Exhibit (3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT dated as of December 1, 1995, by and between ANNUITY
INVESTORS LIFE INSURANCE COMPANY ("AILIC"), an Ohio insurance company, and AAG
SECURITIES, INC. ("AAGS"), an Ohio corporation.
WITNESSETH:
WHEREAS, AAGS is a broker-dealer that engages in the distribution of
investment products; and
WHEREAS, AAGS, together with AAG INSURANCE AGENCY, INC. and certain
affiliated insurance agencies ("AAGI"), an insurance agency that is affiliated
with AAGS, desires to distribute variable annuity contracts and variable life
insurance contracts (collectively, "variable insurance products") offered by
AILIC; and
WHEREAS, AILIC desires to issue certain variable insurance products
described more fully below to the public through AAGS acting as the principal
underwriter and AAGI acting as the principal insurance agent for such products;
NOW, THEREFORE, in consideration of their mutual promises, AILIC and
AAGS hereby agree as follows:
1. ADDITIONAL DEFINITIONS.
a. Contracts - The class or classes of variable annuity contracts 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 14.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 AILIC 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, or
currently effective post-effective amendment thereto, 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 12 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 and statement of additional
information, if any, included within a Registration Statement,
except that, if the most recently filed prospectus and statement
of additional information filed pursuant to Rule 497 under the
1933 Act subsequent to the date on which a Registration Statement
became effective differs from the prospectus and statement of
additional information included within such Registration Statement
at the time it became effective, the term "Prospectus" shall refer
to the most recently filed prospectus and statement of additional
information filed under Rule 497 under the 1933 Act, from and
after the date on which they each shall have been filed. For
purposes of Section 12 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 which is included in the Variable
Account and is an investment alternative under a Contract.
e. Variable Account - A separate account supporting a class or
classes of Contracts and specified on Schedule 2 as in effect at
the time this Agreement is executed, or as it may be amended from
time to time in accordance with Section 14.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. Distributor - 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 2 of this Agreement.
m. Intermediary Distributor - A Distributor authorized to recruit
other persons to become Distributors pursuant to a sales agreement
as provided for in Section 2 of this Agreement.
n. Affiliate - With respect to a person, any other person
controlling, controlled by, or under common control with, such
person.
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o. Representative - When used with reference to AAGS, AAGI, a
Distributor or AILIC, an individual who is an associated person,
as that term is defined in the 1934 Act, thereof.
p. Application - An application for a Contract.
q. Premium - A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
r. Customer Service Center - AILIC Annuity Service Center, 000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000, or such other location as
may be designated in writing from time to time by AILIC.
s. Agent's Manual - The Agent's Manual attached hereto as Exhibit B.
2. DISTRIBUTION ACTIVITIES
-----------------------
a. AUTHORITY
---------
AILIC authorizes AAGS on an exclusive basis, and AAGS accepts such
authority, subject to the registration requirements of the 1933 Act and
the 1940 Act and the provisions of the 1934 Act, to be the distributor
and principal underwriter of the Contracts.
AILIC hereby authorizes AAGS to solicit Applications and Premiums
directly from customers and prospective customers and to select all
persons who will be authorized to engage in solicitation activities
with respect to the Contracts, such selection activity to include the
recruitment and appointment of third parties as Distributors which in
turn may be authorized as Intermediary Distributors to engage in
solicitation activities involving the solicitation of Applications and
Premiums directly from customers and prospective customers and/or as
Intermediary Distributors to recruit other third parties to act as
Distributors, in each case as AAGS and AAGI may in their sole
discretion so provide or limit. AAGS shall enter into separate written
sales agreements with such Distributors. Such sales agreements shall be
substantially in the form attached to this Agreement as Exhibit A, but
may include such additional or alternative terms and conditions that
are not otherwise inconsistent with this Agreement, subject to AILIC's
review and prior written consent, which consent shall not be
unreasonably withheld.
