MANAGEMENT AGREEMENT
of
RISCORP, INC.
THIS MANAGEMENT AGREEMENT (the "Agreement") is made and entered into as
of the 18th day of February, 1998, by and among The Phoenix Management Company,
Ltd., a Florida limited partnership (the "Management Company"), RISCORP, Inc., a
Florida corporation ("RI"), RISCORP Management Services, Inc., a Florida
corporation ("RMS"), ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Services, Inc., a Florida corporation
("1390"), RISCORP of Illinois, Inc., an Illinois corporation ("ROI"),
Independent Association Administrators, Incorporated, an Alabama corporation
("IAA"), RISCORP Insurance Services, Inc., a Florida corporation ("RIS"),
RISCORP Managed Care Services, Inc., a Florida corporation ("RMCS"), CompSource,
Inc., a North Carolina corporation ("CompSource"), RISCORP Real Estate Holdings,
Inc., a Florida corporation ("RREH"), RISCORP West, Inc., an Oklahoma
corporation ("RWl"), RISCORP of Florida, Inc., a Florida corporation ("ROF"),
RISCORP Insurance Company, a Florida corporation ("RIC"), RISCORP Property &
Casualty Insurance Company, a Florida corporation ("RPC"), RISCORP National
Insurance Company, a Missouri corporation ("RNIC"), RISCORP Services, Inc., a
Florida corporation ("RSI"), RISCORP Staffing Solutions Holding, Inc., a Florida
corporation ("RSSH"), RISCORP Staffing Solutions, Inc. I, a Florida corporation
("RSSI"), and RISCORP Staffing Solutions, Inc. II, a Florida corporation
("RSSII") (RI, RMS, 1390, ROI, IAA, RIS, RMCS, CompSource, RREH, RWI, ROF, RIC,
RPC, RNIC, RSI, RSSH, RSSI and RSSII are hereinafter collectively or, if the
context otherwise requires, individually referred to as "RISCORP"), ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, an individual resident of the State of Florida ("▇▇. ▇▇▇▇▇▇"), and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, an individual resident of the State of Florida ("▇▇.
▇▇▇▇▇▇▇▇▇").
R E C I T A L S:
WHEREAS, RISCORP has agreed to transfer substantially all of its
operating assets and noncontingent liabilities to Zenith Insurance Company, a
California corporation ("Zenith"), pursuant to the terms of that certain Asset
Purchase Agreement by and among RISCORP and Zenith dated June 17, 1997, as
amended (the "Asset Purchase Agreement"), and following the consummation of such
transaction it is anticipated that RISCORP will not have any employees;
WHEREAS, ▇▇. ▇▇▇▇▇▇, the current President and CEO of RI, was hired by
RI as a crisis manager pursuant to the terms of that certain Employment
Agreement by and between ▇▇. ▇▇▇▇▇▇, RMS and RI, effective as of May 19, 1997
(the "Employment Agreement") and, in such capacity, has demonstrated exceptional
leadership and has significantly contributed to the value that is expected to be
available for distribution to the shareholders of RI following the sale to
Zenith and the resolution of all claims and contingencies related to RISCORP's
former operations;
WHEREAS, the consummation of the sale to Zenith will constitute a
Change of Control as such term is defined in the Employment Agreement and, as
such, ▇▇. ▇▇▇▇▇▇ will have the right to terminate the Employment Agreement
immediately after the closing date;
WHEREAS, ▇▇. ▇▇▇▇▇▇▇▇▇, the current Senior Vice President and General
Counsel of RI, will also have the right to terminate his employment with RI in
connection with the Change of Control pursuant to the terms of his Employment
Agreement with RMS dated April 2, 1997 (the "▇▇▇▇▇▇▇▇▇ Employment Agreement");
WHEREAS, ▇▇. ▇▇▇▇▇▇ has formed the Management Company to provide
executive management and consulting services to business organizations following
the sale to Zenith;
WHEREAS, ▇▇. ▇▇▇▇▇▇ will serve as the President of the general partner
of the Management Company and, in such capacity, shall control the activities
and operations of the Management Company, and ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ will serve
as Vice President and Secretary of the general partner;
WHEREAS, given the significant issues that will continue to face
RISCORP following the sale to Zenith and the financial consequences that the
resolution of these issues will have on any subsequent distribution to the
shareholders of RI, the Board of Directors has determined that it is in the best
interests of RI and its shareholders to retain the Management Company following
such sale;
WHEREAS, pursuant to the terms of this Agreement, RISCORP hereby
retains the Management Company and through it the personal services of ▇▇.
