Exhibit 10.15
MANAGEMENT AGREEMENT
--------------------
This Agreement is entered into by and between Mercury Indemnity
Company of Illinois, hereinafter referred to as Insurer, and Mercury General
Corporation, hereinafter referred to as Manager.
In consideration of the promises, conditions and covenants herein
contained, the parties agree as follows:
SECTION I
EFFECTIVE DATE
--------------
This Agreement shall become effective on January 1, 1995 subject to
the conditions set forth in Section II.
SECTION II
CONDITIONS OF EFFECTIVENESS
---------------------------
The Agreement or any amendment thereto shall become effective only if:
A. The Illinois Department of Insurance, if required, shall have
approved of and/or acknowledged in writing this Agreement or any
amendment thereto; and
B. The boards of directors of the Manager and the Insurer shall have
approved this Agreement by a majority vote.
SECTION III
SERVICES AND FACILITIES
-----------------------
A. Commencing on the Effective Date and until the termination of this
Agreement, Manager shall provide the services and facilities as are
described hereunder to the Insurer. Such services and facilities as
are provided hereunder shall be subject to the control and approval of
the board of directors of the Insurer, and shall be performed in the
manner and for the consideration set forth herein by manager, and such
services shall be performed in accordance with applicable laws and
regulations in all of the jurisdictions in which the Insurer conducts
business. It is recognized that the Insurer may be governed by laws
and regulations which are particularly applicable to its business and
thus Manager, by virtue of this Agreement, recognizes its
responsibility to perform in accordance with any such laws or
regulations including, but not limited to, compliance with any order
or orders issued by any governmental agency affecting the Insurer; and
Manager hereby acknowledges that in such case it will immediately
conform to same in the performance of its services as hereinafter set
forth. The board of directors of the Insurer shall retain
responsibility for the performance of services provided pursuant to
this Agreement by Manager and, in connection therewith, shall require
Manager to perform in accordance with the standards of performance set
forth herein.
B. The Manager promises to manage the Insurer, and to conduct on its
behalf any and all duties of management as shall be necessary for the
complete operation of the Insurer.
C. The Insurer hereby delegates to the Manager all of the duties of
management which it is allowed to so delegate by the laws of the State
of Illinois, including but not limited to the following duties: to
issue
1
and underwrite insurance policies, which the Insurer may be so
authorized to do by law, in accordance with the rules and regulations
as delineated in the underwriting manuals of the Insurer, settle and
adjust any and all losses and claims, defend lawsuits, establish
premium rates, establish and choose sales agents and brokers,
determine agents' and brokers' commissions, prepare the records
necessary for the conduct of the insurance business, furnish all
forms, supplies and agents' manuals necessary for the conduct of the
insurance business.
D. The Manager promises to perform all of the operating functions on
behalf of Insurer, including but not be limited to the following:
1. To acquire, license and appoint sales agents and brokers for the
production of the insurance business of and for the Insurer,
provided that the Insurer shall retain the right to refuse the
appointment of any agent or broker and the right to terminate any
agent or broker.
2. To issue and underwrite policies on behalf of the Insurer and to
choose and obtain the necessary applications and policy forms.
3. To furnish for the Insurer all of the operating forms, printing
supplies, agents' manuals and any other related items which may
become necessary for the operation of the insurance business.
4. To provide all personnel reasonably required by the Insurer and
to fill all such positions in the Insurer with the advice and
consent of the board of directors of the Insurer, all of which
personnel shall be compensated exclusively by the Manager.
5. To provide all facilities necessary for the conduct of the
Insurer's business, including but not limited to real estate,
office space and personal property, including furniture, fixtures
and equipment. The office space, furniture, fixtures and equipment
utilized by the Insurer in the conduct of its business may be owned
or leased by the Manager or the Insurer.
6. To pay on behalf of the Insurer all of its operating expenses,
including but not limited to rent, supplies, salaries of all
personnel, telephone, advertising costs, costs of settling and
adjusting all insurance claims, legal defense costs, court costs,
costs of loss analysis, accounting costs (other than auditing), and
premium collection costs; provided, however, that the Insurer shall
pay, and be responsible for, the costs of management fees, premium
taxes, losses, reserves for unpaid losses, reserves for unpaid loss
adjustment expense, audit fees, assigned risk or similar
assessments, bureau fees, Fair Plan or similar assessments,
directors' fees, agents' commissions, reinsurance premiums, outside
investment counsel fees, assessments by the Illinois Insurance
Guaranty Fund or similar state guaranty funds, membership fees in
trade associations, any assessments by such associations, political
contributions (to the extent not prohibited by applicable law),
premiums paid for insurance policies in which the Insurer is the
beneficiary and owner, such as fidelity bonds, taxes of all types
and costs which may be levied on insurance companies by the
governmental authorities having jurisdiction over the same, and
agents' bonuses (contingency commissions).
E. This Agreement is not intended to supersede or replace the policy
making decisions of or the supervisory responsibilities of the board of
directors of the Insurer. Nor is it intended that substantial control of
the Insurer or of any of the powers vested in the board of directors
thereof are to be transferred to the Manager as a result of this Agreement.
Said board of directors, a committee thereof or agents appointed by said
board of directors, shall have the right, at all times, to cause the books
and records of the Manager to be inspected and/or audited as they relate to
the business of the Insurer.
