<PAGE> 1
Exhibit 10.1
INSURANCE ADMINISTRATION AND SERVICES AGREEMENT
TERMINATION AND INTERIM SERVICES ADDENDUM
(the "Addendum")
Effective as of August 1, 2000 (the "Addendum Effective Date")
WHEREAS, Insurance Management Solutions, Inc. (the "Administrator"),
International Catastrophe Insurance Managers, LLC (the "General Agent") and
Clarendon National Insurance Company (the "Company"; the Administrator, the
General Agent and the Company are hereinafter collectively referred to as the
"Parties") entered into an Insurance Administration and Services Agreement
effective as of April 1, 1999 (the "Policy Administration Agreement"), for the
supervision and administration by the Administrator on behalf of the General
Agent of the Company's policies (the "Policies"; individually a "Policy")
produced by the General Agent pursuant to the General Agency Agreement between
the Company and the General Agent dated as of October 1, 1998 (the "Agency
Agreement"); and
WHEREAS, the Parties desire that the General Agent assume the
supervision and administration of the Policies; that until the General Agent
assumes all aspects of such supervision and administration, the Administrator
remain responsible for the performance of certain duties and responsibilities
with respect to the Policies; and that upon the General Agent's assumption of
such supervision and administration, but in no event later than February 1,
2001, the Policy Administration Agreement be terminated.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Addendum, the Parties agree as follows:
I. MODIFICATION AND CONTINUED EFFECTIVENESS OF POLICY ADMINISTRATION
AGREEMENT.
As of the Addendum Effective Date:
(a) the Administrator shall perform certain duties as set forth in
SCHEDULE A, "ADMINISTRATOR'S RESPONSIBILITIES; FEES", attached
hereto and forming part of this Addendum, which duties are set
forth in the column titled "Process/Function" in SCHEDULE A;
(b) the Administrator shall perform each Process/Function set
forth in SCHEDULE A in accordance with the requirements set
forth in the column titled "Specific Requirements" in SCHEDULE
A;
Page 1 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 2
(c) in the event the Administrator fails to perform its
Process/Functions in accordance with the Specific
Requirements, as set forth on the column titled "Definition of
Failure" in SCHEDULE A, then in such event the Administrator
shall be liable for fees (hereinafter "Fees") as are provided
in SCHEDULE A;
(d) all Fees incurred in excess of one thousand ($1,000) dollars
per calendar month ("Excess Fees") shall be credited or paid
as follows:
(i) in the event the outstanding principal due under a
certain Secured Promissory Note (the "Note") of even
date attached hereto as SCHEDULE B and forming part
of this Addendum exceeds fifty thousand ($50,000)
dollars, such Excess Fees shall be applied against
the Note and shall reduce the principal balance to
the extent of such Excess Fees;
(ii) in the event the outstanding principal balance of the
Note is equal to or less than $50,000, any Excess
Fees in an amount up to $50,000 shall reduce the
principal balance to the extent of such Excess Fees,
and the balance, if any, shall be payable to ICAT
upon demand;
(iii) in the event the Note is paid in full, any Excess
Fees shall be payable to ICAT upon demand, however in
no event shall Excess Fees payable to ICAT in any
calendar month exceed $50,000, and IMS shall be
excused from payment of any Excess Fees incurred
during any calendar month after the Note is paid in
full to the extent such Excess Fees exceed $50,000;
and
(iv) notwithstanding anything herein to the contrary, in
the event and to the extent ICAT shall be in default
under the Note, Excess Fees shall not be applied
against the Note or payable to ICAT;
(e) in the event IMS fails to provide any report to ICAT, as
requested in writing by ICAT, during the term of this
Agreement, such obligation shall survive the termination of
this Agreement;
(f) to the extent that any provision of the Policy Administration
Agreement conflicts with any provision of SCHEDULE A, the
provision of SCHEDULE A shall govern;
Page 2 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 3
(g) the Administrator's authority to issue binders or Policies
under the Policy Administration Agreement is hereby
terminated;
(h) the obligation of the General Agent to pay, and the right of
the Administrator to receive, a Servicing Fee pursuant to
Article 2 of the Policy Administration Agreement is hereby
terminated;
(i) Article 7 of the Policy Administration Agreement is hereby
amended by changing the address of the General Agent to the
following:
International Catastrophe Insurance Managers, LLC
2995 Wilderness Place, Suite 1NE
Boulder, Colorado 80301
Attention: Edmund J. Kelly, Chief Financial Officer
and
(j) all other provisions of the Policy Administration Agreement,
to the extent they do not conflict with any provision of this
Addendum, including without limitation any Schedule hereto,
shall remain in full force and effect until the Termination
Date, as defined below.
II. TERMINATION DATE.
The Policy Administration Agreement shall terminate on the Termination
Date, which shall be the earlier of:
(a) the date that the General Agent gives written notice to the
other Parties that it will assume all responsibilities to
administer and service the Policies;
(b) the date that the Policy Administration Agreement is
terminated in accordance with the provisions of Section 8.2
thereof; or
(c) February 1, 2001.
III. FINANCING.
IMS agrees to advance the sum of five hundred thousand ($500,000)
dollars to ICAT in four equal weekly installments of one hundred twenty
five thousand ($125,000) dollars, the first installment to be advanced
to ICAT no later than the
Page 3 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 4
Addendum Effective Date, and the second, third and fourth installments
to be advanced to ICAT no later than one, two and three weeks,
respectively, from the Addendum Effective Date. To secure the repayment
of such advances, ICAT shall execute and deliver to IMS a Note in the
form attached hereto as SCHEDULE B and a Security Agreement attached
hereto as SCHEDULE C. In the event IMS fails to advance the foregoing
sums, or any part thereof, to ICAT, then in such event ICAT, upon
notice to IMS, may terminate this Addendum ab initio.
