AMENDED AND RESTATED
PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT
BY AND BETWEEN AAL CAPITAL MANAGEMENT CORPORATION
AND AID ASSOCIATION FOR LUTHERANS
DATED NOVEMBER 23,1994, AS AMENDED July 10,1997
TABLE OF CONTENTS
1. Appointment of DISTRIBUTOR
2. Underwriting Responsibilities of DISTRIBUTOR .
3. Additional Services to be Provided by DISTRIBUTOR
3.1 Preparation of Sales Literature and Advertising Materials
3.2 Licensing of Field and Home Office Staff
3.3 Regulatory Compliance
3.4 Field Training
3.5 Confirmations
4. Responsibilities of AAL
4.1 Sales Commissions
4.2 Sales Credits and Field Expenses
4.3 Registrations of Securities and Investment Adviser
4.4 Books and Records
4.5 Duty to Keep Informed
4.6 Transfer Agent and Management
5 Joint Procedures for Communications with the Public and with Registered
Representatives
6. Fees to be Paid to DISTRIBUTOR by AAL
6.1 Services
6.2 Determination of Charge/Expense Formulas for Services
6.3 Preparation and Negotiation of Final Annual Budget for
Services
6.4 Accounting Procedures
7. Independent Contractor
8. indemnification
8.1 Indemnification of AAL
8.2 Indemnification of DISTRIBUTOR
9. Authorized Representations
10. Amendment or Assignment of Agreement
11. Termination of Agreement
12. Miscellaneous
13. Definition of Terms
14. Compliance with Securities Laws
15. Regulatory Examinations
16. Notices
17. Governing Law
Schedule A: Variable Annuity Schedule of Sales Commissions
Schedule B: Variable Life Schedule of Sales Commissions
PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT
This PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT made and entered this
23rd day of November, 1994, amended October 28, 1996 and July 10, 1997, by and
between AAL CAPITAL MANAGEMENT CORPORATION, a corporation organized and existing
under the laws of the State of Delaware, ( "DISTRIBUTOR" or "AALCMC") and AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized and existing
under the laws of the State of Wisconsin ("AAL"), on its own behalf and on
behalf of AAL Variable Annuity Account I "VARIABLE ANNUITY ACCOUNT" and AAL
Variable Life Account I "VARIABLE LIFE ACCOUNT) both collectively "ACCOUNTS."
RECITALS
AAL and its VARIABLE ANNUITY ACCOUNT and VARIABLE LIFE ACCOUNT, separate unit
investment trust investment accounts registered under the Investment Company Act
of 1940 (the "1940 Act"), propose to offer for sale certain flexible premium
deferred variable annuity and variable universal life contracts (the
"Certificates"), interests under which are registered with the Securities and
Exchange Commission (the "SEC") as securities under the Securities Act of 1933
(the " 1933 Act"), the 1940 Act, and applicable state laws.
Premiums received from owners of Certificates will be deposited at the owner's
designation in the respective ACCOUNTS and/or in the AAL General Account. The
ACCOUNTS will invest solely in portfolio shares "subaccounts" of the AAL
Variable Product Series Fund, Inc.
"FUND."
DISTRIBUTOR is a wholly-owned indirect subsidiary of AAL, is registered as a
broker-dealer with the SEC under the Securities Exchange Act of 1934 (the "1934
Act") and with state securities authorities in all 50 states, is a member of the
National Association of Securities Dealers, Inc. ("NASD"), and is authorized to
offer and sell mutual funds and variable insurance products, and acts as
DISTRIBUTOR of The AAL Mutual Funds, a registered investment company.
AAL and DISTRIBUTOR intend to enter into an agreement by which DISTRIBUTOR will
act as the principal underwriter in a continuous offering of the Certificates
for AAL, to begin on the effective date of the registration statements in
connection with the Certificates under the 1933 Act, and state securities and
insurance registrations. This Agreement pertains to the sale of Certificates by
Registered Representatives licensed with DISTRIBUTOR, and not to the sale of
Certificates by any other party and/or broker-dealer who may be authorized by
AAL to sell Certificates or who may have a separate Distribution or Selling
Agreement with AAL or DISTRIBUTOR.
