EXHIBIT 10.16
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement (this "Agreement") is made as of
September 30, 2003 (the "Effective Date") by and among Xxxxxx Employers
Insurance Company, an Illinois domiciled insurance company (the "Company"), and
Lumbermens Mutual Casualty Company, an Illinois domiciled mutual insurance
company (the "Provider").
RECITAL
A. Pursuant to the terms and subject to the conditions set forth in the
Purchase Agreement (as amended, the "Purchase Agreement"), dated as of
July 14, 2003, by and among Xxxxxx Employers Group, Inc., the Provider,
Eagle Pacific Insurance Company ("EPIC"), Pacific Eagle Insurance
Company ("PEIC") and Insurance Holdings, Inc. ("Holdings"), Holdings
acquired, inter alia, the stock of EPIC and PEIC.
B. The Company would like to receive, and the Provider is willing to
provide, directly or through one or more of its Affiliates, certain
services in accordance with the terms hereof.
AGREEMENT
In consideration of the mutual undertakings contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Provider and the Company agree as follows:
SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION.
1.1 Definitions. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1, and shall be equally
applicable to both the singular and plural forms.
"Action" shall mean any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any
Governmental Authority.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Expenses" means any and all costs and expenses incurred in connection
with investigating, defending or asserting any Actions, threatened Actions,
demands, assessments, judgments, settlements and compromises incident to any
matter indemnified against hereunder (including court filing fees, court costs,
arbitration fees or costs, witness fees, and reasonable
fees and disbursements of legal counsel, investigators, expert witnesses,
consultants, accountants and other professionals).
"Governmental Authority" shall mean any federal, state, local,
municipal, county, foreign or other governmental, quasi-governmental,
administrative or regulatory authority, body, agency, court, tribunal,
commission or other similar governmental entity (including any branch,
department, agency or political subdivision thereof) or any self-regulating body
of similar standing.
"Intellectual Property" shall means databases, computer software
programs, Internet applications, Internet domain names, object code and source
code (and related documentation), copyrights, patents, trademarks, trade names,
service marks, trade secrets and inventions and all other intellectual property
(and all registrations and applications with respect thereto).
"Loss" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, fees,
expenses, deficiencies, claims or other charges.
"Notice" shall mean notice given in accordance with Section 12.1
hereof.
"Person" shall mean an individual, corporation, insurance company,
partnership, joint venture, limited liability company, association, joint-stock
company, trust, unincorporated organization or Governmental Authority.
"Service" shall mean each service generally described in Schedule A
hereto, as such Schedule may be amended from time to time in accordance with the
terms hereof, including those related services that may be necessary for the
performance of such services, and any other service that the Provider agrees in
writing to provide.
1.2 Rules of Construction. For purposes of this Agreement, (i) the
words "include," "includes" and "including" shall be deemed to be followed by
the words "without limitation," and (ii) the words "herein", "hereof", "hereby",
"hereto" and "hereunder" refer to this Agreement as a whole. Unless the context
otherwise requires, references herein: (i) to Articles, Sections and Exhibits
mean the Articles and Sections of, and the Exhibits attached to, this Agreement;
(ii) to an agreement, instrument or other document means such agreement,
instrument or other document as amended, supplemented and modified from time to
time to the extent permitted by the provisions thereof and by this Agreement;
and (iii) to a statute means such statute as amended from time to time and
includes any successor legislation thereto and any regulations promulgated
thereunder. The Exhibits referred to herein shall be construed with and as an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein. Titles to Articles and headings of Sections are inserted for
convenience of reference only and shall not be deemed a part of or to affect the
meaning or interpretation of this Agreement.
Accounting terms used herein shall have the meanings consistently applied by the
Company in its application of statutory accounting principles, based upon the
Company's internal financial policies and procedures in effect from time to
time.
SECTION 2. TERM.
This Agreement shall commence immediately on and as of the Effective
Date and shall thereafter continue in full force and effect until terminated in
accordance with Section 9 hereof.
