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