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EXHIBIT 1.(3)(a)
FORM OF DISTRIBUTION AGREEMENT BETWEEN KILICO AND LIS SECURITIES
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FORM OF DISTRIBUTION AGREEMENT
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TABLE OF CONTENTS
SECTION 1. Additional Definitions..............................................2
SECTION 2. Distribution Activities -- Authority................................3
SECTION 3. Distribution Activities -- Appointment..............................5
SECTION 4. Distribution Activities -- Duties...................................6
SECTION 5. Limitations on Authority............................................7
SECTION 6. Sales Agreements....................................................7
SECTION 7. Forms, Applications, and Licensing..................................8
SECTION 8. Marketing Materials.................................................9
SECTION 9. The Distributor's Compensation.....................................11
SECTION 10. Representations and Warranties.....................................12
SECTION 11. Indemnification....................................................14
SECTION 12. Records............................................................20
SECTION 13. Investigations and Proceedings.....................................20
SECTION 14. Term and Termination...............................................21
SECTION 15. Rights Upon Termination............................................22
SECTION 16. Independent Contractor.............................................23
SECTION 17. Notices............................................................24
SECTION 18. Arbitration........................................................25
SECTION 19. Confidentiality....................................................25
SECTION 20. Severability.......................................................26
SECTION 21. Choice of Law......................................................27
SECTION 22. No Waiver..........................................................27
SECTION 23. Agreement Non-Assignable...........................................27
SECTION 24. Exhibits and Schedules.............................................27
SECTION 25. Headings...........................................................27
SECTION 26. Entire Agreement...................................................27
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DISTRIBUTION AGREEMENT
AGREEMENT made as of the _____ day of _______________, 1998, by and
between Xxxxxx Investors Life Insurance Company, an Illinois insurance company
(the "Insurance Company") and Life Insurance Solutions, LLC, a Delaware limited
liability company d/b/a LIS Securities (the "Distributor"), on its own behalf
and on behalf of the individuals and entities listed on Schedule 1 to this
Agreement (the "Distributor Agency Affiliates"), as that Schedule may be amended
from time to time in accordance with this Agreement.
RECITALS:
WHEREAS, the Insurance Company issues certain variable annuity
contracts and variable life insurance policies; and
WHEREAS, [redacted] certain other variable annuity contracts and
variable life insurance policies issued by the Insurance Company are being
offered and sold pursuant to Registration Statements (the "Registered Products")
and their related Prospectuses filed with and declared effective by the
Securities and Exchange Commission (the "Commission") under the provisions of
the 1933 Act and the 1940 Act [redacted] and the "Registered Products" are
referred to as the "Variable Products") (Variable Products are identified in
Schedule 2 to this Agreement); and
WHEREAS, the Distributor is registered as a broker-dealer with the
Commission under the Securities Act of 1934, as amended (the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD") that engages in the distribution of insurance products; and
WHEREAS, the Insurance Company desires to retain the Distributor to
distribute the Variable Products through registered broker-dealers
("Broker-Dealers") and their registered representatives ("Representatives"); and
WHEREAS, the Distributor desires to be retained by the Insurance
Company to distribute the Variable Products on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of mutual promises contained herein,
the parties hereto agree as follows:
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1. ADDITIONAL DEFINITIONS
(a) AFFILIATE -- With respect to a person, any other person
controlling, controlled by, or under common control with, such person.
(b) APPLICATIONS -- The forms used by the prospective purchaser to
apply for a variable life insurance policy or a variable annuity
contract.
(c) CONTRACTS -- The variable annuity contracts and certificates set
forth in Schedule 2 to this Agreement as in effect at the time this
Agreement is executed, and such other variable annuity products that
may be added to Schedule 2 from time to time.
(d) POLICIES -- The variable life insurance policies set forth in
Schedule 2 to this Agreement as in effect at the time this Agreement is
executed, and such other variable life insurance products that may be
added to Schedule 2 from time to time.
(e) PREMIUM -- A payment made under a Policy by an applicant or
purchaser to purchase Variable Products.
(f) [redacted]
(g) [redacted]
(h) [redacted]
(i) PROSPECTUS -- The prospectus if any, included within a
Registration Statement or, if more recent, the prospectus filed
pursuant to Rule 497 under the 1933 Act. For purposes of Section 11 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(i).
(j) PURCHASE PAYMENT -- A payment made under a Contract by an
applicant or purchaser to purchase benefits under the Contract.
(k) 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 the Contracts
or Policies, including financial statements included in, and all
exhibits to, that registration statement or post-effective amendment.
For purposes of Section 11 of this Agreement, the term "Registration
Statement" means
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any document which is or at any time was a Registration Statement
within the meaning of this Section 1(k).
(l) REGULATIONS -- The rules and regulations promulgated by the
Commission under the 1933 Act, the 1934 Act and the 1940 Act as in
effect at the time this Agreement is executed or thereafter
promulgated.
(m) VARIABLE ACCOUNTS -- Separate accounts established pursuant to
Illinois state insurance law supporting the Variable Products specified
in Schedule 2 as in effect at the time this Agreement is executed, or
as it may be amended from time to time.
