Document:

exv10w40

EXHIBIT 10.40

MANAGEMENT SERVICES AGREEMENT

This Management Services Agreement (the “Agreement”) is made and entered into this 1st day of
January 2009, by and between Liberty Mutual Insurance Company (“Liberty Mutual”), a Massachusetts
stock insurance company and First National Insurance Company of America (“FNICA”), a Washington
stock insurance company.

I. Performance of Services. Liberty Mutual agrees, to the extent requested by FNICA,
to perform such services (collectively, “services”) for FNICA as FNICA determines to be reasonably
necessary or desirable in the conduct of its operations; provided, however, that Liberty Mutual
may, in its sole discretion, decline to provide any of the services contemplated in this Agreement
if providing the requested services would interfere with Liberty Mutual’s ability to meet its
obligations to its policyholders or would otherwise adversely affect Liberty Mutual. All services
provided under this Agreement shall comply with all applicable state laws and regulations governing
FNICA, including all laws and regulations relating to review of FNICA’s books and records. As may
be necessary for the performance of Liberty Mutual’s services under this Agreement, Liberty Mutual
shall have the authority to negotiate or conclude contracts on behalf of FNICA or bind FNICA to any
such contracts.

The listing of the following services to be performed under this Agreement is not intended to
limit the performance of other services that may be provided by Liberty Mutual to or on behalf
of FNICA, as may be agreed to by the parties from time to time:

A. Accounting, financial, tax and auditing. Subject to the direction and control of FNICA’s
Board of Directors and responsible officers, Liberty Mutual shall provide FNICA with such financial
and accounting services as may be desirable, including:

     1. Preparation and maintenance of annual and quarterly financial statements and other reports
providing information required by the state of domicile and other states in which FNICA is
transacting business, the maintenance of necessary and proper records and books of account with
respect to the business of FNICA, and the maintenance and compilation of all data required for the
preparation of tax returns.

     2. Assistance to FNICA in connection with the examination or audit of the books, records,
affairs and activities of FNICA by governmental, insurance or taxing authorities having regulatory
or taxing authority with respect to the operations of FNICA, or by any firm of certified public
accounts appointed by FNICA to audit its books, records and accounts.

     3. Assistance to FNICA with treasury and accounts payable functions as may be determined
between the parties. FNICA shall certify to Liberty Mutual the names and specimen signatures of all
officers or employees of FNICA who are authorized to sign instructions on its behalf. Liberty
Mutual shall have the right to require that all instructions made in connection with this Agreement
meet its satisfaction as to content, form and authenticity.

 

 

Nothing in this Agreement shall be construed to alter the fact that FNICA’s books records and
accounts are owned by FNICA; and FNICA shall have the right to inspect, or authorize others to
inspect, its books, records and accounts.

B. Purchasing, payroll and employee benefits. Subject to the direction and control of FNICA’s Board
of Directors and responsible officers, Liberty Mutual shall provide FNICA with such services
involving purchasing (including access to group purchasing contracts and fleet management
services), payroll processing, and employee relations and/or benefits as may be permissible and
desirable.

C. Information Technology and Support. Subject to the direction and control of FNICA’s Board
of Directors and responsible officers, Liberty Mutual shall provide the technology
infrastructure, information technology systems, software, data center management, network
management services, monitoring, management/oversight, and support services to FNICA and shall
provide trouble-shooting functions on behalf of FNICA.

D. Policy Administration and Production. Subject to the direction and control of FNICA’s Board of
Directors and responsible officers, Liberty Mutual may perform all policy production, print and
mail activities on FNICA’s behalf for all the states in which FNICA currently operates and in which
it may operate in the future.

E. Real Estate Management. Subject to the direction and control of FNICA’s Board of Directors and
responsible officers, Liberty Mutual may handle all matters and issues relating to FNICA’s real
estate purchases, sales, leases and lease-backs.

F. Legal. Subject to the direction and control of FNICA’s Board of Directors and responsible
officers, Liberty Mutual may provide legal services, including litigation management services,
to or on behalf of FNICA.

G. General Administration. Providing all personnel, equipment, data processing programs, materials
and supplies necessary or desirable for the performance of the services contemplated in this
Agreement.

