Exhibit 10.26
TEXAS SUB-PRODUCER AGREEMENT
This Sub-producer Agreement (this "Agreement") is effective this the
1st day of January, 2003 ("Effective Date"), by and between Direct General
Insurance Agency, Inc., a Texas domiciled corporation (the "Company") and All
American General Agency, Inc., a Texas domiciled corporation (the "Agency").
WHEREAS, Company is a duly licensed managing general agent; and
WHEREAS, Company is a party to that certain Managing General Agent
Agreement ("MGA Agreement") with Old American County Mutual Fire and Casualty
Insurance Company, a Texas domiciled insurer (the "Insurer") dated January 1,
2003, pursuant to which Company is authorized to solicit, develop, market,
produce and issue and bind contracts of private passenger automobile insurance
and perform other duties of a managing general agent in the State of Texas (the
'Program"); and
WHEREAS, Company is permitted under its MGA Agreement with the Insurer
to appoint sub-agents to facilitate it in fulfilling its obligations under the
MGA Agreement in connection with the Program; and
WHEREAS, Agency has substantial expertise in soliciting, marketing, and
binding contracts of insurance for certain coverages as described herein which
uniquely meet the insurance needs of certain persons and entities; and
WHEREAS, Company desires to appoint Agency as its sub-agent for the
solicitation, marketing and binding of such insurance coverages in the State of
Texas through Agency's duly licensed sales locations known as "Company Stores"
listed on SCHEDULE A hereto (the "Company Stores" hereinafter defined and
NOW, THEREFORE, for good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1. APPOINTMENT/AUTHORITY
1.01 Authority. Subject to the limitations described in this Agreement,
Company hereby authorizes and appoints Agency as its subagent for the
purpose of producing, issuing and delivering policies or contracts of
insurance and endorsements (individually an "Insurance Policy" or
collectively, the "Insurance Policies"), in accordance with the
Program's written underwriting guidelines, procedures, instructions,
and authority limits and any memoranda provided to Agency from time to
time. Such authority shall be exclusive for the first twelve (12)
months of this Agreement. UNDERWRITING GUIDELINES, as attached hereto
and incorporated herein by reference as SCHEDULE D, may be modified by
Company from time to time without the need to amend this Agreement and
shall be effective upon two (2) business days written notice to Agency
or such other time as the parties may agree. Agency agrees to comply
with and be bound by such modifications without the need for amendment
of this Agreement.
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1.01.a. Franchisee Authority. Such authority granted in Section 1.01
of this Agreement shall be extended to AMCORP General Agency,
Inc. ("Franchisor"), an affiliate of Agency, who may make the
Program available to valid existing franchisees ("Franchisee"
or "Franchisees") as indicated on SCHEDULE C. The authority
granted to Franchisor or provided hereunder to any one or more
Franchisees may be terminated at any time. In any event, the
Authority granted to Franchisor and Franchisees shall
terminate on June 30, 2003, unless a Franchisee is either
acquired by Agency (or one of its affiliates) by such date or
becomes a party to an option and purchase agreement with the
Agency by June 30, 2003. Such option and purchase agreement
shall be subject to approval of the Company. Such approval
shall not be unreasonably withheld. Any Franchisee purchase
will be subject to that certain asset purchase Option
Agreement, of even date herewith, entered into between Company
and one or more affiliates of Agency ("Option Agreement").
1.01.b. "Company Store" Defined. The term "Company Store" shall mean
any sales office location or point of distribution utilized by
the Program that is owned by Guaranteed Insurance Agency,
Inc., an affiliate of Agency and listed in SCHEDULE A.
1.01.c. "Store" or "Stores" Defined. The term "Store" or "Stores"
shall collectively include both Company Stores and Franchisees
as referenced in SCHEDULES A and C, respectively.
1.02 General Duties of Agency. Subject to the limitations described in this
Agreement, Agency shall perform all acts necessary for the proper
solicitation, placement, acceptance, and servicing of the Insurance
Policies. The general duties of the Agency under this paragraph shall
include, but are not limited to, the following:
1.02.a. To solicit, prepare, accept, and submit applications for
Insurance Policies or contracts of insurance and endorsements
as described herein;
1.02.b. To collect, receive, and forward premiums, policy fees and/or
applicable tax(es), including premium and surplus lines taxes;
1.02.c. to appoint agents on behalf of the Insurer; and
1.02.d. To bind insurance contracts on behalf of the Insurer in
accordance with the Program's underwriting guidelines as
modified from time to time.
1.02.e. To carry out its duties to the best of its ability, knowledge,
skill and judgment.
1.03 Administrative Services Provided by Agency. Agency shall manage the
Stores and provide administrative services on behalf of Company in
connection with the Program, including but not limited to the
following:
A. Agency System. Provide and maintain an agency system to all
Stores in a form substantially similar to the FAST system
utilized by the Agency currently. This system shall include
but not be limited to, the following:
i) Maintenance of Rates, Forms and Underwriting
Guidelines.
