries; and (b) in
the case of cash, the deposit of cash Assets into the Trust Account. The
confirmation described in (a)(ii) above shall be forwarded to Zenith within
one (1) Business Day of the Delivery by the Trustee of Delivered Assets to
the Trust Account.
"DELIVER" means (A) in the case of Assets in the form of cash, to
transfer by wire to the Trustee, without any offset and free and clear of all
liens, claims and interests (other than any interest created by this
Agreement); and (B) in the case of Assets in the form of Authorized
Investments, the ownership of which is transferred by possession of a
physical certificate, delivery, free and clear of all liens, claims and
interests (other than the interest created by this Agreement) of a physical
certificate or certificates representing such Assets in suitable form for
delivery and transfer, either registered in the name of the party to whom
Delivery is effected, its nominee or accompanied by duly executed instruments
of transfer or assignment in blank, and, in any case, accompanied by any
required transfer tax stamps, or (C) in the case of Authorized Investments in
book-entry form, (i) the issuance by Riscorp or any other person of
entitlement orders or instructions appropriate to cause such Assets to be
credited by a clearing corporation, including, where appropriate, any Federal
Reserve Bank, to a securities account of the Trustee at such clearing
corporation; (ii) by the making by the relevant clearing corporation of an
appropriate recordation that such Assets have been credited to a securities
account of the Trustee at such clearing corporation; and (iii) the sending of
an appropriate confirmation from such clearing corporation to the Trustee
that it holds such Assets in such securities account. The terms "Delivery"
used as a noun or "Delivered" used as an adjective or participle have a
corresponding meaning.
"LIENS" shall mean any security interest, mortgage, pledge, charge,
hypothecation, assignment, encumbrance, lien (statutory or other), or
preference, priority or other security
-2-
arrangement of any kind or nature whatsoever, and the filing of any financing
statement or similar instrument under the Uniform Commercial Code, the common
law or other applicable law of any jurisdiction, domestic foreign.
"PROCEEDS" shall mean, collectively: (a) any cash, instruments,
securities or other rights or property received from the sale, lease,
exchange or other disposition of any Assets, (b) any cash, instruments,
securities or other property collected on or with respect to any Assets,
whether in the ordinary course of business, upon realization on any Assets or
otherwise, including, without limitation, any payments of principal,
interest, premium or dividends with respect to the Assets, and (c) any
proceeds of any guaranty, indemnity, hold-harmless arrangement, letter of
credit, insurance, co-insurance or re-insurance covering all or any portion
of the Assets.
"REINSURANCE AGREEMENT" has the meaning set forth in the first
recital hereof.
"REINSURANCE OBLIGATIONS" shall mean all of Riscorp's now existing
and hereafter arising or assumed actual and contingent obligations and
liabilities to Zenith under the Transaction Documents, as the same may be
amended, modified, extended, supplemented and/or restated or novated from
time to time.
"RISCORP" shall have meaning set forth in the introductory paragraph.
"SECURITIES" means corporate securities with a rating of AA or
better by Standard & Poors Corporation, and any and all related security
entitlements. In determining whether any corporate securities are rated AA or
better by Standard & Poors Corporation, the Trustee shall be fully protected
in relying on any written advice of Zenith.
"TERMINATION CERTIFICATE" shall have the meaning set forth in
Section 6.02 hereof.
"TRANSACTION DOCUMENTS" shall mean, collectively this Agreement and
the Reinsurance Agreement.
"TREASURIES" means security entitlements in and to debt obligations,
having a maturity of not more than two years, of the United States Department
of the Treasury.
"TRUST ACCOUNT" shall have the meaning set forth in Section 2.01
hereof.
"TRUSTEE" shall have the meaning set forth in the introductory
paragraph hereof.
"WRITTEN NOTIFICATIONS" shall have the meaning set forth in Section
3.04 hereof.
"ZENITH" shall have the meaning set forth in the introductory
paragraph and in Section 6.05 hereof.
