EXHIBIT 3(a)
MASTER MARKETING AND DISTRIBUTION AGREEMENT
BY AND AMONG
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
AMERICAN GENERAL SECURITIES INCORPORATED,
AND Xxx Xxxxxx Funds Inc.
TABLE OF CONTENTS
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Description Page
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SECTION 1. AVAILABLE CONTRACTS........................ 2
1.1 Availability.................................... 2
1.2 Modification of Contracts....................... 2
1.3 Suspension or Restriction of Sales.............. 2
1.4 Reinsurance of Contracts........................ 2
SECTION 2. CONTRACT DISTRIBUTION....................... 2
2.1 Exclusive Appointment........................... 2
2.2 Best Efforts.................................... 3
2.3 Selling Groups.................................. 4
2.4 Suitability Determinations...................... 4
2.5 Sales Persons/Associated Agencies............... 4
2.6 Insurance Agent Licensing....................... 5
2.7 Compliance, Training, and Supervision........... 5
2.8 Marketing Materials............................. 6
2.9 Marketing Services.............................. 7
2.10 Non-Marketing Materials......................... 8
2.11 Information About USL and DISTRIBUTOR........... 9
2.12 Complaints...................................... 10
2.13 Premium Payments................................ 10
2.14 Limitations on Authority........................ 10
2.15 Independent Contractor.......................... 11
SECTION 3. ADMINISTRATION AND RECORDKEEPING........... 11
3.1 Contract Administration......................... 11
3.2 Performance Standards........................... 11
3.3 Recordkeeping................................... 11
SECTION 4. REPRESENTATIONS AND WARRANTIES............. 12
4.1 By USL.......................................... 12
4.2 By AGSI......................................... 14
4.3 By DISTRIBUTOR.................................. 15
SECTION 5. COMPENSATION; COSTS AND EXPENSES........... 16
5.1 Compensation.................................... 16
5.2 Registration Fees............................... 16
5.3 Each Party To Bear Own Costs.................... 16
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SECTION 6. INDEMNIFICATION............................. 16
6.1 Indemnification by USL and AGSI................. 16
6.2 Indemnification by DISTRIBUTOR.................. 18
6.3 Limitation on Liability......................... 19
6.4 Injunctive Relief............................... 20
SECTION 7. TERM AND TERMINATION........................ 20
7.1 Term............................................ 20
7.2 Events of Termination........................... 20
7.3 Remedy of Events of Default..................... 22
7.4 Parties to Cooperate Respecting Termination..... 22
SECTION 8. ASSIGNMENT BY DISTRIBUTOR.................... 22
SECTION 9. CONTRACT LAPSE, TERMINATION, SURRENDER, ETC.. 22
SECTION 10. CONFIDENTIALITY............................. 23
SECTION 11. ARBITRATION OF DISPUTES..................... 23
11.1 Arbitration Binding............................. 23
11.2 Initiation of Arbitration....................... 23
11.3 Selection of Arbitrators........................ 23
11.4 Impartiality.................................... 24
11.5 Hearing Date and Time........................... 24
SECTION 12. TRADEMARKS.................................. 24
12.1 DISTRIBUTOR Trademarks.......................... 24
12.2 USL Trademarks.................................. 25
12.3 Grant of License................................ 25
12.4 Prior Approval.................................. 25
12.5 Sample Materials................................ 25
12.6 Trademarks Valid and Enforceable................ 26
SECTION 13. BONDING AND INSURANCE....................... 26
SECTION 14. NOTICES..................................... 26
14.1 Manner of Notices............................... 26
14.2 Notice of Regulatory Proceedings................ 27
SECTION 15. MISCELLANEOUS............................... 27
15.1 Amendment....................................... 27
15.2 Governing Law................................... 28
15.3 Survival of Provisions.......................... 28
15.4 Severability.................................... 28
15.5 Waiver.......................................... 28
15.6 Force Majeure................................... 28
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15.7 Parties to Cooperate........................... 28
15.8 Entire Agreement............................... 29
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MASTER MARKETING AND DISTRIBUTION AGREEMENT
This Master Marketing and Distribution Agreement (the "Agreement") is made
on this ________ day of ___________________, 1998, by and among THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, a New York insurance
company ("USL"), on behalf of itself and each of its separate accounts listed on
Schedule A hereto, as the same may be amended from time to time (each, an
"Account"), AMERICAN GENERAL SECURITIES INCORPORATED, a Texas corporation
("AGSI"), and Xxx Xxxxxx Funds Inc., a Delaware corporation ("DISTRIBUTOR")
(each, a "Party," collectively, the "Parties").
RECITALS
WHEREAS, USL and DISTRIBUTOR (including certain affiliates of DISTRIBUTOR)
are jointly developing a variable annuity group contract and certificate known
as the Generations Annuity ("New Contract"), which is to be issued through USL's
Separate Account USL VA-R ("Separate Account USL VA-R");
WHEREAS, USL and DISTRIBUTOR (including certain affiliates of DISTRIBUTOR)
may in the future jointly develop other annuity and/or life insurance contracts
(collectively referred to, together with the New Contract and any certificates
under any group contract, as the "Contracts") to be issued through one or more
separate accounts established by USL for such purposes (collectively referred
to, together with Separate Account USL VA-R, as the "Accounts");
WHEREAS, USL hereby appoints AGSI the principal underwriter of the New
Contract and currently intends to appoint AGSI the principal underwriter of all
other Contracts;
WHEREAS, USL and AGSI desire to retain DISTRIBUTOR (and any insurance
agency associated with DISTRIBUTOR and to whom it may assign certain rights or
obligations under this Agreement pursuant to Section 8 hereof (each a "VK Funds
Associated Agency")), on an exclusive basis, to market and distribute the
Contracts and DISTRIBUTOR desires to provide such services; and
WHEREAS, USL, AGSI, and DISTRIBUTOR desire to allocate among themselves
certain functions relating to the administration of the Contracts.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and of the mutual expectations of benefit occurring from the activities herein
contemplated, the Parties hereto agree as follows:
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SECTION 1. AVAILABLE CONTRACTS
1.1 AVAILABILITY. USL shall make available for offer and sale by
DISTRIBUTOR, pursuant to the terms and conditions of this Agreement, the
Contracts described in Schedule A attached hereto and incorporated by reference
herein, as the Parties may amend from time to time by mutual agreement.
1.2 MODIFICATION OF CONTRACTS. USL, in its sole discretion, may modify
or delete the terms of any Contract, to the extent permitted by the Contracts
and applicable law. DISTRIBUTOR may, from time to time, propose modifications to
the terms of any Contract, and USL agrees to consider any such proposed
modification in good faith, provided, however, that any implementation of such
proposed modification shall remain in USL's sole discretion.
1.3 SUSPENSION OR RESTRICTION OF SALES. USL, in its sole discretion,
may suspend or restrict the sale of any Contract in any state or other
jurisdiction upon 30 days' prior written notice to DISTRIBUTOR or upon such
shorter notice period as may be required by applicable law, without incurring
any liability or obligation to DISTRIBUTOR. Upon such notice, DISTRIBUTOR agrees
to immediately cease, and shall instruct all Selling Group Members (as defined
below) to immediately cease, all solicitation activity with respect to the
Contracts in those states or other jurisdictions where USL has suspended or
restricted the sale of Contracts. In addition, notwithstanding any provision
herein to the contrary, USL may refuse to sell any Contract to any applicant for
any reason.
1.4 REINSURANCE OF CONTRACTS. USL may reinsure any of the Contracts
with a reinsurer of its choice at any time, to the extent permitted by
applicable law.
SECTION 2. CONTRACT DISTRIBUTION
2.1 EXCLUSIVE APPOINTMENT.
(a) USL, as the issuer of the Contracts, and AGSI, as the principal
underwriter of the Contracts, hereby appoint DISTRIBUTOR (including any VK Funds
Associated Agency) the exclusive distributor, during the term of this Agreement,
for the marketing and distribution of the Contracts.
(b) The foregoing appointment shall be limited to those states and other
jurisdictions in which the Contracts may lawfully be offered and sold and in
which DISTRIBUTOR and any Associated Agency (as defined below) are properly
licensed as provided in Section 2.5 below, registered or otherwise qualified to
offer and sell the Contracts under the applicable federal securities laws and
the applicable insurance and other laws and regulations of each such state or
other jurisdiction. USL shall periodically provide DISTRIBUTOR with notice
pursuant to Section 14 hereof of all states and other jurisdictions in which the
Contracts may lawfully be
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offered and sold.
(c) As exclusive distributor for the Contracts, DISTRIBUTOR shall:
(i) assist in servicing the Contracts by, in its sole discretion,
either (A) communicating, as appropriate, with Contract owners, annuitants,
beneficiaries, and participants (collectively, "Contract owners") regarding
such matters as the exercise of rights and privileges available to them
under the terms of the Contracts or offered to them by USL; or by (B)
referring Contract owners to USL as appropriate; and
(ii) enter into agreements ("selling group agreements") with other
persons ("Selling Group Members"), pursuant to which such Selling Group
Members will offer, sell, and service Contracts in those states and other
jurisdictions where they and their Associated Agencies (as defined below)
are properly licensed, registered or otherwise qualified to offer and sell
the Contracts under the applicable insurance and other laws of each such
state or other jurisdiction.
