Amended and Restated Management Agreement
1996
THIS AMENDED AND RESTATED MANAGEMENT AGREEMENT, made and entered into as
of this first day of January, 1996 by and between Midwest Medical Insurance
Company (the "Company"), a Minnesota stock insurance corporation, and Midwest
Medical Insurance Holding Company (the "Company"), a Minnesota corporation.
WITNESSETH:
WHEREAS, by Management Agreement dated November 30, 1988, at the request
of the Company, the Manager has managed the business of the Company, provided
certain other management services and provided facilities for the conduct of
the Company's business; and
WHEREAS, the parties desire to continue such relationship, amend certain
provisions of the Management Agreement, and restate such agreement and its
various amendments by this Amended and Restated Management Agreement
("Management Agreement");
NOW, therefore, in consideration of the mutual promises set forth below, the
parties agree and contract as follows:
1. APPOINTMENT OF MANAGER
The Company hereby confirms the appointment of the Manager to be the
exclusive manager of the business of the Company, pursuant to the terms and
conditions of this Management Agreement.
2. GENERAL POWERS
The Manager agrees to perform or provide for the performance of the services
hereinafter specified for the management of the Company in an efficient
manner in strict accordance with the law, applicable requirements of
governmental and non governmental regulatory and supervisory authorities,
and generally accepted insurance, accounting, actuarial and business
practices consistent with the financial well-being and general welfare of
the Company and its insureds. The Manager agrees to procure and maintain
any and all licenses that may be necessary in connection with performance of
its duties under this Agreement, including, without limitation, insurance
brokers' and salesmen's license.
3. SERVICES
The Manager agrees to perform or provide for the performance of the
following services, unless otherwise stated, at its expense, on behalf of
the Company:
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(a) to provide general administration and management of the day-to-day
insurance business of the Company including, without limitation, the
production, underwriting and servicing of insurance and claims;
(b) to solicit, receive and accept or reject applications for insurance to
be issued by the Company and to investigate and pass upon the
desirability of the risks involved in the applications for insurance;
and in such connection to provide marketing and sales services, as
reasonably necessary;
(c) to provide advice and recommendations concerning the strategic
directions and business plans of the Company and to bring to its
attention for appropriate action opportunities for the pursuit of the
business plan of the Company, as it is approved and modified from time
to time;
(d) to underwrite, classify, rate and issue policies and binders of
insurance and reinsurance for the Company;
(e) to establish and maintain for, and as the property of, the Company
complete and accurate records of all insurance policies written by the
Company;
(f) to solicit, collect, receive, and account for all insurance premiums
paid, and to deposit all of said insurance premiums in a bank or banks
to the account of the Company as soon as practicable; to maintain said
premium accounts in accordance with applicable law;
(g) to invest or cause the investment of such funds in accordance with
legal requirements and the advice or instructions of any investment
advisor or advisors selected by the Company upon the recommendation of
the Manager and to monitor and supervise the performance of any such
investment advisor on behalf of the Company and its Board of Directors
and Investment Committee;
(h) to establish and maintain for, and as the property of, the Company all
financial and business records required by law and by sound and accepted
insurance and business practices; to prepare for the Company all reports
required by governmental and non governmental regulatory and supervisory
authorities, including insurance reports and income tax returns;
(i) to procure such reinsurance, automatic or facultative, required by
law and by sound and accepted insurance and business practices; to keep
the necessary records for, and as the property of, the Company in
connection with such reinsurance;
(j) to provide and equip appropriate and adequate offices for the business
of the Company; to furnish all equipment, stationery, forms, printing
and supplies for the conduct of functions required to be performed under
this Agreement by the Manager;
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(k) to provide and maintain an adequate claims service and facilities for
the handling of all claims against the Company and for the payment
thereof on behalf of the Company; to recover promptly for the Company
all reinsurance due on claims paid;
(l) to prepare mailings, advertisements, newsletters and other promotional
material for the Company;
(m) to make all required filings with the Commissioner of Commerce of the
State of Minnesota and any other governmental agencies and authorities
having jurisdiction over the Company including income taxing
authorities; and
(n) to do any and all other things reasonably necessary to carry out the
foregoing.
