EXHIBIT 10.5
MANAGEMENT AGREEMENT
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This Management Agreement (the "Agreement") is entered into this 2nd day
of June, 1997 by and between Universal Property & Casualty Insurance Company, a
Florida insurance corporation ("UPCIC"), and Universal P&C Management, Inc., a
New York corporation ("Universal Management").
WHEREAS, UPCIC desires Universal Management to provide underwriting,
administrative and certain other services described in this Agreement to UPCIC
(the "Services"):
WHEREAS, Universal Management desires to provide the Services to UPCIC;
and
WHEREAS, UPCIC and Universal Management desires to enter into this
Agreement to control their relationship with regard to their respective rights,
obligations and benefits.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
I. RELATIONSHIP OF THE PARTIES
A. APPOINTMENT OF UNIVERSAL MANAGEMENT. UPCIC hereby appoints Universal
Management to perform the Services provided for in this Agreement.
Universal Management hereby accepts said appointment.
B. MANAGEMENT CONTROL OF UPCIC. The parties acknowledge that Universal
Management shall be an independent contractor in the performance of its
duties and responsibilities under this Agreement, and that no employee of
Universal Management shall be regarded as an employee of UPCIC as a result
of this Agreement, except in the circumstance of UPCIC specifically
employing a Universal Management employee.
C. STATUS OF UNIVERSAL MANAGEMENT. The parties acknowledge that Universal
Management shall be an independent contractor in the performance of its
duties and responsibilities under this Agreement, and that no employee of
Universal Management shall be regarded as an employee of UPCIC as a result
of this Agreement, except in the circumstance of UPCIC specifically
employing a Universal Management employee.
D. EMPLOYMENT OF UNIVERSAL MANAGEMENT EMPLOYEES. Universal Management
shall make available to, and UPCIC shall employ: (i) ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇▇ as UPCIC's Chairman and Chief Operating Officer; (ii) ▇▇▇▇▇▇
▇▇▇▇▇▇ as UPCIC's Director of Finances; (iii) ▇▇▇▇▇ ▇▇▇▇▇ as UPCIC's
Director of Underwriting; and (iv) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as UPCIC's Director
of Claims.
II. UNDERWRITING SERVICES
Universal Management shall have the following authority and shall perform
the following underwriting Services for UPCIC.
A. MARKETING SERVICES. Universal Management shall underwrite applications
from potential insureds for prospective business. Universal Management
shall not request UPCIC to appoint any producer without determining that
the producer is lawfully licensed to transact the type of insurance for
which the producer is appointed. Universal Management shall not appoint
any managing general agent or sub-managing general agent and shall not
permit any sub-producers to serve on its board of directors as to new
business after assumption of risks by UPCIC transferred from the Florida
Residential Property and Casualty Joint Underwriting Association.
B. UNDERWRITING AND POLICY ISSUANCE.
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1. UPCIC and Universal Management shall mutually agree on the
underwriting standards and guidelines for the property and casualty
business to be written by UPCIC ("Underwriting Guidelines"), and
which, at a minimum, shall:
a. specify the basis of the rates to be charged;
b. specify the types of risks which may be written;
c. provide for maximum limits of liability;
d. specify applicable exclusions;
e. specify territorial limitations;
f. specify policy cancellation provisions; and
g. specify the maximum policy period.
2. Consistent with the Underwriting Guidelines and within the
limits on writings provided therein, Universal Management shall
receive applications, select risks and underwrite and issue all
policies, contracts, binders, endorsements and other insuring
documents.
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C. POLICY FORMS AND FORM FILINGS. Consistent with the Underwriting
Guidelines, Universal Management shall develop policy and application
forms and related insurance contract wordings subject to UPCIC's written
approval and shall prepare and print all such forms.
D. RATES. Consistent with the Underwriting Guidelines, Universal
Management shall establish premium rates subject to UPCIC's prior
written approval.