(d) DISTRIBUTOR hereby expressly acknowledges and consents to the offer,
sale, and servicing of Contracts directly by AGSI and AGSI's own Sales Persons
(as defined below). The Parties hereby agree to enter into a selling group
agreement in order to support such activity. This Agreement does not limit the
rights of USL or AGSI to offer or sell insurance contracts, including, without
limitation, variable annuity contracts and variable life insurance policies,
other than the Contracts.
In addition, DISTRIBUTOR authorizes AGSI to enter into agreements to sell
the Contracts with persons who are qualified to sell as described in Section
2.3. DISTRIBUTOR shall bear no responsibility or liability for any activity
related to sales under such agreements, and in this regard shall be held
harmless by USL and AGSI. AGSI shall receive DISTRIBUTOR's specific written
consent before entering into any such agreement, which consent, if not withheld
by DISTRIBUTOR, shall be provided within ten calendar days after AGSI has given
notice of its intent to enter into the agreement. Notwithstanding the
foregoing, DISTRIBUTOR, in its sole discretion, may refuse to consent to the
appointment of any Selling Group Member or any Sales Person (as defined below),
or may require revocation of such appointment for any reason. DISTRIBUTOR shall
consult with USL prior to refusing to consent to an appointment or renewal of an
appointment, or requiring a revocation, as to the reasons for such decision.
DISTRIBUTOR shall not incur any obligation to compensate or reimburse any
expenses of USL or AGSI as a result of any such refusal to approve the
appointment of any Selling Group Member or Sales Person for which AGSI seeks
approval.
2.2 BEST EFFORTS. DISTRIBUTOR shall use its reasonable best efforts to
recruit Selling Group Members to offer, sell, and service Contracts.
2.3 SELLING GROUPS. Each Selling Group Member shall be registered with
the
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Securities and Exchange Commission ("SEC") as a broker-dealer under the
Securities Exchange Act of 1934 ("1934 Act") and shall be a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"),
unless the Selling Group Member is exempt from the broker-dealer registration
requirements of the 1934 Act. In addition, each Selling Group Member shall have
received an appropriate appointment or license by or through USL and, unless
exempt, a level of qualification with the NASD appropriate to enable it to offer
and sell Contracts. Each Selling Group Member shall enter into a selling group
agreement the form of which shall be as agreed to by the Parties from time to
time. DISTRIBUTOR shall not enter into any selling group agreement unless and
until USL has given written approval of the Selling Group Member, which approval
shall be provided within ten calendar days after DISTRIBUTOR has given notice of
its intent to enter into the agreement.
2.4 SUITABILITY DETERMINATIONS. USL, AGSI and DISTRIBUTOR wish to ensure
that the Contracts, the applications for which will be solicited by Selling
Group Members and their respective registered sales representatives (Selling
Group Members and registered sales representatives may be referred to
collectively as "Sales Persons"; if the context so warrants, registered sales
representatives may be referred to as "Sales Persons.") will be issued to
persons for whom the Contracts will be suitable. Each Selling Group Member
shall take reasonable steps to ensure that neither it nor any other Sales Person
makes recommendations to an applicant to purchase any of the Contracts, or to
select any investment option thereunder, in the absence of reasonable grounds to
believe that the purchase of the Contracts or selection of that option is
suitable for such applicant in compliance with federal securities law
requirements governing suitability obligations. While not limited to the
following, a determination of suitability shall be based on information
furnished to Sales Persons after reasonable inquiry of such applicant concerning
the applicant's insurance and investment objectives and financial situation and
needs, including the likelihood that the applicant will make sufficient premium
payments to derive the benefits thereof, and tax status. The responsibility of
Sales Persons to take such reasonable steps and make such determinations of
suitability shall be a requirement of each selling group agreement entered into
by DISTRIBUTOR.
2.5 SALES PERSONS/ASSOCIATED AGENCIES. DISTRIBUTOR shall enter into a
separate selling agreement whereby Selling Group Members will represent that
such Selling Group Member and its Sales Persons are duly registered and
qualified pursuant to the 1934 Act, NASD regulations, and any other securities
regulatory requirements. DISTRIBUTOR shall insure that any VK Funds Associated
Agency is and remains properly licensed under the applicable insurance laws and
regulations or each state of jurisdiction in which such VK Funds Associated
Agency is engaged in the offer or sale of the Contracts. DISTRIBUTOR shall
assist in ensuring that any insurance agency associated with a Selling Group
Member (each, an "Associated Agency") is and remains properly licensed under the
applicable insurance laws and regulations of each state or jurisdiction in which
the Associated Agency is engaged in the offer or sale of the Contracts by
including this obligation in each selling group agreement entered into by
DISTRIBUTOR.
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2.6 INSURANCE AGENT LICENSING.
(a) Neither DISTRIBUTOR nor any Selling Group Member or other Sales Person
thereof, shall engage in any activities with respect to the offer or sale of
Contracts that would require insurance agent licensing in the state or
jurisdiction where such activities are performed, unless and until such Sales
Persons are properly licensed to perform such services in the particular state
or other jurisdiction.
(b) DISTRIBUTOR shall immediately notify USL if the license of any VK Funds
Associated Agency is revoked, suspended, or terminated, and shall immediately
notify USL at such time DISTRIBUTOR becomes aware that the license of any Sales
Person or Associated Agency has been revoked, suspended, or terminated.
(c) USL agrees to take all actions necessary to effect the appointment of
the Sales Persons as insurance agents of USL, and to effect renewals thereof,
all as required for the business of this Agreement.
(d) DISTRIBUTOR shall, from time to time, advise USL of the Sales Persons
that DISTRIBUTOR wishes USL to appoint as USL insurance agents. USL shall
forward all approved agent appointment forms that it receives in a timely manner
to the appropriate state insurance departments.
(e) DISTRIBUTOR and USL shall cooperate in making arrangements with each
Selling Group Member in order to help to keep costs associated with the
appointment of Sales Persons at reasonable levels.
(f) Notwithstanding the foregoing, USL, in its sole discretion, may refuse
to appoint or renew the appointment of any Sales Person, or may revoke such
appointment for any reason. USL shall consult with DISTRIBUTOR prior to refusing
to appoint, renew appointment, or revoking an appointment, as to the reasons for
such decision. Neither USL nor AGSI shall incur any obligation to compensate or
reimburse any expenses of DISTRIBUTOR as a result of any such refusal to appoint
or renew an appointment of a Sales Person.
2.7 COMPLIANCE, TRAINING, AND SUPERVISION
(a) Compliance. DISTRIBUTOR shall require each Selling Group Member to
ensure that their respective Sales Persons comply with all applicable federal
and state laws and regulations and the rules of the NASD relating to the offer
and sale of the Contracts. This responsibility shall be a requirement of each
selling group agreement entered into by DISTRIBUTOR.
(b) Training. DISTRIBUTOR agrees to conduct initial and periodic training
and education of the Sales Persons in their solicitations of applications for
the Contracts and all of their activities relating to this Agreement.
DISTRIBUTOR agrees to train the Sales Persons as to the Contracts in accordance
with any guidelines furnished by USL or AGSI. USL
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or AGSI may assist DISTRIBUTOR by assisting in the training and education of
DISTRIBUTOR's training personnel in product specifications and markets.
(c) Supervision. Selling Group Members shall be responsible for the
supervision of the Sales Persons in their solicitation of applications for the
Contracts and all of their activities relating to this Agreement and that are
provided for under the Selling Group Agreement. DISTRIBUTOR shall establish
reasonable procedures to be implemented by Selling Group Members for periodic
inspection and supervision of sales practices of the Sales Persons and
DISTRIBUTOR, after consultation with Selling Group Members, shall submit reports
to USL or AGSI as may be reasonably requested from time to time on the result of
such inspections and the compliance with such procedures.
2.8 MARKETING MATERIALS
(a) DISTRIBUTOR, at its sole cost, shall be responsible for developing
(with the assistance of USL), printing and distributing all marketing materials
to be used in connection with the offer and sale of the Contracts, except for
(i) any prospectus for the Contracts, including any related statement of
additional information ("SAI"), and any amendments or supplements to the
foregoing (collectively, as the context requires, "Contract Prospectus") and
(ii) any annual or semi-annual reports for an Account ("Account Reports"), the
preparation of which shall be the sole responsibility of USL. As used herein,
"marketing materials" shall mean any "advertisement" or "sales literature," as
those terms are defined in Section 35(a) of the NASD's Rules of Fair Practice,
as amended from time to time, including, without limitation, any so-called
"dealer only" materials.
(b) The responsibility for (i) printing and distributing Contract
Prospectuses (including any related SAI) and Account Reports used as marketing
materials and (ii) the costs of printing and distributing such Contract
Prospectuses and Account Reports shall be set forth in the Amended and Restated
Fund Participation Agreement by and among USL, DISTRIBUTOR, and other parties
thereto ("Participation Agreement"). DISTRIBUTOR shall deliver the current
Contract Prospectus together with the current prospectus of the investment
vehicles available under the Contracts, including any supplements thereto ("Fund
Prospectus") (generally attached thereto) to every applicant for the related
Contract at or prior to the time that an application form or other marketing
materials are submitted to the applicant (other than materials submitted in
compliance with Rules 134 or 482 of the Securities Act of 1933 ("1933 Act").
