Exhibit 10.14
AMENDED AND
RESTATED
MANAGING GENERAL AGENCY
AGREEMENT
Entered into by and
between
REPUBLIC LLOYDS
REPUBLIC-VANGUARD INSURANCE
COMPANY
SOUTHERN COUNTY MUTUAL INSURANCE
COMPANY
SOUTHERN INSURANCE
COMPANY
(collectively referred to herein
as “Company”)
and
TEXAS GENERAL AGENCY,
INC.
(referred to herein as
“General Agent”)
Effective Date: January 1,
2006
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This Amended and Restated Managing General
Agency Agreement, including attached Addenda, as amended,
(“Amended and Restated Agreement”) dated as of
January 1, 2006 by and between Republic Lloyds, a Texas Lloyd
plan insurer, Republic-Vanguard Insurance Company, an Arizona
corporation, Southern County Mutual Insurance Company, a Texas
county mutual insurer, and Southern Insurance Company, a Texas
corporation (collectively referred to herein as
“Company”) and Texas General Agency, Inc., a Texas
corporation, (referred to herein as “General
Agent”).
Witnesseth
Whereas, Company and General Agent
have heretofore entered into a Managing General Agency Agreement,
effective January 1, 1993 (the “Original
Agreement”); and
Whereas, the Original Agreement
subsequently was amended by amendments as follows: Amendment
No. 1, effective January 1, 1993; Amendment No. 2,
effective January 1, 1994; Amendment No. 3, effective
July 1, 1997; Amendment No. 4, effective January 1,
1998; Amendment No. 5, effective January 1, 1993;
Amendment No. 6, effective March 1, 2001; Amendment
No. 7, effective July 1, 2000 and Amendment No. 8,
effective January 1, 2003 (collectively the
“Amendments”); and
Whereas, the Original Agreement
subsequently was amended by addenda as follows: Addendum A,
effective January 1, 1993; Amendment No. 1 to Addendum A,
effective January 1, 1994; Amendment No. 2 to Addendum A,
effective January 1, 1994; Amendment No. 3 to Addendum A,
effective January 1, 1996; Amendment No. 4 to Addendum A,
effective December 15, 1996; Amendment No. 5 to Addendum
A, effective January 1, 1998; Amendment No. 6 to Addendum
A, effective January 1, 1999; Amendment No. 7 to Addendum
A, effective January 1, 2000; Amendment No. 8 to Addendum
A, effective January 1, 2001; Amendment No. 9 to Addendum
A, effective January 1, 2002; Amendment No. 10 to
Addendum A, effective January 1, 2003; Amendment No. 11
to Addendum A, effective July 1, 2003; Amendment No. 12
to Addendum A, effective January 1, 2004; Amendment
No. 13 to Addendum A, effective January 1, 1993; Addendum
B, effective January 1, 1999; and Amendment No. 1 to
Addendum B, effective April 1, 2001 (individually
“Addendum” and collectively “Addenda”),
each of which such Addendum is attached to this Amended and
Restated Agreement; and
Whereas, contingent upon the
Hallmark Closing, Company and General Agent desire to amend and
restate the Original Agreement in its entirety as set forth in this
Amended and Restated Agreement to provide for, among other things,
(i) the incorporation of the Amendments into the body text of
this Amended and Restated Agreement, (ii) the extension of the
term of this Amended and Restated Agreement and modification of the
related termination and renewal provisions, (iii) setting of a
maximum volume of business to be produced pursuant to this Amended
and Restated Agreement, (iv) a non-competition provision and
(v) commission rates; and
Whereas, it is the intent of Company
and General Agent that the Addenda attached hereto shall continue
in force as set forth in each Addendum, as amended, and constitute
a part of and are incorporated into this Amended and Restated
Agreement:
Now, Therefore, in consideration of
the agreements and obligations set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and contingent upon the Hallmark Closing,
Company and General Agent hereby amend and restate the Original
Agreement in its entirety and agree as follows:
Article 1 -
Definitions
1.1 “Amended and Restated
Agreement” shall mean this Amended and Restated Managing
General Agency Agreement, including all Addenda hereto, as amended
from time to time.