THEREFORE, in consideration of the covenants and mutual promises of the parties
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, DISTRIBUTOR and AAL agree as follows:
AGREEMENT
1. Appointment of DISTRIBUTOR
AAL hereby appoints DISTRIBUTOR as the principal underwriter for the
Certificates during the term of this Agreement in each state or other
jurisdiction where the Certificates may legally be sold. The Certificates may
also be sold by representatives of other broker-dealer firms with which AALCMC
has executed a selling agreement. In addition, AAL may retain other firms to
serve as principal underwriters of the Certificates. Anything in this Agreement
to the contrary notwithstanding, AAL retains the ultimate right to suspend sales
in any jurisdiction or jurisdictions, or to refuse to sell a Certificate to any
applicant for any reason whatsoever.
2. Underwriting Responsibilities of DISTRIBUTOR
DISTRIBUTOR agrees to offer and sell the Certificates, as agent for AAL, from
time to time during the term of this Agreement upon the terms described in the
Certificate Prospectuses. As used in this Agreement, the term "Prospectuses"
shall mean the Prospectuses and the Statements of Additional Information
included as part of the Registration Statement for AAL and the ACCOUNTS, as such
Prospectuses and Statements of Additional Information may be amended or
supplemented from time to time. The term "Registration Statement" shall mean the
Registration Statement, as amended from time to time and filed by AAL and the
respective ACCOUNTS with the SEC, and effective under the 1933 Act and/or the
1940 Act.
After the effective date of the Registration Statement for the Certificates,
DISTRIBUTOR will hold itself out to receive applications, satisfactory to
DISTRIBUTOR, for the purchase of the Certificates and will promptly transmit
applications and premiums received for the Certificates which it accepts to AAL
or to its designee, currently the AAL Service Center c/o Continuum Inc., 000
Xxxx 00xx Xxxxxx, Xxxxxx Xxxx, XX 00000.
All purchases shall be deemed effective at the time and in the manner set forth
in the Prospectuses. All applications, when accepted by DISTRIBUTOR and by AAL,
shall designate the allocation of premiums by the purchaser among the separate
investment options represented by the sub-accounts and the AAL General Account,
as defined and described in the Certificate Prospectuses. All premiums from
purchasers shall be deposited by AAL in either the ACCOUNTS, to be promptly
allocated among the sub-accounts or to the AAL General Account, as designated by
the purchaser. Premiums allocated to the sub-accounts of the ACCOUNTS shall be
expressed as "accumulation units" of the Certificate as that term is defined in
the Prospectus. The above allocation statements are subject to any specific
allocation of premium requirements that may be set forth in the Certificate
pertaining to allocations during, the free look period and allocations in
connection with incomplete applications.
DISTRIBUTOR agrees to be solely responsible for the operation of its business as
a registered broker-dealer in connection with all its underwriting activities
under this Agreement, and shall operate such business in accordance with all
applicable laws and regulations. All sales of the Certificates by DISTRIBUTOR
shall be made through Registered Representatives who are "Associated Persons"
("Associated Persons" as defined by the 0000 Xxx) of DISTRIBUTOR, and who are
also District Representatives of AAL. DISTRIBUTOR shall be responsible for
selling only through Registered Representatives who are properly licensed to
sell Certificates in jurisdictions where offers and sales take place.
DISTRIBUTOR is responsible for certain services relating to the distribution of
all prospectus(es) of the ACCOUNTS and Fund used by its Registered
Representatives in the marketing of the Certificates. These services include,
but are not limited to design, layout, printing, mailing or other delivery
services.
3. Additional Services to be Provided by DISTRIBUTOR In addition to the
underwriting responsibilities of DISTRIBUTOR described in paragraph 2 above,
DISTRIBUTOR agrees to provide the following additional services to AAL:
3.1 Preparation of Sales Literature and Advertising Materials
DISTRIBUTOR will be responsible for the initiation, preparation, printing and
distribution of all public sales literature and advertising materials, as well
as all training and marketing materials distributed to its Registered
Representatives as "broker-dealer only" materials under the NASD rules, which
are used by DISTRIBUTOR and its Registered Representatives in connection with
the sale of the Certificates. AAL will, in a timely manner, provide DISTRIBUTOR
with any and all materials and information necessary to enable DISTRIBUTOR to
fulfill its obligations set forth in this section regarding sales literature and
advertising materials. AAL will provide DISTRIBUTOR with the names of AAL
employees who will review and approve the materials described in this
subsection. DISTRIBUTOR will coordinate and provide copies of such materials to
designated employees of AAL during the development process and all advertising
and sales literature will be approved by both AAL and DISTRIBUTOR prior to use.