DISTRIBUTOR shall deliver the current SAI related to the Contracts promptly to
any applicant or Selling Group Member who requests one and USL shall promptly
forward all such requests that it receives to DISTRIBUTOR. USL shall at all
times keep DISTRIBUTOR informed of the dates of the appropriate current Contract
Prospectus and SAI.
(c) USL and DISTRIBUTOR shall submit by telecopy or overnight delivery
definitive copies of all marketing materials to the other for its approval,
which approval, unless denied or withheld, shall be provided within at least ten
(10) business days of receipt or such period to which the Parties may agree from
time to time.
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(d) DISTRIBUTOR shall, to the extent required, file in a timely manner all
marketing materials with the NASD, the SEC, and any other regulatory body (other
than state insurance regulatory bodies), as appropriate, and shall obtain any
necessary approval of these regulatory bodies of such marketing materials. USL
shall, to the extent required, file in a timely manner all marketing materials
with the various state insurance regulatory bodies, as appropriate, and shall
obtain any necessary approval of these regulatory bodies of such marketing
materials.
(e) Notwithstanding the foregoing, USL acknowledges that Selling Group
Members, at their own cost, may from time to time develop, print, and distribute
marketing materials that are not jointly developed by USL and DISTRIBUTOR
("supplemental marketing materials"). In no event shall DISTRIBUTOR utilize, or
permit or encourage Selling Group Members to utilize, any supplemental marketing
materials unless USL has provided its written approval of such materials prior
to their intended first use. The responsibility of Selling Group Members to
obtain USL's prior written approval of supplemental marketing materials shall be
a requirement of each selling group agreement entered into by DISTRIBUTOR.
2.9 MARKETING SERVICES. In connection with the offer and sale of
Contracts, DISTRIBUTOR agrees to:
(a) develop a marketing plan for the introduction and continuing sale of
the Contracts through Selling Group Members;
(b) provide USL on an ongoing basis with information concerning the
marketability of the Contracts and the usefulness of the marketing materials
jointly prepared by USL and DISTRIBUTOR or any other documents prepared by USL,
and advise USL with regard to the desirability of revising or redesigning the
same;
(c) provide USL on an ongoing basis with comparative data regarding
products offered by other life insurance companies and mutual fund groups;
(d) initiate and maintain contact with existing and potential Selling Group
Members for purposes of advising USL on the desirability of developing and
implementing new Contract features;
(e) receive written and oral inquiries from Selling Group Members with
respect to the Contracts and coordinate responses to the same with USL;
(f) provide assistance to Selling Group Members in arranging for the
insurance licensing and appointment of the Members' Sales Persons;
(g) distribute to Selling Group Members copies of all marketing and non-
marketing materials, described herein, that are approved or prepared by USL
pursuant to this Agreement;
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(h) maintain a toll-free number and support and service unit to render
assistance to Selling Group Members in connection with the offer and sale of
Contracts;
(i) provide Selling Group Members, to the extent requested, with technical
assistance at the time of sale of the Contracts;
(j) participate in seminars for customers and potential customers of
Selling Group Members; and
(k) provide such other marketing services and support as USL may
reasonably request from time to time.
2.10 NON-MARKETING MATERIALS.
(a) USL, at its sole cost, shall be responsible for preparing, printing
in quantity and delivering to DISTRIBUTOR: (i) all Contract forms, applications
and related materials, (ii) all documents pertaining to the processing of
premium payments, refunds and other monies, and (iii) all documents pertaining
to transactions, claims, and other features available under the Contracts,
including, but not limited to, full or partial surrenders, exchanges, transfers,
loans, systematic purchases, death claims, changes in premium allocations, and
changes in beneficiary.
(b) USL, at its sole cost, shall be responsible for preparing, printing,
and distributing all correspondence with Contract owners, except for
correspondence prepared, printed, and distributed by DISTRIBUTOR pursuant to
USL's prior approval.
(c) The responsibility for printing and distributing Contract
Prospectuses to existing Contract owners shall be set forth in the Participation
Agreement.
(d) USL, at its sole cost, shall be responsible for preparing, printing,
distributing to existing Contract owners, and, to the extent required, filing
with any appropriate regulatory body, in a timely manner, or causing the same to
be done: (i) all Contract owner account statements, (ii) Account Reports, (iii)
voting cards, as appropriate; and (iv) all reports, forms, and other information
necessary to comply with applicable federal and state tax law.
(e) USL shall provide to DISTRIBUTOR or its designated agent at least one
complete copy of all SEC registration statements, Contract Prospectuses, Account
Reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(f) USL, as agent for AGSI and DISTRIBUTOR shall, upon or prior to the
completion of each Contract transaction for which a confirmation is legally
required, send a written confirmation to the Contract owner for each such
transaction, in a form and manner
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which complies with the requirements of the 1934 Act, state laws and
regulations, and the disclosure requirements of the NASD. Such confirmations
shall be furnished to all Contract owners in accordance with securities laws,
shall reflect the facts of the transaction, and, if applicable, shall show that
they are being sent by USL on behalf of AGSI and DISTRIBUTOR.
2.11 INFORMATION ABOUT USL AND DISTRIBUTOR
(a) Neither USL nor any of its affiliates will give any information or make
any representations or statements on behalf of or concerning DISTRIBUTOR or its
affiliates in connection with the sale of the Contracts other than the
information or representations provided by or on behalf of DISTRIBUTOR and its
affiliates that are contained (i) in the registration statement, including the
Contract Prospectus contained therein, as such registration statement and
Prospectus may be amended from time to time; (ii) in Account Reports or voting
instruction solicitation materials for each Account; or (iii) marketing
materials prepared, except with the express written permission of DISTRIBUTOR.
As used herein, the term "affiliate" shall have the same meaning as defined in
Section 2(a)(3) of the Investment Company Act of 1940 ("1940 Act").
(b) Neither DISTRIBUTOR nor any of its affiliates will give any information
or make any representations or statements on behalf of or concerning USL, AGSI,
or their respective affiliates in connection with the sale of the Contracts
other than the information or representations provided by or on behalf of USL,
AGSI, or their respective affiliates that are contained in (i) the registration
statement, including the Contract Prospectus contained therein, as such
registration statement and Prospectus may be amended from time to time; (ii) in
Account Reports or voting instruction solicitation materials for each Account;
or (iii) in marketing material, except with the express written permission of
USL.
2.12 COMPLAINTS.
In the case of an oral or written consumer or regulatory agency complaint,
USL, AGSI, and DISTRIBUTOR shall each promptly notify the others and shall
coordinate and fully cooperate in responding to such complaints. USL, AGSI, and
DISTRIBUTOR shall jointly develop procedures to coordinate, investigate and
respond to such complaints. USL, AGSI and DISTRIBUTOR agree to consult with
one another with respect to the disposition of any complaints or grievances and
DISTRIBUTOR shall use its best efforts to obtain the cooperation of any Sales
Person in the disposition thereof. AGSI and DISTRIBUTOR shall maintain customer
complaint files pursuant to applicable NASD rules.
2.13 PREMIUM PAYMENTS. DISTRIBUTOR and USL shall enter into agreements
with Selling Group Members setting forth the method for, and responsibilities
with respect to, the handling and processing of premium payments or other monies
received in connection with the sale of the Contracts.
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2.14 LIMITATIONS ON AUTHORITY. DISTRIBUTOR and Sales Persons shall have
no authority to, and shall not:
(a) alter or substitute USL's Contract applications or forms in any manner;
(b) guarantee the issuance of any Contract or the reinstatement of any
lapsed Contract (in the case of life insurance Contracts), or the reinvestment
of any Contract (in the case of annuity Contracts);
(c) add, alter, waive or discharge any Contract provision, including,
without limitation, any forfeiture provision, or represent that such can be done
by USL;
(d) make any settlement of any claim or claims or bind USL or any of its
affiliates in any way;
(e) extend the time of making any premium payments, or pay or allow any
inducement not specified in the Contracts to any Contract owner or applicant, or
rebate any portion of a premium payment, in any manner whatsoever;
(f) incur any indebtedness or liability on behalf of or expend or contract
for the expenditure of the funds by USL;
(g) enter into legal proceedings in connection with any matter pertaining
to the business of USL without the prior written consent of USL, unless
DISTRIBUTOR or any Sales Person, as the case may be, is named in such
proceedings;
(h) give or offer to give, on behalf of USL, any tax or legal advice
related to the purchase of a Contract; or
(i) exercise any authority on behalf of USL other than that expressly
conferred on DISTRIBUTOR or any Sales Person by this Agreement.
2.15 INDEPENDENT CONTRACTOR. DISTRIBUTOR shall at all times function as,
and be deemed to be, an independent contractor. Nothing contained herein shall
be construed as creating the relationship of employer and employee between or
among USL, AGSI, and DISTRIBUTOR (or any Sales Person or Associated Agency
thereof).