H. Miscellaneous. Subject to the direction and control of FNICA’s Board of Directors and
responsible officers, Liberty Mutual may perform such other services on behalf of FNICA as it may
desire, and as may be mutually agreed to between Liberty Mutual and FNICA.

I. Reinsurance. Reinsurance services including, but not limited to (i) agreement to
reinsurance policy and/or contract wordings and endorsements to existing policies; (ii) processing
of reinsurance policy cancellations, nonrenewals and endorsements and other amendatory addenda;
(iii) collection of premiums due under reinsurance policies or contracts, audits and remittances;
(iv) negotiation and purchase of reinsurance coverage; (v) administration of letters of credit and
other arrangements for the provision of security; and (vi) administration of reinsurance contracts.

 

 

II. Charges. FNICA shall reimburse Liberty Mutual for the reasonable cost of performing any of the
services provided pursuant to this Agreement. Charges for such services shall include direct
expenses and directly allocable expenses allocated to FNICA by Liberty Mutual in conformity with
customary insurance accounting practices consistently applied. The method of expense allocations
under this Agreement shall be consistent with the principles stated in the Statement of Statutory
Accounting Principles No. 70, “Allocation of Expenses.”

III. Accounts and Disbursements. Amounts owing between the parties shall be settled between the
parties on a quarterly basis and payments of amounts owing shall be made within 45 days after the
end of the calendar quarter.

IV. Confidentiality. Liberty Mutual and FNICA are prohibited from disclosing or communicating to
any other person, not a party to this Agreement, any confidential or proprietary information or
trade secrets relating to the parties’ respective business or relating to any affiliate or agency
of any party to this Agreement, including business methods and techniques, research data, marketing
and sales information, customer lists, know-how and any other information concerning the business
operations of any party of this Agreement, or any such party’s affiliates and subsidiaries, unless
the disclosure of communication of such information has been consented to in writing by the party
whose confidential and propriety information or trade secrets is to be released. Confidential and
proprietary information shall not include (a) information generally known to the public, (b)
information known to Liberty Mutual or FNICA to be non-confidential from other, third party,
sources prior to the execution of this Agreement, and (c) information requited to be disclosed by
law or a state or federal governmental agency having authority over the business of Liberty Mutual
or FNICA, but only for the limited purpose of such disclosure.

V. Standards for Performance of Delegated Administrative and Management Functions.

A. At all times during the term of this Agreement, Liberty Mutual shall perform all delegated
administrative and management functions at a level that is at least equal to its standards for
performing such functions on behalf of its own insurance operations. In addition, all
delegated administrative and management functions shall be performed in accordance with, and
subject to, at all times, the relevant and applicable state (or federal) insurance laws and
regulations to which FNICA’s insurance operations are, or may be, subject.

B. In the event that Liberty Mutual receives a notice from any governmental agency, board, bureau,
commission or public authority of any type, of any alleged violation of any state or federal
insurance law, such notice shall immediately be forwarded to FNICA. Liberty Mutual shall cooperate
in responding to any such governmental notice as such notice relates to its rendering of services
under this Agreement.

VI. Term and Termination.

A. Term. This Agreement shall be effective as of the 1st day of January 2009 and shall
continue in full force and effect until terminated in accordance with subsection B, below. In the
event that this Agreement is required to be approved by any state Department of

 

 

Insurance, any request for such approval shall seek an effective date that mirrors the date
expressed above.

B. Termination.

     1. Termination without Cause. This Agreement may be terminated, in whole or in relevant part,
as appropriate, by FNICA or Liberty Mutual, without case, upon ninety (90) days prior written
notice. The terminating party shall provide the applicable state Department(s) of Insurance with
written notification of any whole or partial termination of this Agreement, as may be appropriate,
in accordance with state law requirements.

     2. Termination with Cause. This Agreement may be terminated immediately, in relevant part, as
appropriate, by FNICA or Liberty Mutual, for the following reasons:

     (a) Material failure by Liberty Mutual to perform the services delegated in accordance
with the standards set forth in this Agreement; provided, however, that upon notification
by FNICA that the services so delegated are not being performed in an appropriate or
satisfactory manner, Liberty Mutual shall have thirty (30) days in which to cure the
deficiency. In the event the deficiency is not cured to the satisfaction of FNICA, FNICA
may immediately terminate this Agreement.