E. POLICY CANCELLATION AND NON-RENEWAL. UPCIC shall have the right to
cancel or non-renew any insurance policies, contracts and endorsements in
accordance with their terms and applicable laws and regulations. Subject
to UPCIC's written Underwriting Guidelines, Universal Management may
cancel and non-renew any insurance policies, contracts and endorsements in
accordance with their terms and applicable laws and regulations.
III. ADMINISTRATIVE SERVICES
Universal Management shall have the following authority and shall perform
the following administrative Services.
A. PREMIUM COLLECTIONS AND REFUNDS. Universal Management shall perform the
following Services with respect to amounts due from policyholders.
1. Collect premiums or other amounts due from policyholders and
from any collection facility, including agents and other persons or
institutions that receive premiums. Universal Management shall
deposit all such premiums collected in a premium trust account in
the name of UPCIC, who shall control the account.
2. Immediately deposit funds collected or received by Universal
Management, in a premium trust account established by and in the
name of UPCIC with a federally or state chartered bank that is a
member of the Federal Reserve System (the "Account"). Commingling of
any funds deposited in the Account with any other funds of Universal
Management is prohibited.
3. Maintain records clearly recording the deposits in the Account
and, upon the request of UPCIC, shall furnish UPCIC with copies of
such records.
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B. CLAIMS-RELATED SERVICES. As requested by UPCIC from time to time,
Universal Management shall communicate UPCIC's instructions regarding
claims matters to any claims adjusters appointed by UPCIC to administer
claims. UPCIC and Universal Management acknowledge that Universal
Management shall have no authority to adjust, compromise, settle or pay
claims or losses arising under any UPCIC insurance policies.
C. CORRESPONDENCE WITH POLICYHOLDERS AND PRODUCERS. Universal Management,
in the name of UPCIC shall conduct all correspondence with policyholders
and shall expeditiously handle all requests by policyholders, including,
but not limited to, requests for information, and shall keep all records
necessary or proper in connection therewith.
D. STAFF. Universal Management shall provide sufficient personnel
with the appropriate experience, expertise, capability and skill
necessary to perform the Services contemplated by this Agreement.
E. OFFICE FACILITIES. Universal Management shall provide all
facilities and equipment as needed for its operations and the
performance of its responsibilities under this Agreement.
F. DATA PROCESSING. Universal Management shall maintain data
processing facilities as needed for its operations and the performance
of its responsibilities under this Agreement.
G. BOOKS AND RECORDS.
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1. Universal Management shall separately maintain complete and
orderly files, books, records and accounts of all transactions
involving the Services that are in a form usable by UPCIC and in
accordance with generally accepted insurance and accounting
practices and applicable insurance laws and regulations. At a
minimum, such files, books, records and accounts shall
a. Show all policies issued, all premiums written,
collected, earned and unearned, all acquisition costs, all
return premiums paid and owing, all expenses paid and owing;
all charges, fees and expenses owed by, received by, or owing
to Universal Management and the data necessary to support all
such charges, fees and expenses; and
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b. Include the relevant statistical information required in
any statement to be furnished to any regulatory authority.
Universal Management may maintain electronic files as long as it
maintains the capacity to deliver copies of such files to UPCIC in a
format suitable for UPCIC's use and in a timely fashion in
accordance with the terms of this Agreement.
2. All files, books, records and accounts maintained by Universal
Management relating to the insurance business administered pursuant
to this Agreement shall be the sole property of UPCIC.
3. UPCIC shall have the right at all times during regular
business hours to inspect all files, books, records and accounts
wherever located that pertain to the Services and shall have the
right to have furnished to it upon demand a copy of any such files,
books, records and accounts. In the event that UPCIC shall take sole
possession of any files, books, records and accounts relating to the
Services, Universal Management shall have the right to inspect and
copy such files, books, records and accounts. Insurance regulatory
authorities shall have access to all books and records of Universal
Management relating to the Services in a usable form, and all bank
accounts established in the name of UPCIC.
