<PAGE>
EXHIBIT 10.35
MASTER AGENCY AGREEMENT
between
AMERICAN PHYSICIANS ASSURANCE CORPORATION
and
SCW AGENCY GROUP, INC.
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MASTER AGENCY AGREEMENT
TABLE OF CONTENTS
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I.
AUTHORITY OF
AGENCY:.....................................................................................1
II.
DEFINITIONS:.............................................................................................1
A.
Adoption
Agreement..............................................................................1
B.
Agent of Record
Letter..........................................................................2
C. APA
Medical Professional Liability Book of
Business.............................................2
D.
*...............................................................................................2
E.
Controlling
Interest............................................................................2
F.
Competing
Insurer...............................................................................3
G.
Customer........................................................................................3
H.
Designated
Markets..............................................................................3
I.
Designated
Products.............................................................................3
J.
Effective
Date..................................................................................3
K.
Exclusive
Market................................................................................3
L.
Expirations.....................................................................................3
M. Late
Payment Interest
Rate......................................................................3
N.
Permitted
Transfer..............................................................................3
O.
Restricted
Transaction..........................................................................3
P.
Shareholder(s)..................................................................................4
Q.
Underwriting
Rules..............................................................................4
III. TERM, RENEWAL
AND
TERMINATION:...........................................................................4
A.
Initial
Term....................................................................................4
B.
Renewal.........................................................................................4
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* Indicates that material has been omitted
and confidential treatment has been
requested therefore. All such omitted
material has been filed separately with
the Securities and Exchange Commission
pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as
amended.
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C.
Termination.....................................................................................4
IV. AGENCY'S
OBLIGATIONS AND SCOPE OF
AUTHORITY:.............................................................4
A.
Grant of
Authority..............................................................................5
B.
Reasonable Commercial
Effort....................................................................5
C.
Compliance with Underwriting
Rules..............................................................5
D.
Expansion into New Designated
Markets...........................................................5
E.
Agreement to Exclusively Market in the State of
Michigan........................................5
F.
Designated Markets Other than the Exclusive
Market..............................................6
G.
Selling
Process.................................................................................7
H.
Billing, Collection and
Processing..............................................................7
I.
Books, Records and
Reporting....................................................................8
J.
Maintenance of
Licensing........................................................................9
K.
Errors and Omissions
Insurance..................................................................9
L.
Independent
Contractor..........................................................................9
M. Use
of
Sub-agents...............................................................................9
V.
COMPANY'S
OBLIGATIONS:..................................................................................10
A.
Licensing and
Registration.....................................................................10
B.
Agent of
Record................................................................................10
C.
Books, Records and
Reporting...................................................................11
D. A.M.
Best
Rating...............................................................................11
E.
Withdrawal.....................................................................................11
VI.
COMMISSIONS:............................................................................................12
A.
Commission
Rates...............................................................................12
B.
Payment
Terms..................................................................................13
C.
Miscellaneous..................................................................................13
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VII. OWNERSHIP OF
EXPIRATIONS:...............................................................................14
A.
Acknowledgment of Ownership of Certain Expirations by the
Agency...............................14
B.
Transfers of Certain
Expirations...............................................................15
C.
Release Regarding Kentucky and
Nevada..........................................................14
D.
Ownership of
Data..............................................................................15
E.
Rights of Company to Pursue Michigan Medical Professional
Liability
Business.......................................................................................15
F.
Miscellaneous..................................................................................16
VIII.
TERMINATION:............................................................................................16
A.
Automatic
Termination..........................................................................16
B.
Termination for
Cause..........................................................................16
C.
Termination Without
Cause......................................................................18
IX.
REMEDIES:...............................................................................................17
A.
Termination of Agency
Representation...........................................................18
B.
Run-off........................................................................................18
C.
Right to Solicit Michigan
Customers............................................................18
D.
Right of
Set-off...............................................................................18
X.
