SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report: April 15, 1997
Date of earliest event reported: April 1, 1997
American Physicians Service Group, Inc.
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(Exact name of registrant as specified in its charter)
Texas 0-11453 75-1458323
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(State of (Commission File Number) IRS Employer
Incorporation) Identification No.
1301 Capital of Texas Highway, Austin, Texas 78746
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(Address of principal executive offices) (Zip Code)
(512) 328-0888
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(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
Pursuant to the terms of that certain Stock Purchase and Stock Option
Agreement, dated April 1, 1997 (the "Stock Purchase Agreement") between American
Physicians Service Group, Inc., a Texas corporation ("APS"), and Florida
Physicians Insurance Company, Inc., a Florida corporation ("FPIC"), APS agreed
to sell FPIC 20% of the common stock of APS' subsidiary, APS Insurance Services,
Inc. ("Insurance Services"). FPIC also received an option to purchase an
additional 35% of Insurance Services common stock, which can be exercised in
1999. Insurance Services, through its subsidiary, APS Facilities Management,
Inc., acts as attorney-in-fact for American Physicians Insurance Exchange, a
provider of medical professional liability insurance in Texas and Arkansas.
The purchase price payable by FPIC for the 20% interest is $2,000,000
in cash. The purchase price of the additional shares covered by the option would
be 10 times the average annual net earnings of Insurance Services for 1997 and
1998. The stock purchases are subject to regulatory approvals, including the
approval of the Texas Department of Insurance.
APS, FPIC and Insurance Services also entered into a shareholders
agreement (the "Shareholders Agreement") which provides that FPIC will be
entitled to elect one of the four members of Insurance Services' Board of
Directors and, upon exercising the option, FPIC will be entitled to cause the
Insurance Services' Board to be increased to a total of five directors, three of
which would be designated by FPIC and two of which would be designated by APS.
The Shareholders Agreement also places certain prohibitions and conditions on
the transfer of the shares of Insurance Services, allows FPIC and APS to force
the other to buy or sell all of its shares of Insurance Services stock, and
requires the approval of FPIC and APS for certain transactions by Insurance
Services or its subsidiaries.
Concurrently with entering into the agreements described above,
American Physicians Insurance Agency, Inc. ("APIA"), a wholly owned subsidiary
of Insurance Services, entered into a Managing General Agency Agreement with
FPIC pursuant to which FPIC appointed APIA as its exclusive agent for the
solicitation and servicing of standard medical malpractice professional
liability insurance for Texas health care providers. Furthermore, FPIC entered
into a Reinsurance Agreement with American Physicians Insurance Exchange
pursuant to which FPIC agreed to cede to American Physicians Insurance Exchange,
all of FPIC's liabilities arising from policies sold by APIA and issued by FPIC.
The foregoing summary of the terms of the Stock Purchase Agreement,
Shareholders Agreement, Managing General Agency Agreement and Reinsurance
Agreement is qualified in its entirety by the terms and provisions contained in
such agreements, which are filed as exhibits to this Current Report on Form 8-K.
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Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not required.
(b) Pro forma financial information.
Not required.
(c) Exhibits.
Exhibit
Number Description
10.26 Stock Purchase and Stock Option Agreement, dated April 1,
1997, between American Physicians Service Group, Inc. and
Florida Physicians Insurance Company, Inc.
10.27 Shareholders Agreement, dated April 1, 1997 by and among APS
Insurance Services, Inc., Florida Physicians Insurance
Company, Inc., and American Physicians Service Group, Inc.
10.28 Managing General Agency Agreement, dated March 27, 1997,
between American Physicians Insurance Agency, Inc. and
Florida Physicians Insurance Company, Inc.
10.29 Reinsurance Agreement, dated March 27, 1997, between
American Physicians Insurance Exchange and Florida
Physicians Insurance Company, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Date: April 15, 1997 By: ________________________
W.H. Hayes
Chief Financial Officer
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EXHIBIT 10.26
STOCK PURCHASE AND STOCK OPTION AGREEMENT
This Stock Purchase and Stock Option Agreement ("Agreement') is entered
into as of April 1, 1997, by and among American Physicians Service Group, Inc.,
a Texas corporation ("Selling Shareholder"), and Florida Physicians Insurance
Company, Inc., a Florida corporation ("Buyer").
In consideration of the mutual promises, representations, warranties,
covenants, and conditions set forth in this Agreement the parties to this
Agreement agree as follows:
1. Ownership and Sale of Shares.
1.1 Ownership of Shares. The Selling Shareholder owns a
total of 1,000 shares of the issued and outstanding
common stock of APS Insurance Services, Inc., a
Delaware corporation ("APS"), which constitutes 100%
of the APS capital stock issued and outstanding. APS
in turn owns 1,000 shares of the issued and
outstanding common stock of APS Facilities
Management, Inc., a Texas corporation, ("APSFMI"),
which constitutes 100% of the APSFMI capital stock
issued and outstanding.
1.2 Sales of Outstanding Shares. Subject to the terms and
conditions hereof, on the Closing Date the Selling
Shareholder shall sell and transfer to Buyer, and
Buyer shall purchase from the Selling Shareholder,
200 of the aforementioned shares of APS (the
"Shares"), constituting 20% of the total outstanding
capital stock of APS for a total purchase price of
TWO MILLION AND NO/100 DOLLARS ($2,000,000).
1.3 Payment for Shares. The purchase price for the
Shares shall be paid in cash at Closing.
2. Closing; Delivery.
2.1 Closing. The Closing of the purchase and sale of the
Shares (the "Closing") shall be held at the offices
of APS within five business days after the
satisfaction or waiver of the conditions set forth in
Sections 9 and 10 or such other date as is mutually
agreed upon by the parties (the "Closing Date").
2.2 Delivery. At the Closing, the Selling Shareholder
shall deliver to Buyer a duly endorsed certificate
representing the Shares being sold, against Buyer's
delivery of the consideration described in Section
1.2 above.
3. Option to Purchase Additional Shares.
3.1 Option. Provided that the sale and purchase of the
Shares set forth in Section 1.2 above is consummated,
Buyer shall have the option ("Option")
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to purchase from Selling Shareholder 350 additional
shares of APS ("Additional Shares"), constituting an
additional 35% of the total outstanding capital stock
of APS upon the terms and conditions set forth
herein. The purchase of the Additional Shares would
result in Buyer owning 55% of the total issued and
outstanding capital stock of APS.
3.2 Exercise of Option. Upon no less than sixty (60) days
prior written notice given at any time after December
31, 1998, and before December 31, 1999, Buyer may
exercise the Option and purchase the Additional
Shares described in Section 3.1 above. The total
price per share at which the Additional Shares may be
purchased is ten times the average of the annual net
earnings per share of APS, determined in accordance
with Generally Accepted Accounting Principles
("GAAP"), for the calendar years ending December 31,
1997, and December 31, 1998. The Option cannot be
exercised for less than all of the Additional Shares.
The exercise of the Option is further subject to
Buyer obtaining all necessary regulatory approvals
with respect to the purchase of the Additional
Shares. The Selling Shareholder shall provide such
assistance, at Buyer's expense, as Buyer may
reasonably request in obtaining all necessary
approvals.
3.3 Payment for Additional Shares. The purchase price for
the Additional Shares shall be paid in cash; unless
otherwise agreed by the Selling Shareholder and the
Buyer.
3.4 Closing; Delivery. The closing of any purchase and
sale of the Additional Shares shall be held at the
offices of APS no later than 60 days after written
notice is given by the Buyer of the exercise of the
Option pursuant to Section 3.2 above. At such
closing, the Selling Shareholder shall deliver to
Buyer a duly endorsed certificate representing the
Additional Shares being sold, against Buyer's
delivery of the consideration described in Section
3.2 above. Notwithstanding the foregoing, Buyer shall
be entitled to extent the period for closing the
purchase and sale of the Additional Shares by an
additional 90 days, if required by Buyer to obtain
all necessary regulatory approvals.
4. Representations and Warranties of the Selling Shareholder
The Selling Shareholder hereby represents and warrants to the
Buyer as follows:
4.1 Organization and Good Standing; Certificate and
Bylaws. The Selling Shareholder, APS and APSFMI are
corporations, each of which is duly organized,
validly existing and in good standing under the laws
of their respective states of organization and
domicile. Each of the Selling
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Shareholder, APS, and APSFMI has all requisite
corporate power and authority and holds all licenses,
permits, and other required authorizations from
governmental authorities necessary to conduct its
business and consummate the transaction contemplated
by this Agreement and the Shareholders Agreement (as
hereinafter defined). Selling Shareholder has
provided Buyer with true and complete copies of APS's
Certificate of Incorporation and Bylaws, each as
amended to date and presently in effect.
4.2 Corporate Power. The Selling Shareholder has all
requisite legal and corporate power and authority to
enter into this Agreement and the Shareholders
Agreement; and on the Closing Date the Selling
Shareholder will have all requisite legal and
corporate power and authority to sell the Shares and
to carry out and perform its obligations under this
Agreement and the Shareholders Agreement.
4.3 Subsidiaries. Schedule 4.3 sets forth a correct and
complete list of each corporation or other entity in
which APS owns or controls, directly or indirectly,
more than 5% of the outstanding equity securities.
4.4 Capitalization.
(a) The authorized capital stock of APS consists
(and on the date of the exercise of the
option by Buyer, will consist) of 1,000
shares of capital stock, all of which shares
are issued and outstanding as of the date of
this Agreement. All such issued and
outstanding shares of capital stock have
been duly authorized and validly issued and
are fully paid and non-assessable, and are
owned beneficially and of record by the
Selling Shareholder.
(b) The authorized capital stock of APSFMI
consists (and on the date of the exercise of
the option by Buyer, will consist) of 1,000
shares of capital stock, all of which shares
are issued and outstanding as of the date of
this Agreement. All such issued and
outstanding shares of capital stock have
been duly authorized and validly issued and
fully paid and non-assessable, and are owned
beneficially and of record by APS.
(c) All of the outstanding shares of Common
Stock of APS and APSFMI have been duly and
validly authorized, offered, issued, sold
and delivered in compliance with all
applicable federal and state securities
laws.
(d) Other than as described herein, there are
not outstanding any
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options, warrants, rights (including
conversion or preemptive rights) or
agreements for the purchase or acquisition
from the Selling Shareholder, APS or APSFMI,
or by the Selling Shareholder, APS or
APSFMI, of any shares of capital stock of
APS or APSFMI.
4.5 Authorization. The making and performance by the
Selling Shareholder of this Agreement and the
Shareholders Agreement have been duly authorized by
the Board of Directors of the Selling Shareholder
and, prior to the Closing, will have been duly
authorized by all other necessary corporate action
and will not violate any law, rule, regulation,
order, writ, judgment, decree, determination or award
presently in effect having applicability to APS or
the Selling Shareholder or any provision of APS's or
the Selling Shareholder's Certificate of
Incorporation, as amended, or Bylaws, as amended, or
result in a breach of or constitute a default under
any indenture, bank loan, credit agreement or other
agreement or instrument to which APS, APSFMI or the
Selling Shareholder is presently a party or by which
APS, APSFMI or the Selling Shareholder or its
property is presently bound or affected. This
Agreement constitutes the valid and legally binding
obligation of the Selling Shareholder enforceable in
accordance with its terms, subject to bankruptcy,
insolvency, reorganization, or other laws of general
application affecting the rights and remedies of
creditors. When sold to the Buyer, the Shares and the
Additional Shares will be duly and validly issued,
fully paid and non-assessable and will be free of any
liens or encumbrances; provided, however, that the
Shares and the Additional Shares will be subject to
the terms and provisions contained in the
Shareholders Agreement, a form of which is attached
hereto as Schedule 4.5 (the "Shareholders Agreement")
and will be subject to the transfer restrictions
imposed under state and federal securities laws.
4.6 Actions, Suits, Proceedings. Except as disclosed on
Schedule 4.6 hereto, there are no actions, suits or
proceedings pending or, to the knowledge of the
Selling Shareholder, threatened against APS or APSFMI
before any court or administrative agency. To the
knowledge of the Selling Shareholder, neither APS nor
APSFMI is presently subject to any material
outstanding order or decree of any court or
governmental agency.
4.7 Contracts and Commitments. Neither APS nor APSFMI
has not entered into any contracts, commitments or
instruments that create liabilities in excess of
$10,000.
4.8 Compliance with Other Instruments. Neither APS nor
APSFMI is in violation of or in default under any
term of its Certificate of Incorporation or Bylaws or
(in any material respect) of any mortgage, indenture,
contract,
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agreement, instrument, judgment, decree, order,
statute, rule or regulation applicable to APS or
APSFMI or any of their assets or other properties.
The execution, delivery, and performance of and
compliance with this Agreement and the delivery of
the Shares and the Additional Shares will not result
in any such violation or be in conflict with or
constitute a default under any such term, or result
in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the property or
assets of APS or APSFMI pursuant to any such term.
4.9 Private Placement. To the best of Selling
Shareholder's knowledge, based on the
representations, warranties and agreements of Buyer
contained herein (i) the offering of the Shares and
the Additional Shares qualifies as a private
placement and/or exempt transaction under all
applicable securities laws, and (ii) no registration
is required under any applicable securities laws with
respect to such offering, and any filings required to
be made have been, or will on a timely basis be, duly
made.
