Document:

exv10w37

Exhibit 10.37

NOTE OFFSET AND CALL OPTION AGREEMENT

     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:

          SunCoast Holdings, Inc.

          5212 Fisher Island Drive

          Miami, Florida 33109

          Attn: Steven M. Mariano

     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.]

5

 

     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:	 		 	 
	 	 	 	 	 	 	 
	 	 	 	 	Steven M. Mariano	 	 
	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	GUARANTEE:	 	Guarantee Insurance Company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 		 	 
	 	 	 	 	 	 	 
	 	 	 	 	Lucia A. Tompkins	 	 
	 	 	 	 	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:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Steven M. Mariano	 	 
	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	GUARANTEE:	 	Guarantee Insurance Company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Lucia A. Tompkins	 	 
	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	WESTWIND:	 	Westwind Holding Company, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 		 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Michael Corley	 	 
	 

	 	 	 	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:	 		 	 
	 	 	 	 	 	 	 
	 	 	 	 	Steven M. Mariano	 	 
	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	GUARANTEE:	 	Guarantee Insurance Company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 		 	 
	 	 	 	 	 	 	 
	 	 	 	 	Lucia A. Tompkins	 	 
	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	WESTWIND:	 	Westwind Holding Company, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Michael Corley	 	 
	 	 	 	 	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:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Steven M. Mariano	 	 
	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	GUARANTEE:	 	Guarantee Insurance Company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 		 	 
	 	 	 	 	 	 	 
	 	 	 	 	Lucia A. Tompkins	 	 
	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	WESTWIND:	 	Westwind Holding Company, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 		 	 
	 	 	 	 	 	 	 
	 	 	 	 	Michael Corley	 	 
	 	 	 	 	Presidentexv10w38

Exhibit 10.38

	 	 	 	 	 
	 

	 	                           
	 	

CALEDONIAN REINSURANCE SPC

This Agreement is made in on the 16 day of August, 2004 (this “Agreement”)

Between:

Westwind Holding Company, LLC (Shareholder) whose registered office is 7560 Commerce Court,
Sarasota, FL 34243 USA and Caledonian Reinsurance SPC reference Segregated Portfolio 110
(“Segregated Portfolio 110”), a segregated portfolio company whose registered office is at
Caledonian House, PO Box 1043GT, 69 Dr Roy’s Drive, George Town, Grand Cayman, Cayman Islands.

This Agreement sets out the terms which have been agreed in respect of the participation of the
Shareholder in Segregated Portfolio 110.

	1.	 	Description of the business to be conducted by Segregated Portfolio 110
	 
	1.1	 	Segregated Portfolio 110 has been established to provide workers compensation reinsurance for
professional employment organizations in the US, specifically reinsurance for workers’
compensation policies issued to Progressive Employer Services, III, Inc., its affiliates and
their client entities, (collectively “Progressive”). Primary policy issuance is with Guarantee
Insurance Company and SP110 reinsures this risk up to certain levels.
	 
	2.	 	The Participation
	 
	2.1	 	Shareholder wishes to purchase one Segregated Portfolio Share in the capital of the
Caledonian Reinsurance SPC to be designated Segregated Portfolio 110 Share (the “SP Share”) on
and subject to the terms of the Memorandum and Articles of Association of Caledonian
Reinsurance SPC, a copy of which is attached hereto as Exhibit “A”, for a subscription price
of US$1, plus 20% percent of Gross Annual Written Premium on policies written by Guarantee for
Progressive, with said 20% being payable within sixty (60) days of written demand by
Caledonian if the loss fund of the program becomes negative. Further subscriptions of
Segregated Portfolio Shares in Caledonian Reinsurance SPC designated Segregated Portfolio 110
Shares may be made on such terms as the parties may agree. Absent such further subscriptions,
Shareholder shall be the sole owner and have 100% of the interest of Segregated Portfolio 110
of Caledonian Reinsurance SPC.

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	2.2	 	Shareholder will participate in the results of the reinsurance business to Segregated
Portfolio 110 in accordance with Section 1 above (the “Reinsurance”).
	 
	2.3	 	The directors of Caledonian Reinsurance SPC may declare dividends on the SP Share solely out
of the profits made by Segregated Portfolio 110 arising from the Reinsurance, which dividends
will be calculated in accordance with Part 1 of the Schedule to this Agreement. The holder of
a SP Share will not be entitled to share in any profits of any other segregated portfolio of
Caledonian Reinsurance SPC or any other profits of Caledonian Reinsurance SPC.
	 