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1.2 “Authorized Business” means
lines of insurance and coverages, with the authority, limitations
and underwriting guidelines, as set forth on the Authorized
Business Addendum attached to and incorporated into this Amended
and Restated Agreement by reference.
1.3 “Collected Net Written
Premium” means Net Written Premium that is actually collected
by Company.
1.4 “Company” shall have
the meaning set forth in the preamble of this Amended and Restated
Agreement.
1.5 “Earned Premiums”
means Net Written Premium for Policies allocated to an Underwriting
Year, less the unearned portion thereof as of the effective date of
calculation, it being understood and agreed that all premiums for
Policies allocated to an Underwriting Year shall be credited to
that Underwriting Year.
1.6 “Effective Date”
means the effective date of this Amended and Restated Agreement and
shall be January 1, 2006.
1.7 “General Agent”
shall have the meaning set forth in the preamble of this Amended
and Restated Agreement.
1.8 “Hallmark Closing”
shall have the meaning set forth in Article 2 of this Amended and
Restated Agreement.
1.9 “Installment Billing
Fees” means the sum of the amounts identified as billing fees
charged by General Agent to policyholders on behalf of Company for
processing installment payments on Policies.
1.10 “Loss Adjustment
Expenses” means expenses assignable to the investigation,
appraisal, adjustment, settlement, litigation, defense or appeal of
specific claims, regardless of how such expenses are classified for
statutory reporting purposes. Loss Adjustment Expenses shall
include, but not be limited to, interest on judgments, expenses of
outside adjusters, ex gratia payments and declaratory judgment
expenses or other legal expenses and costs incurred in connection
with coverage questions and legal actions connected thereto, but
shall not include office expenses or salaries of Company’s or
General Agent’s regular employees.
1.11 “Losses Incurred”
means losses and Loss Adjustment Expenses paid as of the effective
date of calculation, plus the reserves for losses and Loss
Adjustment Expenses outstanding as of the same date, plus the debit
or minus the credit from the preceding Underwriting Year, it being
understood and agreed that all losses and related Loss Adjustment
Expenses under Policies allocated to an Underwriting Year shall be
charged to that Underwriting Year, regardless of the date said
Losses actually occur.
1.12 “Loss Ratio” means
the ratio derived by dividing Losses Incurred on Policies by Earned
Premiums on Policies.
1.13 “Net Written
Premium” means gross written premium on Policies,
[**]
, less cancellations
and returned premiums.
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CERTAIN INFORMATION ON THIS PAGE HAS
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1.14 “Original Agreement” means the
Managing General Agency Agreement, including all addenda thereto,
as amended from time to time by and between Company and General
Agent, with an effective date of January 1, 1993.
1.15 “Policy” (or the
plural “Policies”) means any binder, policy,
endorsement, certificate, or proposal for insurance produced and
issued pursuant to this Amended and Restated Agreement that binds
Company.
1.16 “Policy Fees” mean
the sum of amounts charged to policyholders on behalf of Company,
which [**].
1.17 “Regulations” mean
federal and state statutes, laws, rules, regulations, or orders
which govern or regulate the operations or actions of Company,
General Agent, Sub-Agent or Reinsurer.
1.18 “Reinsurance
Agreements” means those certain reinsurance agreements, as
may be amended from time to time, by and between Company and
Republic Underwriters Insurance Company reinsuring the Authorized
Business.
1.19 “Retrocession
Agreement” means that certain reinsurance agreement, as may
be amended from time to time, by and between Republic Underwriters
Insurance Company and Reinsurer, reinsuring the Authorized
Business.
1.20 “Reinsurer” means
those companies subscribing to certain reinsurance agreements
covering the Authorized Business produced by General
Agent.
1.21 “Sub-Agent” means
any person or entity licensed as an insurance agent who acts in
compliance with Regulations as a sub-producer for General Agent and
Policies are issued as a result.
