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EXHIBIT 10.20
[XXXXX/XXXXXX INC. LETTERHEAD]
June 11, 1998
Xx. Xxxxxx X. Xxxx
Xx. Vice President
Individual Markets
Great-West Life & Annuity Insurance Company
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
RE: PRODUCTION AGREEMENT
Dear Bob:
Xxxxx/Xxxxxx is entering into a Production Agreement with Great-West Life &
Annuity Insurance Company ("Great-West") in consideration of our continued
business relationship and current financing activities. We agree that
Xxxxx/Xxxxxx will do the following:
1. Use commercial best efforts to sell and service products offered by
Great-West in those markets in which Great-West is generally recognized as
being "competitive". For such purpose, "competitive" shall be defined as
either:
A. Being one of the top five companies offering products in a particular
market, or,
B. Being in the top 50% of the companies offering products in a particular
market.
Such assessment shall be based on all salient product features including,
but not limited to, cash values, death benefits, compensation, company
ratings and financial strength, and customer services.
This effort will be made with both existing clients and future clients
and/or clients of companies which we acquire.
This effort will require Xxxxx/Xxxxxx to illustrate and/or present
Great-West products in those cases in which Great-West is "competitive".
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Letter to Xx. Xxxxxx X. Xxxx
June 11, 1998
Page Two
2. We agree to commit annually, for a period of 5-years, to produce and sell
enough business with Great-West to meet the following criteria:
x Xxxxx/Xxxxxx will earn, from Great-West, a minimum of 10% of its total
first year annualized commissions in each market that Great-West
provides a "competitive" non-exclusive product, or at least 15% of
such total commissions in all such markets.
x Xxxxx/Xxxxxx will earn, from Great-West, a minimum of 15% of its total
first year annualized commissions in each market that Great-West
provides a "competitive" exclusive product, or at least 25% of such
total commissions in all such markets.
x Xxxxx/Xxxxxx will earn, from Great-West, at least $3 million of first
year annualized commissions during each consecutive 12 month period.
3. At the end of each 12 month period following the effective date of this
Agreement, Great-West will determine if the production criteria in
paragraph (2) have been met. If Xxxxx/Xxxxxx fails to meet those production
criteria, Xxxxx/Xxxxxx will have an additional 12 month period to come into
cumulative compliance determined with respect to paragraph (2).
The penalty for non-compliance shall be $150,000 for any 12 month period.
4. Any penalty due pursuant to the formula above shall reduce future
commissions otherwise due to Xxxxx/Xxxxxx over the subsequent 12 month
period. If such commission reduction is not allowed under Xxxxx/Xxxxxx'
current financing documents, other security will be provided.
5. This letter agreement, which shall be binding upon Xxxxx/Xxxxxx and
Great-West, shall be incorporated into a formal document on or before July
1, 1998, which agreement shall contain provisions regarding, among others,
term and termination, confidentiality, governing laws, and legal opinions
from Xxxxx/Xxxxxx outside counsel regarding this agreement.
Signed
/s/ XXXXXX X. XXXX /s/ XXXXXX X. XXXX
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Xx. Xxxxxx X. Xxxx Xx. Xxxxxx X. Xxxx
President Senior Vice President
Xxxxx/Xxxxxx, Inc. Individual Markets
Great-West Life & Annuity Insurance Co.
6/11/98 6/11/98
------- -------
Date Date
XXXXX/XXXXXX
inc.
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[XXXXX/XXXXXX, INC. LETTERHEAD]
June 11, 1998
VIA FACSIMILE
Great-West Life & Annuity Insurance Company
Attention: Xxxx Xxxxxxx
0000 Xxxx Xxxxxxx Xxxx
0xx Xxxxx, Xxxxx 0
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
In anticipation of the initial public offering (the "IPO") of common
stock in Xxxxx/Xxxxxx Holdings, Inc. ("CBH"), Xxxxx/Xxxxxx, Inc., a Texas
corporation ("we" or "the Company"), has offered to purchase from you the
Common Stock Purchase Warrants (the "Warrants") of the Company issued to and
held by you pursuant to that certain Note and Warrant Purchase Agreement dated
as of September 8, 1997 (the "Agreement").
On the terms and conditions herein stated, we agree to purchase the
Warrants, and by your execution hereof you agree to sell the Warrants, for the
consideration set forth on Annex A hereto. Upon the purchase and sale of the
Warrants as contemplated hereby, the Registration Rights Agreement and the
Participation Rights Agreement (as both such terms are defined in the
Agreement) shall be of no further force and effect, and the Company shall
immediately cancel the Warrants.
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-2- June 11, 1998
(a) The IPO shall have been consummated not later than December
31, 1998;
(b) CBH shall have received net proceeds from the IPO (i.e., net
of underwriting discounts and commissions and net of expenses payable in
connection with the IPO) of at least $35,000,000; and
(c) CBH shall have contributed at least 95% of the net proceeds
from the IPO to the Company (or to its successor from the contemplated
reincorporation merger of the Company with and into Xxxxx/Xxxxxx, Inc., a
Delaware corporation).
In order to induce you to enter into this letter agreement, the Company
hereby represents and warrants as of the date hereof and, except with respect to
the representation and warranty set forth in clause (v) below, as of the date of
the sale and purchase of the Warrants, as follows:
(i) The Company has all resquisite corporate and other power and
authority to execute, deliver and perform its obligations under this letter
agreement.
(ii) The execution, delivery and performance by the Company of
this letter agreement have been duly authorized by all requisite corporate
action on the part of the Company. The Company has duly executed and delivered
this letter agreement, and this letter agreement constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(iii) Neither the execution and delivery of this letter agreement
by the Company nor compliance by the Company with the terms and provisions
hereof, will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
result in the creation of any security interest, lien or other encumbrance upon
any of the properties or assets of the Company pursuant to, its articles of
incorporation or bylaws, any award of any arbitrator or any agreement (including
any agreement with shareholders), instrument, order, judgment, decree, statute,
rule or regulation to which the Company is subject.
(iv) No authorization, consent, approval, exemption or other
action by or notice to or filing with any court or administrative or
governmental body or any other person or entity is required in connection with
the execution and delivery of this letter agreement by the Company or the
fulfillment of or compliance with the terms and provisions hereof by the
Company.
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-3- June 11, 1998
(v) The current Exercise Price (as defined in the Warrants) of the
Warrants is $2.95 per share, and no event has occurred since September 8, 1997
which, under the terms of the Warrants, would cause or require an adjustment to
such Exercise Price.
If you are in agreement with the foregoing, please sign in the space
provided below and fax a copy of this letter agreement to the Company at (214)
871-7690, Attention: Xxxxxx X. Xxxx, whereupon this letter agreement shall
become a binding agreement between us.
Very truly yours,
Xxxxx/Xxxxxx, Inc.
By: /s/ XXX XXXX
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Name: Xxx Xxxx
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Title: President & CEO
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Nationwide Life Insurance Company
By: /s/ XXXX X. XXXXXXXXXX
---------------------------------
Name: XXXX X. XXXXXXXXXX
----------------------------
Title: Investment Officer
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-4-
ANNEX A
CONSIDERATION FOR PURCHASE OF WARRANTS
Consideration for Great-West Life & Annuity Insurance Company's sale to the
Company of 1,016,949 Warrants issued pursuant to that certain Note and Warrant
Purchase Agreement dated as of September 8, 1997 is as follows:
1) The greater of (a) 75% of the IPO price, less $2.95 per share
multiplied by 1,016,949 provided that if, at any time after the date
hereof and prior to the purchase and sale of the Warrants, any stock
split, reverse stock split, reclassification or other event occurs
which would cause the Exercise Price (as defined in the Warrants) of
the Warrants to be adjusted or cause the number of shares of the
Company to be adjusted according to the terms of the Warrants
(including, without limitation, the merger of the Company with and
into Xxxxx/Xxxxxx, Inc., a Delaware corporation, as contemplated in
the draft registration statement for the IPO previously provided to
you), then in each such case the above-specified price per share of
common stock or number of shares of common stock shall be
proportionately adjusted; or (b) $1,600,000; and
2) Simultaneously with the execution of this letter agreement, the
execution by the Company of that certain letter of agreement between
the Company and Great-West dated June 11, 1998.
Within 15 days of the IPO being consummated, any amounts due to Great-West will
be paid by wire transfer of immediately available funds for credit to an
account designated by Great-West at a later date.
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By: /s/ XXXX XXXXXXX By: /s/ XXXXX XXXXXXX
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Xxxx Xxxxxxx Xxxxx X. Xxxxxxx
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[Printed Name] [Printed Name]
Vice President Vice President
Investments Investments
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[Title] [Title]
XXXXX/XXXXXX, INC.
By: /s/ XXX XXXX
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Xxx Xxxx
---------------------------------
[Printed Name]
President & CEO
---------------------------------
[Title]
