PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT
BY AND BETWEEN
AAL CAPITAL MANAGEMENT CORPORATION
AND
AID ASSOCIATION FOR LUTHERANS
DATED
NOVEMBER 23, 1994,
AS AMENDED OCTOBER 28 , 1996
TABLE OF CONTENTS
Page
1. Appointment of DISTRIBUTOR......................................... 3
2. Underwriting Responsibilities of DISTRIBUTOR...................... 3
3. Additional Services to be Provided by DISTRIBUTOR.................. 4
3.1 Preparation of Sales Literature and Advertising Materials... 4
3.2 Licensing of Field and Home Office Staff.................... 5
3.3 Regulatory Compliance....................................... 5
3.4 Field Training.............................................. 5
3.5 Confirmations............................................... 6
4. Responsibilities of AAL............................................ 6
4.1 Sales Commissions........................................... 6
4.2 Sales Credits and Field Expenses............................ 7
4.3 Registrations of Securities and Investment Adviser.......... 7
4.4 Books and Records........................................... 7
4.5 Duty to Keep Informed....................................... 7
4.6 Transfer Agent and Management............................... 7
5. Joint Procedures for Communications with the Public and with
Registered Representatives....................................... 8
6. Fees to be Paid to DISTRIBUTOR by AAL............................... 8
6.1 Variable Annuity Services ................................... 8
6.2 Determination of Charge/Expense Formulas for VA Services..... 8
6.3 Preparation and Negotiation of Final Annual Budget for
VA Services.................................................. 9
6.4 Accounting Procedures....................................... 9
7. Independent Contractor............................................. 10
8. Indemnification.................................................... 10
8.1 Indemnification of AAL...................................... 10
8.2 Indemnification of DISTRIBUTOR............................. 11
9. Authorized Representations......................................... 11
10. Amendment or Assignment of Agreement............................... 12
11. Termination of Agreement........................................... 12
12. Miscellaneous...................................................... 12
13. Definition of Terms................................................ 12
14. Compliance with Securities Laws.................................... 12
15. Regulatory Examinations............................................ 12
16. Notices............................................................ 13
17. Governing Law...................................................... 13
Schedule A: Schedule of Sales Commissions
PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT
This PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT made and entered
this 23rd day of November, 1994, amended October 28, 1996, by and between AAL
CAPITAL MANAGEMENT CORPORATION, a corporation organized and existing under the
laws of the State of Delaware, ( "DISTRIBUTOR" or "AALCMC") and AID ASSOCIATION
FOR LUTHERANS, a fraternal benefit society organized and existing under the laws
of the State of Wisconsin ("AAL"), on its own behalf and on behalf of AAL
Variable Annuity Account I (the "VARIABLE ACCOUNT").
RECITALS
AAL and its VARIABLE ACCOUNT, a separate unit investment trust
investment account registered under the Investment Company Act of 1940 (the
"1940 Act"), propose to offer for sale certain flexible premium deferred
variable annuity contracts (the "Certificates"), interests under which are
registered with the Securities and Exchange Commission (the "SEC") as securities
under the Securities Act of 1933 (the "1933 Act"), the 1940 Act, and the laws of
some states;
Premiums received from owners of Certificates will be deposited at the
owner's designation in the VARIABLE ACCOUNT and/or in the AAL General Account.
The VARIABLE ACCOUNT will invest solely in shares of the AAL Variable Product
Series Fund, Inc. (the "FUND").
DISTRIBUTOR is a wholly-owned indirect subsidiary of AAL, is registered
as a broker-dealer with the SEC under the Securities Exchange Act of 1934 (the
"1934 Act") and with state securities authorities in all 50 states, is a member
of the National Association of Securities Dealers, Inc. ("NASD"), and is
authorized to offer and sell mutual funds and variable insurance products, and
acts as DISTRIBUTOR of The AAL Mutual Funds, a registered investment company.
AAL and DISTRIBUTOR intend to enter into an agreement by which
DISTRIBUTOR will act as the principal underwriter in a continuous offering of
the Certificates for AAL, to begin on the effective date of the registration
statement in connection with the Certificates under the 1933 Act, and state
securities and insurance registrations. This Agreement pertains to the sale of
Certificates by Registered Representatives licensed with DISTRIBUTOR, and not to
the sale of Certificates by any other party and/or broker-dealer who may be
authorized by AAL to sell Certificates or who may have a separate Distribution
or Selling Agreement with AAL or DISTRIBUTOR.