IV. LATE CHARGE.
Any Excess Fees payable to ICAT pursuant to Section I, paragraph (d)
(ii) and (iii) hereof not received by ICAT within ten (10) days of
ICAT's demand therefor shall be subject to, and it is agreed that ICAT
shall collect thereon and therewith a "late charge" in the amount of
three (3%) per cent of the payment upon any and all such delinquent
Excess Fees. Said "late charge" shall be immediately due and payable
upon demand.
V. CLAIMS ADMINISTRATION AGREEMENT.
Nothing in this Addendum shall affect the Claims Administration
Agreement between the Parties dated as of December 8, 1999 (the "Claims
Administration Agreement"), which shall remain in full force and effect
unless and until the authority of the Administrator thereunder is
suspended, or the Claims Administration Agreement is terminated, in
accordance with the provisions thereof.
VI. RELEASES; CONFIDENTIALITY.
(a) Release of Administrator by General Agent and Company.
The General Agent and the Company hereby release and forever
discharge the Administrator, its subsidiaries and affiliated
entities, and their respective officers, directors, employees,
agents, representatives and attorneys, and their respective
successors and assigns, and each and all thereof, from and
after the Addendum Effective Date from any and all manner of
demands, debts, dues, sums of money, accounts, claims, bonds,
bills, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, actions, suits,
judgments and executions, whatsoever, direct or indirect,
which the General Agent or the
Page 4 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 5
Company, their subsidiaries and affiliated entities, and their
respective officers, directors, employees, representatives and
agents, and their respective successors and assigns, and each
and all thereof, ever had or has as of the Addendum Effective
Date, as a result of being a party to the Policy
Administration Agreement, or otherwise arising out of or
relating to the Policy Administration Agreement; PROVIDED,
HOWEVER, that this paragraph does NOT release the
Administrator, its subsidiaries and affiliated entities, and
their respective officers, directors, employees, agents,
representatives and attorneys and their respective successors
and assigns, from any claim arising from or in connection
with:
(i) this Addendum, including without limitation any
Schedule hereto;
(ii) the Claims Administration Agreement, including
without limitation any provision thereunder which
concerns or involves the use by the Administrator or
transmission by the Administrator to a person or
entity not a party to the Claims Administration
Agreement of any data respecting a Policy or
Policies;
(iii) any provision of the Policy Administration Agreement
respecting Trust Funds, as defined in Section 9.3 of
the Policy Administration Agreement, regardless of
whether such claim arose before, on or after the
Addendum Effective Date; and
(iv) any provision of the Policy Administration Agreement,
as modified by this Addendum, where such claim arises
after the Addendum Effective Date.
(b) Release of General Agent and Company by Administrator.
The Administrator hereby releases and forever discharges the
General Agent and the Company, their subsidiaries and
affiliated entities, and their respective officers, directors,
employees, agents, representatives and attorneys, and their
respective successors and assigns, and each and all thereof,
from and after the Addendum Effective Date from any and all
manner of demands, debts, dues, sums of money, accounts,
claims, bonds, bills, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, actions,
suits, judgments and executions, whatsoever, direct or
indirect, which the Administrator, its subsidiaries and
affiliated entities, and their respective officers, directors,
employees, representatives and agents, and their respective
successors and assigns, and each and all thereof, ever had or
has as of the
Page 5 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 6
Addendum Effective Date, as a result of being a party to the
Policy Administration Agreement, or otherwise arising out of
or relating to the Policy Administration Agreement; PROVIDED,
HOWEVER, that this paragraph does NOT release the General
Agent and the Company, their subsidiaries and affiliated
entities, and their respective officers, directors, employees,
agents, representatives and attorneys and their respective
successors and assigns, from any claim arising from or in
connection with:
(i) this Addendum, including without limitation any
Schedule hereto;
(ii) the Claims Administration Agreement; and
(iii) any provision of the Policy Administration Agreement,
as modified by this Addendum, where such claim arises
after the Addendum Effective Date.
(c) Releases Freely and Voluntarily Executed, etc.
The mutual releases contained in this Section VI are freely
and voluntarily executed by the Parties hereto, and each Party
acknowledges that it has been advised by its own attorneys,
and has performed its own investigation of all relevant
information and data necessary to make an informed decision
prior to executing this Addendum. The Parties executing this
Addendum do not rely on any inducements, silence, promises or
representations made by the other Parties hereto (or their
attorneys, agents, employees or other representatives), except
for promises and representations contained within this
Addendum. Furthermore, no inducement, promise or
representation has been made by any Party hereto, except as
set forth herein.
(d) No Other Releases.
The provisions hereof are not intended to effect, and shall
not be construed as effecting, any release of the General
Agent by the Company or of the Company by the General Agent.
(e) Confidentiality.
The Parties agree to keep the existence and terms of this
Addendum confidential. No information concerning this Addendum
may be disclosed to any person or entity not a party to this
Addendum (other than persons or entities with a need to know
any such information, including without
Page 6 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 7
limitation: reinsurers of the Company; directors, officers and
employees of any of the Parties; investment bankers, investors
and lendors of the General Agent; and members of the General
Agent's Advisory Council) except:
(i) pursuant to the advance written approval of the other
Parties; or
(ii) pursuant to any order of any court, or any statute,
regulation or order of any governmental authority,
having jurisdiction, compelling such disclosure.
IN WITNESS WHEREOF, the parties have executed this Addendum through their duly
authorized officers as of the day and year first above written.
For and on behalf of the
Administrator: INSURANCE MANAGEMENT SOLUTIONS, INC.
By: _________________________
For and on behalf of the
General Agent: INTERNATIONAL CATASTROPHE
INSURANCE MANAGERS, LLC
By: __________________________
For and on behalf of the
Company: CLARENDON NATIONAL INSURANCE
COMPANY
By: __________________________
Page 7 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 8
SCHEDULE A: ADMINISTRATOR'S RESPONSIBILITIES; FEES
<TABLE>
<CAPTION>
PROCESS/FUNCTION SPECIFIC REQUIREMENTS DEFINITION OF FAILURE
<S> <C> <C>
1 Billing - Processing of Timely and accurate billing to insured with Non-timely mailing of the billing
endorsements/cancellations copy to agent and ICAT for endorsements and statement; inaccurate information on
cancellations; needs to be mailed within 2 statement including: inaccurate insured,
business days of receipt from ICAT. agency, amount, mailing address or
policy number; duplicate processing of
the change; improper distribution, etc.