▇▇▇▇▇▇ and the other senior management personnel of the Management Company,
including ▇▇. ▇▇▇▇▇▇▇▇▇, to provide all management services required in
connection with the ongoing operations of RISCORP following the sale to Zenith,
and the Management Company agrees to accept such duties and responsibilities on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto do hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Board of Directors" or "Board" means the Board of Directors
of RI.
1.2 "Effective Date" means the date of the consummation of the sale of
substantially all of the assets and noncontingent liabilities of RISCORP to
Zenith pursuant to the terms of the Asset Purchase Agreement commencing
immediately following the consummation of such transaction and the termination
of the Employment Agreement.
1.3 "Management Company" means The Phoenix Management Company, Ltd., a
Florida limited partnership, which will serve as the management company for
RISCORP pursuant to this Agreement.
1.4 "Records of RISCORP" means, whether hard copy or on computer media,
without limitation: any records pertaining to underwriting and claims, both open
and closed; procedure manuals; mailing lists; safety reports and data; marketing
plans, data and records; statistical reports; accounting records; historical
records; funds received and in the custody of the Management Company; records
relating to the book of business, contracts and claims; all government filings;
and any other documents, materials, data, computer disks, tapes, source
documents, or data file layouts pertaining to or bearing information about
RISCORP and in the possession of the Management Company, its agents or
subcontractors.
ARTICLE II
TERMINATION OF EMPLOYMENT AGREEMENTS
2.1 Termination of ▇▇▇▇▇▇ Employment Agreement. Immediately following
the consummation of the sale to Zenith, RI shall make cash payments to ▇▇.
▇▇▇▇▇▇ required pursuant to Sections 3(d) and 7(b) of the Employment Agreement
and, upon the receipt of such payments, the Employment Agreement shall be
terminated and shall be of no further force and effect. In connection with the
delivery of such payment, the parties shall enter into a Termination Agreement
evidencing the termination of each party's rights, duties and obligations under
the Employment Agreement including, without limitation, the termination of the
stock option grant set forth in Section 3(c) thereof and ▇▇. ▇▇▇▇▇▇'▇ right to
receive any of the shares thereunder.
2.2 Termination of ▇▇▇▇▇▇▇▇▇ Employment Agreement. Immediately
following the consummation of the sale to Zenith, RMS shall make the cash
payment to ▇▇. ▇▇▇▇▇▇▇▇▇ required pursuant to Section 7(b)(2)(i) of the
▇▇▇▇▇▇▇▇▇ Employment Agreement and, upon the receipt of such payment, the
▇▇▇▇▇▇▇▇▇ Employment Agreement (other than Section 8 thereof) shall be
terminated and shall be of no further force and effect. In connection with the
delivery of such payment, the parties shall enter into a Termination Agreement
evidencing the termination of each party's rights, duties and obligations
thereunder, other than the prohibitions with respect to the disclosure of
confidential information or engaging in competitive activities by ▇▇. ▇▇▇▇▇▇▇▇▇.
ARTICLE III
DUTIES AND RESPONSIBILITIES OF MANAGEMENT COMPANY
3.1 Representations and Warranties of Management Company. The
Management Company represents and warrants that its principals, employees, or
subcontractors have the experience and qualifications to perform its duties
under the Agreement, including, but not limited to, management of the day-to-day
operations of RISCORP after the consummation of the transactions with Zenith,
managing the preparation, negotiation and defense of the final business balance
sheet to be provided to Zenith within 70 days of the closing thereof, providing
assistance in the overall planning and coordination of the business of RISCORP,
providing summary data relating to RISCORP's operations, and the skill and
experience to assist RISCORP in the collection and marshaling of RISCORP's
assets, resolving the outstanding liabilities of RISCORP and the orderly
liquidation of RISCORP. The Management Company further represents and warrants
that throughout the term of this Agreement ▇▇. ▇▇▇▇▇▇ shall control the
activities and operations of the Management Company and shall personally devote
a sufficient portion of his business time, efforts, skills, attention and
energies to enable the Management Company to perform the Services hereunder. The
Management Company agrees that neither it nor any of its senior management
personnel shall become engaged or involved in any activities or matters which
may adversely affect or reflect discredit on RISCORP or its respective
businesses, or conflict with the Services to be provided hereunder to RISCORP.
Nothing contained herein shall be construed to limit or restrict the passive
investment or other business activities of any of the senior management
personnel of the Management Company that do not interfere with the discharge of
the Services hereunder in any material respect.
