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Exhibit 10.21
GENERAL AGENCY AGREEMENT
THIS AGREEMENT, made July 1, 1996, between BLISS & XXXXXXX INC.
("Agent") and PENN-AMERICA INSURANCE COMPANY, 000 Xxxxx Xxxx Xxxx, Xxxxxxx,
Xxxxxxxxxxxx, 00000 ("Company").
1. GENERAL PROVISIONS: The relationship between Company and Agent is
one of independent contract based upon mutual trust, understanding,
accountability and responsibility. The parties agree to comply with all
applicable licensing and regulatory rules, and to conduct themselves in a
professional, business-like and ethical manner at all times. This agreement
supersedes any and all prior or contemporaneous agreements, representations, and
understandings, written and oral, on these subjects. The undersigned signatories
hereby warrant that they have full power and authority to execute this Agreement
on behalf of the respective parties thereto.
2. AGENCY MANUAL: Agent agrees to abide by the provisions of Company's
Agency Manual, as published and updated from time to time (the "Manual").
3. AUTHORITY OF AGENT: Agent is granted non-exclusive binding authority
for the Company in California as specified in the Manual. This binding authority
cannot be delegated.
4. COMPENSATION: Agent will earn commissions and, if applicable, profit
sharing on insurance written under this Agreement as set forth in the "Agency
Performance Award/Profit Sharing Addendum."
5. INDEMNIFICATION: Company shall indemnify, hold harmless and defend
Agent, and Agent shall indemnify and hold harmless Company, from any loss,
damage, judgment cost, claim or expense of any kind, including but not limited
to, attorneys' fees, which either may incur or become liable due to the other's
acts of omissions related to or arising out of this Agreement. Company's
obligation to indemnify Agent shall be conditioned as Company receiving prompt
notification of any suit or claim against Agent and being afforded the
opportunity to make such investigation, settlement or defense as Company deems
prudent.
6. ARBITRATION: Any controversy or claim arising out of or related to
this Agreement or its breach shall be settled by binding arbitration in Hatboro,
Pennsylvania. One Arbiter shall be chosen by Company, the other by Agent and
these Arbiters shall then choose an Umpire. The Arbiters and the Umpire shall be
active or retired disinterested executive officers of property and casualty
companies or insurance agencies. If either party fails to choose an Arbiter
within thirty days following a written request from the other, the other may
choose both Arbiters. If the Arbiters fail to agree on an Umpire the Umpire
shall be selected in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, which Rules shall generally
govern the conduct of the arbitration except as specifically modified by this
Agreement. The decision of a majority of the three shall be final, and shall be
based on the customs and usages of the business and in a spirit of equity rather
than of technicalities or legal requirements. The written decision of the
Arbiters and the Umpire shall be delivered to Company and Agent within thirty
days after all matters have been submitted for decision. Each party shall pay
the expenses of its own Arbiter and one half the expenses of the Umpire, except
that, in the event both Arbiters have been selected by one party,
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then each party shall pay one half of the expenses of the two Arbiters. Judgment
on the award rendered in the arbitration may be entered in any court having
jurisdiction thereof.
7. ASSIGNMENT: Agent may not assign any rights or obligations under
this Agreement without Company's prior written consent.
8. SEVERABILITY: If any portion of this Agreement or its application to
any circumstance is judged void or unenforceable, the remaining provisions shall
not be affected, and shall be enforced to the fullest extent permitted by law.
9. TERMINATION: This Agreement may be terminated in one of four ways:
(i) By either party on ninety (90) days advance written notice to the other.
(ii) By either party on written notice for any breach of the Agreement that has
not been cured within thirty (30) days after receipt of written notice thereof.
(iii) Automatically if the Agent's insurance license is suspended or terminated
in any jurisdiction. (iv) On the effective date of the sale or transfer of
Agent's business, or substantially all of the business' assets, from Agent's
present ownership without the Company's prior written consent.