"ZENITH'S BENEFICIAL INTEREST" shall mean Zenith's beneficial
interest in the Assets, as set forth and limited herein.
-3-
ARTICLE II
PROVISIONS RELATING TO THE TRUST ACCOUNT
Section 2.01. ESTABLISHMENT OF TRUST ACCOUNT; INITIAL DELIVERY OF
ASSETS. The Trustee shall establish a trust account (the "Trust Account") in
the name of the Trustee, as trustee for the benefit of Zenith and such Trust
Account shall bear the designation "First Union National Bank, as trustee,
for the benefit of Zenith Insurance Company." Pursuant to the Reinsurance
Agreement and in accordance with the terms thereof, Riscorp agrees to Deliver
to the Trustee on the Business Day following the date of execution of this
Agreement and the Reinsurance Agreement cash, Cash Equivalents, Treasuries
and Securities with a market value of at least $15 million, and the Trustee
shall cause to be Credited to the Trust Account such amount. Riscorp hereby
transfers, assigns and conveys to the Trustee, for the benefit of Zenith, all
right, title and interest of Riscorp in the Assets in the Trust Account.
Section 2.02. AUTHORIZATION AND POWER OF TRUSTEE. Trustee and its
lawfully appointed successors are authorized and shall have the power to (a)
receive such additional Assets as Riscorp from time to time may transfer or
remit to or vest in Trustee or place in Trustee's hands or under Trustee's
control or such additional Assets as are otherwise deposited in the Trust
Account and (b) hold, invest, reinvest, manage and dispose of the same for
the uses and purposes and in the manner and according to the provisions
hereinafter set forth. All such Assets at all times shall be maintained as a
trust account, separate and distinct from all other assets of the Trustee and
Riscorp, and all Assets shall be continuously kept in a safe place at
Trustee's office within the United States of America.
Section 2.03. AUTHORIZED INVESTMENTS. Assets initially credited to
the Trust Account shall consist only of cash, Cash Equivalents, Treasuries
and Securities, and any investments and reinvestments thereof shall consist
only of cash, Cash Equivalents and Treasuries (the "Authorized Investments").
Section 2.04. ASSIGNMENTS AND ENDORSEMENTS. Zenith and Riscorp
shall, upon execution of this Agreement and from time to time thereafter as
required, execute assignments or endorsements in blank of all securities, or
other property, standing in the name of Riscorp, as appropriate which are
delivered to Trustee to form a part of the Trust Account so that, whenever
necessary, Assets held in the Trust Account can be negotiated as provided
herein without the consent or signature of Riscorp, or of any other person or
entity. Any Assets received by Trustee which are not in such proper
negotiable form shall not be accepted by Trustee and shall be returned to
Riscorp as unacceptable. In addition, Trustee may hold Assets of the Trust
Account in bearer form or in its own name or that of a nominee.
Section 2.05. REINVESTMENT OF PROCEEDS OF AUTHORIZED INVESTMENTS.
All proceeds, including payments of interest, dividends and, upon maturity,
principal actually received in respect of Assets in the Trust Account shall
be reinvested by the Trustee, at the direction of Riscorp, in cash, Cash
Equivalents and Treasuries, and Credited to the Trust Account.
-4-
Section 2.06. WITHDRAWALS. (a) Withdrawals from the Trust Account
may be made by or at the direction of Zenith at any time and from time to
time, with concurrent notice to, but without the necessity for any consent
of, Riscorp and the Department, solely for the purpose of paying reinsurance
premiums pursuant to the Reinsurance Agreement, upon the issuance by Zenith
of a written instruction to the Trustee. No other statements or documents
need be presented by Zenith in order to withdraw or direct the withdrawal of
Assets, except that, prior to the initial withdrawal, Zenith agrees that it
will present to the Trustee a certified copy of an order or other appropriate
document issued by a court or the Department declaring Riscorp insolvent
under applicable insurance law, and Zenith may be required by Trustee to
acknowledge receipt of withdrawn Assets. Upon receipt of an instruction from
Zenith directing a withdrawal, Trustee shall immediately take any and all
necessary steps to transfer absolutely and unequivocally to Zenith or as
otherwise directed by Zenith all right, title and interest in the Assets
being withdrawn, and to deliver the custody thereof to Zenith or as otherwise
directed by Zenith. Trustee shall be protected in relying upon any
instruction by Zenith for withdrawal of Assets.
