EXHIBIT 10.39
MANAGEMENT AGREEMENT
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This Agreement is entered into by and between MERCURY INSURANCE COMPANY OF
ILLINOIS, (hereinafter referred to as Insurer), and MERCURY INSURANCE SERVICES,
LLC (hereinafter referred to as Manager).
In consideration of the promises, conditions and covenants herein
contained, the parties agree as follows:
SECTION I
EFFECTIVE DATE
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This Agreement shall become effective January 1, 2001.
SECTION II
CONDITIONS OF EFFECTIVENESS
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The Agreement or any amendment thereto shall become effective only if the
following shall have first occurred:
A. The Illinois Department of Insurance, if required, shall have approved
of and/or acknowledged in writing this Agreement or any amendment thereto;
and
B. The boards of directors of the Manager and the Insurer shall have
approved this Agreement by a majority vote
SECTION III
SERVICES AND FACILITIES
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A. Commencing on the Effective Date and until the termination of this
Agreement, the Manager shall provide the services and facilities as are
described hereunder to the Insurer. Such services and facilities as are
provided hereunder shall be subject to the control and approval of the
Board of Directors of the Insurer, and shall be performed in the manner and
for the consideration set forth herein by the Manager, and such services
shall be performed in accordance with applicable laws and regulations in
all of the jurisdictions in which the Insurer conducts business. It is
recognized that the Insurer may be governed by laws and regulations which
are particularly applicable to its business and this Manager, by virtue of
this Agreement, recognizes its responsibility to perform in accordance with
such laws or regulations including, but not limited to, compliance with any
order or orders issued by any governmental agency affecting the Insurer;
and the Manager hereby acknowledges that in such case it will immediately
conform to same in the performance of its services as hereinafter set
forth. The Board of Directors of the Insurer shall retain responsibility
for the performance of services provided pursuant to
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this Agreement by the Manager and, in connection therewith, shall require
the Manager to perform in accordance with the standards of performance set
forth herein.
B. The Manager promises to manage the Insurer, and to conduct on its
behalf any and all duties of management as shall be necessary for the
complete operation of the Insurer.
C. The Insurer hereby delegates to the Manager all of the duties of
management which it is allowed to so delegate by the laws of the State of
Illinois, including but not limited to the following duties: to issue and
underwrite insurance policies, which the Insurer may be so authorized to do
by law, in accordance with the rules and regulations as delineated in the
underwriting manuals of the Insurer, settle and adjust any and all losses
and claims, defend lawsuits, establish premium rates, establish and choose
sales agents and brokers, determine agents' and brokers' commissions,
prepare the records necessary for the conduct of the insurance business,
furnish all forms, supplies and agents' manuals necessary for the conduct
of the insurance business.
D. The Manager promises to perform all of the operating functions on
behalf of the Insurer, including but not be limited to the following:
1. To acquire, license and appoint sales agents and brokers for the
production of the insurance business of and for the Insurer, provided
that the Insurer shall retain the right to refuse the appointment of
any agent or broker and the right to terminate any agent or broker.
2. To issue and underwrite policies on behalf of the Insurer and to
choose and obtain the necessary applications and policy forms.
3. To furnish for the Insurer all of the operating forms, printing
supplies, agents' manuals and any other related items which may become
necessary for the operation of the insurance business.
4. To provide all personnel reasonably required by the Insurer and to
fill all such positions in the Insurer with the advice and consent of
the Board of Directors of the Insurer, all of which personnel shall be
compensated exclusively by the Manager.
5. To provide all facilities necessary for the conduct of the
Insurer's business, including but not limited to real estate, office
space and personal property, including furniture, fixtures and
equipment. The office space, furniture, fixtures and equipment utilized
by the Insurer in the conduct of its business may be owned or leased by
the Manager or the Insurer.
6. To pay on behalf of the Insurer all of its operating expenses,
including but not limited to rent, supplies, salaries of all personnel,
telephone, advertising costs, costs of settling and adjusting all
insurance claims, legal defense costs, court
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costs, costs of loss analysis, accounting costs (other than auditing),
and premium collection costs; provided, however, that the Insurer shall
pay, and be responsible for, the costs of management fees, premium
taxes, losses, reserves for unpaid losses, reserves for unpaid loss
adjustment expense, audit fees, assigned risk or similar assessments,
bureau fees, Fair Plan or similar assessments, directors' fees, agents'
commissions, reinsurance premiums, outside investment counsel fees,
assessments by the Illinois Insurance Guaranty Fund or similar state
guaranty funds, membership fees in trade associations, any assessments
by such associations, political contributions (to the extent not
prohibited by applicable laws), premiums paid for insurance policies in
which the Insurer is the beneficiary and owner, such as fidelity bonds,
taxes of all types and costs which may be levied on insurance companies
by the governmental authorities having jurisdiction over the same, and
agents' bonuses (contingency commissions).
D. The Manager promises to deposit all premiums received directly into a
bank account of the Insurer.
E. The Manager shall make all books, records and documents pertaining to
the Insurer's business available to the Illinois Director of Insurance or
his designees.
G. Without limiting the generality of the foregoing provisions regarding
the duties of the Manager, the Manager hereby expressly agrees to take all
steps necessary to preserve the Insurer's exemption from the privilege tax
imposed by Section 409 of the Illinois Insurance Code, including but not
limited to:
1. Maintaining the Insurer's principal place of business within the
State of Illinois;
2. Maintaining within the State of Illinois officers and personnel
knowledgeable of and responsible for the Insurer's operation, books,
records, administration, and annual statement;
3. Conducting within the State of Illinois substantially all
underwriting, policy issuing, and servicing relating to the Insurer's
Illinois policyholders; and
4. Complying with the provisions of Section 133(2) of the Illinois
Insurance Code.