2. DISTRIBUTION ACTIVITIES -- AUTHORITY
(a) The Insurance Company authorizes the Distributor, and the
Distributor accepts the authority, to act as a distributor of the
Variable Products, subject to any applicable requirements of the 1933
Act and the 1940 Act.
The Insurance Company hereby authorizes the Distributor to
select persons that will be authorized to engage in solicitation
activities with respect to the Variable Products, including the
recruitment and appointment of Broker-Dealers and Representatives which
in turn may be authorized to engage in solicitation activities
involving the solicitation of Applications, Premiums and Purchase
Payments directly from prospective purchasers.
The Distributor shall enter into separate written "Sales
Agreements" with Broker-Dealers for distribution of the Variable
Products. The Distributor shall notify the Insurance Company of its
intention to enter into a Sales Agreement with a Broker-Dealer by
providing to the Insurance Company a copy of that Sales Agreement at
least five (5) business days prior to the date on which the Sales
Agreement is to be executed by the parties thereto. The Distributor
shall not enter into a Sales Agreement with a Broker-Dealer if the
Insurance Company reasonably objects within five (5) days after
delivery of the proposed Sales Agreement with the Broker-Dealer by
notifying the Distributor of its objection and reasons therefor in
writing.
(b) The Insurance Company shall not offer for sale or sell any
Variable Products to or through any of the persons listed on Schedule 4
to this Agreement, as that Schedule may be amended from time to time,
or any of the successors or assigns of those persons, or to or through
any affiliate of such person other than sales (through Broker-Dealers
or directly) pursuant to this Agreement without the prior written
consent of the
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Distributor. It is understood that Schedule 4 will be re-evaluated each
year after the effective date of this Agreement and will be amended to
add persons with whom a Sales Agreement has been executed (or is
expected to be executed within one year of the annual re-evaluation) or
to delete persons for which no Sales Agreement has been executed during
the one year or longer period that person has been listed on Schedule
4.
(c) Nothing in this Agreement precludes additional distribution and
compensation arrangements among the parties to this Agreement,
including ones that may have compensation arrangements that reward the
Insurance Company for identifying and recruiting new Broker-Dealers to
sell the Variable Products, for identifying potential purchasers of the
Variable Products, or for providing superior support under this
Agreement.
3. DISTRIBUTION ACTIVITIES -- APPOINTMENT
(a) Where required by applicable state insurance law, the Insurance
Company hereby appoints the Distributor as its agent under that state
insurance law to represent the Insurance Company in the distribution
activities contemplated by this Agreement. The Insurance Company hereby
authorizes the Distributor under applicable securities laws to engage
in the activities contemplated by this Agreement relating to the
distribution of the Variable Products.
(b) In states where the Distributor is not licensed as an insurance
agent and applicable state insurance law requires that the Distributor
be so licensed, the Insurance Company hereby appoints each Distributor
Agency Affiliate listed on Schedule 1 to this Agreement (as that
Schedule may be amended from time to time by the Distributor when
required by applicable state insurance law to reflect changes in the
licensing status of the Distributor or the Distributor Agency
Affiliates) as its agent under applicable state insurance laws to
represent the Insurance Company in the distribution activities
contemplated by this Agreement.
(c) The Distributor is hereby vested with the power and authority to
authorize Broker-Dealers to recommend Representatives for appointment
as agents of the Insurance Company. The Insurance Company shall appoint
in the appropriate states or jurisdictions the Representatives
recommended by the Broker-Dealers, provided that the Insurance Company
reserves the right, which right shall not be exercised unreasonably, to
refuse to appoint as agent any Representative, and, once appointed, to
terminate the same at any time for cause. The Distributor shall submit
to the Insurance
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Company a "certificate of good standing" executed by a principal of the
Broker-Dealer for each Representative recommended for appointment. The
Insurance Company shall notify the Distributor of its intent to
terminate a Representative and the reasons therefor not less than two
(2) business days prior to delivering any notice of termination to the
Representative and the Broker-Dealer with whom the Representative is
associated.
(d) The Insurance Company shall not enter into any agent or agency
agreement (an "Agent Agreement") with any Representative,
Broker-Dealer, or affiliate (contractual or otherwise) of a
Broker-Dealer (a "Broker-Dealer Affiliate") in connection with this
Agreement for the sale of the Variable Products, unless that Agent
Agreement (i) is substantially identical to the form of Agent Agreement
attached hereto as Schedule 7 or (ii) is approved by the Distributor,
provided that the approval of the Distributor shall be deemed to have
been given if no written objection to the Agent Agreement has been
delivered by the Distributor to the Insurance Company within five (5)
business days after being provided with a copy of the proposed Agent
Agreement. After entering into an Agent Agreement, the Insurance
Company shall not amend or supplement that agreement without the
Distributor's prior written consent, which consent shall not be
unreasonably withheld. The Insurance Company shall notify the
Distributor of its intent to terminate an Agent Agreement and the
reasons therefor not less than two (2) business days prior to
delivering any notice of termination to the other party to that
agreement.