DISTRIBUTOR will complete all of the necessary filings and approvals with the
NASD and state securities authorities prior to the public use of such sales
material and advertising. DISTRIBUTOR will provide copies of all materials to
AAL. AAL will file and obtain approval of all such sales material and
advertising with State Insurance Commissioners where such filing is required by
state laws. AAL will promptly advise DISTRIBUTOR when such filings and approvals
are completed. Materials will only be made available for public use or
Registered Representative use after all securities and insurance filings and
approvals are completed and AAL has given approval for materials to be used.
DISTRIBUTOR will be responsible for maintaining an inventory and approval
history of all of its sales literature, advertising and "broker-dealer only"
materials, and for the distribution of such materials to its Registered
Representatives and to the public.
3.2 Licensing of Field and Home Office Staff
DISTRIBUTOR will be responsible for managing the licensing of all of its
Registered Representatives in connection with the sale of the Certificates, and
will directly handle all licensing by the NASD and state securities authorities
that is necessary for the sale of the Certificates. AAL will be responsible for
obtaining the necessary insurance licenses with state insurance authorities for
the offer and sale of the Certificates. AAL and DISTRIBUTOR shall develop a
joint electronic data base and reporting system to consolidate securities and
insurance licensing information for their District Representatives and
Registered Representatives, respectively. The system will provide controls
satisfactory to DISTRIBUTOR in the processing of Certificate applications to
assure that all of its Registered Representatives are properly licensed when
offering and selling the Certificates. The system shall be kept current by:
(i) DISTRIBUTOR providing securities licensing, data to AAL; and
(ii) AAL providing insurance licensing data to a database that shall be
maintained by AAL.
The system described herein shall be equally accessible to AAL and DISTRIBUTOR.
DISTRIBUTOR and AAL will cooperate to assure the appropriate licensing of AAL
and DISTRIBUTOR's home office employees (including DISTRIBUTOR's wholesalers)
who require securities or insurance licenses in connection with their work on
the Certificates. DISTRIBUTOR will arrange for pre-licensing study and training
to assist such persons in obtaining their securities licenses as requested by
AAL. All AAL employees who are Associated Persons of DISTRIBUTOR as a result of
being licensed as securities Registered Representatives will be subject to
compliance procedures and supervision of DISTRIBUTOR in connection with all work
related to the Certificates in the same manner as all other Associated Persons.
3.3 Regulatory Compliance
DISTRIBUTOR will have responsibility for compliance by all of its Registered
Representatives who are Associated Persons of DISTRIBUTOR (including employees
of AAL) with all securities laws and regulations in connection with the offer
and sale of the Certificates. Compliance supervision shall include, but not be
limited to, the following matters: acceptance of new business; suitability
determinations (as made in accordance with NASD rules or other applicable SEC or
self-regulatory organizations' rules and regulations); field training,
supervision and sales practices; books and records requirements; approval and
use of all advertising, sales literature and broker-dealer only materials;
supervision of confirmation terms and processing; the payment of commissions;
and compliance with the written supervisory procedures of DISTRIBUTOR.
3.4 Field Training
Immediately after the effective date of the Registration Statement for the
Certificates, DISTRIBUTOR shall be responsible for conducting field training of
all of its associated Registered Representatives in those states where the
Certificates are approved for sale. The training program shall be developed and
conducted by DISTRIBUTOR. DISTRIBUTOR will coordinate with AAL concerning those
AAL employees who will be involved in the development of the training program
and in its execution. The training program shall be approved by both AAL and
DISTRIBUTOR prior to implementation.
3.5 Confirmations
DISTRIBUTOR shall be responsible to assure that all purchases, sales or other
transactions occurring in the account of an owner of a Certificate sold by its
Registered Representatives shall be confirmed to the owner in writing in a form
and manner which complies with the requirements of the 1934 Act, state laws and
regulations, and the disclosure requirements of the NASD. Such confirmations
will be furnished by the broker-dealer to all owners of Certificates in
accordance with securities laws, will reflect the facts of the transaction, and
will show that they are being, sent by AAL on behalf of DISTRIBUTOR acting, in
the capacity of agent for AAL. The parties agree that the form and the manner of
use of confirmations in connection with transactions occurring in such accounts
shall be supervised by DISTRIBUTOR. AAL agrees that AAL and its agent, Continuum
Inc., will prepare and distribute such confirmations in accordance with
DISTRIBUTOR's instructions. AAL agrees that AAL will make no changes or
variations in either the form or the manner of distribution of such
confirmations without the written approval of DISTRIBUTOR and shall cause such
confirmations to be issued as directed by DISTRIBUTOR and on behalf of
DISTRIBUTOR
4. Responsibilities of AAL
4.1 Sales Commissions
AAL will pay DISTRIBUTOR a sales commission on Certificate sales pursuant to
Schedules A and B attached hereto. DISTRIBUTOR intends to reallocate commissions
to its Registered Representatives (including General Agent and General Manager
Registered Representatives) for the sale of Certificates in accordance with a
written fee schedule agreement between DISTRIBUTOR and its associated Registered
Representatives. DISTRIBUTOR, for its convenience, authorizes AAL as agent for
DISTRIBUTOR, to make commission payments due to DISTRIBUTOR directly to its
Registered Representatives.