3.2 Management Services. Subject to the direction and control of the
Board of Directors, the Management Company is hereby engaged to perform
directly, or, with the prior approval of the Board, to retain competent
professionals to perform, the following services in addition to those duties
otherwise contemplated in this Agreement (collectively, the "Services"), and the
Management Company hereby accepts such engagement on the terms and conditions
set forth herein:
A. General Management Responsibilities. The following duties
will be performed by the Management Company at its expense,
unless otherwise approved by the Board of Directors.
1. Management of the day-to-day operations and affairs
of RISCORP including, without limitation, performing
all duties normally performed by the chief executive
officer and other senior management personnel of a
corporation.
2. Management of all outsourcing contracts.
3. Management of all litigation.
4. Management of the preparation and defense of the
Proposed Business Balance Sheet and the determination
of the Final Business Balance Sheet (as such terms
are defined in the Asset Purchase Agreement) in
accordance with the terms of the Asset Purchase
Agreement.
5. Management of the indemnification process with
respect to all litigation targets (i.e. the Board,
RISCORP, as well as its officers, employees and
agents).
6. Management of claims investigation, targeting, data
evaluation, quantification of financial opportunity,
and ultimate litigation management.
7. Responsibility for the preparation of all shareholder
communications, press releases, responses to media
inquiries and similar public communications on behalf
of RISCORP for approval by the Board of Directors
prior to issuance.
8. Entering into contracts approved by the Board of Directors.
9. Performance of such other duties as may from time to
time be requested by the Board of Directors not
inconsistent with the Services set forth herein.
10. Responsibility for maintaining, at the expense of
RISCORP, all policies of insurance related to
RISCORP's continuing operations, including, without
limitation, appropriate D&O insurance coverage.
B. Monthly Accounting and Consulting Services. The Management Company
shall have oversight responsibility for the following functions with
the specific duties to be delegated, at the expense of RISCORP, to
competent professionals approved by the Board.
1. Deposit and account for all cash receipts.
2. Monitor cash balances in all bank accounts and
prepare cash transfers when necessary.
3. Prepare and maintain cash flow projections for
all entities to facilitate proper cash control.
4. Prepare invoices for all amounts due RISCORP and
monitor collection and aging of receivables.
5. Maintain accounts payable detail.
6. Review and approve all vendor invoices for payment
and prepare vendor checks. Subject to the
availability of sufficient cash, net of adequate
reserve cash balances, sign and mail checks when
required in order to obtain any vendor discounts.
7. Prepare payroll for the Company for those former employees
continuing to receive severance benefits.
8. Maintain all fixed asset schedules and account for all
additions and disposals.
9. Maintain monthly general ledgers for all entities
including:
a. recording of all cash receipts;
b. recording of all cash disbursements;
c. recording of all investment activity;
d. recording of the fixed asset transactions;
e. reconcile all bank accounts;
f. reconcile investment accounts;
g. verify the accurate and timely payment of
payroll taxes;
h. reconcile all remaining general ledger
balance sheet accounts monthly to verify
account balances; and
i. review all income statement accounts for
reasonableness of balances.
10. Prepare distribution payments to shareholders after
approval by the Board of Directors.
11. Prepare monthly financial statements on a GAAP and
statutory basis.
12. Prepare GAAP to statutory conversions of the accounting
data needed for certified audits.
13. Prepare budgets for the RISCORP entities remaining after
the Zenith transaction.
14. Prepare quarterly reports of actual vs. budgeted results
for review by the Board of Directors.
15. Prepare explanations of significant budget variances.
16. Prepare all premium tax returns for 1998.
17. Respond to all regulatory correspondence.
18. Maintain document depository of accounting records for
litigation and tax purposes.
19. Perform such other duties customarily performed by a chief
financial officer and a corporate accounting staff.
C. Regulatory Filings, Reports and Relationships with Regulatory
Authorities. The Management Company shall have oversight responsibility
for the following functions with the specific duties to be delegated,
at the expense of RISCORP, to competent professionals approved by the
Board.
1. Prepare and file all reports required under the
Securities Exchange Act of 1934, as amended, with the
Securities Exchange Commission ("SEC").
2. Prepare and file all reports required under
applicable insurance laws where any RISCORP entit
is required to file reports.
3. Meet with representatives of any state department of
insurance having jurisdiction over RISCORP, the SEC
or any other state or federal regulatory authority to
which RISCORP is subject and take such other actions
as may be necessary or appropriate to maintain and
enhance RISCORP's relationship with each such
regulatory authority.