4. DISTRIBUTION ACTIVITIES -- DUTIES
(a) The Distributor shall use its best efforts to market the Variable
Products actively through Broker-Dealers and Representatives in
accordance with the terms and conditions of this Agreement, subject to
applicable material market and regulatory conditions.
(b) The Distributor shall assist and provide information to
Broker-Dealers and Representatives in connection with servicing the
Variable Products sold or marketed by those Broker-Dealers
Representatives.
(c) Under no circumstances shall the Insurance Company or the
Distributor be responsible under this Agreement for any failure by
Broker-Dealers or Representatives to comply with applicable law.
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(d) Under no circumstances shall the Distributor be responsible under
this Agreement for any failure by the Insurance Company to comply with
applicable law.
(e) Under no circumstances shall the Insurance Company be responsible
under this Agreement for any failure by the Distributor to comply with
applicable law.
5. LIMITATIONS ON AUTHORITY
(a) The Distributor shall not have the authority, and shall not grant
authority to Broker-Dealers or Representatives, on behalf of the
Insurance Company:
(1) to make, alter or discharge any Variable Product or other
contract entered into pursuant to a Variable Product;
(2) to waive any Variable Product forfeiture provision;
(3) to extend the time of paying any Purchase Payments, or
Premiums due under the Variable Products; and
(4) to receive any monies, Purchase Payments or Premiums (except
for the sole purpose of forwarding monies, Purchase Payments or
Premiums to the Insurance Company).
(b) The Distributor shall not expend, nor contract for the
expenditure of, funds of the Insurance Company.
(c) The Distributor shall not possess or exercise any authority on
behalf of the Insurance Company other than that expressly conferred on
the Distributor by this Agreement.
6. SALES AGREEMENTS
(a) The Distributor shall not enter into any Sales Agreement with a
Broker-Dealer relating to the distribution of any Variable Product,
unless that Sales Agreement (i) is substantially identical to the form
of Sales Agreement attached hereto as Schedule 8 or (ii) is approved by
the Insurance Company, provided that the approval of the Insurance
Company shall be deemed to have been given if no written objection to
the Sales Agreement has been delivered by the Insurance Company to the
Distributor within five
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(5) business days after being provided by facsimile or express courier
with a copy of the proposed Sales Agreement.
(b) The Distributor shall provide to the Insurance Company a copy of
each Sales Agreement entered into by the Distributor and a
Broker-Dealer within five (5) business days following execution
thereof.
7. FORMS, APPLICATIONS, AND LICENSING
(a) The Insurance Company, or its agent, shall forward to the
Distributor, Applications, Policies, Contracts, subscription
agreements, certificates, other administrative forms, and any
amendments or supplements to the foregoing, necessary to carry out the
Distributor's distribution authority and responsibilities with respect
to the Variable Products.
(b) The Insurance Company shall obtain all requisite regulatory
approvals of such materials furnished to the Distributor and shall
comply with all applicable laws, rules, regulations and orders of any
governmental authority relating to the issuance or sale of the Variable
Products.
(c) All Premiums and Purchase Payments paid by check or money order
that are collected by the Distributor, any Broker-Dealer or
Representative shall be remitted promptly, and in any event not later
than two business days, in full, together with any subscription
agreements, Applications, forms, and any other required documentation,
to the Insurance Company. Checks or money orders in payment of Premiums
and Purchase Payments shall be drawn to the order of "Xxxxxx Investors
Life Insurance Company." Premiums and Purchase Payments may be
transmitted by wire order from the purchaser of the Variable Products,
Broker-Dealer or any Representative to the Insurance Company. If any
Premium or Purchase Payment is held at any time by the Distributor,
Broker-Dealer, or any Representative, the Distributor, Broker-Dealer,
or Representative shall hold that Premium or Purchase Payment in a
fiduciary capacity. All Premiums and Purchase Payments whether by
check, money order or wire, shall be the property of the Insurance
Company.
(d) The Distributor acknowledges that the Insurance Company shall
have the unconditional right to reject, in whole or in part, any
Application. The Insurance Company shall return any monies received by
it from an applicant or purchaser whose Application has been rejected.
The Insurance Company shall notify the Distributor in writing one
business day prior to taking any action to return any such monies,
which
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notice shall identify, if applicable, the Broker-Dealer whose
Representative submitted the rejected Application.
(e) If a purchaser exercises its "free look right" under a Variable
Product, any refund of Premiums or Purchase Payments, due as provided
in that Variable Product, shall be made by the Insurance Company to the
purchaser. The Insurance Company shall notify the Distributor in
writing one business day prior to taking any action to refund any such
Premiums or Purchase Payments, which notice shall identify, if
applicable, the Broker-Dealer through which the Variable Product had
been purchased.
8. MARKETING MATERIALS
(a) REGISTERED PRODUCTS
(1) The Distributor shall design, develop, produce, make the
determination whether to file and, if necessary, file for and
obtain all necessary regulatory approvals for, all advertising,
sales literature, and other promotional material (which shall not
be deemed to include any Prospectus) required in connection with
its distribution of the Registered Products.