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AAGS is hereby vested with power and authority to select and
recommend AAGS Representatives, and to authorize a Distributor to
select and recommend Distributor Representatives, for appointment as
agents of AILIC, and only Representatives so recommended by AAGS or a
Distributor shall become agents of AILIC with authority to engage in
solicitation activities with respect to the Contracts. AAGS shall be
solely responsible for background investigations of the AAGS
Representatives to determine their qualifications, good character, and
moral fitness to sell the Contracts. AILIC shall appoint in the
appropriate states or jurisdictions such selected and recommended
agents, provided that AILIC reserves the right, which right shall not
be exercised unreasonably, to refuse to appoint as agent any AAGS
Representative or Distributor Representative, or, once appointed, to
terminate the same at any time with or without cause. No other
individuals, persons or entities shall have authority to engage in
solicitation activities with respect to the Contracts, unless expressly
approved in writing by AAGS, in its sole discretion, except to the
extent permitted by the following paragraph.
AAGS shall use its best efforts to market the Contracts actively,
directly or through Distributors, subject to applicable material market
and regulatory conditions.
AAGS and AAGS Representatives shall not have authority, and shall
not grant authority to Distributors or Distributor Representatives, on
behalf of AILIC: to make, alter or discharge any Contract or other
contract 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 AILIC). AAGS shall not expend, nor
contract for the expenditure of, the funds of AILIC. AAGS shall not
possess or exercise any authority on behalf of AILIC other than that
expressly conferred on AAGS by this Agreement.
b. SOLICITATION ACTIVITIES, APPLICATIONS AND PREMIUMS
--------------------------------------------------
Solicitation activities shall be subject to applicable laws and
regulations, the Agent's Manual, and the rules set forth herein.
(1) AILIC shall forward to AAGS Applications and other materials
for use by AAGS and the Distributors in their solicitation
activities with respect to the Contracts. AILIC shall notify
AAGS in writing of those states or jurisdictions which
require delivery of a statement of additional information
with a prospectus to a prospective purchaser.
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(2) AAGS shall require that AAGS Representatives appointed by
AILIC as agents 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 to an AAGS Representative after a reasonable inquiry
concerning the applicant's insurance and investment
objectives and financial situation and needs.
(3) All Premiums paid by check or money order that are collected
by AAGS or any AAGS Representative shall be remitted promptly
in full, together with any Applications, forms and any other
required documentation, to the Customer Service Center.
Checks or money orders in payment of Premiums shall be drawn
to the order of "Annuity Investors Life Insurance Company."
Premiums may be transmitted by wire order from AAGS to the
Customer Service Center in accordance with the procedures set
forth in the Agent's Manual. If any Premium is held at any
time by AAGS, AAGS shall hold such Premium in a fiduciary
capacity and such Premium shall be remitted promptly to
AILIC. All such Premiums, whether by check, money order or
wire, shall be the property of AILIC.
(4) AAGS acknowledges that AILIC shall have the unconditional
right to reject, in whole or in part, any Application. In the
event an Application is rejected, any Premium submitted
therewith shall be returned by AILIC to the applicant. AILIC
shall notify AAGS and, if applicable, the Distributor who
submitted the Application, of such action. In the event that
a purchaser exercises his right to cancel under his Contract,
any amount to be refunded as provided in such Contract shall
be so refunded to the purchaser by AILIC. AILIC shall notify
AAGS and, if applicable, the Distributor who solicited the
Contract, of such action.
(5) AAGS shall not encourage a prospective applicant to surrender
or exchange an insurance contract in order to purchase a
Contract, nor shall AAGS encourage any Contractholder to
surrender or exchange a Contract in order to purchase another
insurance contract. AAGS shall require, through all sales
agreements entered into pursuant to Section 2.a of this
Agreement, that each Distributor likewise agree not to
encourage a prospective applicant to surrender or exchange
any insurance contract in order to purchase a Contract, nor
to encourage a Contractholder to surrender or exchange a
Contract in order to purchase another insurance contract.
