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EXHIBIT 8.4(C)
FORM OF
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (the "Agreement") made by and between XXXXXXX
XXXXXX INVESTMENTS, INC., a Delaware corporation ("SKI"), with a principal place
of business in Boston, Massachusetts and XXXXXX INVESTORS LIFE INSURANCE
COMPANY, an Illinois corporation (the "Company"), with a principal place of
business in One Xxxxxx Drive, Long Grove, Illinois, on behalf of one or more
separate accounts of the Company, as set forth on Schedule A hereto, as it may
be amended from time to time upon written notice to the Fund in accordance with
Paragraph 9 herein (the "Account").
WHEREAS, SKI has caused to be organized Xxxxxxx Variable Life
Investment Fund (the "Fund"), a Massachusetts business trust created under a
Declaration of Trust dated March 15, 1985, as amended, the beneficial interest
in which is divided into several series, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of securities, each
of which series (except Money Market Portfolio) is divided into two classes of
shares of beneficial interest; and
WHEREAS, the purpose of the Fund is to act as the investment vehicle
for the separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies which have
entered into indemnification agreements substantially identical to this
Agreement; and
WHEREAS, the parties desire to express their agreement as to certain
other matters;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. Additional Definitions.
For purposes of this Agreement, the following definitions shall apply:
(a) "Shares" means shares of beneficial interest, without par
value, of any class of any Portfolio, now or hereafter
created, of the Fund.
2. Access to Other Products.
SKI shall permit an Account to participate in any registered investment
company other than the Fund which is intended as the funding vehicle for
insurance products and for which SKI or an affiliate of SKI acts as investment
adviser, on the same basis as other insurance companies are permitted to
participate in such a registered investment company. This provision shall not
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require SKI to make available to the Company shares of any investment company
which is organized solely as the funding vehicle for insurance products offered
by a single insurance company or a group of affiliated insurance companies.
3. Right to Review and Approve Sales Materials.
The Company shall furnish, or shall cause to be furnished, to SKI or
its designee, at least 10 days prior to its intended use, each piece of
promotional material in which SKI or the Fund is named. No such material shall
be used unless SKI or its designee shall have approved such use in writing, or
10 days shall have elapsed without approval, rejection or objection since
receipt by SKI or its designee of such material.
SKI shall furnish, or shall cause to be furnished, to the Company or
its designee, at least 10 days prior to its intended use, each piece of
promotional material in which the Company or its separate account(s) is named.
No such material shall be used unless the Company or its designee shall have
approved such use in writing, or 10 days shall have elapsed without approval,
rejection or objection since receipt by the Company or its designee of such
material.
4. Sales Organization Meetings.
Representatives of SKI or its designee shall meet with the sales
organizations of the Company at such reasonable times and places as may be
agreed upon by the Company and SKI or its designee for the purpose of educating
sales personnel about the Fund.
5. Administration of Separate Accounts
(a) Administrative services to owners of variable life insurance
policies and/or variable annuity contracts issued by the Company shall be the
responsibility of the Company and shall not be the responsibility of SKI. SKI
recognizes the Company as the sole shareholder of Fund Shares issued under the
Participation Agreement, dated as of the _____ day of _______, 1998, by and
between the Company on behalf of its separate accounts and the Fund (the
"Participation Agreement"). From time to time, SKI may pay amounts from its past
profits to the Company for providing certain administrative services for the
Fund or its Portfolios, or for providing owners of variable life insurance
policies and/or variable annuity contracts with other services that relate to
the Fund. These services may include, among other things, aggregating
allocation, transfer, and liquidation orders of the Accounts, printing and
mailing to owners of variable life insurance policies and/or variable annuity
contracts copies of the Portfolios'
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prospectuses and other materials that the Fund is required by law or otherwise
to provide to its shareholders, but that the Company is not otherwise required
to provide to owners of variable life insurance policies and/or variable annuity
contracts, providing financial consultants with advice with respect to inquiries
related to the Portfolios (not including information about performance or
related to sales), and such other related services as the Fund and the Company
may from time to time agree. In consideration of the savings resulting from such
arrangement, and to compensate the Company for its costs, SKI agrees to pay the
Company an amount equal to ____ basis points (___%) per annum of the average
aggregate amount invested by the Company in the Portfolios under the
Participation Agreement. Payment of such amounts by SKI will not increase the
fees paid by the Fund, the Portfolios or their shareholders.
(b) The parties agree that SKI's payments to the Company are for
administrative services only and do not constitute payment in any manner for
investment advisory services or for costs of distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated hereby, the average aggregate amount invested by the Company over a
one-month period shall be computed by totaling the Company's aggregate
investment (Share net asset value multiplied by total number of Shares held by
the Company) on each business day during the month and dividing by the total
number of business days during each month.
(d) SKI will calculate the reimbursement of administrative expenses at
the end of each calendar quarter and will make such reimbursement to the Company
within thirty (30) days thereafter. The reimbursement check will be accompanied
by a statement showing the calculation of the monthly amounts payable to SKI and
such other supporting data as may be reasonably requested by the Company.