H. REPORTS.
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Within forty-five (45) days after the close of each calendar
month ("Month"), Universal Management shall render to UPCIC reports
of all transactions for said Month with respect to the Services in
formats acceptable to UPCIC. The reports shall include, but not
necessarily be limited to, an accounting of all premiums written,
collected, earned and unearned, all commissions payable thereon, all
return premium paid and owing, all expenses reported, paid or owing,
and such other data in such form as mutually agreed upon.
I. RESERVES. Universal Management shall determine for UPCIC
unearned premium and all other reserves as may be requested by
UPCIC from time to time.
J. COOPERATION. The parties shall provide each other with all such
information as they may each reasonably request in order to
fulfill the mandates of this Agreement.
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K. FINANCIAL ACCOUNTING AND REPORTING. Universal Management shall
provide the customary and necessary accounting services for UPCIC
and prepare all required regulatory, financial and accounting
reports. The parties shall cooperate with the actuary and
independent certified public accountant in the preparation of all
Federal, State and other governmental tax and other returns and all
regulatory and other statements as may be required to maintain the
parties in good standing or to effect their compliance with all
statutes and regulations governing their corporate existence and the
conduct of their business.
L. OTHER SERVICES. Universal Management shall perform such other duties
and services as are customary in the administration of insurance
business not specifically described in this Agreement but which are
incidental to the performance of the terms of this Agreement.
Notwithstanding the foregoing, Universal Management shall not
provide any services in connection with the negotiating, binding,
ceding or assuming, purchasing or selling of reinsurance or
retrocession coverage, either treaty or facultative, on behalf of
UPCIC.
M. UNIVERSAL MANAGEMENT'S MAINTENANCE OF INSURANCE AND BOND. During the
term of this Agreement, Universal Management shall maintain in force
for the benefit of UPCIC (i) errors and omissions insurance with
limits in the amount of at least $500,000 and (ii) a fidelity bond
in an amount equal to $250,000 or 10% of the gross direct written
premium produced by Universal Management, whichever is greater,
except that such bond shall be no more than $500,000. Universal
Management shall promptly provide evidence of such insurance to
UPCIC on or before each anniversary of the inception of this
Agreement.
IV. UNIVERSAL MANAGEMENT'S COMPENSATION AND EXPENSES
UPCIC agrees to pay Universal Management, and Universal Management agrees
to accept as full compensation for the Services provided hereunder, the fees set
forth in the Schedule of Fees which is attached to and made a part of this
Agreement.
V. MISCELLANEOUS
A. EFFECTIVE DATE. This Agreement shall become effective as of the
date that the Florida Insurance Department issues to UPCIC a
certificate of authority to transact the business of insurance in the
State of Florida.
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B. TERM AND TERMINATION. The term of this Agreement shall be for a period
of three (3) years and thereafter may be renewed for successive two (2)
year terms unless (i) either party shall give prior written notice of
non-renewal to the other party not later than sixty (60) days prior to the
expiration of any term hereof, or (ii) terminated in accordance with this
Section V(B). This Agreement may be terminated only as follows: (i) by
mutual written consent of UPCIC and Universal Management; (ii) by either
UPCIC or Universal Management in the event of material breach of this
Agreement by the other party and such breach is not cured within thirty
(30) days following the breaching party's receipt of written notice of the
breach from the non-breaching party; or (iii) by either UPCIC or Universal
Management immediately for cause in the event of the other party's willful
misconduct or gross negligence.
C. EXPIRATIONS. As between UPCIC and Universal Management, UPCIC shall
retain ownership of the expirations of the insurance business administered
pursuant to this Agreement upon termination of this Agreement.
D. REGULATORY COMPLIANCE. Each of UPCIC and Universal Management shall
be responsible for complying with all regulatory requirements applicable
to it for the lawful performance of its respective obligations under this
Agreement.