4.10 Brokerage. No person is entitled, directly or
indirectly, to compensation from APS by reason of any
agreement or understanding with APS or the Selling
Shareholder, as a broker or finder, in connection
with the sale and purchase of the Shares and the
Additional Shares as contemplated by this Agreement.
Except for any obligations agreed to in writing by
the Buyer, the Selling Shareholder agrees to
indemnify and hold the Buyer and its agents and
representatives harmless against and in respect of
any claims, damages, suits, obligations, liabilities,
or expenses (including, without limitation,
reasonable attorneys' fees and expenses) arising out
of or relating to the assertion of any brokerage or
finder's fee or other commission based on actions by
the Selling Shareholder or APS relative to this
Agreement or the transactions contemplated thereby.
4.11 Financial Statements. The Selling Shareholder has
furnished Buyer with an unaudited balance sheet and
income statement of APS as of, and for the period
ending, December 31, 1996, which financial statements
were prepared for internal purposes only (the
"Financial Statements"). The Financial Statements
have been prepared in accordance with GAAP except
that such Financial Statements contain no footnotes,
no statement of cash flows and no provision for
Federal income taxes. To the best of the Selling
Shareholder's knowledge, the Financial Statements
present fairly the financial condition of APS as of
the date thereof, as well as any changes in capital
and surplus and in the resulting operations for the
same period, all in accordance with GAAP, except as
provided herein. Also, to the best of the Selling
Shareholder's knowledge, APS has no liabilities as of
December 31, 1996, other than as are reflected on the
Financial Statements, except for
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liabilities subsequently arising in the ordinary
course of APS's business, which subsequent
liabilities have not materially adversely changed the
financial condition of APS, and contractual
liabilities arising in the ordinary course of either
APS's or APSFMI's business. Notwithstanding the
foregoing, Buyer acknowledges and agrees that Selling
Shareholder anticipates causing APS to dividend or
otherwise distribute to Selling Shareholder at or
prior to the Closing all earnings of APS for the
period between December 31, 1996, and the date of the
Closing.
4.12 Changes. To the best of the Selling Shareholder's
knowledge, since the date of the Financial
Statements, there has not been any event or condition
of any type that has materially adversely affected
either APS's or APFSMI's business, prospects,
conditions, affairs, operations, properties or
assets.
4.13 Title To Property And Assets; Liabilities. Each of
APS and APSFMI own their respective property free and
clear of all mortgages, liens and encumbrances. With
respect to any property they lease, each of APS and
APSFMI are in compliance with such leases and, to the
best of Selling Shareholder's knowledge, hold a valid
leasehold interest free of any liens, claims or
encumbrances.
4.14 Taxes. Each of APS and APSFMI is included in the
consolidated Federal income tax return of Selling
Shareholder for Federal income tax purposes.Each of
APS and APSFMI has accurately prepared and timely
filed all state and municipal tax returns that are
required to be filed by it and has paid or made
provisions for the payment of all taxes that have
become due pursuant to such returns. No deficiency
assessment or proposed adjustment of APS's or
APSFMI's Federal income taxes or state or municipal
taxes is pending and Selling Shareholder has no
knowledge of any proposed liability for any tax to be
imposed upon APS's or APSFMI's properties or assets.
4.15 Management Agreement. To the best of the Selling
Shareholder's knowledge, the Management Agreement of
Attorney-In-Fact (the "Attorney- In-Fact") for
American Physicians Insurance Exchange ("APIE"),
including amendments 1 and 2 thereto, (a copy of
which is attached as Schedule 4.15), between APSFMI
and APIE, has not been otherwise amended, is
currently valid, in full force and effect, binding
and enforceable in accordance with its terms.
4.16 Misleading Statements. No representation or warranty
by the Selling Shareholder in this Agreement or in
any written statement or certificate furnished by the
Selling Shareholder, APS or APSFMI to the Buyer
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pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement, or in
any related agreements, separately or when taken
together, contains or will contain any untrue
statement of a material fact or omits or will omit to
state a material fact necessary to make the
statements made not misleading.
5. Representations and Warranties of the Buyer.
The Buyer hereby represents and warrants to the Selling
Shareholder as follows:
5.1 Organization and Good Standing. The Buyer is a
corporation duly organized, validly existing and in
good standing under the laws of the State of Florida.
The Buyer has all requisite power and authority, and
holds all licenses, permits, and other required
authorizations from governmental authorities,
necessary to conduct its business and consummate the
transactions contemplated by this Agreement, the
Shareholders Agreement the Managing General Agency
Agreement (the "Agency Agreement") entered into by
Buyer in connection with the transactions
contemplated hereby, and the Reinsurance Agreement
(the "Reinsurance Agreement") entered into by Buyer
in connection with the transactions contemplated
hereby. For purposes of this Agreement, the
Shareholders Agreement, the Agency Agreement and the
Reinsurance Agreement are collectively referred to as
the "Ancillary Agreements."
5.2 Power and Authority. The Buyer has all requisite
legal power and authority to enter into this
Agreement and the Ancillary Agreements and to carry
out and perform its obligations under the terms of
this Agreement and the Ancillary Agreements.
5.3 Authorization. The making and performance by the
Buyer of this Agreement and the Ancillary Agreements
have been duly authorized and, prior to the Closing,
will have been duly authorized by all other necessary
legal action (if any) and will not violate any law,
rule, regulation, order, writ, judgment, decree,
determination, or award presently in effect having
applicability to the Buyer or any provisions of the
Buyer's organizational documents, as amended, or
result in a breach of or constitute a default under
any indenture, bank loan, credit agreement, other
agreement or instrument to which the Buyer is
presently a party or by which the Buyer or its
property is presently bound or affected. This
Agreement and the Ancillary Agreements constitute
valid and legally binding obligations of the Buyer
enforceable in accordance with their terms, subject
to bankruptcy, insolvency, reorganization or other
laws of general application affecting the rights and
remedies of creditors.
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5.4 Investment Plan. The Buyer is purchasing and
acquiring the Shares for its own account for
investment and not with a present view to, or for
sale in connection with, any distribution thereof or
any selling or granting any participation therein.
The Buyer does not have any contract, undertaking,
agreement, or arrangement with any person to sell,
transfer or grant participations to any third person
with respect to any of the Shares.
5.5 Restricted Securities. The Buyer understands that the
Shares will not be registered under the Securities
Act of 1933, as amended (the "1933 Act"), on the
basis that the sale provided for in this Agreement is
exempt from registration under the 1933 Act pursuant
to exemptions contained therein, and that the Selling
Shareholder's reliance on such exemptions is, in
part, predicated on the Buyer's representations set
forth herein.
5.6 Restrictive Legend. The Buyer acknowledges that the
certificates representing the Shares shall bear a
legend indicating the restrictions on transfer of the
Shares under the Shareholders Agreement and
applicable securities laws, and that appropriate stop
transfer instructions will be entered in the stock
records of APS.
5.7 Illiquidity. The Buyer understands that the Shares
may not be sold, transferred or otherwise disposed of
without registration under the 1933 Act or an
exemption therefrom and applicable state securities
laws or an exemption therefrom. In the absence of an
effective registration statement covering the Shares
or an available exemption from such registration, the
Shares may not be disposed of.
5.8 Sophistication. The Buyer is experienced in
evaluating and investing in companies such as APS, is
able to fend for itself in the transactions
contemplated by this Agreement, has such knowledge
and experience in financial and business matters as
to be capable of evaluating the merits and risks of
its investment, and has the ability to bear the
economic risk of its investment.
5.9 Misleading Statements. No representation or warranty
by the Buyer in this Agreement or in any written
statement or certificate furnished by the Buyer to
the Selling Shareholder or APS pursuant to this
Agreement or in connection with the transactions
contemplated by this Agreement or in any related
agreements, separately or when taken together,
contains or will contain any untrue statement of a
material fact or omits or will omit to state a
material fact necessary to make the statements made
not misleading.
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6. Affirmative Covenants of the Selling Shareholder
The Selling Shareholder covenants and agrees that:
6.1 Financial Information. Selling Shareholder will
furnish to Buyer:
(a) Within 60 days after the last day of each
fiscal quarter (except the last in each
fiscal year), a balance sheet and income
statement showing the financial conditions
and results of operations of APS and APSFMI
as of, and for the period then ended,
prepared in accordance with the same
methodology utilized in preparing the
Financial Statements; and
(b) As soon as practicable, and in any event not
later than 90 days after the close of each
fiscal year, audited, consolidated financial
statements of Selling Shareholder showing
the financial condition and result of
operations of Selling Shareholder and its
consolidated subsidiaries (including APS and
APSFMI), as of, and for the year ended,
prepared in accordance with GAAP
consistently applied.
6.2 Rights to Inspect. Selling Shareholder shall cause
APS and APSFMI to permit each record holder of the
Shares or its authorized representative at all
reasonable times during regular business hours and as
often as reasonably requested to visit and inspect,
at the record holder's expense, any of the properties
of each of APS and APSFMI, including their books and
records, and to make extracts therefrom and to
discuss the affairs, finances, and accounts of APS
and APSFMI with their officers.
6.3 Reasonable Efforts. The Selling Shareholder shall use
reasonable efforts to fulfill, as soon as
practicable, all of the conditions contained in
Section 10 hereof. Such efforts shall not require any
waiver of a condition to Closing or of any other term
or condition hereof.
7. Affirmative Covenant of the Buyer. The Buyer shall use
reasonable efforts to fulfill, as soon as practicable, all of
the conditions contained in Section 8 hereof. Such efforts
shall not require any waiver of a condition to Closing or of
any other term or condition hereof.
8. The Selling Shareholder's Conditions to Closing.
The obligation of the Selling Shareholder to sell the Shares
as contemplated in this Agreement shall be subject to the fulfillment on or
before the Closing of each of the following conditions:
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8.1 Representations and Warranties. The representations
and warranties of the Buyer contained in Section 5
shall be true and correct as of the Closing Date with
the same effect as though made on and as of such
date.
8.2 Approvals. All authorizations, approvals or permits,
or exemptions, of any governmental authority or
regulatory body of the United States or of any state
including but not limited to the Texas Insurance
Department that are required in connection with the
lawful issuance and sale of the Shares pursuant to
this Agreement, shall have been duly obtained and
shall be effective on and as of the Closing.
Furthermore, Buyer will have obtained a Certificate
of Authority to do business in Texas.
8.3 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or
complied with by the Buyer on or prior to the Closing
Date shall have been performed or complied with in
all material respects.
8.4 Compliance Certificates. The Buyer shall have
delivered to the Selling Shareholder a certificate
dated the Closing Date executed by a duly authorized
officer of the Buyer certifying to the fulfillment of
the conditions specified in this Section 8.
8.5 Proceedings and Documents. All proceedings of the
Buyer in connection with the transactions
contemplated hereby and all documents and instruments
incident to such transactions shall be satisfactory
in form and substance to the Selling shareholder, and
the Selling Shareholder shall have received all such
counterpart originals or certified or other copies of
such documents as it may reasonably request.
8.6 Execution of Ancillary Agreements. The Buyer shall
have executed and delivered the Ancillary Agreements.
9. The Buyer's Conditions of Closing.
The obligation of the Buyer to purchase the Shares as
contemplated in this Agreement shall be subject to the
fulfillment on or before the closing of each of the following
conditions:
9.1 Representations and Warranties. The representations
and warranties of the Selling Shareholder contained
in Section 4 hereof shall be true and correct as of
the Closing Date with the same effect as though made
on and as of such date.
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9.2 Approvals. All authorizations, approvals or permits,
or exemptions, of any governmental authority or
regulatory body of the United States or of any state
including but not limited to the Florida and Texas
Insurance Departments that are required in connection
with the lawful issuance and sale of the Shares
pursuant to this Agreement, shall have been duly
obtained and shall be effective on and as of the
Closing. Furthermore, Buyer will have obtained a
Certificate of Authority to do business in Texas.
9.3 No Amendments to Certificate of Incorporation or
Bylaws. Neither APS's nor APSFMI's Certificate of
Incorporation or Bylaws shall have been amended since
the date of this Agreement.
9.4 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or
complied with by APS or the Selling Shareholder on or
prior to the Closing Date shall have been performed
or complied with in all material respects.
9.5 Compliance Certificate. Selling Shareholder shall
have delivered to the Buyer a certificate or
certificates, executed by the President of the
Selling Shareholder, dated the Closing Date,
certifying to the fulfillment of the conditions
specified in this Section 9.
9.6 Proceedings and Documents. All corporate and other
proceedings of the Selling Shareholder in connection
with the transactions contemplated hereby and all
documents and instruments incident to such
transactions shall be satisfactory in form and
substance to the Buyer, and the Buyer shall have
received all such counterpart originals or certified
or other copies of such documents as it may
reasonably request.
9.7 Execution of Shareholders Agreement. The Selling
Shareholder shall have executed and delivered to
Buyer the Shareholders Agreement and Selling
Shareholder shall have used its reasonable best
efforts to have caused the execution and delivery by
its affiliates to Buyer of the duly executed
Ancillary Documents.