6. Duration.
This Agreement shall continue in force until terminated in
accordance with the following provisions:
(a) At the option of the Company or SKI at any time upon 180 days'
notice, unless a shorter time is agreed to by the parties;
(b) Contemporaneously with the termination of the Participation
Agreement;
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(c) In the event this Agreement is assigned without the prior
written consent of the Company and SKI. Termination shall be
effective immediately upon such occurrence without notice.
Provided, however, the obligation of each party hereto to
indemnify the other party hereto shall continue with respect to all losses,
claims, damages, liabilities or litigation based upon the acquisition of Shares
purchased as the funding vehicle for any variable life insurance policy or
variable annuity contract issued by the Company or any affiliated insurance
company.
7. Indemnification.
(a) The Company agrees to indemnity and hold harmless SKI and each of
its directors and officers and each person, if any, who control SKI within the
meaning of Section 15 of the Securities Act of 1933 (the "Act") or any person
controlled by or under common control with SKI ("affiliate") against any and all
losses, claims, damages, liabilities or litigation (including legal and other
expenses) to which SKI or such directors, officers or affiliate may become
subject under the Act, under any other statute, at common law or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Company, any of its employees or
representatives, any affiliate of or any person acting on behalf of the Company
or a principal underwriter of its insurance products, or (ii) may be based upon
any untrue statement or alleged untrue statement of a material fact contained in
a registration statement or prospectus covering Shares or any amendment thereof
or supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to SKI or the Fund by the Company; provided, however, that
in no case (i) is the Company's indemnity in favor of a director or officer or
any other person deemed to protect such director or officer or other person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of obligations and duties
under this Agreement or (ii) is the Company to be liable under its indemnity
agreement contained in this Paragraph 7 with respect to any claim made against
SKI
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or any person indemnified unless SKI or such person, as the case may be,
shall have notified the Company in writing pursuant to Paragraph 9 within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon SKI or upon
such person (or after SKI or such person shall have received notice of such
service on any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may have to SKI
or any person against whom such action is brought otherwise than on account of
the indemnity agreement contained in this Paragraph 7. The Company shall be
entitled to participate, at its own expense, in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any such liability,
but, if it elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to SKI, its officers and directors, or to
any affiliates, defendant or defendants in the suit. In the event that the
Company elects to assume the defense of any such suit and retain such counsel,
SKI, such officers and directors or affiliates, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Company does not elect to assume the defense of any such
suit, the Company will reimburse SKI, such officers and directors or affiliates,
defendant or defendants in such suit, for the reasonable fees and expenses of
any counsel retained by them. The Company agrees promptly to notify SKI pursuant
to Paragraph 9 of the commencement of any litigation or proceedings against it
or any of its directors or officers in connection with the issue and sale of any
Shares.
(b) SKI agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or any person controlled by or under
common control with the Company ("affiliate") against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses)
to which it or such directors, officers or affiliate may become subject under
the Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by SKI, any of its employees or representatives, any affiliate of or any
person acting on behalf of SKI or a principal underwriter of the Fund, or (ii)
may be based upon any untrue statement or alleged untrue statement of a material
fact contained in a registration statement or prospectus covering Shares or any
amendment thereof or supplement thereto or the omission or alleged omission to
state
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therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was made in
reliance upon information furnished to the Fund or the Company by SKI; provided,
however, that in no case (i) is SKI's indemnity in favor of a director or
officer or any other person deemed to protect such director or officer or other
person against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties or by reason of his reckless disregard of obligations
and duties under this Agreement or (ii) is SKI to be liable under its indemnity
agreement contained in this Paragraph 7 with respect to any claims made against
the Company or any person indemnified unless the Company or such person, as the
case may be, shall have notified SKI in writing pursuant to Paragraph 9 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 it or upon
such director, officer, or controlling person (or after the Company or such
director, officer or controlling person shall have received notice of such
service on any designated agent), but failure to notify SKI of any claim shall
not relieve it from any liability which it may have to the Company or any person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this Paragraph 7. SKI will be entitled to participate, at
its own expense, in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if SKI elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Company, its directors, officers or affiliates, defendant or
defendants, in the suit. In the event SKI elects to assume the defense of any
such suit and retain such counsel, the Company, its directors, officers or
affiliates, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case SKI does not
elect to assume the defense of any such suit, it will reimburse the Company or
such directors, officers or affiliates, defendant or defendants in the suit, for
the reasonable fees and expenses of any counsel retained by them. SKI agrees
promptly to notify the Company pursuant to Paragraph 8 of the commencement of
any litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of any Shares.