E. ASSIGNMENT; BINDING AGREEMENT. This Agreement may not be assigned in
whole or in part without the prior written consent of UPCIC and Universal
Management. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective successors, heirs
and permitted assigns.
F. SEVERABILITY. If any of the provisions of this Agreement shall be
determined to be contrary to law or unenforceable by any court of
competent jurisdiction, the remaining provisions shall, wherever possible,
be severable and shall remain enforceable in accordance with their terms.
G. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument, which shall be
deemed to have been fully executed in the state of Florida, without regard
to the actual price of execution.
H. HEADINGS. The articles and section headings contained in this
Agreement are inserted for the convenience of the parties only and shall
not affect in any way the meaning or interpretation of this Agreement.
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I. GOVERNING LAWS. This Agreement, and any amendments hereto, shall be
construed, interpreted according to and enforceable under and pursuant to
the laws of the State of Florida, without regard to any conflict of laws
principles.
J. JURISDICTION. Any action at law or equity, arising out of and
relating to the interpretation or the implementation of this Agreement
shall only be brought in the courts, either State or Federal located in
Dade County, State of Florida, to which courts the parties hereto submit
their personal jurisdiction.
K. WAIVER AND FURTHER DOCUMENTATION. No failure to enforce any
provision hereof shall operate as a waiver of or estoppel with respect to
such provision or any other provisions hereof. No waiver shall act as a
continuing waiver except to the extent specifically stated in writing by
the waiving party. Each of the parties hereto agrees to execute all such
further instruments and documents and to take all such further action as
the other parties may reasonably require in order to effectuate the terms
and purposes of this Agreement.
L. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and deemed to have been duly given if hand
delivered, faxed or mailed certified first class mail, return receipt
requested, postage prepaid. Notice shall be deemed effective on the date
of such hand delivery or fax and three (3) days after (not including
Sundays and federal holidays) the date of mailing such certified mail. All
notices shall be addressed as follows:
If to UPCIC:
Universal Property & Casualty Insurance Company
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
If to Universal Management:
Universal P&C Management, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, President
Any party may change the address to which notices are to be addressed by
giving the other parties notice in the manner herein set forth.
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M. AMENDMENT AND MODIFICATION. This Agreement may be amended and
modified only in writing signed by each party hereto.
N. ENTIRE AGREEMENT. This Agreement and all exhibits attached
hereto constitute the entire agreement and understanding of the parties
on the subject hereof, and supersede all prior agreements and
understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the day and year first above written.
UNIVERSAL PROPERTY & CASUALTY
INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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UNIVERSAL P&C MANAGEMENT, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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SCHEDULE OF FEES
16% of UPCIC's gross direct written premium.
ADDENDUM
This addendum dated June 12, 1997, by and between Universal Property
& Casualty Insurance Company ("UPCIC") on the one hand, and Universal P&C
Management Inc. ("Universal Management") on the other hand, amends and modifies
the management agreement ("Agreement") executed June 2, 1997 by and between
UPCIC and Universal Management only in respect of Article IV of the Agreement as
this article relates to the "Schedule of Fees" attached to the Agreement and
made a part thereof.
The "Schedule of Fees" attached to the Agreement is modified and
amended as follows:
Universal Management fees shall be the lesser of (i) sixteen (16%)
percent PER ANNUM of the annual gross direct written premium collected by UPCIC,
OR (ii) a cost plus profit payment (the "CPP") as determined by the formula set
forth below.
