SERVICE AGREEMENT
This Service Agreement ("Agreement") is entered into as of this _____ day
of _______________, 1998 ("Effective Date"), by and between, United Wisconsin
Services, Inc., f/k/a Newco/UWS, Inc., an insurance holding company organized
pursuant to Ch. 180, Wisconsin Statutes ("UWSI"), and American Medical Security
Group, Inc., f/k/a United Wisconsin Services, Inc., an insurance holding company
organized pursuant to Ch. 000, Xxxxxxxxx Xxxxxxxx ("XXXX").
RECITALS
WHEREAS, UWSI provides various business resources and services necessary
for the continued operation of the business of AMSG (including its
subsidiaries);
WHEREAS, by entering into this Agreement, the parties hereto wish to
establish clearly (i) the services and resources that UWSI will provide to AMSG
and the compensation therefor; and (ii) the respective rights and
responsibilities of the parties.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and of the
mutual covenants hereinafter contained, the parties hereto agree as follows:
I. SERVICES AND RESOURCES PROVIDED TO AMSG BY UWSI
A. UWSI Services. UWSI shall provide to AMSG, to the extent requested by
AMSG from time to time, the following services and resources (together
"UWSI Services"). UWSI shall supply UWSI Services only if AMSG has
determined not to have its own employees or third parties furnish such
UWSI Services.
1. Investment Management and Accounting Services. Such investment
management and accounting services, including, but not limited
to, investment portfolio oversight, cash management, treasury,
and related accounting services, as shall be necessary or
appropriate for the conduct of AMSG's business.
2. Risk Management Services. Such risk management services,
including, but not limited to, the selection and purchase of
insurance, as shall be necessary or appropriate for the conduct
of AMSG's business.
3. Corporate Accounting, Financial and Legal Services. Such
corporate accounting, financial and legal services, including,
but not limited to, assistance with SEC filings, risk-based
capital calculations, budget preparation, and audit functions, as
shall be necessary or appropriate for the conduct of AMSG's
business.
4. Corporate Communications. Such corporate communications
services, including, but not limited to, public relations,
corporate marketing, and assistance with shareholder, proxy and
investor related materials, as shall be necessary or appropriate
for the conduct of AMSG's business.
B. Staffing. UWSI shall maintain an adequate source of qualified
employees to ensure the acceptable performance of UWSI Services.
C. Provision of Services by UWSI Group. Notwithstanding Section I.B,
UWSI has the right to provide UWSI Services to AMSG either directly or
indirectly, through any subsidiary of UWSI (the "UWSI Group"). UWSI
may provide UWSI Services to AMSG indirectly through purchase from or
contract with a source outside the UWSI Group only with AMSG's written
consent. Unless otherwise specified herein, charges for outside
services shall be subject to negotiation by the parties hereto.
II. COMPENSATION FOR UWSI SERVICES
A. Investment Management and Accounting Services. To the extent that
UWSI provides Investment Management and Accounting Services pursuant
to Section I.A.1, UWSI shall be compensated as follows:
1. Percentage of Investment Portfolio Plus Fixed Fee. With respect
to each investment portfolio that UWSI oversees on behalf of
AMSG, or any of AMSG's subsidiaries ("Investment Portfolio"),
UWSI shall be entitled, on a monthly basis, to a percentage of
the outstanding balance of the Investment Portfolio ("UWSI's
Investment Fee"), calculated as follows: The average outstanding
balance of the Investment Portfolio during the immediately
preceding calendar month, multiplied by a rate per annum of point
zero five percent (.05% or .0005). For each company, including
AMSG and its subsidiaries, that UWSI provides Investment
Management and Accounting Services under this Agreement, UWSI
also shall be entitled to a monthly fee of $700 per company, in
addition to UWSI's Investment Fee.
2. Reimbursement for Third Party Costs. Any charges, costs or
expenses incurred by UWSI, on behalf or for the benefit of AMSG,
for outside trust, money management or consultant services shall
be directly charged to AMSG by UWSI and AMSG shall promptly
reimburse UWSI for the same.