(b) No withdrawals from the Trust Account may be made by, for
the benefit of, or at the direction of Riscorp, except upon the termination
of this Trust Agreement or, at the direction of Zenith, in accordance with
Section 3.04 of the Reinsurance Agreement.
Section 2.07. ACCOUNTINGS AND NOTICES. Trustee shall furnish to
Zenith and Riscorp an accounting of all Assets in the Trust Account upon its
inception and thereafter at intervals no less frequent than as of the end of
each month, valued in accordance with their current market value. Such
accounting shall be given as soon as practicable, but in no event later than
30 days after such date.
Section 2.08. CREDIT FOR ASSETS. Riscorp and Zenith agree that, so
long as Riscorp shall not be declared insolvent under applicable insurance
law pursuant to court order, the Assets shall be admitted assets of Riscorp.
ARTICLE III
PROVISIONS RELATING TO TRUSTEE
Section 3.01. QUALIFICATIONS. The Trustee shall be a bank or trust
company which is a member of the Federal Reserve System of the United States
of America with capital and surplus in excess of $1,000,000,000 and shall not
be an Affiliate of Zenith or Riscorp.
Section 3.02. COMPENSATION. The Trustee shall be entitled to
receive, as compensation for its services hereunder, an annual fee, computed
and payable quarterly in advance, at such rate as may be agreed from time to
time in writing between the Trustee and Riscorp. Riscorp shall be solely
responsible for the payment of the fee of the Trustee and all reasonable
expenses of the Trustee, including reasonable fees of counsel. The Trust
Account shall not be utilized for the payment of such fees and expenses
except in the event that Riscorp shall fail to pay such fees or expenses.
-5-
Section 3.03. FIDUCIARY RELATIONSHIP; LIABILITY. The Trustee shall
receive and hold all Assets transferred to it in a fiduciary capacity. The
Trustee shall be liable for the safekeeping of the Assets and administration
of the Trust Account in accordance with provisions of this Agreement. The
Trustee shall not be liable nor responsible for any loss to the Trust Account
unless such loss shall be caused by its own negligence, wilful misconduct or
lack of good faith or failure to comply with its obligations under this
Agreement.
Section 3.04. RELIANCE ON WRITTEN NOTIFICATIONS. Subject to its
obligations under Section 3.03 hereof, the Trustee shall be protected in
acting upon any Termination Certificate, statement, instruction, direction,
notice, resolution, request, consent, order, certificate, report, appraisal,
opinion, telegram, telex, letter or other paper or document (collectively,
"Written Notifications") believed by the Trustee to be genuine and to have
been signed, sent or presented by the proper party or parties. All Written
Notifications to the Trustee (unless otherwise provided therein) shall be
deemed to be effective when received by the Trustee.
Section 3.05. PROOF OF CERTAIN MATTERS. Whenever the Trustee, in
the administration of the Trust Account created by this Agreement, shall deem
it necessary or desirable that a matter be proved or established prior to
taking, suffering or omitting any action thereunder, such matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a Written Notification
signed by or on behalf of Zenith or Riscorp, as appropriate, and delivered to
the Trustee, and said Written Notification shall be full warrant to the
Trustee for any action taken, suffered or omitted by it on the faith thereof;
however, in its discretion, the Trustee may in lieu thereof accept other
evidence of the fact or matter or may require such other or additional
evidence as it may deem reasonable.
