EXHIBIT 10(r) - MATERIAL CONTRACTS
BONUS AGREEMENT
This Bonus Agreement is entered into this 10th day of August, 1999, by and
between National Western Life Insurance Company of ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ("NWL" or "we") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ of ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("you" or "your").
WHEREAS, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ is employed by NWL as Senior Vice President-
Domestic Marketing and has supervision over all domestic marketing efforts of
NWL; and
WHEREAS, the parties desire to establish a bonus compensation arrangement as
an incentive for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ to meet certain production and
production-related standards.
NOW THEREFORE, the parties agree as follows:
I. NWL will pay you five different and independent bonuses, as set forth
below, under the following terms and conditions:
A. Bonus 1 - Single Tier Domestic Annuity Account Balance Bonus
1. NWL will pay you a bonus based on the positive percentage increase
in the Single Tier Annuity Account Balance between 12/31/98 and
12/31/99, as set forth in the Annuity Account Value/Reserve Report-
Domestic Bonus as prepared by the NWL Actuarial Department. The
data sources for this report are three computer runs entitled
"SUMCNGGG", "NWSC50", and "IA20RES".
The Percentage Increase shall be determined by subtracting the total
account balance at 12/31/98 ($1,204,046,683) from the total account
balance at 12/31/99, then dividing a positive result by the total
account balance on 12/31/98.
2. The Percentage Increase will then determine the amount of the bonus
as follows (only one section shall apply):
a. No bonus will be paid if the Percentage Increase is less than
10%.
b. If the Percentage increase is equal to 10%, then the bonus
shall be $18,000.
c. If the Percentage Increase is greater than 10% but less than
20%, then the bonus shall be $18,000 plus $450 for each 1%
increase over 10%, or a pro-rata share thereof for percentages
stated as other than whole percentages.
d. If the Percentage Increase is equal to 20%, then the bonus
shall be $22,500.
e. If the Percentage Increase is greater than 20% but less than
30%, then the bonus shall be $22,500 plus $1,350 for each 1%
increase over 20%, or a pro-rata share thereof for percentages
stated as other than whole percentages.
f. If the Percentage Increase is equal to 30%, then the bonus
shall be $36,000.
g. If the Percentage Increase is greater than 30%, then the bonus
shall be $36,000 plus $1,688 for each additional 1% increase
over 30% , or a pro-rata share thereof for percentages stated
as other than whole percentages.
3. The assumptions that will be used in the calculation of the Single
Tier Domestic Annuity Account Balance Bonus are as follows:
a. That the Account Balance refers to the account value on
interest sensitive annuities that are non two-tier annuities,
variously described in policies as account balance,
accumulation amount or fund value, plus the statutory reserves
for payout annuities;
b. That the computer run "SUMCNGGG" will be used to determine
account balances for single-tiered deferred annuities,
excluding equity indexed annuities;
c. That the computer run "NWSC50" will be used to determine
statutory reserves for deferred and immediate payout annuities;
d. That the computer run "IA20RES" will be used to determine
account balances for equity indexed annuities;
e. That the calculations include domestic policies only;
f. That the calculations include single tier deferred annuities
and exclude two-tier annuities;
g. That the calculations include single tier payout and immediate
annuities and exclude two-tier payout and immediate annuities;
and
h. That the methodology remains the same for the year during all
representative times used in calculation of the bonus.
i. Copies of the computer runs "SUMCNGGG", "NWSC50" and "IA20RES",
along with the Annuity Account Value/Reserve Report-Domestic
Bonus, will be provided to you on a monthly basis.
B. Bonus 2 - First Year Life Persistency Rate Bonus
1. NWL will pay you a bonus based on the 12/31/99 Persistency
Percentage of the 13th month persistency calculations for domestic
life insurance policies. The data source for determining the company
Persistency Percentage rate shall be the report entitled "Company
Persistency Report-Domestic-Without Annuities", which is provided
by the NWL Information Services Department, using "Premiums-13
Month Persistency".