(2) Prior to use of any advertising, sales literature, or other
promotional material for the Registered Products, the following
procedures shall be observed:
(i) The Distributor shall provide to the Insurance Company
copies of all advertising, sales literature, and other
promotional material developed by the Distributor at least
10 days prior to first use;
(ii) The Insurance Company shall have the right to
disapprove use of any such promotional material, provided
that written notice of the disapproval and basis therefor is
provided to the Distributor within 10 days of receipt by the
Insurance Company of the promotional material;
(iii) If any advertising, sales literature, or other
promotional material names an investment company or an
investment company's investment adviser, the Distributor
shall furnish such material to that investment company or
that investment company's distributor or investment adviser,
and written approval shall be obtained from that investment
company or its distributor or investment adviser before use
or authorization of use by the Broker-Dealers or
Representatives;
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(iv) Any advertising, sales literature, or other promotional
material relating to the Registered Products required to be
filed with the Commission, NASD Regulation, Inc. ("NASDR"),
and any other appropriate securities and insurance
regulatory authorities, shall be timely filed by the
Distributor. The Distributor shall provide the Insurance
Company with a copy of any comments provided by the NASDR or
any securities or insurance regulatory authority on such
material, and the Insurance Company will cooperate in
resolving and implementing any comments, as applicable.
(b) [redacted]
(c) ALLOCATION OF COSTS
(1) The Distributor shall pay for the development and printing
of all advertising, sales literature, and other promotional
material (other than those materials set forth in paragraph 2,
below) and all fees related to NASDR filings. The Distributor
shall also bear the cost of printing and distributing to
prospective purchasers of Variable Contracts or to owners of
Variable Contracts all Prospectuses (including, for this purpose,
prospectuses of registered open-end management investment
companies that serve as funding media for the Variable Contracts,
to the extent not paid by those investment companies) [redacted].
(2) The Insurance Company shall bear the cost of registration
and qualification of the Registered Products; [redacted] the
preparation and filing of all Prospectuses and Registration
Statements; setting the Prospectuses [redacted] in type; the
preparation, filing, printing, and distributing to existing
owners of Policies or Contracts of any proxy materials and
reports and of all statements and notices required by any state
or federal law.
(3) The Insurance Company shall bear the cost of any review by
it, or on its behalf, of any advertising, sales literature, or
other promotional material.
(4) The Distributor shall bear the cost of any review by it, or
on its behalf, of any Prospectuses or [redacted].
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9. THE DISTRIBUTOR'S COMPENSATION
(a) With respect to [redacted] sales of all other Variable Contracts
made on or after the effective date of this Agreement, in consideration
for the services rendered by the Distributor, the Insurance Company
will pay to the Distributor the compensation set forth in Schedule 5
(Part A) to this Agreement, as that schedule may be amended from time
to time, provided, that, any such amendments are in writing and signed
by the parties. [redacted]
(b) [redacted]
10. REPRESENTATIONS AND WARRANTIES
(a) BY THE DISTRIBUTOR
The Distributor represents and warrants to, and covenants with,
the Insurance Company as follows:
(1) The Distributor has taken all action necessary including
without limitation, those necessary under its articles of
incorporation, by-laws and applicable state corporate law, to
authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereunder.
(2) The Distributor is and shall remain registered during the
term of this Agreement as a broker-dealer under the 1934 Act, a
member in good standing of the NASD, and duly registered under
applicable state securities laws.
(3) The Distributor is and shall remain during the term of this
Agreement in compliance with the eligibility requirements for
certain affiliated persons and underwriters found in Section 9(a)
of the 0000 Xxx.
(4) The Distributor and each Distributor Agency Affiliate has
all necessary licenses and regulatory approvals to perform the
services required by this Agreement and that the Distributor will
notify the Insurance Company within three business days of
obtaining actual knowledge of any change in the status of such
licenses or regulatory approvals.
(5) The Distributor has, or will have, the authority to bind the
Distributor Agency Affiliates to the terms of this Agreement.
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(b) BY THE INSURANCE COMPANY
The Insurance Company represents and warrants to, and covenants
with, the Distributor as follows:
(1) All necessary regulatory approvals and licenses from any
state or federal governmental body having jurisdiction over the
Insurance Company or the Variable Products have been obtained,
and the Insurance Company will notify the Distributor within one
business day of obtaining actual knowledge of any change in the
status of any approvals or licenses related to the marketing,
sale or distribution of the Variable Products.
(2) The Insurance Company has taken all action necessary
including, without limitation, those necessary under its articles
of incorporation, bylaws and applicable state corporate law, to
authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereunder.
(3) The Insurance Company is and shall remain during the term of
this Agreement in compliance with the eligibility requirements
for certain affiliated persons and underwriters found in Section
9(a) of the 0000 Xxx.