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c. INDEPENDENT CONTRACTOR
----------------------
AAGS shall act as an independent contractor in the performance of
its duties and obligations under this Agreement and nothing herein
contained shall constitute AAGS or AAGS Representatives or employees or
the Distributors or their respective Representatives or employees as
employees of AILIC in connection with the distribution of the
Contracts.
d. SUPERVISION AND 1934 ACT COMPLIANCE
-----------------------------------
AAGS shall train, supervise and be solely responsible for the
conduct of AAGS Representatives in their solicitation of Applications
and Premiums, and shall supervise their compliance with applicable
rules and regulations of any securities regulatory agencies that have
jurisdiction over variable insurance product activities. AAGS
understands and acknowledges that neither it nor its Representatives is
authorized by AILIC to 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
then-currently effective Prospectus or for such class of Contracts or
in the then-currently effective prospectus or statement of additional
information for the Funds, or in current advertising materials for such
class of Contracts authorized by AILIC.
AILIC, as agent for AAGS, 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. AILIC
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. AILIC
shall maintain all such books and records and hold such books and
records on behalf of and as agent for AAGS 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, the NASD and any state agency which has jurisdiction.
3. MARKETING MATERIALS
-------------------
AILIC shall be primarily responsible for the design and
preparation of all promotional, sales and advertising material relating
to the Contracts. It is understood that as a general matter AILIC shall
initiate and design all forms of promotional, sales and advertising
material for the Contracts. Prior to any use with members of the
public, the following procedures shall be observed:
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a. AILIC shall provide to AAGS copies of all promotional, sales and
advertising material developed by AILIC for AAGS' review and
written approval, and AAGS shall be given a reasonable amount of
time to complete its review.
b. If any such promotional, sales or advertising material names a
Fund or a Fund's investment adviser, AILIC shall then furnish such
material to such Fund or such Fund's distributor, and approval
shall be obtained from such Fund or such Fund's distributor before
use.
c. The parties shall respond on a prompt and timely basis in
approving any such material and shall act reasonably in connection
therewith.
d. AAGS shall be responsible for filing such material it develops, as
required, with the NASD and any state securities regulatory
authorities.
e. AILIC shall be responsible for filing all promotional, sales or
advertising material, as required, with any state insurance
regulatory authorities.
f. The parties shall notify each other expeditiously of any comments
provided by the NASD or any securities or insurance regulatory
authority on such material, and will cooperate expeditiously in
resolving and implementing any comments, as applicable.
4. COMPENSATION AND EXPENSES
a. AILIC shall pay commissions to AAGS on Premiums paid under
Contracts sold pursuant to this Agreement and any sales agreements
entered into pursuant to Section 2 of this Agreement in the
amounts set forth on Schedule 2. AAGS shall be responsible for all
tax reporting information which AAGS is required to provide under
applicable tax law to its agents, Representatives or employees
with respect to the Contracts.
b. With respect to this Agreement, AILIC shall be obligated to 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;
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(3) any registration, qualification or approval of the Contracts
for offer and sale required under the securities, blue-sky
laws or insurance laws of the states and other jurisdictions
in the Territory;
(4) the expenses of printing the Prospectuses and the Contracts
and the Funds (any supplements thereto) for distribution to
prospective customers;
(5) all registration fees for the Contracts payable to the SEC
and the NASD;
(6) the printing of definitive Prospectuses for the Contracts and
any supplements thereto for distribution to existing
Contractowners;
c. AAGS shall be obligated to pay the following expenses related to
its distribution of the Contracts:
(1) the compensation of AAGS Representatives and employees and
any Distributors;
(2) expenses associated with the initial licensing and training
of AAGS Representatives and other employees involved in the
distribution of the Contracts;
(3) the costs of any promotional, sales and advertising material
that AAGS develops for its use in connection with the sale of
the Contracts; and
(4) any other expenses incurred by AAGS or its Representatives or
employees for the purpose of carrying out the obligations of
AAGS hereunder.
d. Other than as specifically provided in this Agreement, AILIC shall
pay all expenses that it incurs in connection with this Agreement
and AAGS shall pay all expenses that it incurs in connection with
this Agreement; it being understood that neither AAGS nor AAGI
shall be responsible for any expenses relating to the Contracts or
the processing of Contracts, Premiums or Applications, including
without limitation any expenses incurred in connection with the
return of Premiums solicited by Distributors for Applications
rejected or not timely received by AILIC, or relating to any of
the matters or acts contemplated by this Agreement, except to the
extent expressly set forth herein.