THEREFORE, in consideration of the covenants and mutual promises of the
parties and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, DISTRIBUTOR and AAL agree as
follows:
AGREEMENT
1. Appointment of DISTRIBUTOR
AAL hereby appoints DISTRIBUTOR as the principal underwriter for the
Certificates during the term of this Agreement in each state or other
jurisdiction where the Certificates may legally be sold. The Certificates may
also be sold by representatives of other broker-dealer firms with which AALCMC
has executed a selling agreement. In addition, AAL may retain other firms to
serve as principal underwriters of the Certificates. Anything in this Agreement
to the contrary notwithstanding, AAL retains the ultimate right to suspend sales
in any jurisdiction or jurisdictions, or to refuse to sell a Certificate to any
applicant for any reason whatsoever.
2. Underwriting Responsibilities of DISTRIBUTOR
DISTRIBUTOR agrees to offer and sell the Certificates, as agent for AAL,
from time to time during the term of this Agreement upon the terms described in
the Certificate Prospectus. As used in this Agreement, the term "Prospectus"
shall mean the Prospectus and the Statement of Additional Information included
as part of the Registration Statement for AAL and the VARIABLE ACCOUNT, as such
Prospectus and Statement of Additional Information may be amended or
supplemented from time to time. The term "Registration Statement" shall mean the
Registration Statement, as amended from time to time and filed by AAL and the
VARIABLE ACCOUNT with the SEC, and effective under the 1933 Act and/or the 1940
Act.
After the effective date of the Registration Statement for the
Certificates, DISTRIBUTOR will hold itself out to receive applications,
satisfactory to DISTRIBUTOR, for the purchase of the Certificates and will
promptly transmit applications and premiums received for the Certificates which
it accepts to AAL or to the AAL Service Center c/o Continuum Inc., 000 Xxxx 00xx
Xxxxxx, Xxxxxx Xxxx, XX 00000, as directed by AAL.
All purchases shall be deemed effective at the time and in the manner
set forth in the Prospectus. All applications, when accepted by DISTRIBUTOR and
by AAL, shall designate the allocation of premiums by the purchaser among the
separate investment options represented by the sub-accounts of the VARIABLE
ACCOUNT and the AAL General Account, as defined and described in the Certificate
Prospectus. All premiums from purchasers shall be deposited by AAL in either the
VARIABLE ACCOUNT, to be promptly allocated among the sub-accounts of the
VARIABLE ACCOUNT, or to the AAL General Account, as designated by the purchaser.
Premiums allocated to the sub-accounts of the VARIABLE ACCOUNT shall be
expressed as "accumulation units" of the Certificate as that term is defined in
the Prospectus. The above allocation statements are subject to any specific
allocation of premium requirements that may be set forth in the Certificate
pertaining to allocations during the free look period and allocations in
connection with incomplete applications.
DISTRIBUTOR agrees to be solely responsible for the operation of its
business as a registered broker-dealer in connection with all its underwriting
activities under this Agreement, and shall operate such business in accordance
with all applicable laws and regulations. All sales of the Certificates by
DISTRIBUTOR shall be made through Registered Representatives who are "Associated
Persons" ("Associated Persons" as defined by the 0000 Xxx) of DISTRIBUTOR, and
who are also District Representatives of AAL. DISTRIBUTOR shall be responsible
for selling only through Registered Representatives who are properly licensed to
sell Certificates in jurisdictions where offers and sales take place.
DISTRIBUTOR is responsible for certain services relating to the
distribution of all prospectus(es) of the VARIABLE ACCOUNT and Fund used by its
Registered Representatives in the marketing of the Certificates. These services
include, but are not limited to design, layout, printing, mailing or other
delivery services.
3. Additional Services to be Provided by DISTRIBUTOR
In addition to the underwriting responsibilities of DISTRIBUTOR
described in paragraph 2 above, DISTRIBUTOR agrees to provide the following
additional services to AAL:
3.1 Preparation of Sales Literature and Advertising Materials
DISTRIBUTOR will be responsible for the initiation, preparation,
printing and distribution of all public sales literature and advertising
materials, as well as all training and marketing materials distributed
to its Registered Representatives as "broker-dealer only" materials
under the NASD rules, which are used by DISTRIBUTOR and its Registered
Representatives, in connection with the sale of the Certificates. AAL
will, in a timely manner, provide DISTRIBUTOR with any and all materials
and information necessary to enable DISTRIBUTOR to fulfill its
obligations set forth in this section regarding sales literature and
advertising materials. AAL will provide DISTRIBUTOR with the names of
AAL employees who will review and approve the materials described in
this subsection. DISTRIBUTOR will coordinate and provide copies of such
materials to designated employees of AAL during the development process
and all advertising and sales
literature will be approved by both AAL and DISTRIBUTOR prior to use.