IN WITNESS WHEREOF, and intending to be bound, Company and Agent have
executed this Agreement effective July 1, 1996.
PENN-AMERICA INSURANCE COMPANY BLISS & XXXXXXX INC.
BY: /s/ Xxxx X. XxXxxxx BY: /s/ Xxxxxx Xxxxxxxx
---------------------------- --------------------------
Xxxx X. XxXxxxx, CPCU Xxxxxx Xxxxxxxx, CPCU
Executive Vice President President
**********************************************
PERSONAL GUARANTEE: If Agent is a corporation or limited liability company, the
shareholder(s) or member(s), as the case may be, signing below agree to
guarantee the payment of all sums due Company under this Agreement and any
successors hereto.
By /s/ Xxxxxx Xxxxxxxx
-----------------------------------
Xxxxxx Xxxxxxxx, CPCU
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ADDENDUM NO. ONE
AGENT'S CONTRACT ADDENDUM
THIS ADDENDUM by and between PENN-AMERICA INSURANCE COMPANY (hereinafter
referred to as "Company") and BLISS & XXXXXXX INC., hereinafter referred to as
"Agent") shall, upon execution by the Company, become a part of the Agent's
Agreement, between Company and Agent, dated July 1, 1996.
It is understood and agreed by the Company and Agent that the Agreement is
amended as follows:
Add branch office at 00000 Xxxxx Xxxxx Xxxxx,Xxxxx 000, Xxx Xxxxx, XX 00000
Agency Code No. 2224
IN WITNESS WHEREOF, the parties intending to be legally bound execute this
Addendum as follows:
IN WITNESS WHEREOF, and intending to be bound, Company and Agent have executed
this Agreement effective October 14, 1996.
PENN-AMERICA INSURANCE COMPANY BLISS & XXXXXXX INC.
BY: /s/ Xxxx X. XxXxxxx BY: /s/ Xxxxxx Xxxxxxxx
----------------------------- ------------------------------
Xxxx X. XxXxxxx, CPCU Xxxxxx Xxxxxxxx, CPCU
Executive Vice President President
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AGENCY PERFORMANCE AWARD /
PROFIT SHARING ADDENDUM
THIS ADDENDUM, effective January 1, 1996 forms part of the agreement between
PENN-AMERICA INSURANCE COMPANY (hereinafter referred to as "Company" or
"Penn-America") and BLISS & XXXXXXX INC. (hereinafter referred to as "Agent"),
dated September 1, 1991.
I. INTRODUCTION
A. This two-part plan is designed to reward you for the manner in
which you conduct your business with Penn-America and for your
favorable underwriting results. Part "A" is a Performance
Award and Part "B" is a policy-year loss ratio based Profit
Sharing plan.
B. Payments of your Agency Performance Award and Profit Sharing
("Agency Bonus") under this Addendum will be made in shares of
stock of the Company's parent, Penn-America Group, Inc.
("PAGI") ("PAGI Stock" or "Stock") and, unless you elect
otherwise, cash, in accordance with the provisions of Section
IV below.
II. HOW YOUR AGENCY QUALIFIES FOR THE PLAN
A. Part "A" -- (Performance Award) Eligibility
1) Your Agency Bonus will be paid on a 12-month basis,
with criteria evaluated from January 1 forward.
Agency appointments will be subject to pro-ration,
rounded to whole months, during the year appointed.
All calendar year determinations will be made as of
December 31st.
2) To initially qualify you must have written at least
$500,000 total calendar year premium according to
Penn-America's books.
3) To remain eligible in succeeding calendar years, you
must write at least 90 percent of the previous years'
total written premium, subject to the $500,000 total
premium minimum. This 90 percent requirement is
waived in any year you write in excess of $1 million
in premium.
4) You must maintain E&O coverage in conformity with the
Company's standards for such coverage.
5) You agree that the Company's records are final.