H. This Agreement is not intended to supersede or replace the policy
making decisions of or the supervisory responsibilities of the Board of
Directors of the Insurer. Nor it is intended that substantial control of
the Insurer or of any of the powers vested in the Board of Directors, a
committee thereof or agents appointed by said Board of Directors, shall
have the right, at all times, to cause the books and records of the Manager
to be inspected and/or audited as they relate to the business of the
Insurer.
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SECTION IV
INVESTMENT ADVISORY SERVICES
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The Manager agrees to act as investment advisor to the Insurer with respect
to the investment of the Insurer's assets, and, in general, to supervise the
investment and reinvestment of cash, securities or other property comprising the
assets of the Insurer, subject at all times to the direction and control of the
Board of Directors (or responsible committee thereof) of the Insurer, all as
more fully set forth herein.
In connection with the Manager's performance of investment advisory
services for the Insurer, the following provisions shall apply:
A. The Insurer shall at all times maintain a custodian (referred to
hereinafter as the "Custodian") for its securities and appropriate bank or
custodial accounts for the purpose of handling cash involved in the
Insurer's investment transactions.
B. The Manager shall obtain and evaluate pertinent information about
significant economic developments and gather statistical and financial data
affecting the investments of the Insurer and such investments which the
Manager considers may be suitable for inclusion in the Insurer's investment
portfolio.
C. At mutually agreeable intervals, the Manager shall furnish reports to
the Investment Committee of the Insurer setting forth (i) a list of the
Insurer's securities, showing the costs, market value, maturity date and
other pertinent information regarding each such security, (ii) a summary of
the investment transactions effected on behalf of the Insurer since the
closing date of the preceding report, and (iii) the Manager's
recommendations as to what securities should be acquired or sold in light
of prevailing economic and securities market conditions.
D. After reviewing the Manager's periodic investment reports, the
Investment Committee of the Insurer will advise the Manager which of the
Manager's investment recommendations it has accepted or rejected. If the
Manager is notified in writing of the Insurer's acceptance of the Manager's
recommendations, such notification shall constitute authorization to the
Manager to effect the recommended investment transactions.
E. All investment transactions authorized by the Insurer's Investment
Committee shall be carried out by the Manager through the Custodian, but
the Manager may designate a broker or brokers to carry out said
transactions. All instructions or directions of the Manager to the
Custodian shall, unless otherwise agreed to by the Manager and the
Custodian, be made in writing, or orally and confirmed in writing as soon
as practicable thereafter, and the Manager shall instruct all brokers,
dealers or other persons executing investment orders to forward to the
Custodian copies of all brokerage or dealer confirmations promptly after
execution of all transactions.
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F. The Manager is authorized to enter into an agreement with the Custodian
to use the Depository Trust Company's Institutional Delivery System for
trade confirmation and settlements.
G. The Insurer shall notify its Custodian of the appointment of the
Manager as investment advisor by delivering a copy of this Agreement to its
Custodian.
H. It is understood and agreed that the Manager's services in recommending
investments shall be advisory only, and shall not in any way be deemed a
delegation by the Insurer or its Board of Directors of their fiduciary
powers, discretion or judgment in the selection, retention or disposition
of any investments.
I. The investment advisory services provided by the Manager under this
Section, and all actions taken hereunder by it, shall at all times conform
to the requirements imposed by the insurance laws and regulations of the
State of Illinois, including, but not limited to, Article VIII regarding
allowable investments for domestic insurance companies and Section 133 as
it pertains to the keeping of securities in Illinois.
SECTION V
COMPENSATION
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As compensation for the services to be provided by the Manager under this
Agreement, the Manager shall be reimbursed monthly for all expenses incurred on
behalf of the Insurer in providing personnel, facilities and services
contemplated by this Agreement.
SECTION VI
OWNERSHIP OF RECORDS
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The ownership and legal title to the insurance policies, insurance policy
records, data processing tapes, disks, programs and documentation, and account
records of the Insurer, compiled on behalf of the Insurer by the Manager, shall
remain in and with the Insurer. However, the Manager shall have joint custody
with the Insurer of said records.
SECTION VII
TERM OF AGREEMENT
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A. Except as provided in paragraphs B and C below, this Agreement shall be
in effect until terminated by either party upon ninety (90) days prior
written notice to the nonterminating party.
B. The Insurer may terminate its participation under this Agreement
immediately in the event that:
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(1) The Manager shall have defaulted in the performance of any
obligation under this Agreement and shall have failed to remedy within
30 days of receipt of written notice thereof from the Insurer asserting
such default as grounds for termination of this Agreement; or
C. The Manager may terminate its obligations to the Insurer under this
Agreement immediately in the event that:
(1) The Insurer shall have defaulted in the performance of any
obligation under this Agreement and shall have failed to remedy such
default within 30 days of receipt of written notice thereof from the
Manager asserting such default as grounds for termination of this
Agreement: or
(2) The Insurer is dissolved or determined insolvent.
IN WITNESS WHEREOF, we have set our hands and seals this 10th day of January,
2001.
MERCURY INSURANCE COMPANY MERCURY INSURANCE SERVICES,
OF ILLINOIS LLC
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxxx, President Xxxxxx Xxxxxx, President
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