UNDERWRITING AGREEMENT
This Agreement dated this __________ day of ___________________ 2001 is by and
between CNA INVESTOR SERVICES, INC. (herein called "Company"), an Illinois
Corporation, and CONTINENTAL ASSURANCE COMPANY ON BEHALF OF ITS VARIABLE LIFE
SEPARATE ACCOUNT (herein called the "Separate Account"), an Investment Company
under the Investment Company Act of 1940.
WITNESSETH:
WHEREAS, Company is a broker-dealer that engages in the underwriting of
Variable insurance products and other investment products;
WHEREAS, Separate Account desires to issue certain variable insurance
Products described more fully below to the public through Company
acting as Principal underwriter;
WHEREAS, Company and the Separate Account agree that Company shall be a
Statutory underwriter within the meaning of Section 2(11) of the
Securities Act Of 1933 and principal underwriter under Section 2(a)(29)
of the Investment Company Act of 1940; and
WHEREAS, Company and the Separate Account have entered into this
Agreement to meet the requirements of Section 15(b) of the Investment
Company Act of 1940.
NOW, THEREFORE, in consideration of their mutual promises, separate
Account and Company hereby agree as follows:
1. Additional Definitions.
a. Contracts -- The class or classes of variable insurance products set forth
on Schedule 1 to this Agreement as in effect at the time this Agreement is
executed, and such other classes of variable insurance products that may be
added to Schedule 1 from time to time in accordance with Section 11.b of
this Agreement, and including any riders to such contracts and any other
contracts offered in connection therewith. For this purpose and under this
Agreement generally, a "class of Contracts" shall mean those Contracts
issued by Separate Account on the same policy form or forms and covered by
the same Registration Statement.
b. Registration Statement -- At any time that this Agreement is in effect,
each currently effective registration statement filed with the SEC, as
hereinafter defined, under the 1933 Act on a prescribed form, or currently
effective post-effective amendment thereto, as the case may be, relating to
a class of Contracts, including financial statements included in, and all
exhibits to, such registration statement or post-effective amendment. For
purposes of Section 9 of this Agreement, the term "Registration Statement"
means any document, which is or at any time was a Registration Statement
within the meaning of this Section 1.b.
c. Prospectus -- The prospectus included within a Registration Statement,
except that, if the most recently filed version of the prospectus
(including any supplements thereto) filed pursuant to Rule 497 under the
1933 Act subsequent to the date on which a Registration Statement became
effective differs from the prospectus included within such Registration
Statement at the time it became effective, the term "Prospectus" shall
refer to the most recently filed prospectus filed under Rule 497 under the
1933 Act, from and after the date on which it shall have been filed. For
purposes of Section 9 of this Agreement, the term "any Prospectus" means
any document, which is or at any time was a Prospectus within the meaning
of this Section 1.c.
d. Fund -- An investment company in which the Separate Account invests.
e. Variable Account -- A separate account supporting a class or classes of
Contracts and specified on Schedule 1 as in effect at the time this
Agreement is executed, or as it may be amended from time to time in
accordance with Section 11.b of this Agreement
f. 1933 Act -- The Securities Act of 1933, as amended.
g. 1934 Act -- The Securities Exchange Act of 1934, as amended.
h. 1940 Act -- The Investment Company Act of 1940, as amended.
i. SEC -- The Securities and Exchange Commission.
j. NASD -- The National Association of Securities Dealers, Inc.
k. Regulations -- The rules and regulations promulgated by the SEC under the
1933 Act, the 1934 Act and the 1940 Act as in effect at the time this
Agreement is executed or thereafter promulgated.
l. Selling Broker-Dealer -- A person registered as a broker-dealer and
licensed as a life insurance agent or affiliated with a person so licensed,
and authorized to distribute the Contracts pursuant to a sales agreement as
provided for in Section 4 of this Agreement.
m. Agent's Manual -- The agents manual and other written rules, regulations
and procedures provided by Separate Account to insurance agents appointed
to sell its insurance contracts, as revised from time to time.
n. Representative -- When used with reference to Company or a Selling
Broker-Dealer, an individual who is an associated person, as that term is
defined in the 1934 Act, thereof.
o. Application -- An application for a Contract.
p. Premium -- A payment made under a Contract by an applicant or purchaser to
purchase benefits under the Contract.
q. Customer Service Center -- the service center identified in the Prospectus
as the location at which Premiums and Applications are accepted.