9.8 Opinion of Counsel. Selling Shareholder shall have
caused APIE to obtain an opinion of counsel addressed
to, and for the benefit of, Buyer from the law firm
of Clark, Thomas & Winters, in a form reasonably
acceptable to the Buyer and the Selling Shareholder,
which Selling Shareholder will deliver to Buyer at or
before the Closing, to the effect that the
Attorney-In- Fact is valid and enforceable in
accordance with its terms. The Buyer agrees to
reimburse APIE in full for the legal fees and costs
incurred in obtaining such an opinion, which
reimbursement shall be delivered to APIE
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or Selling Shareholder at the Closing.
10. Indemnification.
10.1 Indemnification of Selling Shareholder. Selling
Shareholder hereby agrees to indemnify Buyer and hold
Buyer harmless from and against and in respect of,
all liabilities, losses, claims, costs or damages
(including reasonable attorneys' fees and
disbursements) (collectively, "Losses") incurred by
Buyer and resulting from or arising out of (i) any
breach or inaccuracy of any representations or
warranties by Selling Shareholder contained either
herein or in any certificate delivered pursuant
hereto, including any certificates delivered on the
Closing Date or (ii) any failure by Selling
Shareholder to perform any of its obligations
contained herein.
10.2 Indemnification of Buyer. Buyer hereby agrees to
indemnify Selling Shareholder and APS and hold
Selling Shareholder and APS harmless from and against
and in respect of, all Losses incurred by Selling
Shareholder or APS and resulting from or arising out
of (i) any breach or inaccuracy of any
representations or warranties by Buyer contained
herein or in any certificate delivered pursuant
hereto including any certificates delivered on the
Closing Date or (ii) any failure by Buyer to perform
any of its obligations contained herein.
11. Termination.
This Agreement may be terminated as to all parties hereto and the
transactions contemplated herein abandoned at any time prior to the Closing by:
(a) The mutual consent of the parties hereto;
(b) The Buyer at any time after May 31, 1997, if at such
time the conditions set forth in Section 9 hereof
have not been satisfied through no fault of the Buyer
and the Buyer gives APS and the Selling Shareholder
notice thereof; or
(c) The Selling Shareholder or APS at any time after May
31, 1997, if at such time the conditions set forth in
Section 8 hereof have not been satisfied through no
fault of the Selling Shareholder or APS and the
Selling Shareholder or APS gives the Buyer notice
thereof.
12. Confidentiality.
12.1 From and after the date hereof, unless otherwise
agreed to by the parties,
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each of the parties shall keep, and shall ensure that
its directors, executive officers, contractors,
consultants and agents keep, confidential all
information acquired from the other party pursuant to
this Agreement or otherwise, including the contents
of this Agreement and any document delivered pursuant
thereto or in connection therewith, except that the
foregoing restriction shall not apply to any
information that: (i) is or hereafter becomes
generally available to the public other than by
reason of any default with respect to a
confidentiality obligation under this Agreement, (ii)
was already known to the recipient as evidenced by
prior written documents in its possession (unless the
information is covered by a prior confidentiality
agreement between the parties), (iii) is disclosed to
the recipient by a third party who is not in default
of any confidentiality obligation to the disclosing
party hereunder, (iv) is developed by or on behalf of
the receiving party, without reliance on confidential
information received hereunder, (v) is submitted by
the recipient to governmental authorities or
regulatory bodies to facilitate the issuance of
approvals necessary or appropriate for the operation
of their businesses, provided that reasonable
measures shall be taken to assure confidential
treatment of such information, (vi) is provided by
the recipient to third parties under appropriate
terms and conditions, including confidentiality
provisions substantially equivalent to those in this
Agreement or (vii) is otherwise required to be
disclosed in compliance with applicable laws or order
by a court or other government authority or
regulatory body having competent jurisdiction.
Notwithstanding the foregoing, Buyer and Selling
Shareholder each agree that they will endeavor in
good faith to agree upon joint press releases to be
released by each of them within twenty-four hours
after (i) the execution of this Agreement by all
parties hereto, and (ii) the Closing; provided that
in the event of a failure to so agree, each party
shall be entitled to distribute press releases
prepared by it concerning the entering into of this
Agreement and the Closing of the transactions
contemplated herein as each party deems reasonably
necessary for purposes of ensuring compliance with
applicable securities laws. Otherwise, no press
release or similar public announcement or disclosure
concerning this Agreement or the transactions
contemplated herein shall be made by a party hereto
without the prior written consent of the other party.
Each party shall be entitled, in addition to any
other right or remedy it may have, at law or in
equity, to an injunction, without the posting of any
bond or other security, enjoining or restraining the
other party from any violation or threatened
violation of this Section.
13. Miscellaneous.
13.1 Modification to Agreement. This Agreement may not be
changed orally but
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only by an agreement in writing, signed by the party
against whom enforcement of any waiver, change,
modification or discharge is sought. Subject to the
foregoing, any of the terms or conditions of this
Agreement may be waived or modified at any time by
the party entitled to the benefit thereof, but no
such waiver, express or implied, shall affect or
impair the right of the waiving party to require
observance performance or satisfaction of either (i)
the same term or condition as it applies on a
subsequent or previous occasion, or (ii) any other
term or condition hereof.
13.2 Applicable Law. This Agreement, its construction and
the rights, remedies, and obligations arising by,
under, through or on account of it shall be governed
by the laws of the State of Delaware, excluding its
conflict of laws rules.
13.3 Binding Effect. If any portion of this Agreement is
declared by a court of competent jurisdiction to be
invalid or unenforceable, such declaration shall not
affect the validity of the remaining provisions. This
Agreement shall inure to the benefit of and be
binding upon the representatives, successors, and
assigns of each party. This Agreement is not intended
for the benefit of anyone other than the signatories
hereto, and there shall be no third party
beneficiaries hereof.
13.4 Integration. This Agreement, together with the
Ancillary Agreements related hereto, constitutes a
final and complete integration of the agreement of
the parties respecting the subject matter hereof,
thereby superseding all previous oral and written
agreements. There are no contemporaneous oral
agreements.
13.5 Notices. Any notice hereunder (including notices of
waiver provided for or permitted hereunder), shall be
in writing and hand delivered or sent by certified
mail return receipt requested, nationally recognized
overnight courier service or facsimile transmission,
addressed to the parties at their respective
addresses set forth below:
Selling Shareholder:
American Physicians Services Group, Inc.
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attention: Duane K. Boyd
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With a copy to:
Small, Craig & Werkenthin, P.C.
100 Congress Avenue, Suite 100
Austin, Texas 78701
Attention: Timothy L. LaFrey
The Buyer:
Florida Physicians Insurance Company, Inc.
1000 Riverside Avenue, Suite 800
Jacksonville, Florida 32204
Attention: Robert Finch
With a copy to:
LeBoeuf, Lamb, Greene & MacRae, LLP
50 North Laura Street, Suite 2800
Jacksonville, Florida 32202
Attention: Thomas E. Gibbs
Any such notice shall be deemed given when so personally delivered or
sent by facsimile transmission (provided confirmation is received immediately
thereafter) or if mailed three (3) business days after the date of deposit in
the mail or if sent by overnight courier one (1) business day after the date of
delivery to the courier service marked for overnight delivery. A party may
change its or his address for notice by giving notice as provided hereunder.
13.6 Pronouns, Counterparts. In construing the words of
this Agreement, plural constructions shall include
the singular and singular constructions shall include
the plural. No significance shall be attached to
whether a pronoun is masculine, feminine or neuter.
The words "herein," "hereof" and other similar
compounds of the word "here" shall mean and refer to
his entire Agreement and not to any particular
provisions, section or subsection. Paragraph captions
in this Agreement are for ease of reference only and
shall be given no substantive or restrictive meaning
or significance whatsoever. This Agreement may be
executed in multiple counterparts, each of which
shall be an original regardless of whether all
parties sign the same document. Regardless of the
number of counterparts, they shall constitute one and
the same agreement. It shall not be necessary in
making proof of this Agreement to produce or account
for more than one counterpart.
13.7 Survival of Representations, Warranties, Covenants
and Agreements. The representations, warranties,
covenants and agreements set forth in this Agreement
shall survive the Closing Date and the consummation
of the transactions contemplated hereby for a period
of two years.
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13.8 Attorneys' Fees. In any action brought to enforce the
provisions of this Agreement (including a declaratory
judgment action), the prevailing party shall be
entitled to recover from the other party the costs of
this action, including reasonable attorneys' fees,
whether incurred at trial, in settlement or mediation
or on appeal.
13.9 Assignment. No party may assign any of its or his
rights or obligations under this Agreement without
the prior written consent of the other parties. This
Agreement shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of
the parties hereto.
13.10 Further Assurances. From and after the Closing, each
party shall execute and deliver such documents and
take such other actions as the other parties may
reasonably request to further effect or evidence the
purposes and intent of this Agreement.
13.11 Definition of Knowledge. Whenever there are
references in this Agreement to the "knowledge" of a
party; (i) Selling Shareholder shall be deemed to
have knowledge of the applicable fact or matter
whenever any of the members of the board of
directors, or executive officers, of Selling
Shareholder, APS, APIE or APSFMI, have actual
knowledge of the applicable fact or matter, and (ii)
Buyer shall be deemed to have knowledge of the
applicable fact or matter whenever any of the members
of the board of directors, or any of the executive
officers, of Buyer have actual knowledge of the
applicable fact or matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
1st day of April, 1997.
AMERICAN PHYSICIANS SERVICE GROUP, INC.
By________________________________________
FLORIDA PHYSICIANS INSURANCE
COMPANY, INC.
By________________________________________
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SCHEDULE 4.3
List each corporate or other entity in which APS Insurance Services, Inc. owns
or controls, directly or indirectly, more than 5% of the outstanding equity
securities.
Name Percent Ownership
-------------------------- ---------------------
1.) APS Facilities Management, Inc. 100%
2.) American Physicians Insurance
Agency, Inc. 100%
EXHIBIT 10.27
SHAREHOLDERS AGREEMENT
This Shareholders Agreement ("Agreement") is entered into as of April
1, 1997, by and among APS Insurance Services, Inc., a Delaware corporation
("APS"), Florida Physicians Insurance Company, Inc., a Florida corporation
("FPIC"), and American Physicians Service Group, Inc., a Texas corporation
("APSG").
RECITALS
A. APSG owns a total of 1,000 shares of the issued and
outstanding capital stock of APS, which constitutes 100% of
the APS capital stock issued and outstanding. APS, in turn
owns a total of 1,000 shares of the issued and outstanding
capital stock of APS Facilities Management, Inc. ("APSFMI"),
which constitutes 100% of the APSFMI capital stock issued and
outstanding.
B. The parties have entered into a Stock Purchase and Stock
Option Agreement whereby: (i) APSG has agreed to sell and FPIC
has agreed to purchase 200 shares of APS common stock (the
"Shares"); and (ii) FPIC has the option to purchase from APSG
350 additional shares of APS common stock (the "Additional
Shares").
C. APSG and FPIC desire to enter into certain agreements
concerning FPIC and APSG representation on the APS Board of
Directors, the disposition of any shares of APS common stock
owned by FPIC or APSG, and the disposition of shares between
APS and FPIC.
AGREEMENT
In consideration of the foregoing, the promises contained herein, and
other valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
1. Applicability. All capital stock of APS now owned or
hereafter acquired by FPIC or APSG, or their Permitted
Transferees (as hereinafter defined), shall be subject to the
terms and conditions of this Agreement.
2. General Prohibition on Transfers. Neither FPIC nor APSG shall
sell, assign, convey, give or otherwise transfer its APS stock
except as permitted by this Agreement. Any attempted transfer
of APS stock or any interest therein other than as permitted
hereby shall be void and of no force or effect and shall not
be reflected on the APS stock transfer books. The transfer of
a majority equity or equivalent interest in either FPIC or
APSG in or by virtue of one or more transactions, shall be
deemed a transfer of such shareholder's stock and therefore
subject to the transfer restrictions set forth in this
Agreement. FPIC and APSG, and their Permitted Transferees,
shall be entitled to pledge and grant a security interest in
all or any interest in their APS stock without requiring any
consent or approval of any
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other party hereto; provided, however, that each agrees to
give the other parties hereto prompt written notice of default
or acceleration of the underlying secured indebtedness and,
prior to the commencement of any acts to enforce the rights of
the applicable secured party, to give the other shareholder
the right to purchase such encumbered APS stock on such terms
and conditions as shall be agreed upon by the secured party
and the shareholder proposing to purchase the encumbered APS
stock. The shareholder whose APS stock is subject to any such
pledge or security interest shall cooperate fully, and in good
faith, to facilitate the purchase of the encumbered APS stock
by the other shareholder at a reasonable fair market value so
as to prevent the outright sale or other transfer of the
encumbered APS stock to the secured party or any other third
party. In addition, at the time a shareholder pledges or
grants a security interest in its APS stock (or immediately
upon execution of this Agreement in the case of an existing
pledge) such shareholder shall obtain a certificate from the
pledgee or secured party, addressed to all the parties to this
Agreement, to the effect that (i) the pledgee or secured party
is aware of the existence and terms of this Agreement, and
(ii) the pledgee or secured party will honor the rights of
parties to this Agreement to purchase the encumbered APS
stock, and will release such stock and all rights therein in
exchange for full payment of the purchase price directly to
the secured party or pledgee, upon the exercise by any party
hereto of an option arising pursuant to this Agreement which
gives such party the right to purchase such encumbered APS
stock.