B. Risk Management Services. To the extent that UWSI provides any Risk
Management Services pursuant to Section I.A.2, UWSI shall be
compensated as follows:
1. Premium Reimbursement. Any premium attributable to insurance
procured by UWSI on behalf or for the benefit of AMSG shall be
directly charged to AMSG by UWSI, as often as UWSI is billed for
the same, and AMSG shall promptly reimburse UWSI for such billed
premium.
2. Risk Management Fee. UWSI also shall be entitled to a monthly
"Risk Management Fee," calculated as follows: (a) The annual
premium attributable to insurance procured by UWSI on behalf or
for the benefit of AMSG, as reasonably determined by UWSI, times
(b) a rate per annum of five percent (5%).
C. Corporate Accounting, Financial and Legal Services. To the extent that
UWSI provides any Corporate Accounting, Financial and Legal Services
pursuant to Section I.A.3, UWSI shall charge AMSG for such services at
the rate of $75.00 per hour, plus any non-labor costs and expenses
incurred directly by UWSI.
D. Corporate Communications. To the extent that UWSI provides any
Corporate Communications Services pursuant to Section I.A.4, UWSI
shall charge AMSG for such services at the rate of $40.00 per hour,
plus any non-labor costs and expenses incurred directly by UWSI.
III. SUBSTANTIATION AND PAYMENT OF CHARGES
A. Substantiation of Charges. UWSI shall calculate, determine and
allocate, in a fair and reasonable manner, all fees, costs, expenses
and other sums chargeable to AMSG pursuant to this Agreement
("Charges"). UWSI shall maintain reasonable and appropriate operating
procedures for calculating and tracking all Charges so as to enable
AMSG and it's independent certified public accounting firm to audit
such Charges. At the end of each month, UWSI shall provide to AMSG
appropriate documentation respecting the Charges for that month in
sufficient detail to permit AMSG to identify the sources of such
Charges.
B. Payment of Charges. Unless otherwise specified herein, at the end of
each month, not later than the 30th day of the following month, AMSG
shall promptly pay UWSI for all Charges for the immediately preceding
month.
IV. ADDITIONAL COVENANTS
A. Availability of Records. UWSI shall make available to AMSG, for
inspection, examination and copying, all of its books and records
pertaining to UWSI Services provided under this Agreement each
contract year:
1. At all reasonable times at the principal place of business of
UWSI, or at such other place as the parties hereto may otherwise
agree to and designate;
2. In a form maintained in accordance with generally accepted
accounting principles and with any other general standards or
laws applicable to such book or record;
3. For a term of at least seven (7) years, from the end of each
contract year, irrespective of the termination of this Agreement.
B. Confidentiality.
1. The parties acknowledge and agree that they may deliver to each
other information about themselves and their business which is
nonpublic, confidential or proprietary in nature. All such
information, regardless of the manner in which it is delivered,
is referred to as "Proprietary Information." However,
Proprietary Information does not include information which
1. is or becomes generally available to the public other
than as a result of a disclosure by the other party,
2. was available to the other party on a nonconfidential
basis prior to its disclosure by the disclosing party,
or
3. becomes available to the other party on a
nonconfidential basis from a person other than by the
disclosing party. Unless otherwise agreed to in
writing by the disclosing party, the other party shall
a. except as required by law, keep all Proprietary
Information confidential and not disclose or
reveal any Proprietary Information to any person
other than those employed by the other party, or
who is actively and directly participating in the
performance under this Agreement on behalf of the
other party ("Involved Persons");
b. cause each Involved Person to keep all Proprietary
Information confidential and not disclose or
reveal any Proprietary Information to any person
other than another Involved Person; and c. not use
the Proprietary Information, and ensure that each
Involved Person does not use the Proprietary
Information, for any purpose other than in
connection with the performance under this
Agreement.
2. Upon termination of this Agreement for any reason whatsoever,
each party shall promptly surrender and deliver to each other
party all records, materials, documents, data and any other
Proprietary Information of the other parties and shall not retain
any description containing or pertaining to any Proprietary
Information of the other parties, unless otherwise consented to
in writing by a duly authorized officer of UWSI or AMSG as the
case may be.
