Document:

Exhibit 10.3

 

CONSULTING AND ADVISORY AGREEMENT

 

THIS CONSULTING AND ADVISORY AGREEMENT (this “Agreement”) is made effective as of September 1, 2009 (the “Effective Date”), by and between MIDWEST HOLDING INC., a Nebraska corporation (the “Company”), and CORPORATE DEVELOPMENT INC., a Nebraska corporation (“Consultant”).  In addition, RICK MEYER, an individual (“Meyer”), is made a party to this Agreement solely for purposes of Sections 6, 7, 8, 9 and 19 of this Agreement.

 

WHEREAS, the Company desires to retain the services of Consultant and Consultant desires to perform certain services for the Company; and

 

WHEREAS, Meyer is a shareholder and the President of Consultant who will be assigned to perform services for the Company on behalf of Consultant.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, and for other good and valuable consideration the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

 

1.                                     Services.  Consultant agrees to provide various consulting and advisory services to the Company, as requested from time to time by the Company’s Board of Directors (the “Board”), including but not limited to:

 

(a)                                  Working with the Company to develop and implement long-term strategic plans to further the growth and development of the Company and its business;

 

(b)                                 Working with the Company to develop and implement additional capital-raising strategies, including without limitation additional securities offerings;

 

(c)                                  Assisting the Company in the evaluation of other significant corporate opportunities, including without limitation mergers, acquisitions, joint ventures, and other strategic transactions;

 

(d)                                 Assisting the Company with respect to market research and product development;

 

(e)                                  Assisting the Company in maintaining effective public relations and shareholder relations;

 

(f)                                    Designating employees of Consultant to attend meetings and participate in conference calls or other forms of communication to share Consultant’s ideas, experience, and expertise with the Company; and

 

 

(g)                                 Providing any other services the Company believes will be beneficial in furthering its goals, so long as Consultant agrees to render such services.

 

Such services will be provided at times reasonably agreed to by the Company and Consultant.  Consultant and its employees will use their best efforts in performing such services and will devote such time and resources as are necessary to perform such services in a manner reasonably satisfactory to the Company.  Consultant shall report to the Board from time to time as reasonably requested by the Board with respect to the performance of the duties hereunder.

 

2.                                       Consulting Term.  This Agreement shall commence on the Effective Date and shall continue in effect for a period of four (4) years thereafter, unless earlier terminated as provided in Section 4.  The period during which this Agreement continues in effect is herein referred to as the “Consulting Term”.

 

3.                                       Compensation.

 

(a)                                  Consulting Fee.  As compensation for the services provided hereunder, Consultant shall receive an annual consulting fee (the “Consulting Fee”) equal to One Hundred Ninety Thousand Dollars ($190,000.00) for the first year during the Consulting Term.  On the first anniversary of the Effective Date, and on each subsequent anniversary of the Effective Date during the Consulting Term, the Consulting Fee shall be increased by three percent (3.0%) over the previous year’s Consulting Fee.  The Consulting Fee shall be paid each year in twelve (12) equal monthly installments, and such installments shall be due within ten (10) days following the end of each calendar month during the Consulting Term.

 

(b)                                 Out-of-Pocket Expenses.  The Company shall reimburse Consultant for approved out-of-pocket expenses, if any, actually paid by Consultant in connection with the performance of services under this Agreement; provided, that any and all such reimbursement shall be subject to the requirements and limitations of the Company’s expense reimbursement policy in effect from time to time. Consultant shall submit to the Company itemized statements on a monthly basis together with receipts, in a form satisfactory to the Company, of all such expenses incurred.  The Company shall pay to Consultant amounts shown on each such statement within thirty (30) days of receiving Consultant’s itemized statement.

 

4.                                       Termination.

 

(a)                                  Death or Disability.  In the event Meyer dies or becomes disabled during the Consulting Term, Consultant’s consultancy hereunder shall automatically terminate.  For the purpose of this Agreement, “disability” or “disabled” shall mean Meyer’s inability to perform duties on behalf of Consultant under this Agreement due to physical or mental illness or disease for ninety (90) substantially consecutive days, or one hundred twenty (120) days in any twelve (12) month period.  In the event that there is any dispute between the Company and Consultant with reference to whether or not Meyer has become disabled, the Company shall be entitled to designate one qualified physician and Consultant shall designate a second qualified physician.  If said two (2) physicians agree as to whether or not Meyer is disabled, all parties shall be bound by said decision.  In the event said two (2) physicians are unable to agree, then the two (2)

 

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designated physicians shall select a third qualified physician and the decision of two (2) of said three (3) physicians shall be binding upon all parties involved.

 

(b)                                 By the Company for Cause.  The Company may terminate Consultant’s consultancy hereunder for “Cause” immediately upon written notice to Consultant.  The following shall constitute “Cause” for termination.

