Exhibit 10.12 

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SALE BONUS AGREEMENT

THIS SALE BONUS AGREEMENT (this “Agreement”) is dated as of October 15, 2019 by
and between Independence American Holdings Corp., a Delaware corporation
(“IAHC”), and the undersigned executive (the “Executive”).

BACKGROUND

A.IAHC is the sole parent of IHC SB Holdings, LLC, a Delaware limited liability
company (“Holdings”), and sole indirect parent of Holdings’ subsidiary, IHC
Specialty Benefits, Inc., a Delaware corporation (the “Company”). 

B.IAHC, Holdings and the Company are all affiliated with IHC Carrier Solutions,
Inc., a Delaware corporation (the “CS”), which provides certain actuarial,
compliance, program management and administrative services in connection with
some business sold by the Company. 

C.IAHC desires to induce the Executive, as a key contributor to the success of
the Company, to continue to provide services, enhance the Company’s value, and
assure the present and future continuity, objectivity and dedication of
management in the event of any Sale (as defined herein) of the Company to
maximize the value of the Company upon a Sale, by offering to pay, in accordance
with the terms and conditions set forth herein, an incentive bonus in the event
of a (i) Sale of the Company, (ii) Sale of Holdings, (iii) Sale of the Company
and CS, or (iv) Sale of Holdings and CS.   

AGREEMENT

The parties hereto, in consideration of the foregoing and the mutual covenants
contained herein, along with other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound, hereby agree as follows:

1.Incorporation of Recitals.  The above Recitals are hereby incorporated by
reference as if set forth hereinafter. 

2.Sale Bonus.  Subject to the terms and conditions set forth in this Agreement,
the Company will pay to the Executive a cash bonus (the “Sale Bonus”) upon a
Sale of Holdings, the Company, the Company and CS, or Holdings and CS in an
amount determined in accordance with Schedule A hereto, which shall be deemed a
part of this Agreement. 

3.Time of Payment.  The Sale Bonus, less required withholding, will be paid to
the Executive in a lump sum within 120 days of the date the Sale is consummated
(the “Payment Date”).   

4.Definition of Sale. For purposes of this Agreement, a “Sale” is defined as any
one of the following transactions: 

(a)A sale or other disposition of equity securities representing more than 50%
of the then-outstanding voting securities entitled to vote in the election of
directors to any Person (as defined herein) that is then not an Affiliate (as
defined herein) of the selling party; 

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Exhibit 10.12 

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(b)A merger, consolidation, reorganization or amalgamation;   

(c)The direct or indirect sale, transfer, conveyance or other disposition, in
one or a series of related transactions, of all or substantially all of the
properties or assets to any Person that is not an Affiliate of the selling
party; or 

(d)Any other transaction the intent of which may reasonably and equitably be
construed to effect a result substantially equivalent to that described in
paragraphs (a), (b) or (c) above, as determined in the sole and absolute
discretion of the Board of Directors of IAHC (the “IAHC Board”).   

For purposes of this Agreement, “Affiliate” means, with respect to any Person,
any other Person controlling, controlled by or under common control with such
Person, where “control” is defined as the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.  “Person” means any individual, corporation, partnership, firm, joint
venture, association, limited liability company, limited liability partnership,
joint-stock company, trust, unincorporated organization, governmental, judicial
or regulatory body, business unit, division or other entity.  

 

5.Conditions Precedent.  The payment of the Sale Bonus is conditioned upon the
Executive’s continued employment with the Company or an Affiliate of the
Company, as applicable, through the Payment Date.  In addition, the Executive’s
right to receive and retain the Sale Bonus is expressly conditioned on the
Executive’s continued compliance in full with the Executive’s obligations under
any agreement between the Executive and the Company or an Affiliate of the
Company (including, without limitation, any employment agreement), as
applicable, and with all policies, programs and codes of conduct of the Company
or an Affiliate of the Company applicable to the Executive. 

6.Withholding.  The Company shall have the right to withhold from any Sale
Bonus, any federal, state or local income and/or payroll taxes required by law
to be withheld and to take such other action as the Company may deem advisable
to enable the Company and the Executive to satisfy obligations for the payment
of withholding taxes and other tax obligations relating to the Sale Bonus. 

7.409A.  It is intended that all payments hereunder shall comply with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the
regulations promulgated thereunder so as not to subject the Executive to payment
of interest or any additional tax under Section 409A.  All terms of this
Agreement which are undefined or ambiguous must be interpreted in a manner that
is consistent with Section 409A if necessary to comply with Section 409A.  This
Agreement will be construed and administered to preserve the exemption from
Section 409A of payments that qualify as short-term deferrals pursuant to Treas.
Reg. § 1.409A-1(b)(4).  In furtherance thereof, if payment or provision of any
amount or benefit hereunder that is subject to Section 409A at the time
specified herein would subject such amount or benefit to any additional tax
under Section 409A, the payment or provision of such amount or benefit will be
postponed to the earliest commencement date on which the payment or provision of
such amount or benefit could be made without incurring such additional tax.  In
addition, to the extent that any regulations or other guidance issued under
Section 409A (after application of the previous provisions of this Section)
would result in the Executive’s being subject to the payment of interest or any
additional tax under Section 409A of the Code, the parties hereto agree, to the
extent reasonably possible, to amend this Agreement in order to avoid the
imposition of any such interest or additional tax under Section 409A, which
amendment shall have the minimum economic effect necessary and be reasonably
determined in good faith by IAHC and the Executive.  The right to a series of
payments will be treated as a right to a series of separate payments.  Executive
acknowledges and agrees that none of IAHC, the Company or its other Affiliates
has  

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Exhibit 10.12 

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made any representation to Executive as to the tax treatment of the compensation
provided pursuant to this Agreement and that Executive is solely responsible for
all taxes due with respect to such compensation.

8.Section 280G.   

8.1.Reduction. Notwithstanding any other provision of this Agreement or any
plan, arrangement or agreement between the Executive and the Company or an
Affiliate of the Company, as applicable, to the contrary, if any of the payments
or benefits provided or to be provided by the Company or its Affiliate to the
Executive or for the Executive’s benefit pursuant to the terms of this Agreement
or otherwise (“Covered Payments”) constitute parachute payments (“Parachute
Payments”) within the meaning of Section 280G of the Code and would, but for
this Section 8, be subject to the excise tax imposed under Section 4999 of the
Code (or any successor provision thereto) or any similar tax imposed by state or
local law or any interest or penalties with respect to such taxes (collectively,
the “Excise Tax”), then the Covered Payments shall be reduced to the minimum
extent necessary to ensure that no portion of the Covered Payments is subject to
the Excise Tax (such amount, the “Reduced Amount”).  Any such reduction in
Covered Payments will be made by reducing the amount of the Sale Bonus.   

8.2.Determinations. Any determination required under this Section 8, including
whether any payments or benefits are Parachute Payments, shall be made by the
IAHC Board in its sole and absolute discretion. The Executive shall provide the
IAHC Board with such information and documents as the IAHC Board may reasonably
request in order to make a determination under this Section 8. The IAHC Board's
determination shall be final and binding on the Executive. 

9.Termination.  The term of this Agreement shall commence on the date hereof and
end on the earlier of (i) the termination of the Executive by the Company or
Affiliate of the Company, as applicable, or the last date of employment with the
Company or Affiliate of the Company, as applicable, or (ii) November 7, 2021;
provided, however, that such term shall be automatically extended for successive
two (2) year periods unless IAHC shall, at least thirty (30) days prior to the
expiration of the then-applicable term, have given written notice to the
Executive that the term of the Agreement shall not be so extended, in which case
no such extension shall occur.   

10.Assignment; Third Party Beneficiaries.  Neither IAHC nor the Executive may
make any assignment of this Agreement, by operation of law or otherwise, without
the prior written consent of the other.  This Agreement shall inure to the
benefit of and be binding upon IAHC and the Executive, and their respective
successors, executors, administrators, heirs and permitted assigns.  This
Agreement shall not confer any rights or remedies upon any Person other than the
parties hereto and their respective successors and permitted assigns, except for
the Company, Holdings, and CS, which shall be third party beneficiaries of this
Agreement. 

11.Waiver.  No waiver of any provision of this Agreement shall be effective
unless made in writing and signed by the waiving party.  The failure of either
party hereto to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of or non-performance
under this Agreement, shall not prevent any subsequent enforcement of such term
or obligation or be deemed a waiver of any subsequent breach or
non-performance. 

12.Entire Agreement.  This Agreement constitutes the entire agreement between
the parties hereto and supersedes and terminates all prior communications,
agreements and understandings, written or oral, with respect to the transactions
contemplated herein, including, without limitation, the terms and conditions of
the Sale Bonus. 

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Exhibit 10.12 

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13.Notice.  All written communications to a party under this Agreement shall be
in writing and (a) delivered in person (to be effective when so delivered), (b)
mailed by registered or certified mail, return receipt requested (to be
effective four days after the date it is deposited in the U.S. Mail), (c)
deposited with a nationally recognized overnight courier service (to be
effective two business days after the delivery to such courier service), or (d)
sent by email transmission (to be effective upon receipt by the sender of
electronic confirmation of delivery of the email), with confirmation sent by way
of one of the above methods, to the party at the address given below for such
party (or to such other address as such party shall designate in a writing
complying with this Section 13, delivered to the other party): 

If to IAHC:

 

c/o The IHC Group

485 Madison Avenue, 14th Floor

New York, NY  10022

Attn:  Loan Nisser

Telephone:  (212) 355-4141

Email:  lnisser@sslicny.com

 

If to the Executive:

 

To the address then currently on file with the Company. 

 

14.Headings.  The headings and captions in this Agreement are for convenience
only and do not define or describe the scope or content of any provision of this
Agreement. 

15.Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument. 

16.Miscellaneous.  This Agreement (a) may not be amended, modified or terminated
orally or by any course of conduct pursued by IAHC or the Executive, but may be
amended, modified or terminated only by a written agreement duly executed by
IAHC and the Executive, and (b) shall be governed by, and interpreted and
construed in accordance with, the laws of the State of New York, without regard
to principles of conflicts of law. 

 

[Signature page follows]

 

 

 

IN WITNESS WHEREOF, this Agreement has been executed by Independence American
Holdings Corp., by its duly authorized representative, and by the Executive, as
of the date first above written.

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Exhibit 10.12 

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EXECUTIVE

 

 

 

INDEPENDENCE AMERICAN HOLDINGS CORP.

/s/ Gary J. Balzofiore

 

By: /s/ Teresa A. Herbert  

Name: Gary J. Balzofiore

 

Name:  Teresa A. Herbert 

 

 

Title:  VP - Finance 

 

 

 

 

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Exhibit 10.12 

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Schedule A

 

Sale Bonus Calculation

 

The amount of the Executive’s Sale Bonus will be the product of (x) and (y),
where (x) is the “Net Sale Price” and (y) is 0.75%.

 

For purposes of this calculation:

 

“Net Sale Price” means:

 

I.In the event of a Sale of the Company or Holdings only: 

 

Net Sale Price = A−B−C− D

 

Where:

 

A = the proceeds on sale of the Company or Holdings, as the case may be, in the
transaction constituting the Sale

 

B = the transaction expenses (including this Sale Bonus) incurred by the Company
or Holdings, as the case may be, in connection with the Sale

 

C = the Book Value (defined below) of the Company or Holdings, as the case may
be

 

D = taxes on the transaction determined using the Applicable Tax Rate (defined
below)

 

“Book Value of the Company or Holdings” means $55,000,000 in the event of the
Sale of only the Company or Holdings, subject to upward or downward adjustment,
as appropriate, for any (i) acquisitions of either assets or equity by the
Company or Holdings, as the case may be, (ii) merger with another Person where
the Company or Holdings, as the case may be, is the surviving entity or (iii)
sale or divestiture of equity or assets of the Company or Holdings, as the case
may be, each made after September 30, 2016 that impact the book value of the
Company or Holdings, as the case may be, with any such adjustment made by the
IAHC Board in the good faith exercise of its reasonable discretion.

 

II.In the event that CS is also sold to the purchaser of the Company or
Holdings, as the case may be, or an Affiliate of such purchaser:  

 

Net Sale Price = E−F−G− H

 

Where:

 

E = the proceeds on sale of the Company or Holdings, as the case may be, and CS
in the transaction constituting the Sale

 

F = the aggregate transaction expenses (including this Sale Bonus) incurred by
the Company or Holdings, as the case may be, and CS in connection with the Sale

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Exhibit 10.12 

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G = the aggregate Book Value of the Company or Holdings, as the case may be, and
CS (defined below)

 

H = taxes on the transaction determined using the Applicable Tax Rate

 

“Book Value of the Company or Holdings, as the case may be, and CS” means
$60,000,000 in the event of the Sale of the Company or Holdings, as the case may
be, and CS, subject to upward or downward adjustment, as appropriate, for (i)
acquisitions of either assets or equity by the Company or Holdings, as the case
may be, and/or CS (ii) merger with another Person where the Company or Holdings,
as the case may be, or CS is the surviving entity or (iii) sale or divestiture
of equity or assets of the Company or Holdings, as the case may be, and/or CS,
each made after September 30, 2016 that impact the book value of the Company or
Holdings, as the case may be, and CS with any such adjustment made by the IAHC
Board in the good faith exercise of its reasonable discretion

 

“Applicable Tax Rate” shall mean the federal and state tax rate payable by the
seller, as the case may be, that is in effect as of the date that the Sale is
consummated, but not less than 22.5% in each case unless otherwise determined by
the IAHC Board in the good faith exercise of its reasonable discretion.

 

The IAHC Board shall calculate the Sale Bonus in good faith in compliance with
the terms of this Agreement and in a manner designed to give effect to the
purposes and intent of the parties hereto.

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