SECTION 3. PERFORMANCE OF SERVICES.
3.1 General. From time to time, beginning on the Effective Date, the
Provider will provide to the Company the Services on an "as needed" basis (as
reasonably determined by the Company).
3.2 Standard of Care. The Provider will provide the Services hereunder
using the same degree of care, skill and prudence customarily exercised by a
reasonable person when engaged in similar activities on behalf of itself. The
Company acknowledges and agrees that the Provider is not in the business of
providing the Services.
3.3 Subcontracting. The Provider may, in its discretion, subcontract
any of its obligations in relation to the provision of any Service or portion
thereof to any of its Affiliates or to any other Person, provided that such
other Affiliate or Person shall be subject to the standard of care set forth in
Section 3.2, and any subcontract to any Person (other than an Affiliate) shall
be subject to the approval of the Company, in its reasonable discretion
3.4 Retention of Control by the Company. All Services provided by the
Provider shall be subject to the ultimate authority, control, review and
limitation of the Company and its Board of Directors. All Services shall be
provided in compliance in all material respects with all applicable laws,
regulations and rulings in all jurisdictions in which the Company transacts
business. The Company shall at all times own it general accounts and records.
SECTION 4. INFORMATION AND DATA.
4.1 Provision of Company Information; Confidentiality. (a) To enable
the Provider to provide the Services, the Company shall provide information,
furnish access to data and take such other action as is reasonably requested by
the Provider. The Company shall be provided access to such information by the
Provider upon request.
(b) The Provider shall use commercially reasonable efforts to
maintain the confidentiality of all information provided to, or obtained or used
by (collectively, the "Information") the Provider in the performance of the
Services. The Provider shall not disclose
such Information without the prior written consent of the Company. Furthermore,
the Provider shall be prohibited from selling Information.
(c) Notwithstanding any other provision hereof, the Provider will be
permitted to disclose any Information it receives from or on behalf of the
Company or has access to if it such disclosure is: (i) necessary to carry out
the Services; (ii) permitted or required under the Xxxxx-Xxxxx-Xxxxxx Act or any
other applicable federal or state law or regulation or subpoena or (iii) related
to the tax treatment and tax structure of the transactions contemplated under
this Agreement, including all materials of any kind (including opinions or other
tax analyses); provided that the authorization in the foregoing clause (iii) is
not intended to permit disclosure of any other information including, without
limitation, (w) any portion of any materials to the extent not related to the
tax treatment or tax structure of the transactions contemplated under this
Agreement, (x) the identities of participants or potential participants in the
transactions contemplated under this Agreement, (y) the existence or status of
any negotiations, (iv) any pricing or financial information (except to the
extent such pricing or financial information is related to the tax treatment or
tax structure of the transactions contemplated under this Agreement), or (z) any
other term or detail not relevant to the tax treatment or the tax structure of
the transactions contemplated under this Agreement..
(d) To the extent that the Provider receives or has access to
confidential information of the Company's policyholders or claimants, the
Provider will implement and maintain reasonably appropriate measures designed to
meet the following objectives: (i) to ensure the security and confidentiality of
such information; (ii) to protect against any anticipated threats or hazards to
the security or integrity of such information; and (iii) to protect against the
unauthorized access or use of such information. These measures shall include,
but not be limited to, the maintenance of appropriate safeguards to restrict the
access to such information to those employees, agents, or service providers of
the Provider who need that information to carry out the purposes for which the
information was disclosed.
(e) For information disclosed to the Provider in electronic form,
the Provider agrees that it will maintain "firewalls" or similar barriers and
password-protected access to the Information.
4.2 Ownership of Data. All data, records, files and any other
information created by the Provider solely for the use of the Company in the
provision of any Service hereunder shall be deemed to belong to, and be owned
by, the Company.
4.3 Provider's Intellectual Property. The Company acknowledges that all
right, title and interest in and to all Intellectual Property owned by the
Provider and used in providing the Services hereunder shall at all times remain
with and be owned by the Provider.
