EXHIBIT 10.20
SERVICE AGREEMENT
THIS SERVICE AGREEMENT is entered into as of January 1, 1999 between
LTCAMERICA HOLDING, INC., a Minnesota corporation ("LTCA"), and LIFE USA
HOLDING, INC., a Minnesota corporation ("LUSA").
RECITALS
WHEREAS, LUSA is experienced in the provision of a variety of services
to its insurance company subsidiary; and
WHEREAS, LTCA desires to obtain certain of those services for itself
and its insurance company subsidiary, LTCAmerica Insurance Company ("LTCA
Insurance");
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Description of Services. LUSA agrees to perform the following
services for LTCA:
(a) Accounting Services. LUSA shall provide LTCA with any
accounting services requested by LTCA, including without limitation services
relating to taxes, keeping the general books of account and preparation of any
other accounting or statistical records or financial reports.
(b) Owners' Services. LUSA shall provide the following services as
requested by LTCA: training and education, facilities management and
administration of human resources and risk management.
(c) Treasury and Investment Services. LUSA shall provide all
treasury and investment services requested by LTCA, including without limitation
bank and cash management services (including cash receipts), disbursements and
policy suspense maintenance and investment operations management and reporting
(including asset liability analysis).
(d) Data Processing and Information Systems Services. LUSA shall
provide all data processing and information systems services requested by LTCA,
including without limitation the provision of hardware and software required to
develop and administer products and compensate agents.
(e) Actuarial Services. LUSA shall provide all services in
connection with financial actuarial information necessary for statutory and GAAP
financial statements, product development services and services in connection
with year end certification of an appointed actuary.
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(f) Compliance Services. LUSA shall provide services in connection
with filing corporate documents necessary to do business in all states in which
LTCA Insurance is licensed to do business, filing LTCA products and products
similar to LTCA products on the paper of other insurance companies, advertising
review and other regulatory activities.
(g) Internal Audit Services. LUSA shall provide services required
to document the controls in all critical systems and to audit cash.
(h) Marketing Services. LUSA shall provide services in connection
with the preparation of marketing materials as needed, handling of agent
telephone inquiries as needed, and promotion of LTCA in meetings and seminars.
(i) Mail and Supply Services. LUSA shall provide LTCA with services
in connection with the receiving and sending of mail and the distribution of
supplies.
2. Term; Termination. The term of this Agreement shall commence on the
date hereof and shall expire on the third anniversary hereof unless sooner
terminated or extended. The term of this Agreement shall be automatically
extended for successive periods of three years each unless either party gives
written notice of cancellation at least 120 days prior to expiration of this
Agreement, as extended. In the event that LUSA does not provide the services
required hereunder in accordance with this Agreement, LTCA shall so notify LUSA
in writing and LUSA shall have ten business days in which to remedy the
deficiency. If LUSA has not remedied the deficiency within the cure period, LTCA
may terminate this Agreement in whole or with respect to the specific service,
and such termination shall be effective as of the date on which written notice
is given to LUSA.
3. Relationship. The services provided by LUSA pursuant to this
Agreement shall be rendered as an independent contractor, and nothing herein
shall be deemed to create a joint venture, partnership or employment
relationship between LUSA and LTCA.
4. Compensation. LTCA shall compensate LUSA for the services provided
pursuant to this Agreement in accordance with Schedule A hereto, as such
schedule is modified from time to time by an amendment thereto executed by the
parties. LUSA shall pay all costs incurred by LUSA to provide LTCA with the
services provided pursuant to this Agreement.
5. Service Standards; Access. During the term of this Agreement, LUSA
will accord LTCA a "most favored customer" status to ensure that the services
provided to LTCA by LUSA are of at least the same level (quality, quantity,
reliability and response time) of similar services provided by LUSA to its
insurance subsidiary. LUSA will permit LTCA and its auditors access to the
premises, books and records of LUSA from time to time during normal business
hours to review or audit the services provided hereunder, including without
limitation adherence to generally accepted accounting principles where
applicable.