Section 3.06. DESIGNATION OF AUTHORIZED OFFICERS. Except when
otherwise expressly provided in this Agreement, any Written Notification to
be delivered or furnished by Zenith or Riscorp shall be sufficiently executed
if executed in the name of Zenith or Riscorp by such officer or officers of
Zenith or Riscorp or by such other agent or agents of Zenith or Riscorp as
may be designated in a resolution certified, or a letter of advice executed,
by an authorized officer of Zenith or Riscorp. Written notice of such
designation by Zenith or Riscorp shall be filed with the Trustee. The
Trustee shall be protected in acting upon any Written Notification made by
such officer or agent of Zenith or Riscorp with respect to the authority
conferred on him.
Section 3.07. RECORDS. The Trustee shall keep full and complete
records of the administration of the Trust Account. Zenith and/or Riscorp may
examine such records at any time during business hours. Such examinations may
be made by any person or persons duly authorized in writing by Zenith or
Riscorp.
Section 3.08. ACCEPTANCE OF TRUST; RESIGNATION. (a) The Trustee
hereby accepts the trust herein created and declared upon the terms herein
expressed.
(b) The Trustee may resign, by written resignation, effective
not less than 90 days after receipt thereof by Zenith and Riscorp, and Zenith
and Riscorp may remove the Trustee at any time, without assigning any cause
therefor, by the delivery to the Trustee of a written notice of removal
(executed by Zenith and Riscorp), effective not less than 90 days after
receipt by the
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Trustee of the notice, provided that no such resignation or removal shall be
effective until a successor trustee has been appointed by Zenith and Riscorp
and has accepted such appointment and all Assets in the Trust Account have
been duly transferred to such successor trustee. In case of the appointment
of a successor trustee, all of the powers, rights and duties of Trustee named
herein shall survive and continue in the successor Trustee and every
successor Trustee shall succeed to, take and have all the estate, powers,
rights and duties which belonged to or were held by its predecessor. In the
case of the resignation or removal of a Trustee, such Trustee shall have the
right to a final accounting with respect to the Trust Account.
Section 3.09. ACKNOWLEDGMENT OF TRUST AND REPRESENTATIONS OF THE
TRUSTEE. The Trustee acknowledges receipt of notice of Zenith's Beneficial
Interest in the Assets, and the Trustee will ▇▇▇▇ its records, by book-entry or
otherwise, to indicate Zenith's Beneficial Interest in the Assets. Without
limiting the foregoing, the Trustee agrees to so ▇▇▇▇ its records relating to
the Trust Account and the securities and other investment property and Assets
Credited to the Trust Account. As of the date hereof: (a) Zenith's Beneficial
Interest in the Assets is identified on the books and records of the Trustee, by
book-entry or otherwise; (b) the Trustee has not confirmed an interest in the
Trust Account or the Assets Credited to the Trust Account to any person other
than to Zenith; and (c) the Trustee's records do not indicate any claim to the
Trust Account or the Assets Credited to the Trust Account adverse to that of
Zenith nor do they indicate any person, other than Riscorp and Zenith, as having
any interest in such Assets or authority to issue instructions or entitlement
orders with respect to such Assets or the Trust Account. The Trustee will not
take any action to permit anyone other than Zenith simultaneously or
subsequently to create or perfect a security interest in the Assets or the Trust
Account except as expressly provided in Section 5.02 hereof. The Trustee also
hereby subordinates in favor of Zenith any contractual or statutory security
interest or lien that the Trustee may acquire with respect to the Assets or the
Trust Account. In connection with any investment or reinvestment of any amounts
hereunder in Authorized Investments to be held in the Trust Account, Riscorp and
the Trustee will take all steps necessary to ensure that such Authorized
Investments are Delivered to the Trustee and Credited to the Trust Account.
