exv10w6



 






Exhibit 10.6




INVESTMENT MANAGEMENT AGREEMENT



THIS INVESTMENT MANAGEMENT AGREEMENT (this “Agreement”), dated as of December 21, 2004, is
made by and between HAMBLIN WATSA INVESTMENT COUNSEL LTD. (“HW”), FAIRFAX FINANCIAL HOLDINGS
LIMITED (“FFH”) and CRUM & FORSTER HOLDINGS CORP. As used in this Agreement, “we”, “us” and “our”
shall refer to CRUM & FORSTER HOLDINGS CORP., and “you” and “your” shall refer to HW and FFH
jointly.



In consideration of the mutual promises contained herein and any such other good and valuable
consideration, the parties hereto agree as follows:




Investment
Management



	1.  	We authorize HW to manage on a continuous basis an investment account (the “Account”) on
our behalf on the terms and conditions set out in this Agreement.
	 
	2.  	(a) HW shall manage the Account in our name and HW is hereby authorized to take such action
for the Account as HW, in your sole discretion, may consider appropriate for the operation of
the Account including, without limitation, the power to buy, sell and exchange and otherwise
deal in and with all securities, securities transactions, broker/dealers and advisors which may
at any time form part of, or provide advice with respect to, the Account and to invest, in
securities and securities transaction selected by HW, all funds contained in, paid to or derived
from the operation of, the Account, subject at all times to applicable regulatory or contractual
restrictions.




 









 






	   	(b) The services to be performed by HW shall be performed only by officers and employees who
have appropriate qualifications. HW agrees to provide to us such information as we may
reasonably request concerning the education and experience of any individuals HW proposes to
assign to the performance of such services. Also, upon our request, HW agrees to provide a list
of individual names and a brief description of their responsibilities. HW agrees to promptly
notify us of any changes in HW’s staff involving individuals that perform material functions on
our Account.
	 
	3.  	The securities and funds of the Account have been deposited with and shall be held by such
custodian as is chosen by you from time to time (the “Custodian”) pursuant to an agreement
which we have entered into with the Custodian. We have instructed the Custodian to promptly
follow your directions at all times and to provide HW with all such information concerning the
Account as HW may from time to time require in connection with your management of the Account,
including without limitation, copies of relevant monthly statements.
	 
	4.  	Provided HW has used reasonable care and diligence, HW shall not be liable for any damage,
loss, cost or other expense sustained in the operation of the Account or relating in any manner
to the carrying out of your duties under this Agreement. Notwithstanding the foregoing, any
losses suffered as a result of an error in implementing investment decisions caused by HW’s
negligence, willful misconduct or dishonesty are to be fully reimbursed by HW. To the extent any
errors occur in implementing investment decisions, HW shall immediately notify us in writing of
all relevant facts. HW shall bear full responsibility for any such errors to the extent such
errors result from HW’s negligence, willful misconduct or dishonesty and shall be liable for all
financial injury to us resulting therefrom.
	 
	5.  	We agree that HW shall be entitled to assume that any information communicated by us or the
Custodian to HW is accurate and complete, and that in making investment decisions HW shall be
entitled to rely on publicly available information or on information which HW believes to have
been provided to you in good faith, in both cases barring actual knowledge by HW to the
contrary.
	 
	6.  	HW shall deliver in writing to us, as soon as practicable after implementation of an
investment decision, HW’s confirmation of such implementation. Otherwise, the nature and
timing of HW’s reporting to us on the status of the Account shall be at least quarterly,
within forty-five (45) days after the end of each quarter.






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Investment Administration



	7.  	We authorize FFH to provide, and by signing below FFH agrees to provide, the investment
administration services set forth in Schedule A attached hereto, on our behalf and
on the terms and conditions set out in this Agreement, subject to such guidelines,
procedures and limitations as may be duly established and approved by our Board of Directors
or a duly authorized committee of said Board.





General




	8.  	(a) You shall be entitled to such fees for the services provided hereunder in
accordance with Schedule B attached hereto. Schedule B is a copy of the
current fee schedule and you agree to give us thirty (30) days prior written notice of any
change in such schedule. Such fees shall be the exclusive fees and charges payable (excluding
third party disbursements reasonably incurred) for the services provided hereunder. As
regards third party services, you will charge us only the amount of your actual disbursements
paid to arm’s length third parties for such services. Such disbursements to third parties
shall be reported to us quarterly, provided, that we shall pay third parties such
disbursements directly if requested to do so by you. We will pay you all fees and
disbursements hereunder not later than twenty (20) days after receiving your quarterly report.
	 
	   	(b) All fees will be paid to FFH and FFH shall reimburse HW for its investment management
services. HW acknowledges that it has no right under this agreement to receive fees directly
from us.
	 