D. Tax Services. The Management Company shall have oversight
responsibility for the following functions with the specific duties to
be delegated, at the expense of RISCORP, to competent professionals
approved by the Board.
1. Prepare and file all local, state and federal tax
returns for RISCORP, including but not limited to
income, property, franchise, sales and intangible
taxes.
2. Defend RISCORP in any audits related to its tax returns,
including gathering information and responding to questions.
3. Prepare tax information for financial statements.
4. Perform quarterly tax calculations and determine the
allocation of the tax liabilities among the entities.
5. To the extent necessary, prepare tax provisions and
returns for Third Coast Insurance Company,
Governmental Risk Insurance Trust, National Alliance
for Risk Management Association and the North
Carolina Commerce Fund.
6. Prepare and file information returns on Forms 1099
and provide backup withholding notices on Forms B.
E. General Administration. Except as set forth below, the
following duties will be performed by the Management Compan
at its expense, unless otherwise approved by the Board of
Directors
1. Make such reports pertaining to matters of concern or
general interest with respect to RISCORP as the Board
of Directors may reasonably request and provide such
administrative assistance and staff support to the
Board and its committees as may be reasonably
necessary for the directors to carry out their duties
and responsibilities to RISCORP.
2. Purchase or otherwise demonstrate to the satisfaction
of the Board of Directors that the Management Company
has acquired, and is maintaining in full force and
effect throughout the term of this Agreement,
fidelity bond coverages in reasonable amounts and as
required by the applicable insurance departments. The
allocated portion of the premiums for such fidelity
bond coverage relating to that portion of the
Management Company's operations performed on behalf
of RISCORP shall be purchased and maintained at
RISCORP expense.
3. Provide to the certified public accountants selected
by the Board such reports and information as may
reasonably be necessary to enable such accountants to
express their professional opinion as to the
financial condition of RISCORP.
4. Upon request of the Board of Directors, represent
RISCORP at any examinations, hearings, meetings, and
administrative inquiries involving the financial
interests of RISCORP, and before the SEC or any
insurance department or any other agency of a state
in which RISCORP does business; provided, however,
that the Management Company shall not bear the
expense of RISCORP's separate representation by an
attorney and any other professional advisors at such
examinations, hearings, meetings and administrative
inquiries.
5. Upon reasonable request, provide to the actuaries
employed by RISCORP such reports and information as
may reasonably be necessary for such actuaries to
express their professional opinion as to the
financial status of RISCORP.
6. Provide to the Board of Directors financial
information and reports regarding RISCORP, assist in
overseeing the fiscal policies and financial matters
of RISCORP, provide administrative support for the
fiscal operation and management of RISCORP, including
preparation, accumulation and maintenance of the
Records of RISCORP in accordance with statutes or
regulations promulgated by the SEC, the Internal
Revenue Service or any insurance department or
governing authority.
F. Investment Policy. The following duties will be performed by the
Management Company at its expense, unless otherwise approved by the
Board of Directors.
1. Prepare and submit to the Board of Directors for
approval or modification, as appropriate, an
investment policy plan for RISCORP.
2. Coordinate investment transactions with one or more
investment advisers selected by the Management
Company with the approval of the Board of Directors.
3. Verify that the investment policy adopted by the
Board of Directors is properly implemented and
followed by the aforesaid investment advisers.
4. Provide to the Board of Directors, at reasonable
intervals, reports regarding compliance with the
provisions of the applicable law regulating
permissible investment policies.
5. Provide to the Board of Directors, at reasonable
intervals, reports regarding compliance with
investment policies established by RISCORP.
6. Provide to the Board of Directors, at least
quarterly, a portfolio analysis detailing
descriptions of securities, maturity dates,
interest/dividend rates, yield to maturity, after tax
yield, par value, book value, and realized and
unrealized gains/losses.
G. Auditing. Cooperate with and provide such information relating to
RISCORP as may be reasonably necessary for the external auditors or other
qualified consultants to evaluate the performance by the Management Company of
its duties and responsibilities.
H. Budget. Prepare a proposed annual budget to be reviewed, amended,
modified or revised, if necessary, and approved by the Board.
I. Personnel. In connection with discharging its duties under this
Agreement, Management Company shall be responsible for employing at its expense
such personnel as may be necessary to perform the Services contemplated by this
Agreement, subject to the terms hereof.
J. Plan of Liquidation. In a timely manner, prepare and submit
to the Board of Directors for approval or modification, as appropriate,
a plan of liquidation for RISCORP.