2
SECTION IV
INVESTMENT ADVISORY SERVICES
----------------------------
The Manager agrees to act as investment advisor to the Insurer with respect
to the investment of the Insurer's assets, and, in general, to supervise the
investment and reinvestment of cash, securities or other property comprising the
assets of the Insurer, subject at all times to the direction and control of the
board of directors (or responsible committee thereof) of the Insurer, all as
more fully set forth herein.
In connection with the Manager's performance of investment advisory
services for the Insurer, the following provisions shall apply:
A. The Insurer shall at all times maintain a custodian (referred to
hereinafter as the "Custodian") for its securities and appropriate bank or
custodial accounts for the purpose of handling cash involved in the
insurer's investment transactions.
B. The Manager shall obtain and evaluate pertinent information about
significant economic developments and gather statistical and financial data
affecting the investments of the Insurer and such investments which the
Manager considers may be suitable for inclusion in the Insurer's investment
portfolio.
C. At mutually agreeable intervals, the Manager shall furnish reports to
the Investment Committee of the Insurer setting forth (i) a list of the
Insurer's securities, showing the cost, market value, maturity date and
other pertinent information regarding each such security, (ii) a summary of
the investment transactions effected on behalf of the Insurer since the
closing date of the preceding report, and (iii) the Manager's
recommendations as to what securities should be acquired or sold in light
of prevailing economic and securities market conditions.
D. After reviewing the Manager's periodic investment reports, the
Investment Committee of the Insurer will advise the Manager which of the
Manager's investment recommendations it has accepted or rejected. If the
Manager is notified in writing of the Insurer's acceptance of the Manager's
recommendations, such notification shall constitute authorization to the
Manager to effect the recommended investment transactions.
E. All investment transactions authorized by the Insurer's Investment
Committee shall be carried out by the Manager through the Custodian, but
the Manager may designate a broker or brokers to carry out said
transactions. All instructions or directions of the Manager to the
Custodian shall, unless otherwise agreed to by the Manager and the
Custodian, be made in writing, or orally and confirmed in writing as soon
as practicable thereafter, and the Manager shall instruct all brokers,
dealers or other persons executing investment orders to forward to the
Custodian copies of all brokerage or dealer confirmations promptly after
execution of all transactions.
F. The Manager is authorized to enter into an agreement with the Custodian
to use the Depository Trust Company's Institutional Delivery System for
trade confirmation and settlements.
G. The Insurer shall notify its Custodian of the appointment of the
Manager as investment advisor by delivering a copy of this Agreement to its
Custodian.
H. It is understood and agreed that the Manager's services in recommending
investments shall be advisory only, and shall not in any way be deemed a
delegation by the Insurer or its board of directors of their fiduciary
powers, discretion or judgment in the selection, retention or disposition
of any investments.
3
I. The investment advisory services provided by the Manager under this
Section, and all actions taken hereunder by it, shall at all times conform
to the requirements imposed by the insurance laws and regulations of the
State of Illinois.
SECTION V
COMPENSATION
------------
In consideration of the services to be provided by the Manager under this
Agreement, the Insurer agrees to pay the Manager compensation in the amount and
manner set forth below:
A. Manager shall be reimbursed monthly for all expenses incurred on behalf
of the Insurer in providing personnel, facilities and services contemplated
by this Agreement.
B. In addition to the reimbursement of its expenses as provided in
Paragraph A above, the Manager shall also receive for its services
hereunder a management fee from the Insurer in an amount equal to one
percent (1%) of the gross premiums written by the Insurer. Such fee shall
be payable quarterly within 45 days of the end after each calendar quarter.
SECTION VI
OWNERSHIP OF RECORDS
--------------------
The ownership and legal title to the insurance policies, insurance policy
records, data processing tapes, disks, programs and documentation, and account
records of the Insurer, compiled on behalf of the Insurer by the Manager, shall
remain in and with the Insurer. However, the Manager shall have joint custody
with the Insurer of said records.
SECTION VII
TERM OF AGREEMENT
-----------------
A. This Agreement shall be continuous from the Effective Date hereof to
and including December 31, 1999; provided, however, that this Agreement may
be terminated earlier by either party upon 120 days prior written notice.
B. The Insurer may terminate its participation under this Agreement
immediately in the event that:
(1) The Manager shall have defaulted in the performance of any
obligation under this Agreement and shall have failed to remedy
such default within 30 days of receipt of written notice thereof
from the Insurer asserting such default as grounds for
termination of this Agreement; or
(2) The Manager is dissolved or determined insolvent.
C. The Manager may terminate its obligations to the Insurer under this
Agreement immediately in the event that:
(1) The Insurer shall have defaulted in the performance of any
obligation under this Agreement and shall have failed to remedy
such default within 30 days of receipt of written notice thereof
from the Manager asserting such default as grounds for
termination of this Agreement; or
4
(2) The Insurer is dissolved or determined insolvent.
IN WITNESS WHEREOF, we have set our hands and seals this third day of
January, 1995.
MERCURY INDEMNITY COMPANY MERCURY GENERAL CORPORATION
OF ILLINOIS
- - --------------------------------- ----------------------------------
By: George Joseph, President By: George Joseph, President
- - --------------------------------- ----------------------------------
By: Judy Walters, Secretary By: Judy Walters, Secretary
5