SECTION 3. ADMINISTRATION AND RECORDKEEPING
3.1 CONTRACT ADMINISTRATION. Each Party agrees to perform the
administrative duties assigned to such Party under Schedule B attached hereto
and incorporated by reference herein, as the Parties may amend from time to time
by mutual agreement. Each party acknowledges that the other party may
subcontract its rights and responsibilities enumerated in
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Schedule B to one or more third party vendors. Although such duties may be
delegated, each party agrees that it is legally liable for the performance of
the same.
3.2 PERFORMANCE STANDARDS. Each Party agrees to use its reasonable
best efforts to meet or exceed the standards for performing the various
administrative duties set out in Schedule B attached hereto and incorporated by
reference herein, as the Parties may amend from time to time by mutual
agreement.
3.3 RECORDKEEPING.
(a) Each Party agrees to keep, at its principal office, all accounts, books
and other records (collectively, "records") required by and in accordance with
applicable federal and state law, and the regulations of any regulatory body
having jurisdiction over such records, including, without limitation, Rules
31a-1 and 31a-2 under the 1940 Act and Rules 17a-3 and 17a-4 under the 1934 Act.
In the case of USL, records may be kept at another location in accordance with
procedures approved by the New York Superintendent of Insurance.
(b) Each Party agrees to maintain any and all records as may pertain to the
Contracts and this Agreement in a manner that clearly and accurately discloses
the precise nature and details of Contract transactions or any transactions
related thereto.
(c) Each Party agrees to assist the others in the timely preparation of
records. In this regard, each Party shall promptly furnish to any other Party
hereto any reports and information that such other Party may request for the
purpose of meeting reporting and recordkeeping requirements under the insurance
laws of the state of New York or any other state and under the federal or state
securities laws or the rules of the NASD.
(d) To the extent that records maintained by USL, AGSI or DISTRIBUTOR
(each, a "Maintaining Party" as the case may be) are necessary to satisfy the
recordkeeping requirements imposed by federal securities laws and regulations on
any other Party to this Agreement (the "Responsible Party"), the Responsible
Party hereby appoints the Maintaining Party as its agent for the purpose of
keeping and maintaining such records. As required by 1940 Act Rule 31a-3(a) and
1934 Act Rule 17a-4(i), such records will be the exclusive property of the
Responsible Party, but this shall not preclude the Maintaining Party from having
access to such records or keeping copies of such records for its own files. In
addition, as required by 1940 Act Rule 31a-3(a) and 1934 Act Rule 17a-4(i), the
Maintaining Party shall, promptly upon the request of the Responsible Party,
surrender or provide reasonable access to, as requested, all records held by it
for the Responsible Party pursuant to this Agreement in a form mutually agreed
to by such Parties. In order to comply with 1934 Act Rule 17a-4(i), with respect
to books and records maintained or preserved subject thereto, the Maintaining
Party hereby undertakes to permit examination of such books and records at any
time or from time to time during business hours by representatives or designees
of the SEC, and to promptly furnish to the SEC or its designee true, correct,
complete and current hard copy of any or all of any part of such books and
records.
11
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 BY USL
USL represents and warrants that:
(a) it is an insurance company duly organized, validly existing and in good
standing under the laws of the State of New York and has full corporate power,
authority and legal right to execute, deliver and perform its duties and comply
with its obligations under this Agreement,
(b) it has legally and validly established and maintains each Account as a
segregated asset account under New York statutes and the regulations thereunder,
(c) the Contracts comply in all material respects with all other
applicable federal and state laws and regulations,
(d) interests in each Account pursuant to the Contracts will be registered
under the 1933 Act to the extent required by the 1933 Act,
(e) the Contracts will be duly authorized for issuance and sold in
compliance with all applicable federal and state laws, including, without
limitation, the 1933 Act, the 1934 Act, the 1940 Act, New York law, and the laws
of any other state in which the Contracts are offered and sold,
(f) each Account is and will remain registered under the 1940 Act, to the
extent required by the 1940 Act, and each Account does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required,
(g) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder,
(h) USL will amend the registration statement for its Contracts under the
1933 Act and for its Accounts under the 1940 Act from time to time as required
in order to effect the continuous offering of its Contracts or as may otherwise
be required by applicable law, and
(i) each Contract Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, but
excluding information contained or omitted in reliance upon and in conformity
with information furnished to USL or AGSI by or on behalf of DISTRIBUTOR.
USL further represents that:
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(a) the Contracts currently are and will be treated as annuity,
endowment, or life insurance contracts under applicable provisions of the
Internal Revenue Code of 1986, as amended ("Code"), that it will use its best
efforts to maintain such treatment, and that it will notify DISTRIBUTOR
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future, and
(b) that each Account is a "segregated asset account," that interests in
the Account are offered exclusively through the purchase of or transfer into a
"variable contract," within the meaning of such terms under Section 817 of the
Code and the regulations thereunder, that it will use its best efforts to
continue to meet such definitional requirements, and that it will notify
DISTRIBUTOR immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
4.2 BY XXXX
XXXX represents and warrants that:
(a) it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Texas and has full power, authority, and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement,
(b) it is a member in good standing of the NASD and that it has obtained
all approvals necessary to offer the Contracts and otherwise enter into and
carry out all transactions contemplated by this Agreement, has obtained or will
obtain all approvals, licenses, authorizations, orders or consents, and shall be
duly registered or otherwise qualified under the securities laws of any state or
other jurisdiction where offers or sales of the Contracts may be made,
(c) it is bonded as required by all applicable laws and regulations and
that it will carry out its sales and underwriting obligations hereunder in
continued compliance with the NASD Rules of Fair Practice and federal and state
securities laws and regulations and state insurance laws and regulations,
(d) it is duly registered with the SEC as a broker-dealer under the 1934
Act, and that the activities of DISTRIBUTOR and Sales Persons in connection with
the offer and sale of Contracts shall be in compliance with applicable federal
and state securities laws and regulations in all material respects,
(e) in its capacity as principal underwriter of the Contracts it has
performed due diligence in order to discharge its obligations to all Selling
Group Members, and further that the Contracts are the subject of a bona fide
offering and that after a reasonable examination of the Contracts, it has
determined that the representations contained in the Contract prospectuses are
true and correct,
13
(f) it shall at all times provide appropriate supervision for those home
office employees of USL who are registered representatives of AGSI and who are
required by USL to execute duties on behalf of USL which are related to the
Contracts, and
(g) it shall take all actions necessary to obtain and maintain all
regulatory approvals required to underwrite the Contracts for sale in all states
and jurisdictions in which the Contracts may be sold.
4.3 BY DISTRIBUTOR.
DISTRIBUTOR represents and warrants that:
(a) it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has full power, authority,
and legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement,
(b) it is a member in good standing of the NASD and that it or the VK Funds
Associated Agencies have or will have obtained all approvals necessary to offer
the Contracts and otherwise enter into and carry out all transactions
contemplated by this Agreement, have obtained or will obtain all approvals,
licenses, authorizations, orders or consents, and shall be duly registered or
otherwise qualified under the securities and insurance laws of any state or
other jurisdiction where offers or sales of the Contracts may be made,
(c) it or each VK Funds Associated Agency is bonded as required by all
applicable laws and regulations and will carry out its or their sales and
underwriting obligations hereunder in continued compliance with the NASD Rules
of Fair Practice and federal and state securities laws and regulations and state
insurance laws and regulations,
(d) it is duly registered with the SEC as a broker-dealer under the 1934
Act, and that the activities of DISTRIBUTOR shall be in compliance with
applicable federal and state securities laws and regulations in all material
respects,
(e) neither it nor any of its Sales Persons or the VK Funds Associated
Agencies shall make any representations concerning the Contracts, except those
contained in or reasonably derived from the Contract Prospectus, registration
statements, annual or semi-annual reports of each Account, or in other written
materials prepared or approved by or on behalf of USL, and
(f) to the extent that DISTRIBUTOR assigns rights or obligations under this
Agreement to an Associated Agency pursuant to Section 8 hereof, DISTRIBUTOR
represents and warrants that such Associated Agency will have and maintain all
governmental approvals, licenses, authorizations, orders or consents that are
necessary for it to be assigned such rights and perform any such obligations. In
addition, the representations and warranties made by
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DISTRIBUTOR in this Section 4.3 shall be read to apply to each VK Funds
Associated Agency where the context so requires.
SECTION 5. COMPENSATION; COSTS AND EXPENSES
5.1 COMPENSATION.
(a) USL agrees to compensate DISTRIBUTOR for its services hereunder in
accordance with Schedule C attached hereto and incorporated herein by reference,
as the Parties may amend from time to time by mutual agreement.