2 Billing - Wholesalers Timely and accurate billing to wholesalers Non-timely mailing of statements to
for new and renewal business bound by ICAT; inaccurate information on
wholesaler. Draft wholesaler statements statements including: inaccurate
forwarded and received by ICAT by 5th insured, agency, amount, mailing address
business day of the month not to exceed the or policy number; duplicate processing
10th calendar of the month. ICAT of the change, improper distribution,
edited/approved wholesaler statements mailed calculation of commission, etc.
by the 10th of the month via overnight
delivery within 1 business day after ICAT
has provided edits to IMSG. ICAT mails to
wholesalers and charges mailing costs back
to IMSG.
3 Billing - Installment Timely and accurate billing of installment Non-timely mailing to insured;
Payments payments. Billings to be mailed to insured inaccurate information on statement
30 days prior to due date. including: inaccurate insured name,
mailing address, amount due, policy
number; duplicate processing of
installment payment, improper
distribution, past due and/or
cancellation notice improperly sent due
to late processing into AS400, etc.
4 Disbursements - Agency Timely and accurate production of commission Non-timely production of commission
Commission Statements and statements to retailers. Draft retailer statements and checks to retailers;
Checks statements forwarded to and received by inaccurate information on statement or
ICAT by the 5th business day of the month not checks including: inaccurate insured or
to exceed the 10th calendar day of the month. agency name, commission amount, mailing
ICAT edited retailer commission statements and address, policy number, improper
checks mailed to ICAT via overnight delivery distribution, etc.
within 1 business day after ICAT has provided
edits to IMSG. ICAT mails to retailers and
charges mailing costs back to IMSG.
5 Disbursements - Refunds on Timely processing within 5 business days of Non-timely processing; inaccurate
Cancellations/Endorsements request received from ICAT, and accurate information on statement including:
disbursement to agency. Disbursements to inaccurate insured or agency name,
retailers must be mailed within 10 business mailing address, policy number,
days of receipt from ICAT. Disbursements to duplicate processing of the change,
wholesalers must be included in monthly improper distribution, etc.
statement.
</TABLE>
Page 8 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 9
<TABLE>
<CAPTION>
PROCESS/FUNCTION SPECIFIC REQUIREMENTS DEFINITION OF FAILURE
<S> <C> <C>
6 Collections - EFT for Timely and accurate sweeping of retailers' Non-timely processing of EFT; inaccurate
Retailers accounts. Sweep within 5 business days of amount swept, incorrect agency, policy
receipt of policy data from ICAT. IMSG will number, multiple sweeps, no notification
notify ICAT of rejected bank information to ICAT of unsuccessful sweep, etc. Non-
within 1 business day from the date IMSG is timely or inaccurate processing of
advised of the rejection. Resubmitted EFT to application of cash.
be done within 3 business days after being
provided with corrected EFT information from
ICAT. Correct processing of application of
cash to system within the same time frame.
7 Collections - Retailers Maintain a post office box for daily Non-timely depositing or processing of
(Installment Billings) collection and deposit of payments cash collected; inaccurate posting of
received within 1 business day of receipt; payment, inaccurate amount due, agency,
correct processing of application of cash to policy number, duplicate billing,
system. If no paperwork is provided, incorrect past due notice sent; deposit
processing of payment will be delayed one of cash into an incorrect bank account,
business day. If unable to determine how to etc. Non-timely notification to ICAT of
process payment, ICAT will be notified after inability to process payment.
2nd business day.
8 Collections - Retailers Daily collection and deposit of payments Non-timely deposit of returned
(Return Commissions) received within 1 business days of receipt; commission, late posting of payment,
correct processing of application of cash to posting incorrect amount, agency or
system within same time frame. The foregoing insured name, policy number, etc.
time frame shall apply to payments received Non-timely notification to ICAT as
with proper documentation provided by regards to exception processing
Retailer. If proper documentation is not requirements.
provided, then "exception processing" time
frame applies: Posting and deposit will occur
within 2 business days after receipt of
inadequately documented payment; in any event,
if documentation cannot be reconciled by IMSG,
IMSG will notify ICAT within 3 business days
that reconciliation cannot be completed within
the "exception processing" time frame.
9 Collections - Application of Timely and accurate application of cash Non-timely deposit of cash received from
Cash from Wholesalers received from wholesalers. Checks deposited wholesalers; Non timely application of
within 2 business days of receipt. cash to policy; inaccurate posting of
Application of cash received will be applied amount received, commission taken,
to individual policies within 2 business days agency or insured name, policy number,
and up to 3 business days for those accounts etc. Non-timely communication of any
with exceptions. Any unresolved exceptions unresolved exceptions to ICAT.
will be communicated, including all relevant
documentation, within 4 business days to ICAT
for follow-up with the agency.
10 Collections - Cash Timely and accurate transmittal of cash due Non-timely settlement; inaccurate amount
Settlement to ICAT ICAT; minimum of weekly transmission from transmitted; improper bank account
PTA to designated ICAT operating account; credited.
transmission to ICAT Boulder account within 1
business day of request. Settlement due on
Monday evening for all activity processed
through the preceding Friday. If Monday is a
holiday, the next business day will be used.
</TABLE>
Page 9 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 10
<TABLE>
<CAPTION>
PROCESS/FUNCTION SPECIFIC REQUIREMENTS DEFINITION OF FAILURE
<S> <C> <C>
11 Reporting - CNIC Statistical reporting for all ICAT products Non-timely or inaccurate reports.
(BOP, Property, EQ & Wind) by state to
Clarendon (ISO specs) and the FWUA, quarterly
and annually as required. Reporting is
required to meet all calendar year 2000
requirements. ICAT will provide appropriate
clarification to IMSG as to the content and
the timing of the required reports, as
requested by IMSG.
