MANAGEMENT SERVICES AGREEMENT
EXHIBIT 10.35
This Management Services Agreement (the “Agreement”) is made and entered into this 1st day of
January 2009, by and between Liberty Mutual Insurance Company (“Liberty Mutual”), a Massachusetts
stock insurance company and American States Lloyds Insurance Company (“ASLIC”), a Texas Lloyds
company.
I. Performance of Services. Liberty Mutual agrees, to the extent requested by ASLIC,
to perform such services (collectively, “services”) for ASLIC as ASLIC determines to be reasonably
necessary or desirable in the conduct of its operations; provided, however, that Liberty Mutual
may, in its sole discretion, decline to provide any of the services contemplated in this Agreement
if providing the requested services would interfere with Liberty Mutual’s ability to meet its
obligations to its policyholders or would otherwise adversely affect Liberty Mutual. All services
provided under this Agreement shall comply with all applicable state laws and regulations governing
ASLIC, including all laws and regulations relating to review of ASLIC’s books and records. As may
be necessary for the performance of Liberty Mutual’s services under this Agreement, Liberty Mutual
shall have the authority to negotiate or conclude contracts on behalf of ASLIC or bind ASLIC to any
such contracts.
The listing of the following services to be performed under this Agreement is not intended to
limit the performance of other services that may be provided by Liberty Mutual to or on behalf
of ASLIC, as may be agreed to by the parties from time to time:
A. Accounting, financial, tax and auditing. Subject to the direction and control of ASLIC’s
Board of Directors and responsible officers, Liberty Mutual shall provide ASLIC with such financial
and accounting services as may be desirable, including:
1. Preparation and maintenance of annual and quarterly financial statements
and other reports providing information required by the state of domicile and other states in
which ASLIC is transacting business, the maintenance of necessary and proper records and
books of account with respect to the business of ASLIC, and the maintenance and
compilation of all data required for the preparation of tax returns.
2. Assistance to ASLIC in connection with the examination or audit of the
books, records, affairs and activities of ASLIC by governmental, insurance or taxing
authorities having regulatory or taxing authority with respect to the operations of ASLIC, or
by any firm of certified public accounts appointed by ASLIC to audit its books, records and
accounts.
3. Assistance to ASLIC with treasury and accounts payable functions as may be
determined between the parties. ASLIC shall certify to Liberty Mutual the names and
specimen signatures of all officers or employees of ASLIC who are authorized to sign
instructions on its behalf. Liberty Mutual shall have the right to require that all
instructions
made in connection with this Agreement meet its satisfaction as to content, form and
authenticity.
Nothing in this Agreement shall be construed to alter the fact that ASLIC’s books records and
accounts are owned by ASLIC; and ASLIC shall have the right to inspect, or authorize others to
inspect, its books, records and accounts.
B. Purchasing, payroll and employee benefits. Subject to the direction and control of
ASLIC’s Board of Directors and responsible officers, Liberty Mutual shall provide ASLIC with such
services involving purchasing (including access to group purchasing contracts and fleet management
services), payroll processing, and employee relations and/or benefits as may be permissible and
desirable.
C. Information Technology and Support. Subject to the direction and control of ASLIC’s
Board of Directors and responsible officers, Liberty Mutual shall provide the technology
infrastructure, information technology systems, software, data center management, network
management services, monitoring, management/oversight, and support services to ASLIC and shall
provide trouble-shooting functions on behalf of ASLIC.
D. Policy Administration and Production. Subject to the direction and control of
ASLIC’s Board of Directors and responsible officers, Liberty Mutual may perform all policy
production, print and mail activities on ASLIC’s behalf for all the states in which ASLIC
currently operates and in which it may operate in the future.
E. Real Estate Management. Subject to the direction and control of ASLIC’s Board of
Directors and responsible officers, Liberty Mutual may handle all matters and issues relating
to ASLIC’s real estate purchases, sales, leases and lease-backs.
F. Legal. Subject to the direction and control of ASLIC’s Board of Directors and
responsible officers, Liberty Mutual may provide legal services, including litigation
management services, to or on behalf of ASLIC.