 

(i)                                     Consultant’s or Meyer’s knowing  falsification of the Company’s  (or its subsidiaries or affiliates)  financial books or records, embezzlement of funds from the Company or its subsidiaries or affiliates, or other similar fraud or knowing  dishonesty with respect to the Company or its subsidiaries or affiliates that causes or could reasonably be expected to cause actual  material  harm;

 

(ii)                                  Conduct engaged in or action taken or omitted to be taken by Consultant or Meyer which is in material breach of this Agreement, which breach continues for more than fifteen (15) days after written notice of such breach is given to Consultant;

 

(iii)                               Meyer’s conviction of, or entry of a plea of guilty or nolo contendere to charges of, any crime involving moral turpitude or dishonesty (it being understood for example that violation of a motor vehicle code does not constitute such a crime);

 

(iv)                              Meyer’s conviction of, or entry of a plea of guilty or nolo contendere to charges of, any felony or other crime which has or may have a material adverse effect on Consultant’s or Meyer’s ability to carry out the duties under this Agreement or on the reputation or business activities of the Company or its subsidiaries or affiliates; or

 

(v)                                 A Change in Control occurs with respect to Consultant.  For purposes of this Section 4(b)(v), a “Change in Control” includes (1) the consummation of any transaction or transactions through which Meyer and his immediate family cease to own all of the issued and outstanding capital stock of Consultant, (2) the consummation of a reorganization, merger, share exchange, consolidation, or sale or disposition of all or substantially all of the assets of Consultant, (3) the resignation of Meyer as the President of Consultant, or (4) the liquidation or dissolution of Consultant.

 

(c)                                  At the Election of the Company without Cause.  The Company may terminate Consultant’s consultancy hereunder without Cause at any time upon thirty (30) days’ prior written notice to Consultant.

 

(d)                                 At the Election of Consultant.  Consultant may terminate its consultancy at any time upon thirty (30) days’ prior written notice to the Company.

 

5.                                       Effect of Termination.

 

(a)                                  Termination for Cause or at Election of Consultant.  In the event that Consultant’s consultancy is terminated by the Company for Cause pursuant to Section 4(b), or at the election of Consultant pursuant to Section 4(d), the Company shall pay to Consultant the

 

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Consulting Fee otherwise payable to Consultant under Section 3(a) through the last day of Consultant’s actual consultancy with the Company.

 

(b)                                 Termination at Election of the Company.   In the event that this Agreement is terminated at the election of the Company pursuant to Section 4(c), the Company shall pay to Consultant the Consulting Fee otherwise payable to Consultant under Section 3(a) (including annual increases) through the fourth anniversary of the Effective Date.

 

(c)                                  Termination for Death or Disability. In the event that Consultant’s consultancy is terminated by reason of Meyer’s death or because of Meyer’s disability pursuant to Section 4(a), the Company shall pay to Consultant the Consulting Fee otherwise payable to Consultant under Section 3(a) for a period of one (1) year after such termination.

 

(d)                                  Survival.  Notwithstanding termination of this Agreement as provided in Section 4 and this Section 5, the rights and obligations of Consultant, Meyer and the Company under Sections 6, 7, 8, and 9 shall survive termination.

 

6.                                     Proprietary Information.

 

(a)                                  For purposes of this Agreement, “Confidential Information” shall include, but not be limited to, all nonpublic information pertaining to or in any way connected with the Company’s present or future products or services or any component parts thereof, the Company’s designs, routines, standards, and procedures, all research, development, discoveries, improvements, applications, enhancements, and inventions, whether or not patentable or subject to copyright protection, undertaken or made in connection therewith; all information relating to the Company’s customers, clients and accounts, and contractees, and all information related to executives, executive relations, personnel or pay practices, marketing plans, business plans, business or marketing research; and all information relating to the Company’s financial and/or other business affairs; and all files, documents, contracts, materials, listings, computer programs, printouts, source codes, drawings, specifications, processes, applications, techniques, routines, formulas and information of every name, nature or description, whether or not the same is in machine readable for or reduced to writing, which pertains thereto.

 

(b)                                 Each of Consultant and Meyer acknowledges and agrees that the protection of the Confidential Information is necessary to protect and preserve the value of the Company’s business.  Therefore, each of Consultant and Meyer agrees not to disclose to any unauthorized persons or use for the benefit of any third party any Confidential Information, whether or not such information is embodied in writing or other physical form or is retained in the memory of Meyer or any other employee of Consultant, without the Company’s written consent, unless and to the extent that the Confidential Information is or becomes generally known to the public other than as a result of the fault of Consultant or Meyer, or the fault of any other person bound by a duty of confidentiality to the Company.   Each of Consultant and Meyer agrees to deliver to the Company upon termination of this Agreement, and at any other time the Company may request, all documents, memoranda, notes, plans, records, reports, and other documentation (and all copies of all of the foregoing), that contain Confidential Information and any other Confidential Information that Consultant or Meyer may then possess or have under its or his control.  Notwithstanding anything contained in this Section 6(b), should Consultant or

 

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Meyer be requested or required in any judicial or administrative proceeding to disclose Confidential Information (by order, subpeona, or otherwise), Consultant or Meyer (as the case may be) shall promptly advise the Company of same.  The Company shall have the right to contest any such order or subpeona at its own cost.  Should the Company chose not to contest any such requested or required disclosure, or should Consultant or Meyer nevertheless be required to disclose any such Confidential Information, then Sections 4, 5 and 6 of this Agreement shall not apply to Consultant or Meyer to the extent any such disclosure is required.

