MANAGEMENT SERVICES AGREEMENT
EXHIBIT 10.32
This
Management Services Agreement (the “Agreement”) is made and entered into this 24 day of
August 2007, by and between Liberty Mutual Insurance Company (“Liberty Mutual”), a Massachusetts
stock insurance company and American Fire and Casualty Company (“AFCC”), an Ohio stock
insurance company.
1. Performance of Services. Liberty Mutual agrees, to the extent requested by AFCC,
to perform such services (collectively, “services”) for AFCC as AFCC 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
AFCC, including all laws and regulations relating to review of AFCC’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 AFCC or bind AFCC 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
AFCC, 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
AFCC’s Board of Directors and responsible officers, Liberty Mutual shall provide AFCC 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 AFCC is
transacting business, the maintenance of necessary and proper records and books of account with
respect to the business of AFCC, and the maintenance and compilation of all data required for the
preparation of tax returns.
2. Assistance to AFCC in connection with the examination or audit of the books, records,
affairs and activities of AFCC by governmental, insurance or taxing authorities having regulatory
or taxing authority with respect to the operations of AFCC, or by any firm of certified public
accounts appointed by AFCC to audit its books, records and accounts.
3. Assistance to AFCC with treasury and accounts payable functions as may be determined
between the parties. AFCC shall certify to Liberty Mutual the names and specimen signatures of all
officers or employees of AFCC 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 AFCC’s books records
and accounts are owned by AFCC; and AFCC 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 AFCC’s Board
of Directors and responsible officers, Liberty Mutual shall provide AFCC 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 AFCC’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 AFCC and shall provide trouble-shooting
functions on behalf of AFCC.
D. Policy Administration and Production, Subject to the direction and control of AFCC’s Board of
Directors and responsible officers, Liberty Mutual may perform all policy production, print and
mail activities tin AFCC’s behalf for all the states in which AFCC currently operates and in which
it may operate in the future.
E. Real
Estate Management. Subject to the direction and control of AFCC’s Board of Directors and
responsible officers, Liberty Mutual may handle all matters and issues relating to AFCC’s real
estate purchases, sales, leases and lease-backs.
F. Legal. Subject to the direction and control of AFCC’s Board of Directors and
responsible officers, Liberty Mutual may provide legal services, including litigation
management services, to or on behalf of AFCC.
G. General Administration. Providing all personnel, equipment, data processing
program, 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 AFCC’s Board of Directors and
responsible officers, Liberty Mutual may perform such other services on behalf of AFCC as it may
desire, and as may be mutually agreed to between Liberty Mutual and AFCC.
1. 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. AFCC 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 AFCC 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. Amount owing between the parties shall be settled between the
parties on a monthly basis, unless otherwise agreed to between the parties, provided, however, that
the parties shall settle all amounts owing on at least a calendar quarterly basis.
IV.
Confidentiality Liberty Mutual and AFCC 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 AFCC to be non-confidential from other, third party, sources
prior to the execution of this Amendment, and (c) information required to be disclosed by law or a
stare or federal governmental agency having authority over the business of Liberty Mutual or AFCC,
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 the 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 additions,
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 AFCC’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 of
federal insurance law, such notice shall immediately be forwarded to AFCC. Liberty Mutual shall
cooperate in responding to any such governmental notice as such notice relates to its rendering of
services under the Agreement.
VI. Term and Termination.
A. Term. This Agreement shall be effective as of the 24 day of August 2007 and shall
continue in full force an 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 part, as
appropriate, by AFCC 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 part, as
appropriate, by AFCC 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
AFCC 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 AFCC, AFCC may immediately terminate this
Agreement.
(b) nonpayment of costs by a delegating party of the party performing the services so
delegated.
(c) The suspension, revocation or other restriction on the insurance license of either AFCC or
Liberty Mutual,
(d) The insolvency, voluntary or involuntary bankruptcy, reorganization or liquidation of either
AFCC or Liberty Mutual.
(e) In the event of (i) the acquisition of AFCC 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 AFCC, then this Agreement shall terminate with respect to AFCC 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 AFCC (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 Vl.B.2(e),
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 AFCC Liberty Mutual shall indemnify, defend and hold
harmless AFCC 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 AFCC
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 regulations, 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 or obligation of any
subcontractor appointed by Liberty Mutual if such breach is the result of willful neglect or gross
negligence. AFCC may set off against any amount due Liberty Mutual any amount due to AFCC, pursuant
to this or any other agreement to which the parties to this indemnification are also parties.
B. AFCC’s Indemnification of Liberty Mutual. AFCC shall indemnify Liberty Mutual and hold
Liberty Mutual harmless AFCC 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 agreement 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 duty executed and delivered this Agreement under seal
as of the day and year first above written.
| Liberty Mutual Insurance Company | ||||
| /s/ Xxxxx X. Xxxx | ||||
By:
|
Xxxxx X. Xxxx | |||
Its:
|
Assistant Secretary | |||
| American Fire and Casualty Company | ||||
| /s/ Xxxxx X. Xxxx | ||||
By:
|
Xxxxx X. Xxxx | |||
Its:
|
Chief Financial Officer | |||
LIBERTY MUTUAL INSURANCE COMPANY (“Manager”) and AMERICAN FIRE AND CASUALTY COMPANY (“Company”);
(hereinafter together called the “Parties”).
WHEREAS,
the Parties entered into the Agreement for Manager to provide various services effective
August 24, 2007.
WHEREAS, the Parties deem it necessary to amend certain provisions of the Agreement with respect to
settlement of amounts due between them.
NOW, THEREFORE, the Parties hereto agree to amend the Agreement, as follows:
1. Section III “Accounts and Disbursements” of the Agreement is amended and restated as follows:
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.
2. Section I. “Performance of Services” is hereby amended to include a new subsection I.
“Maintenance and Property Rights of Records:”
I.
Maintenance and Property Rights of Records. Manager shall maintain accurate and
complete records as related to this Agreement. Each of the Parties shall retain the
rights to access such records upon request.
3. Section XV. “Successors and Assigns” is hereby added to the Agreement.
XV. Successors and Assigns. No assignment of this Agreement, including by operation of
Law, may be made by any party to this Agreement without the prior written consent of
other party hereto. Notwithstanding the foregoing, the Manager has full discretion to
delegate any of its responsibilities, duties and authority set forth herein to, or
otherwise to utilize any of its affiliates to provide
services under this Agreement, provided that Manager will be fully accountable for any
acts or omissions of an affiliate pursuant to such an arrangement, as if such acts or
omissions were its own.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment No. 1 to the Agreement, effective
as of the 31st day of December, 2007 to be executed by their respective duly authorized officers.
| Liberty Mutual Insurance Company | American Fire and Casualty Company | |||||||
| /s/ Xxxx X. Xxxxx | /s/ Xxxxx X. Xxxx | |||||||
By:
|
Xxxx X. Xxxxx | By: | Xxxxx X. Xxxx | |||||
Its:
|
Vice President and Comptroller | Its: | Chief Financial Officer | |||||
