EXHIBIT 10.2a
PERSONAL LINES
GENERAL AGENCY AGREEMENT
THIS AGREEMENT, made March 1, 1998 between CARNEGIE GENERAL INSURANCE
AGENCY at 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 ("General Agent")
and PENN-AMERICA INSURANCE COMPANY, 000 X. Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxx,
00000 ("Company").
1. General Provisions: The relationship between the Company and the
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
California and Nevada as specified in Schedule A, "Underwriting Requirements and
Authority".
3. Compensation: The General Agent will earn commissions and, if
applicable, Contingent Profit Commission on insurance written under this
Agreement as set forth in Schedule B, "Commissions, Policy Fees, and Contingent
Profit Commission." The 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 directive. See
Schedule B for the schedule of fees.
4. Premiums: The General Agent shall collect premiums due on all
business written for the Company, and shall be responsible for the timely
payment of all premiums written by the General Agents' subproducers and brokers
submitting business through the General Agent. All premiums must be received by
the Company no later than 45 days after the premium due date, and the 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 the General
Agent under this Agreement or any other agreement (regardless of the effective
date) entered into between the Company and the General Agent, against any
balance due or to become due to the Company from the General Agent or any other
agreement between them.
5. Records and Reports: The 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 the 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: The Company shall indemnify, hold harmless, and
defend the General Agent, and the General Agent shall indemnify and hold
harmless the 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 the General Agent shall
be conditioned on the Company receiving prompt notification of any suit or claim
against the General Agent and being afforded the opportunity to make such
investigation, settlement, or defense as the 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 the Company, the other by the
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 the Company and the 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 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: The 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 the General Agent or the Company as they relate to
business written pursuant to this Agreement or as they relate to the General
Agent's capacity to act as a General Agent of the Company.
9. Errors and Omissions: The General Agent shall maintain errors and
omissions insurance and fidelity bonds providing coverage for matters arising
out of or relating to all aspects of the 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 the General Agent
unless the Company has given prior written approval.
11. Supplies: All supplies furnished by the Company to the General
Agent (including but not limited to policy forms, endorsements, certificates,
applications and claims drafts) shall remain the Company's property. The General
Agent shall account for and/or return all supplies upon demand.
12. Assignment: The General Agent may not assign any rights or
obligations under this Agreement without the 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 the General Agent's business, or substantially all of the business'
assets, from the 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 the Company. No charges
shall be made by the 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, the Company and the
General Agent have executed this Agreement effective March 1, 1998.
PENN-AMERICA INSURANCE COMPANY CARNEGIE GENERAL INSURANCE AGENCY
BY: /s/ Xxxxx X. Xxxxxx BY: /s/ Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxxx, CIC, CPCU Xxxxxxx X. Xxxxx
Senior Vice President Chairman and CEO
BY: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Vice Chairman/Secretary
**********************************************
PERSONAL GUARANTEE: If the 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 the Company under this Agreement
and any successors hereto.
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx
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SCHEDULE A
UNDERWRITING REQUIREMENTS AND AUTHORITY
1. The General Agent is authorized to bind, issue, and/or cancel private
passenger automobile insurance coverage on behalf of the Company, and
to have general supervision of the underwriting of this coverage. The
Company may cancel or reduce the amount of coverage on any risk it
considers to be unsatisfactory.
2. The General Agent shall adhere to all underwriting requirements,
guidelines, and manuals approved by the Company for its private
passenger automobile program, as published and updated from time to
time, and the General Agent shall not bind any risk that does not
satisfy this criteria.
3. The Company reserves the right to limit or suspend the binding
authority and/or premium volume written by the 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 subproducers utilized by the General Agent shall be deemed brokers
of the General Agent for all purposes other than licensing
requirements, and the General Agent shall be responsible and indemnify
the 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 the General Agent.
LINES OF BUSINESS COMMISSION
California
Private Passenger Auto Twenty-one Percent (21%)
Liability and Physical Damage Package
Nevada
Private Passenger Auto Twenty-three Percent (23%)
Liability and Physical Damage Package
2. SCHEDULE OF FEES: (California and Nevada)
Policy Fee 58% to the General Agent
Billing Fee 100% 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, 1998)
The Company will also pay a Contingent Profit Commission as described
below ("Payments To You Under The Plan"). 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.
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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.
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
plan also terminates, with the final calculation of Contingent Profit
Commission payment concerning any eligible years 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.
1) In the event the General Agency Agreement is terminated by the
Company in accordance with the terms of Paragraph 13 (i), the
General Agency's right to Contingent Profit Commission shall
cease on December 31 of the year in which the termination is
effective with the final payment made at June 1 of the following
year.
2) In the event the General Agency Agreement is terminated by the
Company in accordance with the terms of Paragraph 13 (ii), or in
the event the General Agency Agreement terminates in accordance
with the terms of Paragraph 13 (iii) or (iv), no further
calculations shall be made, nor Contingent Profit Commission
paid.
3) In the event the General Agency Agreement is terminated by the
General Agency in accordance with the terms of Paragraph 13 (i)
or (ii), or in the event the Company gives written consent in
accordance with Paragraph (iv), 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. Payments
due concerning any eligible prior years will be made in
accordance with the terms of Paragraph A above.
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 representation, and understandings,
written and oral, on these subjects. The undersigned signatures 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
PRIVATE PASSENGER AUTOMOBILE
Passenger Automobile for Policy Year 1998
Minimum Eligibility $1,000,000 (includes all fees)
Profit Calculation:
(Subtract commission and fees from earned premium;
General multiply by difference between Company Desired Per Year
1998 Company Agency Loss Ratio and Agency Actual Loss Ratio; divide by Pay out
Policy Desired Actual half; then divide by half again to establish the Value (1/2of
Year Valued Class of Loss Loss General Agency's portion for each 1/2 expected
As Of Business Ratio Ratio year.) profit)
3/31/00 * 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
3/31/01 * 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 1998: $277,500
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