(b) DISTRIBUTOR agrees that neither it nor any of its Sales Persons or the
VK Funds Associated Agencies will pay any commission, or portion thereof, or
other compensation based upon a percentage of premium payments or other valuable
consideration for services rendered in soliciting the sale of the Contracts to
any person or entity (i) that is not duly licensed or appointed by USL to sell
the Contracts under the applicable laws of any state or jurisdiction or (ii)
that is not duly registered or otherwise qualified under the 1934 Act and rules
thereunder or under any applicable state laws and rules governing broker-dealers
and their Sales Persons, unless exempt therefrom; provided, however, that this
representation shall not prohibit the payment of compensation to the widow(er)
or other beneficiary of a person lawfully entitled to receive such compensation
pursuant to a bona fide contract that calls for such payment.
5.2 REGISTRATION FEES. The fees imposed by the SEC pursuant to Rule
24f-2 under the 1940 Act in connection with the registration of an Account's
units of interest under the 1933 Act shall be borne equally by USL and
DISTRIBUTOR.
5.3 EACH PARTY TO BEAR OWN COSTS. Except as otherwise expressly
provided, each Party to this Agreement shall bear all expenses of fulfilling its
duties and obligations hereunder. To the extent one Party initially bears any
costs or expenses that are the responsibility of another Party, that other Party
shall reimburse the Party that initially bore such expenses promptly upon
request.
SECTION 6. INDEMNIFICATION
6.1 INDEMNIFICATION BY USL AND AGSI
(a) Except as limited by and in accordance with the provisions of Sections
6.1(c) and 6.1(d) below, USL and AGSI, jointly and severally, shall indemnify
and hold harmless DISTRIBUTOR against any loss, claim, damage or liability
(including amounts paid in settlement with the written consent of DISTRIBUTOR),
or litigation (including reasonable counsel fees and other costs of
investigating or defending any alleged loss, claim, damage, or liability) to
which DISTRIBUTOR may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, or liabilities are
related to the sale of the Contracts and:
15
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Contract, the
registration statement relating to the Contracts, the Contract Prospectus,
or in any published marketing materials or communications with any Contract
owner (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party, as defined below, if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity
with information furnished to USL or AGSI by or on behalf of DISTRIBUTOR or
any VK Funds Associated Agency thereof for use in the foregoing materials;
or
(ii) arise out of the failure of USL, AGSI, or any of their
respective affiliates, officers, directors, or employees, to comply with
any applicable securities, insurance, or other laws and regulations in
connection with its rendering of Contract issue, recordkeeping,
confirmation or other services under this Agreement; or
(iii) arise out of USL's or AGSI's negligence or misconduct, or that of
their respective affiliates, officers, directors, or employees in the
performance of its duties hereunder; or
(iv) arise as a result of any failure by USL or AGSI to substantially
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by USL or AGSI in this Agreement or arise
out of or result from any other material breach of this Agreement by USL or
AGSI.
(b) The indemnities in this Section 6.1 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director, officer, Sales
Person and affiliate of DISTRIBUTOR or any VK Funds Associated Agency and any
person controlling DISTRIBUTOR within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act (each an "Indemnified Party").
(c) USL and AGSI shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
(d) Neither USL or AGSI shall be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified USL and AGSI, if appropriate, in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
16
such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify USL and
AGSI of any such claim shall not relieve USL and AGSI from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against an Indemnified Party, USL and AGSI shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from USL and AGSI to such party of USL's and AGSI's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and USL will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
6.2 INDEMNIFICATION BY DISTRIBUTOR
(a) Except as limited by and in accordance with the provisions of Sections
6.2(c) and 6.2(d) below, DISTRIBUTOR shall indemnify and hold harmless USL and
AGSI against any loss, claim, damage or liability (including amounts paid in
settlement with the written consent of USL and AGSI), or litigation (including
reasonable counsel fees and other costs of investigating or defending any
alleged loss, claim, damage, or liability) to which USL or AGSI may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, or liabilities are related to the sale of the
Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Contract, the
registration statement relating to the Contracts, the Contract Prospectus,
or in any published marketing materials or communications with any Contract
owner (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state
therein or necessary to make the statements therein not misleading, if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to USL or AGSI
by or on behalf of DISTRIBUTOR or any VK Funds Associated Agency thereof
for use in the foregoing materials; or
(ii) arise out of the failure of DISTRIBUTOR or any VK Funds Associated
Agency, including affiliates, officers, directors, or employees of the
foregoing, to comply with any applicable securities or other laws and
regulations in connection with its rendering of Contract marketing,
distribution, recordkeeping, or other services under this Agreement; or
(iii) arise out of the negligence or misconduct of DISTRIBUTOR or any
VK Funds Associated Agency, or that of any affiliate, officer, director, or
employee of the foregoing, in the performance of its duties hereunder; or
(iv) arise as a result of any failure by DISTRIBUTOR to substantially
provide
17
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by DISTRIBUTOR in this Agreement or arise
out of or result from any other material breach of this Agreement by
DISTRIBUTOR.
(b) The indemnities in this Section 6.2 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director, officer, and
affiliate of USL or AGSI and any person controlling USL or AGSI within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (each an
"Indemnified Party").
(c) DISTRIBUTOR shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
(d) DISTRIBUTOR shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified DISTRIBUTOR in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify DISTRIBUTOR of any such claim shall not
relieve DISTRIBUTOR from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, DISTRIBUTOR shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice from
DISTRIBUTOR to such party of DISTRIBUTOR's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and DISTRIBUTOR will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
6.3 LIMITATION ON LIABILITY. In no event shall any Party under this
Agreement be liable for lost profits or for exemplary, special, punitive or
consequential damages alleged to have been sustained by the other Party, as
opposed to a third party.
6.4 INJUNCTIVE RELIEF. The Parties each agree that monetary damages may
be an inadequate remedy in the event of a breach by any Party of any of the
covenants in this Agreement, and that any such breach by a Party may cause the
other Parties great and irreparable injury and damage. Accordingly, the Parties
agree that the non-breaching Parties shall be entitled, without waiving any
additional rights or remedies otherwise available to it at law or in equity or
by statute, to injunctive and other equitable relief in the event of a breach or
intended or threatened breach by any other Party of any of said covenants.
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SECTION 7. TERM AND TERMINATION
7.1 TERM. This Agreement shall be effective as of the date first above
written and shall, unless earlier terminated pursuant to Section 7.2 or 7.3,
remain in full force and effect thereafter with respect to all Contracts of each
particular form type until no Contracts of that particular form type remain
outstanding.
7.2 EVENTS OF TERMINATION.
(a) This Agreement shall terminate at any Party's option, without penalty:
(i) with or without cause, on not less than 180 days' written notice to
the other Parties;
(ii) upon the mutual written consent of the Parties;
(iii) upon written notice of one Party to the other Parties in the
event of bankruptcy or insolvency of such party to which notice is given;
or
(iv) in the event of an assignment of this Agreement, subject to the
provisions of Section 8.
(b) This Agreement shall terminate at the option of DISTRIBUTOR, subject to
Section 7.3, in the event of:
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by USL or AGSI;
(ii) the dissolution or disqualification of USL or AGSI to do business
under any applicable state or federal law where USL or AGSI's ability to
perform is materiallyimpaired; however, such termination shall extend only
to the jurisdiction(s) where USL or AGSI is prohibited from doing business;
(iii) the suspension or revocation of any material license or permit
held by USL or AGSI by the appropriate governmental agency or authority;
however, such termination shall extend only to the jurisdiction(s) where
USL or AGSI is prohibited from doing business;
(iv) the sale (without the prior written consent of DISTRIBUTOR, which
consent shall not be unreasonably withheld) of the USL or AGSI business
relating to the
19
Contracts, which sale is to an unaffiliated person or entity, whether by
merger, consolidation, or sale of substantially all of USL or AGSI's
assets, during the term of, and any extension of, this Agreement; or
(v) upon the institution of formal proceedings against USL or AGSI by
the NASD, SEC, or any other regulatory body regarding USL or AGSI's duties
under this Agreement, the sale of the Contracts, or the operation of any
Account, provided that such proceedings result in a finding of material
wrongdoing by USL or AGSI.
(c) This Agreement shall terminate at the option of USL or AGSI, subject to
Section 7.3, in the event of:
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by DISTRIBUTOR;
(ii) the dissolution or disqualification of DISTRIBUTOR to do business
under any applicable state or federal law where DISTRIBUTOR's ability to
perform is materially impaired; however, such termination shall extend only
to the jurisdiction(s) where DISTRIBUTOR is prohibited from doing business;
(iii) the suspension or revocation of any material license or permit
held by DISTRIBUTOR by the appropriate governmental agency or authority;
however, such termination shall extend only to the jurisdiction(s) where
DISTRIBUTOR is prohibited from doing business;
(iv) the sale (without the prior written consent of USL, which consent
shall not be unreasonably withheld) of DISTRIBUTOR's business to an
unaffiliated person or entity, whether by merger, consolidation, or sale of
substantially all of DISTRIBUTOR'S assets during the term of, and any
extension of, this Agreement (Notwithstanding this subsection 7.2(c)(iv),
USL and AGSI specifically consent to the transactions contemplated by the
Merger Agreement.); or
(v) upon the institution of formal disciplinary proceedings against
DISTRIBUTOR by the NASD, SEC, or any other regulatory body, regarding
DISTRIBUTOR's duties under this Agreement or the sale of the Contracts,
provided that such proceedings result in a finding of material wrongdoing
by DISTRIBUTOR.