2. Authorization and Appointment.
a. Scope of Authority. Separate Account hereby authorizes Company on an
exclusive basis, and Company accepts such authority, subject to the
registration requirements of the 1933 Act and the 1940 Act and the
provisions of the 1934 Act and conditions herein, to be the principal
underwriter for the sale of the Contracts to the public in each state and
other jurisdiction in which the Contracts may lawfully be sold during the
term of this Agreement. Separate Account hereby appoints Company as its
independent general agent for sale of the Contracts. Separate Account
hereby authorizes Company to grant authority to Selling Broker-Dealers to
solicit Applications and Premiums to the extent Company deems appropriate
and consistent with the marketing program for the Contracts or a class of
Contracts, subject to the conditions set forth in Section 4 of this
Agreement. The Contracts shall be offered for sale and distribution at
premium rates set from time to time by Separate Account. Company shall use
its best efforts to market the Contracts actively, directly and/or through
Selling Broker-Dealers in accordance with Section 4 of this Agreement,
subject to compliance with applicable law, including rules of the NASD.
b. Limits on Authority. Company shall act as an independent contractor and
nothing herein contained shall constitute Company or its agents, officers
or employees as agents, officers or employees of Separate Account solely by
virtue of their activities in connection with the sale of the Contracts
hereunder. Company and its Representatives shall not have authority, on
behalf of Separate Account: to make, alter or discharge any Contract or
other insurance policy or annuity entered into pursuant to a Contract; to
waive any Contract forfeiture provision; to extend the time of paying any
Premium; or to receive any monies or Premiums (except for the sole purpose
of forwarding monies or Premiums to Separate Account). Company shall not
expend, nor contract for the expenditure of, the funds of Separate Account.
Company shall not possess or exercise any authority on behalf of Separate
Account other than that expressly conferred on Company by this Agreement.
c. Effective Date of Appointment. This Agreement shall continue inforce until
July 15, 1998 and indefinitely thereafter, but only so long as such
continuance is specifically approved at least annually by the members of
the Board of Directors of the Continental Assurance Company, who are
neither parties to the Agreement nor interested persons of any such party.
Any such vote shall be cast in person at a meeting called for the purpose
of voting on the approval of continuing this Agreement.
3. Solicitation Activities.
a. Company Representatives. No Company Representative shall solicit the sale
of a Contract unless at the time of such solicitation such individual is
duly registered with the NASD and duly licensed with all applicable state
insurance and securities regulatory authorities, and is duly appointed as
an insurance agent of Continental Assurance Company.
b. Solicitation Activities. All solicitation and sales activities
engaged in by Company and the Company Representatives with
respect to the Contracts shall be in compliance with all
applicable federal and state securities laws and regulations,
where applicable, as well as all applicable insurance laws and
regulations and the Agents Manual. In particular, without
limiting the generality of the foregoing:
(1) Company shall train, supervise and be solely
responsible for the conduct of Company
Representatives in their solicitation of Applications
and Premiums and distribution of the Contracts, and
shall supervise their compliance with applicable
rules and regulations of any insurance or securities
regulatory agencies that have jurisdiction over
variable insurance product activities.
(2) Neither Company nor any Company Representative shall
offer, attempt to offer, or solicit Applications for,
the Contracts or deliver the Contracts, in any state
or other jurisdiction unless Separate Account has
notified Company that such Contracts may lawfully be
sold or offered for sale in such state, and has not
subsequently revised such noting.
(3) Neither Company nor any Company Representative shall
give any information or make any representation in
regard to a class of Contracts in connection with the
offer or sale of such class of Contracts that is not
in accordance with the Prospectus for such class of
Contracts, or in the then-currently effective
prospectus or statement of additional information for
a Fund, or in current advertising materials for such
class of Contracts authorized by Separate Account.
(4) All Premiums paid by check or money order that are
collected by Company or any of its Representatives
shall be remitted promptly, and in any event not
later than noon of the next business day, in full,
together with any Applications, forms and any other
required documentation, to the Customer Service
Center. Premiums may be transmitted by wire order
from Company to the Customer Service Center in
accordance with the procedures set forth in the
Agents Manual. If any Premium is held at any time by
Company, Company shall hold such Premium in a
fiduciary capacity and such Premium shall be remitted
promptly, and in any event not later than noon of the
next business day, to Separate Account Company
acknowledges that all such Premiums, either by check,
money order or wire, shall be the property of
Separate Account. Company acknowledges that Separate
Account shall have the unconditional right to reject,
in whole or in part, any Application or Premium.
c. Representations and Warranties of Company. Company represents
and warrants to Separate Account that Company is and shall
remain registered during the term of this Agreement as a
broker-dealer under the 1934 Act, is a member with the NASD,
and is duly registered under applicable state securities laws,
and that Company is and shall remain during the term of this
Agreement in compliance with Section 9(a) of the 1940 Act.
