1
EXHIBIT 10.2
AMENDMENT NINE TO INSURANCE PROCESSING AGREEMENT
This document is Amendment Nine to the Insurance Processing Agreement
("Agreement") made and entered into effective June 1, 1993, and amended by
Amendment One to Insurance Processing Agreement dated June 4, 1998; Amendment
Two to Insurance Processing Agreement dated September 25, 1998; Amendment Three
to Insurance Processing Agreement dated October 19, 1998; Amendment Four to
Insurance Processing Agreement dated December 15, 1998, Amendment Five to
Insurance Processing Agreement dated March 25, 1999, and Amendment Six to
Insurance Processing Agreement dated May 10, 1999, Amendment Seven to the
Insurance Processing Agreement dated June 24, 1999, and Amendment Eight to the
Insurance Processing Agreement dated August 5, 1999 (the "Agreement"), by and
between American National Insurance Company ("American National") a Texas
corporation, and Legacy Insurance Processing Group ("LMG"), a California
corporation.
In consideration of mutual covenants contained herein, the parties agree as
follows:
1. Section 6.1 of the Agreement is hereby deleted in its entirety and the
following new Section 6.1 shall be substituted therefore:
"Subject to termination as hereinafter provided, this Agreement shall
remain in force and effect until the close of business on January 31, 2000,
the term of this Agreement. This Agreement may be renewed by mutual
agreement for additional successive terms of one (1) year unless terminated
by either party by prior written notice to the other at least one hundred
eighty (180) days prior to the end of the initial term or the renewal
term."
2. "Section 5" of the Agreement is hereby deleted in its entirety and the
following new Section 5 shall be substituted therefore:
"This Agreement shall be retained as part of the official record of both
LMG and American National for the duration of the agreement and for seven
(7) years after the termination of this Agreement."
"LMG will maintain complete books and records of all transactions between
LMG, American National, and the contract owners. LMG will preserve detailed
and adequate books and records of all administered transactions among LMG,
American National and contract owners, sufficient to permit the insurer to
fulfill all of its contractual obligations to contract owners. These books
and records shall be maintained in accordance with prudent standards
generally accepted in business insurance record keeping. The documentation
will contain all pertinent documents in sufficient detail to maintain
complete dates, events, and persons participating in those insurance
events. The books and records shall be maintained throughout the agreement
and for a minimum period of ten (10) years after the completion of the
entire transaction to which they respectively relate."
"American National shall own the records generated by LMG pertaining to
American National; however, LMG shall retain the right to continuing access
to records to permit LMG to fulfill all of its contractual obligations. All
such records are proprietary information of American National. American
National shall have continuing right to access and copy all accounts and
records maintained by LMG related to American National's business. Any
appropriately authorized governmental agency shall have access to all
books, bank accounts, and records of LMG and American National for the
purpose of examination, inspection, and audit. All information contained in
the aforementioned books and records, including the identity and addresses
of policyholders shall be kept confidential, except that such information
may be used in proceedings instituted against LMG, or otherwise required to
be disclosed by proper federal, state or regulatory agencies or by court
order."
Page 16 of 23
2
"American National shall have on-line access to the American National
policy information maintained by LMG's policy administration system and
on-line access to its accounting system. LMG will provide policyholder
information on request by American National within a time period mutually
agreeable and appropriate with the request."
"In the event that LMG and American National cancel this Agreement, LMG
may, by written agreement with American National, transfer all records to a
successor administrator or to American National rather than retain them for
the aforementioned period. If LMG transfers the records to a successor
administrator or to American National, LMG is no longer responsible for
retaining such records. Any successor third party administrator shall
acknowledge in writing to LMG that it is responsible for retaining the
records for which LMG had previously been responsible."
3. Add "Section 8.13," as follows:
"It is the sole responsibility of American National to provide for
competent administration of its programs."
4. Add "Section 8.14," as follows:
"American National shall be responsible for determining the benefits,
premium rates, underwriting criteria, and claims payment procedures
applicable to such coverage and for securing reinsurance, if any."
5. Add "Section 8.15," as follows:
"American National shall have the sole responsibility for filing
advertising materials in those states that so require prior to approving
their use by LMG. All costs associated with such filings will be the
responsibility of American National."
6. Add "Section 8.16," as follows:
"American National shall, at least semiannually, conduct a review of
operations of LMG. At least one such review will be an on-site audit of the
operations of LMG. American National shall forward an agenda for such audit
at least five (5) days in advance of the scheduled audit."
7. Add "Section 8.17," as follows:
"LMG shall handle all correspondence of a routine nature and other general
functions necessary for satisfactory administration of the insurance and
shall maintain files relative thereto. Specific services are outlined in
APPENDIX C. Subject to American National's right to approve the resolution
thereof, LMG shall handle all insurance department complaints and inquiries
and policy owner and beneficiary complaints, whether written or oral, and
all attorney letters containing complaints and any other complaints related
to the policies administered hereunder. LMG will notify American National
of complaints from regulatory agencies within twenty-four (24) hours of
receipt thereof. Details of such complaints will be forwarded to American
National within five (5) business days. However, American National will
respond to summons and complaints commencing legal actions on its own
behalf."
8. Add "Section 8.18," as follows:
"LMG will provide written notice, approved in writing by American National,
to policyholders advising them of the identity of American National and
LMG, and the relationship between LMG, the policyholder, and American
National."