	2.4	 	No shareholder of any other segregated portfolio of Caledonian Reinsurance SPC will be
entitled to participate in any profits of Segregated Portfolio 110 by virtue of holding such
shares.
	 
	2.5	 	Caledonian Reinsurance SPC may redeem any SP Share in accordance with Part 2 of the Schedule
to this Agreement.
	 
	2.6	 	On the first to occur of a winding up of Segregated Portfolio 110 or Caledonian Reinsurance
SPC the assets of Segregated Portfolio 110 remaining will be distributed solely to the holders
of SP Shares in accordance with the Redemption provisions as set out in Part 2 of the Schedule
to this Agreement. Holders of SP 110 Shares will not be entitled to share in any other assets
of Caledonian Reinsurance SPC available for distribution or any assets of any other segregated
portfolio of Caledonian Reinsurance SPC.
	 
	2.7	 	SP shares have not been registered in the United Stated and shall not be sold, transferred,
hypothecated, pledged or otherwise encumbered and will bear the following legend:
	 
	 	 	The shares represented by this certificate have not been registered under the Securities Act
of 1933, as amended, of the United Stated (the “U.S Securities Act”) or any securities laws of
any state of the United States. They may not be offered or transferred by sale, assignment,
pledge or otherwise unless (i) a registration statement for the shares under the Securities
Act is in effect or (ii) the Company has received such agreements and certificates as the
Company may require and an opinion of counsel, which opinion is satisfactory to the Company,
to the effect that such registration is not required under the Securities Act or state
securities laws. Transfer of these shares is further restricted as provided in the
Participation Agreement between the Company and the Shareholder. In addition to the transfer
restrictions above, the securities represented by this certificate may not be sold or
otherwise transferred if such transfer would result in the Company being required to register
as an investment company under the Investment Company Act of 1940, as amended, or result in a
violation of any applicable securities law or other applicable law or regulation. Specifically
the shares may not be transferred without the consent of the Cayman Islands Monetary Authority
and in compliance with the requirements of the Insurance Law of the Cayman Islands.

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	2.8	 	Caledonian Reinsurance SPC on behalf of Segregated Portfolio 110, and subject to the
overall supervision and discretion of the board of directors of Caledonian Reinsurance SPC,
agrees to make such investments and divestments of assets of Segregated Portfolio 110 as
Shareholder may reasonably instruct. In acting on the instructions of Shareholder neither
Caledonian Reinsurance SPC nor any of its directors, officers or employees shall be liable for
any loss, claim cost or expense suffered by Segregated Portfolio 110 and each of Caledonian
Reinsurance SPC and its directors, officers and employees shall be indemnified and held
harmless by Shareholder and Segregated Portfolio 110 for any loss, claim, cost or expense
incurred by them in so acting. Caledonian Reinsurance SPC shall be entitled to rely on a
Shareholder’s instruction, approval and authorisation without further enquiry if it shall have
been given in writing or by facsimile (or any person whom Caledonian Reinsurance SPC believes
to be one of the following):
	 
	 	 	Westwind Holding Company, LLC
	 
	3.	 	Limited Recourse
	 
	 	 	Notwithstanding any other provision of this Agreement, Shareholder acknowledges and agrees
that no liability shall arise under this Agreement for any reason against Caledonian
Insurance Services Limited, Caledonian Reinsurance SPC, any portfolio of Caledonian
Reinsurance SPC (other than Segregated Portfolio 110) and Caledonian Bank & Trust Limited and
their respective officers, directors, shareholders, employees, and their attorneys and agents
(the “Limited Liability Parties”).
	 
	 	 	The Shareholder further acknowledges and agrees that all liability under this Agreement shall
be limited to the net proceeds following the realisation of all the assets of Segregated
Portfolio 110 only. If such amount is insufficient to pay all the obligations hereunder in
full for any reason neither Segregated Portfolio 110 nor any of the Limited Liability
Parties shall have any obligation to make up the insufficiency and following exhaustion of
such amount any liability to pay such insufficiency shall thereafter be extinguished.
	 