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B. Part "B" -- (Profit Sharing) Eligibility
1) The same as 1) through 5) in Part "A" except that
there is a two-year waiting period for eligibility
owing to loss development.
2) If you satisfy all above requirements, you are
eligible for your first payment by June 1 of the
second year following the year of initial
eligibility.
III. THE PLAN
A. Part "A" -- Performance Award
This is based on a calendar year evaluation:
Criteria Standards to be Met Value of
-------- ------------------- --------
Agency
------
Bonus
-----
1) Policy Issuance At least 90% of policies are received by Penn-America no $1,000
later than 35 days after effective date with no policies
received later than 60 days after the effective date. Our
binder procedures must be followed.
2) Inspection At least 75% of inspections are received by Penn-America $ 500
Timeliness no later than 50 days after the policy effective date,
with no inspections received
later than 75 days after the
policy effective date. Our
policy inspection guidelines
must be followed.
3) Premium Audit At least 90% of responses to Penn-America's premium audit $ 500
Responsiveness letters are received by the Company no later then 65 days
after the date of the letter,
with no responses received
later then 75 days after the
date of the letter.
4) Statement a) All statement payments received by due date (based $ 1,000
Payment upon your statement per Agency Contract with no
unauthorized credits taken). If the due date
falls on a weekend or holiday, the next working
day will be considered due date. Wire transfers
received by due date will be acceptable if there
is a mailing problem.
b) Agent sends Account Current in acceptable $ 500
electronic format. One-time
Payment
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Criteria Standards to be Met Value of
-------- ------------------- --------
Agency
------
Bonus
-----
5) Production Increase Over 25% increase in written premium vs. prior calendar $2,000
Over Prior Calendar year.
Year
THE CALCULATION OF WRITTEN
PREMIUM FOR EACH YEAR WILL BE
DONE ON MARCH 31 OF THE
FOLLOWING YEAR.
6) Penn-America Audit Audits conducted by Penn-America rated as "Acceptable." $ 500
of Agency
(Internal at Penn-America or at
Agent's office; if no audit is
conducted, there is no award.)
Penn-America will inform Agency
principals after audit
completion and will follow-up
with details concerning: file
documentation; completeness of
applications; risk selection;
pricing; completeness and
timeliness of inspections and
follow-ups; amount of policies
generating additional premiums
and size of additional
premiums; amount of policies
placed in direct collection;
late policy binders; other
relevant underwriting data.
B. Part "B" -- Profit Sharing
1) This is based on a policy year evaluation.
General Liability Business will be evaluated at the
end of the second, third, and fourth years after the
close of the policy year in question. At the end of
each such year, you will receive one-third (1/3) of
the amount of the profit sharing payment for that
year based on the profit calculation formula. There
will be a separate calculation each year of which you
will receive one-third (1/3). This way, your profit
participation traces the loss development of your
business.
- General Liability Business is defined as
monoline liability, garage liability and
Section II of commercial multi peril,
including professional classes and Increased
General Liability Limits.
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Property Business will be evaluated at the end of the
second and third years after the policy year, at the
end of each of which you will receive one-half (1/2)
of the profit sharing payment for that year.
- Property Business is defined as monoline
fire and allied lines, inland marine, and
Section I (fire and allied lines) of
commercial multi peril.
Eligible Lines of Business shall mean all lines of
insurance business and types of risks that Agent is
authorized to write, produce, bind, or solicit for or
on behalf of the Company, as defined in the Agency
Manuals and not otherwise excluded.
2) Your loss ratio is calculated on a policy-year basis,
earned to incurred. Incurred losses are indemnity
paid, reserves, and loss adjustment expenses.
3) Your profit sharing will be calculated for each
policy year as of March 31; if you qualify, you will
be paid by June 1.
4) The profit calculation is simple: Earned policy year
premium minus commission paid times positive
difference between the Company's Desired Loss Ratio
and your Agency's actual loss ratio equals profit.