 

7.                                       Exclusivity.  Except as otherwise provided in Section 7(a), each of Consultant and Meyer agrees that the services to be provided to the Company hereunder are being provided on an exclusive basis.  Therefore, during the Period of Exclusivity (as defined below), so long as the Company is not in default in its obligations under this Agreement, neither Consultant nor Meyer will, directly or indirectly, without the prior written consent of the Company, do any of the following:

 

(a)                                  Engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, or render services to (as an employee, consultant, or otherwise), or guarantee any obligation of, (i) any insurance company, insurance holding company, or company formed for the purpose of establishing an insurance company or insurance holding company;  or (ii) any other business whose products or activities compete in whole or in part with the business of the Company; provided, however, that (i) Consultant and/or Meyer may purchase or otherwise acquire an aggregate of up to (but not more than) five percent (5%) of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under the Securities Exchange Act of 1934; (ii) Consultant and/or Meyer may participate in the management, operation, or control of, or render services to, any subsidiary or affiliate in which the Company retains an ownership interest as approved by the Company’s Board of Directors; (iii) Meyer may continue as a shareholder, owner, director and officer of Consultant; and (iv) Meyer may continue to serve as a director of the companies listed on Schedule 7(a) to this Agreement but shall not otherwise participate in the management, operation, or control of such companies.  The companies listed on Schedule 7(a) to this Agreement constitute all of the insurance companies, insurance holding companies, or companies formed for the purpose of establishing an insurance company or insurance holding company for which Meyer serves as a director as of the date of this Agreement.

 

(b)                                 (i) Induce or attempt to induce any employee of the Company or its subsidiaries or affiliates or any independent contractor of the Company or its subsidiaries or affiliates to terminate his or her relationship with the Company or its subsidiaries or affiliates, (ii) in any way interfere with the relationship between the Company or its subsidiaries or affiliates and any such employee or independent contractor of the Company or its subsidiaries or affiliates; (iii) employ or otherwise engage as an employee, independent contractor, or otherwise any such employee or independent contractor of the Company or its subsidiaries or affiliates; or (iv) induce or attempt to induce any customer, supplier, licensee, or other person to cease doing business with the Company or its subsidiaries or affiliates or in any way interfere with the relationship between any such customer, supplier, licensee, or other business entity and the Companies and its subsidiaries or affiliates; or

 

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(c)                                  Solicit, divert, or take away, or attempt to divert or to take away, the business or patronage of any of the clients, customers, or accounts, or prospective clients, customers, or accounts, of the Company or its subsidiaries or affiliates.

 

8.                                       Period of Exclusivity.  The restrictions contained in Section 7 shall apply to Consultant and Meyer only during the Consulting Term; provided, however, that if this Agreement is terminated at the election of the Company pursuant to Section 4(c) and the Company makes payment to Consultant in accordance Section 5(b), the restrictions contained in Section 7 shall continue to apply to Consultant and Meyer through the fourth  anniversary of the Effective Date.

 

9.                                       Enforceability; Specific Performance.

 

(a)                                   If any restriction set forth in Section 7 or 8 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time, over too great a range of activities, or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities, or geographic area as to which it may be enforceable.

 

(b)                                  The restrictions contained in Section 7 and 8 are necessary to give effect to the exclusivity of this Agreement and for the protection of the business and goodwill of the Company and its subsidiaries and affiliates and are considered by Consultant and Meyer to be reasonable for such purpose.  Each of Consultant and Meyer agrees that any breach of Section 7 and 8 will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief, and if the Company shall prevail in a legal proceeding to remedy a breach under Section 7 or 8, the Company shall be entitled to receive its reasonable attorneys’ fees, expert witness fees, and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief they may be granted.  If Consultant and/or Meyer shall prevail in a legal proceeding pursuant to Section 7 or 8, Consultant and/or Meyer shall be entitled to receive its reasonable attorneys’ fees, expert witness fees, and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief that may be granted.

 

10.                               Independent Contractor Status.  Consultant and the Company understand and intend that Consultant shall perform all services under this Agreement as an independent contractor. This Agreement shall not be construed as constituting any party as partner, joint-venturer, agent, or fiduciary of the other or creating any other form of legal association that would impose liability on one party for the act or failure to act of the other.  The manner of and means by which Consultant will execute and perform their obligations hereunder are to be determined by Consultant in its reasonable discretion.  Consultant is not authorized to assume or create any obligation or responsibility, express or implied, on behalf of, or in the name of, the Company or to bind the Company in any manner, unless, in each instance, Consultant shall receive the prior written approval of the Company to so assume, obligate or bind the Company.

 

11.                                 Entire Agreement.  This Agreement contains the entire understanding of the parties with respect to the matters contained herein.  There are no oral understandings, terms, or

 

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conditions, and no party has relied upon any representation, express or implied, not contained in this Agreement.

 

12.                                 Amendments.  This Agreement may not be amended in any respect whatsoever, nor may any provision hereof be waived by any party, except by a further agreement, in writing, fully executed by each of the parties.

 

13.                                 Successors.  This Agreement shall be binding upon and inure to the benefit of the parties and to their respective heirs, personal representatives, successors and assigns, executors and/or administrators; provided, that (a) Consultant may not assign its rights hereunder (except by will or the laws of descent) without the prior written consent of the Company and (b) the Company may not assign their rights hereunder without the prior written consent of Consultant.