C. Cooperation. The parties hereto will fully cooperate with each other
and their respective counsel, if any, agents and accountants in
connection with any action to be taken in the performance of their
obligations under this Agreement. In the conduct of their affairs and
the performance of this Agreement the parties hereto shall, unless
otherwise agreed, maintain the working relationships of the parties on
substantially the same terms as before the execution of this
Agreement. Notwithstanding the preceding, the parties do not intend,
nor should this Agreement be construed, to restrict any party's
ability to contract with any other person or entity to provide
services similar to or the same as those which are the subject of this
Agreement.
V. TERM AND TERMINATION
A. Term. This Agreement shall commence on the Effective Date and shall
continue in force until December 31, 1999, unless otherwise terminated
pursuant to Section V.B.
B. Termination.
1. This Agreement may be terminated by any party at any time by
giving sixty (60) days advance written notice to the
nonterminating party of its intention to terminate.
2. This Agreement shall terminate immediately at the election of and
upon written notice from the non-defaulting party in the event of
any of the following:
(a) A party hereto becomes incapable of fully performing its
duties and obligations according to the terms of this
Agreement for the following reason(s): insolvency,
bankruptcy, or substantial cessation or interruption of its
business operations for any reason whatsoever;
(b) A party hereto commits fraud or willful, wanton or reckless
misconduct in performing its obligations under this
Agreement; however, if the defaulting party provides the
non-defaulting parties with prompt notice of the event of
default, the defaulting party shall have 30 days to cure the
defect, during which time the non-defaulting parties may not
exercise the termination right under this Section V.B.2.
3. Liabilities After Termination. The termination of this Agreement
shall not limit the obligation or liabilities of any party hereto
incurred but not discharged prior to termination.
VI. INDEMNIFICATION
A. Indemnification by AMSG.
1. Notwithstanding anything to the contrary in this Agreement,
neither UWSI, nor any other company in the UWSI Group, nor any
person who is or was, at the time of any action or inaction
affecting AMSG, a director, officer, employee or agent of UWSI or
any other company in the UWSI Group (collectively "Indemnitees")
shall be liable to AMSG for any action or inaction taken or
omitted to be taken by such Indemnitee; provided, however, that
such Indemnitee acted or made an omission in good faith and such
action or inaction does not constitute actual fraud or willful,
wanton or reckless misconduct.
2. AMSG shall, to the fullest extent not prohibited by law,
indemnify and hold harmless each Indemnitee against any
liability, damage, cost, expense, loss, claim or judgment
(including, without limitation, reasonable attorneys' fees and
expenses) resulting to, imposed upon or incurred by such
Indemnitee a. in connection with any action, suit, arbitration or
proceeding to which such Indemnitee was or is a party or is
threatened to be made a party by reason of the UWSI Services
provided to AMSG hereunder; provided, however, that such
Indemnitee acted or made an omission in good faith and such
action or inaction does not constitute actual fraud or willful,
wanton or reckless misconduct, or b. by reason of, arising out of
or resulting from any breach or misrepresentation by AMSG under
this Agreement.
B. Indemnification by UWSI. UWSI hereby agrees, to the fullest extent
not prohibited by law, to indemnify and hold harmless AMSG, and its
successors and assigns, from and against any liability, damage, cost,
expense, loss, claim or judgment (including, without limitation,
reasonable attorneys' fees and expenses) resulting to, imposed upon or
incurred by AMSG by reason of, arising out of or resulting from any
breach or misrepresentation by UWSI under this Agreement.
VII. MISCELLANEOUS
A. Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned or transferred by any party hereto without
the prior written consent of the other party.
B. Amendment. The parties recognize that it may be desirable to alter
the terms of this Agreement in the future to take into account such
events or conditions as may from time to time occur. Any amendments
to this Agreement shall be in writing and shall be executed by all
parties.
C. Waiver; Remedies. No failure or delay of a party in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise
of any other right or power. In addition to any rights granted
herein, the parties hereto shall have and may exercise any and all
rights and remedies now or hereafter provided by law except as may be
limited by Section VII.D of this Agreement.
