Novation and Transfer Agreement among Tower Insurance Company of New York, PXRE Reinsurance Company, and State National Insurance Company, Inc. (June 28, 2006)

Summary

This agreement, effective June 28, 2006, is between Tower Insurance Company of New York, PXRE Reinsurance Company, and State National Insurance Company, Inc. It transfers all of PXRE's rights and obligations under a reinsurance contract with State National to Tower. PXRE pays Tower $883,328, and in return, Tower assumes all of PXRE's responsibilities under the contract. State National and Tower release PXRE from any further liability, and PXRE is no longer a party to the contract. The agreement ensures that Tower is now solely responsible for the reinsurance obligations to State National.

EX-10.10 11 a5201679ex10_10.txt EXHIBIT 10.10 Exhibit 10.10 NOVATION AND TRANSFER AGREEMENT (hereinafter the "Agreement") THIS AGREEMENT is effective June 28, 2006 (the "Effective Date"), in accordance with the terms and conditions hereon, by and among Tower Insurance Company of New York and/or their subsidiaries, affiliated or controlled companies (hereinafter referred to collectively as "TOWER"), PXRE Reinsurance Company (hereinafter referred to as "PXRE"), and State National Insurance Company, Inc. and/or its subsidiaries, affiliated or controlled companies (hereinafter referred to collectively as "STATE NATIONAL"). WHEREAS, STATE NATIONAL (as the cedant) and PXRE (as a reinsurer) entered into the Reinsurance Agreement and addendum thereto listed in Exhibit A and incorporated herein by reference (hereinafter the "Contract"). WHEREAS, the parties hereto now desire to effect a full novation of the captioned Contract by which TOWER shall be substituted as the reinsurer in place of PXRE for 100% (one hundred percent) of PXRE's share of the captioned Contract, in respect of the subject business of the Contract. WHEREAS, STATE NATIONAL agrees to the substitution of TOWER as the reinsurer in place and instead of PXRE with respect to 100% (one hundred percent) of PXRE's share of the Contract and STATE NATIONAL agrees to perform all duties and obligations undertaken by the cedant pursuant to the Contract. WHEREAS, STATE NATIONAL agrees to the payment by PXRE to TOWER of eight hundred eighty three thousand three hundred twenty eight dollars ($883,328) and in consideration for such payment STATE NATIONAL and TOWER agree to irrevocably and unconditionally release PXRE from any and all duties, obligations and liabilities of any nature whatsoever, whether known or unknown, reported or unreported, vested or contingent, arising pursuant to the Contract as though PXRE had never been a party to the Contract. NOW, THEREFORE, in consideration of the covenants, assumptions, payments and releases set forth herein, the receipt and sufficiency of which is hereby specifically acknowledged, the parties agree as follows: ARTICLE I. ASSUMPTION BY TOWER Effective as of the Effective Date: (i) this Agreement effects a novation of all existing and future rights, duties, obligations and liabilities of PXRE of any nature whatsoever to TOWER in respect of 100% (one hundred percent) of PXRE's share of the Contract; (ii) STATE NATIONAL hereby agrees to enforce any duties, obligations and liabilities of PXRE in respect of 100% (one hundred percent) of PXRE's share of the Contract solely against TOWER; and (iii) STATE NATIONAL and TOWER hereby irrevocably and unconditionally release PXRE from any and all duties, obligations and liabilities of any nature whatsoever, whether known or unknown, reported or unreported, vested or contingent, arising pursuant to the Contract as though PXRE had never been a party to the Contract. 1 Subject to receipt by TOWER of the payment set forth in Article III, TOWER hereby: (a) absolutely and unconditionally assumes all existing and future rights, duties and obligations of PXRE to STATE NATIONAL for 100% (one hundred percent) of PXRE's share under the Contract; and (b) agrees to perform and satisfy as the assuming reinsurer all duties and obligations owing to STATE NATIONAL in respect of 100% (one hundred percent) of PXRE's share of the Contract. Notwithstanding anything else to the contrary in this Agreement, TOWER shall reinsure STATE NATIONAL for 100% (one hundred percent) of PXRE's share under the Contract and on the basis of the terms and conditions of the Contract. ARTICLE II. RELEASE In consideration of the payment to be made by PXRE to TOWER of the residual balance of the Profit Account calculated to be eight hundred eighty three thousand three hundred twenty eight dollars ($883,328), receipt of which will be acknowledged upon satisfaction of the payment set forth in Article III by TOWER and STATE NATIONAL, STATE NATIONAL consents to the novation and assumption by TOWER, as described in Article I hereof, of any and all rights, duties, obligations and liabilities of any nature whatsoever of PXRE in respect of 100% (one hundred percent) of PXRE's share under the Contract. STATE NATIONAL for itself, its successors and assigns hereby: (a) absolutely and unconditionally covenants and agrees with PXRE, its successors and assigns, that STATE NATIONAL, its successors and assigns, will not hereafter for any reason whatsoever demand, claim, initiate or cause to be initiated any proceeding or file suit against PXRE, its successors or assigns (other than TOWER), in respect of any and/or all liabilities, obligations, costs or damages, known or unknown, reported or unreported, existing or which arise in the future in respect of 100% (one hundred percent) of PXRE's share of the Contract; and (b) agrees that TOWER will be solely responsible to STATE NATIONAL for the performance of the duties and obligations of PXRE in respect of 100% (one hundred percent) of PXRE's share of the Contract; and (c) agrees that PXRE by signing this Agreement does not assume any liability either to STATE NATIONAL or TOWER, other than the payment of consideration required by Article III. 2 (d) conditional upon the execution of this Agreement, agrees to promptly release to PXRE all assets in the Security Fund provided by PXRE on behalf of STATE NATIONAL. Subject to receipt by TOWER of the payment set forth in Article III, TOWER for itself, its successors and assigns hereby: (a) absolutely and unconditionally covenants and agrees with PXRE, its successors and assigns, that TOWER, their successors and assigns, will not hereafter for any reason whatsoever demand, claim, initiate or cause to be initiated any proceeding or file suit against PXRE, its successors or assigns, in