Operating costs, including all of its general and overhead expenses and
third party expenses and reimbursements, incurred by the Manager to provide
the services to the Company as described in this paragraph 3, shall be
allocated between Manager, the Company and other in accordance with
generally accepted cost accounting principles consistently applied and
reimbursed as provided in paragraph 5 ("Allocated Costs"). Such method of
allocation shall be reflected on a schedule which Manager shall maintain and
update, from time to time, as appropriate to reflect materially changed
circumstances. Certain third party fees and charges which are direct
obligations of the Company shall be paid by it in the first instance,
including but not limited to items in paragraph 7.
4. EXTRAORDINARY SERVICES
Manager agrees to provide such special, or extraordinary, services as may be
requested by Company from time to time and which are outside the scope of
the services described in paragraph 3, such as services in connection with
the acquisition of other companies or businesses. At the time such services
are provided the Company and Manager shall agree on the basis and amount of
additional consideration or reimbursement, including any incentive
compensation, as shall be payable with respect to any such extraordinary
services.
5. REIMBURSEMENT AND FEES
(a) In consideration of all services to be provided under Article 3, the
Company shall pay promptly upon receipt of invoice all Allocated Costs
plus 10% thereof as a service fee; provided, however, that the following
costs incurred by Manager on behalf of Company, included in Allocated
Costs, shall be paid without service fee:
i) All board of director and board committee fees and expenses of the
Boards of both the Manager and the Company.
ii) Directors and Officers liability insurance of the Company.
iii) Legal, audit, consulting and other third party expenses incurred
directly and specifically for the Company which shall not be
considered to be part of Allocated Costs.
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(b) The Company shall pay promptly upon receipt of invoice all costs, fees
and additional consideration as is agreed upon between the parties under
paragraph 4 with respect to Extraordinary Services.
Payment shall be made on the first business day of each month based on
Manager's estimate of amounts which will be payable to it hereunder with
respect to such month on a cash basis modified to include accruals out
of the ordinary and, with respect to December of each year, anticipated
year end accruals. Such monthly payments shall include a true-up or
adjustment factor to reflect actual results of the previous month and
annually, shall be trued-up and adjusted within 60 days after year's end
to reflect actual accrued expenses and obligations incurred during the
previous year.
Upon termination of this Agreement, such payments shall be trued-up and
adjusted within 60 days after the last day of the month in which such
termination occurred to reflect actual accrued expenses and obligations
hereunder through the date of termination.
6. FEDERAL INCOME TAXES
Federal income taxes incurred by either the Manager or the Company shall be
shared in accordance with the separate Tax Sharing Agreement between the
parties dated July 5, 1989 and are excluded from the Management Agreement.
7. DIRECT EXPENSES
It is agreed that certain expenses, to be agreed upon from time to time, but
to include the following, are direct expenses of the Company and shall be
paid directly by the Company:
(a) Agents commissions.
(b) Premium taxes.
(c) Guarantee fund assessments.
(d) Insurance Department licenses and fees.
(e) Donations approved by the Company's Board of Directors.
(f) Costs of legislative monitoring.
(g) Reinsurance commissions received by the Company from its reinsurance.
(h) Company membership dues and insurance federation dues.
(i) Endorsement and licensing fees.
8. RESPONSIBILITY
The Manager shall remain fully responsible for the proper performance of any
functions which it delegates to agents or independent contractors as
permitted elsewhere in this Agreement.
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The Manager assumes no responsibility hereunder other than to render the
services called for, in good faith, and shall not be responsible for any
actions of the Company, or its Board of Directors, in following or declining
to follow the advise or recommendations of the Manager.
9. NON-INTERFERENCE
Upon any termination of this Management Agreement, Manager agrees to turn
over to Company all of its property and records, and to cooperate with the
transition of the Company to other management services, provided that it
receive its reasonable costs incurred in providing such transitional
services, plus ten percent (10%).