7.3 REMEDY OF EVENTS OF DEFAULT. If any Party breaches this Agreement or
is in default in the performance of any of its duties and obligations hereunder
(the "defaulting Party"), including, without limitation, a breach in any
representation or warranty made by the defaulting
20
Party, the non-defaulting Parties may give written notice thereof to the
defaulting Party, and if such breach is not remedied within 30 days after such
written notice is given, then the non-defaulting Parties may terminate this
Agreement by giving 30 days' written notice of such termination to the
defaulting Party.
7.4 PARTIES TO COOPERATE RESPECTING TERMINATION. The Parties agree to
cooperate and give reasonable assistance to each other in effecting an orderly
transition following termination.
SECTION 8. ASSIGNMENT BY DISTRIBUTOR
DISTRIBUTOR may, with the prior written consent of USL and prior
notification to the New York Insurance Department, assign its rights or
obligations under this Agreement to a VK Funds Associated Agency to the extent
deemed necessary or appropriate by DISTRIBUTOR in order to comply with
applicable laws or regulations. If obligations under this Agreement are
assigned to a VK Funds Associated Agency as permitted herein, DISTRIBUTOR shall
not be relieved of any of such obligations.
SECTION 9. CONTRACT LAPSE, TERMINATION, SURRENDER, ETC.
During the term of this Agreement and for two (2) years following the
termination of this Agreement, neither DISTRIBUTOR nor any of its VK Funds
Associated Agencies or Sales Persons, or any affiliate, director, officer or
employee of the foregoing, shall induce or cause, or attempt to induce or cause,
directly or indirectly, any Contract owner (a) to lapse, terminate, surrender,
exchange, or cancel his or her Contract, (b) to cease or discontinue making
premium payments thereunder, or (c) to direct cash value or premium payments
thereunder to any other financial product without the prior written consent of
USL, unless such act is in response to an enactment of federal or state
legislation, order or decision of any court or regulatory authority, or a change
in circumstances that makes the Contracts or insurance contracts of that type
(e.g., annuity contracts or life insurance contracts) an unsuitable investment
for existing Contract owners. USL shall have the right to cease compensation
payments to DISTRIBUTOR in the event this provision is violated; provided,
however, that this Section 9 shall have no effect in the event USL undertakes
either (1) a formal exchange offer of the Contracts, or (2) a substitution of
any series of a fund or funds advised or sub-advised by an affiliate of
DISTRIBUTOR pursuant to Section 26(b) of the Investment Company Act of 1940, and
neither (1) nor (2) is undertaken as a result of DISTRIBUTOR's or such
affiliates inability to perform their respective obligations hereunder.
SECTION 10. CONFIDENTIALITY
Each Party to this Agreement shall keep confidential any information about
each other Party, or its operations obtained pursuant to this Agreement or the
transactions contemplated herein and shall disclose such information only if
such other Party has authorized such
21
disclosure, or if such disclosure is required by federal, state or any other
applicable regulatory bodies. If any Party hereto receives a request from such
regulatory body requiring such disclosure, that Party shall immediately notify
the other Parties of the request.
SECTION 11. ARBITRATION OF DISPUTES
11.1 ARBITRATION BINDING. Any controversy or claim arising out of or
relating to this Agreement, or the breach hereof, shall be settled by
arbitration under the rules of the NASD in effect at that time. If the NASD
refuses jurisdiction, or the Parties mutually agree in writing, the arbitration
procedure described herein shall be used. In either event, the decision of the
arbitrator(s) shall be final and judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
11.2 INITIATION OF ARBITRATION. To initiate arbitration, the Party
seeking arbitration ("Claimant") shall notify the Party(ies) (each, a
"Respondent") in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The Respondent(s) shall respond to the
notification in writing within 10 days of its receipt.
11.3 SELECTION OF ARBITRATORS.
(a) The arbitration hearing shall be before a panel of three arbitrators,
each of whom must be (i) a present or former officer of a life insurance or
reinsurance company and/or (ii) an officer and principal of a registered broker-
dealer. The panel must contain at least one representative from each of (i) and
(ii). An arbitrator may not be a present or former affiliate, director, officer,
employee, attorney, or consultant of USL, AGSI, and DISTRIBUTOR (or any
Associated Agency or Sales Person thereof).
(b) Claimant and Respondent shall each name five (5) candidates to serve as
an arbitrator. Claimant and Respondent shall each choose one candidate from the
other Party's list, and these two candidates shall serve as the first two
arbitrators. Claimant and Respondent shall each present their initial lists of
five (5) candidates by written notification to the other Party within 25 days of
the date of the mailing of the notification initiating the arbitration. Any
subsequent additions to the list that are required shall be presented within 10
days of the date the naming Party receives notice that a candidate that has been
chosen declines to serve.
(c) The two arbitrators shall then select the third arbitrator from the
eight (8) candidates remaining on the lists of the Claimant and Respondent
within 14 days of the acceptance of their positions as arbitrators. If the two
arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to the Parties. Claimant and Respondent shall take turns striking
thename of one of the remaining candidates from the initial eight (8) candidates
until only one candidate remains. If the candidate so chosen shall decline to
serve as the third arbitrator, the candidate whose name was stricken last shall
be nominated as the third arbitrator. This process shall continue until a
candidate has been chosen and accepted. This candidate shall
22
serve as the third arbitrator. The first turn at striking the name of a
candidate shall belong to the Respondent. Once chosen, the arbitrators are
empowered to decide all substantive and procedural issues by a majority of
votes.
11.4 IMPARTIALITY. The Parties agree that each of the three arbitrators
should be impartial regarding the dispute. Therefore, at no time will any Party
contact or otherwise communicate with any person who is to be or who has been
designated as a candidate to serve as an arbitrator concerning the dispute,
except upon the basis of jointly drafted communications provided by the Parties
to inform those candidates actually chosen as arbitrators of the nature and
facts of the dispute. Likewise, any written or oral arguments provided to the
arbitrators concerning the dispute shall be coordinated with the other
Party(ies) and shall be provided simultaneously to the other Party(ies) or shall
take place in the presence of the other Party(ies). Further, at no time shall
any arbitrator be informed that the arbitrator has been named or chosen by one
Party or another.
11.5 HEARING DATE AND TIME. The arbitration hearing shall be held on a
date fixed by the arbitrators. In no event shall this date be later than six
(6) months after the appointment of the third arbitrator. As soon as possible,
the arbitrators shall establish pre-arbitration procedures as warranted by the
facts and issues of the particular case. At least 10 days prior to the
arbitration hearing, each Party shall provide the other Party(ies) and the
arbitrators with a detailed statement of the facts and arguments that it will
present at the arbitration hearing. The arbitrators may consider any relevant
evidence; they shall give the evidence such weight as they deem it entitled to
after consideration of any objections raised concerning it. The Claimant shall
have the burden of proving its case by a preponderance of the evidence. Each
Party may examine any witnesses who testify at the arbitration hearing. Each
Party shall bear its own costs of arbitration, except that the arbitrators shall
apportion their own reasonable fees and expenses between or among the Parties,
as they deem appropriate.
SECTION 12. TRADEMARKS
12.1 DISTRIBUTOR TRADEMARKS. DISTRIBUTOR has filed for a service xxxx in
order to establish ownership to all right, title and interest in and to the
name, trademark and service xxxx "Generations," and such other tradenames,
trademarks and service marks identified in Schedule D hereto, as the Parties
hereto may amend from time to time (the "DISTRIBUTOR licensed marks" or the
"licensor's licensed marks"). DISTRIBUTOR hereby grants to USL (including its
affiliates) a non-exclusive license to use the DISTRIBUTOR licensed marks in
connection with USL's performance of the services contemplated under this
Agreement, subject to the terms and conditions set forth in this Section 12.
12.2 USL TRADEMARKS. USL owns all right, title and interest in and to
the tradename, trademarks and service xxxx "The United States Life Insurance
Company in the City of New York," and such other tradenames, trademarks and
service marks identified in Schedule D hereto, as the Parties hereto may amend
from time to time (the "USL licensed marks" or the "licensor's
23
licensed marks"). USL hereby grants to DISTRIBUTOR (including its affiliates) a
non-exclusive license to use the USL licensed marks in connection with
DISTRIBUTOR's performance of the services contemplated by this Agreement,
subject to the terms and conditions set forth in this Section 12.
12.3 GRANT OF LICENSE. The grant of license by DISTRIBUTOR and USL
(each, a "licensor") to the other and affiliates thereof (the "licensees") shall
terminate automatically when the Contracts (or any particular form of Contract)
cease to be outstanding or by either Party at its election upon termination of
this Agreement. Upon automatic termination, each licensee shall cease to use a
licensor's licensed marks. Upon USL's elective termination of this license,
DISTRIBUTOR (including its affiliates) shall immediately cease to distribute
marketing material relating to any Contract and shall likewise cease any
activity that suggests that it has any right under the USL licensed marks or
that it has any association with USL or any affiliate of USL in connection with
any such Contracts. Similarly, upon DISTRIBUTOR's elective termination of this
license, USL (including its affiliates) shall cease to issue as soon as
reasonably practicable, any new Contracts bearing any of the DISTRIBUTOR
licensed marks and shall likewise cease any activity which suggests that it has
any right under any of the DISTRIBUTOR licensed marks or that it has any
association with DISTRIBUTOR or any affiliate of DISTRIBUTOR, except that USL
shall have the right to continue to administer any outstanding Contracts bearing
any of the DISTRIBUTOR licensed marks and in connection therewith to use the
DISTRIBUTOR licensed marks.