All commissions for the sale of the Certificates due to DISTRIBUTOR from AAL
shall be reflected on DISTRIBUTOR's financial records as a receipt from AAL and
a disbursement to DISTRIBUTOR'S Registered Representatives, notwithstanding the
direct payment of such commissions by AAL to such Registered Representatives.
AAL agrees to pay commissions directly to such Registered Representatives as a
convenience to DISTRIBUTOR and recognizes that this agreement to pay is purely
ministerial in nature and not discretionary. The financial records maintained by
or for DISTRIBUTOR shall properly reflect such payments.
Notwithstanding the foregoing, it is agreed that AAL shall have the right in the
payment of such commissions to treat such commissions as part of AAL employee
compensation to such Registered Representatives for the purpose of calculation
of AAL benefits programs and withholding taxes; provided however, that AAL will
provide DISTRIBUTOR in advance with a written, signed opinion of outside
counsel, who shall have acceptable expertise in securities laws, stating that
the payment of commissions pursuant to this Agreement:
(i) shall not require AAL to resister as a broker-dealer under federal
law, or state laws (if ascertainable), and (ii shall not violate
DISTRIBUTOR's obligation to supervise and directly pay commissions to
its Registered Representatives under applicable SEC and NASD rules.
AAL will maintain and provide records and reports reflecting the calculation of
all commissions paid to, and any other cash and non-cash compensation
(collectively "Commissions"), received by DISTRIBUTOR'S Registered
Representatives and the details of the transactions upon which such Commissions
are based, and will respond to any inquiries about Commission payments, pursuant
to this paragraph. DISTRIBUTOR shall designate to AAL the records required and
such records shall be maintained subject to the provisions of Paragraph 4.3
below.
4.2 Sales Credits and Field Expenses
Any expenses or charges for AAL field services for the Certificates will be paid
directly by AAL. Sales credits for sales of the Certificates will be based on
gross premiums received for the Certificates, subject to any exceptions that may
exist or be developed with respect to internal transfers of funds among AAL and
affiliated companies.
4.3 Registrations of Securities and Investment Adviser
AAL shall be solely responsible, at its expense, for registration of the
Certificates, the ACCOUNTS, the FUND, and for the registration of AAL as an
investment adviser of the FUND, with all required state and federal authorities.
AAL, agrees to maintain such registration statements in effect at all times
during the term of this Agreement, and to file such amendments, reports and
other documents as may be necessary to assure that there will be no untrue
statement of material fact in any Registration Statement and that there shall be
no omission to state a material fact in the Registration Statement or Form ADV,
which omission would make the statements therein misleading,. AAL may direct
DISTRIBUTOR, and DISTRIBUTOR shall perform, any or all of the services described
in this paragraph.
4.4 Books and Records
AAL agrees to maintain all books and records required and designated by
DISTRIBUTOR under the securities laws in connection with the offer and sale of
the Certificates by its Registered Representatives, as specifically required by
Section 17 of the 1934 Act, Rule I7a-3 and 17a-4 under the 1934 Act or as
required by the NASD and such other or further books or records as may be
required by rule or regulation of any other federal or state regulatory
organization or self-regulatory organization, to the extent such requirements
are applicable to the variable annuity and variable life operations as mutually
determined for purposes of this Agreement by DISTRIBUTOR and AAL. AAL shall
maintain such books and records as agent on behalf of DISTRIBUTOR who shall be
the owner thereof. AAL agrees that such books and records will be open and
available to DISTRIBUTOR at all times, shall be surrendered promptly on request,
without charge, to DISTRIBUTOR, and shall be subject to inspection by the SEC in
accordance with Section 17 of the 1934 Act, and by the NASD or other
self-regulatory organization, at any time. The parties represent and warrant
that DISTRIBUTOR has provided a schedule to AAL that describes the books and
records to be maintained by AAL, on behalf of DISTRIBUTOR.