(4) [redacted]
11. INDEMNIFICATION
(a) BY THE DISTRIBUTOR
(1) The Distributor agrees to indemnify and hold harmless the
Insurance Company and each director, officer, employee or agent
of the Insurance Company, and each person, if any, who controls
the Insurance Company within the meaning of the federal
securities laws (collectively, the "Indemnified Parties" for
purposes of this Section 11(a)) against any and all losses,
claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Insurance Company) or
litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are
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related to the offer or sale of the Variable Products or the
operation of the Variable Accounts and:
(i) arise out of, or are based upon, violation(s) by the
Distributor of federal or state securities law(s) or
regulation(s), applicable banking law(s) or regulation(s),
insurance law(s) or regulation(s) or any rule or requirement
of the NASD; or
(ii) arise out of, or are based upon, any oral or written
misrepresentation, or any unlawful sales practices
concerning the Variable Products by the Distributor; or
(iii) 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 advertising, sales literature,
or other promotional material designed, developed, and
produced by the Distributor and used by it in the
distribution of the Variable Products; provided that the
Distributor shall not be liable in any such case to the
extent that such losses, claims, damages, liabilities or
expenses arises out of, or are based upon, an untrue
statement or alleged untrue statement or omission or alleged
omission made in reliance upon information furnished in
writing to the Distributor by the Insurance Company
specifically for use in the preparation of any such
promotional material; or
(iv) arise out of, or are based upon, claims by the
Representatives or agents or representatives of the
Distributor for commissions or other compensation or
remuneration of any type; or
(v) arise as a result of any failure on the part of the
Distributor to submit Premiums, Purchase Payments, or
Applications to the Insurance Company, or to submit the
correct amount of a Premium or Purchase Payment, on a timely
basis and in accordance with this Agreement, subject to
applicable law; or
(vi) arise as a result of any failure on the part of the
Distributor to deliver the Variable Products to purchasers
thereof on a timely basis;
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provided that the Distributor shall not be liable in any
such case to the extent that such losses, claims, damages,
liabilities or expenses arise as a result of any failure on
the part of the Insurance Company to perform its obligations
under this Agreement on a timely basis; or
(vii) arise as a result of a material breach by the
Distributor of any provisions of this Agreement; or
(viii) arise as a result of actions of a Broker-Dealer or
its Representatives, if, and to the extent that, the
Distributor has received monies from the Broker-Dealer as
indemnification for losses by, or expenses incurred by, the
Insurance Company;
as limited by and in accordance with the provisions of Sections
11(a)(2) and 11(a)(3) hereof.
(2) The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation ("Losses" for purposes of this
Section 11(a)(2)) incurred or assessed against an Indemnified
Party that may arise from any Indemnified Party's willful
misfeasance or bad faith. The Distributor's liability for Losses
in the event of its breach of this Agreement shall be limited to
that portion of Losses caused by its breach, and the Distributor
shall not be liable for that portion of Losses caused by breach
of this Agreement by an Indemnified Party or from any act or
omission by an Indemnified Party.
(3) The Distributor shall not be liable under this
indemnification provision with respect to any claim made against
an Indemnified Party unless that Indemnified Party shall have
notified the Distributor in writing within five (5) business days
after the summons or other first legal process giving information
of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have
received notice of such service on any designated agent).
Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the
Distributor of its obligations hereunder except to the extent
that the Distributor has been prejudiced by such failure to give
notice. In addition, any failure by the Indemnified Party to
notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the
Indemnified Party against whom the action is brought otherwise
than on account of this indemnification
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provision. In case any such action is brought against the
Indemnified Parties, the Distributor shall be entitled to
participate, at its own expense, in the defense of the action.
The Distributor also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action; provided, however, that if the Indemnified Party shall
have reasonably concluded that there may be defenses available to
it which are different from or additional to those available to
the Distributor, the Distributor shall not have the right to
assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Distributor be liable for the
fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the
same general allegations or circumstances). After notice from the
Distributor to the Indemnified Party of the Distributor's
election to assume the defense thereof, and in the absence of
such a reasonable conclusion that there may be different or
additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not
be liable to that party under this Agreement for any legal or
other expenses subsequently incurred by the party independently
in connection with the defense thereof other than reasonable
costs of investigation.
(4) The Indemnified Parties will notify the Distributor within
five (5) business days of the commencement of any litigation or
proceedings against them in connection with the offer or sale of
the Variable Products or the operation of the Variable Accounts.