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ii) Maintenance of cash control and receipt system
including transfer of funds to Company. With respect
to such funds, Agency will be responsible for any
lost, stolen or otherwise misappropriated funds.
iii) Make available for inspection all records of Agency
and producing agents.
iv) Maintain the ability to immediately suspend writing
of Texas agents due to:
A. Inclement weather conditions;
B. Exceeding monthly written premiums caps;
C. Suspension of agents writing authority;
D. Other conditions that may arise.
B. Claims Services Provided by Agency: Agency, or an affiliate of
Agency, shall adjust claims on the Program until such time as
the upload of necessary policy information to Company (or an
affiliate of Company), in a form acceptable to Company is
completed. Additionally, Agency shall:
i) Make available to Company all claims records;
ii) Notify Company immediately of any claims suits;
iii) Not make claim payments for any claim in excess of
five thousand dollars ($5,000) without prior approval
from Company;
iv) Comply with reasonable requests by Company to
facilitate the transition, if necessary, of claims
services to Company.
C. Agency Licensing and Agency Appointment. Agency shall be
responsible for the proper licensing of all agents of Stores
producing under the Program in accordance with laws in the
State of Texas. Agency shall also be responsible for the
timely termination of such appointments. In addition, Agency
shall provide the following:
i) Provide Company with and maintain current an Agency
database to include but not be limited to Agencies
names and addresses and email addresses;
ii) Provide Company with and maintain current an Agent
database that includes but is not limited to agent
name, address, license number, agency affiliation and
email address.
D. Other Cooperation: Agency shall cooperate and assist Company
in developing the necessary information systems required for
accurate and timely transmission of Program data between the
parties as well as the development of any other systems
necessary to implement the purposes of this Agreement.
1.04 Independent Contractor Status. Nothing contained herein shall create an
employer/employee relationship between Company and Agency or between
Agency and any affiliate of Company. Except as set forth herein,
Company shall have no right of control over Agency as to the time,
means, or manner of Agency's performance of its duties hereunder.
Agency shall conduct itself and its business under the terms of this
Agreement solely as an independent contractor.
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ARTICLE 2. COMPENSATION PAYABLE TO THE AGENCY; COMMISSION STATEMENTS
2.01 Commissions. If all of the terms of this Agreement are adhered to by
the Agency, the Agency shall be entitled to commissions, as described
below and listed on SCHEDULE B hereto, on Insurance Policies produced
by the Agency and through the Stores and written under the Program.
The commission so paid shall be accepted by the Agency in full
satisfaction of all claims by the Agency and Stores for services
rendered and expenses incurred on behalf of the Company. Agency shall
be solely responsible for the payment of commissions, if any, to
individual Stores and/or insurance producers. Notwithstanding
termination of this Agreement, in the event of cancellation or
termination of any coverage or policy prior to expiration, regardless
of whether such cancellation or termination was by policyholder or the
Company the Agency shall refund any unearned commissions to the Company
at the same rate paid to the Agency.
2.02 Commission Rate. Beginning on the Effective Date, the Agency will
receive a commission on the net collected premiums of the automobile
insurance business written by Stores under the Program. The rate of
said commission is set forth on SCHEDULE B hereto.
2.03 Estimated Commission Settlement. An estimate of Commissions due to
Agency, hereunder, will be paid to Agency on the first business day
following the receipt of net collected premiums by the Company in
accordance with Article 4.
2.04 Commission Statement. Following the end of each calendar month, the
Company shall, by the 15th day of the next month, send to the Agency a
statement of accounts setting forth, among other things, the premium
written, commissions earned, estimated commissions paid and the net
amount due to/from the Agency, together with payment of that amount, if
any. If such statement reflects an amount due to the Company from the
Agency, the Agency will pay that amount within 5 business days of the
date of said statement.
2.05 Acceleration. Should Agency default in any payment of premiums or
return of unearned commissions referred to herein, all unpaid premiums
and unearned commissions on the Insurance Policies shall be due and
payable immediately.
2.06 Equitable Relief. Notwithstanding Section 13.07 (Arbitration) of this
Agreement, should Agency fail to pay Company any premiums, unearned
commissions, or other monies when due, then Company shall be entitled
to the issuance of an injunction to obtain such premiums or monies to
prohibit Agency's use of such funds in violation of this Agreement, or
to require Agency's deposit of such funds in accordance with this
Agreement; and the cost and expense of the Company to obtain such
injunction, including reasonable attorneys' fees, shall be borne by
Agency. If the Company seeks, but is unsuccessful in obtaining such an
injunction, then the cost and expense of the Agency to obtain a court
order denying the injunction, including reasonable attorney's fees,
shall be borne by the Company.
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2.07 Full Compensation. The compensation to which Agency is entitled under
this ARTICLE 2 shall constitute full compensation for services to be
performed by Agency under this Agreement.