3. Transfer Following Waiver. Notwithstanding any other
provisions of this Agreement, either FPIC or APSG may sell or
convey some or all of its APS stock after first obtaining the
written consent of APS, and the other shareholder, to the
particular disposition. The written consent, if given, shall
identify the transferor, the transferee, the number of shares
to be transferred, and the time within which the transfer
shall occur, and shall state whether or not, as a condition of
such transfer, the transferor shall be required to execute a
shareholders agreement containing provisions substantially
similar to those contained in this Agreement.
4. Permitted Transfers. Notwithstanding any other provisions of
this Agreement, either FPIC or APSG may sell, assign or
otherwise transfer all, or any part of their APS Shares, to
any current or future wholly-owned, or majority-owned, direct
or indirect subsidiary of FPIC or APSG. Any APS shares
transferred pursuant to, or the transfer of which is
permitted by, the immediately preceding sentence shall remain
subject to this Agreement, and any transferees thereunder are
hereinafter referred to as the "Permitted Transferees."
Permitted Transferees may transfer APS shares pursuant to this
paragraph provided that the party to whom such shares are to
be transferred would then be a Permitted Transferee of the
shareholder holding such shares,as defined above. Any APS
shares held by a Permitted Transferee will be subject to the
same rights and restrictions as would have applied
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to such shares in the hands of the original shareholder, and
such Permitted Transferees shall execute a counterpart hereof.
5. Voting Agreement.
5.1 As shall be required to effect the intent of this
Agreement, the number of directors of APS will be
increased to four from three. The positions currently
held by the three directors shall be described herein
as the "APSG Seats". The newly added position on the
Board of Directors shall be described herein as the
"FPIC Seat." The FPIC Seat shall initially be filled
as provided by the APS Bylaws. Each member of the
Board of Directors shall cast his vote so as to cause
the election to the FPIC Seat one candidate
designated by FPIC. Subsequent changes to the APS
Board of Directors shall be made in accordance with
the terms of this Agreement as set forth herein.
In any election of directors of APS during the term
of this Agreement while FPIC owns 20% of the
outstanding common stock of APS, and at which the
FPIC Seat is to be filled (including the election in
which the FPIC Seat is initially filled), APSG shall
cast its votes so as to cause the election to the
FPIC Seat of one candidate designated by FPIC, if
FPIC is a shareholder of APS at the time of the
election. In any election of directors of APS during
the term of this Agreement, if FPIC is not then a
shareholder of APS, APSG may cast its votes with
respect to the FPIC Seat in its sole discretion.
In any election of directors of APS during the term
of this Agreement at which the APSG Seats are to be
filled, and while APSG owns 80% of the outstanding
common stock of APS, FPIC shall cast its votes so as
to cause the election to the APSG Seats of three
candidates designated by APSG, if APSG is a
shareholder of APS at the time of the election. In
any election of directors of APS during the term of
this Agreement, if APSG is not then a shareholder of
APS, FPIC may cast its votes with respect to the APSG
Seats in its sole discretion.
5.2. Upon receipt of a written instruction from FPIC
during the term of this Agreement asking for the
removal of the director then holding the FPIC Seat,
APSG shall exercise its rights as a shareholder of
APS to the greatest extent possible to effect the
removal of that person as a director, subject to the
Bylaws of APS.
Upon receipt of a written instruction from APSG
during the term of this Agreement asking for the
removal of any director then holding an APSG
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Seat, FPIC shall exercise its rights as a shareholder
of APS to the greatest extent possible to effect the
removal of that person as a director, subject to the
Bylaws of APS.
5.3 If this Agreement has not terminated, and if FPIC
purchases the Additional Shares, then APSG and FPIC
shall vote their respective shares, and shall direct
their respective Board of Directors designees to
vote, to increase the total number of directors of
APS to five (5) from four (4), three (3) of which
directorships shall be FPIC Seats and two (2) of
which directorships shall be APSG Seats. At such
time, APSG shall cause the resignation or removal of
one (1) APSG designated director and FPIC shall have
the right to designate two (2) candidates to serve as
the new directors ("New FPIC Seats"). APSG agrees to
cast its votes so as to cause the election to the New
FPIC Seats of two (2) candidates designated by FPIC.
Thereafter, in any election of directors of APS
during the term of this Agreement while FPIC owns
fifty five percent (55%) of the outstanding common
stock of APS, APSG and FPIC shall cast their votes so
as to cause the election of three (3) directors
designated by FPIC to the Board of Directors of APS
and two (2) directors designated by APSG to the Board
of Directors of APS.
5.4 Nothing in this Agreement shall impair the right of
APSG, APS, its other shareholders, or its directors,
to exercise any and all rights they may have to
remove any director for cause, as described in
paragraph c below. FPIC hereby agrees that such
persons shall have the right to take any action in
their discretion to remove any director occupying a
FPIC Seat if:
a. FPIC ceases to be a shareholder; or
b. this Agreement expires or is terminated; or
c. the person occupying the FPIC Seat (i)
breaches his fiduciary duties to APS or its
shareholders; (ii) becomes unable to
exercise the significant duties of a
director of APS because of a physical or
mental condition that appears to be
permanent or of indefinite duration; or
(iii) is found guilty of a felony or a crime
of moral turpitude.
Nothing in this Agreement shall impair the right of
FPIC, APS, its other shareholders, or its directors,
to exercise any and all rights they may have to
remove any director for cause, as described in
paragraph f below. APSG hereby agrees that such
persons shall have the right to take any action in
their discretion to remove any director occupying an
APSG Seat if:
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d. APSG ceases to be a shareholder; or
e. this Agreement expires or is terminated; or
f. any person occupying an APSG Seat (i)
breaches his fiduciary duties to APS or its
shareholders; (ii) becomes unable to
exercise the significant duties of a
director of APS because of a physical or
mental condition that appears to be
permanent or of indefinite duration; or
(iii) is found guilty of a felony or a crime
of moral turpitude.
5.5 At any time during the term of this Agreement when
the FPIC Seat is vacant for any reason, APSG shall
exercise its rights as a shareholder of APS to cause
the shareholders to elect a person designated by FPIC
to occupy the FPIC Seat. At any time during the term
of this Agreement when any APSG Seat is vacant for
any reason, FPIC shall exercise its rights as a
shareholder of APS to the greatest extent possible to
cause the shareholders to elect a person designated
by APSG to occupy the APSG Seat.
5.6 A designation or other voting instruction under this
Agreement shall be valid and binding on APSG only if
given to the President of APSG before the
commencement of the shareholders meeting at which, or
before the contemplated date of a shareholders
consent in which, the instruction is to be
implemented. A designation or other voting
instruction under this Agreement shall be valid and
binding on FPIC only if given to the President of
FPIC before the commencement of the shareholders
meeting at which, or before the contemplated date of
a shareholders consent in which, the instruction is
to implemented.
5.7 Each certificate representing shares of APS's stock,
and each certificate which may be issued and
delivered by APS or its transfer agent upon transfer
of such shares, shall contain a legend to
substantially the following effect:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THESE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO APS THAT SUCH REGISTRATION IS NOT
REQUIRED."
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"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT
TO THE PROVISIONS OF A SHAREHOLDERS' AGREEMENT DATED
AS OF APRIL 1, 1997, A COUNTERPART OF WHICH HAS BEEN
DEPOSITED WITH THE CORPORATION AT ITS PRINCIPAL
OFFICE."
5.8 In case APS is merged into or consolidated with
another corporation, or all or substantially all of
the assets of APS are transferred to another
corporation, then in connection with such transfer
the term "APS" for all purposes of this Shareholders
Agreement shall be deemed to include such successor
corporation. The term "shares" shall include any
shares of capital stock of APS issued in connection
with any stock split, stock dividend or other
recapitalization of APS.
5.9 APSG and FPIC agree to take all such action, or cause
all such action to be taken, as may be necessary to
amend the Articles of Incorporation and/or Bylaws of
APS to require the affirmative vote of more than (i)
75% of directors and (ii) 80% of shareholders to
approve any of the following:
a. amending the articles of incorporation of
APS or any subsidiary of APS;
b. amending the Bylaws of APS or any subsidiary
of APS;
c. changing accounting practices or reserve
levels for American Physicians Insurance
Exchange;
d. merging or dissolving APS or any subsidiary
of APS, unless a higher percentage is
required by applicable law at the time of
such approval;
e. the issuance of any additional capital stock
of APS or any subsidiary of APS;
f. disposing of the stock of APS or any
subsidiary of APS; or
g. filing any registration statement under
state or federal securities laws.
5.10 APS will neither pledge nor grant a security interest
in its APSFMI stock, nor will it permit APSFMI to
sell, transfer, assign, amend or otherwise convey its
existing Attorney-In-Fact relationship with American
Physicians Insurance Exchange.
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6. Sale of Stock.
6.1. If FPIC desires to sell or otherwise transfer any of
its shares of APS stock,or any interest therein to a
third party, FPIC may do so only after first
offering the stock for sale to APSG in writing for
the same price, which shall be paid in cash, and on
the same terms and conditions as have been offered by
the third party. APSG shall notify FPIC in writing
whether it will buy the stock so offered within 30
days of its receipt of written notice of FPIC's
intention to sell the stock. If APSG elects not to
purchase the stock or if APSG does not timely notify
FPIC of its intention, FPIC may sell the stock to the
entity designated, but only upon the terms and
conditions contained in its notice and subject to the
right of APSG to include its APS stock in such sale
on a pro-rata basis as provided below.The foregoing
right of first refusal shall only apply to bona fide
third party offers to purchase APS stock for cash,
and FPIC agrees to give APSG a copy of the written
offer from such third party at the time it gives APSG
its right of first refusal offer as described above.
If APSG elects, or is deemed to have elected, not to
purchase the APS stock subject to such right of first
refusal, and FPIC does not thereafter close its sale
to the third party on the same terms and conditions
as offered to APSG within 90 days, then FPIC shall
not be entitled to conclude such sale without first
providing APSG with another written offer to exercise
its right of first refusal with respect to such
transaction. Third party offers to purchase APS stock
other than for cash shall not give rise to the right
of first refusal provided herein and shall not be
permitted except pursuant to the written consent of
APS and the other shareholder as provided in Section
3 of this Agreement.Furthermore, as a condition to
FPIC being allowed to sell or otherwise transfer any
of its shares to a third party after APSG elects, or
is deemed to have elected, not to purchase the stock
by exercise of its right of first refusal, FPIC must
allow APSG to include such shares of APSG's APS stock
in such transaction, for the same per share price and
on the same other terms and conditions, to the extent
that the total shares of APS stock acquired by such
third party will include shares owned by FPIC and
APSG in the same relative percentage as each of
FPIC's and APSG's ownership of shares of APS stock
immediately prior to such transaction bears to the
total shares of APS stock owned by both APSG and FPIC
at that time. Any third party who acquires any APS
stock pursuant to this Section must, as a condition
to such acquisition, execute an agreement reasonably
acceptable to APS and the remaining shareholders of
APS containing the same terms and restrictions
relating to transfer of shares as is contained
herein.
6.2 If APSG desires to sell or otherwise transfer any of
its shares of APS stock, or any interest therein to a
third party, APSG may do so only after first
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offering the stock for sale to FPIC in writing for
the same price, which shall be paid in cash, and on
the same terms and conditions as have been offered by
the third party. FPIC shall notify APSG in writing
whether it will buy the stock so offered within 30
days of its receipt of written notice of APSG's
intention to sell the stock. If FPIC elects not to
purchase the stock or if FPIC does not timely notify
APSG of its intention, APSG may sell the stock to the
entity designated, but only upon the terms and
conditions contained in its notice and subject to the
right of FPIC to include its APS stock in such sale
on a pro-rata basis as provided below. The foregoing
right of first refusal shall only apply to bona fide
third party offers to purchase APS stock for cash,
and APSG agrees to give FPIC a copy of the written
offer from such third party at the time it gives FPIC
its right of first refusal offer as described above.
If FPIC elects, or is deemed to have elected, not to
purchase the APS stock subject to such right of first
refusal, and APSG does not thereafter close its sale
to the third party on the same terms and conditions
as offered to FPIC within 90 days, then APSG shall
not be entitled to conclude such sale without first
providing FPIC with another written offer to exercise
its right of first refusal with respect to such
transaction. Third party offers to purchase APS stock
other than for cash shall not give rise to the right
of first refusal provided herein and shall not be
permitted except pursuant to the written consent of
APS and the other shareholder as provided in Section
3 of this Agreement. Furthermore, as a condition to
APSG being allowed to sell or otherwise transfer any
of its shares to a third party after FPIC elects, or
is deemed to have elected, not to purchase the stock
by exercise of its right of first refusal, APSG must
allow FPIC to include such shares of FPIC's APS stock
in such transaction, for the same per share price and
on the same other terms and conditions, to the extent
that the total shares of APS stock acquired by such
third party will include shares owned by APSG and
FPIC in the same relative percentage as each of
APSG's and FPIC's ownership of shares of APS stock
immediately prior to such transaction bears to the
total shares of APS stock owned by both APSG and FPIC
at that time. Any third party who acquires any APS
stock pursuant to this Section must, as a condition
to such acquisition, execute an agreement reasonably
acceptable to APS and the remaining shareholders of
APS containing the same terms and restrictions
relating to transfer of shares as is contained
herein.
