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[PENN-AMERICA LOGO]
Exhibit 10.20
PERSONAL LINES
GENERAL AGENCY AGREEMENT
THIS AGREEMENT, made May 30, 1997 between XXXXXXX X. XXXXX, INC. at
0000 0xx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000 ("General Agent") and
PENN-AMERICA INSURANCE COMPANY, 000 Xxxxx Xxxx Xxxx, Xxxxxxx, XX 00000
("Company").
1. GENERAL PROVISIONS: The relationship between Company and General
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 signators
hereby warrant that they have full power and authority to execute this Agreement
on behalf of the respective parties thereto.
2. AUTHORITY OF GENERAL AGENT: The General Agent is granted
non-exclusive authority to write private passenger automobile business in
Washington as specified in Schedule A, "Underwriting Requirements and
Authority".
3. COMPENSATION: General Agent will earn commissions and, if
applicable, profit sharing on insurance written under this Agreement as set
forth in Schedule B, "Commissions, Policy Fees and Contingent Profit
Commission." General Agent will not collect any service, policy or other type of
fee unless the Company has given written approval of the fee and the fee does
not violate any statute, regulation or other for of directive. See Schedule B
for the schedule of fees.
4. PREMIUMS: General Agent shall collect premiums due on all business
written for Company, and shall be responsible for the timely payment of all
premiums written by General Agent's subproducers and brokers submitting business
through General Agent. All premiums must be received by Company no later than 45
days after the premium due date, and General Agent will not collect any fee or
other compensation related to the business written without the Company's prior
written approval. The Company may offset any balance relating to premiums,
commissions or otherwise, due to General Agent under this Agreement or any other
agreement (regardless of the effective date) entered into between the Company
and General Agent, against any balance due or to become due to the Company from
General Agent or any other agreement between them.
5. RECORDS AND REPORTS: General Agent will comply with the Company's
rules and procedures relating to the maintenance and reporting of policy and
related records, data and other file activity. All of General Agent's records
which relate in any way to the Company's business are subject to the Company's
inspection. This inspection may occur during regular business hours without
prior notice. The company may copy all such records or make extracts.
6. INDEMNIFICATION: Company shall indemnify, hold harmless and defend
General Agent, and General Agent shall indemnify and hold harmless Company, for
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 or omissions relating to or arising out of this Agreement. The
Company's obligation to indemnify General Agent shall be conditioned on Company
receiving prompt notification of any suit or claim against General Agent and
being afforded the opportunity to make such investigation, settlement or defense
as Company deems prudent.
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7. 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 General 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 General 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 of the expenses of the Umpire,
except that, in the event both Arbiters have been selected by one party, 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.
8. PROMPT NOTIFICATION TO COMPANY: General Agent shall forward promptly
to the Company any correspondence from any regulatory agency or governmental
authority. The General Agent shall notify the Company immediately of all
administrative proceedings, lawsuits and threats of lawsuits that involve or may
involve General Agent or the Company as they relate to business written pursuant
to this Agreement or as they relate to General Agent's capacity to act as an
agent of the Company.
9. ERRORS AND OMISSIONS: General Agent shall maintain errors and
omissions insurance and fidelity bonds providing coverage for matters arising
out of or relating to all aspects of General Agent's business.
10. USE OF COMPANY NAME: The name of the Company shall not appear in
any advertising or marketing materials used and distributed by General Agent
unless the Company has given prior written approval.
11. SUPPLIES: All supplies furnished by the Company to General Agent
(including but not limited to policy forms, endorsements, certificates,
applications and claims drafts) shall remain the Company's property. General
Agent shall account for and/or return all supplies upon demand.
12. ASSIGNMENT: General Agent may not assign any rights or obligations
under this Agreement without Company's prior written consent.
13. 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 General Agent's insurance license is suspended or
terminated in any jurisdiction; (iv) On the effective date of the sale or
transfer of General Agent's business, or substantially all of the business'
assets, from General Agent's present ownership without the Company's prior
written consent. In the event of termination, all gross premiums written
hereunder shall become immediately due and payable to Company. No charges shall
be made by General Agent for services in settlement of its account or in winding
up the business of the Company.
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14. 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.
IN WITNESS WHEREOF, and intending to be bound, Company and General
Agent have executed this Agreement effective May 30, 1997.
PENN-AMERICA INSURANCE COMPANY XXXXXXX X. XXXXX, INC.
BY: /s/ Xxxx X. XxXxxxx BY: /s/ Xxxxxx X. Xxxxxxxx
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Xxxx X. XxXxxxx, CPCU Xxxxxx X. Xxxxxxxx
Executive Vice President President
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PERSONAL GUARANTEE: If General Agent is a corporation or a 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.
