First Amended And Restated Managing General Agency Agreement

Exhibit 10.14


First Amended and Restated

Managing General Agency Agreement

Number AA-01-001

Table of Contents Page


Article 1

Appointment 2

Article 2

Authority of the Managing General Agent 2

Article 3

Compensation 3

Article 4

Accounting and Records 5

Article 5

Managing General Agent' s Reports and Remittances 6

Article 6

Expenses 7

Article 7

Premium Escrow Accounts 8

Article 8

Ownership of Books and Records 9

Article 9

Independent Contractor Relationship 10

Article 10

Advertising 10

Article 11

Agents Licensing 10

Article 12

Agency Sale or Transfer 11

Article 13

Hold Harmless 11

Article 14

Arbitration 11

Article 15

Termination 12

Article 16

Claims Handling 13

Article 17

Reinsurance 14

Article 18

Miscellaneous 15


1

FIRST AMENDED AND RESTATED

MANAGING GENERAL AGENCY AGREEMENT

NUMBER AA-01-001


This Agreement is made and entered into by and between OLD AMERICAN COUNTY MUTUAL FIRE INSURANCE COMPANY, a Texas Company (Company) and AMERICAN AGENCIES GENERAL AGENCY INC. , a Texas Corporation with administrative offices in Addison, Texas, (Managing General Agent).

THE COMPANY AND THE MANAGING GENERAL AGENT AGREE AS FOLLOWS:

ARTICLE 1 - APPOINTMENT 1.1 The Company appoints the Managing General Agent to act as its Managing General Agent as that term is defined in Article 21.07-3 of the Texas Insurance Code and the Texas Administrative Code. This appointment is originally effective October 1, 2001 and continuous in nature and shall remain in effect until terminated in accordance with Article 15. 1.2 The Managing General Agent acknowledges and agrees that the Company' s appointment of the Managing General Agent does not restrict in any manner the Company' s right to appoint agents writing any lines of insurance the Company writes through any other agent, sub-agent or managing general agent either direct to the Company or through other agents. 1.3 This First Amended and Restated Managing General Agency Agreement Number AA-01-001 hereby amends and restates that certain Managing General Agency Agreement Number AA-01-001 dated October 1, 2001, as amended, made by and between Company and Managing General Agent.


ARTICLE 2 - AUTHORITY OF THE MANAGING GENERAL AGENT

2.1 The Managing General Agent has the authority and duty to act on behalf of the Company in all respects, insofar as necessary for the Managing General Agent to perform the function of a Managing General Agent for the Company. The Company may, from time-to-time, place reasonable written restrictions upon the Managing General Agent. The Managing General Agent' s authority includes, but is not limited to, production, appointment and supervision of agents for the Company, underwriting, accounting and claims handling. All acts of the Managing General Agent, insofar as the Company' s business is concerned, are subject to the ultimate authority of the Company.

2.2 The original source of all business produced under this Agreement shall be property/casualty agents or general lines agents in the State of Texas (Agent(s)).


2 2.3 The Managing General Agent has the authority to accept, on forms approved by the Company, applications, binders, and/or Policies written by or through Agents, for classes or lines of insurance as described in the attached Schedule of Business and in Quota Share Reinsurance Agreements between the Company and various reinsurers (the Reinsurer) effective July 1, 2001, as amended and all substitutions thereof, (Reinsurance Agreement), a copy of said Agreement is attached hereto and fully incorporated herein.

2.4 The Managing General Agent acknowledges and agrees that the term(s) of any Policy shall not exceed twelve (12) months. " Policy" is defined as any policy, endorsement, binder, certificate, proposal for insurance and other document which binds the Company to insurance coverage.

2.5 The Managing General Agent has the authority to cancel Policies, at its discretion, subject to the requirements imposed by law and in compliance with the applicable provisions contained in this Agreement and the Policies.

2.6 The Managing General Agent has the authority to receive and receipt for premiums and to retain commissions out of such collected premiums subject to the terms and conditions of this Agreement.

2.7 The Managing General Agent or its designated claims handler shall have the authority to set loss reserves, adjust and pay losses and loss adjustment expenses on behalf of the Company.