K. Miscellaneous. Provide such other reasonably necessary services as
may be required to fully execute and perform the Management Company's duties and
responsibilities pursuant to this Agreement.
ARTICLE IV
COMPENSATION
4.1 Management Fee. In consideration for the services provided by the
Management Company hereunder, RISCORP shall pay the Management Company $100,000
per month on the first day of each month during the term of this Agreement
(excluding the final six months of the initial term as set forth below), plus
reasonable and necessary out-of-pocket expenses of the Management Company,
including but not limited to, RISCORP's allocated portion of all insurance
costs, supplies, facilities, equipment and transportation expenses incurred in
connection with the services provided by the Management Company to or on behalf
of RISCORP. The fees and expenses payable hereunder shall be prorated for any
partial month that this Agreement is in effect. Upon the Effective Date, RISCORP
shall pay to the Management Company a retainer of $600,000 which shall be
applied by the Management Company against the fees due to the Management Company
during the final six (6) months of the initial term of this Agreement.
4.2 Restricted Stock Grant. On the Effective Date, RISCORP shall
deliver to the Share Custodian (as such term is defined in Exhibit A)
certificates representing 1,725,000 shares of RISCORP, Inc. Class A Common Stock
(the "Restricted Stock"). Such shares shall be subject to the terms and
conditions of a Restricted Stock Award Agreement in substantially the form of
Exhibit A attached hereto. Ten days prior to the date any tax payment is due by
the partners of the Management Company pursuant to an election under Section
83(b) of the Internal Revenue Code, as amended, to include the value of such
shares of Restricted Stock in income on the date of grant, RISCORP shall pay the
Management Company an amount which, on an after-tax basis, is sufficient to
reimburse the partners of the Management Company for that portion of all federal
income, employment and excise taxes incurred in connection with such election
under Section 83(b) then being paid. RISCORP further agrees to indemnify and
hold harmless the partners of the Management Company, on an after-tax basis,
from any additional federal taxes, interest or penalties incurred in connection
with this Restricted Stock grant (exclusive of any assessment for state taxes)
by the partners of the Management Company in the event any of the foregoing
taxing authorities assess one or more of the partners for any such additional
taxes, interest or penalties not initially reimbursed by RISCORP. RISCORP and
the Management Company agree that the initial reimbursement payment shall be
equal to 71.05% of the aggregate value of the shares of Restricted Stock on the
date of grant as reported in the over-the-counter market and that the foregoing
amount is not intended to include any reimbursement for any state taxes that may
be payable by any partner of the Management Company. For purposes of this
Section, "partners of the Management Company" includes such persons or entities
as are subject to federal tax on income recognized by the Management Company.
4.3 Expenses. RISCORP shall reimburse the Management Company for the
reasonable expenses actually incurred by the Management Company for legal
services rendered and the advice of a compensation consultant in connection with
the negotiation of this Agreement within 10 business days of the receipt of
acceptable invoices for such services approved by the Board of Directors.
RISCORP shall also reimburse the Management Company for its allocated portion
(not to exceed the lesser of 25% or $5,000) of the organization costs of the
Management Company and for all customary business and travel expenses approved
by the Board within 10 business days of the receipt of acceptable expense
reports. In addition, the Management Company will be provided with such number
of corporate credit cards in the name of RISCORP as the Board of Directors may
approve to help defray out-of-pocket expenses.
ARTICLE V
EXPENSES OF RISCORP
It is understood and agreed by the parties that the fees paid to the
Management Company are in consideration for the Management Company performing
the Services described herein, but that such fees do not include the following
services and expenses, which shall be borne by RISCORP:
5.1 The cost of services performed by any actuary retained on behalf of
RISCORP.
5.2 The cost of audits by certified public accountants or other
auditors retained on behalf of RISCORP as required by applicable law or
regulations, and preparation of financial statements (whether "audited" or
periodic "reviewed") and all returns and reports required by federal, state or
local taxing authorities.
5.3 Legal fees for services performed by attorneys retained on behalf
of RISCORP.
5.4 All legal fees, costs and expenses incurred in the prosecution
or defense of lawsuits filed by or against RISCORP.
5.5 The cost of services performed by any other professionals retained
with the approval of the Board of Directors on behalf of RISCORP, including but
not limited to financial consultants to operate as the finance department of
RISCORP, information systems specialists to help gather and preserve the Records
of RISCORP and tax professionals to assist in the preparation, filing and
defense of RISCORP tax returns.
