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EXHIBIT 10.16
INVESTMENT ADMINISTRATION AGREEMENT
THIS INVESTMENT ADMINISTRATION AGREEMENT (this "Agreement"), dated as of May 11,
2001 and effective as of October 2, 1998, is made by and between FAIRFAX
FINANCIAL HOLDINGS LIMITED and XXXXXX INSURANCE COMPANY. As used in this
Agreement, "we", "us" and "our" shall refer to XXXXXX INSURANCE COMPANY, and
"you" and "your" shall refer to FAIRFAX FINANCIAL HOLDINGS LIMITED.
In consideration of the mutual promises contained herein, the parties agree as
follows:
1. We authorize you to provide, and by signing below you agree to provide, the
investment administration services set forth in Schedule A attached hereto,
on our behalf and on the terms and conditions set out in this Agreement,
subject to such guidelines, procedures and limitations as may be duly
established and approved by our Board of Directors or a duly authorized
committee of said Board.
2. You shall be entitled to such fees, payable quarterly in arrears, for the
service provided hereunder, as you may specify from time to time. Attached
hereto as Schedule B is a copy of your current fee schedule and you agree
to give us thirty (30) days prior written notice of any change in such
schedule, which change shall require the approval of the Department. Such
fees shall be the exclusive fees and charges payable (excluding third party
disbursements reasonably incurred) for the services provided hereunder. As
regards third party services, you will charge us only the amount of your
actual disbursements paid to third parties for such services. We will remit
payment to you not later than 15 days following delivery to us of a report
showing the amount due hereunder.
3. Either party hereto may terminate this Agreement without penalty by giving
the other party at least thirty (30) days advance written notice of its
desire to terminate the same.
4. This Agreement shall enure to the benefit of and shall be binding upon the
parties hereto and their respective successors. This Agreement may not be
assigned by either party.
5. You and we each acknowledge that the terms of this Agreement are the
exclusive and conclusive terms of our mutual agreement with regard to the
subject matter hereof.
6. Any dispute or difference arising with reference to the applicable
interpretation or effect of this Agreement, or any part thereof, shall be
referred to a Board of Arbitration (the "Board") or two (2) arbitrators and
an umpire.
The members of the Board shall be active or retired disinterested officers
of insurance or reinsurance companies.
One arbitrator shall be chosen by the party initiating the arbitration and
designated in the letter requesting arbitration. The other party shall
respond, within fifteen (15) days, advising of its arbitrator. The umpire
shall thereafter be chosen by two (2) arbitrators. In the event either
party fails to designate its arbitrator as indicated above, the other party
is hereby authorized and empowered to name the second arbitrator, and the
party which failed to designate its arbitrator shall be deemed to have
waived its rights to designate an arbitrator and shall not be aggrieved
thereby. The two (2) arbitrators shall then have thirty days within which
to choose an umpire. If they are unable to do so within thirty (30) days
following their appointment, each arbitrator shall nominate three
candidates within ten (10) days thereafter, two of whom the other shall
decline, and the decision shall be made drawing lots. In the event of the
death, disability or incapacity of an arbitrator or the umpire, a
replacement shall be named pursuant to the process which resulted in the
selection of the arbitrator or umpire to be replaced.
Each party shall submit its case to the Board within one (1) month from the
date of the appointment of the umpire, but this period of time may be
extended by unanimous written consent to the Board.
The sittings of the Board shall take place in Stamford, Connecticut. The
Board shall make its decision with regards to the custom and usage of the
insurance and reinsurance business. The Board is released
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from all judicial formalities and may abstain from the strict rules of law.
The written decision of a majority of the Board shall be rendered within
sixty (60) days following the termination of the Board's hearings, unless
the parties consent to an extension. Such majority decision of the Board
shall be final and binding upon the parties both as to law and fact, and
may not be appealed to any court of any jurisdiction. Judgment may be
entered upon the final decision of the Board in any court of proper
jurisdiction.