12 Reporting - Reinsurers Timely (to meet all monthly, quarterly and Non-timely or inaccurate reports.
annual reporting requirements) providing of
information required to enable ICAT to prepare
reinsurance reports. IMSG will provide all
required information to enable ICAT to prepare
the reinsurance reports required to meet the
calendar year 2000 requirements, regardless of
the date the transition period is terminated.
IMSG will be given 15 business days from
request of data to provide such data to ICAT.
13 Reporting - Premium Taxes, Timely submission of information required Non-timely or inaccurate reports.
Boards, Bureaus and Fees for ICAT and CNIC to meet all quarterly and
annual reporting for premium taxes, boards,
bureaus and fee reports in the various states
that ICAT has business through calendar year
2000. IMSG will be given 15 business days from
request of data to provide such data to ICAT.
14 Reporting - 1099's Timely (For ICAT to meet annual reporting Non-timely or inaccurate reports.
requirements) and accurate preparation of
all 1099 related reporting submitted to ICAT
for approval prior to January 25, 2001.
15 Reporting - Aging Daily EFT activity report on activity for the Non-timely or inaccurate reports.
Receivable Reports for previous business day. This report will
EFT's, Installment Billing, include all EFT transactions completed for
and Account Currents the day, those awaiting completion, any
failed EFT's (NSF) awaiting to be resubmitted
and an analysis for any unusual activity. A
monthly accounts receivable aging report on
all collections activity by agency and insured
(for installment payments). This report should
also include an analysis discussing the nature
of any overdue items. Monthly aging reports
received by ICAT by the 5th business day for
the previous month activity.
16 Reporting - Cancellation Monthly report on all pending and executed Non-timely or inaccurate reports.
Reports cancellations to be received by ICAT by the
5th business day after the end of the month
under consideration. Copies of the individual
cancellation notices to be provided to ICAT
within 1 business day of the date issued by
IMSG. Please refer to list of reports in the
detailed business requirements for TX, CA and
FL.
</TABLE>
Page 10 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 11
<TABLE>
<CAPTION>
PROCESS/FUNCTION SPECIFIC REQUIREMENTS DEFINITION OF FAILURE
<S> <C> <C>
17 Other - Claims "Ensure all policy data required for claims Non-timely or inaccurate reports.
is entered into system on a daily basis.
18 Other - Correspondence Upon request from ICAT, ICAT must have
access to copies of all correspondence sent by Copies not provided to ICAT or access
IMSG to Producers and/or insureds, i.e. unavailable.
cancellation notices, billing notices,
commission statements, within 2 business days
of ICAT's request. Electronic access to images
is acceptable.
19 Other - Correspondence ICAT must receive copies of all Non-timely receipt of correspondence by ICAT.
correspondence from Producers within 2
business days of receipt by IMSG.
20 Service - Accounting Daily access to an Accounting/Customer Access unavailable; untimely follow up
Service Representative. Response from IMSG response to inquiries.
within 1 business day for any outstanding cash
issues or customer service queries.
21 Service - I/S Access to an Account Manager and Product Access unavailable.
Coordinator to manage all ICAT services and
responds to problems within 1 business day.
22 I/S - Web Hosting Transfer Transition the icatmanagers.com domain Non-timely transition.
name to ICAT Managers (Change Request filed
6/9/00).
23 I/S - Complete Policy IMSG will implement the policy administration Non-compliance.
Administration Systems system and process policies submitted by
Required During the ICAT for CA, OR, WA, TX, FL, AL, MS, NC, and
Interim Period SC seventy-five calendar days after the
filing for the state under consideration is
received by IMSG from ICAT and the DBR's and
functional specifications are agreed upon
between IMSG and ICAT. The DBR and functional
specifications will be completed following the
IMSG SDLC utilizing a joint effort between
ICAT and IMSG. The responsibility for the
creation, writing and ultimate completion of
the DBR's is IMSG's. ICAT's responsibility in
the creation of the DBR's and functional
specifications shall be limited to providing
IMSG with the state filing and ICAT's DBR's
pertaining to that state's website. ICAT will
also make staff readily available to IMSG to
answer questions and to provide additional
documentation reasonably requested by IMSG.
ICAT will complete its review within 3
business days of receipt of the DBR's and the
functional specifications from IMSG. In any
event, it is agreed that IMSG will complete
the DBR's and
</TABLE>
Page 11 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 12
<TABLE>
<CAPTION>
PROCESS/FUNCTION SPECIFIC REQUIREMENTS DEFINITION OF FAILURE
<S> <C> <C>
I/S - Complete Policy functional specifications within 10 business
Administration Systems days of receipt of the state filing, or so
Required During the deemed for purposes of determining whether
Interim Period (continued) the 75 calendar day time frame has been met.
It is agreed that not more than 2 states shall
be in the DBR/functional development stage at
any point in time. ICAT shall determine which
two states shall be in that stage should more
than two exist at one time. Notwithstanding
the foregoing, the implementation of the
policy administration system for CA, FL and TX
shall occur not later than September 15, 2000,
and MS and AL not later than October 15, 2000.
24 Change Requests IMSG will implement all change requests Non-compliance.
within 10 business days after receipt of a
signed request from ICAT. IMSG will utilize
the SDLC change request process for all
changes requested. All changes to the policy
administration system, database files,
website, forms, and rating will require an
implementation date agreed upon by both IMSG
and ICAT. However, ongoing web maintenance,
i.e., scripts run in production, establishing
databases, installing new databases from
backups, moving Cold Fusion files and
directories, mid-day backups, etc., are
critical to managing ICAT's production
website. Such activities will be completed as
soon as reasonably possible, but in no event
more than 2 business days from the date of the
request from ICAT, and such requests can be
made by phone or email.
25 Policy Issuance: New, ICAT will continue to bill IMSG for policy Nonpayment of invoices within 10 business
Renewal, Endorsements, processing; including postage, labor, days.