(b) BY THE INSURANCE COMPANY
(1) The Insurance Company agrees to indemnify and hold harmless
the Distributor and each director, officer, employee or agent of
the Distributor, and each person, if any, who controls the
Distributor within the meaning of the federal securities laws
(collectively, the "Indemnified Parties" for purposes of this
Section 11(b)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Insurance Company) or litigation
(including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or
settlements are related to the offer or sale of the Variable
Products or the operation of the Variable Accounts and arise out
of or a result from:
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(i) 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: (a) Registration Statement or
Prospectus; (b) blue-sky application or other document
executed by the Insurance Company specifically for the
purpose of [redacted] qualifying any or all of the
Registered Products for sale under, the securities laws of
any jurisdiction; or (c) information furnished in writing to
the Distributor specifically for the purpose of being
included in any advertising, sales literature, or other
promotional material to be used in connection with the
distribution of the Variable Products; provided that the
Insurance Company shall not be liable in any such case to
the extent that such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, an untrue
statement or alleged untrue statement or omission or alleged
omission made in reliance upon information furnished in
writing to the Insurance Company by the Distributor
specifically for use in the preparation of any such
document, application, or promotional material; or
(ii) result because of the provisions of any Variable
Product or because of any material breach by the Insurance
Company of any provision of this Agreement or of any
Variable Product or which result from any activities of the
Insurance Company's officers, directors, employees or agents
or their failure to take any action in connection with the
sale, processing or administration of the Variable Products
including, without limitation, obtaining auditors' reports,
computing accurate separate account and/or underlying fund
performance data, preparation and timely filing and
delivery, as required, of annual and semiannual reports and
reports on Form N-SAR and the timely payment of all state
and federal registration fees;
as limited by and in accordance with the provisions of Sections
11(b)(1) and 11(b)(2) hereof.
(2) The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation ("Losses" for purposes of this
Section 11(b)(2)) incurred or assessed against an
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Indemnified Party that may arise from any Indemnified Party's
willful misfeasance or bad faith. The Insurance Company's
liability for Losses in the event of its breach of this Agreement
shall be limited to that portion of Losses caused by its breach,
and that party shall not be liable for that portion of Losses
caused by breach of this Agreement by an Indemnified Party or
from any act or omission by an Indemnified Party.
(3) The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against
an Indemnified Party unless that Indemnified Party shall have
notified the Insurance Company in writing within five (5)
business days after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon that Indemnified Party (or after the Indemnified
Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of
any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except
to the extent that the Insurance Company has been prejudiced by
such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Insurance Company of any such
claim shall not relieve the Insurance Company from any liability
which it may have to the Indemnified Party against whom the
action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, the Insurance Company shall be
entitled to participate, at its own expense, in the defense of
the action. The Insurance Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the
party named in the action; provided, however, that if the
Indemnified Party shall have reasonably concluded that there may
be defenses available to it which are different from or
additional to those available to the Insurance Company, the
Insurance Company shall not have the right to assume said
defense, but shall pay the costs and expenses thereof (except
that in no event shall the Insurance Company be liable for the
fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the
same general allegations or circumstances). After notice from the
Insurance Company to the Indemnified Party of the Insurance
Company's election to assume the defense thereof, and in the
absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Insurance Company
will not be liable to that party under this Agreement for any
legal or other expenses subsequently incurred by
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the party independently in connection with the defense thereof
other than reasonable costs of investigation.
(4) The Indemnified Parties will notify the Insurance Company
within five (5) business days of the commencement of any
litigation or proceedings against them in connection with the
offer or sale of the Variable Products or the operation of the
Variable Accounts.
12. RECORDS
The Insurance Company and the Distributor 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 the Insurance Company 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 the Insurance
Company hereunder. Each party 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. Any party that requests an audit
of the accounts, books and records of the other party shall bear the expense of
conducting such an audit, including the expenses of the other party reasonably
incurred in connection with the audit, but not including the costs associated
with the time spent on audit-related matters by directors, officers, or
employees of the other party and the associated overhead expenses incurred by
such party.
13. INVESTIGATIONS AND PROCEEDINGS
(a) COOPERATION
The Distributor and the Insurance Company shall notify each other
promptly of and cooperate fully in any insurance regulatory
investigation or proceeding or judicial proceeding arising in
connection with the offering, sale or distribution of the Variable
Products pursuant to this Agreement. Further, the Distributor and the
Insurance Company shall cooperate fully in any securities regulatory
investigation or proceeding or judicial proceeding with respect to the
Insurance Company, the Distributor, their affiliates, agents or
employees to the extent that such investigation or proceeding is in
connection with the offering, sale or distribution of the Variable
Products pursuant to this Agreement.
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(b) COMPLAINTS
The Insurance Company and the Distributor shall notify each other
promptly of any complaint received by any party with respect to the
Insurance Company, the Distributor or any of their affiliates, agents
or employees or which may affect the Insurance Company's issuance of
any Variable Product marketed under this Agreement. In the case of a
substantive complaint, the Distributor and the Insurance Company shall
cooperate in investigating such complaint and any such response by any
party to such complaint shall be sent to the other party for written
approval not less than five (5) business days prior to its being sent
to the complainant or any regulatory authority. In any event, neither
party shall release any such response without the other party's prior
written approval.
14. TERM AND TERMINATION
(a) TERM --This Agreement shall be effective from the date hereof
through December 31, 2001, which term shall automatically be extended
for a period of three years and tri-annually thereafter for an
additional period of three years until this Agreement is sooner
terminated in accordance with the terms of the Agreement.
(b) TERMINATION -- No party hereto may terminate this Agreement
except as expressly provided in this Section 14(b).
(1) Any party hereto may terminate this Agreement effective the
date that the term of this Agreement would otherwise
automatically be renewed upon written notice delivered to the
other party not less than 30 nor more than 60 days prior to such
effective date, which notice shall specify that it is being given
pursuant to this Section 14(b)(1).
