Exhibit 10.6

MANAGEMENT AGREEMENT OF ATTORNEY-IN-FACT

for

AMERICAN PHYSICIANS INSURANCE EXCHANGE

THIS AGREEMENT entered into by and between AMERICAN PHYSICIANS SERVICE
CORPORATION (the “Attorney-in-Fact”) and AMERICAN PHYSICIANS INSURANCE EXCHANGE
(the “Exchange”), with its principal place of business in Dallas, Dallas County,
Texas;

W I T N E S S E T H:

WHEREAS, AMERICAN PHYSICIANS INSURANCE EXCHANGE is a reciprocal insurance
association organized pursuant to Chapter 19 of the Insurance Code of Texas of
1951, as amended, and is comprised of Subscribers who have entered into a
“Subscribers Agreement and Power of Attorney” with the Attorney-in-Fact; and

WHEREAS, the Attorney-in-Fact is a corporation incorporated under the laws of
the State of Texas; and

WHEREAS, the Attorney-in-Fact has filed an application for a Certificate of
Authority for the AMERICAN PHYSICIANS INSURANCE EXCHANGE with the Commissioner
of Insurance of Texas; and

WHEREAS, AMERICAN PHYSICIANS INSURANCE EXCHANGE and the Attorney-in-Fact desire
to enter into this Agreement respecting the management of the Exchange;

NOW, THEREFORE, it is agreed by and between the parties;

I

AUTHORITY OF ATTORNEY-IN-FACT

The Attorney-in-Fact is responsible for the general operation of the Exchange
and is specifically authorized to:

1) Solicit and receive applications and issue policies of insurance within the
scope and nature authorized by the Board of Directors of the Exchange.

2) Collect and receipt for premiums and maintain bank accounts for the deposit
of funds for the Exchange.

3) Provide all underwriting services for the issuance of policies of the
Exchange.

4) Supervise appraisals of risks and engage, where necessary, independent
appraisal services for such purposes.

5) Handle all insurance claims, including the payment, compromise of and denial
thereof. Such handling shall also include supervision of adjustment of claims,
investigation of claims not requiring arbitration by the Board and supervision
of the defense in the event of any lawsuit growing out of a claim.

6) Provide the required accounting and reporting services for the Exchange
(including the annual reports to the State Board of Insurance); provide
investment counseling to the Exchange.

7) Maintain an office in Dallas, Texas, and such other place or places as the
Attorney-in-Fact may deem necessary for the operation of the business of the
Exchange.

--------------------------------------------------------------------------------

II

ATTORNEY-IN-FACT’S OBLIGATIONS TO THE EXCHANGE

The Attorney-in-Fact shall carry out the authorities given it by the Subscribers
in a reasonable and prudent manner; and shall follow the instructions of the
Board of Directors when the Board is acting within the powers given it under the
By-Laws and shall give due consideration to the advices and wishes of the Board
of Directors in connection with the operational procedures of the Exchange,
subject, however, to the uncertainties of the market, regulation by governmental
agencies and all other risks and mistakes of judgment incident to managing and
operating a business enterprise.

III

LIABILITY OF ATTORNEY-IN-FACT

The Attorney-in-Fact will be liable and responsible for the payment of
administrative costs and expenses in connection with the operation of the
insurance business of the Exchange including the payment of rents and utilities
for offices; the payment of salaries for all employees and officers of the
Attorney-in-Fact; payment of expenses for telephone, postage, supplies, books,
stationery and advertising matter; and the payment of any acquisition of
business costs incurred by the Attorney-in-Fact.

IV

LIABILITY OF THE EXCHANGE

The Exchange shall be responsible and obligated for all of the following:

1) All losses arising out of the policies of the Exchange or amounts for which
the Attorney-in-Fact has settled and compromised for any loss; any judgments
against the Exchange arising out of the policies of the Exchange; any
liabilities or judgments against the Exchange or the Attorney-in-Fact as a
result of the Attorney-in-Fact acting in the course and scope of its authority
and responsibilities to the Exchange and subscribers provided such liability
does not arise because of the gross negligence, bad faith, fraudulent intent or
willful misfeasance of the Attorney-in-Fact or any of its employees, all costs
of adjustment for any losses arising or alleged to be arising under insurance
written by the Exchange, including all costs of independent adjusters,
appraisers, investigators, and attorneys, whether or not suit has been filed, as
well as any court costs in connection with any suit arising out of insurance
coverage afforded or alleged to have been afforded by the Exchange;

2) All costs of printing policies, endorsements, and claim forms.

3) All audit, legal and filing fees and expenses.