(c) SKI agrees to indemnify and hold harmless the Company and each of
its directors and officers against any and all losses, claims, damages,
liabilities or litigation arising from the
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imposition of additional federal income taxes on the Company or any policyholder
and/or contract holder solely as a result of a Final Determination that any
Portfolio has failed (x) to comply with the diversification requirements of
section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to the diversification requirements for variable annuity, endowment and
life insurance contracts, or (y) to qualify as a regulated investment company
within the meaning of section 851 of the Code; provided, however, that (i) SKI
shall have no liability under this Paragraph 7(c) if such failure is caused by a
third party who is not an employee or agent of SKI (e.g., the Fund's custodian
or another service provider), and (ii) in no case is SKI's indemnity under this
Paragraph 7(c) deemed to protect any person against any liability to which that
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of that person's duties or by reason of
reckless disregard by that person of obligations under this Agreement.
The Company agrees that if the Internal Revenue Service asserts in
writing in connection with any governmental audit or review of the Company or,
to the Company's knowledge, of any policyholder and/or contract holder, that any
Portfolio has failed to comply with the diversification requirements of section
817(h) of the Code or the Company otherwise becomes aware of any facts that
could give rise to any claim against SKI as a result of such a failure or
alleged failure, (i) the Company shall promptly notify SKI pursuant to Paragraph
9 of such assertion or potential claim; (ii) the Company shall consult with SKI
as to how to minimize any liability that may arise as a result of such failure
or alleged failure; (iii) the Company shall use its best efforts to minimize any
liability of SKI for indemnification resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the Internal Revenue Service that such
failure was inadvertent; provided, however, this Paragraph 7(c) shall not be
construed to require the Company to jeopardize its or any policyholder's and/or
contract holder's standing or position with respect any such failure or alleged
failure; (iv) the Company shall permit SKI and its legal and accounting advisors
to participate in any conferences, settlement discussions or other
administrative or judicial proceedings or contests (including judicial appeals
thereof) with the Internal Revenue Service, any policyholder and/or contract
holder or any other claimant regarding any claims that could give rise to
indemnification by SKI as a result of such a failure or alleged failure; (v) any
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written materials to be submitted by the Company to the Internal Revenue
Service, any policyholder and/or contract holder or any other claimant in
connection with any of the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the Internal Revenue Service
pursuant to Treasury Regulations Section 1.817-5(a)(2)), shall be provided by
the Company to SKI (together with any supporting information or analysis, but
excluding any privileged materials) at least 10 business days prior to the day
on which such proposed materials are to be submitted; (vi) the Company shall
provide SKI and its advisors with such cooperation as SKI shall reasonably
request (including, without limitation, by permitting SKI and its accounting and
legal advisors to review the relevant books and records of the Company) in order
to facilitate SKI's review of any written submissions provided to it pursuant to
the preceding clause or its assessment of the validity or amount of any claim
against it arising from such a failure or alleged failure; (vii) the Company
shall not with respect to any claim of the IRS or any policyholder and/or
contract holder that would give rise to a claim for indemnification against SKI
(a) compromise or settle any claim, (b) accept any adjustment on audit, or (c)
forego any allowable judicial appeals, without the express written consent of
SKI, which shall not be unreasonably withheld, provided that the Company shall
not be required to appeal any adverse judicial decision unless SKI shall have
provided an opinion of independent counsel to the effect that a reasonable basis
(consistent with Formal Opinion 85-352 of the American Bar Association) exists
for taking such appeal; and (viii) SKI shall have no liability as a result of
such failure or alleged failure if the Company fails to comply with any of the
foregoing clauses (i) through (vii). Should SKI refuse to give its written
consent to any compromise or settlement of any claim or liability hereunder, the
Company may, in its discretion, authorize SKI to act in the name of the Company
in, and to control the conduct of, such conferences, discussions, proceedings,
contests or appeals and all administrative or judicial appeals thereof, and in
that event SKI shall bear the fees and expenses associated with the conduct of
the proceedings that it is so authorized to control.
For purposes of this Paragraph 7(c), "Final Determination" shall mean,
with respect to any claim, a settlement of such claim (including the acceptance
of an adjustment proposed by the Internal Revenue Service) or a decision of a
court of competent jurisdiction with respect to such
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claim that has become final after either the (i) exhaustion of allowable
appeals or (2) expiration of the time to take any such appeal with respect to
the claim.
8. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
9. Notices.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to SKI:
Xxxxxxx Xxxxxx Investments, Inc.
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
(000) 000-0000
Attn: Xxxxx X. Xxxxx
If to the Company:
Xxxxxx Investors Life Insurance Company
Xxx Xxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
Attn: General Counsel
10. Miscellaneous.
The captions in the Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the __________
day of __________, 1998.
SEAL XXXXXXX XXXXXX INVESTMENTS, INC.
By:_____________________________
Xxxxx X. Xxx
Authorized Officer
SEAL XXXXXX INVESTORS LIFE
INSURANCE COMPANY
By:____________________________
Name:
Title:
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SCHEDULE A
TO INDEMNIFICATION AGREEMENT
Separate Account(s) of the Company
KILICO Variable Separate Account - 2
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