Exhibit 10.21
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED
BY AN ASTERISK AND BRACKETS, HAS BEEN OMMITTED AND FILED
SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2
OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
AIG Risk Management, Inc
A Member Company of American International
Group, Inc
Gevity HR, Inc.
1/1/04-05
Final Bound Workers
Compensation/Employers Liability Proposal
AIG
Prepared by Thomas Agnello
12/31/03
AIG Risk Management
80 PINE STREET, THIRD FLOOR
NEW YORK, NEW YORK 10005
(212) 770-3708/ Fax (212) 480-2239
The following item is a Final
Bound Proposal prepared by AIG Risk Management, which describes the
coverages, terms and conditions that AIG Risk Management and Gevity
HR intend to implement in the context of Gevity HR’s Workers
Compensation Risk Management Program effective 1/1/2004.
The Final Bound Proposal
contemplates the following terms:
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1.
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Based on
unmodified manual premium of $118,108,735 with corresponding
modified premium of $141,227,738. Rates outlined within this
proposal will be applied to unmodified manual premium. Our manual
rating contemplated rates as of 10/1/03 for Florida which includes
a 14% rate decrease.
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With respects
rate changes & potential impact to Gevity: Rate changes made
during the course of an in force policy would not
apply until the renewal of the subsequent policy term unless there
is an anniversary rating date.
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2.
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Receipt of
first installment due prior to inception.
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3.
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Annual manual
premium growth of no more than [ * ] % in the
states of CA, GA , TX, or FL ( [ * ] % as
respects FL) individually and no more than [ * ]
% in the aggregate. If calculated at monthly audit [
* ] % or greater premiums are found for states other
than FL (FL is [ * ] %), we would retain the
right to immediately increase and bill excess premium and
collateral by 1.25 times the relative exposure in the applicable
states above the trigger.
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4.
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If actual
surcharges including NY second injury exceed the deposit indicated
below, Gevity will be responsible for the additional
cost.
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5.
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Continued
Compliance with monthly voluntary audits.
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6.
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This quote
contemplates that there are no material changes between the date of
this quote and expiration. If a material change should occur, we
reserve the right to re-price account immediately and change our
collateral requirements. Material change is defined as inclusive
but not limited to: changes in management team, changes in manual
rate profile of Gevity, deterioration in either Gevity’s
financials or projected losses under the current program,
acquisitions or transfer in whole or in part of another similar
organization or book of business, any breach of our current
contract.
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7.
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This proposal
is net of brokerage commission. 8. This quote will expire on
12/31/03 unless extended by AIG.
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8.
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This quote will
expire on 12/31/03 unless extended by AIG.
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Estimated
Exposures
$3,255,418,561 estimated payroll
excluding monopolistic states
Retained Amount
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Workers'
Compensation and Employers'
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**$2,000,000
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Each accident
or each
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Liability under
state Law
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person for
Disease
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Workers'
Compensation and Employers'
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$2,000,000
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Each Accident
or each
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Liability under
Federal Law
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person for
Disease
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** Minnesota
$1,440,000
* THIS
CONFIDENTIAL INFORMATION HAS BEEN OMMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
2
Treatment of
Allocated –
“Pro-Rata” in accordance with the following
definition:
“Allocated Loss
Adjustment Expenses” or “ALAE” means all court
costs and court expenses; pre- and post-judgement interest; fees
for service of process; attorneys’ fees; cost of undercover
operative and detective services, costs of employing experts; costs
for legal transcripts; costs for copies of any public records;
costs of depositions and court-reported or recorded statements;
costs and expenses of subrogation; and any similar fee, cost or
expense reasonably chargeable to the investigation, negotiation,
settlement or defense of a loss or a claim or suit against you, or
to the protection and perfection of your or our subrogation
rights.
“ALAE”
shall not include:
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1.
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Fees payable to the Claims
Service Provider as set forth in its fee schedules payable by us,
nor;
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2.
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the salary, employee benefits, or
overhead of any of our employees, nor
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3.
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the fees of any attorney who is
our employee or under our permanent retainer; nor
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4.
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the fees of any attorney we
retain to provide counsel to us about our obligations, if any,
under any policy issued by us or our affiliated company(ies), with
respect to a claim or suit against you.
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“Allocated Loss Adjustment
Expenses” Included
as Reimbursable Amount or Subject Loss
All or a part of ALAE calculated according to the following
formula:
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a)
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If we have NO obligation
under the Policies to pay damages, benefits or indemnity, all
ALAE up to the applicable Deductible or Loss Limit and 100%
of all ALAE in excess thereof; or
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b)
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If our obligation to pay
damages, benefits or indemnity under the Policies exceeds zero
($0), all ALAE times the amount of our obligation to
pay damages, benefits or indemnity up to the applicable Deductible
or Loss Limit, divided by the total amount of our
obligation to pay damages, benefits or indemnity.
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Program
Components
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Total
Pay-In
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$118,971,136
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Pay-In Loss
Provision
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$
96,563,498
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Pay-In
Insurance Company Expenses(1)
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$
22,407,638
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• Profit and
Administration
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$[ *
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]
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• Excess Premium
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$[ *
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• Claims
Administration
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$[ *
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• Tax/RMLs/ Board &
Bureaus
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$[ *
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]
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• NY State Assessment
Charge
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$[ *
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Estimated
Workers Compensation
Surcharges based upon audited premium
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$ 488,409
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(In addition to
Total Pay-In above)Adjustable
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Annual
Unmodified Manual Premium
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$118,108,735
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Estimated
Monthly Unmodified Manual Premium
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$
9,842,395
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1/12
th of estimated annual
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Aggregate Stop - Not applicable for
this quote option
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(1)
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Does not
include potential premium taxes on deductible reimbursements except
for those states identified in the schedule to the Payment
Agreement. If a determination is made by any state regulatory
authority that deductible reimbursements are taxable as premium or
subject to assessments, you will be charged for said taxes and
assessments.