6. Confidentiality and Security. LUSA acknowledges the confidential
nature of all information it may obtain or acquire concerning LTCA, its business
and the business of its affiliates during the provision of the services under
this Agreement, including without limitation financial information, including
but not limited to information concerning products, revenues,
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profits, markets, sales, trade secrets, agents, key personnel, pricing policies,
operational methods, policyholder lists, supplier lists, marketing,
distribution, studies, analyses, plans for future development and all other
business affairs and methods of the LTCA or any affiliate and any supplier to or
customer of LTCA or any affiliate, which is not readily available to the public,
whether or not obtained with the permission of the Company. LUSA agrees to
maintain in the strictest of confidence all such information, and LUSA will not
permit access to such information to any person other than LTCA or its employees
or agents, except employees of LUSA who require access to such information to
perform the services under this Agreement. LUSA will instruct its employees that
such information of LTCA be maintained in the strictest of confidence.
7. Insurance. LUSA, at its expense, will maintain insurance for all
risks on the computer equipment and other property used to provide the services
provided hereunder for risks customarily covered.
8. Proprietary Rights. LUSA recognizes that LTCA owns the proprietary
rights to any reports, plans, products, programs and other property designed by
LUSA at LTCA's request, including computer source and object code) established
for LTCA during the term of this Agreement, and such property shall remain the
exclusive property of LTCA.
9. Indemnification. LUSA agrees to indemnify, defend and hold LTCA and
its affiliates harmless from any and all claims, demands, suits, liabilities,
costs and expenses (including attorneys' fees) arising from or in any way
connected with the performance of the services contemplated hereunder by LUSA,
except to the extent such nonperformance is the result of the gross negligence
or willful misconduct of LTCA.
10. Arbitration. The parties hereto agree that all disputes arising
under or relating to this Agreement or the transactions contemplated hereunder
shall be subject solely to binding and nonappealable arbitration to be held in
Minneapolis, Minnesota, in accordance with the rules of the American Arbitration
Association under the commercial rules then in effect. The AAA shall recommend
three arbitrators who are knowledgeable in the field of life insurance. The
parties shall agree upon one of the three arbitrators or, if no arbitrator is
mutually agreed upon within 15 days of submission, the AAA shall appoint one of
the three arbitrators within 30 days after such selection period. The award
rendered by the arbitrator shall include costs of arbitration and reasonable
attorneys' fees and fees of experts and other witnesses, but shall not include
punitive damages against either party. Notwithstanding this provision,
appropriate injunctive relief may be sought by LTCA with respect to the
obligations of LUSA under Section 6 hereof.
11. Survival. Notwithstanding any termination of this Agreement, the
confidentiality obligations of LUSA under Section 6 and the indemnification
obligations of LUSA under Section 9 shall survive any such termination.
12. Assignment. Neither LTCA nor LUSA, directly or indirectly, may
sell, assign or transfer any of its rights or obligations contemplated under
this Agreement without first obtaining the written consent of the other party.
This Agreement shall inure to the benefit of and be binding upon the parties,
their successors, trustees, permitted assigns, receivers and legal
representatives but shall not inure to the benefit of any other person or
entity.
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13. Entire Agreement. This Agreement contains the entire and only
agreement between the parties with respect to the subject matter hereof, and no
oral statements or representations or prior written matter not contained herein
or therein shall have any force or effect. This Agreement shall not be modified
in any way except by a writing subscribed by the parties by their duly
authorized representatives. No amendment of this Agreement or its exhibits or
schedules shall be of any force or effect unless reduced to writing and executed
by a writing of the parties in the same manner as the present Agreement.
14. Notices. All notices under this Agreement must be in writing and
shall be addressed as follows:
To LTCA:
LTCAmerica Holding, Inc
000 Xxxxx Xxxxxx Xxxxxxx 000, Xxxxx 00
Xxxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
To LUSA:
Life USA Holding, Inc.