2.8 The Company shall retain the authority to restrict the premium volume.

2.9 The Managing General Agent may not authorize policy issuance on behalf of the Company to any broker, agent, managing general agent or any other entity without the prior written consent of the Company.

2.10 Any and all agreements with Agent(s) shall be made directly between the Managing General Agent and such Agent(s). It is understood that the Agent shall have no claim or cause of action against the Company and said Agent(s) shall look solely to the Managing General Agent for any and all expenses, costs, causes of action and damages, including, but not limited to, extra contractual obligations, arising in any manner from actions or inactions by the Agent(s) or the Managing General Agent.

2.11 The Managing General Agent shall bear sole responsibility to oversee the proper licensing of any Agents(s). Should any fines be levied against the Company as the result of the Managing General Agent accepting business from an unlicensed Agent, the Managing General Agent shall hold the Company harmless and reimburse the Company for any and all expenses so incurred including, but not limited to, legal fees, fines and travel expenses.


ARTICLE 3 - COMPENSATION 3.1 The Managing General Agent' s compensation shall be the commission allowed under the Reinsurance Agreement less fronting fees and premium taxes. As used in the Article, the term " Net Written Premium" is defined as the total of all premium amounts on policies written by the Managing General Agent between the Company and the Managing General Agent less return premium and cancellations.


3 3.2 Amounts paid to the Company shall be a percentage of aggregate Net Written Premiums (NWP) and policy fees charged (PF) on all policies produced and serviced by AAGA, Harbor Insurance Managers, Inc. and Old American Insurance Services, Inc. (OAIS) as follows:


NWP/PF Percentage


0 - $236,565,000 3.275 %

excess of $236,565,000 1.625 %


Until Harbor, OAIS and AAGA produce $236,565,000 aggregate Net Written Premiums and policy fees charged, or until December 31, 2006, whichever occurs first, the Company shall be entitled to receive a minimum annual fronting fee of $1,000,000. The calculation and payment of the remainder of the minimum fronting fee, if any, shall be due on February 15 of each succeeding year. In addition, premium taxes of one and seventy-five percent (1.75%) are due in addition to the payments above based upon NWP and PF.


The Company agrees to apply all amounts paid in excess of 1.625% to satisfy the reinsurance payable of approximately $2.3 million as reflected in the consolidated balance sheet of Old American Investments Inc. (OAII) as of December 31, 2001. In the event of termination of this agreement, the lesser of the reinsurance payable balance or $500,000 shall be forgiven. Notwithstanding the foregoing, it is agreed that all amounts paid to the Company shall be considered for the purpose of determining whether the minimum annual fronting fee has been received by the Company. The calculation and payment of the remainder of the minimum annual fronting fee, if any, shall be due on February 15 of each succeeding year.

3.3 All aggregate Net Written Premiums and policy fees charged on all policies produced and serviced by Harbor, OAIS and AAGA in excess of $236,565,000 shall be included in the calculation of the $100,000,000 combined annual Net Written Premium and policy fees charged threshold for A-Affordable Managing General Agency, Inc., as contemplated by that Managing General Agency Agreement addenda of even date herewith between the Company and A-Affordable. Such Agreement allows for a reduction in the fronting fee charged by the Company for business produced and serviced by A-Affordable and its affiliates from 1.625% to 1.500% after such $100,000,000 threshold is attained.

3.4 The tax provision of one and three-quarters percent (1.75%) of Net Written Premium and policy fees charged includes premium tax and the Texas Overhead Assessment. Amounts due for the Automobile Theft Prevention Pool will be settled separately on a semiannual basis. The Company retains the right to adjust the premium tax of 1.75% to any new effective rate determined by the Texas Department of Insurance or other such agency. The Company will be liable for remitting state premium taxes based on Net Written Premium and policy fees charged.

3.5 Should service fees be charged on any policy covered by this Agreement, and such fees be deemed taxable for premium tax purposes, then such service fees are to be added to the Net Written Premium and net policy fees charged to determine the amount subject to Fronting Fees.


4 3.6 The Managing General Agent shall be entitled to retain the policy fee less premium taxes of one and three quarters percent (1.75%) and fronting fees as stated in Articles 3.2 and 3.3 plus billing and other service fees charged by the Managing General Agent.