DISTRIBUTOR will complete all of the necessary filings and approvals
with the NASD and state securities authorities prior to the public use
of such sales material and advertising. DISTRIBUTOR will provide copies
of all materials to AAL. AAL will file and obtain approval of all such
sales material and advertising with State Insurance Commissioners where
such filing is required by state laws. AAL will promptly advise
DISTRIBUTOR when such filings and approvals are completed. Materials
will only be made available for public use or Registered Representative
use after all securities and insurance filings and approvals are
completed and AAL has given approval for materials to be used.
DISTRIBUTOR will be responsible for maintaining an inventory and
approval history of all of its sales literature, advertising and
"broker-dealer only" materials, and for the distribution of such
materials to its Registered Representatives and to the public.
3.2 Licensing of Field and Home Office Staff
DISTRIBUTOR will be responsible for managing the licensing of all
of its Registered Representatives in connection with the sale of the
Certificates, and will directly handle all licensing by the NASD and
state securities authorities that is necessary for the sale of the
Certificates. AAL will be responsible for obtaining the necessary
insurance licenses with state insurance authorities for the offer and
sale of the Certificates.
AAL and DISTRIBUTOR shall develop a joint electronic data base
and reporting system to consolidate securities and insurance licensing
information for their District Representatives and Registered
Representatives, respectively. The system will provide controls
satisfactory to DISTRIBUTOR in the processing of Variable Annuity
applications to assure that all of its Registered Representatives are
properly licensed when offering and selling the Certificates. The system
shall be kept current by (i) DISTRIBUTOR providing securities licensing
data to AAL; and (ii) AAL providing insurance licensing data to a
database that shall be maintained by AAL. The system described herein
shall be equally accessible to AAL and DISTRIBUTOR.
DISTRIBUTOR and AAL will cooperate to assure the appropriate
licensing of AAL and DISTRIBUTOR's home office employees (including
DISTRIBUTOR's wholesalers) who require securities or insurance licenses
in connection with their work on the Certificates. DISTRIBUTOR will
arrange for pre-licensing study and training to assist such persons in
obtaining their securities licenses as requested by AAL. All AAL
employees who are Associated Persons of DISTRIBUTOR as a result of being
licensed as securities Registered Representatives will be subject to
compliance procedures and supervision of DISTRIBUTOR in connection with
all work related to the Certificates in the same manner as all other
Associated Persons.
3.3 Regulatory Compliance
DISTRIBUTOR will have responsibility for compliance by all of its
Registered Representatives who are Associated Persons of DISTRIBUTOR
(including employees of AAL) with all securities laws and regulations in
connection with the offer and sale of the Certificates. Compliance
supervision shall include, but not be limited to, the following matters:
acceptance of new business; suitability determinations (as made in
accordance with NASD rules or other applicable SEC or self-regulatory
organizations' rules and regulations); field training, supervision and
sales practices; books and records requirements; approval and use of all
advertising, sales literature and broker-dealer only materials;
supervision of confirmation terms and processing; the payment of
commissions; and compliance with the written supervisory procedures of
DISTRIBUTOR.
3.4 Field Training
Immediately after the effective date of the Registration
Statement for the Certificates, DISTRIBUTOR shall be responsible for
conducting field training of all of its associated Registered
Representatives in those states where the Certificates are approved for
sale. The training program shall be developed and conducted
by DISTRIBUTOR. DISTRIBUTOR will coordinate with AAL concerning those
AAL employees who will be involved in the development of the training
program and in its execution. The training program shall be approved by
both AAL and DISTRIBUTOR prior to implementation.
3.5 Confirmations
DISTRIBUTOR shall be responsible to assure that all purchases,
sales or other transactions occurring in the account of an owner of a
Certificate sold by its Registered Representatives shall be confirmed to
the owner in writing in a form and manner which complies with the
requirements of the 1934 Act, state laws and regulations, and the
disclosure requirements of the NASD. Such confirmations will be
furnished by the broker-dealer to all owners of Certificates in
accordance with securities laws, will reflect the facts of the
transaction, and will show that they are being sent by AAL on behalf of
DISTRIBUTOR acting in the capacity of agent for AAL. The parties agree
that the form and the manner of use of confirmations in connection with
transactions occurring in such accounts shall be supervised by
DISTRIBUTOR. AAL agrees that AAL and its agent, Continuum Inc., will
prepare and distribute such confirmations in accordance with
DISTRIBUTOR's instructions. AAL agrees that AAL will make no changes or
variations in either the form or the manner of distribution of such
confirmations without the written approval of DISTRIBUTOR and shall
cause such confirmations to be issued as directed by DISTRIBUTOR and on
behalf of DISTRIBUTOR.
