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EXHIBIT 1(k)
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
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provision shall not 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 business 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 business 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 business 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 business 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 26th day of June, 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
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mailing to owners of variable life insurance policies and/or variable annuity
contracts copies of the Portfolios' 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 15
basis points (.15%) 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) The Company will calculate the reimbursement of administrative
expenses at the end of each calendar quarter and the Company shall send a
detailed statement of each such fee computation to SKI. SKI will make such
reimbursement to the Company within thirty (30) days thereafter.
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 or any person indemnified unless SKI or such
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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
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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 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.
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(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 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)
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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
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.
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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 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: Xxxxxxx X. Xxxxxx
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 26th day of
June, 1998.
SEAL XXXXXXX XXXXXX INVESTMENTS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Authorized Officer
SEAL XXXXXX INVESTORS LIFE
INSURANCE COMPANY
By: /s/ Xxxx X. Xxxxxxx, Xx.
Name: Xxxx X. Xxxxxxx, Xx.
Title: Marketing Officer
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SCHEDULE A
TO INDEMNIFICATION AGREEMENT
Separate Account(s) of the Company
KILICO Variable Separate Account - 2
KILICO Variable Separate Account
KILICO Variable Annuity Separate Account
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