2. The Persistency Percentage will then determine the amount of the
bonus as follows (only one section shall apply):
a. No bonus shall be paid if the Persistency Percentage is below
92%.
b. If the Persistency Percentage is equal to 92%, then the bonus
shall be $9,000.
c. If the Persistency Percentage is greater than 92% but less than
95%, then the bonus shall be $9,000 plus $750 for each 1% over
92%, or a pro-rata amount thereof for percentages stated as
other than whole percentages.
d. If the Persistency Percentage is equal to 95%, then the bonus
shall be $11,250.
e. If the Persistency Percentage is greater than 95% but less than
98%, then the bonus shall be $11,250 plus $2,250 for each 1%
over 95%, or a pro-rata amount thereof for percentages stated
as other than whole percentages.
f. If the Persistency Percentage is equal to 98%, then the bonus
shall be $18,000.
g. If the Persistency Percentage is greater than 98%, then the
bonus shall be $18,000 plus $4,220 for each additional 1% that
the Persistency Percentage exceeds 98%, or a pro-rata share
thereof for percentages stated as other than whole percentages.
3. The assumptions that will be used in the calculation of the First-
Year Life Persistency Rate Bonus are as follows:
a. That the "Company Persistency Report-Domestic-Without
Annuities" is the same report used for agency convention
qualification purposes;
b. That the above mentioned report does not reflect true one-year
persistency, but reflects the persistency of policies written
in the most recent 12 months; and
c. That the 13 Month Persistency Percentage will be calculated as
of 12/31/99, based on premiums.
C. Bonus 3 - Second-Year Life Persistency Rate Bonus
1. NWL will pay you a bonus based on the 12/31/99 Persistency
Percentage of the 24th month persistency calculations for domestic
life insurance policies. The data source for determining the company
Persistency Percentage rate shall be the report entitled "Company
Persistency Report-Domestic-Without Annuities", which is provided
by the NWL Information Services Department, using "Premiums-24
Month Persistency".
2. The Persistency Percentage will then determine the amount of the
bonus as follows (only one section shall apply):
a. No bonus shall be paid if the Persistency Percentage is below
89%.
b. If the Persistency Percentage is equal to 89%, then the bonus
shall be $9,000.
c. If the Persistency Percentage is greater than 89% but less than
92%, then the bonus shall be $9,000 plus $750 for each 1% over
89%, or a pro-rata amount thereof for percentages stated as
other than whole percentages.
d. If the Persistency Percentage is equal to 92%, then the bonus
shall be $11,250.
e. If the Persistency Percentage is greater than 92% but less than
95%, then the bonus shall be $11,250 plus $2,250 for each 1%
over 92%, or a pro-rata amount thereof for percentages stated
as other than whole percentages.
f. If the Persistency Percentage is equal to 95%, then the bonus
shall be $18,000.
g. If the Persistency Percentage is greater than 95%, then the
bonus shall be $18,000 plus $4,220 for each additional 1% that
the Persistency Percentage exceeds 95%, or a pro-rata share
thereof for percentages stated as other than whole
percentages.
3. The assumptions that will be used in the calculation of the Second-
Year Life Persistency Rate Bonus are as follows:
a. That the "Company Persistency Report-Domestic-Without
Annuities" is the same report used for agency convention
qualification purposes;
b. That the above mentioned report does not reflect true two-year
persistency, but reflects the persistency of policies written
in the most recent 24 months; and
c. That the 24 Month Persistency Percentage will be calculated as
of 12/31/99, based on premiums.
D. Bonus 4 - Collected Domestic Life First-Year Premiums Bonus
1. NWL will pay you a bonus based on Collected Domestic Life First-Year
Premiums. The data source used for determining the Total Collected
Premiums will be the report No. UT69-003, Composite Totals-Life,
International U.L. and International Non-U.L., using the fields
"First Year Premium" and "Single Premium".