	9.  	Any party to this Agreement may terminate this Agreement without penalty by giving the
other party at least thirty (30) days advance written notice of its desire to terminate the
same. In the event that the day upon which this Agreement is so terminated is a day other
than the first day of a calendar quarter, the fees payable for such quarter shall be
pro-rated and shall be determined having regard to the market value of the Account based upon
the most recent financial report which has been delivered to you by the Custodian.
	 
	10.  	All notices and communications to each party to this Agreement shall be in writing and
shall be deemed to have been sufficiently given if signed by or on behalf of the party giving
the notice and either delivered personally or sent by prepaid registered mail addressed to such
party at the address of such party indicated herein. Any such notice or communication shall be
deemed to have been received by any such party if delivered, on the date of delivery, or if sent
by prepaid registered mail on the fourth business day following mailing thereof to the party to
whom addressed. For such purpose, no day during which there shall be a strike or other
occurrence interfering with normal mail service shall be considered a business day.
	 
	11.  	This Agreement shall enure to the benefit of and shall be binding upon the parties hereto and
their respective successors. This Agreement may not be assigned by any party.




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	12.  	We acknowledge that we have read and understood this Agreement and that we have received a
copy of the same. You and we each acknowledge that the terms of this Agreement are the
exclusive and conclusive terms of our mutual agreement with regard to the subject matter
hereof.
	 
	13.  	Any dispute or difference arising with reference to the interpretation or effect of this
Agreement, or any part thereof, shall be referred to a Board of Arbitration (the “Board”) of
two (2) arbitrators and an umpire.
	 
	   	The members of the Board shall be active or retired disinterested officers of insurance or
reinsurance companies. One arbitrator shall be chosen by the party initiating the arbitration
and designated in the letter requesting arbitration. The other party shall respond, within
thirty (30) days, advising of its arbitrator. The umpire shall thereafter be chosen by the two
(2) arbitrators. In the event either party fails to designate its arbitrator as indicated
above, the other party is hereby authorized and empowered to name the second arbitrator, and the
party which failed to designate its arbitrator shall be deemed to have waived its rights to
designate an arbitrator and shall not be aggrieved thereby. The two (2) arbitrators shall then
have thirty (30) days within which to choose an umpire. If they are unable to do so within
thirty (30) days following their appointment, the umpire shall be chosen by the manager of the
American Arbitration Association and such umpire shall be a person who is an active or retired
and disinterested officer of an insurance or reinsurance company. In the event of the death,
disability or incapacity of an arbitrator or the umpire, a replacement shall be named pursuant
to the process which resulted in the selection of the arbitrator or umpire to be replaced.
	 
	   	Each party shall submit its case to the Board within thirty (30) days from the date of the
appointment of the umpire, but this period of time may be extended by unanimous written consent
of the Board.
	 
	   	Sitting of the Board shall take place in Morristown, New Jersey. The Board shall make its
decision with regard to the custom and usage of the insurance and reinsurance business. The
Board is released from all judicial formalities and may abstain from the strict rules of law.
The written decision of a majority of the Board shall be rendered within sixty (60) days
following the termination of the Board’s hearings, unless the parties consent to an
extension. Such majority decision of the Board shall be final and binding upon the parties
both as to law and fact, and may not be appealed to any court of any jurisdiction. Judgment
may be entered upon the final decision of the Board in any court of proper jurisdiction.
	 
	   	Each party shall bear the fees and expenses of the arbitrator selected by or on its behalf, and
the parties shall bear the fees and expenses of the umpire as determined by the party, as above
provided, the expenses of the arbitrators, the umpire and the arbitration shall be equally
divided between the two parties. The arbitrators may allocate any and all of the costs and fees
against the losing party upon a determination that the position of the losing party was, in
whole or in part, groundless, specious or otherwise without merit or asserted primarily for the
purposes of obfuscation or delay.
	 
	14.  	Additional terms and conditions applicable to this Agreement are set forth in Schedule
C. The provisions in Schedule A, Schedule B and Schedule C
attached hereto are hereby incorporated into, and form part of, this Agreement.
	 
	15.  	This Agreement, including the schedules attached hereto and made a part hereof, may only be
amended by written agreement signed by the parties hereto.




[Signature Page Follows]


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IN WITNESS WHEREOF, this Agreement is hereby executed by duly authorized officers of the
parties below as of the date first written above.




	 	 	 	 	 	 	 
	 	 	CRUM & FORSTER HOLDINGS CORP.
	 	 