4. Selling Broker-Dealers. Company shall ensure that sales of the
Contracts by Selling Broker-Dealers comply with the following
conditions, and any additional conditions Separate Account may specify
from time to time.
a. Every Selling Broker-Dealer shall be both registered as a broker-dealer
with the SEC and a member of the NASD and licensed as an insurance agent
with authority to sell variable products or associated with an insurance
agent so licensed. Any individuals to be authorized to act on behalf of
Selling Broker-Dealer shall be duly registered with the NASD as
representatives of Selling Broker-Dealer with authority to sell variable
products, and shall be licensed as insurance agents with authority to sell
variable products. Company shall verify that Selling Broker-Dealer and its
Representatives are duly licensed under applicable state insurance law to
sell the Contracts (or, if Broker-Dealer is not so licensed, that it is
associated with an entity so licensed).
b. Every Selling Broker-Dealer (or, if applicable, its associated general
insurance agency) and each of its Representatives shall have been appointed
by Separate Account, provided that Separate Account reserves the right to
refuse to appoint any proposed person, or once appointed, to terminate such
appointment.
c. Every Selling Broker-Dealer must enter into a written sales agreement with
Company which sales agreement, among other things, will require such
Selling Broker-Dealer to use its best efforts to solicit applications for
Contracts and to comply with applicable laws and regulations, including the
Separate Account's rules and regulations as reflected in the Agents Manual
or otherwise communicated to agents appointed by Separate Account, and will
contain such other provisions as the Company deems to be consistent
herewith.
d. In view of Separate Account's desire to ensure that Contracts will be sold
to purchasers for whom the Contracts will be suitable, the written Sales
Agreement shall require that Selling Broker-Dealers and their
Representatives not make recommendations to an applicant to purchase a
Contract in the absence of reasonable grounds to believe that the purchase
of the Contract is suitable for the applicant. While not limited to the
following, a determination of suitability shall be based on information
supplied by an applicant after a reasonable inquiry concerning the
applicant's other security holdings, insurance and investment objectives,
financial situation and needs, and the likelihood that the applicant will
continue to make any premium payments contemplated by the Contract applied
for and will keep the Contract in force for a sufficient period of time so
that Separate Account's acquisition costs are amortized over a reasonable
period of time.
5. Marketing Materials.
a. Preparation and Filing. Company shall be primarily responsible for the
design and preparation of all promotional, sales and advertising material
relating to the Contracts. Company shall be responsible for filing such
material, as required, with the NASD and any state securities regulatory
authorities. Separate Account shall be responsible for filing all
promotional, sales or advertising material, as required, with any state
insurance regulatory authorities and the SEC. Separate Account shall be
responsible for preparing the Contract Forms and filing them with
applicable state insurance regulatory authorities, and for preparing the
Prospectuses and Registration Statements and filing them with the SEC and
state regulatory authorities, to the extent required. The parties shall
notify each other expeditiously of any comments provided by the SEC, NASD
or any applicable securities or insurance regulatory authority on such
material, and will cooperate expeditiously in resolving and implementing
any comments, as applicable.
b. Use in Solicitation Activities. Separate Account shall be responsible for
furnishing Company with such Applications, Prospectuses and other materials
for use by Company and any Selling Broker-Dealers in their solicitation
activities with respect to the Contracts. Separate Account shall notify
Company of those states or jurisdictions, which require delivery of a
statement of additional information with a prospectus to a prospective
purchaser.
6. Compensation and Expenses.
a. The company will receive from the Separate Account such
underwriting commissions as shall be stated from time to time
in the Separate Account's then current prospectus.
b. Separate Account shall pay all expenses in connection with:
(1) The preparation and filing of each Registration
Statement (including each pre-effective and
post-effective amendment thereto) and the preparation
and filing of each Prospectus (including any
preliminary and each definitive Prospectus);
(2) The preparation, underwriting, issuance and
administration of the Contracts;
(3) Any registration, qualification or approval or other
filing of the Contracts or Contract forms required
under the insurance laws of the states in which the
Contracts will be offered, as well as any applicable
state securities laws.