7. The provisions in Schedule A and Schedule B attached hereto are hereby
incorporated into, and form part of, this Agreement.
8. This Agreement, including the schedules attached hereto and made a part
hereof, may only be amended by written agreement signed by the parties and
approved by the Department.
9. Unless otherwise specified herein, all notices, instructions, advises or
other matters covered or contemplated by this Agreement, shall be deemed
duly given when received in writing (including by fax or other similar form
of transmission) by you or us, as applicable, at the address or fax number
first above written or such other address or fax number as shall be
specified in a notice similarly given:
If to us:
Xxxxxx Insurance Company
Attn: General Counsel
00 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No. 000-000-0000
If to you:
FAIRFAX FINANCIAL HOLDINGS LIMITED
00 Xxxxxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Fax No. 000-000-0000
Any such notice or communication shall be deemed to have been received by
any such party if delivered, on the date of delivery, or if sent by prepaid
registered mail on the fourth business day following mailing thereof to the
party to whom addressed. For such purpose, no day during which there shall
be a strike or other occurrence interfering with normal mail service shall
be considered a business day.
10. This Agreement shall be governed and construed in accordance with the laws
of the State of Delaware, our state of domicile. Each of the parties hereto
submits to the jurisdiction of the state and federal courts of the State of
Delaware, in any action or proceeding arising out of or relating to this
Agreement and all claims in respect of any such action or proceeding may be
heard or determined in any such court; and service of process, notices and
demands of such courts may be made upon you by personal service to LeBoeuf,
Lamb, Xxxxxx & XxxXxx, L.L.P., 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 or by mailing copies of such process, notices and demands by certified
or registered mail to such address (such address being automatically changed
to the principal office from time to time of LeBoeuf, Lamb, Xxxxxx & XxxXxx,
L.L.P. in New York, New York.
11. You and we and the duly authorized representatives of each of us shall, at
all reasonable times, each be permitted access to all relevant books and
records of the other pertaining to this Agreement. You and your duly
authorized representatives shall provide to the Department, within fifteen
(15) days of any request from the Department therefor, copies of all your
books and records as they pertain to us (or any portion thereof as may be
specifically requested).
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IN WITNESS WHEREOF, this Agreement is hereby executed by duly authorized
officers of the parties hereto as of the date first written above.
XXXXXX INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Senior Vice President
Dated: May 11, 2001
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FAIRFAX FINANCIAL HOLDINGS LIMITED
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Vice President
Dated:
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SCHEDULE A
SERVICES
Tasks underlying the fees to be performed by Fairfax Financial Holdings Limited
are:
Monthly
-- computation of all regulatory figures
-- analysis and reconciliation of portfolios
-- yield review
-- computation of market decline tests
-- computation of liquidity analysis
-- analysis of book values, e.g. bond amortizations and investment provisions
-- analysis of gross gain and loss positions
-- cash flow obligations
-- investment review meeting
Periodic
-- review and analysis of foreign exchange position
-- placement of foreign exchange contracts, where appropriate
-- discussions with regulators regarding portfolio (positions)
-- reporting to the investment committee
-- reporting to the audit committee
-- general assistance with accounting issues
-- maintaining contact with external auditors
-- such other administrative services as the parties shall mutually agree from
time to time
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SCHEDULE B
FEE SCHEDULE
Fees will be calculated at the end of each calendar quarter year based upon the
average of the market value of the funds held in the investment account (the
"Account") governed by the terms of the Investment Management Agreement between
us and Xxxxxxx Watsa Investment Counsel, Ltd., dated as of , at the
close of business for the three (3) preceding months.
MARKET VALUE CHARGE
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On Total Market Value....................................... .10%
In the event that the day upon which this Agreement is terminated is a day other
than the first day of a calendar quarter, the fees payable for such quarter
shall be pro-rated and shall be determined having regard to the market value of
the Account based upon the most recent financial report which has been delivered
to us by the Custodian for the Account.
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