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* THIS
CONFIDENTIAL INFORMATION HAS BEEN OMMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
3
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(2)
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Claims
Administration Expense Payin = $ [ * ] .
Predicated on assumption of [ * ] % LCF off
Incurred Losses limited to $1,000,000 per occurrence. To be
adjusted annually based on calculation of ultimate loss using LDFs
identified within the proposal times applicable LCF.
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Our proposal
contemplates Gevity successful elimination of F.E.T. – Should
F.E.T. be assessed this charge will be passed along to
Gevity.
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(3)
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The Tax Amount
show above reflects our estimate of taxes, Risk Market Loads
(RML’s) and Board & Bureau Charges in effect currently
for all states. We will continue to review Florida Taxes and
Assessments and finalize this accordingly prior to inception of
this program.
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Monthly/Quarterly Premium
Adjustment
We will require Monthly voluntary
payroll audits, supplemented with quarterly physical
audits:
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If
calculated premium at quarterly audit 10+% greater than projection
- additional premium due immediately.
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If
calculated premium at quarterly audit 15+% greater than projection
– premium due immediately and institute monthly physical
audits.
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Premium to be paid-in in accordance with installment schedule shown
below. The original calculation of the premium is subject to the
following:
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Unmodified Standard
Premium is within 20% of the original estimated amount. If the
variance is greater an entirely new analysis will be
performed.
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P&A and Excess
Premium are subject to a 90% minimum based on the original
calculation of program costs or $ [ * ]. No
further reduction in these costs will be made.
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(New
Monthly Unmodified Manual Premium less $9,842,395) x.100.7 = A/P or
R/P is subject to the following:
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The
change in pay-in premium from the resulting unmodified manual
premium will be allocated 81.2% to loss provision and 18.8% to
insurance company expenses.
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The
monthly adjustment is subject to a minimum loss provision of
$6,839,914 ( 85% of Anticipated Loss Provision) and minimum
expenses as detailed below. If cancelled prior to end of a full
annual term either by GEVITY or AIG – an interim adjustment
will be conducted based on unmodified manual premium on YTD basis
(subject to expense minimum as outlined below).
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The
additional/return unmodified premium will be calculated in
accordance with the monthly underwriting information provided by
GEVITY. The additional/return premium will be applied to the
following monthly installment.
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If
the total amount of claims we shall have paid on your behalf
exceeds the loss provision funding collected for (3) consecutive
billing periods within the first twelve months, we may require you
to pay us additional funds.
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* THIS
CONFIDENTIAL INFORMATION HAS BEEN OMMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
4
Insurance Company Expense
Annual Adjustment
At premium audit, approximately
18 months from inception of the program, the following expenses
will be adjusted. Premiums shown below represent pay-in premiums as
outlined on page 3.
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Taxes
- $[ * ]. Adjustable off the Unmodified Manual Premium at a rate of
[ * ]%.
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NY
State Assessment Charge of $ [ * ] will be
subject to audit based on the final Standard WC Premium.
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Claims Administration — $[ * ] pay-in
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LCF
option selected multiplied by Ultimate Loss as calculated annually
using the LDFs contained within the proposal.
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Excess Premiums and Profit and Administration = $ [ *
]
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Audited
Unmodified Manual Premium times [ * ] %; subject
to 90% minimum.
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Surcharges and Assessments = $488,409
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[Surcharge table to
follow]
Loss Provision Annual
Adjustment
The losses will be adjusted based
on losses valued at eighteen months after inception and annually
thereafter. There is no Minimum or Maximum Loss
Provision.
The
Additional/Return Loss Provision will be:
The
difference between (Ultimate Losses) and (Loss Provision amount
collected during the policy period)
The
formula for the ultimate losses is as follows:
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Ultimate Losses
= Incurred Losses capped at the retention for the period of
1/1/04-1/1/05, valued as of 7/1/05 x loss development factor. The
loss development factors are as follows:
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Determination of loss provision
adjustment after 78 months will be addressed in the Payment
Agreement.
* THIS
CONFIDENTIAL INFORMATION HAS BEEN OMMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
5
Installments
The premium and surcharges are
due and payable according to the following schedule:
Due 1/1/04: $10,393,555 and 11
equal installments of $9,915,090 due 2/1/04 through
12/1/04.
If the first installment is not
received prior to the inception date coverage will not
incept.
If the remaining payments are not
received prior to the due date the policies will be cancelled for
nonpayment of premium.
Surcharges of $488,409 will be
paid in the first installment.
Collateral
Requirement
The current collateral
requirement for 1/1/04-05 will be $96,563,498. This is our original
assessment of loss pick. We will apply the buffer collateral of
$17,000,000 received during the 1/1/03-04 policy term to both
years. The collateral requirement for 1/1/04-05 can be provided
through a RCAMP and a combination of any other AIG approved
Alternative Collateral
The collateral will be reviewed
on a annual basis.
Security will be on a depleting
basis. Using RCAMP as collateral, retained losses will be paid our
of RCAMP funds. No monthl
