Exhibit 10(NN)
Management Services Agreement
As of July 1, 2002
By and Among
State Auto Property and Casualty Insurance Company
Meridian Insurance Group, Inc.
Meridian Security Insurance Company
Meridian Citizens Mutual Insurance Company and
Meridian Citizens Security Insurance Company
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT, made as of this 1st day of JULY 2002, by and among State Auto
Property and Casualty Insurance Company ("State Auto P&C"), Meridian Insurance
Group, Inc. ("MIGI"), Meridian Security Insurance Company ("Security"), Meridian
Citizens Mutual Insurance Company ("Citizens"), and Meridian Citizens Security
Insurance Company ("Meridian Citizens").
WHEREAS, the Boards of Directors of State Auto P&C, MIGI, Security, Citizens,
and Meridian Citizens, (Security, Citizens, Meridian Citizens are collectively
referred to hereafter as the "MIGI Insurers" (individually as a "MIGI Insurer")
and together with MIGI, the "MIGI Companies") have resolved to change the
employer of those persons providing services to the MIGI Companies from MIGI to
State Auto P&C effective January 1, 2002; and
WHEREAS, State Auto P&C desires to make available to the MIGI Companies and the
MIGI Companies desire to obtain from State Auto P&C the services of State Auto
P&C through its executive, managerial, administrative and other employees and
human resources; and
WHEREAS, the MIGI Insurers participate in the Reinsurance Pooling Agreement,
Amended and Restated as of July 1, 2001 (the "MIGI Pooling Agreement" or the
"MIGI Pool" or the "MIGI Pooling Arrangement") while State Auto P&C with other
affiliates participates in the Reinsurance Pooling Agreement, Amended and
Restated as of January 1, 2000, as subsequently amended, (the "State Auto
Pooling Agreement" or the "State Auto Pool" or the "State Auto Pooling
Arrangement"); and
WHEREAS, it is necessary to provide for the allocation and apportionment of
certain expenses of the MIGI Companies as described below and to specifically
address the matter of a service fee based on certain categories of expenses to
be reimbursed by the MIGI Companies to State Auto P&C.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, AND INTENDING TO BE LEGALLY BOUND HEREBY, the parties hereto
agree as follows:
1. State Auto P&C, through its employees, shall operate, administer, and manage
the day-to-day business operations of and otherwise perform Management and
Operations Services (as defined below) for each of the MIGI Companies in
accordance with the underwriting, claims and any other reasonable guidelines of
such companies which may be in effect or established from time to time by the
respective board of directors of each such MIGI Company. The management and
administration of each such company's business operations by State Auto P&C
shall include, without limitation, appointment and termination of agencies,
underwriting of insurance risks, investigation and settlement of claims and
arrangement of reinsurance, as well as every other business operation that
supports or attends the performance of those services or other business
functions of each of the MIGI Companies. State Auto P&C shall use the same
degree of care in acting on behalf of such insurers as it uses in connection
with the conduct of its insurance business operations. For the purposes of this
agreement it is understood and agreed that Management and Operations Services
means all services, including without limitation, executive, managerial,
supervisory, administrative, technical, professional, and clerical services,
necessary or appropriate in the operation of the respective businesses of each
of the MIGI Companies. Any of State Auto P&C's employees may also serve as
directors or officers of any of the MIGI Companies, notwithstanding that such
persons may also be officers or directors of State Auto P&C. State Auto P&C
shall have the right to continue using for its
business operations all of its employees provided to the other parties
hereunder. To the extent reasonably possible, the parties shall jointly utilize
State Auto P&C's employees in a cooperative manner and consistent with the best
business interests and needs of the MIGI Companies and State Auto P&C. State
Auto P&C shall direct its employees, in performing such services for the MIGI
Companies, to use their best efforts to promote the general interests and
economic welfare of the MIGI Companies in the same manner as such employees
provide services to their direct employer. Nothing contained in this Agreement
shall impair the authority and responsibility of the Board of Directors of any
of the MIGI Companies to exercise managerial control as provided in said
companies' Articles of Incorporation.
2. Because the State Auto Companies operate their insurance business utilizing
employees of one employer, subject to the provisions of the MIGI Pooling
Agreement, the non-direct expenses incurred by State Auto P&C for the benefit of
the MIGI Companies shall be apportioned to each of the MIGI Companies, in
accordance with the provisions of this Agreement and reimbursed to State Auto
P&C by each of the MIGI Companies in accordance with the provisions of this
Agreement.
3. As a service fee, in consideration of the services provided and the
efficiencies achieved through the combination of the companies' operations that
would not be available in the absence of such combination, each MIGI Company
shall pay to State Auto P&C for the employees provided hereunder an amount equal
to ten (10%) percent of all State Auto P&C's employee related costs, including
salaries, payroll taxes and employee relations and welfare expenses apportioned
to each MIGI Company. Said service fee shall be paid quarterly in accordance
with section 4 hereof.
4. All amounts due under this Agreement shall be due and payable by the
respective company within fifteen days after request for payment from the party
to be paid. The amounts due from each MIGI Company hereunder shall be recomputed
by State Auto P&C on a semi-annual or annual basis as appropriate to accurately
determine such amounts, using statutory accounting principles and appropriate
bases of allocation and apportionment supported by work papers. Any resulting
adjustments shall be settled between the parties or credited to future payment
periods as may be determined by State Auto P&C. State Auto P&C shall make its
books and records available to the MIGI Companies during regular business hours
for the MIGI Companies to verify the accuracy of the calculations by State Auto
P&C of the payments due from the MIGI Companies hereunder.
5. Any notices to be given hereunder shall be in writing and shall be deemed
effective when delivered in person or by facsimile or, if mailed, two days after
mailing first class prepaid, to the address of the principal office of the party
to which the notice is being given.
6. This Agreement may not be assigned by any party without the prior written
consent of the other party. The provisions of this Agreement shall bind and
inure to the benefit of the parties and their respective successors and
permitted assigns.
7. This Agreement sets forth the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior or contemporaneous
agreements with respect thereto. Any modifications or amendments to this
Agreement must be in writing and signed by the parties to be bound.
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8. This Agreement shall be governed by and construed in accordance with the laws
of the State of Indiana both as to execution and performance.
9. This Agreement shall remain in force until terminated as provided herein. Any
party to this Agreement may terminate this Agreement by giving written notice to
the other party, stating a date certain not less than 180 days hence on which
such termination will become effective.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written, and it hereby made effective as of July 1, 2002.
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY
By: /s/ Robert H. Moone
-----------------------------------------
Title: President
MERIDIAN SECURITY INSURANCE COMPANY
By: /s/ Robert H. Moone
-----------------------------------------
Title: President
MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY
By: /s/ Robert H. Moone
-----------------------------------------
Title: President
MERIDIAN CITIZENS SECURITY INSURANCE COMPANY
By: /s/ Robert H. Moone
-----------------------------------------
Title: President
MERIDIAN INSURANCE GROUP, INC.
By: /s/ Robert H. Moone
-----------------------------------------
Title: President
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