SECTION 5. FEES AND CHARGES.
The fee for the Services provided by the Provider to the Company
pursuant to this Agreement shall be as follows: (i) with respect to each
Service, the fees set forth across from such Service on Schedule A attached
hereto, (ii) the gross amount of any present or future sales, use, excise,
occupation, privilege, value-added, gross-receipts or other similar tax
applicable to the fee, sale or furnishing of any Service, and (iii) all
out-of-pocket expenses (e.g., courier, shipping, document reproduction, postage,
long-distance telephone charges, travel and living expenses for traveling
personnel, and charges for any non-routine supplies and equipment) actually
incurred in connection with the performance of any Service hereunder.
SECTION 6. INVOICING AND PAYMENT.
The Company shall pay all amounts payable hereunder within fifteen (15)
days after its receipt of an invoice from the Provider setting forth in
reasonable detail the amount due and payable hereunder. In addition to any other
rights available to it at law or in equity, upon three (3) days Notice to the
Company, the Provider may suspend the provision of any Services for which an
invoice has not been satisfied within the time period prescribed herein until
such invoice has been satisfied. Any payment owing to the Provider pursuant to
this Agreement and not remitted within the time specified will be subject to
interest calculated monthly at an annual rate of interest equal to the prime
rate published by the Wall Street Journal plus two percent from the date such
amount should have been paid through the date paid.
SECTION 7. INDEPENDENCE; DECISIONS AND JUDGMENT.
7.1 Nature of Relationship. All employees and representatives of the
Provider and its Affiliates will be deemed for purposes of all compensation and
employee benefits to be employees or representatives, as the case may be, of the
Provider and its Affiliates and not employees or representatives of the Company.
In performing Services, such employees and representatives will be under the
direction, control and supervision of the Provider and its Affiliates and not of
the Company, and the Provider will have the sole right to exercise all authority
with respect to the employment (including termination of employment), assignment
and compensation of such employees and representatives. Without limiting the
generality of the foregoing, nothing herein shall be construed as creating the
relationship of employer/employee, partners or joint venturers between the
Provider and its Affiliates, on the one hand, and the Company and its
Affiliates, on the other hand, and nothing herein shall be deemed to make either
party an agent of the other. The Provider shall perform its obligations under
this Agreement as an independent contractor.
7.2 No Business Judgment; No Professional Services. In performing any
Service hereunder, the Provider shall not be required to make, nor shall the
Provider be responsible for, any management decision or any exercise of business
judgment with respect to the business of
the Company, including, but not limited to, decisions relating to investments,
accounting practices or legal matters. Notwithstanding anything to the contrary
in this Agreement, in no event shall Provider be required to provide any legal
services, actuarial services or any other services for which any type of
professional license or certificate is required.
SECTION 8. NONEXCLUSIVITY.
Nothing in this Agreement shall prevent the Provider or its Affiliates
from providing any Service to any other Person.
SECTION 9. TERMINATION.
9.1 Termination of Entire Agreement. This Agreement shall terminate
only as follows:
(a) at any time, upon the mutual agreement of the parties hereto;
(b) by either party, immediately, upon delivery of Notice to the
other party in the event that the other party makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against, such
party seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any law relating to bankruptcy, insolvency or
reorganization;
(c) by either party, immediately, upon delivery of Notice to the
other party if the other party is materially in default in the performance of
any of its covenants or obligations contained in this Agreement and such default
has not been remedied to the nondefaulting party's reasonable satisfaction
within thirty (30) days after Notice to the defaulting party of such default, or
if such default is not capable of cure within thirty (30) days, if the
defaulting party has not promptly commenced to cure the default within such
thirty (30) day period and is not proceeding diligently to cure the default;
(d) as to any particular Service, at the expiration of the period of
time set forth opposite such Service on Schedule A attached hereto unless at
least thirty (30) days prior to the expiration of such period the Company
provides a written notice to the Provider stating its intention to renew such
Service, in which case the period of time set forth opposite such Service shall
be renewed and the Provider shall continue to provide such Service to the
Company for such successive period; and
(e) immediately in the event that the provision of each Service
being provided hereunder has terminated or expired.