     (b) nonpayment of costs by a delegating party to the party performing the services so
delegated.

     (c) The suspension, revocation or other restriction on the insurance license of either
FNICA or Liberty Mutual.

     (d) The insolvency, voluntary or involuntary bankruptcy, reorganization or liquidation
of either FNICA or Liberty Mutual.

     (e) In the event of (i) the acquisition of FNICA by a third party from Liberty Mutual;
or (ii) any other change in control with causes Liberty Mutual to no longer maintain a
majority on the Board of Directors of FNICA, then this Agreement shall terminate with
respect to FNICA as of the effective date of the change of control.

C. Effect of Termination. In the event that this Agreement is terminated, with, or without, cause,
in whole or in part, as appropriate, the relevant services shall continue to be provided by Liberty
Mutual until alternate arrangements reasonably can be made by FNICA (the “Transition Services”);
provided, however, that the Transition Services shall not be required to be provided for a period
of time extending beyond ninety (90) days from the effective date of termination, unless otherwise
agreed to by parties. In the event that this Agreement is terminated, in whole or in part, as
appropriate, for any reason other than those relating to change of control as described in Section
VI.B.2(e), above, all such Transition Services shall continue to be compensation for on a cost
basis. In the event that this Agreement is terminated for reasons specified in Section VI.B.2(e),
above, all such Transition Services shall be compensated for at the then-prevailing market rate for
the provision of such services.

 

 

VII. Indemnification.

A. Liberty Mutual Indemnification of FNICA. Liberty Mutual shall indemnify, defend and hold
harmless FNICA from and against any expenses, damages, liability, actions, costs or other claims,
including but not limited to reasonable attorney’s fees and associated costs, incurred by FNICA
either (i) as a result of the failure of Liberty Mutual or any subcontractor appointed by Liberty
Mutual to comply with any law or administrative regulations, only if such failure is the result of
willful neglect or negligence, or (ii) as a result of, or in connection with, Liberty Mutual’s
breach of any duty or obligation hereunder or the breach of any duty or obligation of any
subcontractor appointed by Liberty Mutual if such breach is the result of willful neglect or
negligence. FNICA may set off against any amount due Liberty Mutual any amount due to FNICA,
pursuant to this or any other agreement to which the parties to this indemnification are also
parties.

B. FNICA’s Indemnification of Liberty Mutual. FNICA shall indemnify Liberty Mutual and hold Liberty
Mutual harmless from all actions, liabilities, costs and expenses arising out of or in any way
related to Liberty Mutual’s services under this Agreement, unless directly related to Liberty
Mutual’s willful neglect or negligence.

VIII. No Waiver. The parties hereto agree that no indulgence or acceptance of any delinquent or
partial payment or ratification after the fact of any violation or breach of any provision of this
Agreement by any party hereto shall be construed as a waiver of any party’s rights hereunder.

IX. Notices. Any notice required to be given pursuant to any provision of this Agreement shall be
in writing and shall be sent to the parties at their respective last known address by first class
mail, postage prepaid, by overnight delivery service, or by confirmed facsimile transmission.

X. Severability. If any provision of this Agreement is held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision, and the Agreement shall be
construed and enforced as if that provision had not been included.

XI. Amendment. This Agreement may only be amended upon the written agreement of both parties
hereto.

XII. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be
considered an original, but all of which together, shall be considered one and the same.

XIII. Governing Law. This Agreement shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts (without application of the conflict of laws principles
thereof).

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement under seal
as of the day and year first above written.