4) Taxes, fees or charges levied or assessed by any governmental agency by
virtue of premiums earned or for any other reason on the insurance business
conducted by the Attorney-in-Fact on behalf of the Exchange;

5) All appraisal costs or the costs of investigation or analysis conducted by
independent parties with respect to the underwriting or related aspects of
insurance business of the Exchange. (It is understood that the Exchange through
a peer review committee selected by the chairman from among the Subscribers will
customarily conduct underwriting studies; however, the Attorney-in-Fact may, in
its discretion, obtain an independent investigating agency to provide it with
information with respect to a risk).

--------------------------------------------------------------------------------

V

COMPENSATION OF ATTORNEY-IN-FACT

The Attorney-in-Fact shall be entitled to receive a management fee of twenty-two
and one-half percent (22-1/2%) of the net earned premiums received on the
insurance business of the Exchange. Net earned premiums shall mean gross
premiums earned less returns for cancellations or return premium endorsements
without the deduction of any of the liabilities of the Exchange as described in
Paragraph IV above. The Attorney-in-Fact may withhold 20% of the net earned
premiums. The balance of the management fee shall be reserved by the Exchange as
an advance to the Exchange by the Attorney-in-Fact.

VI

REPAYMENT OF ADVANCES

The Exchange is liable for and shall repay to the Attorney-in-Fact any advances
made or caused to be made by the Attorney-in-Fact to the Exchange. Repayment of
advances withheld from management fees shall commence on a month to month basis
after accumulating to $50,000 and thereafter as funds become available after the
Exchange has made provision for capital and surplus, expenses and reserves as
required by the Texas Insurance Code. The Exchange will repay to the
Attorney-in-Fact the cost of attorney fees and any other reasonable expenses
incurred in organizing the Exchange.

VII

TERM

This Agreement shall commence on the 1st day of October, 1975, or the date of
the receipt by the Attorney-in-Fact of a Certificate of Authority for the
Exchange, if sooner, and shall be renewed automatically from year to year unless
cancelled by terms and conditions set out herein. The Attorney-in-Fact may elect
to terminate this Agreement by sixty (60) days written notice to the members of
the Board of Directors of the Exchange, which termination shall take effect upon
the selection and qualification of a successor Attorney-in-Fact pursuant to the
By-Laws of the Exchange, which selection and qualification shall be pursued and
brought about as soon as possible. A majority of the Subscribers of the Exchange
may terminate this Agreement upon immediate written notice to the
Attorney-in-Fact solely by reason of the Attorney-in-Fact having been adjudged
in any suit, action or proceeding liable for its own gross negligence, bad
faith, fraudulent intent or willful misfeasance. In the event the Subscribers
terminate this Agreement, the Subscribers agree that all management fees then
due the Attorney-in-Fact, whether reserved by the Exchange or not, shall become
fully earned by the Attorney-in-Fact and shall, be paid to the Attorney-in-Fact
as soon as practicable but in any event within one year from the date of
termination. This Agreement may be cancelled by mutual consent of the parties
hereto.

In the event the Exchange does not select a new and successor Attorney-in-Fact
at the conclusion of the term of this Agreement and in the further event that a
new management agreement is not agreed upon by and between the Exchange and the
new Attorney-in-Fact, it is agreed that this management agreement, in all of its
terms and conditions, shall be deemed renewed on a year to year basis thereafter
until a successor Attorney-in-Fact is selected and qualified to assume the role
of the Attorney-in-Fact for this Exchange at the end of any such annual renewal
of this management agreement.

VIII

ACCESS TO RECORDS

The Attorney-in-Fact shall afford the Board of Directors an opportunity to
inspect at any reasonable times all records of the Attorney-in-Fact insofar as
they relate to the business of the Exchange.

--------------------------------------------------------------------------------

EXECUTED this the 13th day of August, 1975.

 

 

TEMPORARY BOARD OF DIRECTORS OF

AMERICAN PHYSICIANS INSURANCE EXCHANGE

 

/s/ Kenneth G. Burton, M.D.

 

/s/ Jack R. Chandler, M.D.

 

/s/ Charles S. Arnold, M. D.

 

/s/ David Berchelmann, M. D.

   

  /s/ William Peche, M. D.

 

  /s/ D. T. McMahon, Jr. M. D.

   

AMERICAN PHYSICIANS SERVICE CORPORATION

  

By

 

/s/ Jack Murphy, President

 

 

 

--------------------------------------------------------------------------------

RATIFIED AND ACCEPTED as being the Management Agreement agreed upon and
acquiesced in by all Subscribers hereto on the date hereof.

 

       

 

 

 

FIRST PERMANENT BOARD OF

DIRECTORS OF AMERICAN PHYSICIANS

INSURANCE EXCHANGE

   

  /s/ Kenneth G. Burton, M. D.

 

 

 

  /s/ D. T. McMahon, Jr. M. D.

   

  /s/ H. A. Wiebelhaus

 

 

 

  /s/ David Berchelmann, M. D.