6.3 Any transfer of stock by FPIC or by APSG to a
Permitted Transferee, or which is otherwise
specifically allowed by this Agreement with respect
to APS stock which is subject to a pledge or security
interest, shall not be subject to the foregoing
Sections 6.1 and 6.2.
7. Sales Between the Parties.
-8-
<PAGE>
7.1 Offer to Sell. At any time 48 months or more after
FPIC acquires its initial 200 shares of APS stock,
FPIC or APSG (the "Offeror") may provide to the other
(the "Offeree") written notice ("Offer Notice") of
the value as determined by the Offeror of 100% of the
stock of APS owned by the Offeree. The right to send
an Offer Notice is exclusive to each of FPIC and APSG
and their Permitted Transferees, is not otherwise
transferable or assignable, and will remain effective
for so long as FPIC and APSG, or their Permitted
Transferees, own any interest in APS.
7.2 Response. Within 60 business days following the
Offeree's receipt of an Offer Notice, Offeree shall
give written notice ("Intent Notice") to Offeror of
Offeree's intent either (i) to buy all of Offeror's
APS stock at the same price per share described in
the Offer Notice, or (ii) to sell all of Offeree's
APS stock to Offeror at the per share price
determined by Offeror in the Offer Notice. If Offeree
does not respond within 60 business days of receipt
of an Offer Notice, Offeree shall sell all of
Offeree's APS stock to Offeror at the price set forth
in the Offer Notice in accordance with the terms of
Section 7.3.
7.3 Closing of Purchase. Within 10 business days of the
later of (i) Offeror's receipt of the Intent Notice
or (ii) the expiration of 60 business days of
Offeree's receipt of an Offer Notice, the parties
shall close the purchase and sale of the APS stock at
a location to be agreed upon in writing by the
parties, or in the event of failure to agree, at the
principal executive offices of APSG. At closing the
purchasing party will buy from the selling party, for
cash, all the APS stock owned by the selling party at
a price-per-share equivalent to the price stated in
the Offer Notice. At closing, the seller shall
deliver the stock free and clear of all liens and
encumbrances. The parties agree to execute and
deliver all documents which are reasonably necessary
to consummate the sale and purchase. The foregoing
notwithstanding, Buyer shall be entitled to extend
the period for closing the purchase and sale of the
Additional Shares by an additional 90 days, if
required by Buyer to obtain all necessary regulatory
approvals.
8. Dividends. APSG and FPIC agree to vote and agree that the
occupants of the APSG Seats and the FPIC Seat(s) shall vote,
to authorize paying as dividends all earnings of APS, subject
to reasonable reserves established by the APS Board of
Directors, from time to time throughout the APS fiscal
year, but not less frequently than once per year. APS shall
cause all of its subsidiaries to authorize paying as dividends
all of their earnings, subject to reasonable reserves
established by their Boards of Directors, from time to time
throughout their fiscal year, but not less frequently than
once per year.
-9-
<PAGE>
9. Miscellaneous.
9.1 Survival. The warranties, representations and
covenants of the parties hereto contained in or made
pursuant to this Agreement shall survive: (i) the
execution and delivery of this Agreement, (ii) the
Closing, and (iii) the closing of any sale and
purchase of the Additional Shares.
9.2 Entire Agreement. This Agreement, together with the
Stock Purchase and Stock Option Agreement, which it
amends, and the related Reinsurance Agreement and
Managing General Agency Agreement, constitute the
entire agreement between the parties and no party
shall be liable or bound to any party in any manner
by any warranties, representations, or covenants
except as specifically set forth in these agreements.
The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the
respective successors and assigns of the parties
hereto. Other than as provided for herein, this
Agreement shall not be assigned without the written
consent of all parties to this Agreement.
9.3 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Delaware
applicable to agreements made and fully performable
therein.
9.4 Modification; Waiver. No modification or amendment of
any provision of this Agreement shall be effective
unless in writing and approved by each of the parties
hereto, and no consent or waiver of any provision of
this Agreement or departure therefrom shall be
effective unless in writing and executed by the party
against which such consent or waiver is effective.
9.5 Effectiveness. This Agreement shall commence and be
effective as of the date first written above and
shall, unless terminated upon agreement of all the
parties, terminate upon the earliest to occur of (i)
the date on which FPIC or APSG (and their respective
Permitted Transferees) is no longer a shareholder of
the Company or (ii) the effective date of any
registration statement under the Federal Securities
Act of 1933 whereby common stock of APS is being
registered for sale by APS in a public offering.
9.6 Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the heirs, executors,
administrators, successors and assigns of the parties
hereto, and shall not be assigned without the written
consent of all parties hereto.
-10-
<PAGE>
9.7 Specific Performance. APSG agrees that upon deposit
of a counterpart of this Agreement at the principal
office of APS as provided above and upon endorsement
of the above-described legend upon the certificates
representing its shares of APS's stock, this
Agreement shall be specifically enforceable by the
parties hereto in a court of competent jurisdiction,
which remedy shall be in addition to any other
remedies that may be available to them at law or in
equity.
9.8 Counterparts. This Agreement may be executed in any
number of counterparts, all of which shall constitute
one and the same instrument.
9.9 Notice. Any notice, communication or demand to be
given or made hereunder by or to any party to this
Agreement shall be in writing and hand delivered or
sent by certified mail, return receipt requested,
nationally recognized overnight courier service or
facsimile transmission, addressed to the parties at
their respective addresses set forth below:
If to FPIC:
Robert Finch
Florida Physicians Insurance Company, Inc.
1000 Riverside Avenue, Suite 800
Jacksonville, Florida 32204
With a copy to:
LeBoeuf, Lamb, Greene & MacRae, LLP
50 North Laura Street
Suite 2800
Jacksonville, Florida 32202
Attention: Thomas E. Gibbs
If to APSG:
Duane K. Boyd
American Physicians Service Group, Inc.
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
If to APS:
Duane K. Boyd
APS Insurance Services, Inc.
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
-11-
<PAGE>
With a copy to:
Small, Craig & Werkenthin, P.C.
Suite 1100
100 Congress Avenue
Austin, Texas 78701
Attention: Timothy L. LaFrey
Any such notice shall be deemed given when so personally delivered or
sent by facsimile transmission (provided confirmation is received immediately
thereafter) or if mailed three (3) business days after the date of deposit in
the mail or if sent by overnight courier service one (1) business day after the
date of delivery to the courier service marked for overnight delivery. A party
may change its address for notice by giving notice as provided hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
April 1, 1997.
AMERICAN PHYSICIANS SERVICE GROUP, INC.
By_______________________________________
Name_____________________________________
Title______________________________________
FLORIDA PHYSICIANS INSURANCE
COMPANY, INC.
By_______________________________________
Name_____________________________________
Title______________________________________
APS INSURANCE SERVICES, INC.
By_______________________________________
Name_____________________________________
Title______________________________________
-12-
EXHIBIT 10.28
MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
(hereinafter called "AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
(hereinafter called "COMPANY")
Effective Date: March 27, 1997
Section 1. AGENCY APPOINTMENT
a. COMPANY hereby appoints AGENT as its exclusive agent to perform the
duties set forth herein and vests in AGENT full authority to
accomplish, effect and execute such duties upon the terms and
conditions set forth below. The authority of AGENT shall be limited to
the territory and the kinds of insurance specified in Addendum A.
b. Term. The term of this Agreement shall be as follows:
1) The initial term of this Agreement shall be for a period of
eight (8) years beginning on the 27th day of March, 1997,
unless terminated earlier as provided by Section 6 of this
Agreement.
2) This Agreement shall automatically renew for successive terms
of five (5) years, unless either party to this Agreement
provides written notice to the other party at least 18 months
before the expiration of the initial term or any renewal term
that the party does not desire to continue this Agreement.
Section 2. AGENT'S RELATIONSHIP TO COMPANY
a. This Agreement is not a contract of employment and nothing herein
contained shall be construed to create the relationship of employer and
employee between COMPANY and AGENT. AGENT is an independent contractor
and shall be free to exercise judgment and discretion with regard to
the conduct of business as agent for COMPANY.
b. COMPANY shall place all business solicited or covered under
this Agreement through AGENT.
c. COMPANY recognizes AGENT or affiliated companies have existing
business relationships, as described in Addendum C, with
American Physicians Insurance Exchange, Western Indemnity, and
<PAGE>
Prime Medical Services, Inc. and AGENT may continue such relationships
and business at the option of AGENT, except that AGENT agrees that it
will cease all new business production with and through Western
Indemnity effective as of April 1, 1997.
d. The business written by COMPANY pursuant to this Agreement will be
reinsured under a separate reinsurance agreement ("Reinsurance
Agreement") by AMERICAN PHYSICIANS INSURANCE EXCHANGE (hereinafter
called "REINSURER").
Section 3. AUTHORITY AND DUTIES OF AGENT
a. Solicitation and Servicing. Subject to requirements imposed
by law and the terms of this Agreement, AGENT has authority:
1) to receive, underwrite, determine premium, and promptly
process proposals or applications for such insurance
policies as are specified in Addendum A;
2) AGENT has authority to bind COMPANY for such insurance
policies and endorsements as are specified in addendum A;
3) to issue policies on behalf of COMPANY;
4) to have supervisory responsibility for local agency and
field operations of COMPANY in Texas including the
appointment and direction of local recording agents
within Texas;
5) to handle the adjustment of losses including authority to
effect claims settlements in connection with policies issued
by COMPANY in Texas pursuant to this Agreement as permitted by
law and which claims settlement authority in no event shall
exceed 1.0% of the COMPANY'S policyholder surplus as of
December 31 of the last completed calendar year, or $30,000,
whichever is greater (To the extent not subject to reinsurance
with American Physicians Insurance Exchange, COMPANY retains
final authority over disputes involving claim settlements or
loss reserves as regards COMPANY and AGENT);
6) to provide periodic reports to COMPANY relating to
insurance business issued on behalf of COMPANY and any
reports to reinsurers for business of COMPANY that has
been reinsured as described in this Agreement;
7) to obtain premium financing on behalf of insureds, AGENT
may arrange for installment payments.
b. Legal Compliance. AGENT shall comply in all respects with all
applicable laws.
c. Premiums and Accounting.
2
<PAGE>
1) The billing and collection of premiums shall be performed for
COMPANY by AGENT. If AGENT receives any premiums for insurance
issued under this Agreement, AGENT shall promptly report to
COMPANY the premiums received and remit monthly to the COMPANY
and its REINSURER the net premiums due according to the terms
of the Reinsurance Agreement between COMPANY and REINSURER and
this Agreement. Remittance shall be within 30 days after the
close of each month.
2) All premiums, including return premiums, received by AGENT are
the property of COMPANY and shall be held by AGENT as trustee
for the COMPANY and REINSURER until delivered to COMPANY or
the REINSURER as applicable. The trust relationship and
COMPANY's ownership of unpaid premiums which have not been
collected by AGENT shall not be held to be modified, affected
or waived by the keeping of an account on COMPANY's books as a
creditor and debtor account, the payment of balances at stated
periods, the retention of commissions by AGENT, or the duty to
pay commissions to subproducers when and as appropriate. AGENT
will maintain premium monies in a separate bank account and
will not mingle such monies with its own funds.
3) The AGENT shall not be required to return, as commission or
return commission, monies greater than the total commission
paid or otherwise payable to the AGENT.
d. Maintenance of Records.
1) AGENT shall keep complete records and accounts of all
transactions pertaining to insurance written under this
Agreement. Such records shall be kept current and shall be
readily identifiable. During the term of this Agreement and
for such time thereafter as COMPANY shall deem necessary for
the protection of its and COMPANY's property and/or interests,
COMPANY shall have the right and AGENT shall permit and
authorize COMPANY, through any person(s) designated by COMPANY
at such times and as often as COMPANY may reasonably request:
i) to visit, inspect, examine, audit and verify, at
any of its offices or elsewhere, any of the
properties, accounts, books, records or work papers
belonging to or in the possession of AGENT or
belonging to or in the possession of any other
person pertaining to matters which COMPANY shall
deem relevant to the subject matter of this
contract or to the financial condition of AGENT.
ii) to make copies thereof and extracts therefrom.
iii) to discuss the affairs, finances and accounts of
AGENT with AGENT's directors, officers or employees
3
<PAGE>
or any person(s) in any way connected with AGENT, its
affairs, finances or accounts, including, but not
limited to AGENT's independent accountants, bankers,
broker, sub-agents or other insurance companies.