Cancellations equipment and supplies needed to process
policies during the transition period. Monthly
charge-back from ICAT to IMSG is not to exceed
$5,000, or the actual amount, whichever is
less.
</TABLE>
The term "business day" as used herein shall mean all work days, not including
nationally recognized bank holidays and weekends. For purposes of this document,
data received by IMSG after 2:00pm Eastern Time will be deemed "received" on the
following business day.
Page 12 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 13
FEES
Fees for failures as defined above will be assessed as follows.
1. Non-timely failures and access unavailable will result in a deduction to the
outstanding loan amount due IMSG of $100 per day per policy for all Fees
applicable to each policy.
2. Inaccuracies will result in a deduction to the outstanding loan amount due
IMSG of $100 per policy not to exceed $100 per day per policy for all Fees
applicable to each policy.
3. Non-compliance will result in a deduction to the outstanding loan amount due
IMSG of $1000 per day.
4. Any penalties, late fees, etc., assessed ICAT from local, state or federal
agencies will result in a deduction to the outstanding loan amount due IMSG
for the amount assessed if such penalties, late fees, etc., were caused by
IMSG as a result of not performing under the Interim Services Agreement.
5. In the event that Fees reach $10,000 in the aggregate, all subsequent Fees
will double in amount.
6. In the event IMSG incorrectly returns policy fees and/or inspection fees,
IMSG will reimburse ICAT for the fees incorrectly returned. IMSG shall have
no right against ICAT, its Producers, or its policyholders to recover such
fees.
7. It is agreed that IMSG shall have a Fee allowance of $1,000 per month; i.e.,
the first $1,000 of Fees incurred by IMSG, per month, shall be waived and
forgiven.
ICAT will provide timely notification to IMSG of any failures and prepare a
monthly report summarizing the failures and Fees to be offset against the
outstanding loan.
Page 13 of 24
EJK CB GO
---- --- ----
ICAT IMS CNIC
<PAGE> 14
SCHEDULE B
SECURED PROMISSORY NOTE
$500,000, or such lesser Boulder, Colorado
amount as provided below. August 1, 2000
FOR VALUE RECEIVED, INTERNATIONAL CATASTROPHE INSURANCE MANAGERS, LLC
("ICAT"), of 2995 Wilderness Place, Boulder, Colorado 80301, promises to pay to
the order of INSURANCE MANAGEMENT SOLUTIONS, INC. ("IMS"), of 360 Central
Avenue, St. Petersburg, Florida 33701, at the aforesaid address of IMS or such
other place as IMS may direct by written notice to ICAT, the principal amount
equal to sums advanced by IMS to ICAT under the Insurance Administration and
Services Agreement Termination and Interim Services Addendum between ICAT, IMS
and Clarendon National Insurance Company effective as of August 1, 2000
(hereinafter called the "Addendum"), which principal amount shall not exceed
FIVE HUNDRED THOUSAND ($500,000) DOLLARS, in monthly payments commencing on
September 30, 2000 and continuing on the last day of each succeeding month
until such time as the entire principal has been paid to IMS. Each monthly
payment shall be equal to the greater of (a) TEN THOUSAND ($10,000) DOLLARS, or
(b) ONE AND ONE HALF (1 1/2%) PERCENT of Net Written Premium for Policies (as
such term is defined in the Insurance Administration and Services Agreement
between ICAT, IMS and Clarendon National Insurance Company dated as of October
1, 1998) issued on or after the date hereof. NINETY TWO AND ONE HALF (92 1/2%)
PERCENT of each monthly payment shall be applied to the reduction of the
principal due under this Note and SEVEN AND ONE HALF (7 1/2%) PERCENT of each
monthly payment shall be interest under the Note. The principal due shall be
reduced from time to time by one hundred (100%) percent of the Excess Fees (as
such term is defined in, and as provided in the Addendum).
1. Subordination. All payments to be made under this Note are
subject and subordinate to all payments to be made under: (1) the Amended and
Restated Secured Promissory Note dated May 12, 1999 made by ICAT to E.W. Blanch
Holdings, Inc.; and (2) the Convertible Promissory Note dated December 1, 1999
made by ICAT to Renaissance US Holdings, Inc. (collectively the "Other Notes").
Provided however, and notwithstanding anything contained in this Note or the
Other Notes to the contrary, ICAT shall make all payments due under, and
perform all obligations contained in this Note, as fully and completely as if
the Other Notes did not exist, unless and until a default (beyond all
applicable grace and cure periods) shall occur under either or both of the
Other Notes (an "Other Note Default"), and such Other Note Default shall be
continuing,
Page 14 of 24
EJK
----
ICAT
<PAGE> 15
in which case the payment obligation contained in this Note shall be suspended
until such Other Note Default is cured. Provided however, nothing contained in
this Section 1 shall alter, expand, increase, impair or diminish IMS's rights
against ICAT under this Note, or under the Addendum or Security Agreement,
including without limitation Paragraph 3, "Subordination" thereof, being
executed by ICAT in favor of IMS on or about the date hereof. Further, upon the
curing of any Other Note Default, all payments that have accrued under this
Note shall become immediately due and payable in full, retroactive to the date
of suspension of payment.
2. Security. This Note is secured by a Security Agreement of
ICAT in favor of IMS dated the date hereof covering certain collateral, all as
more particularly described and provided in said Security Agreement, and is
entitled to the benefits thereof.
3. Prepayment. This Note may be prepaid in part or in its
entirety at anytime, without penalty, and the entire amount of any prepayment
shall be applied to the reduction of the outstanding principal balance. When
the outstanding principal balance has been reduced to zero, ICAT shall have no
liability to make any further payment to IMS under this Note.
4. Waiver of Presentment, etc. ICAT waives (i) presentment and
demand for payment, notice of non-payment, notice of dishonor, protest and
notice of protest of this note, and (ii) any defense of laches or statute of
limitations in any action brought on this note by the holder.
5. Amendment and Waiver. No term or condition of this Note may
be amended or waived except by a writing signed by ICAT and IMS, and no
executed written waiver shall extend to or affect any obligation or agreement
not expressly waived or impair any rights consequent thereon.