In the event of any such termination, Company agrees not to solicit the
employment or services of employees of Manager, without its prior written
consent, nor retain such employment or service within one year of the
effective date of the termination of this Management Agreement.
10. TERM AND TERMINATION
(a) Upon execution, this Agreement shall be effective for an indefinite term
and shall continue unless terminated by either party at the end of any
calendar year by written notice to the other given at least 180 days
prior to the effective date of termination.
(b) Notwithstanding the provisions of paragraph 8(a), either party may
terminate this Agreement as hereinafter provided:
(1) Effective immediately upon written notice to the other party in the
event of fraud or dishonesty by the other party, provided that such
notice shall be given as soon as practicable after discovery of such
fraud or dishonesty.
(2) Effective immediately upon written notice to the other party upon
the final judicial determination of the insolvency or bankruptcy of
the other party provided that such notice shall be given as soon as
practicable after discovery of such fraud or dishonesty.
(3) Upon at least one full month's notice effective the last day of any
month because of the material breach by the other party of its
obligations under this Agreement, provided that such notice shall be
given as soon as practicable after discovery of such breach and that
the other party fails to remedy such breach within the notice period
provided.
(4) Upon at least one full month's notice effective the last day of any
month upon the merger of Company with another entity or upon the
change in controlling ownership of Company by Manager.
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(c) Upon termination of this Agreement the Manager shall deliver to the
Company or its successor in interest all property, records and information
of every kind concerning the affairs of the Company in the possession,
custody, or control of the Manager and the parties shall make all payments
required in paragraphs 4 and 5.
(d) After the effective date of termination of this Agreement for any
reason, the Company shall bear the cost of both allocated and unallocated
loss adjustment expense for all claims open at the date of termination or
reported after the date of termination and the Manager shall not be
responsible for any such expense after the date of termination.
(e) In the event that either party gives such notice of termination, the
Company shall have the right, during the period preceding the termination
date, to make any and all arrangements necessary or desirable in its
discretion to provide for personnel and facilities for the performance of
the services performed under this Agreement by the Manager, and the Manager
will cooperate with the Company toward the end that there will be an orderly
transfer of management service functions in respect of the Company's
business from the Manager to the Company or its designee.
11. DAMAGES FOR BREACH
No provision of this Agreement shall preclude either party from recovering
damages, if any, sustained by reason of any conduct in breach of the terms
hereof.
12. REGULATORY COMPLIANCE
The Manager agrees and acknowledges that it shall cooperate in all respects
with the relationship between the Company and the various governmental
agencies having jurisdiction over it and its activities and agrees to make
available to such agencies during normal business hours and upon reasonable
request any and all records maintained by it for the Company under this
Agreement.
13. ARBITRATION
(a) In the event any dispute or difference of opinion arises under or with
respect to this Agreement, the controversy shall be submitted to
arbitration. Each party shall select on arbitrator, and the two
arbitrators so selected shall select a third arbitrator before the entry
into arbitration. Each of the arbitrators shall be persons having no less
than five (5) years' experience in executive position with casualty
insurance companies transacting substantial business.
(b) The arbitrators may use their discretion in conducting the arbitration
proceedings and are relieved of all judicial formalities except that they
shall allow the parties an opportunity to be heard after reasonable
notice before reaching any decision.
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(c) Each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other the expense of the third arbitrator and of
the arbitration. Any such arbitration shall take place in the greater
Minneapolis-St. Xxxx area at a mutually acceptable location.
MIDWEST MEDICAL INSURANCE
HOLDING COMPANY
By /s/ Xxxxxx X.X. Xxxxx
-------------------------------------
Xxxxxx X.X. Xxxxx, M.D., Chairman
By /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx, President and CEO
MIDWEST MEDICAL INSURANCE
COMPANY
By /s/ Xxxxxx X.X. Xxxxx
-------------------------------------
Xxxxxx X.X. Xxxxx, M.D., Chairman
By /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx, President and CEO
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