ARTICLE 3. LIMITATIONS OF AUTHORITY
3.01 Maximum Premium Volume. Absent prior written approval, the maximum
monthly premium volume (direct written premium, net of cancellations
and return premium, hereafter "Net Written Premium") that the Agency is
authorized to produce for the Company's account is as follows:
Monthly Year-to-Date
----------- ------------
January 2003 $ 3,000,000 $ 3,000,000
February 2003 5,000,000 8,000,000
March 2003 5,000,000 13,000,000
April 2003 3,000,000 16,000,000
May 2003 3,000,000 19,000,000
June 2003 3,000,000 22,000,000
July 2003 3,000,000 25,000,000
August 2003 3,000,000 28,000,000
September 2003 3,000,000 31,000,000
October 2003 3,000,000 34,000,000
November 2003 3,000,000 37,000,000
December 2003 3,000,000 40,000,000
----------- -----------
Total 2003 $40,000,000
-----------
January 2004 $ 6,000,000 $ 6,000,000
February 2004 10,000,000 16,000,000
March 2004 10,000,000 26,000,000
April 2004 6,000,000 32,000,000
May 2004 6,000,000 38,000,000
June 2004 6,000,000 44,000,000
July 2004 6,000,000 50,000,000
August 2004 6,000,000 56,000,000
September 2004 6,000,000 62,000,000
October 2004 6,000,000 68,000,000
November 2004 6,000,000 74,000,000
December 2004 6,000,000 80,000,000
----------- -----------
Total 2004 $80,000,000
-----------
Agency may request approval from the Company to exceed a specific
monthly cap. Such required approval shall not be unreasonably withheld
as long as the year-to-date aggregate total has not been exceeded.
3.02 Underwriting Guidelines and Forms under the Program. The rules and
rates to be utilized by the Agency under the Program in underwriting
the insurance are those which
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have been approved for use by the Insurer and the Company and filed
with the insurance department of the State of Texas (see attached
"Underwriting Guidelines" in SCHEDULE D. A copy of the rules and rates
shall be maintained on file at the offices of the Agency. These rules
and rates cannot be changed or deviated from without the prior written
consent of the Company. Further, insurance coverage shall be evidenced
pursuant to the policy form(s) which have been approved for use by the
Insurer and the Company and which shall be maintained on file at the
offices of the Agency.
3.03 Maximum Policy Limits and Policy Term. The maximum limits of insurance
coverage and policy term that may be provided under any policy bound by
the Agency shall be consistent with the Underwriting Guidelines
established by the Company, from time to time.
3.04 Company's Right to Cancel/Nonrenew Insurance Policies. The Company
reserves the right on behalf of Insurer to cancel or non-renew any
Insurance Policy, subject to requirements imposed by law and any policy
provision, without specifying the reason therefore and without
liability to the Agency or the producing agents.
3.05 Company's Right to Suspend Binding Authority. Company may suspend the
binding authority of the Agency or of any of the Stores at any time
with notice.
3.06 Prohibited Expenses. The Agency shall not charge or commit Company to
any expense, agreement, payment, debt, settlement, or obligation other
than as expressly provided for herein.
3.07 Claims Settlement Authority. Except as specifically provided herein,
Agency has no authority to adjust or settle any claims arising out of
or in connection with the Insurance Policies. Agency shall not collect
payment from any reinsurer or commit Company or Insurer to a claim
settlement with a reinsurer.
ARTICLE 4. PREMIUM COLLECTION AND REMITTANCES
4.01 Payment of Premium Responsibility for. All applications and, where
applicable, premium payments for new Insurance Policies submitted by
the Agency will be forwarded to the Company in the manner prescribed in
the Insurer's or Company's Underwriting Guidelines or as otherwise may
be instructed by the Company from time to time. The Agency may not
collect premiums on any Insurance Policies that have been cancelled,
expired terminated, or non-renewed.
4.02 Premium Trust Account. All premiums and other funds collected by Agency
for the Company's account are the property of Company and shall be held
in trust on behalf of Company in fiduciary capacity ("Premium Trust
Funds") and shall be deposited and maintained in an account separate
and segregated from Agency's own funds or funds held by Agency on
behalf of any other company or person (the "Premium Trust Account")
until such time that the Agency has remitted premiums to the Company in
accordance with 4.03 below. The Premium Trust Accounts shall be
maintained in an amount at least
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equal to the premiums (unpaid to Company), and return premiums (unpaid
to policyholders or insureds) received by Agency.
4.03 Premium Remittances. The Agency shall make available premiums collected
or deemed to have been collected by the Agency or Stores by the third
(3rd) business day following the receipt of premiums by the Agency or
Stores. Company will by ACH or other means debit the Premium Trust
Account for said premiums collected.
ARTICLE 5. REPORTS
5.01 Financial Information. Agency agrees to furnish Company with financial
statements each calendar quarter, which accurately reflect the
financial condition of the Agency and the Stores and other affiliates
of Agency through which Agency performs its duties and obligations
under this Agreement, and which financial statements, if annual, will
include an auditor's statement and report if Agency obtains audited
statements. If Agency does not obtain audited statements, the financial
information furnished may be unaudited, unless the law of any state
having jurisdiction over this Agreement requires submission of an
audited statement Such financial information shall be furnished to
Company within ninety (90) days (or sixty 60 days if unaudited)
following the close of the calendar year or quarter of the Agency.
5.02 Reporting Requirements. With regard to the Insurance Policies written,
Agency shall provide, at its expense and within a reasonable time after
written request from the Company, sufficient information to satisfy
reasonable reporting requirements imposed on Company by boards,
bureaus, and associations, and to enable Company and reinsurers to file
required financial statements and reports with insurance departments
and regulatory bodies. Company shall provide Agency with such written
reporting requirements.