1.22 “Underwriting Year”
means the period beginning 12:01 a.m., Central Standard Time,
January 1 of a calendar year to 12:01 a.m., Central Standard
Time, January 1, of the following calendar year, and each such
12-month period (or portion thereof) shall be a separate
Underwriting Year.
1.23 “Unearned Premiums”
means that portion of Net Written Premiums and Policy Fees not
earned because the Policy term has not expired as of the date for
which the calculation is made.
Article 2 – Hallmark
Closing
The effectiveness of this Amended
and Restated Agreement is contingent upon the consummation of the
purchase by Hallmark Financial Services, Inc. of Texas General
Agency, Inc. and certain of its subsidiaries and the approval of
such purchase by appropriate regulatory authorities on or prior to
March 31, 2006 (the “Hallmark Closing”). Upon
the occurrence of the Hallmark Closing, this Amended and Restated
Agreement shall be deemed effective as of the Effective
Date. In the event the Hallmark Closing does not occur, this
Amended and Restated Agreement shall not become effective and shall
be deemed null and void ab initio , and the Original
Agreement shall continue in effect pursuant to its terms and
provisions.
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CERTAIN INFORMATION ON THIS PAGE HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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Article 3 – Appointment;
Independent Contractor
Relationship
3.1 Appointment . Company has
heretofore appointed General Agent to act as its managing general
agent, as defined in Chapter 4053 et seq., Managing General Agents,
Texas Insurance Code.
3.2 Independent Contractor .
General Agent shall act as an independent contractor, and Company
shall have no right of control over General Agent as to the time,
means, or manner of General Agent’s performance or the
conduct of its business within the authority granted by this
Amended and Restated Agreement. General Agent shall furnish and
maintain, at [**] , the office and office equipment,
vehicles, telephone service, books of accounts, clerks and
employees deemed by it as necessary or desirable to the carrying on
and promoting of the business of General Agent and shall [**].
Nothing contained in this Amended and Restated Agreement is
intended to nor shall it be construed as creating the relationship
of employer and employee, nor partner, nor joint venturer between
Company and General Agent or between Company and any Sub-Agent with
whom General Agent might contract.
Article 4 –
Confidentiality; Non-competition
4.1 Confidentiality
.
(a) During the term of this Amended
and Restated Agreement and for a period of 18 months after the
termination of this Amended and Restated Agreement for any reason
other than as set forth in Section 6.14(b)(i), (ii) or
(iii) (“Restricted Period”), one party to this
Amended and Restated Agreement (“Disclosing Party”) may
reveal to the other party (“Receiving Party”) certain
confidential or proprietary information related to its business
operations and other information. All such information and all
information related to the Authorized Business and this Amended and
Restated Agreement, whether oral, written, electronic or otherwise,
furnished by Disclosing Party to Receiving Party, its directors,
officers, employees, agents, consultants, or representatives
(“Representatives”), together with analyses, working
papers, notes, compilations, studies, or other documents or records
prepared by Disclosing Party or its Representatives which contain
or otherwise reflect or are generated from such information, are
collectively referred to herein as “Confidential
Information.”
(b) Receiving Party agrees to use
Confidential Information solely for the purpose of this Amended and
Restated Agreement, the Reinsurance Agreement or the Retrocession
Agreement (and no other purposes) and shall keep Confidential
Information confidential and not disclose Confidential Information
to others, except that Disclosing Party may disclose Confidential
Information to its Representatives who need to know Confidential
Information, or to whom such disclosure is reasonably desirable,
for the sole purpose of Receiving Party’s performance under
this Amended and Restated Agreement, the Reinsurance Agreement or
the Retrocession Agreement.