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5. REPRESENTATIONS AND WARRANTIES OF AILIC
---------------------------------------
AILIC represents and warrants to AAGS, on the effective date of
each Registration Statement for the Contracts (or for each class of
Contracts) and at each time that AAGS sells a Contract and, with
respect to Sections 5.g., 5.i., and 5.j. below, also on the date of
this Agreement, as follows:
a. Such Registration Statement has been declared effective by the SEC
or has become effective in accordance with the Regulations.
b. Such Registration Statement and the related Prospectus comply in
all material respects with the provisions of the 1933 Act and the
1940 Act and the Regulations, and neither the Registration
Statement nor the Prospectus contains an untrue statement of a
material fact or omits 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;
provided, however, that none of the representations and warranties
in this Section 5.b. shall apply to statements or omissions from a
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to AILIC in writing by AAGS
expressly for use in such Registration Statement.
c. AILIC has not received any notice from the SEC with respect to
such Registration Statement pursuant to Section 8(e) of the 1940
Act and no stop order under the 1933 Act has been issued and no
proceeding therefor has been instituted or threatened by the SEC.
d. The auditors who certified the financial statements included in
such Registration Statement and the related Prospectus are
independent public auditors as required by the 1933 Act and the
Regulations.
e. The financial statements included in such Registration Statement
present fairly the respective financial positions of AILIC and the
Variable Account (as applicable) at the dates indicated; and such
financial statements have been prepared in conformity with
generally accepted accounting principles in the United States
applied on a consistent basis.
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f. Subsequent to the respective dates as of which information is
given in such Registration Statement or the related Prospectus,
there has not been any material adverse change in the condition,
financial or otherwise, of AILIC or the Variable Account (as
applicable) which would cause such information to be materially
misleading.
g. AILIC has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Ohio
with full power and authority to own, lease and operate its
properties and conduct its business in the manner described in
such Registration Statement, is duly qualified to transact the
business of a life insurance company, and is in good standing, in
each state or other jurisdiction in which the Contracts will be
offered for sale.
h. The form of the Contracts has been approved to the extent required
by the Ohio Insurance Commissioner and by the governmental agency
responsible for regulating insurance companies in each other state
or jurisdiction in which the Contracts will be offered for sale.
i. The execution and delivery of this Agreement and the consummation
of the transactions contemplated herein have been duly authorized
by all necessary corporate action by AILIC, and when so executed
and delivered this Agreement shall be the valid and binding
obligation of AILIC enforceable in accordance with its terms.
j. The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms of this Agreement,
shall not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse
of time) a default under, the articles of incorporation or code of
regulations of AILIC, or any indenture, agreement, mortgage, deed
of trust, or other instrument to which AILIC is a party or by
which it is bound, or violate any law, or, to the best of AILIC's
knowledge, any order, rule or regulation applicable to AILIC of
any court or of any federal or state regulatory body,
administrative agency or any other governmental instrumentality
having jurisdiction over AILIC or any of its properties.
k. No consent, approval, authorization or order of any court or
governmental authority or agency is required for the issuance or
sale of the Contracts or for the consummation of the transactions
contemplated by this Agreement, that has not been obtained.