	 	 	BY:	 	/s/ Mary Jane Robertson


     AUTHORIZED SIGNATURE	 	 
	 	 	 	 	Mary Jane Robertson


NAME OF AUTHORIZED SIGNATORY	 	 
	 	 	HAMBLIN WATSA INVESTMENT COUNSEL LTD.	 	 
	 	 	BY:	 	/s/ F. Brian Bradstreet


     AUTHORIZED SIGNATURE	 	 
	 	 	 	 	F. Brian Bradstreet


NAME OF AUTHORIZED SIGNATORY	 	 
	 	 	FAIRFAX FINANCIAL HOLDINGS LIMITED	 	 
	 	 	BY:	 	/s/ Paul Rivett


     AUTHORIZED SIGNATURE	 	 
	 	 	 	 	Paul Rivett


NAME OF AUTHORIZED SIGNATORY	 	 






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SCHEDULE A




Services



	   	Investment Administration to be performed are:





	   	Monthly






	 	–  	daily processing of securities
	 
	 	–  	portfolio accounting functions including posting of all trades, monitoring investment
	 
	 	–  	income, corporate actions, open payables and receivables
	 
	 	–  	analysis and reconciliation of portfolios
	 
	 	–  	yield review
	 
	 	–  	computation of market decline test
	 
	 	–  	computation of liquidity analysis
	 
	 	–  	analysis of book values, e.g. bond amortizations and investment provisions
	 
	 	–  	analysis of gross gain and loss positions
	 
	 	–  	cash flow obligations
	 
	 	–  	investment review meeting
	 
	 	–  	custodial relationships
	 
	 	–  	broker relationships





	   	Periodic







	 	–  	review and analysis of foreign exchange position
	 
	 	–  	placement of foreign exchange contracts, where appropriate
	 
	 	–  	reporting to the investment committee
	 
	 	–  	reporting to the audit committee
	 
	 	–  	general assistance with accounting issues
	 
	 	–  	maintaining contact with external auditors
	 
	 	–  	such other administrative services as the parties shall mutually agree from time to time




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	 	–  	5900 report on investment controls
	 
	 	–  	performance reporting
	 
	 	–  	software provider (including e-Pam) – functioning and testing




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SCHEDULE B




FEE SCHEDULE



The Investment fee is comprised of only a Base Fee Amount. The Base Fee Amount calculation is
provided below.





	(1)  	Fees will be payable quarterly. Interim invoices may be issued based on our estimates of
the final fees payable.
	 
	(2)  	After the end of each calendar quarter, FFH shall submit its investment management
charges in accordance with the schedule below.
	 
	(3)  	The charges are on a calendar year basis. They will be calculated at the end of each
calendar quarter based upon the average of the market value of the funds at the close of
business for the three (3) preceding months.







	 	 	 	 	 	 	 	 	 	 	 	 	 
	(4)	Market Value	 	 	Charge	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	On Total Market Value	 	 	.30	%	 	 	 	 






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	 	 	SCHEDULE C        





NOTICE AND INTERPRETATION





	1.  	Notices




Unless otherwise specified herein, all notices, instructions, advices or other matters covered
or contemplated by this Agreement, shall be deemed duly given when received in writing (including
by fax) by you or us, as applicable, at the address or fax number set forth below or such other
address or fax number as shall be specified in a notice similarly given:




	   	If to us:

CRUM & FORSTER HOLDINGS CORP.

305 Madison Avenue

P.O. Box 1973

Morristown, New Jersey 07962

Fax No.: (973) 490-6612

Attention: Chief Financial Officer
	 
	   	If to you:
	 
	   	HAMBLIN WATSA INVESTMENT COUNSEL LTD.

95 Wellington Street West

Suite 802

Toronto, Ontario

M5J 2N7

Fax No.: (416) 366-3993

Attention: President
	 
	2.  	Governing Laws; Jurisdiction; Service of Process




This Agreement shall be governed and construed in accordance with the laws of the State of
Delaware. Each of the parties thereto submits to the jurisdiction of the state and federal courts
of the State of Delaware, in any action or proceeding arising out of or relating to this Agreement
and all claims in respect of any such action or proceeding may be heard or determined in any such
court; and service of process, notices and demands of such courts may be made upon you by personal
service to the person and at the address contained in Section 1 above as such person or address may
be changed from time to time.




	3.  	Inspection of Records




You and we and the duly authorized representatives of each of us shall, at all reasonable
times, each be permitted access to all relevant books and records of the other pertaining to this
Agreement.



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	4.  	Headings




The inclusion of headings in this Agreement is for convenience of reference only and shall not
affect the construction or interpretation hereof.




	5.  	Severability




Each of the provisions contained in this Agreement is distinct and severable and a declaration
of invalidity or unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other provision hereof.




	6.  	Entire Agreement




This Agreement and the documents to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter of this Agreement.




	7.  	Control




Notwithstanding any other provision of this Agreement, it is understood and agreed that we
shall at all times retain the ultimate control of the investment of our investable funds and we
reserve the right, upon written notice by us to you, to direct, approve, or disapprove any
investment made by you hereunder or any action taken by you with respect to any such investment.
Furthermore, it is understood and agreed that we shall at all times own and have custody of our
general corporate accounts and records.




	8.  	Confidential Relationship




Subject to applicable law, the parties hereto will treat as confidential all information that
is not publicly available received from the other party.




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