D. Resolution of Disputes.
1. Any dispute, controversy or claim between the parties hereto that
arises out of or relates to this Agreement shall be settled by
arbitration. In order to initiate an arbitration, UWSI or AMSG
(as the case may be) shall deliver a written notice of demand for
arbitration to the other party. Within thirty (30) days of the
giving of such written notice, each party shall appoint an
individual as arbitrator (the "Party Arbitrators"). Within
thirty (30) days of their appointment, the Party Arbitrators
shall collectively select one additional arbitrator (together the
"Panel Arbitrators") and shall give the parties notice of such
choice.
2. The arbitration hearings shall be held in Milwaukee, Wisconsin.
Each party shall submit its case to the Panel Arbitrators within
sixty (60) days of the selection of the Panel Arbitrators or
within such longer period as may be agreed by the Panel
Arbitrators. The decision rendered by a majority of the Panel
Arbitrators shall be final and binding on the parties. Such
decision shall be a condition precedent to any right of legal
action arising out of the arbitrated dispute. Judgment upon the
award rendered may be entered in any court having jurisdiction
thereof.
3. Each party shall
a. pay the fees and expenses of its own Party Arbitrator, and
pay its own legal, accounting, and other professional fees
and expenses,
b. jointly share in the payment of the fees and expenses of the
other arbitrator selected by the Party Arbitrators, and
c. jointly share in the payment of the other expenses jointly
incurred by the parties directly related to the arbitration
proceeding.
4. Except as provided above, the arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
E. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, or if mailed (by registered or
certified mail, postage prepaid, return receipt requested), or if
transmitted by facsimile or e-mail, as follows:
1. If to UWSI:
General Counsel
UWSI
000 Xxxx Xxxxxxxx Xxxxxx
P.O. Box 2025
Milwaukee, Wisconsin 53201-2025
Facsimile Telephone Number: 414/000-0000
2. If to AMSG:
General Counsel
AMSG
0000 XXX Xxxx.
Xxxxx Xxx, Xxxxxxxxx 00000
Facsimile Telephone Number: 920/000-0000
Any notice or other communication given as provided in this Section VII.E,
shall be deemed given upon the first business day after actual delivery to the
party to whom such notice or other communication is sent (as evidenced by the
return receipt or shipping invoice signed by a representative of such party or
by the facsimile confirmation or e-mail return receipt). Any party from time to
time may change its address for purpose of notices to that party by giving a
similar notice specifying a new address.
F. Relationship of the Parties. Negotiations relating to this Agreement
have occurred and shall continue to be carried out on an arm's length
basis. Further, the services and other resources contemplated by this
Agreement shall be provided to AMSG on an independent contractor
basis. Nothing in this Agreement shall be construed to create an
employer-employee relationship between AMSG and UWSI or any of UWSI
Group employees.
G. Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties hereto and supersedes all prior
agreements and understandings, written or oral, between the parties
with respect to the transactions contemplated herein. Provided,
however, the foregoing shall not operate or be construed to prohibit
proof of prior understandings and agreements between or among the
parties to the extent necessary to properly construe or interpret this
Agreement.
H. Headings. The headings used in this Agreement have been inserted for
convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement.
I. No Third Party Beneficiaries. This Agreement is only for the benefit
of the parties hereto and does not confer any right, benefit, or
privilege upon any person or entity not a party to this Agreement.
J. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin (without giving
effect to principles of conflicts of laws) as to all matters,
including, without limitation, matters of validity, construction,
effect, performance and remedies.
K. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law,
and if the rights or obligations of any party under this Agreement
will not be materially and adversely affected thereby,
1. such provision will be fully severable,
2. this Agreement will be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part
hereof,
3. the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal,
invalid, or unenforceable provision or by its severance here
from, and
4. in lieu of such illegal, invalid, or unenforceable provision,
there will be added automatically as part of this Agreement, a
legal, valid, and
enforceable provision as similar terms to such illegal, invalid,
or unenforceable provision as may be possible.
L. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which will be deemed an original, but
all of which will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
United Wisconsin Services, Inc.
By:___________________________________
Title:_________________________________
American Medical Security Group, Inc.
By:___________________________________
Title:_________________________________