ASSIGNMENT, SALE OR TRANSFER OF THE AGENCY'S
ASSETS:....................................................18
A.
Restricted
Transaction.........................................................................18
B.
Company's Right of First
Refusal...............................................................18
C.
Prohibition to Insurer
Acquirors...............................................................19
D.
Company's Right to Direct Communication With Third
Parties.....................................19
E.
Sub-Agents.....................................................................................20
F.
Permitted
Transfer.............................................................................20
G.
Agreements With Shareholders and Key
Employees.................................................20
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XI.
INDEMNIFICATION:........................................................................................20
A.
Indemnification by the
Company.................................................................20
B.
Indemnification by the
Agency..................................................................20
C.
Notice and Opportunity to
Defend...............................................................20
D.
Settlement.....................................................................................21
E.
Interest on Late
Payment.......................................................................21
XII. DISPUTE
RESOLUTION:.....................................................................................21
A.
Binding
Arbitration............................................................................21
B.
Limitation on
Damages..........................................................................22
XIII.
MISCELLANEOUS:..........................................................................................22
A.
Amendment......................................................................................22
B.
Non-Waiver.....................................................................................22
C.
Integrated
Agreement...........................................................................22
D.
Applicable
Law.................................................................................22
E.
Counterparts...................................................................................23
F.
Authority......................................................................................23
G.
Assignment.....................................................................................23
H.
Confidentiality................................................................................23
I.
Exhibits.......................................................................................24
J.
Notices........................................................................................24
K.
Headings.......................................................................................24
L.
Representations and Warranties of the
Agency...................................................24
M.
Representations and Warranties of the
Company..................................................25
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<PAGE>
APA/SCW
MASTER AGENCY AGREEMENT
This Agreement is made effective 1st day of January, 2004,
between
AMERICAN PHYSICIANS ASSURANCE CORPORATION,
a Michigan insurance company (the
"Company"), and SCW AGENCY GROUP, INC., a
Michigan corporation, and its
subsidiaries and affiliates (the "Agency").
The Company and the Agency are
referred to individually as a "Party" or
collectively as the "Parties."
RECITALS:
A. The Company desires to maintain for the term of this Agreement
a
mutually beneficial relationship with the
Agency and to consolidate into this
Agreement all terms and conditions of its
relationship with the Agency relative
to the Company's medical professional
liability business.
B. The Agency desires to maintain for the term of this Agreement
a
mutually beneficial relationship with the
Company and to consolidate into this
Agreement all terms and conditions of its
relationship with the Company relative
to the Company's medical professional
liability business.
C. The Company and the Agency desire to enter into this Agreement
with
the intent that the medical professional
liability products and services to be
offered by the Company and the production
of new professional liability business
by the Agency, together with the servicing
of existing insureds, shall
strengthen the long-term competitive
positions of both Parties and shall
contribute to the mutual growth and benefit
of both Parties during the term of
this Agreement.
In consideration of the recitals, the mutual covenants and
agreements
below, the Company and the Agency agree as
follows:
I. AUTHORITY OF AGENCY: The Company hereby
appoints the Agency as an agent of
the Company to sell and service Designated
Products in Designated Markets,
subject to the terms and conditions of this
Agreement.
II. DEFINITIONS: In addition to terms
defined elsewhere in this Agreement, the
following terms shall have the following
meanings for purposes of this
Agreement.
A. ADOPTION AGREEMENT. An "Adoption Agreement" means any
addendum,
exhibit or agreement executed by the
Parties by which the Parties agree that
this Agreement shall apply to one or more
Designated Markets listed in such
Adoption Agreement.
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Master Agency Agreement
Page 2
B. AGENT OF RECORD LETTER. "Agent of Record Letter" shall mean
a
written request directed to the Company by
an insured served by the Agency that
the Company recognize an agent other than
the Agency as the insured's agent of
record.