2. The Total Collected Premiums shall be calculated as follows:
There are two components of the Total Collected Premiums: the
Domestic First Year Premiums and the Domestic Single Premiums.
a. Domestic First Year Premiums shall be determined by subtracting
both the International U.L. and the International Non-U.L.
"First Year Premium" from the Composite Totals- Life "First
Year Premium" as of 12/31/99, as stated in the UT69-003 Report.
b. Domestic Single Premiums shall be determined by subtracting
both the International U.L. and the International Non-U.L.
"Single Premium" from the Composite Totals-Life "Single
Premium" as of 12/31/99, as stated in the UT69-003 Report.
The Domestic Single Premiums will then be multiplied by 5% to
determine the amount of Domestic Single Premiums to be included in
the bonus calculation. This amount will then be added to the
Domestic First-Year Premiums to determine the Total Collected
Premiums.
3. The Total Collected Premium will then determine the amount of the
bonus as follows (only one section shall apply):
a. No bonus will be paid if the Total Collected Premium is less
than $6.8 million.
b. If the Total Collected Premium equals $6.8 million, then the
bonus shall be $42,000.
c. If the Total Collected Premium is greater than $6.8 million but
less than $8.5 million, then the bonus shall be $42,000 plus
$618 for each additional $100,000 over $6.8 million, or a pro-
rata share thereof.
d. If the Total Collected Premium equals $8.5 million, then the
bonus shall be $52,500.
e. If the Total Collected Premium is greater than $8.5 million but
less than $10.2 million, then the bonus shall be $52,500 plus
$1,853 for each additional $100,000 over $8.5 million, or a
pro-rata share thereof.
f. If the Total Collected Premium is equal to $10.2 million, then
the bonus shall be $84,000.
g. If the Total Collected Premium is greater than $10.2 million,
then the bonus shall be $84,000 plus $2,500 for each additional
$100,000 over $10.2 million, or a pro-rata amount thereof.
4. The assumptions made in calculation of this bonus are as follows:
a. That 100% of the Domestic First-Year Life Insurance Premium is
included;
b. That 5% of the Domestic Single Premium Life Insurance is
included, which currently includes Benefactor only;
c. That the Total Collected Premium includes no renewal life
insurance premiums;
d. That this bonus is not contingent on the bonus for Collected
Domestic Annuity First-Year and Single Premiums;
e. That this bonus is based on domestic life insurance premiums
only and excludes all international premiums; and
f. That this bonus is calculated for the calendar year 1999, as of
12/31/99.
E. Bonus 5 - Collected Domestic Annuity First-Year and Single Premiums Bonus
1. NWL will pay you a bonus based on the amount of collected premiums
for Domestic Annuity First-Year and Single Premiums. The data source
used for determining this bonus is the report ▇▇. ▇▇▇▇-▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇▇, using the fields "First-Year Premium",
"Single Premium", and the New Business Market Summary-
International, Report #5, using the field, "Annuity, YTD Paid
Premium".
The Total Collected Annuity Premiums shall be determined by adding
the First Year Annuity Premium and Single Annuity Premium as stated
in UT69-003, less the International Annuity Premiums as stated in
the New Business Market Summary.
2. The Total Collected Annuity Premiums shall then determine the amount
of the bonus as follows (only one section shall apply):
a. No bonus will be paid if the Total Collected Annuity Premium is
less than $272 million.
b. If the Total Collected Annuity Premium is equal to $272
million, then the bonus shall be $42,000.
c. If the Total Collected Annuity premium is greater than $272
million but less than $340 million, then the bonus shall be
$42,000 plus $154 for each additional $1 million over $272
million, or a pro-rata share thereof.
d. If the Total Collected Annuity Premium is equal to $340
million, then the bonus shall be $52,500.
e. If the Total Collected Annuity Premium is greater than $340
million but less than $408 million, then the bonus shall be
$52,500 plus $463 for each additional $1 million over $340
million, or a pro-rata share thereof.
f. f the Total Collected Annuity Premium is equal to $408 million,
then the bonus shall be $84,000.
g. If the Total Collected Annuity Premium is greater than $408
million, then the bonus shall be $84,000 plus $600 for each
additional $1 million over $408 million, or a pro-rata share
thereof.