5.6 The costs incurred on behalf of RISCORP related to any
examination or investigation by the SEC, the IRS or any insurance department.
5.7 Premiums for errors and omissions insurance, directors and officers
insurance, and fidelity coverage (including an allocated portion of the premiums
for such coverage related to that portion of the Management Company's operations
performed on behalf of RISCORP) and surety bonds to satisfy the needs of
RISCORP, its officers, directors, employees and agents.
5.8 Such other reasonable and necessary expenses incurred by the
Management Company in the performance of its duties hereunder and approved by
the Board.
5.9 Cost of investing RISCORP monies.
5.10 Taxes and assessments charged against RISCORP.
5.11 The Management Company shall prepare and submit to the Board of
Directors a suggested annual budget for the fees, costs and other expenses to be
incurred by RISCORP described in this Article V. Subject to the direction and
control of the Board, upon approval of a budget, the Management Company shall
proceed with carrying out the programs and projects contemplated therein, with
the costs thereof to be advanced monthly by RI and at the rate provided in the
budget.
5.12 All other expenses described under this Article V shall be paid by
either RISCORP or the Management Company according to such procedures as the
parties shall agree upon from time to time; provided, however, that if the
Management Company pays for any such items, it will be reimbursed by RISCORP
within ten (10) days after providing copies of the invoice and its checks to
RISCORP or such other reasonable time as the parties may determine.
ARTICLE VI
RECORDS AND OFFICE
6.1 Principal Office. The Management Company shall maintain at
its principal office an original counterpart of this Agreement.
6.2 Access to Records. The Board of Directors and its representatives
shall have complete and unfettered access to the books and records of RISCORP
maintained by the Management Company and the Management Company shall make all
such books and records reasonably available at the request of the Board.
6.3 Location of Records. The primary activities of the Management
Company under this Agreement shall be handled from RISCORP's offices in
Sarasota, Florida and Orlando, Florida, and the Records of RISCORP shall be
maintained in the Sarasota office unless another location is approved by the
Board.
6.4 Confidentiality. The Management Company recognizes and acknowledges
that all programs and Records of RISCORP used by RISCORP are the property of
RISCORP and shall be deemed confidential and proprietary information of RISCORP.
The Management Company covenants and agrees that it will not, during the term of
this Agreement or after termination thereof, use, disseminate, disclose or in
any manner publish any such confidential and proprietary information without
RISCORP's consent; provided, however, that the Management Company may in its
discretion and at its expense make copies of or have access to such information
to the extent it is needed for defending or prosecuting any legal, tax, or other
administrative investigation or proceeding against the Management Company or
pertaining to the performance of its duties hereunder.
6.5 Return of Records and Assets. Upon termination of this Agreement,
all original Records of RISCORP, hardware and software (except software
purchased or developed by the Management Company) utilized in generating and
maintaining those records in the custody of the Management Company or its
subcontractors shall be assembled by the Management Company and delivered to
RISCORP all at the expense of RISCORP; provided, however, that the Management
Company may in its discretion and at its expense make copies of or have access
to such information to the extent it is needed for defending or prosecuting any
legal, tax, or other administrative investigation or proceeding against the
Management Company or pertaining to the performance of its duties hereunder.
ARTICLE VII
TERM AND TERMINATION
7.1 Term. The term of this Agreement shall commence on the Effective
Date and, subject to the terms of this Article VII, shall remain in full force
and effect for a period of three (3) years thereafter. After the initial term of
this Agreement, at the election of RISCORP, this Agreement may be renewed for an
additional one-year term upon providing written notice to the Management Company
of its election to extend this Agreement at least 120 days prior to the
termination of the initial term. Such extension, if elected by RISCORP, shall be
on the terms and conditions set forth herein, including the payment of the
monthly management fee set forth in Section 4.1 hereof.
7.2 Disqualification by Insurance Department. Notwithstanding the
provisions of Section 7.1, this Agreement may be terminated by RISCORP if the
Management Company is disqualified from acting as a management company by any
insurance department and the Management Company is thereafter unable to cure the
deficiencies cited by such agency within a reasonable period of time.
7.3 Annual Review. RISCORP's independent auditors shall annually review
the Management Company's performance hereunder. If the independent auditors or
the members of the Board of Directors (exclusive of ▇▇. ▇▇▇▇▇▇) unanimously
determine in good faith that the Management Company is not in compliance, in all
material respects, with the terms of this Agreement or applicable law, then
written notice of such noncompliance shall be given to the Management Company
and the Management Company shall be given a reasonable time (not less than 60
days) to correct the noncompliance. If the Management Company fails to correct
the noncompliance in all material respects within such cure period, then the
Management Company shall pay RISCORP liquidated damages in the amount of ten
percent (10%) of the annual management fee then in effect and RISCORP shall have
the right to terminate this Agreement at the expiration of such cure period.