Pursuant to Zenith's agreement with Riscorp, under which, as between Zenith and
Riscorp, Zenith agrees that withdrawals may only be made to pay reinsurance
premiums due pursuant to the Reinsurance Agreement, the Trustee is authorized
and directed by Riscorp, and the Trustee hereby agrees with Riscorp, to comply
with and follow (without the necessity of obtaining Riscorp's further consent)
any instructions and entitlement orders that Zenith may give with respect to the
Trust Account or the Assets Credited to the Trust Account. Until the Trustee
receives written instructions from Zenith to the contrary, the Trustee agrees
not to permit or allow Riscorp to redeem or to withdraw any of the Assets, or
any income or proceeds derived or to be derived therefrom.
Section 3.10. RELIANCE ON COUNSEL. The Trustee shall be fully
protected in relying on any written advice of counsel rendered in conjunction
with its duties hereunder.
-7-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RISCORP
Section 4.01. FURTHER ASSURANCES. (a) Riscorp will give notice to
the Trustee and Zenith of, and defend the Assets against, any suit, action or
proceeding against the Assets or which could adversely affect the interest of
the Trustee or Zenith's Beneficial Interest therein.
(b) Riscorp hereby waives any and all rights of offset, recoupment and
counterclaim that it may now or hereafter have against any of the Reinsurance
Obligations.
(c) At any time and from time to time, upon the request of Zenith, and
at the sole expense of Riscorp, Riscorp will promptly and duly execute and
deliver any and all such further instruments, endorsements, powers of attorney
and other documents, make such filings, give such notices and take such further
action as Zenith may reasonably deem desirable in obtaining the full benefits of
the Transaction Documents and of the rights, remedies and powers herein granted,
including, without limitation, the following:
(i) the filing of any financing statements, in a form acceptable
to Zenith under the Uniform Commercial Code in effect in any
jurisdiction, with respect to the interests granted hereby. Riscorp
also hereby authorizes Zenith to file any such financing statement
without the signature of Riscorp to the extent permitted by applicable
law. A photocopy or other reproduction of this Agreement shall be
sufficient as a financing statement and may be filed in lieu of the
original to the extent permitted by applicable law. Riscorp will pay
or reimburse Zenith for all filing fees and related expenses;
(ii) making (or reimbursing Zenith upon demand for making) all
searches deemed necessary by Zenith to establish and determine the
priority of Zenith's Beneficial Interest or to determine the presence
or priority of other secured parties; and
(iii) furnishing to Zenith from time to time statements and
schedules further identifying and describing the Assets and such other
reports in connection with the Assets as Zenith may reasonably
request, all in reasonable detail and in form satisfactory to Zenith.
(d) Riscorp will not take or permit to be taken any action which could
impair Zenith's Beneficial Interest in the Assets.
(e) Riscorp will not create, incur or permit to exist, will defend the
Assets against, and will take such other action as is necessary to remove, any
Lien or claim on or to the Assets, other than the interests created hereby and
will defend the right, title and interest of the Trustee, and Zenith in and to
any of the Assets against the claims and demands of all Persons whomsoever.
-8-
(f) Riscorp will not sell, transfer, lease or otherwise dispose of any
of the Assets, or attempt, offer or contract to do so, except as provided
hereunder.
(g) Riscorp will advise Zenith promptly, in reasonable detail, in
accordance with the provisions hereof: (i) of any Lien on, or claim asserted
against, any of the Assets and (ii) of the occurrence of any other event which
could reasonably be expected to have a material adverse effect on the aggregate
value of the Assets or on Zenith's Beneficial Interest created hereunder.
Section 4.02 RECOURSE. Riscorp shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Assets are
insufficient to satisfy the Reinsurance Obligations. Riscorp shall also be
liable for all expenses of Zenith incurred in connection with collecting such
deficiency, including, without limitation, the fees and disbursements of any
attorneys employed by Zenith to collect such deficiency.
