PARTICIPATION AGREEMENT
THIS AGREEMENT dated as of the 30th day of September, 1996, by and between Aid
Association for Lutherans, a fraternal benefit society located in Appleton,
Wisconsin ("AAL"), and AEGON USA, Inc., an insurance holding company located in
Cedar Rapids, Iowa ("AEGON").
RECITALS
WHEREAS, AAL desires to explore distribution methods that would supplement its
existing methods of distributing fixed and variable annuity products issued by
AAL ("Annuity Products") to AAL members in select territories;
WHEREAS, AUSA Direct, a telemarketing service of the AEGON Insurance Group, has
capabilities to act as an agent and registered representative through AEGON USA
Securities, Inc. to develop customer relationships and make Annuity Products
sales directly with eligible prospects; and
WHEREAS, AAL wishes to utilize, on an experimental basis, the telemarketing
services of AUSA Direct as a supplemental means of distributing its Annuity
Products to AAL members in select territories, and AUSA Direct has agreed to
provide such service.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
representations and warranties of the parties set forth below, the parties
hereto agree as follows:
1. JOINT VENTURE
AAL and AEGON will enter into a joint venture which will be conducted
in the following manner:
A. AEGON USA Securities, Inc. will enter into a general agent agreement
with AAL and a selected broker agreement with AAL Capital Management
Corporation to market Annuity Products through the AEGON telemarketing
services known as AUSA Direct.
B. AAL shall provide AEGON with a list of not less than fifteen
thousand (15,000) names and valid telephone numbers of AAL members, all
of which are age 40 or older and none of which are older than AAL's
maximum annuity issue age ("Eligible Persons"), for purposes of
conducting the telemarketing services.
C. AUSA DIRECT shall conduct telemarketing services with respect to
such Eligible Persons from 8:00 A.M until 4:00 P.M CST from Monday
through Friday of every week (except legal holidays). AUSA Direct shall
make every reasonable effort to contact each Eligible Person at least
three to four times per year.
D. AUSA DIRECT shall perform the following telemarketing activities
with respect to Eligible Persons:
1. Solicit and procure the sale of Annuity Products and the
payment of additional premiums on existing Annuity Products
pursuant to the General Agent Agreement and Selected Broker
Agreement described in Section 2 of this Agreement.
2. Provide customer service on Annuity Products in accordance
with the General Agent Agreement and Selected Broker Agreement
described in Section 2 of this Agreement.
3. Solicit and refer any inquiries regarding the sale or
service of other products issued by AAL or offered by its
subsidiary to a specific person(s) or department(s) designated
by AAL.
E. AAL shall pay AEGON USA Securities, Inc. for the sale of Annuity
Products and for the payment of additional premiums on existing Annuity
Products (together with assets under management fees on certain of this
business), all in accordance with the General Agent Agreement described
in Section 2 of this Agreement.
F. If any Eligible Person makes request to AAL or AUSA DIRECT that they
do not wish to be called or otherwise contacted by AEGON, that person's
name shall be removed from the list of Eligible Persons. AUSA DIRECT
shall immediately notify AAL of such action.
G. All names and telephone numbers of Eligible Persons provided to AUSA
DIRECT by AAL shall be the exclusive property of AAL and cannot and
will not be used, directly or indirectly, by AUSA DIRECT or AEGON
except for the express purpose of this Agreement. AEGON agrees that
these names and telephone numbers will be held in strict confidence and
will not be disclosed to any third party. This provision shall survive
termination of this Agreement.
2. SUBSIDIARY AGREEMENTS
To implement the components of the joint venture described in Section
1, the parties or their affiliated companies shall enter into this
Agreement and the following "Subsidiary Agreements", each of which
shall be deemed a part of this Agreement and all of which shall be
effective and dependent upon the others for the implementation of the
entire joint venture.
A. A Non-Disclosure Agreement between AEGON USA, Inc. and AAL dated
June 3, 1996, and attached hereto as EXHIBIT 2A.
B. A General Agent Agreement between AAL and AEGON USA Securities, Inc.
of even date herewith and attached hereto as EXHIBIT 2B.
C. A Selected Broker Agreement between AAL Capital Management
Corporation and AEGON USA Securities, Inc. of even date herewith and
attached hereto as EXHIBIT 2C.
Unless otherwise specifically agreed in writing by the parties, in the
event this Agreement or any one of the Subsidiary Agreements is
terminated for any reason whatsoever, the remaining agreements (except
the Non-Disclosure Agreement) shall also be concurrently terminated.
The
obligations and rights under the Non-Disclosure Agreement shall survive
the termination of this Agreement and the termination of any of the
Subsidiary Agreements.
3. TERMINATION
The following provisions shall govern the termination of this
Agreement:
A. From September 30, 1996 through September 29, 1997 AAL may terminate
this Agreement unilaterally on 30 days written notice to AEGON if AAL
reasonably determines that the joint venture is substantially adversely
affecting its relationship with its field staff or members in the areas
served by AEGON. In such event, AAL shall reimburse AEGON for
unrecovered costs as defined in SCHEDULE 3B attached hereto and made a
part of this provision by reference.
B. AAL may terminate this Agreement unilaterally from September 30,
1997 through September 29, 1999 on 60 days written notice to AEGON for
any reason. Upon termination pursuant to this section, unless AEGON
otherwise agrees, AAL shall reimburse AEGON for unrecovered costs as
defined in SCHEDULE 3B attached hereto and made a part of this
provision by reference and pay any employee redeployment compensation
fee that may be due pursuant to section 3D.
C. Either party may terminate this Agreement unilaterally upon 60 days
written notice to the other party after September 29, 1999. In the
event that AAL terminates the Agreement after September 29, 1999, AAL
shall not be required to reimburse AEGON for unrecovered costs defined
in SCHEDULE 3B, but shall be required to pay any employee redeployment
compensation fee that may be due pursuant to section 3D.
D. If AAL terminates this Agreement pursuant to sections A, B, or C, of
this "TERMINATION" section of this Agreement, but provides AEGON with
less than twelve (12) months prior written notice of termination, then
AAL shall pay AEGON an employee redeployment compensation fee as
defined in SCHEDULE 3C attached hereto and made a part of this
provision by reference. Any amount per month per employee shall be
pro-rated for any employee who is not entirely devoted to the joint
venture, according to the average amount of such employee's time that
was devoted to the joint venture during the 30 day period preceding the
receipt of the notice of termination by AEGON. AEGON will have no more
than three (3) full time employees or their equivalent devoted to the
joint venture at any time unless AAL provides prior written approval
for additional staff.
E. AEGON may not terminate this Agreement unilaterally before September
30, 1999.
F. If AAL is required to make payments to AEGON in connection with
termination of this Agreement as provided in this section, such
payments shall be made by AAL in full on the effective date of
termination of this Agreement.
G. Notwithstanding the above provisions, this Agreement may be
terminated, at the option of a party, if the other party has materially
breached this Agreement or any Subsidiary Agreement, and such breach is
not cured within 30 days after notice. For this purpose, a material
breach shall include, but not be limited to, failure to comply with all
applicable laws
or regulations of any federal, state or other governmental body having
jurisdiction over the sale of insurance or securities, loss of
authority to conduct the business of the joint venture, or failure to
comply with the marketing, compensation, confidentiality, or
non-compete provisions of this Agreement or any Subsidiary Agreement. A
failure to elect to terminate this Agreement by reason of a material
breach shall not operate as a waiver of the provision as to future
action.
In the event of termination of this Agreement due to a material breach,
the provision of Sections 3A through 3F of this Agreement shall not
apply with respect to the party who has elected to terminate the
Agreement due to the material breach by the other party.
H. AEGON agrees that all records, materials, membership lists, or other
information obtained or developed by AEGON or AUSA DIRECT by reason of
or as a result of this Agreement or the Subsidiary Agreements are the
exclusive property of AAL and shall be promptly returned to AAL at the
time of termination of this Agreement.
4. COVENANTS NOT TO COMPETE
A. AAL and AEGON agree not to knowingly hire or attempt to hire each
other's employees who are involved in this joint venture for a period
of one (1) year following termination of the joint venture.
B. AUSA DIRECT and AEGON agree that AAL has a proprietary interest in
AAL's relationship with its members and in the list of names,
addresses, and telephone numbers of such members. AUSA Direct and
AEGON's subsidiaries agree not to knowingly solicit or attempt to
solicit any business of any kind from the AAL members that AAL
authorizes AUSA Direct to solicit and service during the term of this
Agreement, or after termination of this Agreement. AEGON agrees that
this provision may be enforced by an action for an injunction, as well
as or in addition to an action for damages. However, solicitation of
any of these members who come to AUSA Direct or AEGON subsidiaries
attention through means other than this joint venture is not
prohibited.
5. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
A. AAL hereby represents and warrants as follows:
1. Organization. AAL is a Wisconsin corporation duly organized,
validly existing and in good standing under the laws of the
State of Wisconsin. AAL has corporate power to carry on its
business as it is now being conducted.
2. Approval of Agreement. The execution and delivery of this
Agreement and the Subsidiary Agreements and the consummation
of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action on the
part of AAL, or any AAL affiliated company which is a party
to any Subsidiary Agreement ("AAL affiliate"), and this
Agreement and the Subsidiary Agreements upon execution and
delivery will be valid and binding obligations of AAL and
AAL affiliates.
3. No Conflict With Other Instruments. Subject to the receipt
of all required regulatory approvals and compliance with all
applicable federal and state laws and regulations, neither
the execution and delivery of this Agreement or the
Subsidiary Agreements, nor the consummation of the
transactions provided for therein, will violate any material
agreement to which AAL or any AAL affiliate is a party or by
which it is bound, or any law, order, or decree or any
provision of its articles of incorporation or bylaws. AAL
and AAL affiliates have full power, authority, and legal
right to enter into this Agreement and the Subsidiary
Agreements and, to consummate the transactions provided for
therein.
4. Litigation or Adverse Events. There is no suit, action, or
legal or administrative proceeding pending, or to the
knowledge of AAL threatened, against AAL or any AAL
affiliate which, if adversely determined, would delay or
prevent the transactions contemplated by this Agreement or
would materially and adversely affect the financial
condition or properties of AAL or any AAL affiliate, or the
conduct of its business.
B. AEGON hereby represents and warrants as follows:
1. Organization. AEGON is an Iowa corporation duly organized,
validly existing and in good standing under the laws of the
State of Iowa. AEGON has corporate power to carry on its
business as it is now being conducted.
2. Approval of Agreement. The execution and delivery of this
Agreement and the Subsidiary Agreements and the consummation
of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action on the
part of AEGON, or any AEGON affiliated company which is a
party to any Subsidiary Agreement ("AEGON affiliate"), and
this Agreement and the Subsidiary Agreements upon execution
and delivery will be valid and binding obligations of AEGON
and AEGON affiliates.
3. No Conflict With Other Instruments. Subject to the receipt
of all required regulatory approvals and compliance with all
applicable federal and state laws and regulations, neither
the execution and delivery of this Agreement or the
Subsidiary Agreements, nor the consummation of the
transactions provided for therein, will violate any material
agreement to which AEGON or any AEGON affiliate is a party
or by which it is bound, or any law, order, or decree or any
provision of its articles of incorporation or bylaws. AEGON
and AEGON affiliates have full power, authority, and legal
right to enter into this Agreement and the Subsidiary
Agreements and, to consummate the transactions provided for
therein.
4. Litigation or Adverse Events. There is no suit, action, or
legal or administrative proceeding pending, or to the
knowledge of AEGON threatened, against AEGON or any AEGON
affiliate which, if adversely determined, would delay or
prevent the transactions contemplated by this Agreement or
would materially and adversely affect the financial
condition or
properties of AEGON or any AEGON affiliate, or the conduct of its
business.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION
A. The representations and warranties of AAL and AEGON contained in or
made pursuant to this Agreement shall be deemed to have been
repeated and reaffirmed as of the effective date of this Agreement
and shall survive such effective date.
B. AAL and AEGON shall indemnify and hold harmless each other against
any loss, damage, liability, or expense, including reasonable
attorney's fees (collectively hereinafter the "Loss"), and the Loss
is the result of any breach of the representations, warranties or
covenants of AAL or AEGON contained in this Agreement or the
Subsidiary Agreements, and written notice of the discovery of such
breach which results in the Loss is provided to the other party
prior to any claim for indemnification. This indemnification
obligation shall continue for the term of this Agreement and for a
period of three years following the later of the termination of this
Agreement or any Subsidiary Agreements.