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l. AILIC has filed with the SEC all statements and other documents
required for registration under the provisions of the 1940 Act and
the Regulations thereunder, of the Variable Account supporting the
Contracts, and such registration has been effected; further, there
are no contracts or documents of AILIC which are required to be
filed as exhibits to such Registration Statement by the 1933 Act,
the 1940 Act or the Regulations which have not been so filed.
m. AILIC has obtained all exemptive or other orders of the SEC
necessary to make the public offering and consummate the sale of
such Contracts pursuant to this Agreement and to permit the
operation of the Variable Account supporting such Contracts as
contemplated in the related Prospectus.
n. Such class of Contracts has been duly authorized by AILIC and
conforms to the descriptions thereof in the Registration Statement
for such class of Contracts and the related Prospectus and, when
issued as contemplated by such Registration Statement, shall
constitute legal, validly issued and binding obligations of AILIC
in accordance with their terms.
6. UNDERTAKINGS OF AILIC
----------------------
a. AILIC shall use its best efforts
(1) to maintain the registration of the Contracts with the SEC
and any state securities commissions of any state or other
jurisdiction in which the Contracts will be offered for sale
where the securities or blue-sky laws of such state or other
jurisdiction require registration of the Contracts, including
without limitation using its best efforts to prevent a stop
order from being issued or if a stop order has been issued to
cause such stop order to be withdrawn;
(2) to gain approval of the Contract forms where required under
the insurance laws and regulations of each state or other
jurisdiction in which the Contracts will be offered for sale;
and
(3) to keep such registrations and approvals in effect thereafter
so long as the Contracts are outstanding.
b. AILIC shall take all action required to cause the Contracts to
comply, and to continue to comply, as annuity contracts and as
registered securities under applicable laws and regulations, and
to cause each Registration Statement and each related Prospectus
to comply, and to continue to comply, with:
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(1) all applicable federal laws and regulations; and
(2) all applicable laws and regulations of each state and other
jurisdiction in which the Contracts will be offered for sale.
c. AILIC shall notify AAGS immediately or in any event as soon as
possible under the circumstances:
(1) When a Registration Statement has become effective or any
post-effective amendment with respect to a Registration
Statement becomes effective thereafter;
(2) Of any request by the SEC for any amendments to a
Registration Statement, for any supplement to a Prospectus,
or for additional information;
(3) Of any event which makes any material statement made in a
Registration Statement or a Prospectus untrue in any material
respect or results in a material omission in a Registration
Statement or a Prospectus;
(4) Of the issuance by the SEC of any stop order with respect to
a Registration Statement or any amendment thereto, or the
initiation of any proceedings for that purpose or for any
other purpose relating to the registration and/or offering of
the Contracts;
(5) In which states or jurisdictions registration of the
Contracts is required under the securities or blue-sky laws,
and when such registration(s) have become effective;
(6) In which states or jurisdictions approval of the Contract
forms is required under the applicable insurance laws and
regulations, and when such approvals have been obtained; and
(7) In what states or jurisdictions the Contracts may not be
lawfully sold.
d. AILIC shall furnish to AAGS without charge promptly after filing
five (5) complete copies of each Registration Statement and any
pre-effective or post-effective amendment thereto, including
financial statements and all exhibits not incorporated therein by
reference.
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e. Schedule 3 attached to this Agreement is a list provided by AILIC
of all states and jurisdictions in which the Contracts can
lawfully be offered as of the date of this Agreement. AILIC shall
promptly notify AAGS of any change on Schedule 3.
f. AILIC shall provide AAGS, without charge, with as many copies of
each Prospectus (and any amendments or supplements to such
Prospectus) as AAGS may reasonably request.
g. AILIC shall timely file all required reports, statements and
amendments required to be filed by or for AILIC and each Variable
Account under the 1933 Act, the 1934 Act, and/or the 1940 Act or
the Regulations and under applicable state insurance statutes and
regulations.
h. AILIC shall deliver to AAGS, as soon as practicable after it
becomes available, the Quarterly Statements, Annual Statement for
AILIC and for each Variable Account in the form filed with the
State of Ohio.
i. AILIC shall provide AAGS access to such records, officers and
employees of AILIC at reasonable times as is necessary to enable
AAGS to fulfill its obligation, as the underwriter under the 1933
Act for the Contracts, to perform due diligence and to use
reasonable care.
j. AILIC shall have the responsibility for maintaining the
appointment records of all agents appointed by AILIC to distribute
the Contracts.