The annual CPP for Universal Management shall be determined by the
following formula comprised of costs incurred by, and profit to Universal
Management:
(a) (i) the actual salary and benefits cost of American
European Group's and/or any of its subsidiaries or related company's
(collectively the "AEG Group") personnel and staff (as determined
and paid by the AEG Group for their own business) that provide
services to UPCIC, on a PRO RATA basis for their allocable time
utilization by Universal Management for UPCIC services, and (ii) the
actual salary and benefits cost to Universal Management for any
non-AEG Group personnel and staff required to be hired by Universal
Management to provide services to UPCIC, and
(b) (i) the PRO RATA cost of any of the AEG Group facilities,
equipment, computers and related software, allocable for the time they are
utilized by Universal Management in their provision of services to UPCIC,
and (ii) the actual cost of any non-AEG Group facilities, equipment,
computers and related software acquired, rented or leased by Universal
Management in its provision of services to UPCIC.
Upon computing the total of the actual costs incurred by Universal
Management for the payment period due, in accordance with the above stated
and defined costs at Paragraphs (a) and (b), thus yielding the actual
costs for the payment period due (the "Payment Period Costs"), a ten (10%)
percent per ANNUM profit percentage (the "Profit %") shall be computed for
the payment period due, by multiplying the Profit % to Payment Period
Costs, thus yielding the profit payment for the payment period due (the
"Profit Period Payment"). The CPP payment calculation for the payment
period due, shall thus be the total of the Payment Period Costs and the
Profit Period Payment.
All expenses and disbursements to third-parties shall be reimbursable in
addition to the CPP.
UPCIC shall be entitled to review and obtain substantiation from Universal
Management and the AEG Group, prior to its payment, which substantiation
shall show (i) detailed cost breakdowns for all (a) AEG Group staff and
personnel providing services to UPCIC, (b) non AEG Group staff and
personnel hired by Universal Management to provide services to UPCIC, (c)
AEG Group facilities, equipment, computers and software utilized to
provide services to UPCIC and (d) non-AEG Group facilities, equipment
computers and software utilized to provide services to UPCIC and (ii) time
records for the (x) staff and personnel, and (y) facilities, equipment,
computers and software, utilized by Universal Management to provide
services to UPCIC.
The annual Fee shall be invoiced and paid quarterly for the first ninety
(90) days of the Agreement, and then monthly for the balance of the term
of the Agreement, and any renewals of the Agreement ("Payment Periods").
The payments shall be made within the twenty-five (25) days of the receipt
of any invoice relating to the close of each Payment Period, together with
supporting calculations, and data if requested. The Fee for the first
quarters payment, and then each Payment Period thereafter shall be
computed both (i) in the flat amount of sixteen (16%) percent for the
gross written premium collected in that Payment Period, AND (ii) pursuant
to the CPP formula for the Payment Period.
The sixteen (16%) percent flat calculation and the CPP calculations shall
both be made by Universal Management for each payment period due, and
provided to UPCIC with each invoice sent for payment, for each payment
period. UPCIC shall have the right to make payment of any invoice, in the
lesser amount of the two calculations for the Payment Period then due, in
its sole discretion.
Universal Management undertakes the responsibility and warrants to
UPCIC ("Warranty"), that it will itself produce to UPCIC, or cause the AEG Group
to produce directly to UPCIC, in a timely manner upon request of UPCIC, any and
all auditable information, data and statistics required by UPCIC, to enable
UPCIC to establish the cost basis to the AEG Group, of the cost components set
forth in (a) and (b) in the above CPP formula. This Warranty shall be considered
an honorable undertaking, in addition to being a covenant of the agreement
between the parties, to enable UPCIC to select which method of payment would
yield the lesser payment to Universal Management for any of the payment periods,
I.E., the lesser of the flat sixteen (16%) percent payment, or the CPP payment.
The selection of either payment calculation for any payment period shall not
bind UPCIC to that payment calculation for any subsequent payment period.
In all other respects the Agreement remains the same, as if this
addendum had not made.
In WITNESS WHEREOF, the parties have signed this addendum as of the
date first written above.
UNIVERSAL PROPERTY & CASUALTY INSURANCE COMPANY
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
UNIVERSAL P & C MANAGEMENT, INC.
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, President