2) All records relating to business issued pursuant to this
Agreement shall be jointly held by AGENT for COMPANY and
AGENT. Policy files and claim files shall be considered
COMPANY records that will be held by AGENT for COMPANY. AGENT
shall have a right to make copies thereof and extracts
therefrom. AGENT will maintain procedures to ensure all
records are reasonably produced, maintained and protected.
3) AGENT shall maintain records for at least five years or until
the completion of a financial examination by the insurance
department of the state in which the COMPANY is domiciled,
whichever is longer.
e. Reporting and Servicing of Business.
1) AGENT shall promptly process all applications for insurance
and submit monthly written reports to COMPANY and REINSURER
concerning the insurance written under this Agreement in
accordance with the rules and regulations promulgated from
time to time by COMPANY or its REINSURER.
2) AGENT shall immediately notify COMPANY and REINSURER of all
claims, suits and losses of which it has notice. AGENT shall
cooperate fully with COMPANY to facilitate the investigation,
adjustment, and settlement and payment of any claim and assist
COMPANY in the collection of any deductibles due from the
insured.
3) AGENT shall provide all usual and customary services of an
insurance agent in connection with all insurance policies
placed by AGENT with COMPANY.
f. Advertising. AGENT shall not insert any advertisement
-----------
referring to COMPANY or issue or cause to have issued any letter,
circular, pamphlet or other publication or statement referring to
COMPANY, without the prior written consent of COMPANY. Such consent
shall not be construed as any agreement by COMPANY to bear any part of
the expense of advertisement. In the event COMPANY shall be subjected
to loss or expense arising out of any unauthorized advertisement,
publication or statement of AGENT, AGENT shall indemnify the COMPANY
for all resulting damages and costs whether direct or consequential.
g. Ownership of Printed Matter. It is expressly understood that
any policies, forms and other supplies furnished to AGENT by
COMPANY shall remain the property of COMPANY and shall be
returned to COMPANY promptly upon demand. It is expressly
4
<PAGE>
understood that any policies, forms and other supplies furnished to
COMPANY by AGENT shall remain the property of AGENT and shall be
returned to AGENT promptly on demand.
h. Expenses. AGENT shall pay all expenses in respect to the
--------
performance of AGENT's duties under this Agreement, including but not
limited to rentals, transportation facilities, clerical expense,
solicitor's fees, commission's to local recording agents, postage,
advertising, or personal local license fees. Unless otherwise specified
in writing in advance by COMPANY, AGENT shall not charge or commit
COMPANY to any expense, agreement, payment, debt, or obligation other
than the insurance expressly described herein which AGENT is authorized
to write.
i. AGENT may not bind reinsurance or retrocession on behalf of
the COMPANY, may not commit the COMPANY to participation in
insurance or reinsurance syndicates, and may not collect
payment from a reinsurer or commit the COMPANY to a claim
settlement with a reinsurer without the prior written approval
of the COMPANY. AGENT has written approval to perform all
acts necessary to effect settlements on reinsurance ceded with
American Physicians Insurance Exchange. AGENT shall promptly
report all transactions with American Physicians Insurance
Exchange.
Section 4. COMPENSATION
As full compensation for services rendered under this Agreement, AGENT agrees to
accept and COMPANY agrees that agent is entitled to keep as part of premiums
received the amounts specified in Addendum B.
Section 5. SUSPENSION OF AGENT'S AUTHORITY
If AGENT is delinquent either in accounting for or payment of any funds due to
COMPANY, or is otherwise in default under this Agreement, COMPANY may, by
written notice to AGENT, suspend or otherwise limit AGENT's authority to manage
any new or renewal business or change any existing policy during the suspension.
COMPANY, at its option, may suspend or otherwise limit such authority in whole
or in part or may condition the exercise of such authority on any appropriate
condition, including, but not limited to, the payment of premiums in advance of
the effective date.
For the purposes of this Section, AGENT is not delinquent because of routine
differences in the accounting records of the AGENT and the COMPANY which are
minor in amount and do not involve funds willfully withheld by the AGENT.
Upon the occurrence of any of the events described in Section 6(a), AGENT'S
authority under this Agreement, including such authority and duties described in
Section 3 to, among other things, manage any new or renewal business or change
any existing policy, shall
5
<PAGE>
automatically be suspended and shall be terminated upon termination
of this Agreement.
Section 6. TERMINATION
a. Termination. The term of this Agreement shall expire and this
Agreement shall terminate in accordance with subsection b. of
this section upon the occurrence of any of the following
events:
1) Upon the effective date of the suspension, revocation or
termination of either party's license by appropriate authority
and after exhausting any appeals to which either party is
entitled.
2) The insolvency of either party, the inability to pay debts as
they mature, the making of an assignment for the benefit of
creditors, the dissolution of either party, the appointment of
a receiver or liquidator for either party or for a substantial
part of either partys' property, or the institution of
bankruptcy, reorganization, arrangement, insolvency or similar
proceedings by or against either party under the laws of any
jurisdiction.
3) Misappropriation of funds or property of COMPANY or funds
received for it by AGENT; the failure of AGENT to remit to
COMPANY the funds due promptly upon demand; the commission by
AGENT of any fraud against COMPANY or any conduct injurious to
COMPANY's standing or good name.
4) Misappropriation of funds or property of AGENT or funds
received for it by COMPANY; the failure of COMPANY to remit to
AGENT the funds due promptly upon demand; the commission by
COMPANY of any fraud against AGENT or any conduct injurious to
AGENT's standing or good name.
5) At the date and time that American Physicians Insurance
Exchange fails to fund or to maintain sufficient security
after 60 day notice and failure of American Physicians
Insurance Exchange to cure such default as required by Article
XV, Part C of the Reinsurance Agreement, effective March 27,
1997, between Florida Physicians Insurance Company, Inc. and
American Physicians Insurance Exchange.
6) Eighteen months after the date and time that Florida
PHysicians Insurance Company, Inc. is no longer a
shareholder of APS Insurance Services, Inc.
7) Either party may terminate this Agreement at any time if
the Stock Purchase and Stock Option Agreement between
American Physicians Service Group, Inc., and Florida
Physicians Insurance Company, Inc. is not closed in
accordance with its terms.
6
<PAGE>
b. Continuing Duties. Upon termination of this Agreement for
-----------------
default, AGENT shall be obligated to proper servicing of all in-force
policies of insurance written hereunder until all such policies shall
have expired. COMPANY shall not cancel or terminate such policies in
effect on the termination date of this Agreement prior to the
expiration or regular renewal date of the policy, whichever date shall
first occur. Such services shall consist of, but shall not necessarily
be limited to, cancelling, issuing amendatory endorsements, and
collecting and returning premiums, and consultations as required by the
COMPANY.
Section 7. OWNERSHIP OF BUSINESS
a. All information and knowledge of AGENT regarding the insurance
business including its accounts, customers, prospective
customers, plans regarding future insurance business, and
otherwise relating to the COMPANY's insurance business, which
could be used by a competitor or other third person to solicit
the said insurance business in competition with the AGENT for
which in any manner could affect the goodwill of the AGENT,
shall be treated by COMPANY in the strictest confidence and
shall not be divulged by COMPANY to any person, or used in any
manner which might reasonably result in it being divulged to
any person, other than employees of the COMPANY as reasonably
and necessarily required in the ordinary course of business.
This covenant shall continue to be binding on COMPANY
indefinitely in accordance with its terms notwithstanding
termination or suspension of AGENT's authority under this
Agreement.
b. All data, customer lists, records and written material prepared or
compiled by AGENT shall be the sole and exclusive property of the
AGENT, and none of such data, customer lists, records, or written
materials, or copies thereof, shall be retained by COMPANY upon
termination of this Agreement.
Section 8. HOLD HARMLESS
a. COMPANY agrees to indemnify, defend and hold AGENT harmless from and
against any and all claims, suits, actions, liability, loss of expense
caused by or resulting from any violation by COMPANY of this Agreement.
b. AGENT agrees to indemnify, defend and hold COMPANY harmless from and
against any and all claims, suits, actions, liability, loss or expense
caused by or arising out of any violation by the AGENT of this
Agreement.
Section 9. GENERAL PROVISIONS
a. Assignment. Neither party shall assign, delegate, transfer,
encumber or otherwise dispose of this Agreement, any interest
therein, or any rights or obligations hereunder without the
prior written consent of the other party and any purported
7
<PAGE>
assignment, transfer, encumbrance or other disposition without such
consent shall be void. Except that, the merger, consolidation or other
corporate reorganization of COMPANY, or the assignment, or other
transfer of this Agreement to a subsidiary or affiliate of the COMPANY,
shall not be deemed a violation of this subsection a.
b. No Waiver. The failure of COMPANY or AGENT to insist on strict
compliance with this Agreement, or to exercise any right or remedy
hereunder, shall not constitute a waiver of any rights contained herein
nor estop the parties from thereafter demanding full and complete
compliance therewith nor prevent the parties from exercising such
remedy in the future.
c. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be deemed duly
given if delivered personally, by registered or certified mail
or by telefax to the party for whom it is intended at the
following address or such other address as the recipient may
designate from time to time.
d. Full Agreement. This Agreement supersedes and makes null and void any
and all previous agency agreements, whether written or oral, between
COMPANY and AGENT with respect to the type of business to be serviced
hereunder and constitutes the full agreement between the parties. No
amendment to this Agreement shall be valid unless in writing and signed
by the parties.
e. Severability. If any provision of this Agreement should be
------------
invalid under or in conflict with the laws of any state, this Agreement
shall be deemed amended to comply with the minimum requirements of such
laws without affecting the remaining provisions of this Agreement;
provided, however, if either party believes that the voiding of any
provision hereof materially affects the whole Agreement, such party by
written notice, may terminate this Agreement forthwith.
f. Choice of Law. This Agreement shall be interpreted under and
pursuant to the laws of the State of Texas.
g. Third Parties. The provisions of this Agreement are for the
sole benefit of the parties and shall not be enforceable for
the benefit of any one who is not a party to this Agreement,
except as expressly provided herein.
h. Notices. AGENT must notify the COMPANY in writing within 30
days if there is a change in:
1) ownership of 10% of more of the outstanding stock of the
AGENT;
2) any principal office of the AGENT; or
3) any director of the AGENT.
8
<PAGE>
i. AGENT may not offset balances due under any contract with any
offset due under any other contract.
IN WITNESS WHEREOF, the parties intending to be bound have caused this Agreement
to be effective this 27th day of March, 1997.
For AGENT: AMERICAN PHYSICIANS INSURANCE
AGENCY, INC.
By:________________________________
Title:_____________________________
For COMPANY: FLORIDA PHYSICIANS INSURANCE COMPANY, INC
By:________________________________
Title:_____________________________
For REINSURER: AMERICAN PHYSICIANS INSURANCE EXCHANGE
By:________________________________
Title:_____________________________
9
<PAGE>
ADDENDUM A
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
("AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated March 27, 1997
The parties agree that:
1. The AGENT is authorized to be the exclusive managing agent for
COMPANY for the following kind(s) of business:
All standard Medical Malpractice Professional Liability
insurance for Texas health care providers described in
Addendum A-1 and such other policies authorized in writing by
the COMPANY from time to time in Texas.
2. The AGENT is authorized only for the following territory to
the extent the AGENT is properly licensed:
STATE OF TEXAS
<PAGE>
ADDENDUM A - 1
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
("AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated March 27, 1997
Specialties
Medical Doctors (M.D.)
Osteopaths (D.O.)
Chiropractors (D.C.)
Podiatrists (D.P.M.)
Certified Nursing Assistant
Dental Hygienist
Dietitian/Nutritionist
Heart/Lung Perfusionist
Medical Laboratory Technician
Nurse Anesthetist
Nurse Midwife
Nurse Practitioner
(Including Obstetrical N.P., Pediatric/Family N.P.
Psychiatric N.P.
Surgical N.P.)
Nurse - Critical Care
Nurse - Emergency Room
Nurse - LPN, LVN, Aide,
1st year RN Nurse - General Duty Nurse - Obstetrical Nurse - Scrub Nurse
OR Technician (Hospital) Optician Optometrist Paramedic Pharmacist Physical
Therapist Physicians Assistant Psychotherapist Respiratory Therapist Surgeons
Assistant Other - Allied Health
Care N.O.C.
<PAGE>
ADDENDUM B
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC., as AGENT
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated: March 27, 1997
1. The parties agree that, for business described in Addendum A and A-1,
AGENT shall be entitled to a commission of 13.5% of written premium.
2. AGENT shall also be entitled to receive as additional compensation any
commissions paid by AGENT to local recording agent, solicitor or other
soliciting agent.
3. Commissions on any other business shall be determined on a
case-by-case basis.
