NOTE OFFSET AND CALL OPTION AGREEMENT
Exhibit 10.37
This Note Offset and Call Option Agreement (this “Agreement”) is made
and entered into as of the 29th day of July, 2004, by and between SunCoast Holdings,
Inc., a Delaware corporation (the “Company”), Guarantee Insurance Company, a South
Carolina corporation (“Guarantee”) and Westwind Holding Company, LLC, a Florida limited
liability company (“Westwind”).
Statement Of Purpose
Contemporaneously with the execution of this Agreement, Westwind is purchasing 195,694 shares
of the Series A Common Stock of the Company and Westwind, with Caledonian Reinsurance SPC
Segregated Portfolio 110 (“SP110”), is entering into that certain Participation Agreement (the
"Participation Agreement”) and that certain Segregated Portfolio 110 Subscription Agreement (the
"Subscription Agreement”). Under the terms of the Participation Agreement and the Subscription
Agreement, Westwind will participate in the results of the reinsurance business of SP110 and is
obligated to contribute to SP110 funds in an amount up to 20% of the gross premium written by
Guarantee, an indirect wholly-owned subsidiary of the Company, and reinsured by SP110 (the “Gross
Premium”). Contemporaneously with the execution of this Agreement, Westwind is providing surplus
funds of $500,000 (the “Surplus Contribution”) to Guarantee, and such Surplus Contribution is to be
repaid by Guarantee pursuant to a promissory note (the “Surplus Note”), to be executed and
delivered to Westwind by Guarantee. Westwind is also obligated under the terms of the Participation
Agreement and the Subscription Agreement to contribute additional funds to maintain its
participation in SP110 at an amount up to, but not to exceed, 20% of Gross Premium. In conjunction
with and as further consideration for the Company to issue the Series A Common Stock of the Company
to Westwind and for Guarantee to cede reinsurance to SP110, which is subject to Westwind’s
obligations under the Participation Agreement and the Subscription Agreement, Westwind has agreed
to grant the Company an option to purchase certain of the above-described shares of Series A Common
Stock of the Company owned by Westwind in accordance with the terms and conditions set forth
herein.
Now, Therefore, in consideration of the foregoing Statement of Purpose, the mutual
covenants hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Grant Of Option. Subject to the terms and conditions set forth in this Agreement,
Westwind hereby grants to the Company the option (the “Option”) to purchase from Westwind up to
195,694 shares in the aggregate of Westwind’s Series A Common Stock of the Company (the “Option
Shares”), which Option vests immediately upon execution of this Agreement by the parties hereto.
The Option shall be exercisable in accordance with Section 4 below. The number of Option Shares
shall be subject to adjustment pursuant to Section 3 below.
2. Option Price Per Share. The price of each of the Option Shares to be purchased and
sold pursuant to the exercise or partial exercise of the Option shall be $0.001 (the
“Option Price Per Share”). The Option Price Per Share shall be subject to adjustment pursuant to
Section 3 below.
3. Adjustment
Of Option Shares And Option Price Per Share. If there is any change in
the common stock of the Company after the effective date hereof, whether by reason of declaration
of a stock split or stock dividend or by reason of the subdivision, combination or reclassification
of shares or by reason of any liquidation, recapitalization, reorganization, merger, consolidation
or sale of assets of the Company, the number of Option Shares as to which the Company has not
exercised the Option shall be appropriately and equitably adjusted, and the Option Price Per Share
of the said Option Shares, as adjusted, shall be determined by dividing the total option price
required to purchase all of the Option Shares as to which the Option had not been exercised
immediately prior to the said adjustment by the total number of Option Shares as to which the
Option had not been exercised immediately after the said adjustment.
4. Offset Against Note. In the event that from time to time the Company receives
notice from Caledonian Reinsurance SPC, or any of its affiliates, that Westwind is in default of
its payment obligations to fund SP110 pursuant to the Participation Agreement or the Subscription
Agreement, then, notwithstanding any provision to the contrary set forth in this Agreement or the
Surplus Note, Guarantee shall have the sole and absolute right immediately to offset against and
reduce from the accrued interest and outstanding principal amount of the Surplus Note an amount
equal to such default, and in such event Guarantee shall have no further obligation to pay Westwind
any such amount(s) so offset from such Surplus Note. Westwind shall have the right to designate
whether any appropriate offset on the Surplus Note shall be applied toward principal, interest or a
combination thereof.