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
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SCHEDULE A
UNDERWRITING REQUIREMENTS AND AUTHORITY
1. General Agent is authorized to bind, issue and/or cancel private
passenger automobile insurance coverage on behalf of Company and to
have general supervision of the underwriting of this coverage. Company
may cancel or reduce the amount of coverage on any risk it considers to
be unsatisfactory.
2. General Agent shall adhere to all underwriting requirements, guidelines
and manuals approved by Company for its private passenger automobile
program, as published and updated from time to time, and General Agent
shall not bind any risk that does not satisfy these criteria.
3. Company reserves the right to limit or suspend the binding authority
and/or premium volume written by General Agent in the event the
Company, in its sole discretion, determines that the loss ratios,
premium volume, policy term mix or other factors may adversely affect
the Company's continued compliance with regulatory, rating or financial
requirements.
4. All local and producing brokers utilized by General Agent shall be
deemed brokers of General Agent for all purposes other than licensing
requirements. General Agent shall be responsible and indemnify Company
for any liability resulting from their acts or failures to act as set
forth in Section 6 of the Agreement.
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SCHEDULE B
COMMISSION, FEES, AND CONTINGENT PROFIT COMMISSION
1. COMMISSION:
The Company shall pay the General Agent the following commission on all
business written pursuant to this Agreement as compensation for its
services as General Agent.
LINES OF BUSINESS COMMISSION
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Private Passenger Auto Twenty-six Percent
Liability and Physical Damage Package (26%)
2. SCHEDULE OF FEES:
All Fees 26% to the General Agent
The Company will be responsible for applicable taxes on all billing and
policy fees reported to the Company.
3. CONTINGENT PROFIT COMMISSION (EFFECTIVE JANUARY 1, 1997)
The Company will also pay a contingent profit commission as described
below ("Contingent Profit Commission"). Payment of the contingent
profit commission will be made in shares of stock of the Company's
parent, Penn-America Group, Inc. ("PAGI") ("PAGI Stock" or "Stock")
and, unless the General Agent elects otherwise, cash, in accordance
with the provisions below.
PAYMENTS TO YOU UNDER THE PLAN
A. Allocation of Contingent Profit Commission between stock and
cash:
1) 33 1/3% of your Contingent Profit Commission will be
distributed in shares of PAGI stock, rounded to the
nearest even share.
2) For the purposes of the calculation, the PAGI stock
will be valued as of the median between the bid and
asked price for stock as of March 31 Contingent
Profit Commission calculation date. If the stock
markets are closed on that date, the valuation will
be on the same basis as of the nearest business day.
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
Contingent Profit Commission in shares of PAGI stock.
B. Payment Due Date:
1) Your Contingent Profit Commission 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.
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C. Your Contingent Profit Commission will be subject to income
tax in accordance with the 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.
TERMINATION
A. If your General 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. Contingent Profit Commission 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 it was in effect, without proration and without
allowance for the portion of the year in which this
Addendum was terminated; and
2) The General Agency's right to Contingent Profit
Commission 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 General Agency shall
not be eligible for Contingent Profit Commission in
the termination or succeeding years.
D. If the GENERAL AGENCY AGREEMENT is terminated in accordance
with any of the terms of PARAGRAPH 13, no further calculations
shall be made, nor Contingent Profit Commission paid.
GENERAL
A. This Contingent Profit Commission Program constitutes the
entire and exclusive agreement between Company and General
Agency on the subject of Contingent Profit Commissions, and
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.
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EXAMPLE NO. 1
PRIVATE PASSENGER AUTOMOBILE LIABILITY
Private Passenger Automobile Liability for Policy Year 1997
Minimum Eligibility $1,000,000 (includes all fees)
Per Year
1997 Profit Calculation: Pay out
Policy (Subtract commission and fees from earned premium; Value (-1/2
Year Company Agency multiply by difference between Company Desired Loss of -1/2
Valued Class of Desired Actual Ratio and Agency Actual Loss Ratio; divide by half expected
As Of Business Loss Ratio Loss Ratio to establish Agency portion) profit
----- -------- ---------- ---------- ---------------------------------------------------- -----------
3/31/99 * Private Passenger 55% 45% Earned Premium = $10,000,000 - $2,600,000 $185,000
Auto Liability (commission paid and policy fees) = $7,400,000 x
and Physical 10% = $740,000 / 2 = $370,000 / 2
Damage
3/31/00 * Private Passenger 60% 55% Earned Premium = $10,000,000 - $2,600,000 $ 92,500
Auto Liability (commission paid and policy fees) = $7,400,000 x
and Physical 5%= $370,000 / 2 = $185,000 /2
Damage
* Note: In any year, any actual loss ratio below 40% will be calculated as if
it were 40%.
Total 2-year Value of Private Passenger Auto Pay Out for Policy Year 1997: $277,500