6. Events of Default; Remedies. If any of the following events
(Events of Default) shall occur, whatever the reason therefor and whether it
shall be voluntary or involuntary or by operation of law, or otherwise, that is
to say:
(a) default shall be made in the performance of any
covenant, term or agreement contained in this Note which shall not be cured
within ten (10) days of notice thereof; or
(b) ICAT shall (i) apply for or consent to the
appointment of a receiver, custodian, trustee or liquidator of itself or all or
a substantial part of its assets, (ii) make an assignment for the benefit of
its creditors, (iii) commence a voluntary case under the Federal Bankruptcy
Code, as same may be amended, (iv) or acquiesce to any petition
Page 15 of 24
EJK
----
ICAT
<PAGE> 16
filed against it in an involuntary case under the Federal Bankruptcy Code, (v)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, or (vi) fail for a period of ninety (90) days or longer to
dismiss or stay any involuntary proceeding commenced against it in any court
seeking the liquidation, reorganization, dissolution or composition or
readjustment of its debts or assets, or the appointment of a receiver, trustee,
custodian, liquidator, or the like, of it or a substantial part of its assets;
then upon the occurrence of an Event of Default, IMS may declare the unpaid
principal balance, as reduced by any Fees, to be, and the same shall forthwith
become, due and payable.
7. Late Charge. Any installment not received within ten (10)
days when due shall be subject to, and it is agreed that IMS shall collect
thereon and therewith a "late charge" in the amount of three (3%) percent of
the payment on each such delinquent installment. Said "late charge" shall be
immediately due and payable upon demand.
8. Attorney's Fees. ICAT agrees to pay IMS reasonable attorney's
fees and costs, whether or not an action be brought, for the services of
counsel employed after maturity or default to collect this Note or any
principal or interest due hereunder, or to protect the security, if any, or to
enforce the performance of any other agreement contained in this Note or any
instrument of security executed in connection with the loan evidenced hereby,
including costs and attorney's fees on any appeal, or in any proceedings under
the National Bankruptcy Code or in any post judgment proceedings.
9. Governing Law. This Note shall be governed by, and construed
in accordance with, the laws of the State of New York, and any dispute arising
out of or relating to this Note shall be resolved in accordance with Article 6
of the Policy Administration Agreement.
10. Documentary Stamps. This instrument was made, executed and
delivered outside the State of Florida, and no Florida documentary stamp tax is
due thereon in accordance with F.A.C. 12B-4.053(35).
IN WITNESS WHEREOF, ICAT, by its duly authorized officer, has executed
this Note the day and year first above written.
INTERNATIONAL CATASTROPHE INSURANCE MANAGERS, LLC
By:
----------------------------------------------
Page 16 of 24
EJK
----
ICAT
<PAGE> 17
SCHEDULE C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is entered into as of August
1, 2000 by International Catastrophe Insurance Managers, LLC, a Delaware
limited liability company ("ICAT") in favor of Insurance Management Solutions,
Inc., a Florida corporation ("IMS").
WHEREAS, ICAT, IMS and Clarendon National Insurance Company ("CNIC")
are parties to that certain Insurance Administration and Services Agreement
entered into as of April 1, 1999 (the "Policy Administration Agreement"); and
WHEREAS, ICAT, IMS and CNIC have entered into that certain Insurance
Administration and Services Agreement Termination and Interim Services Addendum
of even date hereof (the "Addendum"), in connection with which ICAT has made
that certain Secured Promissory Note in favor of IMS of even date hereof (the
"Note") (the Policy Administration Agreement, the Addendum, the Note and this
Agreement are hereinafter collectively called the "Loan Documents");
NOW, THEREFORE, the parties agree as follows:
1. Definitions and Incorporation by Reference. Unless the
context otherwise requires, all terms used but not expressly defined herein
which are defined in the New York Uniform Commercial Code (the "Code") shall
have the same meaning herein as the Code. All of the terms, provisions and
definitions of the Policy Administration Agreement, the Addendum and the Note
are hereby incorporated herein by reference as though set forth in full herein.
2. Grant of Security Interest. ICAT hereby grants to IMS a
security interest in the Collateral to secure the payment and performance of
all of the Obligations (defined below). The collateral in which IMS is granted
a security interest by this Agreement (collectively, the "Collateral") is
described on Exhibit A.
3. Subordination. The security interest created by this
Agreement is subject and subordinate to: (1) the Amended and Restated Security
Agreement dated May 12, 1999 made by ICAT to E. W. Blanch Holdings, Inc., and
(2) the Convertible Promissory Note dated December 1, 1999 made by ICAT to
Renaissance US Holdings, Inc.
Page 17 of 24
EJK CB
---- ---
ICAT IMS
<PAGE> 18
4. Obligations Secured. The obligations secured hereby
(collectively the "Obligations") are the payment and performance of: (a) all
present and future obligations, liabilities and indebtedness of ICAT to IMS
pursuant to the loan evidenced by the Note, as amended, modified and renewed
from time to time; (b) all costs, including reasonable attorneys' fees,
incurred by IMS from time to time to enforce this Agreement and maintain,
preserve and collect and realize upon the Collateral; and (c) all obligations
of ICAT and rights of IMS under this Agreement.
5. Termination. This Agreement will terminate upon: (i) the full
performance of all Obligations of ICAT to IMS, including without limitation the
payment of all indebtedness of ICAT evidenced by the Note, to IMS; and (ii) the
satisfaction and termination of all Loan Documents by IMS.
6. Warranties of ICAT. ICAT represents and warrants with respect
to the Collateral and proceeds thereof (collectively the "Proceeds"): (i) ICAT
is the owner thereof; (ii) ICAT has the right to pledge the Collateral and
Proceeds; and (iii) all Collateral and Proceeds are genuine; free from liens,
adverse claims, setoffs, default, prepayment, defenses and conditions precedent
of any kind or character, except as set forth in Paragraph 3, "Subordination",
hereof.