G. General Administration. Providing all personnel, equipment, data processing
programs, materials and supplies necessary or desirable for the performance of the services
contemplated in this Agreement.
H. Miscellaneous. Subject to the direction and control of ASLIC’s Board of Directors and
responsible officers, Liberty Mutual may perform such other services on behalf of ASLIC as it may
desire, and as may be mutually agreed to between Liberty Mutual and ASLIC.
I. Reinsurance. Reinsurance services including, but not limited to (i) agreement to
reinsurance policy and/or contract wordings and endorsements to existing policies; (ii) processing
of reinsurance policy cancellations, nonrenewals and endorsements and other amendatory addenda;
(iii) collection of premiums due under reinsurance policies or contracts, audits and remittances;
(iv) negotiation and purchase of reinsurance coverage; (v) administration of letters of credit and
other arrangements for the provision of security; and (vi) administration of reinsurance contracts.
II. Charges. ASLIC shall reimburse Liberty Mutual for the reasonable cost of
performing any of the services provided pursuant to this Agreement. Charges for such
services shall include direct expenses and directly allocable expenses allocated to ASLIC by
Liberty Mutual in conformity with customary insurance accounting practices consistently
applied. The method of expense allocations under this Agreement shall be consistent with
the principles stated in the Statement of Statutory Accounting Principles No. 70, “Allocation
of Expenses.”
III. Accounts and Disbursements. 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.
IV. Confidentiality. Liberty Mutual and ASLIC are prohibited from disclosing or
communicating to any other person, not a party to this Agreement, any confidential or
proprietary information or trade secrets relating to the parties’ respective business or relating
to any affiliate or agency of any party to this agreement, including business methods and
techniques, research data, marketing and sales information, customer lists, know-how and
any other information concerning the business operations of any party of this Agreement, or
any such party’s affiliates and subsidiaries, unless the disclosure of communication of such
information has been consented to in writing by the party whose confidential and propriety
information or trade secrets is to be released. Confidential and proprietary information shall
not include (a) information generally known to the public, (b) information known to Liberty
Mutual or ASLIC to be non-confidential from other, third party, sources prior to the
execution of this Agreement, and (c) information required to be disclosed by law or a
state
or federal governmental agency having authority over the business of Liberty Mutual or
ASLIC, but only for the limited purpose of such disclosure.
V. Standards for Performance of Delegated Administrative and Management Functions.
A. At all times during the term of this Agreement, Liberty Mutual shall perform all
delegated administrative and management functions at a level that is at least equal to its
standards for performing such functions on behalf of its own insurance operations. In
addition, all delegated administrative and management functions shall be performed in
accordance with, and subject to, at all times, the relevant and applicable state (or federal)
insurance laws and regulations to which ASLIC’s insurance operations are, or may be,
subject.
B. In the event that Liberty Mutual receives a notice from any governmental agency,
board, bureau, commission or public authority of any type, of any alleged violation of any
state or federal insurance law, such notice shall immediately be forwarded to ASLIC. Liberty
Mutual shall cooperate in responding to any such governmental notice as such notice relates
to its rendering of services under this Agreement.
VI. Term and Termination.
A. Term.
This Agreement shall be effective as of the 1st day of January 2009 and shall
continue in full force and effect until terminated in accordance with subsection B, below. In
the event that this Agreement is required to be approved by any state Department of
Insurance, any request for such approval shall seek an effective date that mirrors the date
expressed above.
B. Termination.
1. Termination without Cause. This Agreement may be terminated, in
whole or in relevant parts, as appropriate, by ASLIC or Liberty Mutual, without case, upon
ninety (90) days prior written notice. The terminating party shall provide the applicable
state Department(s) of Insurance with written notification of any whole or partial termination of
this Agreement, as may be appropriate, in accordance with state law requirements.
2. Termination with Cause. This Agreement may be terminated
immediately, in relevant parts, as appropriate, by ASLIC or Liberty Mutual, for the following
reasons:
(a) Material failure by Liberty Mutual to perform the services
delegated in accordance with the standards set forth in this Agreement; provided,
however, that upon notification by ASLIC that the services so delegated are not
being performed in an appropriate or satisfactory manner, Liberty Mutual shall have
thirty (30) days in which to cure the deficiency. In the event the deficiency is
not cured to the satisfaction of ASLIC, ASLIC may immediately terminate this
Agreement.