 

14.                                 Captions.  The captions of this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement.

 

15.                                 Notice.  Any notice or communication must be in writing and given by depositing the same in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, or by delivering the same by hand delivery (including by a nationally recognized overnight carrier) or by fax.  Such notice shall be deemed received on the date on which it is delivered or faxed (with confirmation received).  For purposes of notice, the addresses of the parties shall be:

 

If to the Company, to:

 

Midwest Holding Inc.

Attn:  Chairman of the Board

8101 “O” Street, Suite 101

Lincoln, Nebraska 68510

Facsimile: (402) 489-8295

 

With a required copy to:

 

Cline Williams Wright Johnson & Oldfather, L.L.P.

Attn:  David J. Routh

1900 U.S. Bank Building

233 South 13th Street

Lincoln, Nebraska 68508

Facsimile:  (402) 474-5393

 

If to Consultant or Meyer, to:

 

Corporate Development Inc.

 

 

 

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Facsimile:

 

With a required copy to:

 

 

 

Facsimile:

 

Any party may change its address for notice by written notice given to the other party in accordance with this Section 15.

 

16.                                 Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, via facsimile or otherwise, each of which when so executed and delivered shall be taken to be an original, but such counterparts shall together constitute but one and the same document.

 

17.                                 Severability.  If any provision of this Agreement is held illegal, invalid or unenforceable, such illegality, invalidity, or unenforceability shall not affect any other provision hereof.  Such provision and the remainder of this Agreement shall, in such circumstances, be modified to the extent necessary to render enforceable the remaining provisions hereof.

 

18.                                 Applicable Law.  This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Nebraska without regard to principles of comity or conflicts of laws provisions of any jurisdiction.

 

19.                                 Voluntary Execution; Conflict Waiver.  Each of the Company, Consultant and Meyer is signing this Agreement knowingly and voluntarily.  Each of the Company, Consultant and Meyer hereby agrees and acknowledges that the law firm of Cline Williams Wright Johnson & Oldfather, L.L.P. (the “Firm”), which represents the Company, has drafted this Agreement.  The Company, Consultant and Meyer further acknowledge that they have received full disclosure regarding the potential conflict of interest associated with the drafting of this Agreement by the Firm.  Each of the Company, Consultant and Meyer knowingly and voluntarily consents to the drafting of this Agreement by the Firm and waives any action or claim he or it may have against the Firm and/or any of its attorneys regarding any such conflict.

 

20.                                 Withholding.  All payments made by Company to Consultant hereunder shall be subject to applicable tax withholdings (if any).

 

21.                                 Waiver.  The failure of either party to insist upon strict performance of any of the terms or conditions of this Agreement shall not constitute a waiver of any of its rights hereunder.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first set forth above.

 

	
THE   COMPANY:
    	
MIDWEST   HOLDING INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Doug Clark
    
	
 
    	
 
    	
Doug   Clark, on behalf of the Board of Directors
    
	
 
    	
 
    
	
 
    	
 
    
	
CONSULTANT:
    	
CORPORATE   DEVELOPMENT INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Rick Meyer
    
	
 
    	
 
    	
Rick   Meyer, President
    
	
 
    	
 
    
	
 
    	
 
    
	
MEYER:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
/s/   Rick Meyer
    
	
 
    	
 
    	
Rick   Meyer
    

 

9Exhibit 10.4

 

ADMINISTRATIVE

SERVICES AGREEMENT

 

BETWEEN

 

AMERICAN LIFE & SECURITY CORP.

 

AND

 

INVESTORS HERITAGE LIFE INSURANCE COMPANY

 

 

TABLE OF CONTENTS

 

	
SECTION
    	
 
    	
 
    	
 
    	
 
    
	
NUMBER
    	
 
    	
DESCRIPTION
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
1.
    	
 
    	
Parties
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.   
    	
 
    	
Purpose
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
 
    	
Products
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.   
    	
 
    	
Administrative   Services and Pricing Agreement
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
 
    	
Complaints   and Litigation
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.
    	
 
    	
Performance   of Administrative Services
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
7.
    	
 
    	
Records   and Reports
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
8.
    	
 
    	
Compensation
    	
 
    	
4
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
9.
    	
 
    	
Confidentiality
    	
 
    	
4
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
10.
    	
 
    	
Auditing   Rights
    	
 
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
11.
    	
 
    	
Term   and Termination
    	
 
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
12.
    	
 
    	
Notice
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
13.
    	
 
    	
Indemnification   and Liability
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
14.
    	
 
    	
Assignment
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
15.
    	
 
    	
Governing   Law
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
16.
    	
 
    	
Waiver
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
17.
    	
 
    	
Entire   Contract and Amendments
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
18.
    	
 
    	
Arbitration
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
19.
    	
 
    	
Authorization
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
20.
    	
 
    	
Construction
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
21.
    	