ARTICLE 6. RECORDS
6.01 Records Retention. Agency shall keep true and complete records of all
transactions and correspondence with policyholders, agents, brokers,
insurance departments, and Company. The Company shall have access to,
and the right to copy, all accounts and records related to such
insurance, in a form usable by the Company, at any time during the
Agency's business hours. All records and documents required to be
maintained by Agency including, but not limited to, policyholder
information and financial documents, shall be maintained during the
Term, as defined in Section 10.01 and thereafter while providing any
continuing services hereunder, in a manner and form as mutually agreed
upon or as required by Company to be compatible with Company's internal
systems and in accordance with generally acceptable accounting
principles and insurance regulatory practices.
6.02 Document Production. On request, Agency will forward to Company, no
later than five (5) days from such request (or such longer period as
may be reasonably necessary to produce such information), exact copies
of all Insurance Policies or other appropriate evidences of insurance
written pursuant to this Agreement; financial documents or other
reports; policyholder data; or any other information in Agency's
possession requested by
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Company and not otherwise readily available to Company relating to the
Insurance Policies.
ARTICLE 7. GENERAL OBLIGATIONS OF AGENCY
7.01 Licensing. Agency warrants that it is, and will continue to be during
the Term and thereafter while providing any continuing services
hereunder, authorized and licensed to perform all acts set out in this
Agreement. On or before the signing of this Agreement, the Agency shall
provide Company with a copy of its current Managing General Agent
and/or Agency License, and thereafter shall provide copies of any
renewal of such license to Company within 15 days of receipt of the
renewed license from the Texas Department of Insurance.
7.02 Supervision of Agents/Producers. Agency shall maintain a listing and
current copies of the insurance licenses of any agent or broker or
Franchisee from which Agency accepts a submission. Agency shall
supervise all agents, brokers and franchisees who place business
through Agency. Further, Agency shall be responsible to Company for
such agents, brokers and Franchisees and for all funds collected for
business solicited by such agents ,brokers and Franchisees. At
Company's request, the Agency shall provide to Company copies of the
listing of and of any agreements with such agents and brokers, and
Franchisees.
7.03 Compliance with Laws. Agency shall be responsible for full compliance
with all applicable laws, regulations, rules and requirements relating
to the performance of its obligations hereunder; and the general
standards, rules, and regulations of the insurance industry; and all
written instructions provided to Agency from time to time by Company.
7.04 Complaint Procedure. Agency, Company and Insurer shall notify the other
within three (3) business days of notice or receipt (or such shorter
period as necessary to adequately respond) of any complaint with any
insurance department or other regulatory authority relating to the
Insurance Policies, whether against Company, any affiliate of the
Company, Insurer, Agency, its agents, or brokers or Franchisees. Agency
shall provide Company with a proposed written response to a complaint
including, but not limited to, a written summary of all facts relevant
to such complaint. Company will then respond, or authorize Agency to
respond, to such complaint in such form as Company determines, in
Company's sole discretion, is necessary. The parties will work together
to promptly and adequately respond to any such complaint.
7.05 No Authority to Delegate. Except as specifically provided herein,
Agency shall not have the authority to delegate any authority contained
herein to any other person or entity without prior written
authorization from Company.
7.06 Agency Expense Responsibility. Since Agency, the Stores, and their
employees are independent contractors and not employees of Company, all
expenses including, but not limited to, Agency's office rent;
transportation; salaries; utilities; furniture; fixtures; equipment;
telephone; attorney and/or legal fees; postage; promotional advertising
and public relations expenses; printing costs, records and reports;
inspection fees; credit
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reports and any other documents required to fulfill Agency obligations
hereunder; commissions, fees due to agents or brokers; and Agency
license fees and occupational taxes, whether billed to Agency or
Company, shall be the sole liability of Agency, unless assumption of
such expense by Company is agreed to in writing by Company. Agency will
remit promptly to Company the amount of any such item billed to Company
upon notice by Company to Agency of the charge therefore.
7.07 Use of Company Logo, etc. Agency may not use the name, logo, or service
xxxx of Company or any of its affiliates in any advertising,
promotional material, or in any material disseminated by Agency without
the prior written consent of Company. Agency shall maintain copies and
provide an original to Company of any advertisement or other materials
approved by Company along with full details concerning where, when, and
how it was used. Agency shall be liable for any liability of or cost
incurred by Company as a result of the use of any such advertisements
or materials.
7.08 Ownership of Supplies. All forms and supplies provided to Agency or
authorized to be used by Agency by Company shall remain the property of
Company and shall be returned immediately upon request. Upon
termination of this Agreement or Agency's authority hereunder, at the
request of Company Agency shall return to the Company or to its
designated representative all property owned or leased by Company.
7.09 RESERVED
7.10 RESERVED
7.11 Confidentiality. If either party provides to the other party access to
information or networks through computer access, such other party shall
be responsible for maintaining the confidentiality, security and
integrity of such information and of the providing party's computer
programs and systems. Additionally, each party that obtains such
information shall be responsible to insure that its employees, agents,
and representatives are aware of the sensitive and proprietary nature
of the information obtained, of the importance of confidentiality, and
of the conditions described in this Section 7.11. This Section 7.11
shall survive termination of this Agreement.
7.12 Claims Reporting. At such time that the Company (or an affiliate of the
Company) assumes responsibility for handling claims under the Program,
Agency shall ask policyholders to promptly report all claims, suits, or
losses to Company or an assigned adjuster or claim representative who
has been designated by Company. Company will provide Agency appropriate
telephone numbers and addresses for this purpose. Agency shall
cooperate with Company or the assigned adjuster or claim representative
in the investigation, adjustment, settlement, and payment of claims
arising out of the Insurance Policies. All records, files,
correspondence, or other materials pertaining to claims shall be the
sole property of Company. Retention of a commission under the terms of
this Agreement shall constitute a representation by Agency that all
known claims have been accurately, promptly, and completely reported to
Company.