	 	 	 	 	 

	Liberty Mutual Insurance Company	 	 
	 
	 	 	 	 
	/s/ James R. Pugh	 	 
	 	 	 
	By:

	 	James R. Pugh	 	 
	Its:

	 	Assistant Secretary	 	 
	 
	 	 	 	 
	First National Insurance Company of America	 	 
	 
	 	 	 	 
	/s/ Michael J. Fallon	 	 
	 	 	 
	By:

	 	Michael J. Fallon	 	 
	Its:

	 	Chief Financial Officerexv10w41

EXHIBIT 10.41

MANAGEMENT SERVICES AGREEMENT

This Management Services Agreement (the “Agreement”) is made and entered into 1st day of
January 2009, by and between Liberty Mutual Insurance Company (“Liberty Mutual”), a Massachusetts
stock insurance company and General Insurance Company of America (“GICA”), a Washington stock
insurance company.

I. Performance of Services. Liberty Mutual agrees, to the extent requested by GICA,
to perform such services (collectively, “services”) for GICA as GICA determines to be reasonably
necessary or desirable in the conduct of its operations; provided, however, that Liberty Mutual
may, in its sole discretion, decline to provide any of the services contemplated in this Agreement
if providing the requested services would interfere with Liberty Mutual’s ability to meet its
obligations to its policyholders or would otherwise adversely affect Liberty Mutual. All services
provided under this Agreement shall comply with all applicable state laws and regulations governing
GICA, including all laws and regulations relating to review of GICA’s books and records. As may be
necessary for the performance of Liberty Mutual’s services under this Agreement, Liberty Mutual
shall have the authority to negotiate or conclude contracts on behalf of GICA or bind GICA to any
such contracts.

The listing of the following services to be performed under this Agreement is not intended to
limit the performance of other services that may be provided by Liberty Mutual to or on behalf
of GICA, as may be agreed to by the parties from time to time:

A. Accounting, financial, tax and auditing. Subject to the direction and control of
GICA’s Board of Directors and responsible officers, Liberty Mutual shall provide GICA with
such financial and accounting services as may be desirable, including:

     1. Preparation and maintenance of annual and quarterly financial statements
and other reports providing information required by the state of domicile and other states in
which GICA is transacting business, the maintenance of necessary and proper records and
books of account with respect to the business of GICA, and the maintenance and
compilation of all data required for the preparation of tax returns.

     2. Assistance to GICA in connection with the examination or audit of the
books, records, affairs and activities of GICA by governmental, insurance or taxing
authorities having regulatory or taxing authority with respect to the operations of GICA, or
by any firm of certified public accounts appointed by GICA to audit its books, records and
accounts.

     3. Assistance to GICA with treasury and accounts payable functions as may be
determined between the parties. GICA shall certify to Liberty Mutual the names and
specimen signatures of all officers or employees of GICA who are authorized to sign
instructions on its behalf. Liberty Mutual shall have the right to require that all
instructions
made in connection with this Agreement meet its satisfaction as to content, form and
authenticity.

 

 

Nothing in this Agreement shall be construed to alter the fact that GICA’s books records and
accounts are owned by GICA; and GICA shall have the right to inspect, or authorize others to
inspect, its books, records and accounts.

B. Purchasing, payroll and employee benefits. Subject to the direction and control of
GICA’s Board of Directors and responsible officers, Liberty Mutual shall provide GICA
with such services involving purchasing (including access to group purchasing contracts and
fleet management services), payroll processing, and employee relations and/or benefits as
may be permissible and desirable.

C. Information Technology and Support. Subject to the direction and control of
GICA’s Board of Directors and responsible officers, Liberty Mutual shall provide the
technology infrastructure, information technology systems, software, data center
management, network management services, monitoring, management/oversight, and
support services to GICA and shall provide trouble-shooting functions on behalf of GICA.

D. Policy Administration and Production. Subject to the direction and control of
GICA’s Board of Directors and responsible officers, Liberty Mutual may perform all policy
production, print and mail activities on GICA’s behalf for all the states in which GICA
currently operates and in which it may operate in the future.

E. Real Estate Management. Subject to the direction and control of GICA’s Board of
Directors and responsible officers, Liberty Mutual may handle all matters and issues relating
to GICA’s real estate purchases, sales, leases and lease-backs.

F. Legal. Subject to the direction and control of GICA’s Board of Directors and
responsible officers, Liberty Mutual may provide legal services, including litigation
management services, to or on behalf of GICA.