 
    	
Effective   Date
    	
 
    	
9
    

 

EXHIBITS

A     Service Pricing Agreement

B     Reports Covered By this Agreement

C     Authorized Officers of the Administrator

D     Financial Reporting Timelines

 

 

ADMINISTRATIVE

SERVICES AGREEMENT

between

AMERICAN LIFE & SECURITY CORP.

and

INVESTORS HERITAGE LIFE INSURANCE COMPANY

 

1. Parties

 

1.1           The parties to this Agreement are American Life & Security Corp. (hereinafter referred to as “ALSC”), a corporation, whose principal place of business is at 8101 0 Street, Suite 101, Lincoln, Nebraska 68510 and Investors Heritage Life Insurance Company (hereinafter referred to as “Administrator”), a Kentucky corporation, whose principal place of business is at 200 Capitol Avenue, Frankfort, Kentucky 40601.

 

1.2           The registered agent and address for service of process for ALSC is Rick Meyer, 8101 0 Street, Suite 101, Lincoln, Nebraska 68510 and for Administrator is Robert M. Hardy, Jr., 200 Capitol Avenue, Frankfort, Kentucky 40601.

 

2. Purpose

 

The parties desire to enter into an Agreement to provide for the performance by Administrator of certain administrative services for ALSC in connection with certain life insurance products.

 

3. Products

 

3.1           All of the life insurance products developed, filed, approved and sold by ALSC shall be covered by this Agreement (the “ALSC products”).  New Business Fees listed in Exhibit A, “Service Agreement Pricing” will be negotiated for any new non-underwritten or limited underwritten products prior to being sold.

 

4. Administrative Services and Pricing Agreement

 

4.1           Administrator will perform administrative services for ALSC as set forth in paragraph 4.2 and as priced in accordance with the Service Agreement Pricing attached as Exhibit A, with respect to the policies and certificates issued for the ALSC products (“Administrative Services”).  Exhibit B may be amended from time to time upon written notice by the Administrator. All Administrative Services will be performed in a manner reasonably acceptable to and approved by both parties.

 

 

4.2           The Administrative Services shall include the following items:

 

a.             Underwrite all applications for life insurance;

 

b.             Provide actuarial services for all life insurance;

 

c.             Issue all policies; cancel policies upon request.

 

d.             Assist ALSC in the development of ALSC’s life insurance and related products

 

e.             Maintain the policy and administrative forms and records for all insurance products covered by this Agreement. Administrator shall be responsible for maintaining necessary materials and supplies in sufficient quantities necessary to perform its duties hereunder. Expenses for these materials are identified as “pass-through fees” and listed on Exhibit A.  No changes to printed material shall be made without the mutual consent of the parties.

 

f.              Provide billing, collection, receipt, and accounting of all premiums, including any return premiums;

 

g.             Furnish ALSC the information necessary for ALSC’s 1099 reporting requirements;

 

h.             Investigate, adjudicate, settle, and pay all claims with approval of ALSC;

 

i.              Prepare a monthly settlement report and other reports listed on Exhibit B;

 

J.             Provide maintenance and summary of accounting records;

 

k.             Prepare all statutory filings and actuarial certifications for submission by ALSC to the appropriate regulatory entity;

 

I.              Respond to agent and policyholdmer inquiries;

 

m.            Pay commissions reported on a weekly basis;

 

n.             Submit all of the insurance forms for approval to the appropriate state’s Department of Insurance; and

 

o.             Prepare the initial drafts of the Federal Form 1120L for ALSC and the Nebraska state income and/or premium tax returns for submission by ALSC to appropriate regulatory authorities.  Administrator shall not be

 

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responsible for the final preparation, certification or filing of any federal or state tax filings.

 

p.             Provide reporting for unclaimed property

 

4.3           ALSC shall retain responsibility for making certain that its agents are properly licensed and appointed.

 

5. Complaints and Litigation

 

5.1           Each party will inform the other on a timely basis of and ALSC will respond to all Insurance Department complaints, or complaints or inquiries from any other state, federal or local governmental agency, or other inquiries or notices (“Complaints”) regarding ALSC’s products.  ALSC will forward to Administrator, in a timely manner, any Complaint so that Administrator can determine if it should respond to such Complaint.  If appropriate, Administrator may forward a draft of its response to ALSC for review.  Each party may respond on its own behalf, and will advise the other of its intent to do so.

 

5.2           Administrator will inform ALSC immediately of any litigation relating to ALSC’s products of which Administrator becomes aware.  ALSC will immediately inform Administrator of any litigation that names Administrator as a party.  Administrator shall not be responsible or liable for any contractual dispute between ALSC, its insureds or its agents.

 

6. Performance of Administrative Services

 

6.1           Administrator agrees to perform all functions contemplated by this Agreement in a timely and professional manner.  For Financial Reporting Timelines please see Exhibit D.

 

6.2           Administrator will employ individuals with the necessary skills to perform the Administrative Services according to Paragraph 6.1. above, and/or contract with the appropriate consultants who have the necessary professional qualifications to perform in a like manner.

 

7. Records and Reports

 

7.1           All original books, records, documents, accounts, and vouchers, or true copies of the same produced by Administrator pursuant to this agreement shall be located at the home office of Administrator.

 

7.2           All original copies of the items listed above, shall be available to ALSC upon request.  All information or data in any computerized records held by Administrator concerning ALSC’s products or related transactions shall be available to ALSC upon

 

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request.  Upon termination of this Agreement, Administrator shall provide any or all of this property to ALSC upon ALSC’s request at the home or branch office of Administrator.  Administrator shall not dispose of these records without the prior consent of ALSC. Administrator shall comply with all applicable record retention statutes and regulations of the Commonwealth of Kentucky, the state of Nebraska and any other applicable jurisdictions.