7. CONDITIONS TO OBLIGATIONS OF AAGS
The obligations of AAGS hereunder are subject to the accuracy of
the representations and warranties of AILIC contained in this
Agreement, to the performance by AILIC of its obligations hereunder,
and to the condition that prior to the time that AAGS begins offering
the Contracts and each time, during the period in which AAGS is
offering the Contracts, that an amendment to a Registration Statement
becomes effective, AAGS shall have received an officer's certificate
executed by a senior executive officer of AILIC to the effect that the
representations and warranties set forth in Section 5 of this Agreement
are true and correct.
8. REPRESENTATIONS AND WARRANTIES OF AAGS
AAGS represents and warrants to AILIC, on the date hereof and at
each time that AAGS sells a Contract, as follows:
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a. AAGS has taken all actions including, without limitation, those
necessary under its articles of incorporation, code of regulations
and applicable state corporate law, necessary to authorize the
execution, delivery and performance of this Agreement and all
transactions contemplated hereunder.
b. AAGS 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.
c. AAGS shall solicit, and shall instruct Distributors to solicit,
sales of the Contracts only in those states or jurisdictions
listed on Schedule 3 as in effect at the time of solicitation.
d. AAGS is and shall remain during the term of this Agreement in
compliance with Section 9(a) of the 1940 Act.
9. UNDERTAKINGS OF AAGS
a. All solicitation and sales activities engaged in by AAGS and the
AAGS Representatives in regard to the Contracts shall be in
compliance with all applicable federal and state securities laws
and regulations, as well as all applicable insurance laws and
regulations. No AAGS Representative shall solicit the sale of a
Contract unless at the time of such solicitation such individual
is:
(1) Properly licensed by the NASD and all other applicable state
insurance and securities regulatory authorities; and
(2) Appointed as an insurance agent of AILIC except as may be
otherwise agreed to by AILIC.
b. Neither AAGS nor any AAGS 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 then-currently
effective 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 AILIC.
c. Neither AAGS nor any AAGS Representative shall offer, attempt to
offer, or solicit Applications for the Contracts or deliver the
Contracts, in any state or other jurisdiction as to which AILIC
has notified AAGS in accordance with Section 6.c.(7) of this
Agreement that such Contracts may not legally be sold or offered
for sale.
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10. RECORDS
-------
AILIC and AAGS each shall maintain such accounts, books and other
documents as are required to be maintained by each of them by
applicable laws and regulations and shall preserve such accounts, books
and other documents for the periods prescribed by such laws and
regulations. The accounts, books and records of AILIC, the Variable
Account(s) and AAGS as to all transactions hereunder shall be
maintained so as to clearly and accurately disclose the nature and
details of the transactions, including such accounting information as
necessary to support the reasonableness of the amounts paid by AILIC
hereunder. Each party or designee thereof shall have the right to
inspect and audit such accounts, books and records of the other party
during normal business hours upon reasonable written notice to the
other party. Each party shall keep confidential all information
obtained pursuant to such an inspection or audit, and shall disclose
such information to third parties only upon receipt of written
authorization from the other party, except as required by law.
11. EXAMINATIONS, INVESTIGATIONS AND PROCEEDINGS
--------------------------------------------
a. COOPERATION
-----------
AILIC and AAGS shall cooperate fully in any insurance regulatory
examination or investigation or proceeding or judicial proceeding
arising in connection with the offering, sale or distribution of the
Contracts distributed under this Agreement. Further, AILIC and AAGS
shall cooperate fully in any securities regulatory investigation or
proceeding or judicial proceeding with respect to AILIC, AAGS, their
Affiliates and their agents, Representatives or employees to the extent
that such investigation or proceeding is in connection with the
offering, sale or distribution of the Contracts distributed under this
Agreement. Without limiting the foregoing, AILIC and AAGS 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 AILIC, AAGS or any of their Affiliates,
agents, Representatives or employees or which may affect AILIC's
issuance of any Contract marketed under this Agreement.
b. CUSTOMER COMPLAINT
In the case of a customer complaint, AAGS and AILIC shall
cooperate in investigating such complaint and any response by either
party to such complaint shall be sent to the other party for written
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approval not less than five business days prior to its being sent to
the customer or any regulatory authority, except that if a more prompt
response is required, the proposed response shall be communicated by
telephone or facsimile. In any event, neither party shall release any
such response without the other party's prior written approval. AILIC
shall maintain all complaint records by applicable regulations and
applicable insurance laws and regulations. AAGS shall maintain all
records required by the rules and regulations of the NASD.