   

   

 

 

 

  /s/ Bernard M. Barrett, Jr., M.D.

   

   

 

 

 

  /s/ Frank S. Martin, Jr.

   

   

 

 

 

  /s/ J Royston Brown

   

 

 

 

 

  /s/ Jack R. Chandler

   

 

 

 

 

  /s/ Charles S. Arnold, M. D.

--------------------------------------------------------------------------------

ADDENDUM TO AGREEMENT

This Addendum is entered into as of the 21st day of October, 1983 between
American Physicians Insurance Exchange, a reciprocal insurance company (the
“Company”), and APS Facilities Management, Inc., a Texas Corporation (“APSFM”),
and specifically amends that certain Agreement entered into as of October 1,
1975 between the parties in the following particulars:

(1) All reference made to American Physicians Service Corporation shall be
amended to APS Facilities Management, Inc., and all reference made to APSC shall
be amended to APSFM.

This Addendum is executed to amend the above mentioned and its intention is to
modify the said original Agreement in the manner indicated herein, but to
otherwise continue the Agreement, as so amended, in full force and effect.

 

   

Dated:

 

October 21, 1983

 

AMERICAN PHYSICIANS INSURANCE EXCHANGE

  

By:

 

/s/ Jack R. Chandler, M.D.

 

 

 

Jack R. Chandler, M.D., Chairman of the Board

   

APS FACILITIES MANAGEMENT, INC.

  

By:

 

/s/ Roger Detrich

 

 

 

Roger Detrich, President

--------------------------------------------------------------------------------

ADDENDUM NO. 2

MANAGEMENT AGREEMENT OF ATTORNEY-IN-FACT

FOR

AMERICAN PHYSICIANS INSURANCE EXCHANGE

This Addendum is entered into to be effective as of the 8th day of December,
1995, between American Physicians Insurance Exchange (“the Exchange”) and APS
Facilities Management, Inc. (“APSFMI, the Attorney-in-Fact”) and specifically
amends that certain Management Agreement entered into as of October 1, 1975, and
also as amended on October 21, 1983, in the following particulars:

 

1.

The principal place of business of the Exchange and the Attorney-in-Fact is in
Austin, Travis County, Texas.

 

2.

Paragraph I (7) (AUTHORITY OF ATTORNEY-IN-FACT) is amended to read as follows:

“(7) Maintain a principal and home office in Texas and offices elsewhere, at
such place or places as the Attorney-in-Fact deems necessary for the operation
of the business of the Exchange.”

 

3.

Paragraph I (AUTHORITY OF ATTORNEY-IN-FACT) is amended by adding a new
subsection (8) to read as follows:

“(8) All services relating to any reinsurance contracts for or by the Exchange
including, but not limited to, selecting reinsurance carriers and brokers;
negotiating the terms and conditions of reinsurance contracts; negotiating the
rates to be paid or received for any reinsurance; providing all underwriting,
claims and other services required for the administration of any reinsurance;
determining if any renewals, commutation or other changes in the reinsurance for
the Exchange is necessary; and, taking such action as the Attorney-in-Fact deems
necessary to resolve or handle any disputes involving any contract of
reinsurance. All reinsurance agreements entered into by the Attorney-in-Fact
shall be presented to and reviewed by the Board of Directors on an annual
basis.”

 

4.

Paragraph I (AUTHORITY OF ATTORNEY-IN-FACT) is amended by adding a new
subsection (9) to read as follows:

“(9) Perform all acts necessary for the appointment, termination and
supervision, of any agents, including local recording agents, for the Exchange.”

 

--------------------------------------------------------------------------------

5.

Paragraph I (AUTHORITY OF ATTORNEY-IN-FACT) is amended by adding a new
subsection (10) to read as follows:

“(10) The Attorney-in-Fact is authorized to provide all services relating to any
joint marketing arrangements with other insurance carriers including, but not
limited to, arrangements when the Attorney-in-Fact or its affiliates are
directly involved in marketing of insurance products for other carriers. Any
services relating to any joint marketing arrangements shall be approved in
advance by the Board of Directors.”

 

6.

Paragraph III (LIABILITY OF ATTORNEY-IN-FACT) is amended to read as follows:

“The Attorney-in-Fact will be liable and responsible for the payment of
administrative costs and expenses in connection with the operation of the
insurance business of the Exchange including the payment of rents and utilities
for offices; the payment of salaries for all employees and officers of the
Attorney-in-Fact; payment of expenses for telephone, postage, supplies, books,
stationery and advertising matter; payment of 50% of commissions paid to agents
appointed for the Exchange; and the payment of any other non-commission
acquisition of business costs incurred by the Attorney-in-Fact.”

 

7.

Paragraph IV (3) (LIABILITY OF THE EXCHANGE) is amended to read as follows:

“(3) All audit, legal, actuarial, investment, regulatory electronic data base
and related expenses, reinsurance contract and related expenses; and any filing
fees, expenses or other related expenses.”