4. Responsibilities of AAL
4.1 Sales Commissions
AAL will pay DISTRIBUTOR a sales commission on Variable Annuity
sales pursuant to the Schedule A attached hereto. DISTRIBUTOR intends to
reallocate commissions to its Registered Representatives (including
General Agent and General Manager Registered Representatives) for the
sale of Certificates in accordance with a written fee schedule agreement
between DISTRIBUTOR and its associated Registered Representatives.
DISTRIBUTOR, for its convenience, authorizes AAL as agent for
DISTRIBUTOR, to make commission payments due to DISTRIBUTOR directly to
its Registered Representatives.
All commissions for the sale of the Certificates due to
DISTRIBUTOR from AAL shall be reflected on DISTRIBUTOR's financial
records as a receipt from AAL and a disbursement to DISTRIBUTOR'S
Registered Representatives, notwithstanding the direct payment of such
commissions by AAL to such Registered Representatives. AAL agrees to pay
commissions directly to such Registered Representatives as a convenience
to DISTRIBUTOR and recognizes that this agreement to pay is purely
ministerial in nature and not discretionary. The financial records
maintained by or for DISTRIBUTOR shall properly reflect such payments.
Notwithstanding the foregoing, it is agreed that AAL shall have
the right in the payment of such commissions to treat such commissions
as part of AAL employee compensation to such Registered Representatives
for the purpose of calculation of AAL benefits programs and withholding
taxes; provided however, that AAL will provide DISTRIBUTOR in advance
with a written, signed opinion of outside counsel, who shall have
acceptable expertise in securities laws, stating that the payment of
commissions pursuant to this Agreement (1) shall not require AAL to
register as a broker-dealer under federal law, or state laws (if
ascertainable), and (2) shall not violate DISTRIBUTOR's obligation to
supervise and directly pay commissions to its Registered Representatives
under applicable SEC and NASD rules.
AAL will maintain and provide records and reports reflecting the
calculation of all commissions paid to, and any other cash and non-cash
compensation (collectively "Commissions"), received by DISTRIBUTOR'S
Registered Representatives and the details of the transactions upon
which such Commissions are based, and will respond to any inquiries
about Commission payments, pursuant to this
paragraph. DISTRIBUTOR shall designate to AAL the records required and
such records shall be maintained subject to the provisions of Paragraph
4.3 below.
4.2 Sales Credits and Field Expenses
Any expenses or charges for AAL field services for the
Certificates will be paid directly by AAL. Sales credits for sales of
the Certificates will be based on gross premiums received for the
Certificates, subject to any exceptions that may exist or be developed
with respect to internal transfers of funds among AAL and affiliated
companies.
4.3 Registrations of Securities and Investment Adviser
AAL shall be solely responsible, at its expense, for registration
of the Variable Annuity Certificate, the VARIABLE ACCOUNT, the FUND, and
for the registration of AAL as an investment adviser of the FUND, with
all required state and federal authorities. AAL agrees to maintain such
registration statements in effect at all times during the term of this
Agreement, and to file such amendments, reports and other documents as
may be necessary to assure that there will be no untrue statement of
material fact in any Registration Statement and that there shall be no
omission to state a material fact in the Registration Statement or Form
ADV, which omission would make the statements therein misleading. AAL
may direct DISTRIBUTOR, and DISTRIBUTOR shall perform, any or all of the
services described in this paragraph.
4.4 Books and Records
AAL agrees to maintain all books and records required and
designated by DISTRIBUTOR under the securities laws in connection with
the offer and sale of the Certificates by its Registered
Representatives, as specifically required by Section 17 of the 1934 Act,
Rule 17a-3 and 17a-4 under the 1934 Act or as required by the NASD and
such other or further books or records as may be required by rule or
regulation of any other federal or state regulatory organization or
self-regulatory organization, to the extent such requirements are
applicable to the variable annuity operations, as mutually determined
for purposes of this Agreement by DISTRIBUTOR and AAL. AAL shall
maintain such books and records as agent on behalf of DISTRIBUTOR who
shall be the owner thereof. AAL agrees that such books and records will
be open and available to DISTRIBUTOR at all times, shall be surrendered
promptly on request, without charge, to DISTRIBUTOR, and shall be
subject to inspection by the SEC in accordance with Section 17 of the
1934 Act, and by the NASD or other self-regulatory organization, at any
time. The parties represent and warrant that DISTRIBUTOR has provided a
schedule to AAL that describes the books and records to be maintained by
AAL, on behalf of DISTRIBUTOR.