4.5 Duty to Keep Informed
AAL shall at its expense keep DISTRIBUTOR fully informed on a current basis of
any changes or other material matters affecting the Certificates or FUND. AAL
will use its best efforts to provide advance notice to DISTRIBUTOR of any
proposed chances in the Certificates or FUND and to discuss such matters with
DISTRIBUTOR prior to taking any action. AAL shall furnish DISTRIBUTOR copies of
all information, financial statements, books and records and other papers which
DISTRIBUTOR may reasonably request in connection with its due diligence inquiry
or for use in connection with the distribution of Certificates.
4.6 Transfer Agent and Management
AAL shall be solely responsible for the selection and supervision of a Transfer
Agent for the Certificates; management of all Certificate accounts, including
the sub-accounts, establishing and maintaining account records and processing;
and the receipt and disbursement of all monies related to the Certificates.
Notwithstanding its responsibility for these matters, AAL shall keep DISTRIBUTOR
currently informed, through reports requested by DISTRIBUTOR, of all activities
related to the Certificates and the FUND. AAL will also keep DISTRIBUTOR
informed and consult with DISTRIBUTOR in advance of any changes to the
procedures for the management or administration of the Certificates or to any of
the underlying records or documents related thereto. AAL recognizes that any
communications with Certificate owners, or prospective Certificate owners,
related to the Certificates sold by DISTRIBUTOR'S Registered Representatives
subject to securities regulations and must be approved in advance by AAL and
DISTRIBUTOR and may require filing with and approval by the NASD and state
securities authorities. Such communications include but are not limited to:
correspondence statement stuffers, newspaper or magazine articles, confirmation
messages and other similar written materials.
5. Joint Procedures for Communications with the Public and with Registered
Representatives
The parties recognize that all written materials which are provided to AAL
members or prospective members in connection with the Certificates sold by
DISTRIBUTOR'S Registered Representatives are required to meet specific standards
established by securities and insurance regulatory authorities. Such materials
will include advertising and sales materials, correspondence, magazine articles,
newspaper articles, press releases and any other written public communication.
To assure compliance with all applicable rules and laws, it is agreed that
DISTRIBUTOR will manage and coordinate the distribution of all public written
materials related to the Certificates sold by DISTRIBUTOR'S Registered
Representatives, including materials related to the FUND. No public materials
will be released without the prior written approval of both AAL and DISTRIBUTOR,
and both parties shall cooperate in the preparation and review of such
materials. AAL will provide DISTRIBUTOR with the names of its employees
designated to give approval for such written materials. All nonpublic written
communications with DISTRIBUTOR'S Registered Representatives and to employees of
AAL or DISTRIBUTOR, related to the Certificates shall be reviewed and approved
by both AAL and DISTRIBUTOR prior to use. Such materials include, without
limitation, field updates, "broker-dealer only" materials, training materials,
compliance information, and administrative forms sent to owners. AAL and
DISTRIBUTOR will establish internal policies to insure that all such materials
are appropriately and timely reviewed and shall cooperate with each other in
establishing such procedures.
6. Fees to be Paid to DISTRIBUTOR by AAL
6.1 Services
DISTRIBUTOR shall perform certain services, as requested by AAL, in connection
with DISTRIBUTOR's role as principal underwriter in AAL's continuous offering of
the Certificates ("Services"). Services shall be initially designated as
"Marketing Services", "Broker-Dealer Administration", "Licensing", "Regulatory
Compliance", "Field Training", and "Consulting". The parties represent and
warrant that AAL and DISTRIBUTOR have mutually agreed to the definition and
composition of each of the foregoing Services. AAL and DISTRIBUTOR agree that
the definition and composition of each of the foregoing Services, and additional
services to be rendered in connection with the sale of the Certificates, shall
be reaffirmed or amended, as the case may be, on an annual basis in connection
with the preparation and negotiation of the "Final Annual Budget" (as that term
is defined in Paragraph 6.3) for Services for such year.
