INVESTMENT MANAGEMENT AGREEMENT
Exhibit 10.117
This Amended and Restated Investment Management Agreement (this “Agreement”) is made and
entered into this 1st day of January 2010 by and between Indiana Insurance Company (the
“Company”), an Indiana stock insurance company and Liberty Mutual Investment Advisors LLC (the
“Advisor”), a Massachusetts limited liability company and supersedes the prior agreement between
the parties dated May 1, 2000.
WHEREAS, the Company desires to enter into a contract for the purpose of appointing the
Advisor to manage the assets of its Account (hereinafter defined) in accordance with the terms
hereof; and
WHEREAS, the Advisor is willing to manage the assets of the Account in accordance with the
terms hereof;
NOW, THEREFORE, the Company and the Advisor hereby agree as follows:
1. Appointment. The Company hereby authorizes and appoints the Advisor as its investment
advisor
and, as its agent and attorney-in-fact, to exercise the investment discretion set forth below with
respect
to the assets of the Company’s Account. “Account” shall mean the assets which Company notifies
the Manager shall be included in the Account, together with the income, proceeds and profits
thereon. The Company hereby authorizes and appoints the Advisor, as its agent and attorney-in-fact,
to
(i) execute all documentation on the Company’s behalf necessary to open additional accounts in the
Company’s name to facilitate investments made within the investment discretion set forth in the
Investment Guidelines, as defined below, and (ii) to execute all documentation, on the Company’s
behalf, to facilitate investment in securities for the Account.
2. Scope of Authorization for Investment Discretion. The Advisor shall manage the
Company’s
Account in accordance with the investment policy and guidelines set forth on Appendices A and
B
respectively (such guidelines, the “Investment Guidelines”), as such may be amended from
time-to-time
by written agreement between the parties hereto. In connection therewith, the Advisor shall have
full
power to supervise and direct the investment and reinvestment of the cash, securities and other
assets
and to engage in such transactions on behalf of the Company as the Advisor may deem appropriate, in
the Advisor’s absolute discretion and without prior consultation with the Company, subject only to
this
Agreement and the Investment Guidelines. The Company hereby acknowledges that the Advisor need
not seek approval prior to engaging in any transaction where such transaction complies with the
terms
and conditions of the Investment Guidelines. The Company acknowledges that performance objectives
referred to in Appendices A and B are intended as goals and not as an assurance or guarantee of
performance.
In performing its duties under this Agreement, the Advisor will act in the interests of the
Company, except as otherwise provided herein. The Advisor will not deal with the assets in the
Company’s Account in its own interest or for its own account and, in particular, will not, without
prior written consent of the Company, as principal, sell assets to, purchase assets from, or borrow
money or other property from the Company’s Account.
Without limiting the foregoing, the Company hereby authorizes the Advisor:
(a) to act as the Company’s agent and attorney-in-fact with respect to the Company’s Account
and to have complete discretionary control over the composition of the assets in the Account,
including the power to make such acquisitions and disposals of investments as the Advisor considers
appropriate, but always in accordance with the Investment Guidelines;
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(b) to issue to brokers instructions to buy or to sell or otherwise trade in or deal with any
asset
in the Account;
(c) to instruct any custodian of any asset in the Account to deliver any security or other
asset
sold, exchanged or otherwise disposed of from the Account;
(d) to pay any fee incurred on behalf of the Company in providing services under this
Agreement, including commission expenses, attendant Securities and Exchange Commission
transaction
fees and National Association of Insurance Commissioners transaction fees which shall be paid
from the
Account in the conventional manner;
(e) to delegate any of its responsibilities, duties and authority set forth herein to, or
otherwise to
utilize the investment management services of, any of its affiliates provided that the Advisor
will be
fully accountable for any acts or omissions of an affiliate pursuant to such an arrangement,
as if such
acts or omissions were its own;
(f) to place any securities on deposit with any governmental authority as may be necessary or
desirable to comply with applicable law, and to substitute other securities in their place;
(g) to perform any other act necessary or desirable to enable the Advisor to carry out
its obligations under this Agreement; and
(h) unless directed otherwise by the Company, to vote proxies on behalf of the
Account, solicited by or with respect to the issuers of securities in which the assets of
the Account may be invested, pursuant to proxy voting guidelines maintained by the Advisor.