7. Covenants of ICAT.
(a) ICAT agrees: (i) to pay indebtedness secured by this
Agreement, and perform all Obligations when due; (ii) to pay all expenses,
including reasonable attorneys' fees and costs, expended or incurred by IMS in
the perfection, preservation, realization, enforcement and exercise of its
rights, powers, privileges and remedies hereunder; (iii) to permit IMS to
exercise its powers; (iv) to execute and deliver such documents as IMS deems
necessary to create, perfect and continue the security interests contemplated
hereby; (v) not to permit any lien, other than as set forth in Paragraph 3,
"Subordination" hereof, on the Collateral or Proceeds, except in favor of IMS
or unless it is subordinated, in writing, to the lien of IMS, as preapproved in
writing by IMS, on terms acceptable to IMS in its sole discretion; and (vi) not
to change its location of the Collateral, or the chief place of business or the
place where ICAT keeps its records concerning the Collateral and Proceeds
without first giving IMS thirty (30) days prior written notice of the address
to which the same is moving.
(b) ICAT agrees: (i) to keep complete and accurate
records regarding all
Page 18 of 24
EJK CB
---- ---
ICAT IMS
<PAGE> 19
Collateral and Proceeds; (ii) not to sell, hypothecate or otherwise dispose of
any Collateral or Proceeds subject hereto at any time, except in the ordinary
course of business; provided, however, that this shall not prevent ICAT from
selling a membership interest in ICAT to any party in any amount at any price;
(iii) at IMS's request, notify any account debtors or any other persons of
IMS's interest in the Collateral and Proceeds; (iv) to provide any reasonable
service and do any other acts or things necessary to keep the Collateral and
Proceeds free and clear of all defenses, rights of offset, counterclaims,
liens, encumbrances and security interests (other than as set forth in
Paragraph 3, "Subordination" hereof); (v) keep all Collateral in good
condition, and defend all Collateral against the claims and demands of all
persons at any time claiming an interest therein adverse to IMS (other than
those set forth in paragraph 3, "Subordination", hereof); and (vi) promptly
furnish to IMS any information with respect to the Collateral reasonably
requested from time to time by IMS.
8. Powers of IMS. ICAT appoints IMS its true attorney in fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by IMS's officers and employees, or any of them, at any time ICAT is in
default: (a) to perform any obligation of ICAT hereunder in ICAT's name or
otherwise; (b) to liquidate any time deposit pledged to IMS hereunder prior to
its maturity date and to apply the proceeds thereof to payment of the
indebtedness, notwithstanding the fact that such liquidation may give rise to
penalties for early withdrawal of funds; (c) to notify any person obligated on
any security, instrument or other document subject to this Agreement of IMS's
rights hereunder; (d) to demand and to collect by legal proceedings or
otherwise all interest, principal or other sums now or hereafter payable upon
or on account of the Collateral or Proceeds; (e) to enter into any extension,
reorganization, deposit, merger or consolidation agreement, or any other
agreement relating to or affecting the Collateral or Proceeds, and in
connection therewith to deposit or surrender control of the Collateral and
Proceeds, accept other property in exchange for the Collateral or Proceeds, and
do and perform such other acts and things as IMS may deem proper, and any money
or property received in exchange for the Collateral or Proceeds may be applied
to the indebtedness or held by IMS under this Agreement; (f) to make any
compromise or settlement IMS deems desirable or proper in respect of the
Collateral and Proceeds; and (g) to protect and preserve the Collateral and
Proceeds.
9. IMS's Care and Delivery of Collateral. IMS's obligation with
respect to Collateral and Proceeds in its possession shall be strictly limited
to the duty to exercise reasonable care in the custody and preservation of such
Collateral and Proceeds, and
Page 19 of 24
EJK CB
---- ---
ICAT IMS
<PAGE> 20
such duty shall not include any obligation to ascertain or to initiate any
action with respect to or to inform ICAT of maturity dates, conversion, call or
exchange rights, or offers to purchase the Collateral or Proceeds, or any
similar matters, notwithstanding IMS's knowledge of the same. IMS shall have no
duty to take any steps necessary to preserve the rights of ICAT against prior
parties, or to initiate any action to protect against the possibility of a
decline in the market value of the Collateral or Proceeds. IMS shall not be
obligated to take any action with respect to the Collateral or Proceeds
requested by ICAT, unless such request is made in writing, and IMS determines,
in its sole discretion, that the requested action would not reasonably
jeopardize the value of the Collateral or Proceeds as security for the
indebtedness. IMS may at any time deliver the Collateral and Proceeds, or any
part thereof, to ICAT, and the receipt thereof by ICAT shall be a complete and
full acquittance for the Collateral and Proceeds so delivered, and IMS shall
thereafter be discharged from any liability or responsibility therefor.
10. Events of Default. The occurrence of any of the following
shall constitute an "Event of Default" under this Agreement: (a) any default in
the payment or performance of any Obligation; (b) any representation or
warranty made by ICAT herein shall prove to be at any time incorrect in any
material respect; (c) any sale or transfer of all or a substantial or material
part of ICAT's assets other than in the ordinary course of business; or (d) a
default shall occur under any of the Loan Documents.
11. Remedies.
(a) Upon the occurrence of any Event of Default, IMS
shall have the right to declare immediately due and payable all indebtedness
secured hereby and to terminate any commitments to make loans or otherwise
extend credit to ICAT without presentment, demand, protest or notice of
dishonor, all of which are expressly waived by ICAT. IMS shall have all other
rights, privileges, powers and remedies granted to a secured party upon default
under the Code or otherwise provided by law, including without limitation the
right to contact any persons obligated to ICAT on Collateral and to instruct
such persons to deliver all Proceeds directly to IMS. The rights, privileges,
powers and remedies of IMS shall be cumulative. No delay, failure or
discontinuance of IMS in exercising any right, power, privilege or remedy shall
affect or operate as a waiver of such right, power, privilege or remedy; nor
shall any single or partial exercise of any right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or
the exercise of any other right, power, privilege or remedy. Any waiver,
permit, consent or approval of any kind by IMS of any default hereunder, or
Page 20 of 24
EJK CB
---- ---
ICAT IMS
<PAGE> 21
any such waiver of any provisions or conditions hereof, must be in writing and
shall be effective only to the extent set forth in writing.