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ARTICLE 8. GENERAL OBLIGATIONS OF COMPANY
8.01 Insurance Department Complaints. Notwithstanding Section 7.04 hereof
Company shall have the sole right to respond to any state insurance
department complaint or inquiry, after consulting with Agency as
provided herein.
8.02 Use of Agency's Logo, etc. Company agrees that it shall not use
Agency's name, logo, or service xxxx in connection with any advertising
without Agency's prior written approval.
8.03 Company's Right to Offset. Company may combine or offset any balances
or funds owed by Agency to Company against any balances or funds owed
to Agency by Company under this Agreement or any other agreement
between the parties.
8.04 Representations.
8.04.a. During the Term of this Agreement, Company shall not solicit
Franchisees for the purpose of competing with Company Stores.
8.04.b. During the Term of this Agreement, Company shall not open any
sales location for the purpose of offering the Program within
a two (2) mile radius of any Company Store.
ARTICLE 9. INSURANCE AND INDEMNITY
9.01 Insurance. Agency and the Stores are required to maintain in fill force
and effect the following existing insurance policies issued by an
insurer acceptable to Company during the Term of this Agreement and
thereafter while Agency has any obligations hereunder covering Agency
and the Stores and their employees as follows:
a. Errors and omissions coverage in the minimum amount of $1
million, with a deductible not to exceed $100,000;
b. Commercial general liability insurance policy in the minimum
amount of $l million each occurrence and $l million general
aggregate, including:
i. Personal injury liability of $l million; and
ii. Non-owned automobile liability of $l million;
c. Fidelity bond coverage in the amount of $1 million; and
d. Workers compensation insurance in the amount of Texas'
required minimum.
Such insurance shall be maintained by Agency and/or the Stores at their
sole cost and expense, and shall be primary on contributing coverage
over any other valid and collectible insurance available to Company.
Agency shall request its insurers to provide thirty (30) days prior
notification to Company, and Agency agrees to immediately notify
Company when it receives notice of any lapse, increased deductibles, or
upon receipt of a notice terminating coverage. Agency shall furnish
proof of such insurance within fifteen (15)
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days of the Company's written request for the same. Agency further
agrees to notify Company promptly of any claim brought under any such
policy which arises out of or is connected with the Insurance Policies
written hereunder.
9.02 Indemnification by Agency. At all times hereafter, Agency hereby agrees
to defend, indemnify, and hold Company harmless from and against all
claims, actions, causes of action, liability, or loss which result from
any negligent or willful acts, errors, or omissions of Agency, or the
Stores, their employees, representatives, agents, or sub-agents in the
performance or breach of duties under this Agreement. Agency further
agrees that in the event Company or any Store is in violation of any
code, statute, regulation, or bulletin due to the negligent or willful
acts, errors or omissions of Agency, or Store, its employees,
representatives, agents, or sub-agents, then Agency shall assume the
responsibility and liability for such act and shall indemnify and hold
Company harmless for such liability and loss. Loss shall include, but
not be limited to, all damages, costs, expenses, reasonable attorneys'
fees, penalties, fines, direct damages, verdicts (including punitive
damages to the extent permissible by law), and any other expense or
expenditure incurred by Company. This Section shall survive termination
of this Agreement.
9.03 Indemnification by Company. At all times hereafter, Company hereby
agrees to defend, indemnify, and hold Agency harmless from and against
all claims, actions, causes of actions, liability, or loss which result
form any negligent or willful acts, errors, or omissions of Company,
its employees, representatives, agents, or sub-agents in the
performance or breach of duties under this Agreement. Company further
agrees that in the event Agency is in violation of any code, statute,
regulation, or bulletin due to the negligent or willful acts, errors,
or omissions of Company, its employees, representatives, agents, or
sub-agents, then Company shall assume the responsibility and liability
for such act and shall indemnify and hold Agency harmless for such
liability and loss. Loss shall include, but not be limited to, all
damages, costs, expenses, reasonable attorney's fees, penalties, fines,
direct damages, verdicts (including punitive damages to the extent
permissible by law), and any other expenses or expenditures incurred by
Agency. This Section shall survive termination of this Agreement.
9.04 Notice of Indemnifiable Claim. Upon receipt of a claim or demand for
which a party is entitled to indemnification, the indemnified party
shall as promptly as is reasonably possible:
9.04.a. Notify the indemnifying party in writing of the nature of the
indemnifiable claim, and the names and addresses of the
persons involved in or having an interest in such claim in the
manner provided in Section 1.01 of this Agreement; and
9.04.b. Furnish the indemnifying party with all documents and
information within the possession, custody or control of the
indemnified party and relating to such claim; and
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9.04.c. Cooperate with the indemnifying party and its counsel,
including but not limited to, appearing as a witness as may be
reasonably required and responding to all reasonable request
for documents and answering interrogatories.