3. Reports and Compliance. Advisor shall promptly furnish to or place at the disposal of
the
Company, as appropriate, such information, reports, evaluations, analysis, and opinions as the
Company
may, at any time or from time to time, reasonably request. Additionally, Advisor shall furnish such
information, reports and evaluations as the Company may from time to time reasonably request which
may be necessary or appropriate in order to enable the Company to maintain oversight over the
Account
and assure compliance with the Investment Guidelines.
4. Fees. The Advisor shall be entitled to compensation for its services hereunder as set
forth in
Appendix C attached hereto, and which is made part of this Agreement. Commission expenses
and
attendant Securities and Exchange Commission transaction fees resulting from transactions executed
on
behalf of the Company shall be paid from the Account assets. Compensation amounts owing between
the parties shall be settled between the parties on a quarterly basis and payments of amounts owing
shall
be made within 45 days after the end of the calendar quarter.
5. Limits on Advisor Responsibility.
(a) The Advisor shall not be responsible for the solvency of or the performance of the
obligations of any third party bank, clearing organization, broker, intermediary, nominee or
agent
appointed or employed by the Advisor in good faith for the performance of its duties but the
Advisor
shall assign to the Company such rights (if any) as the Advisor may have against such person
in the
event of the insolvency of any of the above or its failure properly to perform such
obligations and shall
give, without further compensation, such assistance as the Company may reasonably require to
exercise
such rights.
(b) The Advisor shall be fully protected in acting and relying upon any written advice,
certificate, notice, instruction, request or other paper or document which the Advisor in
good faith
believes to be genuine and to have been signed or presented by an authorized person or
other proper
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party or parties, and may assume that any person purporting to give such written advice or other
paper or document has been duly authorized to do so unless contrary instructions have been
delivered to the Advisor by the Company.
(c) The Advisor shall not be liable to the Company for any acts or omissions by the Advisor,
its
employees and agents under and in connection with this Agreement, except by reason of acts or
omission constituting gross negligence, willful misconduct or fraud on the part of the
Advisor, including
its employees. Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 5
shall not be construed to provide for the exculpation of the Advisor or any affiliate from any
liability to
the extent that such liability may not be waived, modified or limited under applicable law,
but shall be
construed so as to effectuate the provisions of this Section 5 to the fullest extent permitted
by law.
(d) The Company shall reimburse and indemnify the Advisor for, and hold it harmless against,
any loss, liability or expense, including, without limit, reasonable counsel fees, incurred on
the part of
the Advisor arising out of or in connection with its acceptance of, or the performance of its
duties and
obligations under, this Agreement, as well as the costs and expenses of defending against any
claim or
liability arising out of or relating to this Agreement unless such loss, liability or expense
is the result of
acts or omissions by the Advisor constituting gross negligence, willful misconduct or fraud;
provided,
however, that nothing contained herein shall constitute a waiver or limitation of any rights
which the
Company may have under applicable securities or other laws.
6. Representations and Agreements.
(a) The Advisor represents to and agrees with the Company that:
(1) the terms of this Agreement do not violate any obligation by which the Advisor is
bound, whether arising by contract, operation of law or regulation, or otherwise;
(2) this Agreement has been duly authorized, executed and delivered by the Advisor and
constitutes a legal, valid and binding agreement of the Advisor enforceable in accordance with
its terms,
and the Advisor has full power and authority to enter into this Agreement and to perform its
duties
hereunder;
(3) it shall maintain at all times during the term of this Agreement competent personnel
to perform the duties required of it hereunder, and the Advisor’s expenses in connection
therewith shall
be borne by the Advisor; and
(4) the representations and warranties contained herein shall continue and remain in
effect during the term of this Agreement, and, if at any time during the term of this
Agreement any event
occurred which would make any of these foregoing representations untrue, incomplete or
inaccurate in
any respect, the Advisor will promptly notify the Company of such event.