(c) Receiving Party may disclose
Confidential Information to any of its affiliates and any of their
respective directors, officers, employees, agents, consultants, or
representatives (each an “Authorized Recipient”) who
need to know the Confidential Information solely for the purpose of
Receiving Party’s performance under this Amended and Restated
Agreement, the Reinsurance Agreement or the Retrocession Agreement,
provided that each Authorized Recipient shall have agreed to treat
such Confidential Information in accordance with the terms of this
Amended and Restated Agreement as if such Authorized Recipient were
Receiving Party (in the case of an entity) or a Representative (in
the case of an individual) under this Amended and Restated
Agreement. Receiving Party shall be responsible for any breach of
this Amended and Restated Agreement by its Representatives or any
if its Authorized Recipients.
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CERTAIN INFORMATION ON THIS PAGE HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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(d) Confidential Information shall
not include:
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(i)
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information
which at the time of disclosure by Disclosing Party is in the
public domain or which later becomes part of the public domain
through no act or omission of Receiving Party or its
Representatives;
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(ii)
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information
received by Receiving Party or its Representatives from any third
party not known by Receiving Party or its Representatives to be
bound by a confidentiality agreement;
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(iii)
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information
already known by Receiving Party, provided that such information is
not known by Receiving Party to be subject to another
confidentiality agreement with or other obligation of secrecy to
Disclosing Party;
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(iv)
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information
independently developed by Receiving Party or its Representatives
not receiving disclosure hereunder or from a source known by
Receiving Party or its Representatives to be bound by a
confidentiality agreement with or other obligation of secrecy to
Disclosing Party; or
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(v)
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information
that is required to be disclosed in compliance with any law or
regulation, in response to any properly and lawfully issued summons
or subpoena or other judicial process or at the request or demand
of any governmental authority, including, any regulator,
administrative arbiter or court with authority or jurisdiction over
Receiving Party’s or any of its affiliates (it being agreed
that Receiving Party shall promptly give Disclosing Party notice of
any such request or grounds for disclosure, if permitted by
applicable law).
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(e) Company and General Agent
acknowledge and agree that Confidential Information is valuable
information to Disclosing Party and unauthorized disclosure or use
of Confidential Information by Receiving Party or its
Representatives may cause irreparable harm and damage to Disclosing
Party, and in the event of any breach of the provisions of this
Article 4, Disclosing Party shall be entitled to seek equitable
relief, including injunctions and orders for specific performance,
in addition to all other remedies available to it at law or in
equity.
4.2 Non-competition
.
(a) During the Restricted Period,
Company shall not directly or indirectly solicit business which
under this Amended and Restated Agreement would qualify as
Authorized Business from those wholesale Sub-Agents listed on the
Wholesale Sub-Agents Addendum attached to and incorporated into
this Amended and Restated Agreement by reference who were
Sub-Agents as of the Effective Date and with whom Company did not
have a business relationship other than through General Agent prior
to the Effective Date.
(b) Except as provided in subsection
(a) above, during the Restricted Period, Company may directly
or indirectly solicit business that includes similar or identical
lines or classes of business as Authorized Business.
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Article 5 –
Compensation
5.1 Commissions .
(a) Commissions, as set forth in
each Commission Schedule Addendum attached to and incorporated into
this Amended and Restated Agreement by reference, shall be payable
to General Agent and shall be General Agent’s sole and full
compensation for all business placed with Company under this
Amended and Restated Agreement; provided, however, commissions are
payable to General Agent only to the extent premiums on Policies
are collected by Company. Compensation is payable in consideration
of General Agent’s performance of the duties and obligations
set forth in this Amended and Restated Agreement, and includes
payment for unallocated Loss Adjustment Expenses, which shall
include General Agent’s internal costs for administering
claims, including, but not limited to, employees’ salaries
and home office expenses.
(b) General Agent shall be solely
responsible and solely liable for the payment of any compensation
due any Sub-Agent through whom Authorized Business is produced, and
payment by Company to General Agent of any commissions due in
connection with any business accepted by Company under this Amended
and Restated Agreement shall satisfy any obligation or liability
whatsoever on the part of Company, whether in law or equity, to
make such payment to any Sub-Agent or other person or entity. If
there is not a Sub-Agent to receive the designated commission on a
Policy, General Agent may retain the commission.