12.4 PRIOR APPROVAL. Notwithstanding any provision in this Agreement to the
contrary, a licensee shall obtain the prior written approval of the licensor for
the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approval shall not be unreasonably withheld.
12.5 SAMPLE MATERIALS. During the term of this grant of license, a
licensor may request that a licensee submit samples of any materials bearing any
of the licensor's licensed marks that were previously approved by the licensor
but, due to changed circumstances, the licensor may wish to reconsider, or that
were not previously approved in the manner set forth above. If, on the
reconsideration or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld. The licensee shall obtain the prior
written approval of the licensor for the use of any new materials developed to
replace the disapproved materials, in the manner set forth above.
12.6 TRADEMARKS VALID AND ENFORCEABLE. Each licensee hereunder: (a)
acknowledges and stipulates that the licensor's licensed marks are valid and
enforceable trademarks and/or service marks and that such licensee does not own
the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (b) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (c) acknowledges and agrees that the
use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
24
SECTION 13. BONDING AND INSURANCE
Each Party shall maintain sufficient fidelity bond coverage (including
coverage for larceny and embezzlement) and errors and omissions insurance
coverage as may be required by applicable law or as such Party seems necessary
in light of its obligations under this Agreement. DISTRIBUTOR shall maintain
errors and omissions coverage from a reputable insurance company in an amount
and form acceptable to USL at all times during the term of this Agreement.
SECTION 14. NOTICES
14.1 MANNER OF NOTICES. Unless otherwise provided in this Agreement,
any notice required or permitted to be sent under this Agreement shall be given
to the following persons at the following addresses and facsimile numbers, or
such other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
The United States Life Insurance Company in the City of New York
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
American General Securities Incorporated
0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: F. Xxxx Xxxxxx, Xx.
Telecopier: (000) 000-0000
Xxx Xxxxxx Funds Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 000000
Attn: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
14.2 NOTICE OF REGULATORY PROCEEDINGS.
(a) USL and AGSI shall immediately notify DISTRIBUTOR of: (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to any Contract or to any Account's
registration statement under the 1933 Act relating to the Contracts or any
Contract Prospectus or any order having a material effect with respect to USL's
or AGSI's ability to perform their respective obligations hereunder, (ii) any
request by the
25
SEC or other regulatory body for any amendment to such registration statement or
Contract Prospectus, (iii) the initiation of any proceeding for that purpose or
for any other purpose relating to the offering of any Contract, or the
registration or offering of the Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent or otherwise
materially affect the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. USL and AGSI shall make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time. USL and AGSI shall also
immediately notify DISTRIBUTOR if any of their Sales Persons or Associated
Agencies is or becomes subject to any proceedings or is sanctioned or suspended
(i) by the SEC or NASD, (ii) by any court for securities law violations, or
(iii) by any state regulatory authority.
(b) DISTRIBUTOR shall immediately notify USL of: (i) the issuance by any
court or regulatory body of any order having a material effect with respect to
DISTRIBUTOR's ability to perform its obligations hereunder, (ii) the initiation
of any proceeding for any purpose relating to the sale of the Contracts, and
(iii) any other actions or circumstances that may prevent the lawful offer or
sale of any of the Contracts in any state or jurisdiction. DISTRIBUTOR shall
also immediately notify USL if any of its Sales Persons or any VK Funds
Associated Agency is or becomes subject to any proceedings or is sanctioned or
suspended (i) by the SEC or NASD, (ii) by any court for securities law
violations, or (iii) by any state regulatory authority.
SECTION 15. MISCELLANEOUS
15.1 AMENDMENT. This Agreement may be amended at any time by a writing
executed by the parties.
15.2 GOVERNING LAW. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of New York.
15.3 SURVIVAL OF PROVISIONS. Upon termination of this Agreement, the
following provisions shall survive: Sections 2.11, 2.12, 3.3, 6, 9, 10, 11, 12,
14, and 15.
15.4 SEVERABILITY. Should any provision of this Agreement be held or
made invalid by a court decision, statute, rule, or otherwise, the remainder of
this Agreement shall not be affected thereby.
15.5 WAIVER. Any failure or delay by any Party to enforce at any time
any of the provisions of this Agreement, or to exercise any right or option
which is herein provided, or to require at any time the performance of any of
the provisions hereof, shall in no way be construed to be a waiver of such
provision of this Agreement. If any Party waives the breach of any provision of
this Agreement by another Party, the waiving Party still has the right to
require
26
performance of that provision and its conduct shall not be construed to waive
succeeding breaches of that provision or any breaches of any other provision.
15.6 FORCE MAJEURE. No Party shall be liable for damages due to delay or
failure to perform any obligation under this Agreement where such delay or
failure results directly or indirectly from circumstances beyond the control and
without the fault or negligence of such Party.
15.7 PARTIES TO COOPERATE.
(a) USL, AGSI, DISTRIBUTOR, and any necessary Associated Agencies and
Selling Group Members shall cooperate fully in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial proceeding
with respect to USL, AGSI, DISTRIBUTOR, and their respective affiliates, agents
and representatives to the extent that such examination, investigation, or
proceeding arises in connection with Contracts 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 that authorities may request in order to ascertain whether USL's
operations are being conducted in a manner consistent with any applicable law or
regulations.
(b) DISTRIBUTOR shall execute such papers and do such acts and things as
shall from time to time be reasonably requested by USL for the purpose of
qualifying and maintaining qualification of the Contracts for sale under the
applicable laws of any state, and maintaining the registration of the Contracts
under the 1933 Act and any Account under the 1940 Act.
15.8 ENTIRE AGREEMENT. This Agreement shall be the sole and only
agreement among USL, AGSI, and DISTRIBUTOR regarding the marketing and
distribution of Contracts, and it supersedes all prior and contemporaneous
agreements. The Parties recognize that USL and DISTRIBUTOR may be parties to
other agreements, the terms and conditions of which may pertain to their
respective duties and obligations under this Agreement. To the extent anything
in those other agreements contradicts the terms of this Agreement, this
Agreement shall control. This Agreement may not be amended, supplemented, or
modified, except as expressly permitted herein, without the written agreement of
the Parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first written above.
The United States Life Insurance Company in the City of New York
on behalf of itself and each Account
named in Schedule A hereto,
as amended from time to time
27
-------------------------------------
BY:
AMERICAN GENERAL SECURITIES INCORPORATED
-------------------------------------
BY:
Xxx Xxxxxx Funds Inc.
-------------------------------------
BY:
28
SCHEDULE A
NAMES OF SEPARATE ACCOUNTS
The United States Life Insurance Company in the City of New York Separate
Account USL VA-R
AVAILABLE CONTRACTS (IDENTIFIED BY FORM NUMBER)
Generations Variable Annuity
Certificate form number: 98033N
A-1
SCHEDULE B
USL ADMINISTRATIVE RESPONSIBILITIES
1. Contract Maintenance
(a) File and obtain state approvals for the Contracts being issued, and any
amendments thereof.
(b) Notify DISTRIBUTOR of the effective date for each state in which the
Contracts become available for issue.
(c) Customize and support state specific requirements where administratively
feasible.
2. Contract Servicing
(a) Issue and maintain master records for Contracts applied for and
accepted.
(b) Provide maintenance support for all Contract features:
(i) Purchase Payments (new issues, 1035 Exchanges, EFT, additions);
(ii) Withdrawals (systematic, partial, full, cancellations, and death
claims);
(iii) Exchanges among Divisions, change of allocations;
(iv) Title Changes (beneficiary, ownership, name, assignments);
(v) Rebalancing, Dollar-Cost Averaging;
(vi) Annuitization.
3. Customer Correspondence
(a) Generate and provide various customer correspondence documents:
(i) Contract (with appropriate riders and endorsements);
(ii) Confirmations of financial transactions;
(iii) Quarterly statements of account activity and balances;
(iv) Billing forms, in a manner agreed to between Owner and USL.
B-1
4. Customer Service Functions
(a) Provide a telephone staff or other medium to respond to customer
inquiries.
(b) Prepare and update service forms necessary to support the Contract.
(c) Respond to written inquiries from Contract Owners.
(d) Coordinate complaint resolution (formal and informal).
5. Compliance
(a) Coordinate the printing and mailing of the following documents:
(i) Separate Account semiannual and annual reports;
(ii) Evergreen prospectus.
(b) Coordinate proxy solicitations as outlined in the Participation
Agreement.
(c) Prepare updates and regulatory filings as warranted.
(d) Generate tax reporting for Contract Owners as warranted by account
activity.
(e) Maintain appropriate books and records.