(b) The Company represents to and agrees with the Advisor that:
(1) the terms of this Agreement do not violate any obligation by which the Company is
bound, whether arising by contract, operation of law or regulation, or otherwise;
(2) the Company is the sole owner of the assets covered hereby and such assets are free
and clear of any and all liens and restrictions on their transfer or sale, except for
applicable transfer
restrictions under various securities laws;
(3) this Agreement has been duly authorized, executed and delivered by the Company
and constitutes a legal, valid and binding agreement of the Company enforceable in accordance
with its
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terms, and the Company has full power and authority to enter into this Agreement and to perform its
duties hereunder;
(4) the Account is not subject to the U.S. Employee Retirement Income Security Act of
1974, as amended (“ERISA”);
(5) it is not a “Benefit Plan Investor,” as defined under ERISA;
(6) the Company will deliver or cause to be delivered to the Advisor in writing, all the
information, documents and instruments that the Advisor may reasonably request in order to
perform its
duties hereunder; and
(7) the representations and warranties contained herein shall continue and remain in
effect during the term of this Agreement, and, if at any time during the term of this
Agreement any event
occurred which would make any of these foregoing representations untrue, incomplete or
inaccurate in
any respect, the Company will promptly notify the Advisor of such event.
7. Acknowledgements and Consents. The Company acknowledges that:
(a) the Advisor may place orders for the execution of transactions with or through such
brokers,
dealers or banks as the Advisor may select in its sole discretion. In selecting such broker,
Advisor will
give primary consideration to obtaining the most favorable price and efficient execution. The
Advisor
may consider, in addition, the financial stability and reputation of brokers and dealers and
the brokerage
and research services (as those terms are defined in Section 28(e) of the Securities and
Exchange Act of
1934, as amended) provided by brokers and dealers that may benefit the Company. The Advisor
may,
and is authorized to, consistent with its duty of best execution and in compliance with all
applicable
securities laws, pay a commission for executing a transaction which may be greater than the
amount of
the commission another broker or dealer might have charged for effecting that transaction,
provided that
the Advisor determines in good faith that such amount of commission was reasonable in relation
to the
value of the brokerage and research services provided. Subject to the foregoing, the Company
acknowledges that such research services rendered may be useful in providing services to
clients other
than the Company, and that not all such information will necessarily be used by the Advisor in
connection with rendering services to the Company. The Company understands and agrees that it
will
not direct brokerage, and that the choice of brokers is in the Advisor’s sole discretion;
(b) (i) the Advisor acts as adviser to other clients and may give advice, and take action,
with
respect to any of those clients which may differ from the advice given, or the time or nature
of action
taken, with respect to the Company’s Account; (ii) where there is a limited supply of a
security, the
Advisor will use its best efforts to allocate or rotate investment opportunities in a fair and
equitable
manner, and the Company acknowledges that the Advisor cannot assure, and assumes no
responsibility
for, equality among all accounts and customers; (iii) affiliates of the Advisor and officers,
directors and
employees of the Advisor and such affiliates of the Advisor may engage in transactions, or
cause or
advise other customers to engage in transactions, which may differ from or be identical to
transactions
engaged in by the Advisor for the Account and the Company acknowledges that the Advisor and
affiliates of the Advisor and officers, directors and employees of the Advisor and such
affiliates of the
Advisor may at any time acquire, increase, decrease or dispose of positions in securities or
other assets
which are, at the same time being acquired, held or disposed of for the Company’s Account; and
(iv) the
Advisor shall not have any obligation to recommend any transaction or initiate the purchase or
sale of
any security or other asset for the Account which any of such affiliates or any of the
officers, directors
or employees of Advisor or such affiliates may engage in for their own accounts or the account
of any
other customer, except as otherwise required by applicable law;
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(c) from time to time the Advisor may determine, in its reasonable judgment, to sell a
security
for the Company that certain of the Advisor’s investment advisory clients or the clients of
its affiliated
broker-dealer wishes to buy, or buy a security that certain of the Advisor’s investment
advisory clients
or the clients of its affiliated broker-dealer wishes to sell. Such an agency-cross
transaction could result
in the payment of fees to the Advisor by both the Company and such other client. By execution
of this
agreement, the Company authorizes and grants consent to the Advisor to participate in
agency-cross
transactions involving the Account. The Company may revoke its consent at any time by written
notice
to the Advisor; and
(d) the Advisor may aggregate sales and purchase orders for the Company’s Account with
similar orders being made concurrently for other accounts managed by the Advisor, if in the
Advisor’s
reasonable judgment such aggregation shall result in an overall economic benefit to the
Company’s
Account, taking into consideration the selling or purchase price, brokerage commission and
other
expenses; in such case the actual prices applicable to the transaction will be averaged among
the
accounts for which the transaction is effected, including the Company’s Account.
