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procure applications for life and health insurance and annuities
on behalf of ITT.
Petitioner subsequently changed Whitco’s name to Midwest
Agencies, Inc. (Midwest). On or about July 29, 1982, petitioner,
in his capacity as Midwest’s president, entered into a “General
Agent’s Contract” and an “Advance Commission and Loan Agreement
for General Agent” with ITT. This contract and agreement were
identical to the Agent’s Contract and the Agreement, and
hereinafter will be referred to as such. Petitioner personally
guaranteed Midwest’s performance under the Agent’s Contract and
the Agreement.
Whitco and Midwest engaged agents, including petitioner, to
sell insurance products on a commission basis. ITT’s insurance
products (e.g., life insurance policies) were among these
products. Under the Agreement, ITT paid commissions to Midwest
(and its predecessor Whitco) and its agents. When an agent sold
a policy, he or she received from ITT a commission that
approximated the total commissions that would be earned over the
life of the policy (including renewals). The unearned portions
of the commissions were considered loans. If the policy was
later renewed, the commission on the renewal that would otherwise
have gone to the agent was applied to reduce the advance (or
unearned) commissions that were previously paid to the agent.
If the policy lapsed or was canceled, the portion of the
commissions remaining unearned on the policy was treated as a
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