6.2 Determination of Charge/Expense Formulas for Services
The parties represent and warrant that DISTRIBUTOR and AAL agree on the methods
to determine and calculate the amount of Services to be charged by DISTRIBUTOR
as an expense to AAL (the "Charge/Expense Formulas"). Charge/Expense Formulas
shall be initially determined and defined as "Sales Credit Charges", "Direct
Expenses", and "Per Hour Charges". AAL and DISTRIBUTOR covenant and agree that:
(i) Charge/Expense Formulas shall be reaffirmed or amended, as the case
may be, on an annual basis in connection with the preparation and negotiation of
the Final Annual Budget for Services for such year; and
(ii) Charge/Expense Formulas shall include a portion of DISTRIBUTOR's
general overhead expenses as specifically stated in the underlying detail
schedules for Charge/Expense Formulas ("Detail Schedules").
DISTRIBUTOR and AAL affirm and agree that the Detail Schedules were reviewed by
representatives of both AAL and DISTRIBUTOR in the due diligence process. The
parties represent and warrant that DISTRIBUTOR and AAL agree on the allocation
of dollar amounts of Services to the various categories of Charge/Expense
Formulas (" Services Allocation"). Services Allocation shall be initially
determined as set forth in the Final Annual Budget for the 1995 calendar year.
AAL and DISTRIBUTOR covenant and agree that Services Allocation shall be
reaffirmed or amended, as the case may be, on an annual basis in connection with
the preparation and negotiation of the Final Annual Budget for Services for such
year.
6.3 Preparation and Negotiation of Final Annual Budget for Services
Each successive year that this Agreement is in effect, DISTRIBUTOR shall prepare
a projected annual budget for the successive year (the " Projected Annual
Budget") and deliver the Projected Annual Budget to a designated representative
of AAL. Each successive year that this Agreement is in effect, AAL shall provide
comments to DISTRIBUTOR on the content of the Projected Annual Budget AAL and
DISTRIBUTOR covenant and agree that:
(i) a final, agreed form of the Projected Annual Budget (the "Final
Annual Budget") shall be determined on or before the deadline date set forth for
the submission of annual budgets pursuant to AAL budget policies; and
(ii) the policies, definitions and operating procedures (including but
not limited to "Billing Process", and "Billable Items") set forth in P.O.P. 251
- "Subsidiary and Affiliate Billing", shall be followed in connection with the
preparation and negotiation of the Projected Annual Budget and the Final Annual
Budget.
6.4 Accounting Procedures
DISTRIBUTOR and AAL, covenant and agree that:
(i) payroll & expense records and procedures,
(ii) invoicing procedures; and
(iii) the time and manner of charge/expense payment for the VA Services
set forth in this Agreement shall be determined by reference to certain AALCMC
accounting manuals and procedures. Notwithstanding the foregoing, the parties
covenant and agree that the provisions of this Agreement pertaining to books and
records (e.g. Paragraph 4.4 hereof) shall apply to all transactions relating to
Services and the offering and sale of Certificates by DISTRIBUTOR The parties
agree that because of the sensitive and confidential nature of these records and
procedures, such records and procedures shall not be disclosed nor disseminated
except to authorized accounting and management personnel of AAL and DISTRIBUTOR.
DISTRIBUTOR and AAL acknowledge that unanticipated conditions may materially
change the Final Annual Budget. DISTRIBUTOR and AAL agree that the nature of
these unanticipated conditions can be characterized as either a "permanent
change" or a "temporary change". For example, a permanent change is the
elimination of a Service that DISTRIBUTOR provides pursuant to this Agreement
and a temporary chance is AAL's assumption of a Service, pursuant to
DISTRIBUTOR's request. DISTRIBUTOR and AAL covenant and agree that the
accounting treatment for permanent changes shall be redetermined on an annual
basis and the accounting treatment for a temporary change shall be as set forth
herein. In the event a temporary change occurs, DISTRIBUTOR and AAL covenant and
agree that AAL shall be permitted a payment credit towards any outstanding
charges/expenses for Services performed by DISTRIBUTOR, for certain services
rendered by AAL employees and agents in connection with the offering and sale of
the Certificates (e.g. legal or accounting services) ("Services Offset") The
relevant terms and conditions of this Agreement shall apply to the Services
Offset (e.g. determination for Final Annual Budget, accounting procedures). On a
monthly basis during the term of this Agreement:
(i) DISTRIBUTOR shall provide written documentation to AAL for
Services; and
(ii) AAL shall provide written documentation to DISTRIBUTOR for
Services Offset rendered during the preceding calendar month (collectively, the
"Accounting Statements").
The Accounting Statements shall reasonably itemize and detail the Services and
Services Offset provided by each of the parties during the proceeding, month.
The format for the Accounting Statements shall follow certain CMC accounting
procedures.