3. The assumptions made in the calculation of this bonus are as
follows:
a. That the bonus is based on First-Year and Single Annuity
Premiums only;
b. That the bonus calculation does not include two tier annuities
or renewal premiums;
c. That this bonus is based on domestic annuity premiums only and
excludes all international premiums;
d. That this bonus is not contingent on Bonus 4; and
e. That this bonus is calculated for the calendar year 1999, as of
12/31/99.
II. All bonus performance is based on production produced between January 1,
1999 and December 31, 1999.
III. All bonuses will be calculated after December 31, 1999, based on reports
as of December 31, 1999.
IV. All bonuses will be calculated and paid, if amounts are due, as soon as
reasonably possible after January 1, 2000, but no later than February 1, 2000.
V. During the year 1999, if you request or have requested, NWL may make or may
have made advances to you against such bonuses in amounts determined by NWL.
Any advances to you will offset any bonuses due. Amounts of bonus compensation
that exceed the advances will be due and owing to you and will be paid by
February 1, 2000. Any amounts of advances that exceed bonuses due will result
in an amount due and owing by you, and such amounts will be paid by you on or
before February 1, 2000. Any amount of advances due and owing by you and not
paid by you to NWL by February 1, 2000, will be deducted by NWL from your
future compensation. You expressly agree to such deductions from your
compensation, including salary.
This does not limit NWL's right to initiate litigation against you to recover
any debt owed by you to NWL. If the parties cannot agree on a payment schedule
and if it is necessary for NWL to file suit against you to recover such debts,
you agree to pay to NWL its attorneys fees and court costs incurred in
collecting said debts.
VI. The term of this contract is from January 1, 1999 to December 31, 1999.
Under no circumstances will this bonus agreement automatically renew for the
following year. Both you and NWL must sign a separate agreement if renewal of
this agreement is desired.
VII. In order to qualify for the bonus and be paid the bonus, you must be
employed by NWL on the date that the bonus is actually paid by NWL.
VIII. Nothing in this agreement limits NWL's authority to make ALL decisions
concerning products, including, but not limited to, profitability issues,
commission and overwrite amounts, publications, advertising, compliance,
market conduct, underwriting, and availability.
IX. This agreement shall not be amended, modified, or altered in any manner
except in a writing signed by both parties. This agreement shall be governed,
interpreted and construed according to the laws of the State of Texas.
X. This agreement constitutes the complete and exclusive agreement of the
parties with respect to your Bonus Compensation and supersedes any prior
understandings or written or oral agreements between the parties respecting
this subject matter.
XI. This Bonus Agreement is binding upon signing. There are no conditions
precedent or subsequent, other than the conditions specifically mentioned in
this contract, that must occur before this contract becomes binding upon both
parties. There are no representations other than those expressly included in
this agreement relating to bonus compensation of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
EXECUTED at Austin, Texas, on August _____, 1999.
NATIONAL WESTERN LIFE INSURANCE COMPANY
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, President
/S/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Senior Vice President- Domestic Marketing
I acknowledge that I have read, understand and agree to the above terms in
section V relating to advances. Furthermore, I agree that these terms shall
also apply to any advances already made to me during the year 1999 prior to
signing this agreement. I agree to repay any debt owed by me to NWL by
February 1, 2000. In default of such repayment, I authorize NWL to deduct the
debt created by advances from my salary or any other compensation in amounts
and at times determined by NWL.
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
1999 Amendment to Bonus Agreement
I. This amendment modifies Section V, relating to advances of bonus
compensation, of the Bonus Agreement between NWL and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
This amendment only addresses the calculation of advances and the method to
determine the offset described in that section. This amendment does not
effect the deadline for payment by either party or the provisions relating to
deduction of debt from future compensation, nor shall it be construed to limit
NWL's right to debt recovery as set forth in Section V.