12. INDEMNIFICATION
---------------
a. BY AILIC
--------
AILIC shall indemnify and hold harmless AAGS and each person who
controls or is associated with AAGS 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 AAGS 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 AILIC specifically for the purpose of
qualifying any or all of the Contracts for sale under the
securities laws of any jurisdiction; provided that AILIC
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 AILIC by AAGS
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 the terms of any Contract or because of any
breach by AILIC of any provision of this Agreement or of any
Contract or which proximately result from any activities of
AILIC's officers, directors, employees or agents or their
failure to take any action in connection with the sale,
processing or administration of the Contracts; or
16
(3) result from any breach of any representation or warranty made
by AILIC in this Agreement.
This indemnification agreement shall be in addition to any liability
that AILIC 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 AAGS
AAGS shall indemnify and hold harmless AILIC and each person who
controls or is associated with AILIC 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 AILIC and/or any such person may become
subject under any statute or regulation, and 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 (ii) blue-sky application or
other document executed by AILIC specifically for the purpose
of qualifying any or all of the Contracts for sale under the
securities laws of any jurisdiction; in each case to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission made
in reliance upon information furnished in writing to AILIC by
AAGS 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 AAGS or any AAGS Representative
of promotional, sales or advertising material not authorized
by AILIC or any verbal or written misrepresentation by AAGS
or any AAGS Representative or any unlawful sales practices
concerning the Contracts by AAGS or any AAGS Representative
under federal securities laws or NASD regulations, but not
including state insurance laws compliance with which is a
responsibility of AILIC under this Agreement or otherwise; or
17
(3) result from any claims by agents or Representatives or
employees of AAGS for commissions or other compensation or
remuneration of any type; or
(4) result from any breach by AAGS or any AAGS Representative of
any provision of this Agreement or any breach of any
representation or warranty made by AAGS in this Agreement.
This indemnification shall be in addition to any liability that AAGS
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
-------
After receipt by a party entitled to indemnification ("indemnified
party") under this Section 12 of notice of the commencement of any
action, if a claim in respect thereof is to be made against any person
obligated to provide indemnification under this Section 12
("indemnifying party"), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that that the omission to so notify
the indemnifying party shall not relieve the indemnifying party from
the liability under this Section 12, except to the extent that the
omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of this
failure to give such notice. The indemnifying party, upon the request
of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have
the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (1)
the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (2) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
18
The indemnification provisions contained in this Section 12 shall
remain operative in full force and effect, regardless of (1) any
investigation made by or on behalf of AILIC or by or on behalf of any
controlling person thereof, (2) delivery of any Contracts and Premiums
therefor, and (3) any termination of this Agreement. A successor by law
of AILIC or AAGS, as the case may be, shall be entitled to the benefits
of the indemnification provisions contained in this Section 11.
13. TERMINATION
-----------
a. This agreement shall be effective upon execution by the parties
hereto and will remain in effect unless terminated, as provided in
this Section 13.
b. This Agreement shall terminate automatically if it is assigned by
a party without the prior written consent of the other party.
c. 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 made in this
Agreement, unless such breach has been cured within 10 days after
receipt of notice of breach from the non-breaching party.
d. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (1) 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 AILIC prior to
termination; and (2) the obligations contained in Sections 4, 6,
10, 11 and 12 hereof.