(4) All registration fees for the Contracts payable to
the SEC.
(5) The printing of all promotional materials,
definitive Prospectuses for the Contracts,
and any supplements thereto for distribution to
existing Contractholders; and
(6) Company shall pay any other expenses incurred by
Company or its Representatives or employees for the
purpose of carrying out the obligations of Company
hereunder.
7. Compliance.
a. Maintaining Registration and Approvals. Separate Account shall be
responsible for maintaining the registration of the Contracts with the SEC
and any applicable state securities regulatory authority with which such
registration is required, and for gaining and maintaining approval of the
Contract forms where required under the insurance laws and regulations of
each state or other jurisdiction in which the Contracts are to be offered.
b. Confirmations and 1934 Act Compliance. Separate Account, as agent for
Company, shall confirm to each applicant for and purchaser of a Contract in
accordance with Rule 10b-10 under the 1934 Act acceptance of Premiums and
such other transactions as are required by Rule 10b-10 or administrative
interpretations thereunder. Separate Account shall maintain and preserve
such books and records with respect to such confirmations in conformity
with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act to the
extent such requirements apply. Separate Account shall maintain all such
books and records and hold such books and records on behalf of and as agent
for Company whose property they are and shall remain, and acknowledges that
such books and records are at all times subject to inspection by the SEC in
accordance with Section 17(a) of the 1934 Act.
c. Issuance and Administration of Contracts. Separate Account shall be
responsible for issuing the Contracts and administering the Contracts and
the Variable Account, provided, however, that Company shall have full
responsibility for the securities activities of all persons employed by the
Separate Account, engaged directly or indirectly in the Contract
operations, and for the training, supervision and control of such persons
to the extent of such activities.
8. Investigations and Proceedings.
a. Cooperation. Company and Separate Account shall cooperate
fully in any securities or insurance regulatory investigation
or proceeding or judicial proceeding arising in connection
with the offering, sale or distribution of the Contracts
distributed under this Agreement. Without limiting the
foregoing, Separate Account and Company shall notify each
other promptly of any customer complaint or notice of any
regulatory investigation or proceeding or judicial proceeding
received by either party with respect to the Contracts
9. Indemnification.
a. By Separate Account. Separate Account shall indemnify and hold harmless
Company and each person who controls or is associated with Company within
the meaning of such terms under the federal securities laws, and any
officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amounts paid in settlement of, any action, suit or proceeding
or any claim asserted), to which Company and/or any such person may become
subject, under any statute or regulation, any NASD rule or interpretation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities:
(1) Arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, in light of
the circumstances in which they were made, contained
in any (i) Registration Statement or in any
Prospectus or (ii) blue-sky application or other
document executed by Separate Account specifically
for the purpose of qualifying any or all of the
Contracts for sale under the securities laws or
insurance laws of any jurisdiction, where applicable;
provided that Separate Account shall not be liable in
any such case to the extent that such loss, claim,
damage or liability arises out of, or is based upon,
an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon
information furnished in writing to Separate Account
by Company specifically for use in the preparation of
any such Registration Statement or any such blue-sky
application or any amendment thereof or supplement
thereto:
(2) Result from any breach by Separate Account of any
provision of this Agreement. This indemnification
agreement shall be in addition to any liability that
Separate Account may otherwise have; provided,
however, that no person shall be entitled to
indemnification pursuant to this provision if such
loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the person seeking
indemnification
b. By Company. Company shall indemnify and hold harmless Separate Account and
each person who controls or is associated with Separate Account within the
meaning of such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amounts paid in settlement of, any action, suit or proceeding
or any claim asserted), to which Separate Account and/or any such person
may become subject under any statute or regulation, any NASD rule or
interpretation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities:
(1) Arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
required to be stated therein or necessary in order
to make the statements therein not misleading, in
light of the circumstances in which they were made,
contained in any (i) Registration Statement or in any
Prospectus, or (ii) blue-sky application or other
document executed by Separate Account specifically
for the purpose of qualifying any or all of the
Contracts for sale under applicable securities laws
or insurance laws of any jurisdiction, where
applicable; in each case to the extent, but only to
the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was
made in reliance upon information furnished in
writing by Company to Separate Account specifically
for use in the preparation of any such Registration
Statement or any such blue-sky application or any
amendment thereof or supplement thereto
(2) Result because of any use by Company or any Company
Representative of promotional, sales or advertising
material not authorized by Separate Account or any
verbal or written misrepresentations by Company or
any Company Representative or any unlawful sales
practices concerning the Contracts by Company or any
Company Representative under federal securities laws
or NASD regulations; or
(3) Result from any breach by Company of any provision of
this Agreement. This indemnification shall be in
addition to any liability that Company may otherwise
have; provided, however, that no person shall be
entitled to indemnification pursuant to this
provision if such loss, claim, damage or liability is
due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the
person seeking indemnification.