7. Independent Contractor
In performing its duties hereunder, DISTRIBUTOR shall be an independent
contractor and neither DISTRIBUTOR, nor any of its officers, directors,
employees, or Registered Representatives is, or shall be, an employee of AAL in
the performance of DISTRIBUTOR's duties hereunder. DISTRIBUTOR shall be
responsible for the employment, control, and conduct of its officers, agents and
employees and for injury to such agents or employees or to others through its
agents or employees. DISTRIBUTOR assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all employee taxes
thereunder.
8. lndemnification
8.1 Indemnification of AAL
DISTRIBUTOR agrees to indemnify and hold harmless AAL and each of its present or
former directors, officers, employees, representatives and each person, if any,
who controls or previously controlled AAL within the meaning of Section 15 of
the 1933 Act, against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claims or expense and reasonable counsel fees
incurred in connection therewith) to which AAL or any such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Certificate by any person which
may be based upon any wrongful act by DISTRIBUTOR or any of DISTRIBUTOR's
directors, officers, employees or representatives, or may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering the Certificates filed or made public by AAL 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 AAL by DISTRIBUTOR.
In no case is DISTRIBUTOR's indemnity in favor of AAL, or any person indemnified
to be deemed to protect AAL or such indemnified person against any liability to
which AAL or 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 his obligations and duties under this
Agreement, or is DISTRIBUTOR to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against AAL or any
person indemnified unless AAL or such person, as the case may be, shall have
notified DISTRIBUTOR in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon AAL or upon such person (or after AAL or
such person shall have received notice to such service on any designated agent).
However, failure to notify DISTRIBUTOR of any such claim shall not relieve
DISTRIBUTOR from any liability which DISTRIBUTOR may have to AAL or any person
against whom such action is brought otherwise than on account of DISTRIBUTOR's
indemnity agreement contained in this Paragraph. DISTRIBUTOR shall be entitled
to participate, at its own expense, in the defense, or, if DISTRIBUTOR so
elects, to assume the defense of any suit brought to enforce any such claim,
but, if DISTRIBUTOR elects to assume the defense, such defense shall be
conducted by legal counsel chosen by DISTRIBUTOR and satisfactory to AAL and to
the defendant or defendants who are entitled to such indemnification. In the
event that DISTRIBUTOR elects to assume the defense of any suit and retain legal
counsel, AAL and the defendant or defendants who arc entitled to such
indemnification, shall bear the fees and expenses of any additional legal
counsel retained by them. If DISTRIBUTOR does not elect to assume the defense of
any such suit, DISTRIBUTOR will reimburse AAL and the defendant or defendants
entitled to such indemnification for the reasonable fees and expenses of any
legal counsel retained by them. DISTRIBUTOR agrees to promptly notify AAL of the
commencement of any litigation or proceedings against it or any of its officers,
employees or representatives in connection with the issue or sale of the
certificates.
8.2 Indemnification of DISTRIBUTOR
AAL agrees to indemnify and hold harmless DISTRIBUTOR and each of its present or
former directors, officers, employees, representatives and each person, if any,
who controls or previously controlled DISTRIBUTOR within the meaning of Section
15 of the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition, or with regard to the terms and conditions, of
any Certificates by any person that may be based upon any wrongful act by AAL or
any of AAL's directors, officers, employees or representatives (other than
DISTRIBUTOR) or any other broker/distributors who are selling Certificates for
AAL, may be based upon any untrue statement or alleged untrue statement or a
material fact contained in a registration statement, prospectus, shareholder
report or other information covering the Certificates or FUND filed or made
public by AAL 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 unless such statement
or omission was made in reliance upon information furnished to AAL by
DISTRIBUTOR. In no case is AAL's indemnity in favor of DISTRIBUTOR, or any
person indemnified to be deemed to protect DISTRIBUTOR or such indemnified
person against any liability to which DISTRIBUTOR or 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 his
obligations and duties under this Agreement, or is AAL to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim made
against DISTRIBUTOR or person indemnified unless DISTRIBUTOR, or such person, as
the case may be, shall have notified AAL in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon DISTRIBUTOR
or upon such person (or after DISTRIBUTOR or such person shall have received
notice of such service on any designated agent). However, failure to notify AAL
of any such claim shall not relieve AAL from any liability which AAL may have to
DISTRIBUTOR or any person against whom such action is brought otherwise than on
account of AAL's indemnity agreement contained in this Paragraph. AAL shall be
entitled to participate, at its own expense, in the defense, or, if AAL so
elects, to assume the defense of any suit brought to enforce any such claim, but
if AAL elects to assume the defense, such defense shall be conducted by legal
counsel chosen by AAL and satisfactory to DISTRIBUTOR and to the defendant or
defendants entitled to such indemnification. In the event that AAL elects to
assume the defense of any suit and retain legal counsel, DISTRIBUTOR and the
defendant or defendants entitled to such indemnification, shall bear the fees
and expenses of any additional legal counsel retained by them. If AAL does not
elect to assume the defense of any such suit, AAL will reimburse DISTRIBUTOR and
the defendant or defendants entitled to such indemnification for the reasonable
fees and expenses of any legal counsel retained by them. AAL agrees to promptly
notify DISTRIBUTOR of the commencement of any litigation or proceedings against
it or any of its trustees, officers, employees, or representatives in connection
with the issue or sale of the Certificates.