 

7.3           To the extent either party requests copies of any information, readable copies of all such information contained in the records maintained hereunder shall be delivered to the other party’s home office, or at any other place mutually agreeable to the parties, within ten (10) business days after written request is made for such records by an officer of either party.  Either party will comply with all reasonable requests to produce readable copies in less than ten (10) business days if either needs such copies to respond to threatened or actual litigation, complaints, examinations or regulatory inquiries from any state, federal, or local governmental agencies.

 

7.4           In the event of the termination of this Agreement, Administrator’s records in the possession of Administrator and the use and control of those records shall remain the property of ALSC and shall be returned to ALSC or its representative at ALSC’s request.

 

7.5           Section 7 shall survive the termination of this Agreement.

 

8. Compensation

 

As full and complete consideration for the services to be provided hereunder, the parties agree to accept the Pricing Agreement attached as Exhibit A which provides for an annual base fee paid to the administrator on a monthly basis and payment of pass through fees billed as indicated.  The Pricing Agreement may be modified from time to time, as agreed upon by the parties.  New Business Fees listed in Exhibit A, “Service Agreement Pricing,” will be negotiated for any new non-underwritten or limited underwritten products prior to being sold.

 

9. Confidentiality

 

9.1           Administrator and ALSC acknowledge that certain information concerning the other’s business is confidential or trade secret information, and neither party shall permit the duplication, use, or disclosure of any such ‘confidential or trade secret information’ to any person (other than its own employees, agents, representatives, independent contractors or consultants who must have such information for the performance of obligations hereunder), unless such duplication, use, or disclosure is specifically authorized in writing by the other party.  Provided, however, that Administrator and ALSC will be responsible for assuring that all such employees, agents, representatives, independent contractors, or consultants comply with section 9 of this Agreement.  ‘Confidential or trade secret information’ includes, but is not limited to all records, marketing materials, forms, rates and any materials used by the parties

 

4

 

under this Agreement that are not meant for public dissemination.  ‘Confidential or trade secret information’ is not meant to include any information which, at the time of disclosure, is generally known to the public or the insurance industry.

 

9.2           Both parties agree to comply with federal and state privacy notice requirements.

 

9.3           Section 9 shall survive the termination of this Agreement.

 

10. Auditing Rights

 

ALSC, at its own expense, shall have the right to conduct such audit activities at least annually or more often as deemed appropriate by both parties including the right to audit the appropriate books and records of Administrator from time to time to verify the accuracy of the information supplied by Administrator to ALSC and to permit ALSC to fulfill its contractual obligations to insureds.  If ALSC requests such audits, they will be performed during regular office hours in a manner least likely to disturb the day-to-day operation of Administrator.  Administrator also recognizes the right of ALSC’s independent auditors and state insurance examiners to examine the books and records of Administrator that are applicable only to ALSC and will make reasonable efforts to allow them to do so.

 

11. Term and Termination

 

The Effective Date of the Agreement is the          day of                     , 2009, and this Agreement shall be effective for a period of five (5) years to and including                                     .  This Agreement may be terminated at any time by either party providing prior written notice of termination to the other party at least 180 days before the effective date of termination

 

Either party may immediately terminate this Agreement upon written notice to the other party if, with respect to such other party, there has been:

 

(a)   Misappropriation of Funds.  Any misappropriation or use in violation of this Agreement, of funds or property of either party by the other party; or

 

(b)   Bankruptcy.  Any bankruptcy, receivership or insolvency proceedings filed against a party, or there has been a common law composition of creditors of either party or the guarantor hereof, regardless of whether any of these occur voluntarily or involuntarily; or

 

(c)   Breach of Agreement.  Any other material breach or default by either party in its obligations under this Agreement which breach or default remains uncured more than thirty (30) days after notice thereof from

 

5

 

the non-defaulting party specifying the nature of the breach or default; or

 

(d)   Fraud etc.  In the event of fraud, misrepresentation, breach of warranties or representations contained herein, abandonment, or gross and willful misconduct on the part of the other party.

 

12. Notice

 

12.1         Any and all notices, designations, consents, offers, acceptances, or any other communication provided for herein shall be given in writing by hand delivery, by overnight carrier, by registered or certified mail or by facsimile transmission and shall be addressed as follows:

 

For ALSC:

 

American Life & Security Corp.

Attn: Rick Meyer, Chairman

8101 O Street, Suite 101

Lincoln, Nebraska 68510

 

For Administrator:

 

Investors Heritage Life Insurance Company

Attention: Harry Lee Waterfield II, President

Post Office Box 717

Frankfort, Kentucky 40602-0717

 

Notices sent by hand delivery shall be deemed effective on the date of hand delivery. Notices sent by overnight carrier shall be deemed effective on the next business day after being placed into the hands of the overnight carrier.  Notices sent by registered or certified mail shall be deemed effective on the third business day after being deposited into the post office.  Notices sent by facsimile transmission shall be deemed to be effective on the day when sent if sent prior to 4:30p.m. (the time being determined by the time zone of the recipient) otherwise they shall be deemed effective on the next business day.

 

13. Indemnification and Liability

 

Each party shall indemnify and shall be liable to the other for any material claims and damages, and any associated costs and reasonable attorney fees, resulting from the negligent acts or omissions, intentional acts or omissions, or regulatory violations in disregard of usual and customary operating procedures of such parties by their employees, officers, common-law agents, independent contractors or consultants. ALSC shall indemnify and hold Administrator harmless from any and all claims from any

 

6

 

of ALSC’s policyowners, insureds or beneficiaries, unless any such claim is the direct result of Administrator’s gross negligence or willful misconduct.

 

14. Assignment

 

No right or obligation under this Agreement may be assigned by either party without the written consent of the other.

 

15. Governing Law

 

The parties to this Agreement expressly and explicitly agree that this Agreement is entered into and approved in the Commonwealth of Kentucky, that the laws of Kentucky shall govern the rights and duties of the parties and the interpretation of this Agreement, and that the Commonwealth of Kentucky shall be the exclusive and proper forum in which to bring and litigate any action arising under this Agreement.

 

16. Waiver

 

Any waiver by either party of any requirement hereunder shall be deemed to be a specific limited waiver and shall not be deemed to be a continuing waiver nor a waiver of any other requirement hereof.

 

17. Entire Contract and Amendments

 

This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof.  No amendment to or modification of this Agreement shall be valid unless set forth 1n a written instrument executed by authorized officers of both parties.

 

18. Arbitration

 

18.1         Should any controversy arise between the parties which cannot be resolved in the normal course of business with respect to the interpretation of this Agreement for the performance of the respective obligations of the parties under this Agreement, the controversy shall be submitted to arbitration in accordance herewith.

 

18.2         The Board of Arbitration shall consist of two Arbitrators and an Umpire, all of whom shall be active or retired executive officers of insurance or reinsurance companies having no direct or indirect financial interest in either party or its affiliates. The seat of this Board of Arbitration shall be Frankfort, Kentucky unless disputants

 

7

 

agree otherwise in writing. One Arbitrator shall be chosen by Administrator and the other by the ALSC.  The umpire shall be chosen by the two Arbitrators.

 

18.3         Arbitration may be initiated by either party (the petitioner) demanding arbitration and naming its Arbitrator.  The other party (the respondent) shall have thirty (30) days within which to designate its Arbitrator after receiving demand, in writing, from the petitioner.  In case the respondent fails to designate its Arbitrator within the time stated above, the petitioner is expressly authorized and empowered to name the second Arbitrator; and respondent shall not be deemed to be aggrieved thereby.  The Arbitrators shall designate an Umpire within thirty (30) days after both Arbitrators have been named.  In the event the two Arbitrators do not agree within thirty (30) days on the selection of an Umpire, each of them shall immediately name three (3) names, of whom the other two shall decline two (2); and the decision shall be made by drawing lots.  The three (3) arbitrators shall be referred to as the Board of Arbitration.

 

18.4         Each party shall submit its case to the Board of Arbitration within forty- five (45) days from the date of appointment of the Umpire, but this period of time may be extended by unanimous consent, in writing, of the members of the Board of Arbitration (the Board).  The Board shall interpret this Agreement as an honorable engagement rather than as a legal obligation and shall make its award with a view to effecting the general purpose and intent of this Agreement in a reasonable manner, rather than in accordance which the literal interpretation of the Agreement.  The Board shall be relieved from all judicial formalities and may abstain from following the strict rules of the law.  The decision of the Board, or a majority of the Board, in writing, rendered at the earliest convenient date, shall be final and binding upon all parties.

 

18.5         Administrator and ALSC shall each pay the fee of its own Arbitrator and one-half of the fee of the Umpire, and the remaining costs of the Arbitration shall be borne and paid by the party incurring the costs.

 

In the event both Arbitrators are chosen by the petitioner, as provided in the third paragraph of this Section, Administrator and ALSC shall each pay one-half of the fees of both the Arbitrators and the Umpire; and the remaining cost of the Arbitration shall be borne and paid by the party incurring the cost.

 

18.6         This Article shall survive cancellation of this Agreement.

 

19. Authorization

 

ALSC agrees to grant binding authorization for certain officers of Administrator, as set forth on Exhibit C, to sign any and all necessary documents relating to the performance of services set forth in Section 4.  These documents include, but are not limited to, underwriting reports, actuarial reports, account commission agreements, override commission agreements, master policies, amendments, letters and checks.

 

8

 

20. Construction

 

To the extent that this Agreement may be in conflict with any applicable law or regulation, this Agreement shall be construed in a manner not inconsistent with such law or regulation. If any term or provision of this Agreement shall be found by a court of competent jurisdiction to be illegal or otherwise unenforceable, the same shall not invalidate the whole of this Agreement, but such term or provision shall be deemed modified to the extent necessary in the court’s opinion to render such term or provision enforceable, and the rights and obligations of the parties shall be construed and enforced accordingly, preserving to the fullest permissible extent the intent and agreements of the parties herein set forth.

 

21. Effective Date

 

The effective date of this Agreement shall be 17th day of August, 2009.