 

8.

Paragraph IV (LIABILITY OF THE EXCHANGE) is amended by adding a new subsection
(6) to read as follows:

 

 

“(6)

The following additional costs and expenses:

 

 

(a)

50% of all commissions paid to agents relating to Exchange business;

 

 

(b)

Any salary benefits or other compensation and all other costs and expenses
associated with the positions of Medical Director, Secretary to the Exchange
Board, or other special positions approved or created by the Exchange’s Board of
Directors.”

 

9.

Paragraph V (COMPENSATION OF ATTORNEY-IN-FACT) is amended to read as follows:

V.

COMPENSATION OF ATTORNEY-IN-FACT

“The attorney-in-Fact shall be entitled to receive a management fee paid monthly
equal to 13-1/2% of the net earned premium on the insurance business of the
Exchange plus a contingent amount equal to 50% of the Exchange’s statutory
income before Federal income taxes and this contingent amount. The total
management fees in a calendar year shall not exceed the greater of $5,400,000 or
16-1/2% of the net earned premium. Net earned premiums shall mean gross premiums
earned less returns for cancellation or return premium endorsements without the
deduction of any of the liabilities of the Exchange as directed in Paragraph IV
above.”

--------------------------------------------------------------------------------

EXECUTED this 8th day of December, 1995.

 

   

AMERICAN PHYSICIANS INSURANCE EXCHANGE

(The Exchange)

 

/s/ John H. Meador, M.D.

By:

 

/s/ John H. Meador, M.D.

Title:

 

Chairman of the Board

 

APS FACILITIES MANAGEMENT, INC.

                    (Attorney-in-Fact)

 

/s/ Duane K. Boyd, Jr.

By:

 

/s/ Duane K. Boyd, Jr.

Title:

 

President

--------------------------------------------------------------------------------

ADDENDUM NO. 3

MANAGEMENT AGREEMENT OF ATTORNEY-IN-FACT

FOR

AMERICAN PHYSICIANS INSURANCE EXCHANGE

This addendum is entered into to be effective as of the 2nd day of March, 2001,
between American Physicians Insurance Exchange (“The Exchange”) and APS
Facilities Management, Inc. (“APSFMI, Attorney-in-Fact”) and specifically amends
that certain Management Agreement entered into as of October 1, 1975, and also
as amended on October 21, 1983 and December 8, 1995, in the following
particulars:

 

1.

Paragraph VII (Term) is amended to read as follows:

This Agreement shall commence on the 1st day of October, 1975, or the date of
the receipt by the Attorney-in-Fact of a Certificate of Authority for the
Exchange, if sooner, and shall be renewed automatically from year to year unless
cancelled by terms and conditions set out herein. The Attorney-in-Fact may elect
to terminate this Agreement by eighteen (18) months written notice to the
members of the Board of Directors of the Exchange, which termination shall take
effect upon the selection and qualification of a successor Attorney-in-Fact
pursuant to the By-Laws of the Exchange, which selection and qualification shall
be pursued and brought about as soon as possible. A majority of the Subscribers
of the Exchange may terminate this Agreement upon immediate written notice to
the Attorney-in-Fact solely by reason of the Attorney-in-Fact having been
adjudged in any suit, action or proceeding liable for its own gross negligence,
bad faith, fraudulent intent or willful misfeasance. In the event the
Subscribers terminate this Agreement, the Subscribers agree that all management
fees then due the Attorney-in-Fact, whether reserved by the Exchange or not,
shall become fully earned by the Attorney-in-Fact and shall be paid to the
Attorney-in-Fact as soon as practicable but in any event within one year from
the date of termination. This Agreement may be cancelled by mutual consent of
the parties hereto.

In the event the Exchange does not select a new and successor Attorney-in-Fact
at the conclusion of the term of this Agreement and in the further event that a
new management agreement is not agreed upon by and between the Exchange and the
new Attorney-in-Fact, it is agreed that this management agreement, in all of its
terms and conditions, shall be deemed renewed on a year to year basis thereafter
until a successor Attorney-in-Fact is selected and qualified to assume the role
of the Attorney-in-Fact for this Exchange at the end of any such annual renewal
of this management agreement.

Executed this 2nd day of March, 2001.

 

   

AMERICAN PHYSICIANS INSURANCE EXCHANGE

                            “The Exchange”

 

/s/ Norris C. Knight, Jr., M.D.

By:

 

Norris C. Knight, Jr., M.D.

Title:

 

  Chairman of the Board

 

APS FACILITIES MANAGEMENT, INC.

                    “Attorney-in-Fact”

 

/s/ Maury L. Magids

By:

 

Maury L. Magids

Title:

 

  President & COO