(2) A party (the "Terminating Party") may terminate this
Agreement for cause if:
(i) another party (the "Breaching Party") materially
breaches this Agreement,
(ii) the Terminating Party has delivered to the Breaching
Party a notice specifying that it is a notice of breach
being given pursuant to this Section 14(b)(2), and
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(iii) the Breaching Party has not cured that breach within
30 days after the delivery of the notice.
(3) A Terminating Party may terminate this Agreement for cause
(upon 30 days' written notice to the other party) if, as a result
of
(i) the voluntary institution by the Distributor of
bankruptcy proceedings or the voluntary institution by the
Insurance Company of insolvency or rehabilitation
proceedings under any state insurance laws or regulations
(each an "Insolvent Party") or
(ii) a formal order or written finding by a court of
competent jurisdiction that the Insolvent Party is bankrupt
or insolvent,
there is a degradation of the Insolvent Party's reputation that
would materially impair the ability of the Insolvent Party to
carry out its obligations under this Agreement.
(c) SOLICITATION AFTER TERMINATION -- Upon termination of this
Agreement for any reason, the Distributor agrees that it will not take
any action designed or calculated to result in the transfer or exchange
of Contracts or Policies.
(d) SURVIVAL -- The provisions of Sections 10, 11, 18 and 19
(Representations and Warranties, Indemnification, Arbitration and
Confidentiality, respectively) shall survive the termination of this
Agreement.
15. RIGHTS UPON TERMINATION
(a) In no event will any further compensation be paid to the
Distributor should the Insurance Company terminate this Agreement for
cause pursuant to Section 14(b)(2) or Section 14(b)(3).
(b) As of the date of termination, the Insurance Company shall have
the right to set off against any monies it owes the Distributor any
amounts owed by the Distributor to the Insurance Company. In the event
that the amounts owed by the Distributor exceed the amounts owed by the
Insurance Company, the difference shall become immediately due and
payable by the Distributor.
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(c) In the event that either party does not pay within two weeks
after termination the net amount it owes, then the net amount owed will
accrue interest, compounded daily, at the fluctuating prime interest
rate charged by [redacted].
(d) [redacted]
(e) If the Insurance Company terminates this Agreement pursuant to
Section 14(b)(1), the Insurance Company, after the termination of this
Agreement, shall continue to:
(1) pay the Distributor the compensation set forth in Schedule 5
to this Agreement; and
(2) offer all of the Variable Products identified on Schedule 2
to this Agreement for a period of not less than one (1) year from
the date of termination of this Agreement, during which period of
time (i) the Insurance Company shall employ at least the same
level of efforts in offering and supporting the Variable Products
as it did before the termination of this Agreement and (ii) the
terms of this Agreement shall remain in full force and effect as
though the Agreement had not been terminated.
(f) If the Distributor terminates this Agreement pursuant to Section
14(b)(1), the Insurance Company, after the termination of this
Agreement, shall continue to pay the Distributor the compensation set
forth in Schedule 5 to this Agreement.
16. INDEPENDENT CONTRACTOR
The Distributor shall act as an independent contractor in the
performance of its duties and obligations under this Agreement and nothing
herein contained shall constitute the Distributor, Broker-Dealers,
Representatives or employees or officers of the Distributor or Broker-Dealers as
employees of the Insurance Company in connection with the distribution of the
Variable Products.
17. NOTICES
Any notice required or permitted under this Agreement shall be
delivered personally or sent by facsimile or by registered or certified mail,
return receipt requested, with all postage prepaid:
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(a) TO THE DISTRIBUTOR:
LIS Securities
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Fax: (000) 000-0000
(b) TO THE INSURANCE COMPANY:
Xxxxxx Investors Life Insurance Company
0 Xxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
A party may change its address or fax number for the delivery of
notices by delivering a written notice to the other party at its last specified
address. All notices shall be effective upon delivery; provided that any notice
sent by facsimile shall be deemed ineffective unless a copy of the notice is
also delivered personally or sent by express courier or mail for delivery on the
same or next business day.
18. ARBITRATION
Any dispute between the Distributor and the Insurance Company arising
under or relating to this Agreement shall be settled by compulsory arbitration
before a panel of three (3) arbitrators in accordance with the Commercial
Arbitration Rules then in force of the American Arbitration Association. The
arbitration shall take place in Chicago, Illinois, unless some other location is
mutually agreed upon by the parties in dispute. Each party shall bear its own
costs and expenses in any such arbitration, except that the Distributor and the
Insurance Company shall bear the expenses of the arbitrators' services equally.