<PAGE>
ADDENDUM C
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
("AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated March 27, 1997
Western Indemnity Policies:
Coastal Healthcare
STAT Physicians
Southwest Medical
OB/GYN Associates
Prime Medical Services, Inc.:
National Urology Program, including Texas
EXHIBIT 10.29
THIS AGREEMENT SUBJECT TO ARBITRATION
Reinsurance Agreement
Effective March 27, 1997
(hereinafter referred to as the "Agreement")
between
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
Jacksonville, Florida
(hereinafter referred to as the "Company")
and
AMERICAN PHYSICIANS INSURANCE EXCHANGE
Austin, Texas
(hereinafter referred to as the "Reinsurer")
WHEREAS, Company has appointed agents approved by Reinsurer to produce
business under certain programs covering all standard medical malpractice
insurance written by Company in Texas and which is described with more
particularity on Addendum 2 hereto (hereafter "APS Program"); and
WHEREAS, all insurance policies that are the subject of this Agreement
(the "Policies") are managed for Company by American Physicians Insurance
Agency, Inc., a Texas Managing General Agency (hereafter "Agent"); and
WHEREAS, the Company desires to cede all of its liabilities
arising from the Policies; and
WHEREAS, the Reinsurer desires to accept all of the liability
from the Policies, which the Company desires to reinsure;
NOW, THEREFORE, in consideration of the premiums, terms, conditions,
limitations and other consideration set forth in this Agreement, the parties
agree as follows:
ARTICLE I - CLASSES OF BUSINESS REINSURED
A. Unless otherwise agreed on policies on a facultative basis,
the Company hereby cedes on a 100% quota share basis with
Reinsurer, and Reinsurer hereby accepts the cession on such
basis, all liability under medical professional liability
policies issued or renewed on behalf of all Texas health care
providers issued by Company on or after the effective date of
this Agreement. Company and Reinsurer anticipate that Company
will retain larger portions of the business ceded to Reinsurer
during the term of this Agreement. Business ceded hereunder
shall include every rewrite, renewal or extension (whether
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before or after termination of this Agreement) of any policy the
liability for which has already been ceded hereunder by the Company to
the Reinsurer, including the liability associated with any such
rewrite, renewal or extension that may be required by a state statute
or by any rule or regulation of a state Insurance Department, or other
authority having competent jurisdiction.
B. It is understood that the classes of business reinsured under
this Agreement are deemed to include:
Coverage for standard medical professional liability insurance in Texas
written by Company.
C. "Net liability" as used herein is defined as the Company's
gross liability assumed from business produced by authorized
agents of Company in the APS Program.
D. The liability of the Reinsurer with respect to each cession
hereunder shall commence obligatorily and simultaneously with
that of the Company as regards the APS Program. The liability
of the Reinsurer shall follow the Company in respect to all of
the provisions of the Policies and any endorsements thereon or
changes made thereto. In every case, the Reinsurer shall be
deemed to have reinsured the risk on the same terms,
conditions and limitations as those of the original policies,
it being the intent of this Agreement that the Reinsurer shall
follow the insurance fortunes of the Company in all matters
falling under this reinsurance.
ARTICLE II - COMMENCEMENT AND TERMINATION
A. This Agreement shall become effective on March 27, 1997, as of 12:01
a.m. Central Time, with respect to policies with effective dates on or
after this time, and shall continue in force thereafter for a period of
eight (8) years, unless sooner terminated as provided herein.
B. Unless earlier terminated, this Agreement shall automatically be
renewed for a renewal term of five (5) years, unless either party to
this Agreement provides written notice to the other party at least 18
months before the expiration of the initial term that the party does
not desire to continue this Agreement.
C. The Reinsurer retains the exclusive right and control to the book of
business to be produced under the APS Program and may, upon agreement
of termination, elect to find a different direct writing company to
produce this reinsured business. Reinsurance hereunder on business in
force on the effective date of termination shall remain in full force
and effect
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until the natural expiration, cancellation or rewrite of Policies
constituting such business in force.
D. Termination. The term of this Agreement shall expire and this
Agreement shall terminate upon the occurrence of any of the
following events:
1. Upon the effective date of the suspension, revocation or
termination of either party's license necessary to perform its
obligations under this Agreement by appropriate authority and
after exhausting any appeals to which either party is
entitled.
2. The insolvency of either party, the inability to pay
debts as they mature, the making of an assignment for the
benefit of creditors, the dissolution of either party,
the appointment of a receiver or liquidator for either
party or for a substantial part of either party's
property, or the institution of bankruptcy,
reorganization, arrangement, insolvency or similar
proceedings by or against either party under the laws of
any jurisdiction.
3. Misappropriation of funds or property of Company or funds
received for it by Reinsurer; the failure of Reinsurer to
remit to Company the funds due promptly upon demand; the
commission by Reinsurer of any fraud against Company or any
conduct injurious to Company's standing or good name.
4. Misappropriation of funds or property of Reinsurer or funds
received for it by Company; the failure of Company to remit to
Reinsurer the funds due promptly upon demand; the commission
by Company of any fraud against Reinsurer or any conduct
injurious to Reinsurer's standing or good name.
5. Default or material breach of this Agreement which is not
cured by the defaulting or breaching party within 30 days of
written notice from the non-defaulting or non- breaching
party, such termination to take effect on the same date as
termination of the Managing General Agency Contract between
Agent and Company.
6. Either party may terminate this Agreement at any time if
the Stock Purchase and Stock Option Agreement between
American Physicians Service Group, Inc., and Florida
Physicians Insurance Company, Inc. is not closed in
accordance with its terms.
E. Accounting for premiums and losses shall be done on an
accident year basis, using the same conventions that are used
in the NAIC annual statement blanks for Schedule P.
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ARTICLE III - TERRITORY
The liability of the Reinsurer shall be limited to Policies issued to risks
located in Texas under Policies issued by Company to insureds domiciled in the
State of Texas at the time of issuance; however, this limitation shall not apply
to losses of Company if the Policies provide coverage outside the aforesaid
territorial limits.
ARTICLE IV - RETENTION AND LIMIT
As respects business subject to this Agreement, the Company shall cede to the
Reinsurer and the Reinsurer agrees to accept 100% of the premiums and losses
attached to the Policies produced under the APS Program.
ARTICLE V - LOSS IN EXCESS OF POLICY LIMITS
A. Loss in excess of policy limits shall mean any amount the
Company pays or is held liable to pay in excess of its policy
limits, but otherwise within the terms of its policy, together
with any legal costs and expenses incurred in connection
therewith or any punitive, exemplary, compensatory or
consequential damages, other than loss in excess of policy
limits (hereinafter called "extra contractual obligations")
because of alleged or actual bad faith or negligence on its
part in rejecting a settlement within policy limits, or in
discharging its duty to defend or prepare the defense in the
trial of an action against its policyholder, or in
discharging its duty to prepare or prosecute an appeal
consequent upon such an action, or in otherwise handling a
claim under a policy subject to this Agreement, 100% of the
loss in excess of Policy limits and/or 100% of the extra
contractual obligations shall be added to Company's loss, if
any, under the policy involved and be covered under this
Agreement.
B. Any loss in excess of limits or extra contractual obligation
shall be deemed to have occurred on the same date as the loss
covered or alleged to be covered under the policy.
C. Recoveries from any excess insurance or reinsurance which protects the
Company against claims that are subject to this Agreement shall inure
to the benefit of this Agreement only to the extent that the Reinsurer
has paid for such excess insurance or reinsurance.
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ARTICLE VI - CEDING COMMISSION
The Reinsurer shall pay the Company a ceding commission equal to the sum of the
following:
1. The commissions allowed to the producing agents and managing
general agent under their contracts with Company as authorized
by its MGA, American Physicians Insurance Agency, Inc. On all
return premiums, the Company shall return to the Reinsurer at
the same rate of advanced commission as paid by Company to
producing agents. The Company and Reinsurer may mutually
agree to have commissions, at agreed upon rates, paid directly
from the Reinsurer to the producing agents, with the Reinsurer
acting as the processing agent on Company's behalf.
2. The costs for all brokerage, taxes, board, exchange or bureau
assessments, and for all other bureau or regulatory body
expenses, excepting loss adjustment expense. The provision
for taxes shall be estimated at 2.5% of net premiums written
and adjusted annually to actual taxes paid. The difference
between actual and estimated taxes shall be paid by the owing
party to the other as soon as practicable after the close of
each calendar year. In the event that return premiums exceed
gross premiums written during any one calendar year, and in
the further event that the Company is not able to recover
premium taxes from the State of Texas on the resulting net
return premiums, the Reinsurer agrees to reimburse the Company
for any premium tax deduction made by the Reinsurer in the
monthly accountings to the Company for the calendar year
involved.
3. A fee as outlined in Addendum No. 1 attached hereto and
incorporated herein for all purposes.
ARTICLE VII - REPORTS AND REMITTANCES
A. In lieu of the Company furnishing the Reinsurer with
bordereaux showing the particulars of all reinsurances ceded
hereunder, the Reinsurer shall furnish, or cause to be
furnished, the Company as soon as practicable, but in no event
later than sixty days, after the close of each of the
respective periods indicated below (on forms agreeable to both
parties hereto) with monthly, quarterly and annual reports
showing the following statistical data in respect of the
business reinsured hereunder.
1. Quarterly, with the data segregated by major classes:
(a) Net premiums written (i.e., gross less returns
during the quarter).
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(b) Net losses paid (i.e., gross losses less salvages
and other recoveries) during the quarter.
(c) Net adjusting expenses paid during the quarter.
(d) Other related expenses.
(e) Original premiums, and the unearned premiums thereon,
on business in force hereunder at the close of the
quarter year, segregated by term and month and year
of expiration.
(f) Estimated outstanding losses, with the data
segregated by major classes.
(g) Other related expenses.
2. Annually, with the data segregated by major classes.
Annual summaries of net premiums written, net losses paid, net
adjusting expenses paid during the year and other related
expenses in such form so as to enable the Company to record
such data in its convention annual statement. In force and
unearned premium segregated as to advance premiums, premiums
running 12 months or less from inception date of policy, and
premiums running more than 12 months from inception date of
policy in such form as to enable the Company to record such
data in its statutory annual statement.
3. Such other reasonable reports or information from time to
time as reasonably requested by Company.
B. Monthly, within 45 days of the end of each calendar month, the
Company shall remit the balance of the following to the
Reinsurer provided the Company has collected the gross net
written premium:
1. Ceded gross net written premium for the month; less
2. Ceding commissions and other expenses referenced in
Article VI of this Agreement.
Any amount shown to be due the Company shall be remitted by the Reinsurer as
promptly as possible after receipt and verification of the Company's report by
the Reinsurer.
ARTICLE VIII - ORIGINAL CONDITIONS
A. All reinsurance under the Agreement shall be subject to the
same rates, terms, conditions and waivers, and to the same
modifications as the respective policies of the Company which
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<PAGE>
shall be approved by Reinsurer. The Reinsurer shall be credited with
its exact proportion of the original premiums received by the Company,
as specified in Article IV.
B. Nothing herein shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any
third party or any persons not parties to this Agreement.
ARTICLE IX - ASSIGNMENTS AND ASSESSMENTS
A. The provisions of Article IV shall apply to risks assumed by the
Company under any Assigned Risk Plan if, in the opinion of the Company,
such risks were assumed by the Company because of the business written
and reinsured hereunder.
B. The provisions of Article IV shall also apply to a proportion
of any assessments or credits imposed or allowed on Company by
law, including any credits against premium taxes, pursuant to
those laws and regulations creating obligatory funds
[including, to the extent applicable to the Policies, the
Texas Property Casualty Guaranty Association or other guaranty
association pools; the Texas Medical Liability Insurance
Underwriting Association ("JUA"); FAIR plans and similar
plans], said proportion to be the proportion of Company's APS
Program premiums causing the assessment which were or are
subject to this Agreement.
C. In the event this Agreement is terminated, the provisions of this
Article shall continue to apply for as long as Company is subject to
assignments and/or assessments because of the business reinsured
hereunder.
ARTICLE X - CLAIMS SETTLEMENT
A. All loss settlements made by the Company under the terms of
this Agreement shall be unconditionally binding upon the
Reinsurer in proportion to its participation, and the
Reinsurer shall benefit proportionately in all salvage and
recoveries. The Reinsurer shall bear its proportionate share
of all expenses incurred by the Company in investigation,
adjustment, appraisals or defense of all claims under policies
issued by the Company and reinsured hereunder (excluding,
however, office expense and salaries of officials of the
Company), and shall receive its proportionate share of any
recovery of such expense. However, the Company hereby
authorizes the Reinsurer to negotiate loss settlements, and to
handle all such other matters as are necessary for the
adjustment or defense of claims arising under Policies as
previously defined, under the supervision of the Company.
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<PAGE>
B. It is understood that the Company is not required, nor will it carry
any excess of loss coverage that might arise from any single
catastrophe or catastrophes, and that the Reinsurer will, if it
desires, provide catastrophe coverage in the amount or amounts it
considers sufficient.
ARTICLE XI - OFFSET
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Agreement. The
party asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses, or otherwise.
ARTICLE XII - ACCESS TO RECORDS
Each party shall have access during normal business hours to all records of the
other party which pertain to the reinsurance hereunder. Requests shall be made
at least 72 hours in advance of the access date.
ARTICLE XIII - ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions made in connection with this Agreement
or any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission will be rectified as soon as
possible after discovered and brought to the attention of the Company's
management.
ARTICLE XIV - CURRENCY
A. Whenever the word "dollars" or the "$" sign appears in this Agreement,
they shall be construed to mean United States dollars and all
transactions under this Agreement shall be in United States dollars.