	 	 	The Shareholder covenants, acknowledges and agrees that it shall not take or seek to take any
recourse (including but not limited to action before any court or governmental agency),
directly or indirectly, with respect to the actions or inactions of Segregated Portfolio 110
or Caledonian Reinsurance SPC or any obligations of Segregated Portfolio 110 or Caledonian
Reinsurance SPC or under this Agreement against:

	 	•	 	any owner of a beneficial interest in Segregated Portfolio 110;
	 
	 	•	 	any partner, owner, beneficiary, director, officer, shareholder, employee or agent of
Segregated Portfolio 110 in its individual capacity or any of their respective legal
advisers; or
	 
	 	•	 	any of the Limited Liability Parties.

	 	 	The Shareholder further covenants, acknowledges and agrees that it shall not, until the expiry
of one year and one day after the payment of all secured obligations, take any corporate
action or other steps or legal proceedings for the winding-up, dissolution or re-

3

 

	 	 	organisation or for the appointment of a receiver, administrator, administrative receiver,
trustee, liquidator, sequestrator or similar officer of Caledonian Reinsurance SPC or
Segregated Portfolio 110 or of any or all of Caledonian Reinsurance SPC or Segregated
Portfolio 110 revenues and assets or analogous proceedings in any jurisdiction domestic or
foreign.

	4.	 	Indemnification
	 
	 	 	The Shareholder agrees to indemnify and hold harmless the Segregated Portfolio 110 and
Caledonian Reinsurance SPC and their respective officers, directors, shareholders, employees,
and their attorneys, affiliates and agents (“Indemnified Persons”), and hold each of them
harmless from and against any error of judgment, and any and all loss, damage, claims,
demands, or proceedings, liability or expense, including costs and reasonable attorneys’ fees
and expenses (together “Losses”), to which any Indemnified Person may be put or may incur by
reason of or in connection with any misrepresentation made by the Shareholder, any breach of
the Shareholder representations and warranties, the Shareholder failure to fulfill any of its
covenants or agreements under this Agreement or any Losses suffered or sustained by an
Indemnified Person by reason of such person’s status as an Indemnified Person other than
Losses which arise out of or relate to fraud or willful default of such Indemnified Person.
	 
	5.	 	Undertakings, Representations and Warranties
	 
	5.1	 	Shareholder undertakes and/or represents and warrants to Caledonian Reinsurance SPC:

	 	(a)	 	that it has had its own opportunity to investigate its participation and the terms
and conditions of its participation and to obtain such legal, tax, accounting and other
professional advice as it considers proper or appropriate and that it is not relying on
any advice, representation or warranty from Caledonian Reinsurance SPC, and specifically
that it is aware of the provisions of the Cayman Islands Companies Law (2003 Revision)
which relate to segregated portfolio companies;
	 
	 	(b)	 	that it has the legal capacity and authority and is permitted by applicable law to
execute and deliver this Agreement;
	 
	 	(c)	 	that it is not (i) a U.S. person from whom an investment would not qualify for an
exemption under the U.S. Securities Act of 1933 or would require Caledonian Reinsurance
SPC to register this Agreement under the U.S. federal or state securities laws or causes
Caledonian Reinsurance SPC to become subject to the United States Investment Company Act
of 1940 or (ii) a person in circumstances (whether directly or indirectly affecting the
shareholder and whether taken alone or in conjunction with any other person, connected or
not, or any other circumstance appearing to Caledonian Reinsurance SPC to be relevant)
which in the opinion of Caledonian Reinsurance SPC might result in Caledonian Reinsurance
SPC incurring any liability to taxation or suffering any other

4

 

	 	 	 	pecuniary, fiscal or regulatory disadvantage which Caledonian Reinsurance SPC might not
otherwise incur or suffer;

	 	(d)	 	that all consents required to be obtained and all legal requirements necessary to
be complied with or observed in order for this Agreement or the participation to be
lawful and valid under the laws or regulatory rules or regulations of any jurisdiction to
which Shareholder is subject have been obtained, complied with and observed;
	 
	 	(e)	 	to notify Caledonian Reinsurance SPC immediately if it becomes aware that any of
these undertakings, representations and warranties is no longer accurate and
complete;
	 
	 	(f)	 	that its participation will not breach any applicable money laundering rules and
regulations of any jurisdiction and that it has provided accurate verification of its
identity;
	 