7. DUE DILIGENCE REVIEW
A. Within thirty days after the date of this Agreement, each
party and their representatives shall complete their initial
examination of the other party to determine to their
satisfaction the accuracy of representations of the party
contained in this Agreement. Such examination may include
consultation with applicable regulatory authorities regarding
the existence of this Agreement. Any breach, noncompliance,
errors, omissions, or misrepresentations discovered in such
examination shall be corrected to the satisfaction of the
examining party within thirty (30) days after such notice or
the examining party shall be entitled to terminate this
Agreement without regard to the provisions of Section 3 of
this Agreement.
B. During the term of this Agreement each party shall allow the
other or their representatives, access to the party's books,
records, employees and information necessary to carry out the
terms and conditions of this Agreement at reasonable times and
upon reasonable notice.
AAL shall have the right to perform audits, at AEGON's
offices, or the offices of its affiliates, of AEGON's or its
affiliates performance under this Agreement or the Subsidiary
Agreements. AAL shall provide AEGON with notice of its intent
to conduct an audit and the parties shall mutually agree on
the specific dates for audits which shall not be later than 25
days after the date of written notice from AAL of its
intention to conduct an audit.
8. MISCELLANEOUS
A. Waivers. Any of the terms or conditions of this Agreement or
the Subsidiary Agreements may be waived at any time by any
party thereto, by action evidenced by a writing executed by a
duly authorized officer of the party.
B. Amendment. To the extent permitted by law, this Agreement and
the Subsidiary Agreements may be amended or supplemented at
any time by a writing executed by duly authorized officers of
the parties thereto.
C. Assignment. This Agreement, or any of the rights, obligations,
or duties hereunder, shall not be assigned by either party
without consent of the other party.
D. Entire Contract. This Agreement, the Subsidiary Agreements,
and the instruments referred to therein constitute the entire
contract among the parties and supersede all other and prior
understandings, written or oral, with respect to the subject
matter hereof.
E. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall be deemed one and the same
Agreement, and shall become binding on the parties hereto when
one or more counterparts have been signed by each of the
parties and delivered to the other parties.
F. Notices. All notices, demands, or communications which are
permitted or required under this Agreement or the Subsidiary
Agreements shall be made in writing, and shall be sent by
United States certified mail, return receipt requested.
All notices, demands, or communications directed to AAL shall
be addressed as follows:
Aid Association for Lutherans
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxx 00000-0000
Attn: D. Xxxxxxx XxXxxxx
All notices, demands, or communications directed to AEGON
shall be addressed as follows:
AEGON USA, Inc.
Financial Markets Division
0000 Xxxxxxxx Xxxx XX
Xxxxx Xxxxxx, Xxxx, 00000-0000
Attn: Xxxxxx X. Xxxxxxx
G. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Wisconsin, and the parties agree that the courts of the State
of Wisconsin shall have jurisdiction to hear and determine any
suit, action or proceeding and to settle any disputes which
may arise out of or in connection with this Agreement, and,
for such purposes, each party irrevocably submits to the non-
exclusive jurisdiction of such courts.
H. Headings. The descriptive headings of the several articles,
sections, and paragraphs of this Agreement are inserted for
convenience only and do not constitute a part of this
Agreement.
IN WITNESS WHEREOF, AAL and AEGON have caused this Agreement to be signed by
their respective officers thereunto duly authorized, all effective as of the
date first above written.
Aid Association for Lutherans AEGON USA, Inc.
By: /s/ D. Xxxxxxx XxXxxxx By: /s/ Xxxxxxx X. Xxxxxx
Title: Vice President Title: President, Financial Markets Division
SCHEDULE 3B
Expense Recovery upon termination by AAL prior to September 30, 1999.
Start-up Expenses $30,000
On-going Monthly Expenses $7,000
Recovery Formula
The above expenses shall be accumulated at an effective annual rate of 15% and
shall be reduced by 5% of each premium payment made under the products sold.
Accumulation of the start-up and monthly expenses will begin on September 30,
1996. The net accumulated amount of unrecovered costs shall be determined on a
monthly basis, taking into account accrued interest during the month along with
on-going monthly expenses and premium payments made during the month.
SCHEDULE 3C
Employee Redeployment Compensation Fee Schedule upon termination by AAL with
less than 12 full calendar months prior written notice.
Number of Full Fee per full-time
Calendar Months Employee
Notice
12 $ -0-
11 $ 1,000
10 $ 2,000
9 $ 3,000
8 $ 5,000
7 $ 7,000
6 $ 9,000
5 $12,000
4 $15,000
3 $18,000
2 $22,000
1 $26,000
0 $30,000