B. Amounts paid or received by the Company in any other currency
shall be converted to United States dollars at the rate of
exchange at the date such transaction is entered on the books
of the Company.
ARTICLE XV - SECURITY PROVIDED BY REINSURER
A. The Reinsurer agrees to fund its share of the Company's
unearned premium and outstanding loss and loss adjustment
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expense reserves on the APS Program, as described in Article XV, Part
C, so as to allow the Company to take credit for reserves ceded in its
statutory annual statement as follows (Determination of reserves shall
be made by Agent and Reinsurer):
1. Clean, irrevocable and unconditional letters of credit issued
and confirmed, if confirmation is required by the insurance
regulatory authorities involved, by a bank or banks meeting
the NAIC Securities Valuation Office credit standards for
issuers of letters of credit and acceptable to said insurance
regulatory authorities; and/or
2. Escrow accounts for the benefit of the Company and/or
3. Cash advances;
if, without such funding a penalty would accrue to the Company
on any financial statement it is required to file with the
insurance regulatory authorities involved in the states in
which the APS Program business is written. The Reinsurer, at
its sole option, may fund in other than cash if its method and
form of funding are acceptable to the insurance regulatory
authorities involved.
B. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause", which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Agreement, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of unearned
premiums returned to insureds on account of policy
cancellations, unless paid in cash by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of losses
and/or loss adjustment expense paid under the terms of
policies reinsured hereunder, unless paid in cash by the
Reinsurer;
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3. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
4. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded unearned premium and/or
outstanding loss and loss adjustment expense reserves
including incurred but not reported loss reserves funded
by means of a letter of credit which is under non-renewal
notice, if said letter of credit has not been renewed or
replaced by the Reinsurer 10 days prior to its expiration
date;
5. To refund to the Reinsurer any sum in excess of the actual
amount required to fund the Reinsurer's share of the Company's
ceded unearned premium and/or outstanding loss and loss
adjustment expense reserves, if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of credit is
in excess of the actual amount required for B(1), B(2) or B(4), or in
the case of B(3), the actual amount determined to be due, the Company
shall return to the Reinsurer within 45 days the excess amount so
drawn.
C. Reinsurer agrees that for the first two years after issuance
of any policy reinsured under this Agreement, the amount of
security shall be the greater of (1) the direct written
premiums or (2) the Company's unearned premium and outstanding
loss and loss adjustment expense reserves; such losses and
loss adjustment expense reserves to be established by mutual
agreement of the Company and Reinsurer (the "Case Reserves").
After the first two years after issuance of any policy
reinsured under this Agreement, the amount of security
required from the Reinsurer shall be the Company's unearned
premium reserves and the Case Reserves.
ARTICLE XVI - INSOLVENCY
A. In the event of the insolvency of the Company, this
reinsurance shall be payable directly to the Company or to its
liquidator, receiver, conservator or statutory successor
immediately upon demand, with reasonable provision for
verification, on the basis of the liability of the Company
without diminution because of the insolvency of the Company or
because the liquidator, receiver, conservator or statutory
successor of the Company has failed to pay all or a portion of
any claim. It is agreed, however, that the liquidator,
receiver, conservator or statutory successor of the Company
shall give written notice to the Reinsurer of the pendency of
a claim against the Company indicating the policy or bond
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reinsured which claim would involve a possible liability on the part of
the Reinsurer within a reasonable time after such claim is filed in the
conservation or liquidation proceeding or in the receivership, and that
during the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such
claim is to be adjudicated, any defense or defenses that it may deem
available to the Company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall
be chargeable, subject to the approval of the Court, against the
Company as part of the expense of conservation or liquidation to the
extent of a pro rata share of the benefit which may accrue to the
Company solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the
expense shall be apportioned in accordance with the terms of this
Agreement as though such expense had been incurred by the Company.
C. It is further understood and agreed that, in the event of the
insolvency of the Company, the reinsurance under this
Agreement shall be payable directly by the Reinsurer to the
Company or to its liquidator, receiver or statutory successor,
or except (1) where this Agreement specifically provides
another payee of such reinsurance in the event of the
insolvency of the Company or (2) where the Reinsurer with the
consent of the direct insured or insureds has assumed in
writing such policy obligations of the Company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the Company to such
payees.
ARTICLE XVII - ARBITRATION
A. Resolution of Disputes by Arbitration
The parties agree that all controversies or disputes arising out of, in
connection with, or which relate to this Agreement or performance under
this Agreement, which cannot be resolved by mutual agreement, shall be
submitted to arbitration for resolution, as herein provided.
B. Selection of Arbitrators
Arbitration shall be by a panel of three neutral arbitrators, each of
which shall be an active or former officer of an insurance or
reinsurance company, including a Lloyd's company, which, at the time of
the demand for arbitration, issues or has recently issued policies of
insurance of the type covered
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by this Reinsurance Agreement. In addition, each arbitrator shall meet
the requirements of, and shall agree to act in accordance with, the
Code of Ethics for Arbitrators in Commercial Disputes sponsored by the
American Bar Association and the American Arbitration Association,
except to the extent that conduct prohibited by such Code is
specifically permitted by the terms of this provision.
Within thirty (30) days after receipt of a demand for arbitration, each
party shall designate its arbitrator. The designation shall contain
information sufficient to allow the other party to judge the
qualifications of the person designated as arbitrator. Thereafter, each
party shall have fifteen (15) days within which to accept the
arbitrator designated by the other party or to challenge the
qualifications of the arbitrator so designated.
The arbitrators so designated and accepted shall, within thirty (30)
days after acceptance, select the third arbitrator. Arbitrators may
consult with the party nominating them as to acceptability of persons
under consideration for appointment by them as third arbitrator. If the
third arbitrator has not been selected within that time, each
arbitrator shall, within fifteen (15) days, nominate three qualified
individuals to serve as the third arbitrator. The American Arbitration
Association shall appoint a third arbitrator from the persons nominated
who meet the qualifications described in this Agreement.
If either party refuses or neglects to appoint an arbitrator within
thirty (30) days after receipt of a demand for arbitration, the
demanding party may appoint two (2) arbitrators.
C. Arbitration Procedure
Arbitration shall begin upon the filing by one of the parties of a
written demand for arbitration. Such demand shall contain a statement
setting forth the nature of the dispute, the amount involved, if any,
and the remedy sought. Such demand shall be served upon the other party
by certified mail, return receipt requested, at the place designated by
this Agreement for the service of notices in Article II of this
Agreement.
Within sixty (60) days after the arbitration panel has been finalized,
the parties shall submit their dispute or controversy to the panel of
arbitrators for decision. The site for the arbitration hearing shall be
Dallas, Texas or as mutually agreed by the parties. The rules for the
gathering of evidence, taking of discovery or depositions, if any, and
the conduct of the hearing shall be such rules as are included
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in the Commercial Arbitration Rules of the American Arbitration
Association, to the extent not inconsistent with the terms of this
provision. The parties may agree to use modified rules to expedite the
arbitration process. The formal rules of evidence need not apply, in
the arbitrators' discretion, to the hearing.
All arbitrators shall participate in the deliberations and a decision
on any matter shall be by a majority of the arbitrators.
The final decision of the arbitration panel shall be submitted in
writing, in such form as the arbitrators determine, within thirty (30)
days after the conclusion of the arbitration hearing. The decision of
the arbitrators shall be final, except that an appeal may be taken only
for one or more of the reasons assigned for vacating an award as
provided by the Federal Arbitration Act, which law shall apply and
govern the arbitration process contemplated hereunder, to the extent
not inconsistent with this provision.
Insofar as the panel looks to substantive law, it shall consider the
laws of the State of Texas.
D. Costs of Arbitration Proceeding
Each party shall bear the cost of its own arbitrator. The costs of the
arbitration proceeding, including the fees of the third arbitrator,
shall be borne equally by the parties, unless the arbitration panel
orders otherwise. The panel, in its discretion, may also allocate and
award other reasonable out-of-pocket costs of the parties, including
reasonable attorney's fees, as it deems fair and equitable under the
circumstances.
E. Confidentiality
The parties agree, and the appointed arbitrators shall agree as part of
their acceptance of nomination, to keep confidential and not disclose
to persons not connected with the arbitration the details of the
arbitration and all information received by them in connection
therewith, except as may be required by process of law.
ARTICLE XVIII - HOLD HARMLESS AGREEMENT
In consideration of the Company having delegated to the Reinsurer and to Agent,
the duty of performing the day-to-day policy underwriting, clerical, processing
and claims functions on policies reinsured hereunder (with the Company retaining
the general and ultimate authority in such matters), the Reinsurer hereby holds
the
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Company harmless from and shall reimburse the Company for any and all loss,
costs, damage or expense of whatever kind or character (including but not
limited to all legal fees and expenses incurred by the Company in asserting its
rights under this Agreement) as a result of the Company's having made such
delegation whether or not such loss, costs, damage or expenses fall within the
terms of Policies written and reinsured hereunder.
ARTICLE XIX - PROCESSING AND HANDLING OF BUSINESS
It is specifically understood and agreed to by the Company and Reinsurer , that
all issuance, maintenance and servicing of Policies, claims and any other
documents arising out of business written by Company in the APS Program under
this Agreement will be performed by Agent. This includes, but is not limited to,
application processing, policy issuance, cash handling, billings, collections,
cancellations, reinstatements, agency commission payments (including information
return reporting on behalf of the Company) and collections, claims handling,
adjusting, payments, litigation, subrogation, all financial reporting records
and requirements, and any other operational functions normally performed in the
course of writing automobile business.
ARTICLE XX - EXCLUSIVE AGREEMENT
Company agrees that Reinsurer will act as its exclusive reinsurer for all
standard medical professional liability insurance in Texas during the term of
this Agreement.
ARTICLE XXI - MISCELLANEOUS
A. This Agreement shall bind and inure to the sole benefit of the
Company and the Reinsurer and their respective successors and
assigns and shall not confer any benefit on any other person.
B. The provisions of this Agreement shall not create any right or
legal relationship between Reinsurer and any insured and/or
policyholder of Company.
C. This Agreement may be executed in one or more counterparts,
each of which is deemed to be an original, and all of which
taken together shall constitute one and the same instrument.
D. This Agreement sets forth the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any
prior understandings, whether written or oral, with respect thereto.
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E. This Agreement may be amended from time to time by a written instrument
validly executed by the duly authorized representatives of each of the
parties hereto. No waiver of any of the terms or conditions of this
Agreement by any party shall be considered as creating a waiver of the
same terms or conditions in any subsequent transaction or occurrence.
F. This Agreement shall be construed under the laws of the State
of Texas.
G. This Agreement shall be considered as an honorable undertaking made in
good faith and shall be subject to a liberal construction for the
purpose of giving effect to the good faith and honorable intentions of
the Company and Reinsurer.
The Company by its duly authorized representative has executed this Agreement as
of the date undermentioned:
This 27th day of March, 1997.
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
By __________________________
Its ________________________
The Reinsurer by its duly authorized representative has executed this Agreement
as of the date undermentioned at:
Austin, Texas, this 27th day of March, 1997.
AMERICAN PHYSICIANS INSURANCE EXCHANGE
By _____________________________
Its _____________________________
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The Agent by its duly authorized representative has executed this Agreement as
of the date undermentioned at:
Austin, Texas, this 27th day of March, 1997.
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
By _____________________________
Its _____________________________
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ADDENDUM NO. 1
TO REINSURANCE AGREEMENT
Effective March 27, 1997
issued to
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
Jacksonville, Florida
by
AMERICAN PHYSICIANS INSURANCE EXCHANGE
Austin, Texas
It is agreed that a fee shall be allowed by the Reinsurer to the Company at four
percent of direct premiums written for the first year that this Agreement is in
effect. Thereafter the fee allowed by the Reinsurer to the Company shall be the
greater of (i) four percent of direct premiums written, or (ii) $240,000.
COMPANY:
-------------------------------------
By:__________________________________
Title:_______________________________
REINSURER:
------------------------------------
By:_________________________________
Title:______________________________
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ADDENDUM NO. 2
TO REINSURANCE AGREEMENT
Effective March 27, 1997
issued to
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
Jacksonville, Florida
by
AMERICAN PHYSICIANS INSURANCE EXCHANGE
Austin, Texas
Specialties
Medical Doctors (M.D.)
Osteopaths (D.O.)
Chiropractors (D.C.)
Podiatrists (D.P.M.)
Certified Nursing Assistant
Dental Hygienist
Dietitian/Nutritionist
Heart/Lung Perfusionist
Medical Laboratory Technician
Nurse Anesthetist
Nurse Midwife
Nurse Practitioner
(Including Obstetrical N.P., Pediatric/Family N.P.
Psychiatric N.P.
Surgical N.P.)
Nurse - Critical Care
Nurse - Emergency Room
Nurse - LPN, LVN, Aide,
1st year RN Nurse - General Duty Nurse - Obstetrical Nurse - Scrub Nurse
OR Technician (Hospital) Optician Optometrist Paramedic Pharmacist Physical
Therapist Physicians Assistant Psychotherapist Respiratory Therapist Surgeons
Assistant Other - Allied Health
Care N.O.C.
2