(b) While ICAT is in default: (i) IMS may, at any time
and at IMS's sole option, liquidate any time deposits pledged to IMS hereunder,
whether or not said time deposits have matured and notwithstanding the fact
that such liquidation may give rise to penalties for early withdrawal of funds;
(ii) IMS may appropriate the Collateral and apply all Proceeds toward repayment
of the indebtedness in such order of application as IMS may from time to time
elect or, at IMS's sole option, place any Proceeds in the cash collateral
account; and (iii) ICAT will assemble and deliver all Collateral and Proceeds,
and books and records pertaining thereto, to IMS at a reasonably convenient
place designated by IMS.
12. Disposition of Collateral and Proceeds. Any proceeds of any
disposition of any of the Collateral or Proceeds, or any part thereof, may be
applied by IMS to the payment of expenses incurred by IMS in connection with
the foregoing, including reasonable attorneys' fees, and the balance of such
proceeds may be applied by IMS toward the payment of the indebtedness and in
such order of application as IMS may from time to time elect.
13. Further Assurances and Power of Attorney. ICAT will execute
and deliver to IMS, at IMS's request, at any time and from time to time, such
financing statements and other instruments (and pay the cost of filing or
recording the same in all public offices reasonably deemed necessary or
desirable by IMS) and do such other acts and things as IMS may reasonably deem
necessary or desirable in order to establish, maintain and perfect a valid
security interest in the Collateral and Proceeds in favor of IMS (free and
clear of all other security interests, liens, charges, encumbrances and other
claims, whether voluntarily or involuntarily created, except as permitted
herein including without limitation as noted in Paragraph 3, "Subordination",
hereof) or in order to facilitate the collection of the Collateral.
14. ICAT Remains Liable. Anything herein to the contrary
notwithstanding: (a) ICAT shall remain liable for under the contracts and
agreements contained in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed; (b) the exercise by IMS of any of its
rights hereunder shall not release ICAT from any of its duties or obligations
under the contracts and agreements included in the Collateral; and (c)
Page 21 of 24
EJK CB
---- ---
ICAT IMS
<PAGE> 22
IMS shall not have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall
IMS be obligated to perform any of the obligations or duties of ICAT thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
15. Costs, Expenses and Attorneys' Fees. ICAT shall reimburse IMS
for all payments, advances, charges, costs and expenses, including reasonable
attorneys' fees, made or incurred by IMS in exercising any right, power,
privilege or remedy conferred by this Agreement or in the enforcement thereof,
including any of the foregoing incurred in connection with any bankruptcy
proceeding relating to ICAT, including without limitation the seeking of relief
from or modification of the automatic stay, the negotiation and drafting of a
cash collateral order, or any proceeding in bankruptcy relating to the
valuation of the Collateral and/or Proceeds. All of the foregoing shall be paid
to IMS by ICAT immediately and without demand, together with interest at a rate
of seven and one half (7 1/2) percent per annum.
16. Notices. All notices or demands of any kind which IMS may be
required or desires to serve upon ICAT under the terms of this Agreement shall
be served upon ICAT in accordance with Article 7 of the Policy Administration
Agreement, as amended by the Addendum.
17. Successors, Assigns; Governing Law. This Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties, and shall be
governed by and construed in accordance with the laws of the State of New York.
Any dispute arising out of or relating to this Agreement shall be resolved in
accordance with Article 6 of the Policy Administration Agreement.
18. Severability of Provisions. If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provision of this Agreement.
19. Controlling Agreement. To the extent that this Agreement conflicts
with or is in any way incompatible with any other Loan Document concerning the
Obligations, the Note shall control over any other Loan Document, and if the
Note does not address an issue, then each other Loan Document shall control to
the extent that it deals most specifically with an issue.
Page 22 of 24
EJK CB
---- ---
ICAT IMS
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day above first written.
INTERNATIONAL CATASTROPHE INSURANCE
MANAGERS, LLC
By:
--------------------------------
Title:
-----------------------------
INSURANCE MANAGEMENT SOLUTIONS, INC.
By:
--------------------------------
Title:
-----------------------------
Page 23 of 24
EJK CB
---- ---
ICAT IMS
<PAGE> 24
EXHIBIT A: DESCRIPTION OF COLLATERAL
------------------------------------
All of ICAT's assets, wherever located, whether now owned or hereafter
acquired, including, without limitation, all tangible and intangible personal
property of ICAT, including, without limitation, all of ICAT's:
(a) inventory, accounts, accounts receivable, general
intangibles, investments, investment property, deposit accounts, letter of
credit rights, supporting obligations, documents, instruments and chattel
paper, and all products and proceeds thereof, including insurance proceeds;
(b) furniture, fixtures, equipment and machinery, including all
parts, accessories, attachments, additions and replacements thereof, and all
proceeds thereof, including insurance proceeds;
(c) present and future rents, payments, issues, profits, income
and proceeds from the sale or lease of personal property, and all accessories,
attachments, additions and replacements thereof, and proceeds of all the
foregoing, including insurance proceeds and all interest of ICAT in every
lease, franchise, insurance policy, license or permit or other contractual
right, whether written or verbal, covering all or any part of the foregoing,
and all patents and trademark rights;
(d) books, records, documents and ledgers pertaining to any or
all of the foregoing, including, without limitation, all customer lists, credit
files, computer records and all media upon which any of the foregoing may be
stored or located; and
(e) all proceeds and products of, and general intangibles related
to, any and all of the foregoing collateral (including, without limitation,
proceeds which constitute property and proceeds of any tort claims relating to
any of the foregoing collateral).
Page 24 of 24
EJK CB
---- ---
ICAT IMS