5. Exercise of Option; Procedure; Payment Terms.
(a) The Company shall be entitled to exercise the Option in whole or in part from time to time
upon notice from Caledonian Reinsurance SPC, or any of its affiliates, to the Company that Westwind
is in default of its payment obligations to fund SP110 pursuant to the Participation Agreement or
the Subscription Agreement and the full amount of such default is not satisfied pursuant to Section
4 above. The number of Option Shares that the Company may elect to purchase at any one time with
respect to any such exercise of the Option shall be equal to the quotient of (i) divided by (ii)
where (i) is the amount of the deficit that Westwind has failed to fund and which gives rise to its
default under the Participation Agreement or the Subscription Agreement (after giving effect to any
offset against any Surplus Notes pursuant to Section 4 above) and (ii) is $10.22.
(b) To exercise the Option, the Company shall give written notice of exercise to Westwind (the
"Option Notice”), setting forth in such notice the number (which must be a whole number) of Option
Shares that the Company elects to purchase and the purchase price applicable to such purchase (the
"Purchase Price”), which Purchase Price shall be in the amount equal to the product of (i)
multiplied by (ii) where (i) is the number of Option Shares that the Company elects to purchase
pursuant to such exercise and (ii) is the Option Price Per Share.
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(c) Contemporaneously upon giving an Option Notice to Westwind and as a condition to each such
exercise, the Company shall deliver to Westwind a cashier’s or bank check made payable to the order
of Westwind in the full amount of the Purchase Price.
(d) Contemporaneously with the execution of this Agreement, Westwind shall deliver a stock
power duly executed in blank in form satisfactory to the Company sufficient to transfer ownership
of the Option Shares to the Company upon exercise of the Option by the Company. The Company shall
maintain possession of the stock certificates representing the Option Shares until the later of the
exercise in full of the Option by the Company or the termination of this Agreement. Westwind hereby
irrevocably appoints the Company as its attorney-in-fact to transfer ownership of the Option Shares
on the books and records of the Company upon exercise by the Company of the Option, and Westwind
acknowledges that this power of attorney is irrevocable and coupled with an interest.
(e) Upon each exercise or partial exercise of the Option in accordance with the provisions of
this Section 4, the Company shall be entitled to transfer to the Company the Option Shares as to
which the Option is exercised and to deliver to the Secretary of the Company certificates
representing the same for cancellation thereof.
6. Legend.
(a) Concurrently with the execution of this Agreement, Westwind shall cause to be imprinted or
otherwise placed on the certificates representing the Option Shares the following restrictive
legend (the “Legend”):
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A NOTE OFFSET AND CALL OPTION AGREEMENT, DATED JULY 29, 2004,
WHICH PLACES CERTAIN TRANSFER OBLIGATIONS ON THE HOLDER OF THIS CERTIFICATE.
ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO
AND SHALL BE BOUND BY ALL OF THE PROVISIONS OF SUCH NOTE OFFSET AND CALL
OPTION AGREEMENT.”
(b) Westwind agrees that during the term of the Agreement it will not cause or permit the
removal of the Legend from any such certificate for the Option Shares with respect to which it is
the holder and will cause the Legend to be placed on any new certificate issued to represent the
Option Shares.
7. Termination. This Agreement shall terminate on the date which is ninety (90) days
after termination of all of Westwind’s obligations to fund SP110 under the Participation Agreement
and the Subscription Agreement.
8. Miscellaneous.
(a) Status as Stockholder. Nothing herein is intended to or shall give the Company any
right or status of any kind as a stockholder of the Company in respect of any of the Option
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Shares unless and until the Option Shares have been delivered to the Company pursuant to the
exercise or partial exercise of the Option.
(b) Further Assurances. The Company and Westwind agree to execute and deliver such
other documents or agreements and to take such other action as may be reasonably necessary or
desirable for the implementation of this Agreement and the consummation of the transactions
contemplated hereby.
(c) Entire Agreement; Amendments and Waivers. This Agreement represents the entire
understanding and agreement between the parties hereto with respect to the subject matter hereof.
This Agreement may be amended, supplemented or changed, and any provision hereof may be waived,
only by written instrument making specific reference to this Agreement signed by the party against
whom enforcement of any such amendment, supplement, modification or waiver is sought. The waiver by
any party hereto of a breach of any provision of this Agreement shall not operate or be construed
as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.
No failure on the part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof.
(d) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.