	 	(g)	 	that it acknowledges and agrees that directors, officers, agents and shareholders
of Caledonian Reinsurance SPC are or may be interested in the insurance manager or
affiliates of the insurance manager as either directors, officers, or shareholders or
otherwise and that directors, officers, agents and shareholders of the insurance manager
are or may be interested in Caledonian Reinsurance SPC or segregated portfolios thereof
as directors, officers, shareholders or otherwise and it further acknowledges that no
person so interested shall be liable to account for any benefit to any other party by
reason solely of such interest and without limitation, the insurance manager will be
entitled to retain for its own benefit and without accounting therefore to Caledonian
Reinsurance SPC or Segregated Portfolio 110 or Shareholder any profit arising out of it
acting in such capacity or any other capacity (including banker) to Caledonian
Reinsurance SPC or Segregated Portfolio 110 and that Segregated Portfolio 110 is
obligated to pay Caledonian Reinsurance SPC fees in relation to the administrative
services provided by Caledonian Reinsurance SPC to Segregated Portfolio 110 and that
Segregated Portfolio 110 is to indemnify and hold harmless Caledonian Reinsurance SPC in
respect of any loss, claim or cost it may incur in the performance of its administrative
services.

	6.	 	Term

	 	6.1	 	This Agreement will terminate when Caledonian Reinsurance SPC has no further liability or
obligation under or in respect of the Reinsurance. On termination of this Agreement Caledonian
Reinsurance SPC shall redeem the SP Share held by Shareholder for an amount calculated in
accordance with the Redemption Provisions set out in Part 2 of the Schedule and otherwise in
accordance with the Articles of Association of Caledonian Reinsurance SPC.

5

 

	6.2	 	Each party’s further rights and obligations cease immediately on termination of this
Agreement, but termination does not affect a party’s accrued rights and obligations at the
date of termination. Shareholder’s sole right to any payment on termination will be the
amount, if any, calculated in accordance with the Redemption Provisions set out in Part 2 of
the Schedule.
	 
	7.	 	Confidentiality
	 
	7.1	 	For the purposes of this Agreement Confidential Information means all information disclosed
(whether in writing or orally) by a party (the Disclosing Party) to the other party (the
Receiving Party) whether before or after the date of this Agreement including, without
limitation, information relating to the Disclosing Party’s products, operations, processes,
plans or intentions, product information, know-how, market opportunities and business affairs.
	 
	7.2	 	Except as required by the laws of any relevant jurisdiction or by the requirements of its
regulators (including for the avoidance of doubt Caledonian Reinsurance SPC’s obligations
under the Cayman Islands Insurance Law (as revised)), during the term of this Agreement and
after termination or expiration of this Agreement for any reason, the Receiving Party (a) may
not use Confidential Information for a purpose other than the performance of its obligations
under this Agreement and (b) may not disclose Confidential Information to a person (other than
the employees, officers, directors, auditors, legal advisers and other duly authorised agents
of the Receiving Party) except with the prior written consent of the Disclosing Party.
	 
	 	 	Notwithstanding the foregoing, either party may use Confidential Information (i) in the course
of prosecuting or defending any claim or cause or action in any proceedings of any nature
whatsoever, including a threatened proceeding; (ii) in making any filings with or statements
to any governmental agency of any nature whatsoever: (iii) to the extent either party in its
sole discretion determines disclosure of Confidential Information may be required by or
advisable under applicable law, rule, regulation, order, contract or agreement; (iv) in
communicating with the respective parties, shareholders, prospective shareholders and
creditors; and (v) as the parties deem reasonably necessary or prudent, in their sole
discretion, in connection with the operation or management of its business.
	 
	7.3	 	This restriction does not apply to Confidential Information which (a) is at the date of this
Agreement, or at any time after that date becomes, publicly known other than by the Receiving
Party’s breach of this Agreement or (b) was known by the Receiving Party before disclosure by
the Disclosing Party to the Receiving Party, or (c) the disclosure of any Confidential
Information in any legal proceedings relating to this Agreement.
	 
	8.	 	Assignment

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	8.1	 	No party to this Agreement may assign or transfer or subcontract or purport to assign or
transfer or subcontract any right or obligation under this Agreement without having first
obtained the written consent Caledonian Reinsurance SPC.
	 