4.5 Duty to Keep Informed
AAL shall at its expense keep distributor fully informed on a
current basis of any changes or other material matters affecting the
Certificates or the FUND. AAL will use its best efforts to provide
advance notice to DISTRIBUTOR of any proposed changes in the
Certificates or FUND and to discuss such matters with DISTRIBUTOR prior
to taking any action. AAL shall furnish DISTRIBUTOR copies of all
information, financial statements, books and records and other papers
which DISTRIBUTOR may reasonably request in connection with its due
diligence inquiry or for use in connection with the distribution of
Certificates.
4.6 Transfer Agent and Management
AAL shall be solely responsible for the selection and supervision
of a Transfer Agent for the Certificates; management of all Certificate
accounts, including the sub-accounts and the underlying portfolios
(series) of the FUND; establishing and maintaining account records and
processing; and the receipt and disbursement of all monies related to
the Certificates. Notwithstanding its responsibility for these matters,
AAL shall keep DISTRIBUTOR currently informed, through reports requested
by DISTRIBUTOR, of all activities related to the Certificates and the
FUND. AAL will also keep DISTRIBUTOR informed and consult with
DISTRIBUTOR in advance of any changes to the procedures for the
management or administration of the Certificates or to any of the
underlying records or documents related thereto. AAL recognizes that any
communications with Certificate owners, or prospective Certificate
owners, related to the Certificates sold by DISTRIBUTOR'S Registered
Representatives subject to securities regulations and must be approved
in advance by AAL and DISTRIBUTOR and may require filing with and
approval by the NASD and state securities authorities. Such
communications include but are not limited to: correspondence statement
stuffers, newspaper or magazine articles, confirmation messages and
other similar written materials.
5. Joint Procedures for Communications with the Public and with Registered
Representatives
The parties recognize that all written materials which are provided to
AAL members or prospective members in connection with the Certificates sold by
DISTRIBUTOR'S Registered Representatives are required to meet specific standards
established by securities and insurance regulatory authorities. Such materials
will include advertising and sales materials, correspondence, magazine articles,
newspaper articles, press releases and any other written public communication.
To assure compliance with all applicable rules and laws, it is agreed that
DISTRIBUTOR will manage and coordinate the distribution of all public written
materials related to the Certificates sold by DISTRIBUTOR'S Registered
Representatives, including materials related to the FUND. No public materials
will be released without the prior written approval of both AAL and DISTRIBUTOR,
and both parties shall cooperate in the preparation and review of such
materials. AAL will provide DISTRIBUTOR with the names of its employees
designated to give approval for such written materials.
All non-public written communications with DISTRIBUTOR'S Registered
Representatives and to employees of AAL or DISTRIBUTOR, related to the
Certificates shall be reviewed and approved by both AAL and DISTRIBUTOR prior to
use. Such materials include, without limitation, field updates, "broker-dealer
only" materials, training materials, compliance information, and administrative
forms sent to owners. AAL and DISTRIBUTOR will establish internal policies to
insure that all such materials are appropriately and timely reviewed and shall
cooperate with each other in establishing such procedures.
6. Fees to be Paid to DISTRIBUTOR by AAL
6.1 Variable Annuity Services
DISTRIBUTOR shall perform certain services, as requested by AAL,
in connection with DISTRIBUTOR's role as principal underwriter in AAL's
continuous offering of the Certificates ("VA Services"). VA Services
shall be initially designated as "Marketing Services", "Broker-Dealer
Administration", "Licensing", "Regulatory Compliance", "Field Training",
and "Consulting".
The parties represent and warrant that AAL and DISTRIBUTOR have
mutually agreed to the definition and composition of each of the
foregoing VA Services. AAL and DISTRIBUTOR agree that the definition and
composition of each of the foregoing VA Services, and additional
services to be rendered in connection with the sale of the Certificates,
shall be reaffirmed or amended, as the case may be, on an annual basis
in connection with the preparation and negotiation of the "Final Annual
Budget" (as that term is defined in Paragraph 6.3, infra) for VA
Services for such year.
6.2 Determination of Charge/Expense Formulas for VA Services
The parties represent and warrant that DISTRIBUTOR and AAL agree
on the methods to determine and calculate the amount of VA Services to
be charged by DISTRIBUTOR as an expense to AAL (the "Charge/Expense
Formulas"). Charge/Expense Formulas shall be initially determined and
defined as "Sales Credit Charges", "Direct Expenses", and "Per Hour
Charges". AAL and DISTRIBUTOR covenant and
agree that (i) Charge/Expense Formulas shall be reaffirmed or amended,
as the case may be, on an annual basis in connection with the
preparation and negotiation of the Final Annual Budget for VA Services
for such year; and (ii) Charge/Expense Formulas shall include a portion
of DISTRIBUTOR's general overhead expenses as specifically stated in the
underlying detail schedules for Charge/Expense Formulas ("Detail
Schedules"). DISTRIBUTOR and AAL affirm and agree that the Detail
Schedules were reviewed by representatives of both AAL and DISTRIBUTOR
in the due diligence process prior to the completion of the 1995 Final
Annual Budget.