(b) nonpayment of costs by a delegating party to the party
performing the services so delegated.
(c) The suspension, revocation or other restriction on the insurance
license of either ASLIC or Liberty Mutual.
(d) The insolvency, voluntary or involuntary bankruptcy,
reorganization or liquidation of either ASLIC or Liberty Mutual.
(e) In the
event of (i) the acquisition of ASLIC by a third party from
Liberty Mutual; or (ii) any other change in control with causes Liberty Mutual
to no longer maintain a majority on the Board of Directors of ASLIC, then
this Agreement shall terminate with respect to ASLIC as of the effective date
of the change of control.
C. Effect of Termination. In the event that this Agreement is terminated, with, or
without, cause, in whole or in part, as appropriate, the relevant services shall continue to be
provided by Liberty Mutual until alternate arrangements reasonably can be made by ASLIC
(the “Transition Services”); provided, however, that the Transition Services shall not be
required to be provided for a period of time extending beyond ninety (90) days from the
effective date of termination, unless otherwise agreed to by parties. In the event that this
Agreement is terminated, in whole or in part, as appropriate, for any reason other than those
relating to change of control as described in Section VI.B.2(e), above, all such Transition
Services shall continue to be compensation for on a cost basis. In the event that this
Agreement is terminated for reasons specified in Section VI.B.2(c), above, all such
Transition Services shall be compensated for at the then prevailing market rate for the
provision of such services.
VII. Indemnification.
A. Liberty Mutual Indemnification of ASLIC. Liberty Mutual shall indemnify, defend
and hold harmless ASLIC from and against any expenses, damages, liability, actions, costs or
other claims, including but not limited to reasonable attorney’s fees and associated costs,
incurred by ASLIC either (i) as a result of the failure of Liberty Mutual or any subcontractor
appointed by Liberty Mutual to comply with any law or administrative regulation, only if
such failure is the result of willful neglect or gross negligence, or (ii) as a result of, or in
connection with, Liberty Mutual’s breach of any duty or obligation hereunder or the breach
of any duty of obligation of any subcontractor appointed by Liberty Mutual if such breach is
the result of willful neglect or gross negligence. ASLIC may set off against any amount due
Liberty Mutual any amount due to ASLIC, pursuant to this or any other agreement to which
the parties to this indemnification are also parties.
B. ASLIC’s Indemnification of Liberty Mutual. ASLIC shall indemnify Liberty Mutual
and hold Liberty Mutual harmless from all actions, liabilities, costs and expenses arising out
of or in any way related to Liberty Mutual’s services under this Agreement, unless directly
related to Liberty Mutual’s willful neglect or gross negligence.
VIII. No Waiver. The parties hereto agree that no indulgence or acceptance of any
delinquent or partial payment or ratification after the fact of any violation or breach of any
provision of this Agreement by any party hereto shall be construed as a waiver of any party’s
rights hereunder.
IX. Notices. Any notice required to be given pursuant to any provision of this
Agreement shall be in writing and shall be sent to the parties at their respective last known
address by first class mail, postage prepaid, by overnight delivery service, or by confirmed
facsimile transmission.
X. Severability. If any provision of this Agreement is held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provision, and the Agreement
shall be construed and enforced as if that provision had not been included.
XI. Amendment. This Agreement may only be amended upon the written agreement of both parties
hereto.
XII. Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be considered an original, but all of which together, shall be considered one and
the same.
XIII. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts (without application of the conflict of
laws principles thereof).
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement under seal
as of the day and year first above written.
| Liberty Mutual Insurance Company |
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| /s/ Xxxxx X. Xxxx | ||||
| By: Xxxxx X. Xxxx | ||||
| Its: Assistant Secretary | ||||
| American States Lloyds Insurance Company By General America Corporation of Texas, Its Attorney-In-Fact |
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| /s/ Xxxxxxx X. Xxxxxx | ||||
| By: Xxxxxxx X. Xxxxxx | ||||
| Its: Chief Financial Officer | ||||