ARTICLE V
INDEMNITY
Section 5.01. INDEMNITY. (a) Riscorp agrees to indemnify, reimburse
and hold the Trustee and Zenith, and their respective officers, directors,
employees, representatives and agents (hereinafter in this Section referred to
individually as "Indemnitee" and collectively as "Indemnitees") harmless from
any and all liabilities, obligations, losses, damages, penalties, claims,
actions, judgments, suits, and reasonable costs and expenses, including
reasonable fees of counsel) (for the purposes of this Section the foregoing are
collectively called "expenses") for whatsoever kind or nature which may be
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement or the documents executed in
connection herewith or in any other way connected with the administration of
the transactions contemplated hereby or the enforcement of any of the terms of
or the preservation of any rights hereunder, or in any way relating to or
arising out of the ownership, delivery, control, acceptance, possession or other
disposition of the Assets, the violation of the laws of any country, state or
other governmental body or unit, any tort or any contract claim; provided, that
Riscorp shall have no obligation to reimburse Zenith for expenses of Zenith's
counsel in connection with the preparation and negotiation of this Agreement;
provided, further, that no indemnitee shall be indemnified pursuant to this
Section for expenses to the extent caused by the negligence or wilful misconduct
of such Indemnitee. Riscorp agrees that upon written notice by any Indemnitee
of any assertion that could give rise to an expense, Riscorp shall assume full
responsibility for the defense thereof. Each Indemnitee agrees to use its best
efforts to promptly notify Riscorp of any such assertion of which such
Indemnitee has knowledge. The indemnity provided by this Section shall survive
the termination of this Agreement.
(b) Without limiting the application of clause (a) of this Section,
Riscorp agrees to pay, or reimburse Zenith for any and all fees, costs and
expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection for Zenith's Beneficial Interest in, the
Assets, including, without limitation, all fees and taxes in connection with
the recording or filing of instruments and documents in public offices,
payment or discharge of any taxes or Liens upon or in respect of the Assets,
premiums for insurance with respect to the Assets and all other fees, costs
and expenses in connection with protection, maintaining or preserving the
Assets and Zenith's Beneficial
-9-
Interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of or
relating to the Assets.
(c) Without limiting the application of clauses (a) and (b) of this
Section, Riscorp agrees to pay, indemnify and hold each Indemnitee harmless from
and against any expenses which such Indemnitee may suffer, expend or incur in
consequence of or growing out of any misrepresentation by Riscorp in this
Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.
(d) if and to the extent that the obligations of Riscorp under this
Section are unenforceable for any reason, Riscorp hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations which
is permissible under applicable law.
Section 5.02. INDEMNITY OBLIGATIONS SECURED BY ASSETS; SURVIVAL. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute obligations of Riscorp secured by the Assets.
The indemnity obligations of Riscorp contained in this Article shall continue in
full force and effect notwithstanding the full payment and performance of the
Reinsurance Obligations and notwithstanding the discharge thereof.
ARTICLE VI
MISCELLANEOUS
Section 6.01. NOTICES. Any notice required or permitted hereunder
shall be in writing and shall be delivered personally (by courier or otherwise),
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, three days after the date of deposit in the United
States mails, as follows:
(1) If to Zenith to:
Zenith Insurance Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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(2) If to Trustee to:
First Union National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a concurrent copy to:
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, Towers, Bailey, ▇▇▇▇▇ & Gay
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇)-▇▇▇-▇▇▇▇
(3) If to Riscorp to:
RISCORP, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
▇▇▇▇▇▇ & Bird
One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Polsinelli, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by notice given in accordance with this Agreement to
the other parties, designate another address or person for receipt of notices
hereunder.
-11-
Section 6.02. TERMINATION. This Agreement shall be terminated upon
Trustee's receipt of a certificate substantially in the form of Exhibit A
hereto (a "Termination Certificate") signed by a duly authorized officer of
Zenith and a duly authorized officer of Riscorp. Within 10 days of the
termination of this Agreement, Trustee shall transfer, pay over and deliver
to Zenith or Riscorp, as applicable, all right, title and interest in the
remaining assets of the Trust Account in exchange for a written receipt from
the receiving party. The Department shall, not less than 30 days prior to
Zenith's delivery of a Termination Certificate to the Trustee, be provided
with a copy of such Termination Certificate and notified in writing by Zenith
of its intention regarding termination of the Trust Account.