G. General Administration. Providing all personnel, equipment, data processing
programs, materials and supplies necessary or desirable for the performance of the services
contemplated in this Agreement.

H. Miscellaneous. Subject to the direction and control of GICA’s Board of Directors and
responsible officers, Liberty Mutual may perform such other services on behalf of GICA as it may
desire, and as may be mutually agreed to between Liberty Mutual and GICA.

I. Reinsurance. Reinsurance services including, but not limited to (i) agreement to
reinsurance policy and/or contract wordings and endorsements to existing policies; (ii)
processing of reinsurance policy cancellations, nonrenewals and endorsements and other
amendatory addenda; (iii) collection of premiums due under reinsurance policies or
contracts, audits and remittances; (iv) negotiation and purchase of reinsurance coverage; (v)
administration of letters of credit and other arrangements for the provision of security; and
(vi) administration of reinsurance contracts.

II. Charges. GICA shall reimburse Liberty Mutual for the reasonable cost of
performing any of the services provided pursuant to this Agreement. Charges for such

 

 

services shall include direct expenses and directly allocable expenses allocated to GICA by Liberty
Mutual in conformity with customary insurance accounting practices consistently applied. The method
of expense allocations under this Agreement shall be consistent with the principles stated in the
Statement of Statutory Accounting Principles No. 70, “Allocation of Expenses.”

III. Accounts and Disbursements. Amounts owing between the parties shall be settled between
the parties on a quarterly basis and payments of amounts owing shall be made within 45 days after
the end of the calendar quarter.

IV. Confidentiality. Liberty Mutual and GICA are prohibited from disclosing or communicating
to any other person, not a party to this Agreement, any confidential or proprietary information or
trade secrets relating to the parties’ respective business or relating to any affiliate or agency
of any party to this Agreement, including business methods and techniques, research data, marketing
and sales information, customer lists, know-how and any other information concerning the business
operations of any party of this Agreement, or any such party’s affiliates and subsidiaries, unless
the disclosure of communication of such information has been consented to in writing by the party
whose confidential and propriety information or trade secrets is to be released. Confidential and
proprietary information shall not include (a) information generally known to the public, (b)
information known to Liberty Mutual or GICA to be non-confidential from other, third party, sources
prior to the execution of this Agreement, and (c) information required to be disclosed by law or a
state or federal governmental agency having authority over the business of Liberty Mutual or GICA,
but only for the limited purpose of such disclosure.

V. Standards for Performance of Delegated Administrative and Management Functions.

A. At all times during the term of this Agreement, Liberty Mutual shall perform all
delegated administrative and management functions at a level that is at least equal to its
standards for performing such functions on behalf of its own insurance operations. In
addition, all delegated administrative and management functions shall be performed in
accordance with, and subject to, at all times, the relevant and applicable state (or federal)
insurance laws and regulations to which GICA’s insurance operations are, or may be,
subject.

B. In the event that Liberty Mutual receives a notice from any governmental agency,
board, bureau, commission or public authority of any type, of any alleged violation of any
state or federal insurance law, such notice shall immediately be forwarded to GICA. Liberty
Mutual shall cooperate in responding to any such governmental notice as such notice relates
to its rendering of services under this Agreement.

VI. Term and Termination.

A. Term. This Agreement shall be effective as of the 1st day of January 2009 and shall
continue in full force and effect until terminated in accordance with subsection B, below. In the
event that this Agreement is required to be approved by any state Department of Insurance, any
request for such approval shall seek an effective date that mirrors the date expressed above.

 

 

B. Termination.

     1. Termination without Cause. This Agreement may be terminated, in whole or
in relevant part, as appropriate, by GICA or Liberty Mutual, without case, upon ninety (90)
days prior written notice. The terminating party shall provide the applicable state
Department(s) of Insurance with written notification of any whole or partial termination of
this Agreement, as may be appropriate, in accordance with state law requirements.

     2. Termination with Cause. This Agreement may be terminated immediately, in
relevant part, as appropriate, by GICA or Liberty Mutual, for the following reasons:

     (a) Material failure by Liberty Mutual to perform the services delegated in
accordance with the standards set forth in this Agreement; provided, however, that
upon notification by GICA that the services so delegated are not being performed in
an appropriate or satisfactory manner, Liberty Mutual shall have thirty (30) days in
which to cure the deficiency. In the event the deficiency is not cured to the
satisfaction of GICA, GICA may immediately terminate this Agreement.