6. Financial
(a) Calculate unit values on business days of the separate account.
(b) Place trades with corresponding Trust funds and settle such trades as
defined in the Participation Agreement.
(c) Prepare Separate Account semiannual and annual reports.
7. Licensing/Contracting and Compensation
(a) Establish the initial record and perform ongoing maintenance for
representatives appointed to sell the product.
(b) Maintain copies of all approved Selling Group Agreements.
(c) Arrange for payment of appointment fees.
B-2
(d) Pay compensation based on arrangements of marketing and Selling Group
Agreements.
8. Reporting
(a) Provide sales or other reports as mutually agreed upon by USL and
Distributor or Selling Group Member.
9. Communications
(a) Provide review and feedback/approval for all marketing pieces associated
with the Contract.
DISTRIBUTOR ADMINISTRATIVE RESPONSIBILITIES
1. Distribution
(a) Solicit and obtain Selling Group Agreements.
(b) Assist in appointing Sales Persons.
(c) Assist in arranging for payment of appointment fees as required.
2. Marketing Support
(a) Provide wholesaling support to prospective and current Selling Group
Members.
(b) Draft and distribute approved marketing and product literature as well
as all forms associated with the Contract (applications, service forms,
etc.).
(c) Provide sales reporting data to wholesalers.
(d) Provide training on Contract features and procedures.
(e) Provide hypothetical data and illustrations for Fund performance.
B-3
SCHEDULE C
This Schedule governs the compensation to be paid by USL in connection with
the Contracts issued in accordance with the Agreement. The defined terms used
herein shall have the same meaning as in the Agreement to which this Schedule C
is attached or as in the Contracts, whichever is applicable.
1. DISTRIBUTION FEE TO DISTRIBUTOR.
USL shall pay or cause to be paid to DISTRIBUTOR, each semi-monthly period,
a Distribution Fee ("Fee") equal to either one percent (1%) of Purchase Payments
paid pursuant to Schedule 1, 2, 4 or 5 below, or .75 percent (.75%) of Purchase
Payments paid pursuant to Schedule 3 below, and received by USL during such
period that are attributable to all Certificates issued by USL. All Purchase
Payments upon which the Fee may be based must be received by USL in accordance
with the Agreement and such other requirements that USL and DISTRIBUTOR may,
from time to time, establish. The Fee shall constitute the sole and exclusive
payment by USL to DISTRIBUTOR with respect to the Certificates issued pursuant
to the Agreement and all services rendered under or in contemplation of this
Agreement.
2. COMPENSATION TO SELLING GROUP MEMBERS.
USL shall remit, or cause to be remitted, sales commissions in the amounts
set out in the schedules below, as compensation to the appropriate Selling Group
Members who have submitted applications for Certificates that USL has approved
for issuance ("Sales Commissions" or "commissions"). The Parties agree that more
than one schedule may be in effect at a time with respect to a Selling Group
Member.
SALES COMMISSION SCHEDULES
--------------------------
Schedule 1: 6% commission, 0% trail commission
Schedule 2: 4.75% commission, plus a 0.25% trail commission
commencing at the end of the 12th month after receipt
of the initial Purchase Payment and continuing through
the end of the seventh year following receipt of the
Purchase Payment, followed by a 0.50% trail commission
commencing at the end of the third month of the eighth
year following receipt of the initial Purchase Payment.
Schedule 3: 5% commission, plus a 0.25% trail commission commencing
at the end of the 12th month after receipt of the
initial Purchase Payment and continuing through the end
of the seventh year following receipt of the Purchase
Payment, followed by a 0.50% trail commission
commencing at the end of the third month of the eighth
year
C-1
following receipt of the initial Purchase Payment.
Schedule 4: 5.5% commission, plus a 0.50% trail commission
commencing at the end of the third month of the eighth
year after receipt of the initial Purchase Payment.
Schedule 5: 2.25% commission, plus a 0.75% trial commission
commencing at the end of the 12th month after receipt
of the intitial Purchase Payment.
In addition to the preceeding Sales Commission Schedules, the Parties agree
that they may, from time to time, enter into one or more agreements with one or
more Selling Group Members to pay Sales Commissions in excess of 6% but not to
exceed 7%. The amount by which the rate of Sales Commission payable exceeds 6%
shall be commensurate with a reduction in the amount of the 1% Fee otherwise
payable to DISTRIBUTOR. (For example, a 6.4% Sales Commission rate would
require a Fee payable of .6%; such agreements will always result in a sum of
Sales Commissions payable plus Fees payable, of 7%.)
Commissions shall be paid semi-monthly (unless otherwise agreed). As used
in the above schedules, the term "commission" refers to an amount equal to a
fixed percentage of Purchase Payments received by USL during each semi-monthly
period that are attributable to Certificates solicited by Sales Persons. All
Purchase Payments upon which the commission may be based must be received by USL
in accordance with the Agreement and such other requirements that USL and
DISTRIBUTOR may, from time to time, establish.
As used in the above schedules, the term "trail commission" refers to an
amount equal to an annual percentage of the Certificate Account Value. Trail
commissions will be initially calculated as of the date specified in the above
schedules. Once trail commissions have commenced, trail commissions shall be
computed on each quarterly Certificate anniversary by multiplying 0.0625% (in
the case of a 0.25% trail commission) or 0.125% (in the case of a 0.50% trail
commission) by the Certificate Account Value computed on each quarterly
Certificate anniversary. Trail commissions shall be paid at the calendar
quarter end which follows the computation of the trail commission. Trail
commissions shall continue until annuitization, surrender, or death which
requires distribution of the Certificate AccountValue.
3. COMMISSION REDUCTIONS.
Notwithstanding the foregoing, the following commission reductions shall
apply to all DISTRIBUTOR Fees and Sales Commissions, except as otherwise noted,
under the circumstances described below.
C-2
(a) REDUCTIONS FOR PURCHASE PAYMENTS AT AGE 81 AND LATER. A 50% commission
reduction shall apply with respect to Purchase Payments made on or after the
Annuitant's eighty-first birthday (regardless of whether the Certificate has a
Contingent Annuitant). Such commission reduction is not applicable to trail
commissions.
(b) CHARGEBACKS FOR WITHDRAWALS. The following commission chargebacks shall
apply on full or partial withdrawals (excluding withdrawals made pursuant to the
Systematic Withdrawal Program that are within the 10% Free Withdrawal
Privilege):
. 100% for full or partial withdrawal of a Purchase Payment made during the
first six months following its receipt; and
. 50% for full or partial withdrawal of a Purchase Payment made during the
next six months following its receipt.
The foregoing chargebacks shall not apply in the event of the death of the
Annuitant or Owner during the periods specified above.
4. NO COMPENSATION PAYABLE.
Notwithstanding the foregoing, no compensation shall be payable, and any
compensation already paid by USL hereunder shall either be promptly returned by
check payable to USL on request or will be deducted by USL from future payments
due under this Schedule C, under each of the following conditions:
(a) if USL, in its sole discretion, determines not to issue the Certificate
applied for or rescinds the Certificate;
(b) if the Certificate owner returns the Certificate pursuant to the "Free
Look" provision of the Certificate;
(c) if a Purchase Payment is received within 60 days following a prior
partial withdrawal, and such Purchase Payment is reasonably believed to be a
reinvestment of part or all of the prior partial withdrawal;
(d) if USL refunds all or any portion of the Purchase Payment as a result
of a complaint or grievance;
(e) if the Certificate owner, at the time the Certificate is purchased, is
(i) an employee or registered representative (or the spouse or minor child of an
employee or registered representative) of any broker-dealer authorized to sell
the Certificates, or (ii) is an officer, director, or bona-fide employee of USL,
AGSI, or any of their company affiliates, or DISTRIBUTOR; provided, however,
that the owner shall have completed, at the time the
C-3
Certificate is purchased, appropriate documents supplied by USL which provide
for a waiver of all surrender charges; or
(f) if USL or AGSI determines that any Sales Person signing an application
or any person or entity receiving compensation for soliciting purchases of the
Certificates is not duly licensed to sell the Certificates in the state or
jurisdiction of such attempted sale and registered or otherwise qualified under
the 1934 Act and rules thereunder and any applicable state laws and rules
governing broker-dealers and their related persons.
In addition, if USL determines that any Certificate applied for is a
replacement of any insurance or annuity product issued by USL or any of its
affiliates, USL reserves the right not to pay any compensation and to require
the return of any compensation already paid.
5. MISCELLANEOUS.
The Parties may also supplementally agree that USL will directly pay Sales
Commissions to the appropriate Selling Group Member. USL, in its discretion,
may offset against compensation payable by it pursuant to this paragraph any due
and unpaid amounts owed to USL by DISTRIBUTOR.
C-4
SCHEDULE D
(AS OF SEPTEMBER 15, 1998)
DISTRIBUTOR TRADEMARKS
The name "Xxx Xxxxxx"
The product name "Generations"
The phrase "A wealth of knowledge, a knowledge of wealth," and its logo
design
USL TRADEMARKS
The name "American General Corporation"
The name "The United States Life Insurance Company in the City of New York"
The American General logo
D-1