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AMENDED AND RESTATED
EXPENSE SHARING AGREEMENT
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This Amended and Restated Expense Sharing Agreement, made effective as of
February 14, 1996, by and among Farm Family Mutual Insurance Company ("FFMIC"),
Farm Family Life Insurance Company ("FFLIC"), and Farm Family Holdings, Inc.
("FFH").
WHEREAS, FFMIC and FFLIC entered into an Expense Sharing Agreement,
effective as of January 1, 1996 (the "Agreement"), providing for the sharing of
certain expenses between the parties and defining the methods to be used for
allocating such expenses; and
WHEREAS, FFMIC and FFLIC wish to amend and restate the Agreement, for the
purpose of making FFH a party; and
WHEREAS, FFH wishes to become a party to the Agreement, as amended and
restated, for the purpose of sharing certain expenses with FFMIC and FFLIC using
the methodology described therein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and intending to be legally bound hereby, FFMIC,
FFLIC and FFH agree that the text of the Agreement is hereby amended and
restated, effective February 14, 1996, to read in full as follows:
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1. Methods of Allocation. Subject to New York Insurance Law and
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Regulations, the methods for allocating expenses shared pursuant to this
Agreement shall be those used by the parties for internal cost distribution
including, where appropriate, time records prepared at least annually for this
purpose.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
(a) Weighted Time Method. Weighted Time Method means the method of
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allocation based on a series of ratios derived from weighted time studies
conducted from time to time for the purpose of quantifying the efforts of
directors, officers and employees as applied to each party.
(b) Written Premium Method. Written Premium Method means the method
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of allocation based on the ratio of (i) the annual amount of direct written
premium written by each individual party to this Agreement as reported in the
statements filed with the New York Insurance Department to (ii) the annual
amount of direct written premium written by all parties to this Agreement in the
aggregate as reported in the statements filed with the New York Insurance
Department. Such direct written premiums for clauses (i) and (ii) shall be
calculated as gross premiums less return premiums.
(c) Actual Usage. Actual Usage means the estimated actual hours (or
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fractions thereof) of use benefiting a party.
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2. Direct Expenses. All expenses for goods, services or facilities that
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are incurred for the sole benefit of any party shall be charged to the party for
whose benefit such expenses were incurred at cost.
3. Shared Expenses. If any party incurs an expense for goods, services,
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or facilities that benefits the other parties to this Agreement, then that
expense shall be shared among the parties on a reasonable and equitable basis.
Unless otherwise agreed to by the parties hereto the following basis of
allocation shall be used:
(a) Salaries. Salaries and expenses related to officers and employees,
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including but not limited to employee benefits and payroll taxes, shall be
allocated pro rata among the parties according to the Weighted Time Method.
(b) Directors' Expenses. Directors' expenses shall be allocated pro
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rata among the parties according to the Weighted Time Method.
(c) Office Space. (i) Home office costs will be shared between FFMIC
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and FFLIC pursuant to a presently existing lease between these companies, dated
July 1, 1988, as amended. FFH agrees to reimburse FFMIC for its share of Home
Office costs according to the Weighted Time Method. (ii) The costs for all other
joint office space shall be allocated among the parties according to the
Weighted Time Method.
(d) Fixed Assets. Where fixed assets, including but not limited to
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office equipment, furniture, computer equipment and motor vehicles, are held in
the name of one party and used jointly by the parties, the annual depreciation
or costs of such assets shall be allocated pro rata among the parties according
to the Weighted Time Method.
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(e) General Expenses. (i) General expenses, including but not
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limited to postage, telephone, equipment rental, books and subscriptions, shall
be allocated pro rata among the parties according to the Weighted Time Method.
(ii) The costs associated with conferences and meetings shall be allocated pro
rata among the parties according to the Written Premium Method. (iii) The costs
of electronic data processing services shall be allocated pro rata among the
parties according to Actual Usage.
(f) Advertising. Advertising expenses shall be allocated pro rata
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among the parties according to the Written Premium Method.
(g) Other Shared Expenses. All other shared expenses, if any, shall
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be allocated among the parties in accordance with the applicable New York
Insurance Law and Regulations, as the same may be amended from time to time.
4. Modification of Allocations. The methods and bases used to allocate
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the expenses shared pursuant to this Agreement shall be reviewed, at least
annually, and modified and adjusted by the mutual agreement of the parties
hereto where necessary or appropriate to reflect fairly and equitably the actual
incidence of cost incurred by the parties.
To the extent that any allocation methodology set forth herein is
determined to be contrary to, or in violation of, an existing New York Insurance
Law or Regulation, the parties agree that this Agreement shall be automatically
conformed to comply with said Law or Regulation.
5. Payment. The amounts due hereunder shall be determined at the end of
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each month using the same accounting principles and practices used for filing
quarterly and
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annual statements with the New York Insurance Department. All charges under this
Agreement shall be paid within fifteen (15) days following the end of each
month.
6. Termination and Modification. This Agreement or any part thereof shall
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remain in effect until terminated in whole or in part by mutual consent or by
any party upon giving at least 60 days advance written notice.
This Agreement may be amended only by mutual consent in writing signed by
the parties.
7. Settlement on Termination. No later than thirty (30) days after the
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effective date of termination of this Agreement, each party shall deliver to the
other parties a detailed written statement of all charges incurred and not
included in any statement prior to the effective date of termination. The
amount owed hereunder shall be due and payable within thirty (30) days of
receipt of such statement.
8. Assignment. This Agreement and any rights pursuant hereto shall not be
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assignable by any party hereto, except by operation of law. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto, or their respective legal successors, any rights, remedies,
obligations or liabilities, or to relieve any person other than the parties
hereto, or their respective legal successors, from any obligations or
liabilities that would otherwise be applicable.
9. Governing Law. This Agreement is made pursuant to and shall be
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governed by, interpreted under, and the rights of the parties determined in
accordance with the laws of the State of New York.
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10. Notice. All notices, statements or requests provided for hereunder
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shall be in writing and shall be deemed to have been duly given when delivered
by hand to an officer of the other party, or when deposited with the U.S. Postal
Service, as certified or registered mail, postage prepaid, addressed:
(a) If to FFMIC to:
Farm Family Mutual Insurance Company
PO. Box 656
Albany, New York 12201
Attn: Corporate Secretary
(b) If to FFLIC to:
Farm Family Life Insurance Company
PO. Box 656
Albany, New York 12201
Attn: Corporate Secretary
(c) If to FFH to:
Farm Family Holdings, Inc.
P.O. Box 656
Albany, New York 12201
Attn: Corporate Secretary
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or to such person or place as each party may from time to time designate by
written notice sent as aforesaid.
11. Headings. The headings of the various paragraphs of this Agreement
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are for convenience only, and shall be accorded no weight in the construction of
this Agreement.
12. Entire Agreement. This Agreement, together with such Amendments as
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may from time to time be executed in writing by the parties, constitutes the
entire Agreement among the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers as of the date and year first above
written.
FARM FAMILY MUTUAL INSURANCE COMPANY
BY: /s/ Charles E. Simon
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Charles E. Simon
Senior Vice President and Chief Financial Officer
FARM FAMILY LIFE INSURANCE COMPANY
BY: /s/ Philip P. Weber
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Philip P. Weber
Executive Vice President and Chief Executive Officer
FARM FAMILY HOLDINGS, INC.
BY: /s/ Philip P. Weber
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Philip P. Weber
President and Chief Executive Officer