Upon receipt of written notice of an indemnifiable claim and all other
documents and instruments required by this Agreement to be furnished to
the indemnifying party, the indemnifying party shall thereafter be
given a reasonable opportunity to defend or settle such a claim at its
own expense. Neither party shall settle any such claim that might have
an adverse effect on the other party, without the prior written consent
of the other party, which shall not be unreasonably withheld. Each
party shall at all times have the full right to participate in any such
defense at its own expense. If either party, within a reasonable time
after receiving notice of a claim from the other party, fails to
defend, such other party shall have the right, but not the obligation
to undertake the defense, compromise, or settlement of such claim on
behalf of, for the account of, and at the risk of the party failing to
defend.
ARTICLE 10. TERM OF AGREEMENT
10.01 Term. The term of this Agreement shall commence on the Effective Date,
and terminate on December 31, 2004, unless terminated earlier as set
forth in Article 11 below (the "Term").
ARTICLE 11. TERMINATION OF THIS AGREEMENT
11.01 Termination by Company. The Company may terminate this Agreement at any
time for any reason with written notice to Agency. In the event of such
termination (unless the termination is for cause, as described below),
Agency shall retain all rights to the renewal of all of the Company's
business written by Stores under this Agreement. Thereafter, the
Company will not solicit any of the customers of Stores for renewal of
Insurance Policies. In no event, however, shall the term "solicit"
include response to any general advertisement by Company or as required
by law.
11.02 Termination by the Company for Cause. The Company may immediately
terminate this Agreement in whole or in part, for cause if Agency
materially breaches any provision of this Agreement after written
notice of such breach has been given to Agency and Agency has failed to
cure within a ten (10) day notice period. Breach shall include, but not
be limited to, the following events:
11.02.a. Insolvency. Agency or any of the Company Stores becomes
insolvent, institutes or acquiesces in the institution of any
bankruptcy, or liquidation proceeding or any such proceeding
is instituted against Agency or any of the Stores that remains
undismissed for thirty (30) days; or
11.02.b. Sale of Stock or Assets to a Third Party. Other than as
related to the Option Agreement, Agency or the owner of a
controlling interest in Agency or the Company Stores, sells,
exchanges, transfers, assigns, consolidates, pledges or
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causes to be sold, exchanged, transferred, assigned,
consolidated, or pledged, all or substantially all of the
stock of Agency, or all or substantially all of the stock or
assets of the Company Stores, to a third party without the
prior written consent of Company, which consent will not be
unreasonably withheld (Agency shall immediately notify Company
of same); or
11.02.c. Inadequate Staff. Agency or Company Stores fails to maintain
a staff qualified to service the Insurance Policies or to
maintain the quality of services and obligations necessary to
operate within this Agreement, if such failure would have a
material adverse effect on the level of the quality of
services provided by Agency under this Agreement; or
11.02.d. Remit Reports or Premiums. Agency fails to provide, or cause
to be provided, timely and proper reports or premium
accounting as required, or to remit premiums when due after
thirty (30) days written notice from Company; or
11.02.e. Maintain Trust Funds. Agency fails to maintain Premium Trust
Funds in the amount and manner required in this Agreement
after ten (10) days notice from the Company that such funds
are not being maintained; or
11.02.f. Misconduct, etc. Agency or any Company Store engages in acts
or omissions constituting abandonment, fraud, misappropriation
of funds, material misrepresentations, gross or willful
misconduct, or any other acts that are prohibited by law or
regulation of any applicable regulatory authority; or
11.02.g. Agency License. Agency's or any Company Store's license or
certificate of authority is canceled, suspended, or is
declined renewal by any regulatory body within the State of
Texas if, after ninety (90) days, Agency fails to remedy such
loss of license (Agency shall immediately notify Company of
same); or
11.02.h. Underwriting Guidelines; Policy Forms. Agency or any Company
Store binds or underwrites risks (i) that are unacceptable in
accordance with the underwriting guidelines, procedures,
instructions, or memoranda provided for herein, or (ii) with
limits in excess of those specified in the underwriting
authority limits provided for herein, or (iii) with policy
forms or filings in a jurisdiction where Agency has knowledge
that required regulatory approvals have not been met;
provided, however, that clauses (i) and (ii) of this
subparagraph shall not apply if any unacceptable risk is bound
or underwritten by an Agency as an occasional and isolated
event, and Agency takes immediate action to correct and avoid
recurrence of such event; or
11.02.i. Access to Records. Agency or the Company Stores fail to permit
Company to inspect or audit any records or files relating to
the Insurance Policies.
11.03 Ownership of Business. If this Agreement is terminated by the Company
pursuant to Section 11.01, the records and the use and control of
expirations for the insurance serviced under this Agreement shall
remain the property of the Agency and be left in the
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Agency's exclusive possession, provided Agency has then rendered and
continues to render timely accounts and payments of all monies due the
Company.
However, if the Agency is in default of this Agreement and/or if this
Agreement is terminated by the Company for Cause as described in
Section 11.02, or if Agency fails to render timely accounts and
payments within three (3) days after such failure is brought to the
Agency's attention, then the records and the use and control of
expirations, shall be the property of the Company and Agency shall
immediately thereafter forward all such records to the Company.