     (b) nonpayment of costs by a delegating party to the party performing the
services so delegated.

     (c) The suspension, revocation or other restriction on the insurance license
of either GICA or Liberty Mutual.

     (d) The insolvency, voluntary or involuntary bankruptcy, reorganization or
liquidation of either GICA or Liberty Mutual.

     (e) In the event of (i) the acquisition of GICA by a third party from Liberty
Mutual; or (ii) any other change in control with causes Liberty Mutual to no longer
maintain a majority on the Board of Directors of GICA, then this Agreement shall
terminate with respect to GICA as of the effective date of the change of control.

C. Effect of Termination. In the event that this Agreement is terminated, with, or
without, cause, in whole or in part, as appropriate, the relevant services shall continue to be
provided by Liberty Mutual until alternate arrangements reasonably can be made by GICA
(the “Transition Services”); provided, however, that the Transition Services shall not be
required to be provided for a period of time extending beyond ninety (90) days from the
effective date of termination, unless otherwise agreed to by parties. In the event that this
Agreement is terminated, in whole or in part, as appropriate, for any reason other than those
relating to change of control as described in Section VI.B.2(e), above, all such Transition
Services shall continue to be compensation for on a cost basis. In the event that this
Agreement is terminated for reasons specified in Section VI.B.2(e), above, all such
Transition Services shall be compensated for at the then-prevailing market rate for the
provision of such services.

VII. Indemnification.

 

 

A. Liberty Mutual Indemnification of GICA. Liberty Mutual shall indemnify, defend
and hold harmless GICA from and against any expenses, damages, liability, actions, costs or
other claims, including but not limited to reasonable attorney’s fees and associated costs,
incurred by GICA either (i) as a result of the failure of Liberty Mutual or any subcontractor
appointed by Liberty Mutual to comply with any law or administrative regulation, only if
such failure is the result of willful neglect or negligence, or (ii) as a result of, or in
connection
with, Liberty Mutual’s breach of any duty or obligation hereunder or the breach of any duty
or obligation of any subcontractor appointed by Liberty Mutual if such breach is the result
of willful neglect or negligence. GICA may set off against any amount due Liberty Mutual
any amount due to GICA, pursuant to this or any other agreement to which the parties to
this indemnification are also parties.

B. GICA’s Indemnification of Liberty Mutual. GICA shall indemnify Liberty Mutual
and hold Liberty Mutual harmless from all actions, liabilities, costs and expenses arising out
of or in any way related to Liberty Mutual’s services under this Agreement, unless directly
related to Liberty Mutual’s willful neglect or negligence.

VIII. No Waiver. The parties hereto agree that no indulgence or acceptance of any
delinquent or partial payment or ratification after the fact of any violation or breach of any
provision of this Agreement by any party hereto shall be construed as a waiver of any party’s
rights hereunder.

IX. Notices. Any notice required to be given pursuant to any provision of this
Agreement shall be in writing and shall be sent to the parties at their respective last known
address by first class mail, postage prepaid, by overnight delivery service, or by confirmed
facsimile transmission.

X. Severability. If any provision of this Agreement is held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provision, and the Agreement
shall be construed and enforced as if that provision had not been included.

XI. Amendment. This Agreement may only be amended upon the written agreement of
both parties hereto.

XII. Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be considered an original, but all of which together, shall be considered one and
the same.

XIII. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts (without application of the conflict of
laws principles thereof).

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement under seal
as of the day and year first above written.

	 	 	 	 	 
	Liberty Mutual Insurance Company

 	 	 
	/s/ James R. Pugh
 	 	 
	By:	 	 James R. Pugh  	 	 
	Its: 	 	Assistant Secretary 	 	 
	 
	General Insurance Company of America

 	 	 
	/s/ Michael J. Fallon
 	 	 
	By: 	 	Michael J. Fallon  	 	 
	Its: 	 	Chief Financial Officer

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