3.7 In the event there is no Agent to receive the designated commission on a Policy, the Managing General Agent may retain the commission. 3.8 The commission may, from time to time, be amended upon mutual agreement of the Company and the Managing General Agent without otherwise affecting the terms and conditions of this Agreement.

3.9 The Company agrees to pass through to the Managing General Agent any Contingent or Profit Commission allowed by the Reinsurer(s) as referenced in the Reinsurance Agreement.


ARTICLE 4 - ACCOUNTING AND RECORDS 4.1 The Managing General Agent shall provide and maintain all necessary books, records, policies, claim files, dailies and correspondence with policyholders to determine the amount of liability of the Company and the amount of premiums therefrom.

4.2 The Managing General Agent shall prepare separate, itemized, monthly statements for each Agent on the business placed by the Agent through the Managing General Agent, and furnish the Agent with an IRS Form 1099 each year when required.

4.3 All records shall be kept in such manner and form as is generally recognized as acceptable in the insurance industry or as may be required by the Company. Such records shall be maintained for at least five (5) years or for any longer applicable retention period required by the Texas Department of Insurance. All records must be located in Texas, unless approved by the Texas Department of Insurance under Article 1.28 of the Texas Insurance Code.

4.4 All records applicable to the Company' s business shall be opened for inspection and/or audit at all reasonable times by the Company, its reinsurers, insurance department personnel or other governmental authorities.

4.5 Upon request and pursuant to regulatory requirements, the Managing General Agent shall forward as reasonably required to the Company or the Company' s Designated Accountant and/or Statistical Agent, exact, as written, copies of all applications, binders, policies, daily reports, monthly reporting forms and endorsements issued by or through licensed Agent(s), including all other evidence of insurance written, modified or terminated.

4.6 The Managing General Agent shall be solely responsible for and shall keep accurate records of all policies assigned to the Managing General Agent and shall account to the Company, upon the Company' s reasonable request, for all outstanding and unused policy supplies. In the event canceled or terminated policies or binders are unavailable, the Managing General Agent shall forward, or cause to be forwarded, properly executed Lost Policy Receipts.


5 4.7 At renewal of any Policy issued by the Managing General Agent, the Managing General Agent shall be responsible to the insured for the renewal or non-renewal of the Policy and shall timely communicate any renewal quote or notice of non-renewal to the insured to preclude the extension of coverage beyond the expiration date of the current in-force policy. 4.8 The Company shall conduct or cause to be conducted a semi-annual examination of the Managing General Agent. This examination will take place at the Managing General Agent' s business offices or premises where necessary records are maintained, and the Managing General Agent will bear the total cost of $1,500 per audit plus out of pocket expenses actually and reasonably incurred by the Company to conduct each examination. Such examination must remain on file with the Company for three (3) years, be available to the Commissioner of Insurance for review, and contain, at a minimum, the following information: a. claims control procedures;

b. timeliness of claims payments;

c. timeliness of premium reporting and collection;

d. compliance with underwriting guidelines; and

e. reconciliation of policy inventory.

4.9 If within any thirty (30) day period, the Company' s aggregate premium volume increases by thirty percent (30%) or more, the Company shall conduct, within ninety (90) days of said period, an examination of the Managing General Agent if the Managing General Agent:

a. writes greater than twenty percent (20%) of the Company' s aggregate premium volume; and

b. has experienced an increase of twenty percent (20%) or more of premium volume during the thirty (30) day period.

Any such examination shall contain the information required pursuant to Article 4.8.


ARTICLE 5 - MANAGING GENERAL AGENT' S REPORTS AND REMITTANCES

5.1 The Managing General Agent shall submit a report to the Company, within thirty (30) days after the close of business each calendar month, summarizing the business transacted under this Agreement during the prior month. Such report shall include the following items:

a. gross premiums written less returns and cancellations;

b. Agent' s commissions;

c. losses paid less recoveries and salvage;

d. loss adjustment expenses paid;

e. outstanding loss reserves;

f. outstanding loss expense reserves;

g. losses incurred but not reported;

h. unearned premium reserve; and ...