19. CONFIDENTIALITY
(a) GENERALLY. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will safeguard it as
provided herein. The party receiving Confidential Information will not,
directly or indirectly, report, publish, distribute, disclose, or
otherwise disseminate the Confidential Information, or any portion
thereof, to any third party including its affiliates, and will not use
the
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Confidential Information, or any portion thereof, for the benefit of
itself or any third party including its affiliates or for any purpose,
except only as necessary to perform its duties and exercise its rights
hereunder, or as expressly authorized in writing by the party who owns
such Confidential Information. Disclosure of Confidential Information
internally by a recipient will be limited to those of its and its
affiliates' officers, directors, employees, and agents on a "need to
know" basis who must have access to the Confidential Information to
enable such party to perform its duties and exercise its rights
hereunder. In order to safeguard the Confidential Information, each
party shall (i) inform each recipient of the Confidential Information
of the confidential nature thereof and of the requirements of this
Agreement, (ii) direct such recipients to comply with the terms of this
Agreement, and (iii) exercise any other precautions necessary to
prevent any improper use or disclosure of Confidential Information.
(b) DEFINITION. "Confidential Information" shall mean: (i)
information regarding a party's or such party's affiliates', financial
condition, information systems, business operations, plans and
strategies, products or services, customers and prospective customers,
and marketing and distribution plans, methods and techniques; (ii)
information that is marked "confidential", "proprietary" or in like
words, or that is summarized in writing as being confidential prior to
or promptly after disclosure to the other party; (iii) any and all
related research; and (iv) any and all designs, ideas, concepts, and
technology embodied therein. Confidential Information of the
Distributor or its affiliates that is to be kept confidential by the
Insurance Company shall also include: (v) [redacted]; (vi) specific
marketing and training materials of each Broker-Dealer; (vii) any
information of the Distributor or its affiliates in any form whatsoever
that is covered by a patent issued by the United States Patent and
Trademark Office; and (viii) any information relating to the [redacted]
illustration and case management system.
Information is not considered confidential or proprietary if such
information: (1) is or becomes generally available to the public other
than as a result of disclosure by the recipient; (2) was available to
or already known by the recipient on a non-confidential basis prior to
its receipt from the party claiming confidentiality; (3) is developed
by the recipient independently of any information or data acquired from
the party claiming confidentiality; or (4) is disclosed pursuant to a
court order or the requirement of any federal or state regulatory,
judicial, or government authority.
(c) REMEDIES. Each party acknowledges and agrees that monetary
damages would not be a sufficient or adequate remedy for a breach or
anticipated breach of this Section and that, in addition to any other
legal or equitable remedies which may be available,
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each party shall be entitled to specific performance and injunctive
relief for any breach or anticipated breach of this Section.
(d) SURVIVAL. The provisions of this Section shall survive the
expiration or other termination of this Agreement.
20. SEVERABILITY
If any provision of this Agreement is held to be unenforceable or
invalid, that provision shall be severed from this Agreement and the remainder
of this Agreement shall remain in full force and effect.
21. CHOICE OF LAW
This Agreement and any disputes, actions or other proceedings arising
under or relating to it shall be governed by law of the State of Illinois
without regard to its principles of conflicts of law.
22. NO WAIVER
No failure or delay on the part of any party hereto in exercising any
power or right under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No waiver
by any party of any provision of this Agreement, nor of any breach or default,
shall be effective unless in writing and signed by the party against whom such
waiver is to be enforced.
23. AGREEMENT NON-ASSIGNABLE
Any assignment of this Agreement in whole or in part by a party without
the prior written consent of the other parties thereto shall be void and shall
vest no rights in the assignee.
24. EXHIBITS AND SCHEDULES
The Exhibits and Schedules to this Agreement are a part of this
Agreement as if set forth in full herein.
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25. HEADINGS
The headings herein are for the purpose of convenience only and have no
legal force, meaning or effect.
26. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there are no warranties,
representations and/or agreements between the parties in conjunction with the
subject matter hereof except as set forth in this Agreement. This Agreement,
including any Schedule or Exhibit hereto, may be amended or modified only by
written instrument, executed by duly authorized officers of the parties.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be
executed as of the date first above written.
LIFE INSURANCE SOLUTIONS, LLC XXXXXX INVESTORS LIFE INSURANCE
D/B/A LIS SECURITIES COMPANY
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
----------------------------- -----------------------------
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SCHEDULE 1
DISTRIBUTOR AGENCY AFFILIATES
[redacted]
29
SCHEDULE 2
VARIABLE PRODUCTS
---------------- ------------------------- ------- -----------------------------------------------
PRODUCT POLICY/CERTIFICATE NUMBER DESCRIPTION
---------------- ------------------------- ------- -----------------------------------------------
[redacted] [redacted] [redacted]
---------------- ------------------------- ------- -----------------------------------------------
FIRST FOUNDATION L - 8161 Registered Individual Variable Universal Life
---------------- ------------------------- ------- -----------------------------------------------
L - 8162 Registered Survivorship Variable Universal Life
---------------- ------------------------- ------- -----------------------------------------------
30
SCHEDULE 3
[redacted]
31
SCHEDULE 4
[redacted]
32
SCHEDULE 5
COMPENSATION SCHEDULE
[redacted]
33
SCHEDULE 6
[redacted]
34
SCHEDULE 7
[redacted]
35
SCHEDULE 8
[redacted]
36
SCHEDULE 9
[redacted]