9.2 Termination as to Particular Services or Parts of Services.
(a) The parties shall have the right, by mutual agreement, to
terminate this Agreement as to any particular Service.
(b) At any time following the second anniversary of the date of this
Agreement, the Company shall have the right to terminate this Agreement as to
any particular Service by providing sixty (60) days written notice of such
termination to the Provider.
(c) Once a termination is effective as to any particular Service,
the Provider shall no longer be required to provide such Service to the Company,
unless the Provider agrees, in writing, to provide such Service.
9.3 Procedures on Termination. On any termination of this Agreement in
whole or in part, each party will cooperate with the other party as reasonably
necessary to avoid disruption of the ordinary course of the other party's
business. Termination shall not affect the Provider's rights to payment for
Services provided.
9.4 Effects of Termination. Upon termination of this entire Agreement
becoming effective: (a) the Provider shall not be obligated to provide any
further Services pursuant to this Agreement; and (b) the Company shall
immediately pay to the Provider all amounts owing under this Agreement on the
date of termination.
SECTION 10. DISCLAIMERS OF WARRANTIES AND DAMAGES.
10.1 DISCLAIMER OF WARRANTIES. THE PROVIDER MAKES NO REPRESENTATIONS OR
WARRANTIES, EITHER EXPRESS OR IMPLIED, THAT THE SERVICES PROVIDED HEREUNDER ARE
OR WILL BE ADEQUATE OR SUFFICIENT (AS TO QUANTITY, QUALITY OR TYPE) TO MEET THE
NEEDS (INCLUDING ANY SPECIFICALLY IDENTIFIED NEEDS) OR OBJECTIVES OF THE
COMPANY, ITS AFFILIATES OR ANY OTHER PERSON WITH RESPECT TO THE CONDUCT OF THE
BUSINESS OF THE COMPANY, ITS AFFILIATES OR SUCH PERSON. EXCEPT AS SET FORTH IN
THIS AGREEMENT, THE SERVICES ARE PROVIDED ON AN "AS-IS" BASIS.
10.2 DISCLAIMER OF DAMAGES. IN NO EVENT, WHETHER BASED ON CONTRACT,
INDEMNITY, WARRANTY, TORT (INCLUDING WILLFUL AND WANTON MISCONDUCT, RECKLESSNESS
OR NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, SHALL EITHER PARTY, ITS
AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, MEMBERS,
PARTNERS, STOCKHOLDERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS, BE LIABLE FOR ANY
LOST PROFITS OR ANY SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT; PROVIDED
THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE COMPANY SHALL
INDEMNIFY
THE PROVIDER AND ITS AFFILIATES FOR ANY CONSEQUENTIAL DAMAGES, LOST PROFITS OR
PUNITIVE DAMAGES ARISING OUT OF OR RELATING TO THE PROVISION OF THE SERVICES
HEREUNDER BY THE PROVIDER AND ANY OF ITS AFFILIATES TO THE EXTENT RECOVERED
AGAINST THE PROVIDER OR ANY OF ITS AFFILIATES BY A THIRD PARTY AND NOT RESULTING
FROM THE PROVIDER'S OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE FOREGOING
DISCLAIMER SHALL APPLY IRRESPECTIVE OF WHETHER THE POSSIBILITY OF SUCH LOST
PROFITS OR DAMAGES HAD BEEN DISCLOSED IN ADVANCE OR COULD HAVE REASONABLY BEEN
FORESEEN. THE FOREGOING REPRESENTS AN EXPRESS ALLOCATION OF RISK BETWEEN THE
PARTIES.
SECTION 11. INDEMNIFICATION.