5.2 Expenses and Return
Commissions . General Agent shall be obligated for and shall
pay [**] , and Company shall not be liable
for or obligated to pay [**] incurred by, for, or on behalf of
General Agent. General Agent shall be liable for the return of
commissions on return premiums at the same rate as the commissions
allowed in connection with the coverage for which the return of
premiums is being made. General Agent shall not, however, be
required to return, as return commissions, monies greater than the
total commission payable to General Agent in connection with the
coverage for which the return of premium is made.
5.3 Commission Schedule
Addendum . More than one Commission Schedule Addendum may be
attached to this Amended and Restated Agreement, and each
Commission Schedule Addendum may be amended by Company and General
Agent without otherwise affecting the terms and conditions of this
Amended and Restated Agreement. All such amendments shall be in
writing, executed by the parties, and specify the effective date
thereof.
5.4 Contingent Commission
.
(a) This Amended and Restated
Agreement allows for payment of a contingent commission between
Company and General Agent as set forth on the attached Commission
Schedule Addendum.
(b) Not withstanding any provision
in this Amended and Restated Agreement to the contrary, in the
event that General Agent is in default or has committed a breach of
its obligations under this Amended and Restated Agreement, no
contingent commission adjustment shall be paid until such time that
General Agent has cured the default or breach.
(c) Not withstanding any provision
in this Amended and Restated Agreement to the contrary, no
contingent commission that may otherwise become due to General
Agent hereunder shall be paid to General Agent until Company first
has received such payment from Reinsurer.
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CERTAIN INFORMATION ON THIS PAGE HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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Article 6 - General
Agent’s Authority
6.1 (a) General Agent shall
have the authority and the duty to act for and on behalf of Company
in all respects, insofar as necessary for General Agent to perform
the functions of a managing general agent of Company, including,
but not limited to, Policy issuance, accounting, billing and claims
handling, subject to the terms and conditions of this Amended and
Restated Agreement.
(b) General Agent shall comply with
all Regulations with respect to the placement of business with
Company and in carrying out its duties and obligations under this
Amended and Restated Agreement. General Agent shall make every
reasonable attempt to cure any unauthorized business placed with
Company. General Agent shall maintain current licenses and
certificates of authority as required by Regulations for the
conduct of business pursuant to this Amended and Restated
Agreement.
(c) Company shall have ultimate
authority over business placed with Company. Company may from time
to time place written restrictions upon General Agent for the
business produced pursuant to this Agreement, including
restrictions on premium volume, concentration of risks, forms,
rates, fees, and underwriting guidelines. General Agent shall make
recommendations to Company regarding such items.
(d) The Authorized Business Addendum
attached to and incorporated into this Amended and Restated
Agreement by reference shall set forth the authority and
limitations of General Agent with regard to, but not limited to,
maximum annual premium volume, basis of the rates to be charged,
Authorized Business, maximum limits of liability, applicable
exclusions, territorial limitations, Policy cancellation
provisions, maximum Policy period and control of Policy issuance.
More than one Authorized Business Addendum may be attached hereto,
and each attached Authorized Business Addendum may be amended by
Company, in consultation with General Agent, without otherwise
affecting the terms and conditions of this Amended and Restated
Agreement. All such amendments shall be in writing and specify the
effective date thereof. Underwriting guidelines developed in
accordance with the authority and limitations set forth in the
Authorized Business Addendum shall be incorporated into this
Amended and Restated Agreement by reference.
6.2 Binding Authority
.
(a) General Agent shall have the
authority to accept applications for, and to issue, Policies
submitted by or through Sub-Agents, on forms and at rates approved
by Company. General Agent shall not delegate its authority to issue
Policies to any Sub-Agent or other third party, unless otherwise
approved in writing by Company. Company’s approval shall be a
written acknowledgement made in advance of the delegation of
authority by General Agent to a Sub-Agent. General Agent’s
request to Company for approval to delegate authority to a
Sub-Agent shall include a copy of the agreement between General
Agent and Sub-Agent which includes Sub-Agent’s authorities
delegated by General Agent.