The parties represent and warrant that DISTRIBUTOR and AAL agree
on the allocation of dollar amounts of VA Services to the various
categories of Charge/Expense Formulas ("VA Services Allocation"). VA
Services Allocation shall be initially determined as set forth in the
Final Annual Budget for the 1995 calendar year. AAL and DISTRIBUTOR
covenant and agree that VA Services Allocation shall be reaffirmed or
amended, as the case may be, on an annual basis in connection with the
preparation and negotiation of the Final Annual Budget for VA Services
for such year.
6.3 Preparation and Negotiation of Final Annual Budget for VA Services
Each successive year that this Agreement is in effect,
DISTRIBUTOR shall prepare a projected annual budget for the successive
year (the " Projected Annual Budget") and deliver the Projected Annual
Budget to a designated representative of AAL. Each successive year that
this Agreement is in effect, AAL shall provide comments to DISTRIBUTOR
on the content of the Projected Annual Budget. AAL and DISTRIBUTOR
covenant and agree that (i) a final, agreed form of the Projected Annual
Budget (the "Final Annual Budget") shall be determined on or before the
deadline date set forth for the submission of annual budgets pursuant to
AAL budget policies; and (ii) the policies, definitions and operating
procedures (including but not limited to "Billing Process", and
"Billable Items") set forth in P.O.P. 251 - "Subsidiary and Affiliate
Billing", shall be followed in connection with the preparation and
negotiation of the Projected Annual Budget and the Final Annual Budget.
6.4 Accounting Procedures
DISTRIBUTOR and AAL covenant and agree that (A) payroll & expense
records and procedures; (B) invoicing procedures; and (C) the time and
manner of charge/expense payment for the VA Services set forth in this
Agreement shall be determined by reference to certain AALCMC accounting
manuals and procedures. Notwithstanding the foregoing, the parties
covenant and agree that the provisions of this Agreement pertaining to
books and records (e.g. Paragraph 4.4 hereof) shall apply to all
transactions relating to VA Services and the offering and sale of
Certificates by DISTRIBUTOR The parties agree that because of the
sensitive and confidential nature of these records and procedures, such
records and procedures shall not be disclosed nor disseminated except to
authorized accounting and management personnel of AAL and DISTRIBUTOR.
DISTRIBUTOR and AAL acknowledge that unanticipated conditions may
materially change the Final Annual Budget. DISTRIBUTOR and AAL agree
that the nature of these unanticipated conditions can be characterized
as either a "permanent change" or a "temporary change". For example, a
permanent change is the elimination of a VA Service that DISTRIBUTOR
provides pursuant to this Agreement and a temporary change is AAL's
assumption of a VA Service, pursuant to DISTRIBUTOR's request.
DISTRIBUTOR and AAL covenant and agree that the accounting treatment for
permanent changes shall be redetermined on an annual basis and the
accounting treatment for a temporary change shall be as set forth
herein. In the event a temporary change occurs, DISTRIBUTOR and AAL
covenant and agree that AAL shall be permitted a payment credit towards
any outstanding charges/expenses for VA Services performed by
DISTRIBUTOR, for certain services rendered by AAL employees and agents
in connection with the offering and sale of the Certificates (e.g. legal
or accounting services) ("VA Services Offset"). The relevant terms and
conditions of this Agreement shall apply to the VA Services Offset (e.g.
determination for Final Annual Budget, accounting procedures).
On a monthly basis during the term of this Agreement, (A)
DISTRIBUTOR shall provide written documentation to AAL for VA Services;
and (B) AAL shall provide written documentation to DISTRIBUTOR for VA
Services Offset rendered during the preceding calendar month
(collectively, the "Accounting Statements"). The Accounting Statements
shall reasonably itemize and detail the VA Services and VA Services
Offset provided by each of the parties during the proceeding month. The
format for the Accounting Statements shall follow certain CMC accounting
procedures.
7. Independent Contractor
In performing its duties hereunder, DISTRIBUTOR shall be an independent
contractor and neither DISTRIBUTOR, nor any of its officers, directors,
employees, or Registered Representatives is, or shall be, an employee of AAL in
the performance of DISTRIBUTOR's duties hereunder. DISTRIBUTOR shall be
responsible for the employment, control, and conduct of its officers, agents and
employees and for injury to such agents or employees or to others through its
agents or employees. DISTRIBUTOR assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all employee taxes
thereunder.
8. Indemnification
8.1 Indemnification of AAL
DISTRIBUTOR agrees to indemnify and hold harmless AAL and each of
its present or former directors, officers, employees, representatives
and each person, if any, who controls or previously controlled AAL
within the meaning of Section 15 of the 1933 Act, against any and all
losses, liabilities, damages, claims or expenses (including the
reasonable costs of investigating or defending any alleged loss,
liability, damage, claims or expense and reasonable legal counsel fees
incurred in connection therewith) to which AAL or any such person may
become subject under the 1933 Act, under any other statute, at common
law, or otherwise, arising out of the acquisition of any Certificate by
any person which (i) may be based upon any wrongful act by DISTRIBUTOR
or any of DISTRIBUTOR's directors, officers, employees or
representatives, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, shareholder report or other information covering
the Certificates filed or made public by AAL or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made
in reliance upon information furnished to AAL by DISTRIBUTOR.
In no case (i) is DISTRIBUTOR's indemnity in favor of AAL, or any
person indemnified to be deemed to protect AAL or such indemnified
person against any liability to which AAL or such person would otherwise
be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of his obligations and duties under this Agreement, or (ii) is
DISTRIBUTOR to be liable under its indemnity agreement contained in this
Paragraph with respect to any claim made against AAL or any person
indemnified unless AAL or such person, as the case may be, shall have
notified DISTRIBUTOR in writing of the claim within a reasonable time
after the summons or other first written notification giving information
of the nature of the claim shall have been served upon AAL or upon such
person (or after AAL or such person shall have received notice to such
service on any designated agent). However, failure to notify DISTRIBUTOR
of any such claim shall not relieve DISTRIBUTOR from any liability which
DISTRIBUTOR may have to AAL or any person against whom such action is
brought otherwise than on account of DISTRIBUTOR's indemnity agreement
contained in this Paragraph.
DISTRIBUTOR shall be entitled to participate, at its own expense,
in the defense, or, if DISTRIBUTOR so elects, to assume the defense of
any suit brought to enforce any such claim, but, if DISTRIBUTOR elects
to assume the defense, such defense shall be conducted by legal counsel
chosen by DISTRIBUTOR and satisfactory to AAL and to the defendant or
defendants who are entitled to such indemnification. In the event that
DISTRIBUTOR elects to assume the defense of any suit and retain legal
counsel, AAL and the defendant or defendants who are entitled to such
indemnification, shall bear the fees and expenses of any additional
legal counsel retained by them. If DISTRIBUTOR does not elect to assume
the defense of any such suit, DISTRIBUTOR will reimburse AAL and the
defendant or defendants entitled to such indemnification for the
reasonable fees and expenses of any legal counsel retained by them.
DISTRIBUTOR agrees to promptly notify AAL of the commencement of any
litigation or proceedings against it or any of its officers, employees
or representatives in connection with the issue or sale of the
certificates.
8.2 Indemnification of DISTRIBUTOR
AAL agrees to indemnify and hold harmless DISTRIBUTOR and each of
its present or former directors, officers, employees, representatives
and each person, if any, who controls or previously controlled
DISTRIBUTOR within the meaning of Section 15 of the 1933 Act, under any
other statute, at common law, or otherwise, arising out of the
acquisition, or with regard to the terms and conditions, of any
Certificates by any person that (i) may be based upon any wrongful act
by AAL or any of AAL's directors, officers, employees or representatives
(other than DISTRIBUTOR) or any other broker/distributors who are
selling Certificates for AAL, (ii) may be based upon any untrue
statement or alleged untrue statement or a material fact contained in a
registration statement, prospectus, shareholder report or other
information covering the Certificates or FUND filed or made public by
AAL or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading
unless such statement or omission was made in reliance upon information
furnished to AAL by DISTRIBUTOR.
In no case (i) is AAL's indemnity in favor of DISTRIBUTOR, or any
person indemnified to be deemed to protect DISTRIBUTOR or such
indemnified person against any liability to which DISTRIBUTOR or such
person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of his duties or by reason
of his reckless disregard of his obligations and duties under this
Agreement, or (ii) is AAL to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against
DISTRIBUTOR or person indemnified unless DISTRIBUTOR, or such person, as
the case may be, shall have notified AAL in writing of the claim within
a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served
upon DISTRIBUTOR or upon such person (or after DISTRIBUTOR or such
person shall have received notice of such service on any designated
agent). However, failure to notify AAL of any such claim shall not
relieve AAL from any liability which AAL may have to DISTRIBUTOR or any
person against whom such action is brought otherwise than on account of
AAL's indemnity agreement contained in this Paragraph.
AAL shall be entitled to participate, at its own expense, in the
defense, or, if AAL so elects, to assume the defense of any suit brought
to enforce any such claim, but if AAL elects to assume the defense, such
defense shall be conducted by legal counsel chosen by AAL and
satisfactory to DISTRIBUTOR and to the defendant or defendants entitled
to such indemnification. In the event that AAL elects to assume the
defense of any suit and retain legal counsel, DISTRIBUTOR and the
defendant or defendants entitled to such indemnification, shall bear the
fees and expenses of any additional legal counsel retained by them. If
AAL does not elect to assume the defense of any such suit, AAL will
reimburse DISTRIBUTOR and the defendant or defendants entitled to such
indemnification for the reasonable fees and expenses of any legal
counsel retained by them. AAL agrees to promptly notify DISTRIBUTOR of
the commencement of any litigation or proceedings against it or any of
its trustees, officers, employees, or representatives in connection with
the issue or sale of the Certificates.
9. Authorized Representations
DISTRIBUTOR is not authorized by AAL to give on behalf of AAL any information or
to make any representations in connection with the sale of Certificates other
than the information and representations contained in a Registration Statement
filed with the SEC under the 1933 Act and/or the 1940 Act, covering the
Certificates, the VARIABLE ACCOUNT, or the FUND, as such Registration Statements
may be amended or supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on behalf of AAL for
DISTRIBUTOR's use. This shall not be construed to prevent DISTRIBUTOR from
preparing and distributing advertising and sales literature or other material as
it may deem appropriate, subject to the requirements of Paragraph 5 above.
10. Amendment or Assignment of Agreement
This Agreement may not be amended or assigned except by written
agreement of both parties.
11. Termination of Agreement
This Agreement may be terminated by either party hereto, without the
payment of any penalty, on 90 days prior notice in writing to the other party.
12. Miscellaneous
The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Nothing herein contained shall be deemed to require AAL to take any
action contrary to its Charter or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to
relieve or deprive the Board of Directors of AAL of responsibility for and
control of the conduct of the affairs of AAL.
13. Definition of Terms
Any questions of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the 1933 Act, the 1934 Act or the 1940 Act shall be resolved by reference to
such term or provision and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to such Act.
14. Compliance with Securities Laws
AAL represents that it is registered as an investment adviser under the
Advisers Act and agrees that it will comply with all the provisions of the Act
and of the rules and regulations thereunder. AAL and DISTRIBUTOR each agree to
comply with all of the applicable terms and provisions of the 1933 Act, the 1934
Act, the 1940 Act, the Advisers Act, and all applicable state laws.
Each party hereto shall advise the other promptly of (a) any action of
the SEC or any authorities of any state or territory, of which it has knowledge,
affecting the registration or qualification of the VARIABLE ACCOUNT or the
Certificates, or the right to offer the Certificates for sale or (b) the
happening of any event which makes untrue any statement, or which requires the
making of any change in any Registration Statement or any current prospectus or
statement of additional information, in order to make the statements therein not
materially misleading.
15. Regulatory Examinations
DISTRIBUTOR and AAL agree to cooperate fully in any insurance regulatory
examination, investigation, or proceeding or any judicial proceeding arising in
connection with the Certificates. DISTRIBUTOR and AAL further agree to cooperate
fully in any securities regulatory examination, investigation or proceeding or
any judicial proceeding with respect to AAL, DISTRIBUTOR, their affiliates and
their agents or representatives, to the extent that such examination,
investigation or proceeding is in connection with Certificates distributed under
this Agreement. DISTRIBUTOR shall furnish applicable Federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request in order to
ascertain whether AAL's operations are being conducted in a manner consistent
with any applicable laws or regulations.
16. Notices
Any notice required to be given pursuant to this Agreement shall be
deemed duly given if delivered or mailed by registered mail, postage prepaid, to
DISTRIBUTOR or to AAL at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxx,
00000-0000.
17. Governing Law
This Agreement shall be governed and construed in accordance with the
laws of the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective corporate
seals to be hereunto affixed, as of the day and year first above written.
AID ASSOCIATION FOR LUTHERANS
By: /s/ Xxxx X. Xxxxxxx
------------------------------------
Xxxx X. Xxxxxxx
President and
Chief Executive Officer
By: /s/ Xxxxxxx X. Xxx
------------------------------------
Xxxxxxx X. Xxx
Senior Vice President
Secretary and General Counsel
AAL CAPITAL MANAGEMENT CORPORATION
By: /s/ H. Xxxxxxx Xxxxxx
------------------------------------
H. Xxxxxxx Xxxxxx
President
By: /s/ Xxxxxx X. Same
------------------------------------
Xxxxxx X. Same
Secretary
SCHEDULE A
(Commissions)