11.1 Indemnification by the Company. Subject to Section 10.2 hereof,
the Company hereby agrees to indemnify and hold harmless the Provider and its
Affiliates, and each of their respective officers, directors, managers, members,
partners, stockholders, employees, agents and subcontractors, to the fullest
extent lawful, from and against any and all Losses and Expenses, to the extent
arising out of or relating to the provision of the Services hereunder by the
Provider and any of its Affiliates; provided, however, that the Company shall
have no obligation to indemnify and hold harmless the Provider or any of its
Affiliates in respect of Losses or Expenses which arise out of the gross
negligence or willful misconduct of the Provider.
11.2 Indemnification by the Provider. Subject to Sections 10.1 and 10.2
hereof, the Provider hereby agrees to indemnify and hold harmless the Company,
and its officers, directors, managers, members, partners, stockholders,
employees, agents and subcontractors, to the fullest extent lawful, from and
against Losses and Expenses incurred by the Company to the extent arising out of
or relating to the Provider's gross negligence or willful misconduct in the
provision of the Services hereunder; provided, however, that the Provider shall
have no obligation to indemnify and hold harmless the Company in respect of
Losses or Expenses to the extent arising out of the gross negligence or willful
misconduct of the Company.
SECTION 12. GENERAL PROVISIONS.
12.1 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally or when sent by registered or certified mail or by
facsimile or private courier addressed as follows:
If to the Company, to:
Xxxxxx Employers Insurance Company
c/o SeaBright Insurance Holdings, Inc.
0000 0xx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: President
Facsimile: 000-000-0000
with a copy to:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxx, P.C.
Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to the Provider, to:
Eagle Pacific Insurance Company
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
With concurrent copies to:
Lumbermens Mutual Casualty Company
0 Xxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
and
Sidley Xxxxxx Xxxxx & Xxxx LLP
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
or to such other address or facsimile number as such party may indicate by a
notice delivered to the other parties hereto.
12.2 Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and shall be enforceable by the parties hereto, but
shall not be assignable by any party hereto; provided that the Provider shall be
entitled to assign the Agreements to any of its Affiliates or a purchaser of all
or substantially all of its assets, and the Company hereby approves
and consents to such assignment; provided further that no assignment shall
relieve the assigning party of its obligations hereunder.
12.3 Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and may not be
amended or modified except by an instrument in writing signed by the parties to
be bound thereby. Waiver of any term or condition of this Agreement shall only
be effective if in writing and shall not be construed as a waiver of any
subsequent breach or waiver of the same term or condition, or a waiver of any
other term or condition of this Agreement.
12.4 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
12.5 No Third Party Beneficiaries. Nothing herein expressed or implied
is intended to confer upon any person, other than the parties hereto or their
respective permitted assigns, successors, heirs and legal representatives, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
12.6 Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Illinois. The parties hereto hereby irrevocably submit in any suit, action or
proceeding arising out of or related to this Agreement or any of the
transactions contemplated hereby to the jurisdiction of any state or federal
court in the State of Illinois and waive any and all objections to jurisdiction
that they may have under the laws of the State of Illinois or the United States.
12.7 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party. The failure
of any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
12.8 Partial Invalidity. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
12.9 Force Majeure. In the event that either party to this Agreement is
unable to perform its obligations under the terms of this Agreement because of
acts of God, strikes, equipment or damage reasonably beyond its control, or
other cause reasonably beyond its control, such party shall not be liable for
damages to the other party to the extent that any unforeseeable damages result
from such failure to perform or otherwise from such causes. Performance under
this Agreement shall resume when the affected party is able to perform
substantially that party's duties. In no event shall the provisions of this
Section 12.9 apply to any monetary obligations under this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed by their authorized representatives as of the Effective Date.
XXXXXX EMPLOYERS INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Treasurer
LUMBERMENS MUTUAL CASUALTY COMPANY
By: /s/ Xxxx X. Xxxxxx
--------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Secretary
*SIGNATURE PAGE TO ADMINISTRATIVE SERVICES AGREEMENT*