respect of any and/or all liabilities, obligations, costs or damages, known or unknown, reported or unreported, existing or which arise in the future in respect of the Contract; and (b) agrees that TOWER will be solely responsible to STATE NATIONAL for the performance of the duties and obligations in respect of 100% (one hundred percent) of PXRE's share of the Contract; and (c) agrees that PXRE by signing this Agreement does not assume any liability either to STATE NATIONAL or TOWER, other than the payment of consideration required by Article III. PXRE for itself, its successors and assigns hereby absolutely and unconditionally covenants and agrees with STATE NATIONAL and TOWER, their respective successors and assigns, that PXRE, its successors and assigns, will not hereafter for any reason whatsoever demand, claim, initiate or cause to be initiated any proceeding or file suit against STATE NATIONAL and TOWER, their respective successors or assigns, in respect of any and/or all liabilities, obligations, costs or damages, known or unknown, reported or unreported, existing or which arise in the future in respect of the Contract. ARTICLE III. PAYMENTS TO TOWER As a condition precedent to the obligations of TOWER hereunder, PXRE will pay to TOWER, via wire transfer, eight hundred eighty three thousand three hundred twenty eight dollars ($883,328) as soon as practicable. In consideration of the payment described in this Article III and other considerations as recited in this Agreement, all premium paid to TOWER in respect of 100% (one hundred percent) of PXRE's share under the Contract hereto shall be deemed fully earned and non-refundable. ARTICLE IV. UNDERTAKINGS Each party agrees that it shall, from time to time, upon the reasonable request of any other party, execute and deliver any further documents which may be required to fully implement the intent of this Agreement. 3 ARTICLE V. GENERAL A. The rights, duties and obligations set forth in this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective predecessors, successors, parents, affiliates, subsidiaries, agents, past, present and future officers, directors, employees, consultants, shareholders, attorneys, agents, trustees, administrators, liquidators, receivers and assigns. B. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York, without regard to and exclusive of the rules with respect to conflicts of law. C. The parties hereto expressly warrant and represent that they are corporations or insurance companies in good standing; that the person or persons executing this Novation and Transfer Agreement have the necessary and appropriate authority to do so; that to the best of their knowledge there are no pending agreements, transactions, or negotiations to which any of them are a party that would render this Agreement or any part thereof void, voidable, or unenforceable; and that to the best of their knowledge no authorization, consent or approval of any government entity is required to make this Agreement valid and binding upon them. D. Except as otherwise provided in this Agreement, each party shall be responsible for its own costs and expenses arising under this Agreement. E. This Agreement contains the entire agreement between the parties as respects its subject matter. All discussions and agreements previously entertained between the parties concerning the subject hereto are merged into this Agreement. This Agreement may not be modified or amended, nor any of its provisions waived, except by an instrument in writing, signed by the parties hereunder. F. This Agreement and any of its rights and obligations may not be assigned in whole or in part without the written approval of all parties hereto. G. The parties agree to cooperate and undertake such further acts in the future as may be reasonably necessary or proper to carry out the terms and purpose of this Agreement. H. In consideration of the mutual covenants and agreements contained herein, each party hereto agrees that this Agreement, and each and every provision hereof, is and shall be enforceable by and between them according to its terms subject to applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws relating to or affecting creditors' rights generally and to general principles of equity, and each party does hereby agree that it shall not, directly or indirectly, contest the validity or enforceability hereof. I. This Agreement may be executed and delivered in counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together be one and the same instrument and agreement. The parties hereto agree that this Agreement shall become effective as of the Effective Date upon the exchange by telecopier of such counterparts duly signed by each party. 4 J. It is mutually understood and agreed that STATE NATIONAL, PXRE, and TOWER shall keep all terms and provisions of this Agreement confidential and shall not disclose such terms or provisions to any third party, other than their financial or legal advisers, rating agencies and/or auditors without the prior written consent of STATE NATIONAL, except where otherwise required by operation of law or the requirements of any regulatory authority and upon reasonable prior written notice to the other parties. K. If any provision in this Agreement is illegal, invalid or unenforceable, the remaining provisions shall not be impaired. L. The failure of the parties to enforce any provision of this Agreement shall not be construed as a waiver of such provision or any other provision of this Agreement. No waiver of any provision of this Agreement shall be deemed a waiver of any of its other terms, nor shall such waiver constitute a continuing waiver. All other terms and conditions of the Contract remain unchanged. 5 IN WITNESS WHEREOF, the parties have executed this Agreement by their duly authorized representatives. For and on behalf of State National Insurance Company, Inc., this 28th day of June , 2006, By: Terry Ledbetter Title: President For and on behalf of PXRE Reinsurance Company, this 28th day of June , 2006 By: Robert P. Myron Title: Executive Vice President and Chief Financial Officer For and on behalf of Tower Insurance Company of New York, its authorized representative, this 28th day of June , 2006, By: Marina Contiero Title: Vice President 6 EXHIBIT A CONTRACT 1.) Quota Share Reinsurance Agreement between State National Insurance Company, Inc. and PXRE Reinsurance Company, Effective April 1, 2003, for its respective 100% (one hundred percent) share (the "Reinsurance Agreement") 2.) Termination Addendum to the Reinsurance Agreement 7