Unless the acts or omissions of the Management Company constitute gross
negligence or willful misconduct, such liquidated damages shall constitute the
satisfaction of all liabilities to RISCORP under this Agreement.
7.4 Termination by RISCORP. RISCORP shall have the right to terminate
this Agreement following the occurrence of any of the following events: (i) ▇▇.
▇▇▇▇▇▇ ceases to actively exercise management and control over the activities
and operations of the Management Company on behalf of RISCORP, exclusive of any
period of physical or mental disability not in excess of 12 weeks during any
period of 12 consecutive months; (ii) Management Company's neglect of or refusal
to perform its duties or the material breach of any provision of this Agreement
by the Management Company if such breach is not cured within the time period
reasonably prescribed by the Board of Directors for such breach or violation
(such cure period to be not less than 60 days); (iii) any act of fraud,
misappropriation, dishonesty or embezzlement by any senior management personnel
of the Management Company; (iv) the indictment of any senior management
personnel of the Management Company for any felony criminal offense; (v) any
change of control, dissolution or liquidation of the Management Company; (vi)
any merger, consolidation or other reorganization of the Management Company,
other than a transaction not involving a change of control; (vii) the filing of
a petition in voluntary bankruptcy or an assignment for the benefit of creditors
by the Management Company, or upon other action taken or suffered, voluntarily
or involuntarily, under any federal or state law for the benefit of insolvents
by a party, except for the filing of a petition of involuntary bankruptcy
against a party with the dismissal of such petition within 30 days after filing;
(viii) the complete liquidation, dissolution and winding up of all of the
business and affairs of RISCORP including, without limitation, the final
distribution to all shareholders of RISCORP; or (ix) the final distribution to
the holders of the Series A Common Stock of RI.
7.5 Effect of Termination.
A. Upon termination of this Agreement for any reason other than as set
forth in Section 7.4(viii) or (ix), RISCORP shall cease all payments to the
Management Company as of the effective date of such termination and, except as
set forth in subparagraph C below, within 30 days of the effective date thereof,
the Management Company shall refund to RISCORP the advance payment set forth in
Section 4.1 hereof, as well as any other funds advanced to the Management
Company for services to be rendered after the termination date.
B. Upon the termination of this Agreement pursuant to Section 7.4(viii)
or (ix), the Management Company shall be entitled to retain the $600,000
prepayment described in Section 4.1 hereof and RISCORP shall pay the Management
Company an additional amount equal to the difference between (1) $3,000,000 and
(2) the aggregate amount of the monthly management fees paid to the Management
Company pursuant to Section 4.1 hereof prior to the effective date of such
termination.
C. Upon the termination of this Agreement due to the death or
disability of ▇▇. ▇▇▇▇▇▇, the Management Company shall be entitled to retain the
$600,000 prepayment described in Section 4.1 hereof; however, any other funds
advanced to the Management Company for services to be rendered after the
termination date shall be refunded to RISCORP within 30 days of the effective
date of termination.
D. Upon the termination of this Agreement, at the request of the Board
of Directors, the Management Company agrees to assist RISCORP in the orderly
transition of the Services being provided hereunder to a new management services
provider or to the executive officers and employees then being employed by
RISCORP, as the case may be. A prorated portion of the management fee set forth
in Section 4.1 hereof shall be payable with respect to any such transition
services requested by the Board; provided, however, the Management Company shall
not be required to perform any such services for more than 120 days following
the termination of this Agreement.
ARTICLE VIII
DELEGATION OF DUTIES
Subject to the approval of the Board of Directors, the Management
Company shall have the right to delegate its duties under this Agreement to such
persons or entities as agents, delegates or assignees as it may properly deem
necessary for the efficient performance of the duties and responsibilities
assigned to the Management Company hereunder. Notwithstanding the foregoing, the
parties hereto agree that RISCORP is entering into this Agreement with the
Management Company to, among other things, obtain the personal services of ▇▇.
