Item 1.01. Entry into
Material Definitive Agreement
On June 14, 2017, Action Holdings Financial
Limited (“AHFL”), a wholly-owned British Virgin Islands subsidiary of China United Insurance Service, Inc. (the “Company”
or “CUIS”), entered into an Amendment 3 (the “Third Amendment”) to Strategic Alliance Agreement (the “Alliance
Agreement”) with AIA International Limited Taiwan Branch (“AIATW”) to further revise certain provisions in the
Alliance Agreement and the previous amendments to the Alliance Agreement entered into by and between AHFL and AIATW.
On June 10, 2013, AHFL entered into the
Alliance Agreement with AIATW. The purpose of the Alliance Agreement is to promote life insurance products provided by AIATW within
the territory of Taiwan by insurance agency companies or insurance brokerage companies affiliated with AHFL or CUIS. The term of
the Alliance Agreement is from April 15, 2013 to August 31, 2018. Pursuant to the Alliance Agreement, subject to certain terms
and conditions therein, AHFL is entitled to the payment of an execution fee by AIATW which will be recorded as revenue upon fulfilling
sales target over the five-year period, including the satisfaction of the performance targets and the threshold 13-month persistency
ratio. The execution fee may be required to be recalculated if certain performance targets are not met by AHFL.
On July 25, 2013, AHFL entered into an
Amendment to the Alliance Agreement (the “First Amendment”) with AIATW. Pursuant to the First Amendment, AIATW paid
the execution fees to AHFL in accordance with Section 4 of the Alliance Agreement.
On September 30, 2014, AHFL entered into
an Amendment 2 to the Alliance Agreement (the “Old Second Amendment”) with AIATW, pursuant to which the expiration
date of the Alliance Agreement was extended from May 31, 2018 to December 31, 2020. In addition, both AHFL and AIATW agreed to
adjust certain terms and conditions set forth in the Alliance Agreement, including the downward adjustment of the performance targets
as well as the mechanism and formula calculating the execution fee to be refunded, if any.
On January 6, 2016, AHFL entered into a
new Amendment 2 to the Alliance Agreement (the “New Second Amendment”) with AIATW to further revise certain provisions
in the Alliance Agreement and the Old Second Amendment. Pursuant to the New Second Amendment, the expiration date of the Alliance
Agreement was extended from May 31, 2018 to December 31, 2021, and the effect of the Alliance Agreement during the period from
October 1, 2014 to December 31, 2015 has been suspended. In addition, both AHFL and AIATW agree to adjust certain terms and conditions
set forth in the Alliance Agreement to, among which: (i) expand the scope of services to be provided by AHFL to AIATW to include,
without limitation, assessment and advice on suitability of cooperative partners, advice on product strategies suitable for promotion
channel development, advice on promotion/sales channel improvement, advice on promotion channel marketing and strategic planning,
and promotion channel talent training; and (ii) remove certain provisions related to performance milestones and refund of execution
fees. On March 15, 2016, AHFL unilaterally issued a confirmation letter to AIATW (the “2016 Letter”), where it emphasized
its commitment to achieve certain sales targets within a specific time frame and covenanted to refund certain portion of execution
fees calculated based on the formula therein upon failure to achieve the applicable sales target, and the Old Second Amendment
was terminated.
Pursuant to the Third Amendment, except
for the first contract year (April 15, 2013 to September 30, 2014), the sales targets for the remaining contract term under the
Alliance Agreement shall be changed by reference to (i) the amount of the value of new business (“VONB”) and (ii) the
13-month persistency ratio as set forth therein, provided that to the extent any underlying insurance contract is revoked, invalid
or terminated and premiums is refunded to such policyholder, the amount of the related VONB shall be correspondingly reduced. Both
AHFL and AIATW agree to calculate the business promotion fees (equivalent to the “execution fee” referred above) to
be returned in case of failure to achieve the sales targets or the fees to be increased in case of exceeding the sales targets,
as the case may be, based on two formulas specified in the Third Amendment. The primary factor under formula one focuses on the
annual and/or accumulated achievement rate(s), while the primary factor under formula two focuses on the 13-month persistency ratio(s),
subject to terms and conditions therein. The expanded scope of services to be provided by AHFL to AIATW as set forth in Section
4 of New Second Amendment is removed under the Third Amendment as well.
On June 14, 2017, with AIATW's consent,
the 2016 Letter has been revoked in order to conform with the latest terms and conditions regarding the cooperation between AHFL
and AIATW as set forth in the Third Amendment.
An English translation of the Third Amendment
is included as Exhibit 10.1 to this Current Report on Form 8-K and is the legal document that governs the terms of the cooperation
described therein and the other actions contemplated by the Third Amendment. The foregoing description of the cooperation does
not purport to be complete and is qualified in its entirety by reference to the complete text of the Third Amendment, which is
filed as Exhibit 10.1 hereto, and incorporated herein by reference.