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EXHIBIT 10.92
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, dated as of the 21st day of May, 1996 by and between
Asset Allocation & Management Company, L.L.C., an Illinois corporation having
its principal place of business at Thirty North LaSalle Street, 36th Floor,
Xxxxxxx, Xxxxxxxx 00000 (herein "AAM"), and Alpine Insurance Company, having
its principal place of business at 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000 (herein "Client").
In consideration of the promises set forth in this Agreement, AAM and
Client agree as follows:
1. Subject to the terms set forth herein, Client hereby designates and
appoints AAM as its investment adviser for a three (3) year term. As
investment adviser, AAM shall act with respect to the assets of Client
only with prior approval of Client, except where specific investment
parameters are set by Client in writing in advance, and which may be
changed by Client from time to time. The initial Statement of
Investment Policy Objective and Guidelines are attached hereto as
Exhibit A and made a part hereof.
2. For its investment advisory services, AAM shall be compensated in
accordance with its schedule of fees current from time to time. If this
Agreement is terminated by either party other than on the last day of
the quarter, the advisory fee for such quarter shall be based on
the ratio that the number of days that have expired in such quarter
bears to ninety (90) days. AAM hereby agrees to fix the current Fee
Schedule for the three year term commencing on the effective date of
this Agreement as indicated above, which is attached hereto as Exhibit
B and made a part hereof.
3. This Agreement may be terminated at any time by either party upon 60
days prior written notice to the other party, but in no event shall this
Agreement continue for a period exceeding three (3) years from the date
first stated above.
4. Except for negligence or malfeasance, or violation of applicable law,
neither AAM nor any of its employees or partners (or any officers,
directors or employees of its partners) shall be liable hereunder for
any action performed or omitted to be performed or for any errors or
judgments in connection with AAM's services rendered under this
Agreement. The federal securities laws impose liabilities under certain
circumstances on persons who act in good faith, and therefore, nothing
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herein shall in any way constitute a waiver or limitation of any rights
which Client may have under any federal securities laws.
5. This Agreement and the rights and obligations hereunder shall not be
subject to assignment as that term is defined in the Investment
Advisers Act of 1940, by AAM except with the prior written consent of
Client.
6. AAM, a partnership, shall notify Client of any change subsequent to the
date of this Agreement in the membership of the partnership. Such
notification shall be made in writing within 20 business days after such
change.
7. Client represents that, (a) the executions of and performance
contemplated under this Agreement do not and will not violate or abridge
any obligation or duty of Client, (b) this Agreement has been authorized
by appropriate action and when executed and delivered will be binding
upon Client in accordance with its terms, and (c) Client will deliver to
AAM such evidence of such authority as AAM may reasonably require,
either by way of a certified resolution or otherwise.
8. Without the express prior written consent of AAM, Client shall not
directly or indirectly employ or solicit for employment any employee of
AAM during the term of this Agreement and for a period of 12 months
after termination of the Agreement. Without the express written consent
of Client, AAM shall not directly or indirectly employ or solicit for
employment any employee of Client during the terms of this Agreement and
for a period of 12 months after termination.
9. Client warrants that the following are empowered to approve
recommendations made on behalf of Client by AAM:
Xxxx X. Xxxxx President
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NAME: TITLE
Xxxxx X. Gay Vice President-Investments
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NAME: TITLE
Xxxxxx X. Xxxxx Director
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NAME: TITLE
Xxxxxxx X. Xxxxxxx Secretary/Treasurer
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NAME: TITLE
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10. Client and AAM acknowledge and understand that Client shall have
ultimate control and responsibility of the functions that Client has
delegated to AAM herein.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day, month and year above written.
AAM: ASSET ALLOCATION & MANAGEMENT COMPANY, L.L.C.
By: [SIG]
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CLIENT: ALPINE INSURANCE COMPANY
By: [SIG]
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STATEMENT OF INVESTMENT POLICY
OBJECTIVES AND GUIDELINES
I. POLICY AND PHILOSOPHY
The Investment Policy of Alpine Insurance Company and Transco Syndicate
#1 Ltd. is to optimize the after tax return on investable assets;
maintain necessary liquidity to support operational needs, and preserve
principal in order to maintain the surplus position.
The Company will utilize an investment advisor to provide relative value
analysis and to make the purchases and sales of securities. The
Investment Committee is responsible for the continual monitoring of the
investment advisors and adherence to this policy. A bank will act as
custodian to hold the invested assets for the Company.