000 Xxxxx Xxxxxx Xxxxxxx 000, Xxxxx 00
Xxxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
All notices, consents, waivers, and other communications under this Agreement
shall be deemed to have been duly given when (i) delivered by hand (with written
confirmation of receipt), (ii) sent by facsimile (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return receipt
requested, or (iii) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and facsimile numbers set forth above (or to such other
addresses and facsimile numbers as a party may designate by notice to the other
party).
15. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed and enforced in all respects according to the internal laws of the
State of Minnesota, determined without reference to conflict of law principles.
16. Severability. In the event that any of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
thereof and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein and the parties hereto
shall to the fullest extent possible modify any such provision to the
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extent required to carry out the general intention of this Agreement and to
impart validity thereto.
17 No Waiver. No forbearance, indulgence, or relaxation or inaction by
any party at any time to require performance of any provisions of this Agreement
shall in any way affect, diminish or prejudice the right of a party hereto to
require performance of that provision, and any waiver or acquiescence by any
party hereto in any breach of any provision of this Agreement shall not be
construed as a waiver or acquiescence in any continuing or succeeding breach of
such provision, a waiver or an amendment of the provision itself or a waiver of
any right under or arising out of this Agreement or acquiescence in or
recognition of rights and/or positions other than as expressly stipulated in
this Agreement.
18. Counterparts; Headings This Agreement may be executed in any number
of counterparts each of which shall be deemed to be an original and all of which
shall constitute one and the same Agreement. No heading or caption contained in
this Agreement shall be considered in interpreting any of its terms or
provisions.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
LIFEUSA HOLDING, INC.
By: /s/ Xxxx X. Xxxxxxxx
--------------------
Name:
Title: CFO
LTCAMERICA HOLDING, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Name:
Title: CFO
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SCHEDULE A
SERVICES AND COMPENSATION
Service
Area Service Provided Method of Charge Rate
Actuarial (33)
Product Development Hourly by project 95
Product Filing Hourly by project 95
Monthly Reporting Monthly Retainer 3,563
Year-end Reporting Monthly Retainer 100
Compliance (34)
Product Filing and Approval Hourly by project 61
Advertising Approval Monthly Retainer 1,220
Regulatory Monthly Retainer 610
Corp. Filings Monthly Retainer 1,845
Overhead Monthly Retainer 1,288
Corp. Accounting (22)
Sr. Mgmt - Ins. Co. Monthly Retainer 5,000
Internal Audit (12)
Documentation Monthly Retainer 3,206
Audit - Internal Monthly Retainer
Security Monthly Retainer 529
Other Monthly Retainer 266
Investment (27)
Accounting and Reporting Monthly Retainer 3,355
Analysis Monthly Retainer 600
ALM Annual year end 4,550
Policies and Design Once in January 5,800
Treasury (23)
401(k) & Stock Options Monthly Retainer 303
Financial Reporting - Shares Monthly Retainer 69
Cash Management Monthly Retainer 1,210
Suspense Processing Monthly Retainer 4,400
Info. Services (92,75,94)
Development Hourly by project 75
Telecommunication - Not LD Actual Cost per month 6,700
Telecommunication - LD Actual Cost per month 10,000
Technical Services Monthly Retainer 23,920
Info. Management (93)
Development Hourly by project 75
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Service
Area Service Provided Method of Charge Rate
Mail/Supply (87)
Workshops By Piece 44.000
Supply Orders By Piece 6.250
Starter Kits Per Kit 0.900
Mailings (1 per Qtr) By Piece 0.030
Out-going Mail By Piece 0.115
In-coming Mail By Piece 0.070
Marketing (86)
Prepare marketing material By Piece 4,000
FASTeam - overflow Phone per Call -
Commercials on the road per Workshop 60
Software Monthly Retainer 10,000
Owners Services (73,74)
Training (73) Monthly Retainer 1,000
Facilities (74) per Sq. Ft. 24.00
Owners Council/CBO Monthly Retainer 2,282
Holding Co. Svc Fee % of Ceded Revenue 2.5%
% of Retained Revenue 1.0%
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