The term "year-end bonus" refers to the total bonus for the 1999 calendar
year, as calculated under the provisions of the Bonus Agreement, to be paid on
or before February 1, 2000.
II. As of August 6, 1999, NWL has advanced to you a total of $79,698. Of
this amount $77,198 shall be designated as an earned advance on your year-end
bonus, and $2,500 shall be designated as an unearned advance on your year-end
bonus.
III. From August 1999 to November 1999, if you so request, NWL will make
monthly bonus advances to you based on the following calculations:
Bonus 1
If the Single Tier Annuity Account Balance at the end of the applicable
month is greater than or equal to the figure stated below in a) through
d), then NWL will pay you a $1500 earned advance on your year-end bonus,
plus a $1500 earned advance for each previous month in 1999 excluding the
months of January through July, less any earned advances for previous
months already paid. The data source used for determining this bonus will
be the Annuity Account Value/Reserve Report-Domestic Bonus as prepared
by the NWL Actuarial Department, based on the computer runs "SUMCNGGG",
"NWSC50", and "IA20RES".
a) August $1,284,316,462
b) September $1,294,350,184
c) October $1,304,383,906
d) November $1,314,417,629
Bonus 2
If the First Year Persistency Percentage for the applicable month is
equal to or greater than 92%, then NWL will pay you a $750 earned advance
on your year-end bonus. The data source for this calculation will be the
report entitled "Company Persistency Report-Domestic-Without
Annuities", as provided by the NWL Information Services Department, using
the field "Premiums-13 Month Persistency".
Bonus 3
If the Second Year Persistency Percentage for the applicable month is
equal to or greater than 89%, then NWL will pay you a $750 earned advance
on your year-end bonus. The data source for this calculation will be the
report entitled "Company Persistency Report-Domestic-Without
Annuities", as provided by the NWL Information Services Department, using
the field "Premiums-24 Month Persistency".
Bonus 4
If the Total Collected Domestic Life First Year Premiums for the
applicable month is equal to or greater than $566,667, then NWL will pay
you a $3,500 earned advance on your year-end bonus. The data source used
for determining this bonus will be the report No. UT69-003, Composite
Totals-Life, International U.L. and International Non-U.L, using the
fields "First Year Premium" and "Single Premium".
Bonus 5
If the Total Collected Domestic Annuity First Year and Single Premiums
for the applicable month is equal to or greater than $22,667,000, then
NWL will pay you a $3,500 earned advance on your year-end bonus. The data
source used for determining this bonus will be the report ▇▇. ▇▇▇▇-▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇▇, using the fields "First-Year Premium", "Single
Premium", and the New Business Market Summary-International, Report #5,
using the field "Annuity, YTD Paid Premium".
IV. Monthly bonus advances will be determined using the same method as
specified in the Bonus Agreement for that particular bonus, with any necessary
adjustments for calculation on a monthly basis. All assumptions remain the
same for the monthly advance (with the exception of dates) as for that
particular bonus in the Bonus Agreement.
V. At our discretion, NWL may make advances on your year-end bonus above the
earned advances specified in Section III of this Amendment. Any advances over
these amounts shall be designated as "unearned advances".
VI. All payments designated either as earned or unearned advances shall be
credited against your year-end bonus, as determined by the Bonus Agreement.
VII. (A) Any earned advance, although credited against your year-end bonus,
shall not create a debt owed by you to us in the event that the earned advance
bonus exceeds the actual year-end bonus as determined by the Bonus Agreement.
(B) Any unearned advance shall be credited against your year-end bonus
and shall create a debt owed by you to us in the event that the total of the
earned and unearned advances exceeds the actual year-end bonus as determined
by the Bonus Agreement.
EXECUTED at Austin, Texas, on August ______, 1999.
NATIONAL WESTERN LIFE INSURANCE COMPANY
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, President
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Senior Vice President- Domestic Marketing