▇▇▇▇▇▇ in connection with the performance of the Services hereunder and,
accordingly, the Management Company shall have no authority to delegate those
duties typically performed by a chief executive officer of a corporation to any
person other than ▇▇. ▇▇▇▇▇▇ without the prior approval of the Board of
Directors. Neither the Management Company nor any of its employees shall be
liable to RISCORP in connection with any actions taken in reliance upon the
advice of any professionals selected or approved by the Board of Directors with
respect to the subject matter of their engagement.
ARTICLE IX
PREVAILING LAW
This Agreement shall be construed according to the laws of the State of
Florida to the extent that such laws are not preempted by Federal law.
ARTICLE X
INDEMNIFICATION
RISCORP agrees to indemnify and hold the Management Company and
officers, directors and employees harmless from and against all costs, damages,
judgments, attorneys' fees, expenses, obligations and liabilities of any kind or
nature that occur, arise or result from the Management Company's (or its
delegates' or agents') mismanagement of RISCORP's assets or any other breach of
their duties to RISCORP or its shareholders, or any other duties imposed by law
(except to the extent that such mismanagement or breach of duties results from
the gross negligence or willful misconduct of the Management Company, its
officers, directors and employees).
ARTICLE XI
MISCELLANEOUS
11.1 Fidelity Bond. During the term of this Agreement, the Management
Company, at the expense of RISCORP shall maintain a fidelity bond covering its
employees, with RISCORP as obligee, to protect all monies placed in any
revolving account made available to the Management Company for the payment of
claims, judgments and other related expenses for the benefit of RISCORP. The
coverage and amount for the bond shall be as required by the applicable
insurance departments or other applicable law.
11.2 No Violation. This Agreement has been duly adopted by the partners
of the Management Company and the Board of Directors of RISCORP. This Agreement
does not and will not conflict with or violate the charter or other
organizational documents of any party, or any agreement, instrument, law, order,
rule, regulation, or other obligation or arrangement by which a party may be
bound.
11.3 Assignment. Except as expressly set forth herein, this Agreement
shall not be assignable without the express written consent of the other parties
hereto.
11.4 Performance. Neither party nor any representative, agent,
employee, designee or other firm or individual acting on its behalf or at its
direction, shall in bad faith take any action for the primary purpose of
circumventing, diminishing or otherwise avoiding the party's obligations under
this Agreement, terminating this Agreement, or causing the non-renewal of the
same, including the (i) imposition of unreasonable or unfair obligations upon
the other party for the purpose of causing the other party to request
termination of this Agreement, (ii) the imposition of arbitrary standards,
policies or procedures upon the other party, or (iii) unreasonably withholding
consent or unreasonably exercising its discretion where such consent or
discretion may be requested by the other party.
11.5 Corporate Authority. Prior to the Effective Date of this
Agreement, the Board of Directors of RI shall adopt such resolutions as may be
necessary or advisable for the Management Company to carryout its duties and
responsibilities hereunder, including, without limitation, resolutions naming
▇▇. ▇▇▇▇▇▇ as the President and Chief Executive Officer of RI and ▇▇. ▇▇▇▇▇▇▇▇▇
as Chief Investment Officer, Treasurer and Secretary thereof.
11.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties, cannot be modified except in a writing signed by the
parties, and shall be binding upon and for the benefit of the respective
successors and permitted assigns of the parties (including any entities, funds,
or other organizations merging into, consolidated with, formed by, or acquired
by RISCORP).
11.7 Key Man Life Insurance. At the request of the Board of Directors,
▇▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇▇▇ each agree to undergo annual physical examinations
and cooperate with RISCORP in seeking to obtain, at the expense of RISCORP, "key
man" insurance against their death or disability in connection with the Services
to be provided hereunder.
11.8 Arbitration. RISCORP and the Management Company agree that any
dispute or disagreement arising under or related to this Agreement will be
subject to final and binding arbitration conducted under the rules of the
American Arbitration Association. The parties agree to request a proposed panel
of seven (7) arbitrators and to engage in respective strikes until one (1)
arbitrator remains. The expenses of the arbitration, including the arbitrator's
fee, will be shared equally between RISCORP and the Management Company provided
that each party shall be responsible for the fees and expenses of its own
counsel, except as the arbitrator, in his or her sole discretion, may otherwise
determine.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RISCORP, Inc., individually and on behalf of each of
its subsidiaries identified as parties to this
Agreement
/s/ Seddon ▇▇▇▇▇, Jr.
---------------------------------
Seddon ▇▇▇▇▇, Jr.
Director
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Director
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Director
THE PHOENIX MANAGEMENT
COMPANY, LTD.
By:▇▇▇▇▇▇ Managers, Inc., its General Partner
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