 

MIDWEST HOLDING INC. (“MHI”)

 

 

	
By:
    	
/S/ Rick Meyer
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
CEO
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
8/11/09
    	
 
    	
Date:
    	
 
    

 

 

INVESTORS HERITAGE LIFE INSURANCE COMPANY (“ADMINISTRATOR”)

 

 

	
By:
    	
/s/ [Illegible]
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
Date:
    	
 
    

 

9

 

EXHIBIT A

 

SERVICE AGREEMENT PRICING

 

American Life & Security Corp.

Service Agreement Pricing

 

Pricing Structure

 

Our pricing structure is established so that there are no required start-up costs.  Our fees are established based on the greater of an annual minimum fee, billed and collected on a monthly basis, or monthly per policy administration and new business fees.  The annual minimum fees are as follows:

 

	
 
    	
 
    	
Annual Base Fee
    	
 
    
	
Year1
    	
 
    	
132,500
    	
 
    
	
Year 2
    	
 
    	
145,000
    	
 
    
	
Year 3
    	
 
    	
155,000
    	
 
    
	
Year4
    	
 
    	
165,000
    	
 
    
	
Year5
    	
 
    	
175,000
    	
 
    

 

The Policy Administration annual fees, on a per policy basis, along  with new business underwriting fees per application received are as follows:

 

	
Policy   Administration Annual Fees:
    	
 
    	
 
    	
 
    
	
Premium paying traditional life (with traditional riders except annuity)
    	
 
    	
$
    	
19.20
    	
 
    
	
Flexible premium deferred annuity rider
    	
 
    	
3.00
    	
 
    
	
Traditional paid-up, RPU, and ETI
    	
 
    	
15.40
    	
 
    
	
Terminated policies
    	
 
    	
1.20
    	
 
    
					

 

	
New   Business Fees (per application, depending upon underwriting required)
    	
 
    	
$
    	
40.00- 75.00
    	
 
    
	
Excludes pass through fees outlined below Juvenile   Product
    	
 
    	
15.00
    	
 
    

 

The above referenced annual fees will increase by the CPI or other agreed upon index each year.

 

Other pass through fees, which’ are billed and collected as needed and/or as incurred, are as follows:

 

Product development costs

 

·      Product filing fees

 

·      Underwriting reports (APS, MIB, MVR, Focus, etc.) and associated software costs, if any

 

10

 

Postage

 

Printing costs

 

·      Travel and lodging

 

·      Non-company audits

 

Software costs for NAIC filings and tax return preparation

 

Any other fees relative to new product types or additional accounting, actuarial or administration requirement currently outside the scope of this proposal, will be negotiated with the Company prior to prov1ding such services.

 

Initial Term

 

As stated above, the initial term of this agreement shall be for five years.

 

11

 

EXHIBIT B

 

Report(s) Covered by this Agreement

 

1.  A Monthly Summary Settlement Report

 

2.  List of Resisted Claims

 

3.  Annual list of Pending Litigation (from Page 3)

 

4.  Annual1099 Reporting

 

5.  Monthly Commission Reports

 

6.  Statutory Statements

 

12

 

EXHIBIT C

 

Officers of Administrator Authorized to Sign on Behalf of ALSC

 

	
 
    	
Harry   Lee Waterfield, II
    
	
 
    	
Chairman   of the Board;
    
	
 
    	
President   and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
Robert   M. Hardy, Jr.
    
	
 
    	
Vice   President and General Counsel
    
	
 
    	
 
    
	
 
    	
Raymond   L. Carr
    
	
 
    	
Chief   Financial Officer
    
	
 
    	
Vice   President, Administrative Operations
    
	
 
    	
 
    
	
 
    	
Larry   Johnson
    
	
 
    	
Assistant   Vice President, Administrative Operations
    
	
 
    	
 
    
	
 
    	
Julie   Hunsinger
    
	
 
    	
Vice   President and Chief Actuary
    
	
 
    	
 
    
	
 
    	
Jimmy   McIver
    
	
 
    	
Treasurer
    

 

13

 

Exhibit D

 

Financial Reporting Timelines

 

Monthly Base financial information will be provided by the 20th of the month following with the following timelines in place:

 

Receipt of approved cost-sharing allocation entries by the 10th of the month following close

 

Receipt of other accrual entries for which administrator does not have information by the 10th of the month following close

 

Online access to bank accounts including operations, custody, etc.

 

Downloadable file from custodian bank with transactions, ie. Interest payments, dividends, principal reductions, purchases, sales, etc.

 

If CMO’s are in portfolio, Book values on prepayment speeds to calculate amortization provided by 3rd business day following close 

 

Market values by 5th business day following close

 

Quarterly Statutory Financial Filings would be available by 35 days following close with the following additional timelines:

 

FAS 115 level designation for GAAP financials, Classify securities by:

Asset Backed

Corporate

Foreign

U.S. Govt. Backed

Commercial Mtg-Backed Sec

Residential Mtg-Baked

Collateralized Debt Obligation

State and Political Subdivision

 

By 10th business day following the end of quarter

 

FAS 157 level

1

2

3

 

By 10th Business day following the end of quarter

 

NAIC Designation & Market Value

By 10th business day following end of quarter

 

Annual Statutory Filings would be available by February 15th

 

14

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