11.04 Continued Servicing. Agency agrees that in the event this Agreement is
terminated for any reason, Agency and the Stores shall continue to
perform all customary and necessary services for all in-force Insurance
Policies in accordance with the provisions of this Agreement until all
such Insurance Policies have been completely cancelled, non-renewed, or
otherwise terminated; provided, however, that Company may, in its sole
discretion, immediately suspend or terminate Agency's continuing
service obligation hereunder. Agency's continuing service obligations
after termination of the Agreement shall include, but not be limited
to:
11.04.a. The issuance and countersignature, if applicable, of
appropriate endorsements to such in-force Insurance Policies
when so authorized in writing by Company, provided that such
endorsements shall not increase Company's liability or extend
the term of any Insurance Policy without prior written
approval of Company; and
11.04.b. The collection and remittance of all premiums due on such
in-force Insurance Policies hereunder.
If Agency fails in any respect to fulfill this continuing service
obligation, then Agency shall reimburse Company any reasonable expense
incurred by Company to service or arrange for the servicing of the
Insurance Policies issued by or through Agency hereunder or such
amounts may be offset by Company.
Upon Company providing written notice of termination to Agency
hereunder, Company is hereby authorized to deal directly with all other
licensed persons and/or entities with respect to the Insurance Policies
hereunder, including but not limited to, the right to collect from and
return premiums directly to the Stores and all producers, brokers, or
insureds.
ARTICLE 12. SOLICITATION AND RECRUITMENT
12.01 Non Solicitation. During the Term of this Agreement, and for a period
of eighteen months (18) after Company exercises its Option, as defined
in the Option Agreement, Agency and Stores shall not solicit any
customer of Company, or divert or attempt to divert from Company any
customer of Company, for automobile insurance sales or services to be
provided by any person or entity that competes with Company in the
business of selling, quoting or servicing automobile insurance
policies. For the purposes hereof, a "customer
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of Company" shall mean any person or entity for whom or which Company
has provided automobile insurance sales within two (2) years prior to
the termination of this Agreement. This Section 12.01 shall not apply
to solicitation of customers of the Company, following termination of
this Agreement under Section 11.01.
12.02 Non-Recruitment. During the Term of this Agreement, and for a period of
eighteen (18) months after Company exercises its Option, Agency shall
not, directly or indirectly, recruit, solicit or encourage, or
facilitate the recruitment, solicitation, or encouragement of any
employee of Company to terminate said employee's employment with
Company or otherwise interfere in anyway with said employee's
employment with Company.
12.03 Injunctive Relief. Notwithstanding Section 13.07 (Arbitration) of this
Agreement, should Agency violate the terms of Section 12.01 or 12.02,
then the parties agree that Company would suffer irreparable harm and
the Company shall be entitled to the issuance of an injunction to
prohibit Agency from such solicitation, recruitment and/or interference
with Company's employees. The cost and expense of the Company
successfully obtaining said relief including reasonable attorneys'
fees, shall be borne by Agency. If the Company seeks, but is
unsuccessful in obtaining such injunction, then the cost and expense of
the Agency to obtain a court order denying the injunction, including
reasonable attorneys' fees, shall be borne by the Company.
ARTICLE 13. GENERAL PROVISIONS
13.01 Notice. Except as otherwise set forth herein, any notice required under
this Agreement must be in writing and either sent by first class mail,
facsimile, electronic mail, certified mail, or personally delivered.
Notice shall be effective either upon receipt or five (5) days after
mailing to the other party, whichever comes first. Unless changed by
written notice to the other party, the U.S. mail addresses of the
respective parties are:
AGENCY:
All American General Agency, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxx, President
COMPANY:
Direct General Insurance Agency, Inc. (Texas)
0000 Xxxxxxxx Xxxx Xxxxx, Xxxxxxxx X
Xxxxxxx, XX 00000
Attn: Xxxxxxxxxx X. Xxxxx, President
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With copy to:
Direct General Insurance Agency, Inc. (Texas)
Regional Administrative Xxxxxx
0000 Xxxxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Secretary
13.02 Integration, Waiver, and Amendment. This Agreement, together with its
Schedules constitute the entire agreement between Company and Agency
and supersedes any and all other agreements, either oral or written,
between Company and Agency with respect to the sub-producer or agency
relationship between the parties. No waiver by either party to enforce
any provision of this Agreement will be effective unless made in
writing and signed by an authorized officer of Company and Agency and
shall be effective as to the specifically stated waiver. No amendment
to this Agreement will be effective unless made in writing and signed
by the parties hereto, and specifying the effective date of such
amendment.
13.03 Remedies Not Exclusive. No right or remedy set forth in this Agreement
is exclusive of any other right or remedy but shall be in addition to
every other right and remedy given under this Agreement or existing now
or hereafter at law or equity.
13.04 Severability. Wherever possible, each provision of this Agreement will
be interpreted in such a manner and to such an extent as to be
effective and valid under applicable law. If any provision is
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity.
13.05 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to its
rules regarding conflict of laws.
13.06 Conformance to Law. This Agreement and the provisions relating to
commissions shall, without prior notice, be automatically modified to
conform to any law or governmental regulation having application to or
jurisdiction over the subject matter of the parties hereto and the
parties shall promptly amend the Agreement to comply with such
modifications.
13.07 Arbitration. Except as provided in Section 2.05 (Equitable Relief) and
Section 12.03 (Injunctive Relief), all unresolved differences of
opinion or disputes between Company and Agency arising out of or in
connection with this Agreement or any transaction hereunder shall be
submitted to arbitration, in accordance with the rules relating to
commercial arbitration of the American Arbitration Association except
as modified herein.