II. LEGAL LIMITATIONS
The Company's funds are to be invested within the parameters defined by
the Illinois Insurance Code. NAIC Risk Based Capital Regulations and
Model Laws will be monitored as adopted. FASB Rulings will also be
monitored and acted upon where appropriate (i.e. FASB 115). All
securities will be registered with the securities valuation office of
the NAIC.
III. OBJECTIVES
The primary investment management objectives are as follows:
- Accumulation and preservation of capital.
- Optimize, within accepted risk levels, after tax returns.
- Assure proper levels of liquidity.
- Provide an acceptable and stable level of current income.
- Closely match investment maturities with company liabilities.
- Have a quality portfolio which will help attain the highest
possible A.M. Best rating.
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EXHIBIT A
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STATEMENT OF INVESTMENT POLICY
OBJECTIVES AND GUIDELINES
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IV. OPERATING PARAMETERS
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A. Maximum holdings will be as follows:
MAXIMUM %
SECURITY TYPE OF PORTFOLIO PER ISSUE
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Governments No Limit 5.00%
Agencies Other Than "Full Faith" 60% 3.00%
Mortgage Backed Securities
Collatralized Mortgage
Obligations 50%
Agency Backed 3.00%
AAA Non-Agency 2.50%
AA Non-Agency 2.00%
Asset Backed Securities 35%
Corporate Bonds 40%
AAA Corporate Bonds 2.00%
AA Corporate Bonds 1.75%
A Corporate Bonds 1.50%
BBB Corporate Bonds 1.00%
Municipal Bond 60%
Pre Refunded Municipal Bonds 3.00%
AAA Municipal Bonds 2.50%
AA Municipal Bonds 2.00%
A Municipal Bonds 1.75%
BBB Municipal Bonds 1.00%
Sinking Fund Preferred Stock 20%
AAA Sinking Fund Preferred Stock 1.75%
AA Sinking Fund Preferred Stock 1.50%
A Sinking Fund Preferred Stock 1.25%
BBB Sinking Fund Preferred Stock .50%
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EXHIBIT A
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EXSTAR FINANCIAL GROUP
STATEMENT OF INVESTMENT POLICY
OBJECTIVES AND GUIDELINES
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MAXIMUM %
SECURITY TYPE OF PORTFOLIO PER ISSUE
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Common Stocks Expressed as a percent of 5.00%*
surplus adjusted for the
volatility of a particular
Program.
Convertible Securities 5.00%*
B. Quality
Purchases will be limited to issues rated Baa3/BBB- or better
with a weighted average quality for the portfolio of AA. If an
issue in the core fixed income portfolio falls below investment
grade, Management will be contacted in order to determine
whether issue should continue to be held in the portfolio.
Convertible Securities will have a weighted average quality of
BBB- or better.
C. Maturities
Individual maturities (and in the case of mortgage-backed
securities, and sinking fund preferred stocks the expected
average lives) will not exceed 15 years. The average
maturity/expected average life of the portfolio dedicated to
reserves will be in the 2.75-3.25 year range with a
corresponding average duration of approximately 2.75.
D. Equities
Equity Exposure will be viewed within the context of the
company's ability to absorb the implicit volatility of such a
program. The purchase of common stock shall be limited to
actively traded issues on leading stock exchanges or on the
National Over-the-Counter Market.
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EXHIBIT A
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EXSTAR FINANCIAL GROUP
STATEMENT OF INVESTMENT POLICY
OBJECTIVES AND GUIDELINES
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E. Convertible Securities
Maintaining a Xxxxx'x Baa3 or equivalent average weighted
quality rating (other rating agency) on the overall convertible
securities program. No more than 25% of this allocation will be
in Ba rated securities and no securities below this rating will
be purchased. The Convertible Securities program operates on a
discretionary basis so as to optimize total return results.
F. Foreign Securities may be utilized as a means of further
diversifying the portfolio. Allocations to this sector will be
limited to 5% of the portfolio.
G. Prohibited Securities and Transactions
The following securities are not permissible investments:
Interest only securities, interest rate swaps and short sales.
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EXHIBIT A
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ASSET ALLOCATION & MANAGEMENT COMPANY
ANNUAL FEE SCHEDULE
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$25,000 on first $10 million market value, plus
$550 per million market value on assets $10 million to $100 million, plus
$750 per million flat fee on assets over $100 million.
Optional
$60 fee per SVO filing.
* Fees are exclusive of reasonable travel and lodging expenses for
client meetings. Expenses will be billed to and payable by the
client as incurred.
EXHIBIT B