Section 6.03. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA AND, WITH RESPECT TO ANY
ASSETS CONSISTING OF AUTHORIZED INVESTMENTS THAT ARE SUBJECT TO FEDERAL "BOOK
ENTRY" REGULATIONS, BY FEDERAL LAW, WHICH INCORPORATES REVISED ARTICLE 8 OF
THE UNIFORM COMMERCIAL CODE.
Section 6.04. AMENDMENT. This Agreement may be amended at any time
by written agreement signed by Zenith and Riscorp and delivered to Trustee;
PROVIDED, HOWEVER, that no such amendment shall affect the powers, rights or
duties of Trustee without Trustee's written consent.
Section 6.05. AGREEMENT FOR BENEFIT OF ZENITH. This Agreement shall
be for the sole use and benefit of Zenith and the Trustee. The powers conferred
on Zenith hereunder are solely to protect Zenith's Beneficial Interest in the
Assets and shall not impose any duty upon Zenith to exercise any such powers.
Zenith shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers, and neither Zenith nor any of its
officers, directors, employees or agents shall be responsible to Riscorp for any
act or failure to act hereunder, except for their own gross negligence or
willful misconduct. As used herein, the term "Zenith" shall include any
successor to Zenith by operation of law, including, without limit, any
liquidator, rehabilitator, receiver or conservator.
Section 6.06. LIMITATION ON DUTIES REGARDING PRESERVATION OF ASSETS.
The sole duty of the Trustee with respect to the custody, safekeeping and
physical preservation of the Assets in its possession shall be to deal with it
in the same manner as the Trustee with similar property for its own account.
The Trustee shall not have any obligation to take any steps to preserve rights
against prior parties to any Assets. Neither the Trustee, nor any of its
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon all or any part of the Assets or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Assets upon the request of Riscorp or otherwise.
Section 6.07. WAIVER OF CLAIMS. Except as otherwise provided in this
Agreement, RISCORP HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE AND JUDICIAL HEARING IN CONNECTION WITH ZENITH'S TAKING POSSESSION OR
ZENITH'S DISPOSITION OF ANY OF THE ASSETS, INCLUDING, WITHOUT LIMITATION, ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY
-12-
PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH RISCORP WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE STATES OR OF ANY
STATE, AND RISCORP HEREBY FURTHER WAIVES, TO THE EXTENT PERMITTED BY LAW:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the negligence or willful misconduct of
the Trustee or Zenith;
(b) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the rights of Zenith
hereunder;
(c) demand of performance or other demand, notice of intent to demand
or accelerate, notice of acceleration presentment, protest, advertisement or
notice of any kind to or upon Riscorp or any other Person; and
(d) all rights of redemption, appraisement, valuation, diligence,
stay, extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement, the absolute
sale of the Assets or any portion thereof, and Riscorp, for itself and all who
may claim under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws.
Section 6.08. ENTIRE AGREEMENT. This Agreement is not subject to any
conditions or qualifications outside this Agreement. This Agreement constitutes
the entire agreement of the parties and no other documents will be referred to
or apply.
Section 6.09. COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
Section 6.10. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the successors and assigns of the parties hereto.
-13-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ZENITH INSURANCE COMPANY, as beneficiary
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chairman & President
RISCORP PROPERTY & CASUALTY
INSURANCE COMPANY, as grantor
By /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
FIRST UNION NATIONAL BANK, as trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
-14-
Exhibit A
TERMINATION CERTIFICATE
Each of the undersigned, the [insert position] and a duly authorized
officer of Zenith Insurance Company ("Zenith"), the [insert position] and a
duly authorized officer of RISCORP Property & Casualty Insurance Company
("RP&C"), do hereby certify as follows:
(1) The Interim Reinsurance Agreement dated as of June 18, 1997 by and
among Zenith and RISCORP Insurance Company and RP&C has been
terminated in accordance with the provisions thereof.
