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OAK PROPERTY AND CASUALTY
LLC
MEMBERSHIP PARTICIPATION AGREEMENT
This Membership Participation Agreement (the "Agreement") is
made as of the 1 st day of October, 2006, by and among
the undersigned participants (the "Member" or "Members") and Oak
Property and Casualty LLC, a Vermont captive insurance company,
with a principal place of business at 76 St. Paul Street,
Burlington, Vermont (the "Company").
In consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
ARTICLE I
Limitation of Liability
Section 1. Limitation on Member’s Financial
Liability.
(a)
In General . No Member, individual or
organization shall have the authority to increase the undersigned
Member's liability as set forth in this Agreement. The
Member’s membership in the Company shall be regarded as
membership in a "limited liability company". Annually the
Company will oversee the purchase of one or more insurance policies
that will be acceptable to all Members. Portions of these
insurance policies agreed upon by all Members will be funded or
reimbursed by insurance policies purchased from the Company by the
Members.
(b)
Payment of Non-Catastrophic Premium . For
insurance policy years beginning as of October 1, 2006, and for
each year thereafter, each Member shall pay a premium for the
insurance policy(ies) based on a determination by the
Company’s third-party, independent, consulting actuary (
"Actuary") of losses, loss reserves, loss expenses, and a
proportional allocation of all associated costs for operating,
managing, and maintaining the Company. Each Member agrees to
pay its premium within thirty (30) days of receiving of an invoice
from the Company. The actual loss experience of each Member
will be reviewed by the Actuary and shall form the basis of their
future premium contributions.
(c)
Non-Catastrophic Loss Sharing Among Members .
Each Member acknowledges and agrees that, with respect to
insurance policy years beginning October 1, 2006, and for each year
thereafter, it shall share a portion of the losses and loss
expenses, both paid and estimated to be paid in the future by the
Actuary, that exceed the premium contribution of any other Member
pursuant to a loss sharing formula determined by the Actuary and
approved by the Board of Directors, which may be amended from time
to time. Under the current formula, the afore-described
Member’s loss with respect to a policy year shall be shared
among Members in proportion to their premium contribution as a
percentage of the total premium contributions of all Members.
(d)
Catastrophic Deductible Funding . On a
voluntary basis each Member may participate in funding for the loss
retained under the deductible provision of its insurance policy
that will be available in the event of a catastrophic occurrence as
defined in the Named Windstorm or Earthquake section of the
insurance policy.
(d.1)
Contribution . The contribution will be
based on current catastrophic modeling formulas for determining
exposure. The agreed upon funding level for that policy year
will be divided amongst each participating Member according to its
potential average annual loss as determined by the modeling
process. The total of all contributions shall be known as the
Catastrophic Deductible Fund.
(d.2)
Allocation of Deductible. Within ninety (90)
days of the end of the policy year each Member participating in the
catastrophic deductible funding shall submit to the Company a
listing of any and all claims that fall within the catastrophic
deductible. Each Member submitting a valid, accepted claim
will be paid a percentage of the Catastrophic Deductible Fund equal
to the value of their claims expressed as a percentage of the total
value of all valid, accepted claims.
(d.3)
Catastrophic Limitation . The fund will not
pay out more than the Catastrophic Deductible Fund. No
additional contributions will be assessed each participating Member
during the policy year.
Section 2. Rights to Participate in Governance and
Business of the Company . The Member agrees that its
rights to participate in the governance and business of the Company
are limited to the provisions of the Operating Agreement of the
Company, including the election or appointment of one or more
directors and officers of the Company.
ARTICLE II
Representations and Warranties
Section 1. Representations and Warranties of Each
Member . Each of the undersigned Members hereby
represents and warrants to the other Members and to the Corporation
that:
(a)
The Member has full power and authority, and has taken all
necessary and proper action under its governing instruments and
under applicable state law, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
(b)
This Agreement constitutes a valid and binding obligation of the
Member, enforceable against it in accordance with its terms.
(c)
There are no actions pending or, to the best of its knowledge,
threatened by or against the Member with respect to this Agreement
to which such Member is a Party, or in connection with the
transactions contemplated hereby.
(d)
To the best of its knowledge after diligent inquiry, all
information supplied by the Member to the Company in connection
with its application for membership, including but not limited to
exposure information and loss data, is true and correct.
(e)
It has been provided with a true and correct copy of the
Company’s Business Plan, Articles of Organization and
Operating Agreement as they currently exist. It has carefully
considered and, to the extent Member believes such discussion
necessary, discussed with its professional financial, legal and tax
advisors the suitability of becoming a member of the Company.
(f)
It has such knowledge and experience in financial, insurance and
business matters that it is capable of evaluating the merits and
risks of becoming a Member of the Company and purchasing policies
of insurance from the Company. In making such evaluation, it
has not relied upon any representations or other information from
the Company, other than as set forth in the Company’s
Business Plan, Articles of Organization, Operating Agreement and
the insurance coverage proposal, including premium quotations and
insurance policy provisions.
Section 2. Representations and Warranties of the
Company . The Company hereby represents and warrants to
each undersigned Member that:
(a)
It has full power and authority, and has taken all necessary and
proper action under its governing documents and under applicable
state law, to execute and deliver this Agreement and to consummate
the transactions contemplated hereby.
(b)
This Agreement constitutes a valid and binding obligation of the
Company, enforceable against it in accordance with its terms.
(c)
There are no actions pending or, to the best of its knowledge,
threatened by or against the Company with respect to this Agreement
to which the Company is a Party, or in connection with the
transactions contemplated hereby, nor does the Company have reason
to believe there is a valid basis for any such action.
(d)
To the best of its knowledge after diligent inquiry, all
information supplied by the Company in connection with the
application for membership is true and correct.
(e)
The Company will operate in a manner consistent with
requirements imposed by Vermont law.
Section 3. Survival of Representations . All
representations, warranties and agreements made in this Agreement
or pursuant hereto shall survive the execution, delivery and
termination hereof.
ARTICLE III
Acknowledgments
Section 1. Member Acknowledgments . The
undersigned Member understands, acknowledges and agrees with the
Company as follows:
(a)
To comply with all reasonable underwriting, claims management,
risk management and loss control standards established by the
Company, and shall take any and all actions required by the Company
to addr
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