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 29 th 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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