(e) Notices. All notices required or permitted hereunder shall be in writing and shall
be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then
on the next business day; (iii) five (5) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (iv) one (1) day after deposit with a
nationally recognized overnight courier for next day delivery. All communications shall be sent to
the Company and Westwind at their respective addresses set forth below or at such other address as
the Company or Westwind may designate for it by ten (10) days’ advance written notice to the other
party hereto.
If to the Company:
If to Westwind:
Westwind Holding Company, LLC
Attn:
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(f) Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
(g) Binding Effect; Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
(h) Counterparts; Facsimile Signature. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument, and may be executed by means of
signatures transmitted by facsimile.
[Signatures appear on the following page.]
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In Witness Whereof, the parties hereto have caused this Note Offset and Call
Option Agreement to be executed by their duly authorized representatives as of the date first
above written.
| COMPANY: | Suncoast Holdings, Inc. | |||||||
| By: |  |
|||||||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| GUARANTEE: | Guarantee Insurance Company | |||||||
| By: |  |
|||||||
| ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| WESTWIND: | Westwind Holding Company, LLC | |||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
In Witness Whereof, the parties hereto have caused this Note Offset and Call
Option Agreement to be executed by their duly authorized representatives as of the date first
above written.
| COMPANY: | Suncoast Holdings, Inc. | |||||||
| By: | ||||||||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| GUARANTEE: | Guarantee Insurance Company | |||||||
| By: | ||||||||
| ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| WESTWIND: | Westwind Holding Company, LLC | |||||||
| By: |  |
|||||||
| Name: | ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||||||
| Title: | President | |||||||
AMENDMENT TO NOTE OFFSET AND CALL OPTION AGREEMENT
This Amendment to Note Offset and Call Option Agreement (this “Amendment”) is made
and entered into as of the 2 day of November, 2004, by and between Suncoast Holdings, Inc,
a Delaware corporation (the “Company”), Guarantee Insurance Company, a South Carolina
corporation (“Guarantee”) and Westwind Holding Company, LLC, a Florida limited liability
company (“Westwind”).
Statement
of Purpose
On July 29, 2004, the parties hereto entered into that certain Note Offset and Call Option
Agreement, (the “Call Option Agreement”) pursuant to which Westwind granted the Company an option
to purchase 195,694 shares of Series A Common Stock of the Company owned by Westwind in accordance
with the terms and conditions set forth therein. Contemporaneously with the execution of this
Amendment, Westwind is purchasing an additional 19,569 shares of the Series A Common Stock of the
Company (the “Additional Shares”). In conjunction with and as further consideration for the Company
to issue the Additional Shares to Westwind, Westwind has agreed to grant the Company an option to
purchase the Additional Shares by amending the Call Option Agreement in accordance with the terms
and conditions set forth herein.
Now, Therefore, in consideration of the foregoing Statement of Purpose, the mutual
covenants hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree that (i) the Call
Option Agreement is hereby amended by deleting the phrase “195,694 shares” wherever such phrase
appears in the Call Option Agreement and by substituting in lieu thereof the phrase “215,263
shares” and (ii) the defined term “Option Shares” as used in the Call Option Agreement shall be
deemed to include the Additional Shares wherever such term is used in the Call Option Agreement.
Except as amended hereby, the Call Option Agreement is hereby ratified and confirmed and shall
continue is full force and effect.
[Signatures appear on the following page.]
In Witness Whereof, the parties hereto have caused this Amendment to Note Offset
and Call Option Agreement to be executed by their duly authorized representatives as of the
date first above written.
| COMPANY: | Suncoast Holdings, Inc. | |||||||
| By: | |
|||||||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| GUARANTEE: | Guarantee Insurance Company | |||||||
| By: | |
|||||||
| ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| WESTWIND: | Westwind Holding Company, LLC | |||||||
| By: | ||||||||
| ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | ||||||||
| President | ||||||||
In Witness Whereof, the parties hereto have caused this Amendment to Note Offset
and Call Option Agreement to be executed by their duly authorized representatives as of the
date first above written.
| COMPANY: | Suncoast Holdings, Inc. | |||||||
| By: | ||||||||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| GUARANTEE: | Guarantee Insurance Company | |||||||
| By: | ||||||||
| ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | ||||||||
| President | ||||||||
| WESTWIND: | Westwind Holding Company, LLC | |||||||
| By: | |
|||||||
| ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | ||||||||
| President | ||||||||