C. APA MEDICAL
PROFESSIONAL LIABILITY BOOK OF BUSINESS. Agency's "APA
Medical Professional Liability Book of
Business" shall mean and is limited to
the Agency's medical professional liability
insurance business for insureds of
the Company, including but not limited
to:
1.
Renewals and Expirations owned by the Agency pursuant to this
Agreement.
2. All
of the Agency's related written or otherwise recorded
documentation (including electronic and computerized records),
expiration and other related data or information, whether
compiled by Agency or by other agents, sub-agents or employees
of Agency, including but not limited to any customer lists,
prospect lists, policy forms, rating information, expiration
dates and all other expiration data, information on risk
characteristics, information concerning insurance markets for
large or
unusual risks, and all other records of and
pertaining to the medical professional liability accounts and
customers of Agency, past and present, insured by the Company;
3.
Goodwill of the Agency's APA medical professional liability
insurance business; and
4. All
of the Agency's right, title and interest, if any, in
expirations owned by sub-agents relative to Customers insured
by the Company.
"Agency's APA Medical Professional Liability Book of Business"
excludes
any liabilities, debts and other obligations of any kind of the
Agency
to its shareholders, employees, Customers, sub-agents, other
professional
liability insurers, governmental agencies, or others; the
Company shall not assume any such liabilities, debts and other
obligations, all of which shall remain the Agency's sole
responsibility.
D.
*
E. CONTROLLING INTEREST. A "Controlling Interest" means shares
comprising a majority of the voting stock
of the Agency or other entity, as the
case may be, or the power or ability to
elect or control the voting of more than
a majority of the stock of the Agency.
* Indicates that material has been omitted
and confidential treatment has been
requested therefore. All such omitted
material has been filed separately with
the Securities and Exchange Commission
pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as
amended.
<PAGE>
Master Agency Agreement
Page 3
F. COMPETING INSURER. A "Competing Insurer" means any of the
following
to the extent offering medical professional
liability insurance products or
services in a Designated Market: an
admitted, non-admitted, surplus lines,
alternatively financed or self-funded
insurer, risk retention group, purchasing
group or other alternative program.
G. CUSTOMER. A "Customer" shall mean a medical professional
liability
insured of the Company and prospective
medical liability insureds for which the
Company is willing to furnish, or does
furnish, a quote.
H. DESIGNATED MARKETS. A "Designated Market" means a state or
market
area with respect to which the Parties have
agreed this Agreement shall apply,
as listed in Exhibit A, or subsequently
added to this Agreement by execution of
an Adoption Agreement, pursuant to Section
IV.D.
I. DESIGNATED PRODUCTS. "Designated Products" means and are limited
to
the Company's medical professional
liability insurance products offered and sold
in each Designated Market. The Parties
acknowledge and agree that the Company
shall have absolute discretion concerning
which medical professional liability
insurance products to offer and sell, or
not to offer or sell, in each
Designated Market, and may offer additional
products in or withdraw products
from a Designated Market at any time.
J. EFFECTIVE DATE. The "Effective Date" of this Agreement shall
be
January 1, 2004.
K. EXCLUSIVE MARKET. "Exclusive Market" means the State of
Michigan.
L. EXPIRATIONS. "Expirations" shall mean all right, title and
interest
in and to medical professional liability
insurance expirations within the
meaning of applicable state law.
M. LATE PAYMENT INTEREST RATE. The "Late Payment Interest Rate"
means
the "prime interest rate," as published in
The Wall Street Journal, plus one
(1%) percent.
N. PERMITTED TRANSFER. A "Permitted Transfer" means:
1. Any
transfer of shares of the Agency between the Shareholders,
or between the Shareholders and their spouses and children; or
2. Any
transfer of shares of the Agency by a Shareholder of the
Agency to a revocable trust of which he or she is the settlor,
or back to himself or herself from such a trust, at any time
during the Shareholder's lifetime.