c. General. Promptly after receipt by a party entitled to indemnification
("indemnified person") under this Section 9 of notice of the commencement
of any action as to which a claim will be made against any person obligated
to provide indemnification under this Section 9 ("indemnifying party"),
such indemnified person shall notify the indemnifying party in writing of
the commencement thereof as soon as practicable thereafter, but failure to
so notify the indemnifying party shall not relieve the indemnifying party
from any liability which it may have to the indemnified person otherwise
than on account of this Section 9. The indemnifying party will be entitled
to participate in the defense of the indemnified person but such
participation will not relieve such indemnifying party of the obligation to
reimburse the indemnified person for reasonable legal and other expenses
incurred by such indemnified person in defending himself or itself. The
indemnification provisions contained in this Section 9 shall remain
operative in full force and effect, regardless of any termination of this
Agreement. A successor by law of Company or Separate Account, as the case
may be, shall be entitled to the benefits of the indemnification provisions
contained in this Section 9.
10. Termination. This Agreement shall terminate automatically upon assignment.
This Agreement may be terminated at any time for any reason by either party
upon 60 days' written notice to the other party, without payment of any
penalty. This Agreement may be terminated at the option of either party to
this Agreement upon the other party's material breach of any provision of
this Agreement or of any representation or warranty made in this Agreement,
unless such breach has been cured within 10 days after receipt of notice of
breach from the non-breaching party. Upon termination of this Agreement all
authorizations, rights and obligations shall cease except the obligation to
settle accounts hereunder, including commissions on Premiums subsequently
received for Contracts in effect at the time of termination or issued
pursuant to Applications received by Separate Account prior to termination.
11. Miscellaneous.
a. Schedules. The parties to this Agreement may amend Schedule 1
to this Agreement from time to time to reflect additions of
any class of Contracts and Variable Accounts. The provisions
of this Agreement shall be equally applicable to each such
class of Contracts and each Variable Account that may be added
to the Schedule, unless the context otherwise requires. Any
other change in the terms or provisions of this Agreement
shall be by written agreement between Separate Account and
Company.
b. Rights and Remedies are Cumulative. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to any and
all rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.
c. Interpretation: Jurisdiction. This Agreement constitutes the whole
agreement between the parties hereto with respect to the subject matter
hereof, and supersedes all prior oral or written understandings, agreements
or negotiations between the parties with respect to such subject matter. No
prior writings by or between the parties with respect to the subject matter
hereof shall be used by either party in connection with the interpretation
of any provision of this Agreement. This Agreement shall be construed and
its provisions interpreted under and in accordance with the internal laws
of the state of Illinois without giving effect to principles of conflict of
laws.
d. Severability. This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action prohibited
by applicable federal or state law or prohibit a party from taking action
required by applicable federal or state law, then it is the intention of
the parties hereto that such provision shall be enforced to the extent
permitted under the law, and, in any event, that all other provisions of
this Agreement shall remain valid and duly enforceable as if the provision
at issue had never been a part hereof.
e. Regulation. This Agreement shall be subject to the provisions of the 1933
Act, 1934 Act and 1940 Act and the regulations thereunder, and the rules
and regulations of the NASD, from time to time in effect, including such
exemptions from the 1940 Act as the SEC may grant, and the terms hereof
shall be interpreted and construed in accordance therewith.
f. Section and Other Headings. The headings in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly Executed by such authorized officers on the date specified below.
CNA INVESTOR SERVICES, INC.
By: __________________________________
Name:________________________________
Title: _________________________________
CONTINENTAL ASSURANCE COMPANY ON BEHALF OF ITS VARIABLE LIFE SEPARATE ACCOUNT
By: __________________________________
Name:________________________________
Title: _________________________________