The Board of Arbitration ("Board") shall consist of one (1) arbitrator
chosen by Company, one (1) arbitrator chosen by Agency, and an umpire
chosen as promptly as possible by the two (2) arbitrators. The
arbitrators and umpire shall be financially
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disinterested parties or former executives of property or casualty
insurance or reinsurance companies.
The party demanding arbitration shall communicate its demand therefore
in writing, identifying the nature of the dispute and the name of its
arbitrator, to the other The other party shall then be bound to name,
in writing, its arbitrator within thirty (30) days after receipt of
such demand. Failure or refusal of the other to name its arbitrator
within the thirty (30) day time period shall empower the demanding
party to name the second arbitrator as well.
If the two (2) arbitrators are unable to agree upon an umpire within
thirty (30) days after the second arbitrator is named, either party may
petition a court of competent jurisdiction to make the appointment of
an umpire from candidates submitted by both parties in conformity with
the qualifications set out in this Agreement.
The applicant for arbitration shall submit its position in writing
within thirty (30) days after selection of the umpire. The respondent
shall submit its written position within thirty (30) days after receipt
of the applicant's position. The Board may extend any of the time
periods set forth above.
The Board shall have the power to make and determine all procedural
rules for the holding of the arbitration including discretionary power
to make orders as to any matter which they may consider proper in the
light of circumstances of the case with regard to pleadings,
depositions, discovery, inspection of documents, examination of
witnesses, and any other matter whatsoever relating to the conduct of
the arbitration and may receive and act upon such evidence, whether
oral or written, strictly admissible or not as the Board shall find
fit. The Board shall make its decision based on the terms of this
Agreement, the intent of the parties and the custom and usage of the
non-standard automobile insurance industry.
All rules, orders, acts, and decisions of the Board shall be effective
if done by a majority of the Board. The final determination of the
Board shall be made in writing within sixty (60) days of the conclusion
of the arbitration. Any decision shall be final and binding on the
parties, and shall not be subject to appeal. If either party fails to
comply with the Board's decision, the other party may apply for its
enforcement to a court of competent jurisdiction.
Each party shall bear the cost of its own arbitrator and shall jointly
and equally bear with the other party the expenses of the umpire. The
Board shall allocate the remaining costs of the arbitration proceeding.
The arbitration proceedings shall convene and be held within Davidson
County, Tennessee or such other location mutually agreed upon by the
parties.
Nothing contained in this Paragraph shall be construed as limiting the
ability of Company to suspend the authority of Agency pursuant to this
Agreement.
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This Section 13.07 shall survive termination of this Agreement.
13.08 Other Companies. Agency agrees to advise Company of existing and future
agency agreements entered into with other insurance companies with
respect to the classes of business covered by this Agreement.
13.09 Non-Assignability/Non-Delegation. Except as specifically provided
herein, neither party may delegate its duties nor assign its rights
under this Agreement, unless otherwise agreed upon and authorized in
writing by an officer of the other party.
13.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.
13.11 Headings. The headings and table of contents utilized in this Agreement
are for convenience purposes only and are not part of the Agreement.
ARTICLE 14. PERFORMANCE GUARANTY
14.01 Performance Guaranty. Agency shall guarantee and ensure the following:
A. General Duties. Agency shall guarantee and ensure that Stores
and their producers shall perform all acts necessary for the
proper solicitation, placement, acceptance, and servicing of
the Insurance Policies. The general duties of the Stores and
its producers shall include, but are not limited to, the
following:
i) To solicit, prepare, accept, and submit applications
for Insurance Policies or contracts of insurance and
endorsements as described herein;
ii) To collect, receive, and forward premiums, policy
fees and/or applicable tax(es), including premium and
surplus lines taxes;
iii) to appoint agents on behalf of the Insurer;
iv) To bind insurance contracts on behalf of the Insurer
in accordance with the Program's underwriting
guidelines as modified from time to time;
v) To carry out its duties to the best of its ability,
knowledge, skill and judgment.
B. Records Retention. Stores and its producers shall keep true
and complete records of all transactions and correspondence
with policyholders, agents, brokers, insurance departments,
and Company. Such records shall be maintained during the Term
and thereafter while providing any continuing services
hereunder, in a manner and form as mutually agreed upon or as
required by Company to be compatible with Company's internal
systems and in accordance with generally acceptable accounting
principles and insurance regulatory practices.
C. Supervision of Agents/Producers. Stores shall maintain a
listing and current copies of the insurance licenses of any
agent or broker or Franchisee from which Agency accepts a
submission. Agency shall supervise all agents, brokers and
Franchisees who place business through Agency. Agency shall be
responsible to Company for such agents,
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brokers and Stores and for all funds collected for business
solicited by such agents, brokers and Stores.
D. Indemnification. If failure of the Stores or their producers
to perform hereunder results in any claim, action, cause of
action, liability or loss to Company, Agency shall indemnify
Company in accordance with Sections 9.02 and 99.04 hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective as of the Effective Date.
ALL AMERICAN GENERAL AGENCY, INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxx
President
DIRECT GENERAL INSURANCE AGENCY, INC., a Texas corporation
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx
Senior Vice President and CFO
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