O. RESTRICTED TRANSACTION. A "Restricted Transaction" means any of
the
following:
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Master Agency Agreement
Page 4
1. A
sale, transfer (for or without consideration), or pledge of
all
or substantially all of the Agency's business assets in
one or more Designated Markets;
2. A
sale of the Agency's APA Medical Professional Liability Book
of Business in one or more Designated Markets;
3. A
merger or consolidation of the Agency with or into one or
more other corporations or entities, if the Shareholders do
not own a Controlling Interest in the surviving entity;
4.
A sale of shares of
the Agency constituting a Controlling
Interest;
5.
Grant of a proxy to vote the shares owned by the Shareholders;
6.
Transfer of a Controlling Interest to a voting trust; or
7.
Issuance of any shares of capital stock if, after such
issuance, the Shareholders would own less than a Controlling
Interest.
8. A
Permitted Transfer shall not constitute a Restricted
Transaction.
P. SHAREHOLDER(s). A "Shareholder" or the "Shareholders" means any
one
or all of the current shareholders of the
Agency.
Q. UNDERWRITING RULES. The "Underwriting Rules" mean the
Company's
rules, rating classifications and rates
governing the underwriting of its
Designated Products. The Company shall have
the sole right and discretion to
establish and modify its Underwriting Rules
from time to time.
III. TERM, RENEWAL AND TERMINATION:
A. INITIAL TERM. The initial term of this Agreement shall begin on
the
Effective Date and shall last for a period
of five (5) years.
B. RENEWAL. The term of this Agreement shall thereafter
automatically
renew for successive periods of five (5)
years each, unless this Agreement is
terminated as provided in Section VIII
below.
C. TERMINATION. Notwithstanding the foregoing, this Agreement
is
subject to termination, in whole or as to
one or more Designated Markets, under
Section VIII.
IV. AGENCY'S OBLIGATIONS AND SCOPE OF
AUTHORITY: Subject to the requirements
imposed by law, and the terms of this
Agreement:
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Master Agency Agreement
Page 5
A. GRANT OF AUTHORITY. The Company authorizes Agency to act as
its
agent to sell the Company's Designated
Products and to service the Company's
Customers in the Designated Markets,
subject to any exceptions or specifications
stated in this Agreement or an Adoption
Agreement.
B. REASONABLE COMMERCIAL EFFORT. The Agency shall use
reasonable
commercial efforts to promote and sell the
Company's Designated Products and
service the Company's Customers in the
Designated Markets, subject to the terms
and conditions of this Agreement.
C. COMPLIANCE WITH UNDERWRITING RULES. In performing its
obligations
under this Agreement, the Agency shall at
all times comply with the Underwriting
Rules, as adopted, amended and communicated
by the Company from time to time.
D. EXPANSION INTO NEW DESIGNATED MARKETS. The Parties may, at any
time,
agree to add one or more Designated Markets
to this Agreement, and to have this
Agreement apply to such additional
Designated Markets, by the execution of an
Adoption Agreement. The terms and
conditions of this Agreement shall apply to
such Designated Markets except to the
extent otherwise stated in the Adoption
Agreement. It is the intent of the Parties,
in the interest of uniformity and
consistency, that the terms and conditions
of this Agreement shall apply to all
Designated Markets except to the extent
unique characteristics of a Designated
Market justify different terms or
conditions. Each Party shall be responsible
for its own costs and expenses of preparing
to commence business in any
additional Designated Markets.
E. AGREEMENT TO EXCLUSIVELY MARKET IN THE STATE OF MICHIGAN. In
the
State of Michigan, the Agency (including
its authorized sub-agents) agrees to
provide exclusive services to the Company
on the following terms:
1.
Except as expressly permitted by this Agreement, the Agency
shall not quote or otherwise solicit or place medical
professional liability insurance coverage for a Customer with
any Competing Insurer (including any Approved Competing
Insurers) on a direct or brokered basis. The loss of a
Customer or potential Customer to an agency representing a
Competing Insurer shall not be deemed a breach of this
Agreement.