Page 17 of 23
3
9. Add "Section 8.19," as follows:
"When a policy is issued to a trustee or trustees, a copy of the trust
agreement and any amendment thereto, shall be furnished to American
National by LMG and shall be retained as part of the official records of
both LMG and American National for the duration of the policy and for six
(6) years thereafter."
10. Add "Section 8.20," as follows:
"LMG will only use advertising pertaining to the business underwritten by
American National that American National has approved in writing in advance
of its use. If so required, American National shall obtain the prior
approval of the appropriate Department of Insurance before approving
advertising for use by LMG."
11. Add "Section 8.21," as follows:
"LMG will possess and maintain an adequate fidelity and/or surety bond as
so required in the states in which it is compelled to do so. LMG will file
such bond, if so required, with the appropriate agency. The bond shall be
executed by a corporate insurer authorized to transact business in the
states which mandate the maintenance of such bond."
12. Add "Section 8.22," as follows:
"LMG will possess and maintain at all times errors and omissions coverage
or other appropriate liability insurance, written by an insurer authorized
to transact business in the states which mandate the maintenance of such
insurance. Such coverage will comply with the requirements of the states in
which such insurance coverage is required."
13. Add "Section 8.23," as follows:
"Payment to LMG of any premiums or charges for insurance by or on behalf of
the insured party shall be deemed to have been received by American
National, and the payment of return premiums or claim payments forwarded by
American National to LMG shall not be deemed to have been paid to the
insured party or claimant until such payments are received by the insured
party or claimant."
14. Add "Section 8.24," as follows:
"Currently, LMG does not perform underwriting for American National;
however, if granted such authority, LMG will comply with all underwriting
standards established by American National and adhere to all pertinent
provisions contained in applicable Third Party Administrator statues.
American National shall be responsible for the underwriting or other
standards pertaining to the business underwritten by American National."
15. Add "Section 8.25," as follows:
"Any policies, certificates, booklets, termination notices, or other
written communications delivered by American National to LMG for delivery
to insured parties or covered individuals shall be delivered by LMG within
ten (10) days after receipt of instructions from American National to
deliver them. Costs associated with the distribution of items not normally
distributed will be reviewed on a case by case basis to determine the
responsible party and will be mutually agreed upon by American National and
LMG."
Page 18 of 23
4
16. Add "Section 8.26," as follows:
"All insurance charges or premiums collected by LMG on behalf of American
National, and return premiums received from American National, shall be
held by LMG in a fiduciary capacity and will not be used as general
operating funds of LMG. Such funds shall, within two (2) business days, be
remitted to the person or persons entitled to them or shall be deposited,
within two (2) business days, into a Premium Fiduciary Account established
and maintained by American National in a federally or state insured
financial institution, separate and apart from any funds belonging to LMG
or third parties. American National agrees that any such funds collected by
LMG will be included in determining the amount of premium tax for which it
may be responsible."
17. Add "Section 8.27," as follows:
"This Premium Fiduciary Account will at all times have a balance equal to
contributions plus any interest earned less authorized disbursements by
American National. If LMG is authorized to draw checks on the Premium
Fiduciary Account this will clearly be indicated on their face. LMG may
retain float with prior written agreement of American National."
18. Add "Section 8.28," as follows:
"LMG may not pay any claim by withdrawals from the aforementioned Premium
Fiduciary Account. Withdrawals from the Premium Fiduciary Account shall be
made as provided in this written agreement between LMG and American
National for any of the following:
a) Remittance to American National, if so entitled to such remittance;
b) Deposit in an account maintained in the name of American National;
c) Transfer to and deposit in a claims-paying account, with claims to be
paid as provided by American National."
19. Add "Section 8.29," as follows:
"LMG is not authorized to adjust, settle or pay claims on behalf of
American National. In the event that American National grants LMG such
authority, LMG will pay such claims from funds collected on behalf of
American National and shall be paid only on drafts of, and as authorized
by, American National. In the event that LMG received monies to pay claims
on behalf of American National, such funds will be held in a fiduciary
capacity. No deposits will be made into or disbursements made from this
fiduciary account except for claims and claim adjustment expenses. This
fiduciary account will at all times have a balance equal to the amount
deposited less claims and claims adjustment expenses paid."
20. Add "Section 8.30," as follows:
"This Administrative Agreement shall not provide for compensation,
commissions, fees, or charges which are contingent upon savings effected in
the adjustment, settlement, and payment of losses (the loss ratio) covered
by American National's obligations. In the event that American National
grants LMG the authority to adjust or settle claims on its behalf, such
compensation shall in no way be contingent on claims experience."
21. Add "Section 8.31," as follows:
"This provision does not prevent the compensation of LMG from being based
on premiums or charges collected or the number of claims paid or processed
or performance-based compensation for providing auditing services. LMG will
not receive any administrative compensation except as expressly set forth
in this Agreement between LMG and American National."
Page 19 of 23
5
Except as specifically amended hereby, all terms and provisions of the Insurance
Processing Agreement shall remain in full force and effect.
LEGACY MARKETING GROUP AMERICAN NATIONAL INSURANCE COMPANY
By: /s/ Gregory C Egger By: /s/ Debra Knowles
-------------------------- ----------------------------
Title: Chief Marketing Officer Title: Assistant Vice President
-------------------------- ----------------------------
Witness: /s/ Stephanie Molteni Witness: /s/ Gretchen M. Childress
-------------------------- ----------------------------
Date: October 1, 1999 Date: October 1, 1999
-------------------------- ----------------------------
Page 20 of 23