One-half of that amount is the value of the profit
sharing portion of your Agency Bonus. Penn-America
reserves the right to review and change the Company's
Desired Loss Ratios from time to time at its sole
discretion.
5) Because the policy-year formula is used, there is no
need for loss carry forwards or stop losses -- each
year stands alone.
6) The current annual "Company's Desired Loss Ratios"
are:
Class of Business Pay Out Year Loss Ratio
----------------- ------------ ----------
CMP and Garage Liability 1st Year 25.00%
Monoline General Liability 1st Year 17.50%
CMP and Garage Liability 2nd Year 35.00%
Monoline General Liability 2nd Year 22.50%
CMP and Garage Liability 3rd Year 45.00%
Monoline General Liability 3rd Year 35.00%
Property Business 1st Year 50.00%
Property Business 2nd Year 55.00%
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GENERAL LIABILITY EXAMPLE:
General Liability for Policy Year 1996 - General Liability Written Premium
Volume $800,000
(CMP Liability Written Premium = $300,000)
(Monoline Liability Written Premium = $500,000)
Profit Calculation:
(Subtract commission paid from earned Per Year
1996 premium; multiply by difference between Pay Out Value
Policy Year Class Company Agency Company Desired Loss Ratio and Agency (1/3 of 1/2) of
Valued Of Desired Actual Actual Loss Ratio; divide by half to expected
As Of Business Loss Ratio Loss Ratio establish value of Agency portion) profit
----- -------- ---------- ---------- ---------------------------------- ------
3/31/98* CMP and Garage 25% 15% Earned Premium = $300,000 $4,000
Liability -$60,000 commission paid
$240,000 x 10% = $24,000
$24,000 / 2 = $12,000
Monoline General 17.5% 10% Earned Premium = $500,000 $5,000
Liability -$100,000 commission paid $400,000 x
7.5% = $30,000 $30,000 / 2 = $15,000
*Note: First Year Liability loss ratio below 10% will be evaluated as if 10%.
CMP and Garage 35% 20% Earned Premium = $300,000 $6,000
Liability -$60,000 commission paid
3/31/99* $240,000 x 15% = $36,000
$36,000 / 2 = $18,000
Monoline General 22.5% 17% Earned Premium = $500,000 $3,666
Liability -$100,000 commission paid $400,000 x
5.5% = $22,000
$22,000 / 2 = $11,000
*Note: Second Year Liability loss ratio below 15% will be evaluated as if 15%.
3/31/2000* CMP and Garage 45% 30% Earned Premium = $300,000 $6,000
Liability -$60,000 commission paid $240,000 x 15%
= $36,000
$36,000 / 2 = $18,000
Monoline General 35% 27.5% Earned Premium = $500,000 $5,000
Liability -$100,000 commission paid $400,000 x
7.5% = $30,000
$30,000 / 2 = $15,000
*Note: Third Year Liability loss ratio below 25% will be evaluated as if 25%.
Total 3-year Value of General Liability Pay Out for Policy Year 1996: $29,666
=======
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PROPERTY EXAMPLE:
Property for Policy Year 1996 - Property Written Premium Volume $700,000
Profit Calculation:
(Subtract commission paid from earned premium; multiply by Per Year
1996 Company Agency difference between Company Desired Loss Ratio and Agency Pay Out Value
Valued Desired Actual Actual Loss Ratio; divide by half to establish value of (1/2 of 1/2) of
As Of Loss Ratio Loss Ratio Agency portion) expected profit
----- ---------- ---------- ---------------------------------------------------------- ---------------
3/31/98* 50% 40% Earned Premium = $700,000 $14,000
-$140,000 commission paid
$560,000 x 10% = $56,000
$56,000 / 2 = $28,000
3/31/99* 55% 45% Earned Premium = $700,000 $14,000
-$140,000 commission paid
$560,000 x 10% = $56,000
$56,000 / 2 = $28,000
*Note: First and Second Year Agency Property loss ratio below 40% will be evaluated as if 40%
Total 2-year Value of Property Pay Out for Policy Year 1996: $28,000
=======
VALUE OF TOTAL PROPERTY AND GENERAL LIABILITY PAY OUT FOR POLICY YEAR 1996: $57,666
=======
The above examples only reflect calculations and payments on the 1996
policy year. It is possible that you may be paid on more than one
policy-year statement in a given year as calculations for subsequent
policy-year statements are made assuming you maintain eligibility each
year.