2.
*
3. The
Agency represents and warrants to the Company that, as of
the Effective Date of this Agreement, it has not been
appointed in Michigan by any Competing Insurer, other than the
insurers, if any, identified in Exhibit A. The Agency shall
use its reasonable best efforts to transfer to the Company, at
policy renewal consistent with any contractual obligations to
Competing Insurers, any business of prospective Customers
which the Agency placed with Competing Insurers before the
execution of this Agreement which the Company is willing to
quote. Sixty (60) days prior to
* Indicates that material has been omitted
and confidential treatment has been
requested therefore. All such omitted
material has been filed separately with
the Securities and Exchange Commission
pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as
amended.
<PAGE>
Master Agency Agreement
Page 6
each annual renewal, the Agency shall seek a quote from the
Company and, if the Company issues a quote within thirty (30)
business days as set forth in Section IV.E.5, the Agency shall
present the quote to the prospective Customer simultaneously
with or prior to the submission of any competing quote.
4. *,
and request a quote for the Customer, provided that no such
request shall be made earlier than ninety (90) days before a
coverage expiration date.
5.
Within thirty (30) business days of receiving a completed
request for a quote, along with a completed application and
all relevant underwriting information the Company requires to
issue a quote, the Company shall notify the Agency whether it
will issue a quote or shall give the Agency written notice
declining to issue the quote. Upon receiving written notice
from the Company declining to issue a quote, *. If the Company
fails to issue a quote or written notice declining to quote
within the thirty (30) business day period, the Agency shall
notify the Company in writing of the failure *.
6.
Company Quote Confidentiality. The Agency shall at no time,
whether during or following termination of the term of this
Agreement, release or otherwise apprise any other insurer
(including a Competing or Approved Insurer) or source of
medical professional liability coverage or any other agent, of
any quote, details, price or component of a quote given by
Company.
7. The
Company's appointment of the Agency is non-exclusive as to
the Company in all the Designated Markets, including Michigan.
The Company may appoint, in its discretion, other agents as
deemed necessary by the Company on terms and conditions deemed
appropriate by the Company.
F. DESIGNATED MARKETS OTHER THAN THE EXCLUSIVE MARKET. The Agency
is
designated as a non-exclusive agent for the
Company with regard to the
Designated Markets other than Michigan.
G. SELLING PROCESS.
1.
Advertising and Promotional Materials. The Company may furnish
the Agency with advertising materials and other printed
materials from time to time. No other advertising material
which makes reference to Company products or services may be
used by the Agency without prior written
* Indicates that material has been omitted
and confidential treatment has been
requested therefore. All such omitted
material has been filed separately with
the Securities and Exchange Commission
pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as
amended.
<PAGE>
Master Agency Agreement
Page 7
approval from the Company. The Agency shall be deemed to be a
trustee for the Company of all such advertising materials and
supplies provided by the Company, which supplies shall remain
the property of the Company. Upon termination of this
Agreement, all Company supplies shall be returned to the
Company.
2.
Notice of Renewals. The Company will furnish Agency with a
list of all policies issued through the Agency which are due
to renew, at least ninety (90) days in advance of expiration.
Such list will include the expiring premium, so long as the
information is reasonably available from the computer base
currently used by the Company.
3.
Application for Insurance. All applications and binders for
insurance shall be forwarded to the Company within three (3)
business
days of receipt by the Agency. All applications and
binders of coverage shall be in accordance with the Company's
Underwriting Rules or other requirements as the Company shall
communicate to the Agency from time to time.
4.
Authority to Bind Insurance. The Agency has no authority to
bind the Company or issue a certificate of insurance without
the specific written authorization of the Company, and shall
not do so. The Company has the exclusive right, authority and
discretion whether and under what terms and conditions it will
issue insurance.