8. Termination. This Agreement may be terminated by the Advisor upon 180 days written
notice to the
Company, and terminated by the Company at any time upon written notice to the Advisor, termination
effective upon receipt of such notice by the Advisor (the “Termination Date”). Upon termination,
the
Advisor shall have no further investment management responsibility for assets in the Account, but
shall
have reasonable time, not to exceed 90 days, to transfer assets to a custodian of the Company’s
selection. The fee payable to the Advisor pursuant hereto will be prorated to the Termination Date
and
any unearned portion of prepaid fees will be refunded to the Company.
9. Enforceability. If any provisions of this Agreement are held invalid or unenforceable,
such
invalidity or unenforceability shall not affect any other provision, and the Agreement shall be
construed
and enforced as if such provisions had not been included.
10. Assignment. No assignment of this Agreement, including by operation of law, may be made
by
any party to this Agreement without the consent of the other parties hereto. Subject to the
foregoing, this
Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors
and
assigns.
11. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or
the breach of
the same, shall be settled by arbitration in accordance with the rules of the American Arbitration
Association, or another nationally recognized arbitration association mutually agreed upon by the
parties hereto. Judgment upon the award rendered by the arbitrators may be entered in any court
having
jurisdiction. All arbitration expenses shall be borne equally by the Advisor and the Company.
Notwithstanding any of the foregoing to the contrary, the provisions of this Section 11 do not
constitute
a waiver of any right provided by any applicable law, including the right to choose the forum,
whether
arbitration or adjudication, in which to seek resolution of disputes.
12. Governing Law. This Agreement shall be construed in accordance with applicable federal
law
and, to the extent not preempted, the laws of The Commonwealth of Massachusetts without regard to
its
conflict of laws principles.
13. Counterparts and Facsimile. This Agreement may be executed in several counterparts,
each of
which shall be deemed to be an original, and all of which, when taken together, shall constitute
one and
the same instrument.
14. Entire Agreement/Amendment. This Agreement, including the Appendices hereto,
constitutes
the entire agreement among the parties with respect to the subject matter hereof and supersedes all
previous agreements, promises, representations, understandings and negotiations, whether written or
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oral, between the parties with respect to the subject matter hereof. This Agreement, including
the Appendices hereto, may not be amended except in writing signed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Investment Management Agreement to be
executed as of the date set forth above.
| Indiana Insurance Company |
||||
| By: | 
|
|||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Vice President, Chief Financial Officer and Treasurer | |||
| Liberty Mutual Investment Advisors LLC |
||||
| By: | 
|
|||
| Name: | A. Xxxxxxxxx Xxxxxxxx | |||
| Title: | Vice President | |||
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Appendix A
STATEMENT OF INVESTMENT POLICY
The investment policy of the Company like that of the other portfolios managed for the accounts of
Liberty Mutual Group of Companies (LMG) has been formulated with two basic tenets in mind. First,
as property and casualty insurance companies, the primary purpose of the investment portfolio is to
support the Company’s insurance operations and to be consistent with the Company’s objectives for
long-term financial strength in order to meet its obligations to policyholders. Second, as
insurance company, the preponderance of risk assumed should be in the underwriting of the Company’s
insurance products, not in the investment of its assets. Within these broad risk parameters,
management of the portfolio will focus on maximizing the long-term after-tax total rate of return
on invested assets through disciplined asset allocation and security selection, balanced with the
need for the portfolio to produce investment income, stable cash flow, and sufficient liquidity.