Example: In 2000 you could be paid profit sharing payments based upon
property experience from policy years 1997 and 1998 and general
liability experience of policy years 1996, 1997, and 1998.
IV. PAYMENTS TO YOU UNDER THE PLAN
A. Allocation of Agency Bonus between stock and cash:
1) 33 1/3% of your Agency Bonus will be distributed in
shares of PAGI Stock, rounded up to the nearest even
share.
2) For purposes of the calculation the PAGI Stock will
be valued as of the median between the bid and asked
price for the Stock as of the March 31 profit sharing
calculation date. If the stock markets are closed on
that date, the valuation will be made on the same
basis as of the nearest previous business day.
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3) You may, at your option, exercisable by written
notice to the Company received by us on or before
March 15, take either 50%, 75%, or 100% of your
Agency Bonus in shares of PAGI stock.
4) Notwithstanding the above, if the value of your
Agency Bonus is less than $2,500, payment of the
Agency Bonus will be made entirely in cash.
B. Payment due date:
1) Your Agency Bonus will be distributed to you by June
1.
2) Shares of stock distributed to you will be delivered
free of all commissions and transaction costs.
C. Your Agency Bonus will be subject to income tax in accordance
with applicable IRS laws and regulations. Stock distributed to
you under the Plan may not be sold until after August 1 of the
same year, and will be legended accordingly.
V. TERMINATION
A. If your Agency Agreement is terminated by either party, the
program also terminates, with the final calculation and
pro-rata payment made at June 1 of the following year.
B. The plan may be terminated or amended by us at any time
without cause, but existing obligations will be honored.
C. Profit Sharing Upon Termination. Upon termination of this
Addendum for any reason:
1) Before the end of a full calendar year, its terms and
conditions shall apply to all prior calendar years in
which this Addendum was in effect, without proration
and without allowance for the portion of the year in
which this Addendum was terminated; and
2) The Agency's right to Profit Sharing shall cease on
December 31 of the year preceding the year in which
termination is effective, notwithstanding the
continuance in force and effect of any unexpired
policies or binders after such calendar year.
3) In the event of termination of the General Agency
Agreement by either party, this Addendum shall
terminate simultaneously and the Agency shall not be
eligible for Profit Sharing in the termination or
succeeding years.
D. If the AGENCY AGREEMENT is terminated by us because of a
breach of its terms by you and/or in accordance with any of
the terms of paragraphs 10(iii) or (iv), there shall be no
further calculations made, nor award/profit sharing payments
made.
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VI. GENERAL
A. This Performance Award/Profit Sharing Program constitutes the
entire and exclusive agreement between Company and Agency on
the subjects of performance awards and profit sharing
(contingent commissions), and supersedes any and all prior or
contemporaneous agreements, representations, and
understandings, written and oral, on these subjects. The
undersigned signators hereby warrant that they have full power
and authority to execute this Addendum on behalf of the
respective parties thereto.
IN WITNESS WHEREOF, this Addendum has been executed in duplicate by the parties
hereto.
DATE: June 14, 1996
PENN-AMERICA INSURANCE COMPANY BLISS & XXXXXXX INC.
BY: /s/ Xxxx X. XxXxxxx BY: /s/ Xxxxxx Xxxxxxxx
--------------------------- ------------------------------
Xxxx X. XxXxxxx, CPCU Xxxxxx Xxxxxxxx, CPCU
Executive Vice President President
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