(2) The Trustee is directed to transfer all assets remaining in the Trust
Account as follows: [wire transfer instructions]
This Certificate is a "Termination Certificate" within the meaning of
Section 6.02 of the Trust Agreement dated as of June 18, 1997 entered into by
and among Zenith, RP&C and First Union National Bank, as a trustee.
Dated: _______________________ ________________________________
Name:
Title:
Zenith Insurance Company
Dated: _______________________ ________________________________
Name:
Title:
RISCORP Property & Casualty
Insurance Company
EXECUTION COPY
7/10/97
===============================================================================
AMENDMENT NO. 1
to
TRUST AGREEMENT
by and among
RISCORP PROPERTY & CASUALTY INSURANCE COMPANY, as grantor,
and
ZENITH INSURANCE COMPANY, as beneficiary,
and
FIRST UNION NATIONAL BANK, as trustee
Dated as of June 18, 1997
===============================================================================
AMENDMENT NO. 1
to
TRUST AGREEMENT
THIS AMENDMENT NO. 1 TO TRUST AGREEMENT (this "Amendment No. 1"),
dated as of June 18, 1997, is entered into by and among RISCORP PROPERTY &
CASUALTY INSURANCE COMPANY, a stock insurance company organized under the laws
of the State of Florida ("Riscorp"), as grantor, and ZENITH INSURANCE COMPANY, a
stock insurance company organized under the laws of the State of California
("Zenith"), as beneficiary, and FIRST UNION NATIONAL BANK, as trustee, a
national banking association organized and existing under the laws of the United
States of America ("Trustee").
W I T N E S S E T H
WHEREAS, Zenith and Riscorp have entered into an Interim Reinsurance
Agreement dated as of June 18, 1997 (the "Reinsurance Agreement"), pursuant to
which Zenith has agreed to accept reinsurance ceded by Riscorp;
WHEREAS, Zenith, Riscorp and Trustee have entered into a Trust
Agreement dated as of June 18, 1997 (the "Trust Agreement"), in order to
establish a trust account for the benefit of Zenith to assure that Zenith will
have access to sufficient assets in the event that Riscorp becomes unable to
meet its obligations under the Reinsurance Agreement to pay reinsurance premiums
to Zenith; and
WHEREAS, Zenith Riscorp and Trustee desire to amend the Trust
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and upon the terms and conditions set forth herein,
the parties hereto agree as follows:
ARTICLE I
AMENDMENTS
Section 1.01. Article I of the Trust Agreement is hereby amended by
deleting the definition of "Securities" in its entirety and, in lieu
thereof, replacing it with the following definition of "Securities":
"SECURITIES" means securities with a rating of AA or better by
Standard & Poors Corporation, and any and all related security entitlements.
In determining whether any securities are rated AA or better by Standard &
Poors Corporation, the Trustee shall be fully protected in relying on any
written advice of Zenith.
Section 1.02. Article II, Section 2.01 of the Trust Agreement is
hereby amended by adding the word "second" on the sixth line thereof before
the words "Business Day."
ARTICLE II
MISCELLANEOUS
2.01. OTHER TERMS AND CONDITIONS RATIFIED AND CONFIRMED. Except as
amended in Article I above, all other terms and conditions of the Trust
Agreement are hereby ratified and confirmed by Zenith, Riscorp and Trustee, and
shall remain in full force and effect.
2.02. COUNTERPARTS. This Amendment No. 1 may be executed by the
parties hereto in separate counterparts, each of which when so executed shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ZENITH INSURANCE COMPANY, as beneficiary
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chairman & President
RISCORP PROPERTY & CASUALTY INSURANCE
COMPANY, as grantor
By /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
FIRST UNION NATIONAL BANK, as trustee
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
-2-