(b) General Agent shall
[**]
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CERTAIN INFORMATION ON THIS PAGE HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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(c) Company may refuse to accept any
application or to underwrite any risk submitted and shall have the
right to cancel or non-renew any Policy, subject to Regulations and
Policy provisions.
6.3 Sub-Delegation of
Authority, [**].
(a) General Agent shall have
authority to recruit, contract with, manage, train, and supervise
Sub-Agents, as producing agents acting for and on behalf of General
Agent. However, no Sub-Agent shall be appointed nor shall an
appointed Sub-Agent be terminated by General Agent, except upon
notice to and the consent of Company. GENERAL AGENT
[**].
(b) General Agent shall assure that
the source of Policies produced pursuant to this Amended and
Restated Agreement is properly licensed, and authorized agents as
required by Regulations. General Agent shall conduct and maintain
reasonable background checks of Sub-Agents. Upon discovery, General
Agent shall immediately notify Company of any irregularities
regarding any Sub-Agent. Company shall have the right to accept,
reject or cancel any agent’s appointment recommended or made
by General Agent. General Agent shall not delegate its authority to
underwrite and issue Policies or any risk changing endorsements to
any Sub-Agent or other entity without the written consent of
Company.
(c) GENERAL AGENT SHALL COMPLY WITH
ALL REGULATIONS WITH RESPECT TO ANY TERMINATION, SUSPENSION, OR
REVOCATION OF AUTHORITY DELEGATED TO ANY SUB-AGENT AND SHALL
INDEMNIFY AND HOLD COMPANY HARMLESS AGAINST ANY DAMAGES, LOSSES,
CLAIMS, COSTS, CAUSES OF ACTION, OR EXPENSES, INCLUDING
ATTORNEYS’ FEES, ARISING DIRECTLY OR INDIRECTLY, OUT OF OR IN
CONNECTION WITH ANY ACTION TAKEN OR NOT TAKEN BY GENERAL AGENT OR
SUB-AGENT IN THIS REGARD, EXCEPT FOR ANY SUCH ACTION TAKEN OR NOT
TAKEN SOLELY AT THE WRITTEN DIRECTION OF COMPANY. GENERAL AGENT
SHALL INDEMNIFY AND HOLD COMPANY HARMLESS AGAINST ANY PENALTIES AND
FINES IMPOSED BY REGULATORY AUTHORITIES, INCLUDING ATTORNEYS’
FEES AND EXPENSES, ARISING DIRECTLY OR INDIRECTLY, OUT OF OR IN
CONNECTION WITH COMPANY’S ACCEPTANCE OF BUSINESS FROM ANY
SUB-AGENT.
(d) General Agent shall maintain in
force a written contractual agreement, in a form acceptable to
Company, with any Sub-Agent to whom any authority of General Agent
under this Amended and Restated Agreement is delegated. Each such
agreement shall expressly provide that the Sub-Agent shall have no
right, claim or cause of action against Company and shall look
exclusively to General Agent for the payment or satisfaction of any
damages, losses, claims, costs, causes of action, or expenses,
including attorney’s fees, arising, directly or indirectly,
out of or in connection with, any action taken or not taken by
Company or General Agent.
6.4 Agent’s Licensing
.
(a) General Agent shall maintain
current licenses or certificates of authority as required by
Regulations for the conduct of business under this Amended and
Restated Agreement.
(b) General Agent shall assure that
all Sub-Agents to whom any authority of General Agent under this
Amended and Restated Agreement is delegated maintain appropriate
licenses, certificates of authority, and Company appointments as
required by Regulations for the conduct of business under this
Amended and Restated Agreement.
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6.5 Collection and Distribution of Funds
.
(a) Fiduciary Obligation .
General Agent shall act for and on behalf of Company in collecting
and receiving funds from insureds, Reinsurers, and Sub-Agents under
this Amended and Restated Agreement. All such funds shall be
received by General Agent in a fiduciary capacity and sh