H. BILLING, COLLECTION AND PROCESSING.
1.
Company Responsible for Billing. The Company shall be
responsible for all premium billing and collection, including
annual audit premiums where applicable, unless otherwise
mutually agreed in writing by Agency and Company. Although the
Agency may communicate such information to Customers, the
Company shall have the right to communicate such matters
directly to its Customers.
2.
Agency Trustee for Premiums Received. The Agency shall remit
all monies collected by it or its sub-agents with respect to
Company business without deduction of commissions or other
amounts payable to the Agency. The Agency shall be deemed to
be the trustee for the Company of any monies which the Agency
or its sub-agents receive for premiums. Although premium
billing is generally done by the Company, if the Agency ever
holds such funds, it shall do so for the Company's benefit and
in a dedicated premium trust account bearing the Company's
name. All such funds shall be the exclusive property of the
Company, which at all times shall have the right to immediate
possession of such funds, whether such funds are held by the
Agency or by a bank or other financial institution.
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Master Agency Agreement
Page 8
No funds of the Agency shall be commingled with the Company's
funds held in a premium trust account.
I. BOOKS, RECORDS AND REPORTING.
1.
Maintenance of Books and Records. The Agency will maintain
accurate records and have proper internal controls in place
with such records and controls being consistent with typical
good business
practices of firms similar in size and function
to the Agency.
2.
Annual Reports. At least annually, the Agency shall furnish
the Company with (a) such reasonable financial statements or
reports as may be requested by the Company, relevant to the
medical professional liability insurance business of the
Agency and its sub-agents, and (b) confirmation of the absence
of transactions, claims, events or contingencies which the
Agency knows or should know could have a material impact on
its financial statements.
3.
Ongoing Duty to Report Material Events. The Agency shall give
the Company reasonable timely notice of events that are known
to the Agency that may render information previously disclosed
pursuant to this paragraph to be materially false or
misleading.
4. Loss
Claims. The Agency shall promptly report all claims and
losses of which the Agency has knowledge to the Company, and
properly notify the Company when the Agency receives notice of
the commencement of any related legal action. The Agency shall
not admit or deny liability on the part of the Company in
connection with any claim or lawsuit.
5.
Right to Inspect. The Company and its accountants shall have a
right of access to the books and records of the Agency related
to the medical professional liability business of the Agency
at reasonable times during normal business hours, upon
reasonable notice and with reasonable frequency, for the
purpose of ensuring compliance with this Agreement. Any such
inspection shall be conducted in a reasonable manner so as to
minimize
any disruption to the Agency's business.
6.
Information Concerning Competing Insurers. Whenever the Agency
places a Michigan risk with a Competing Insurer, *.
7.
Exclusions. Notwithstanding the foregoing, SCW shall have no
obligation to disclose information to the Company to the
extent such disclosure would be prohibited by law, or by a
contract or agreement with a third-party.
* Indicates that material has been omitted
and confidential treatment has been
requested therefore. All such omitted
material has been filed separately with
the Securities and Exchange Commission
pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as
amended.
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Master Agency Agreement
Page 9
J. MAINTENANCE OF LICENSING. Agency's authority in each
Designated
Market under this Agreement is contingent
upon the Agency maintaining any and
all licenses that may be necessary under
federal or state law for the Agency to
lawfully perform its duties and obligations
in such Designated Market.
K. ERRORS AND OMISSIONS INSURANCE. The Agency and each of its
sub-agents shall at all times maintain
errors and omissions coverage with a
minimum limit of $1,000,000/$3,000,000 from
an insurer with an A.M. Best's
rating of no less than A-. The Agency shall
annually provide the Company a copy
of its current errors and omissions policy
or of a binder for the same
satisfactory to the Company.
L. INDEPENDENT CONTRACTOR. The Agency at all times shall function
as an
independent contractor of the Company.
Nothing in this Agreement shall be
cons