Asset management should also provide safety through adequate diversification of risk, the
preservation of principal, and the avoidance of unacceptable levels of asset/liability mismatches.
Within this context, individual investment decisions will be based on fundamental economic,
financial, credit and security analysis/selection combined with relative value considerations among
securities and market sectors. The specific terms and conditions of individual securities and the
specific asset’s fit within the total portfolio framework will be evaluated prior to investment.
The overall policy will be managed through adherence to a set of broadly defined policy guidelines
designed to give the advisor discretion in meeting portfolio objectives. This investment policy and
the investment guidelines, all of which will be reviewed on a periodic basis in conjunction with
changing regulatory and business requirements, are subject to the final approval of the Company’s
Board of Directors or a duly appointed and authorized committee thereof.
The ongoing implementation of the investment policy will be the responsibility of the investment
advisor through the authority granted by the Company’s Board of Directors. The investment advisor
consists of the same group of investment professionals responsible for managing the other
insurance companies investment assets of LMG, currently totaling over $50.0 billion. As such, the
implementation and maintenance of the investment policy will occur within the same basic
framework, as LMG’s other portfolios and adjusted, when and where appropriate, to accommodate the
specific requirements of the Company. All investment related decisions and transactions will be
implemented by those individuals with proven abilities to do so effectively and that have been
granted that authority by the Company’s Board of Director through the Chief Investment Officer of
LMG. All investment transactions will be reported to the respective Boards at its regularly
scheduled meetings.
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Appendix B
INVESTMENT GUIDELINES
The investments will be managed on a full discretionary basis, subject to the
guidelines and constraints described below and in a manner consistent with the overall
policy framework. Table 1 below presents broad policy guidelines as to the percent of
total long-term assets that may be invested in any particular asset category. The
level of exposure within the established range will be governed by the fundamental
long-term outlook for total returns within the given asset category in relation to
assessed risk combined with shorter-term tactical or technical issues. Any investment
in assets classes other than those outlined in Table 1 will be reviewed with the
Company’s Boards of Directors prior to purchase.
Table 1
Asset Category Guidelines
Asset Category Guidelines
| Maximum % of Invested | ||||
| Asset Category | Assets or Surplus | Limits Within Asset Category | ||
Debt Obligations: |
||||
Noninvestment Grade
|
Lesser of 5% of assets or 50% of surplus | 0.5% of invested assets per issuer | ||
Equities: |
||||
Public Common Securities
|
Lesser of 10% of assets or 50% of surplus | 2% of invested assets per issuer | ||
Preferred Securities /Direct Investments |
Up to 10% of assets | 2% of invested assets per issuer | ||
Limited Partnership,
LLC’s or other
investment fund vehicles
|
Lesser of 10% of invested assets or 50% of surplus | None |
Maturity Constraints: The expected average maturity of the Company’s holdings of
debt obligations will not exceed 15 years.
OTHER AUTHORIZED INVESTMENT PRACTICES
Reverse repurchase-agreements may be entered into for purposes of liquidity
management and yield enhancement to the degree that the total amount outstanding
does not exceed 25% of portfolio assets and the original term does not exceed 90
days. Such reverse repurchase agreements will be executed in a manner consistent
with standard industry practices regarding the pledging of collateral,
marking-to-market, et cetera.
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Appendix C
Indiana Insurance Company
and
Liberty Mutual Investment Advisors LLC
and
Liberty Mutual Investment Advisors LLC
Compensation
Advisor shall receive a quarterly management fee calculated as follows:
| {(the market value under US GAAP of all cash and securities in the Company Account on the first day of each calendar quarter plus the market value under US GAAP of all cash and securities in the Company Account on the last day of that same calendar quarter) divided by two} times .00045. |
For the purposes of the above calculations, the market value of the securities shall be determined
as of the close of business on the first and last days of each quarter.
Company shall be responsible for all custody related charges and wire transfer fees originating
from the custody account.
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