14. MISCELLANEOUS
-------------
a. BINDING EFFECT
--------------
Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein
have been duly authorized by all necessary corporate action by such
party and when so executed and delivered this Agreement shall be the
valid and binding obligation of such party enforceable in accordance
with its terms. This Agreement shall be binding on and shall inure to
the benefit of the respective successors and assigns of the parties
19
hereto of the respective successors and assigns of the parties hereto
provided that neither party shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other
party.
b. AMENDMENT OF SCHEDULES
----------------------
The parties to this Agreement may amend Schedules 1, 2, and 3 to
this Agreement from time to time to reflect additions of or changes in
any class of Contracts, Commissions or jurisdictions in which Contracts
may be offered and sold. The provisions of this Agreement shall be
equally applicable to each such class of Contracts that may be added to
the Schedules, unless the context otherwise requires. Any other change
in the terms or provisions of this Agreement shall be by written
agreement between AILIC and AAGS.
c. RIGHTS, REMEDIES, ETC. 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. Failure of either party to insist upon
strict compliance with any of the conditions of this Agreement shall
not be construed as a waiver of any of the conditions, but the same
shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.
d. NOTICES
-------
All notices hereunder are to be made in writing and shall be
given:
If to AILIC, to:
Annuity Investors Life Insurance Company
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: General Counsel
If to AAGS, to:
AAG Securities, Inc.
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: General Counsel
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return
receipt requested, and shall be effective upon delivery.
20
e. ARBITRATION
-----------
Any controversy or claim arising out of relating to this
Agreement, or the breach hereof, shall be settled by arbitration in the
forum jointly selected by AILIC and AAGS (but if applicable law requires
some other forum, than such other forum) in accordance with the
Commercial Arbitration Rules of the American Arbitration Association,
and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof.
f. INTERPRETATION; JURISDICTION
----------------------------
This Agreement constitutes the whole agreement between the
parties thereto 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 Ohio without giving effect to
principles of conflict of laws.
g. 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 profit 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.
h. 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.
i. COUNTERPARTS
------------
This Agreement may be executed in two or more counterparts, each
of which taken together shall constitute one and the same instrument.
21
j. REGULATION
----------
This Agreement shall be subject to the provisions of the 1933 Act,
1934 Act and 1940 Act and the Regulations 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.
IN WITNESS WHEREOF, each party hereto represents that the officer
signing this Agreement on the party's behalf is duly authorized to execute this
Agreement; and the parties hereto have caused this Agreement to be duly executed
by such authorized officers on the date specified below.
ANNUITY INVESTORS LIFE INSURANCE
COMPANY
By: /s/ Xxxx X. Xxxxxxxx
Name: Xxxx X. Xxxxxxxx
Title: Senior Vice President
AAG SECURITIES, INC.
By: /s/ Xxxx X. Xxxxxxxx
Name: Xxxx X. Xxxxxxxx
Title: Vice President
22
SCHEDULE 1
CONTRACTS SUBJECT TO DISTRIBUTION AGREEMENT
--------------------------------------------------------------------------------
CONTRACT MARKETING NAME POLICY FORM NOS. SEC REGISTRATION NO.
================================================================================
Commodore Nauticus G800(95)-3; C800(95)-3 811-07299/33-59861
--------------------------------------------------------------------------------
Commodore Americus A800(Q96)-3 811-07299/33-65409
--------------------------------------------------------------------------------
Commodore Americus, f/k/a A800(NQ96)-3 811-07299/33-65409
Commodore Mariner
--------------------------------------------------------------------------------
Commodore Navigator A801-BD(NQ97)-3 811-08017/333-19725
--------------------------------------------------------------------------------
Commodore Navigator A801-BD(Q97)-3 811-08017/333-19725
--------------------------------------------------------------------------------
Commodore Navigator G801-BD(97)-3; 811-08017/333-19725
C801-BD(97)-3
--------------------------------------------------------------------------------
EFFECTIVE DATE: MAY 1, 1997
SCHEDULE 2
Commissions
23
Schedule 3
List of Jurisdictions in which the
Contracts may be Offered for Sale
24