	9.	 	Notices
	 
	9.1	 	A notice under or in connection with this Agreement shall be in writing and shall be
delivered personally or sent by fax, as follows;

if to Caledonian Reinsurance SPC or Segregated Portfolio 110 to:

	Address:  	 	Caledonian Reinsurance SPC

PO Box ll03GT

Caledonian House

69 Dr Roy’s Drive

George Town

Grand Cayman

Cayman Islands

Tel: 345-949-0050

Fax: 345-949-8062

	Marked for the attention of:  	 	Nicholas J. Leighton

	if to Shareholder to:  	 	Westwind Holding Company, LLC

7560 Commerce Court, Sarasota, FL 34243

USA

	Marked for the attention of:  	Westwind Holding Company, LLC

or to another person, address, telex number or fax number specified by a party by written notice
to the other.

	9.2	 	In the absence of evidence of earlier receipt, a notice is deemed given, if delivered
personally, when left at the address referred to above, if sent by fax, on confirmation of
receipt.
	 
	10.	 	General
	 
	10.1	 	This Agreement shall not be amended nor shall any provision of this Agreement be considered
modified or waived unless evidenced in writing signed by Shareholder and Caledonian
Reinsurance SPC on its own behalf and on behalf of Segregated Portfolio 110.
	 
	10.2	 	Shareholder shall not be an employee, partner or co-venturer of Caledonian Reinsurance SPC or
Segregated Portfolio 110 and shall have no authority to bind, obligate or represent Caledonian
Reinsurance SPC or Segregated Portfolio 110 in any respect.

7

 

	10.3	 	A failure to exercise or delay in exercising a right or remedy provided by this Agreement
or by law does not constitute a waiver of the right or remedy or a waiver of other rights or
remedies. No single or partial exercise of a right or remedy provided by this Agreement or by
law prevents further exercise of the right or remedy or the exercise of another right or
remedy.
	 
	10.4	 	Shareholder shall be responsible for all its own costs relating to the negotiation,
preparation, execution and implementation of this Agreement and of each document referred to
in it.
	 
	10.5	 	This Agreement constitutes the entire agreement, and supersedes any previous agreement,
between us relating to the subject matter of this Agreement.
	 
	11.	 	Governing Law
	 
	 	 	This Agreement and all matters arising out of or in connection with it shall be governed by
and interpreted in accordance with the laws of the Cayman Islands and the parties to it
irrevocably submit to the jurisdiction of the courts of the Cayman Islands in respect of all
such matters.

8

 

	 	 	 	 	 
	Signed for and on behalf of Caledonian Reinsurance SPC

For the Account of Segregated Portfolio 110.

 	 
	By:  	Nicholas John Leighton
 	 	 
	 	

Title:        Director 	 
	 
	 	Date: 	30 AUG 2004 	 
	 
	 	Witness:	
	 
	 	Name:	Priscilla Burlington 
	 
	 	Date:	30 Aug 2004 
	 
	 	Signed for and on behalf of Shareholder

 	 
	 	By:  	
 	 		 
	 	Title: 	        President 	 
	 
	 	Date 	8/26/04	 
	 
	 	Witness: 	 
      	 
	 
	 	Name: 	Steve Harris	 
	 
	 	Date 	8/26/04	 

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SCHEDULE

DIVIDEND & REDEMPTION POLICY

Part 1

Dividends

Dividends can be declared at any time, at the request of the shareholder, out of the available
profits of Segregated Portfolio 110, subject to any constraints imposed upon Segregated Portfolio
110, by the Cayman Islands Monetary Authority (“CIMA”). Profits are defined as the excess of
insurance and investment income, over the insurance losses and administrative expenses of
Segregated Portfolio 110, as calculated in accordance with United States generally accepted
accounting principles.

It is anticipated that no dividends will be declared during the first 18 months of operation of
Segregated Portfolio 110, and this will be incorporated into the business plan for Segregated
Portfolio 110 as presented to CIMA.

Part 2

Redemption

The consideration for the redemption of each SP Share, shall be the distribution to the holders of
the SP Shares of the assets of Segregated Portfolio 110 remaining available for distribution at the
date of redemption divided by the number of SP Shares being redeemed. In the event that there is
more than one holder of SP Shares the assets will be distributed pro rata to the holders of the SP
Shares.

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