9. Authorized Representations
DISTRIBUTOR is not authorized by AAL to give on behalf of AAL any information or
to make any representations in connection with the sale of Certificates other
than the information and representations contained in a Registration Statement
filed with the SEC under the 1933 Act and/or the 1940 Act, covering the
Certificates, the ACCOUNTS, or the FUND, as such Registration Statements may be
amended or supplemented from time to time, or contained in shareholder reports
or other material that may be prepared by or on behalf of AAL for DISTRIBUTOR's
use. This shall not be construed to prevent DISTRIBUTOR from preparing and
distributing advertising and sales literature or other material as it may deem
appropriate, subject to the requirements of Paragraph 5 above.
10. Amendment or Assignment of Agreement
This Agreement may not be amended or assigned except by written agreement of
both parties.
11. Termination of Agreement
This Agreement may be terminated by either party hereto, without the payment of
any penalty, on 90 days prior notice in writing to the other party.
12. Miscellaneous
The captions 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. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Nothing herein contained shall be deemed to require AAL to take any
action contrary to its Charter or by-laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to
relieve or deprive the Board of Directors of AAL of responsibility for and
control of the conduct of the affairs of AAL.
13. Definition of Terms
Any questions of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1933 Act, the 1934 Act, the Advisers Act or the 1940 Act shall be resolved by
reference to such term or provision and to interpretation thereof, if any, by
the United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC validly Issued pursuant
to such Act.
14. Compliance with Securities Laws
AAL represents that it is registered as an investment adviser under the Advisers
Act and agrees that it will comply with all the provisions of the Act and of the
rules and regulations thereunder. AAL and DISTRIBUTOR each agree to comply with
all of the applicable terms and provisions of the 1933 Act, the 1934 Act, the
1940 Act, the Advisers Act, and all applicable state laws. Each party hereto
shall advise the other promptly of (a) any action of the SEC or any authorities
of any state or territory, of which it has knowledge, affecting the registration
or qualification of the ACCOUNTS or the Certificates, or the right to offer the
Certificates for sale or (b) the happening of any event which makes untrue any
statement, or which requires the making of any change in any Registration
Statement or any current prospectus or statement of additional information, in
order to make the statements therein not materially misleading.
I5. Regulatory Examinations
DISTRIBUTOR and AAL agree to cooperate fully in any insurance regulatory
examination, investigation, or proceeding or any judicial proceeding arising in
connection with the Certificates. DISTRIBUTOR and AAL further agree to cooperate
fully in any securities regulatory examination, investigation or proceeding or
any judicial proceeding with respect to AAL, DISTRIBUTOR, their affiliates and
their agents or representatives, to the extent that such examination,
investigation or proceeding is in connection with Certificates distributed under
this Agreement. DISTRIBUTOR shall furnish applicable Federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request in order to
ascertain whether AAL's operations are being conducted in a manner consistent
with any applicable laws or regulations.
16. Notices
Any notice required to be given pursuant to this Agreement shall be deemed duly
given if delivered or mailed by registered mail, postage prepaid, to DISTRIBUTOR
or to AAL at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxx, 00000-0000.
17. Governing Law
This Agreement shall be governed and construed in accordance with the laws of
the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized representatives and their respective corporate seals to
be hereunto affixed, as of the day and year first above written.
Aid Association for Lutherans
by: Xxxx 0. Xxxxxxx President
attest: Xxxxxxx X. Xxx Senior Vice President, Secretary and General Counsel
AAL Capital Management Corporation
By: Xxxxxx X. Same, Executive Vice President and Chief Operating Officer
attest:
