DISTRIBUTION AGREEMENT
AGREEMENT made this ___ day of ______, 2000 by and between American
Family Life Insurance Company ("AFLIC"), a Wisconsin corporation, on its behalf
and on behalf of each separate account identified in Schedule 1 hereto (the
"Separate Accounts"), and American Family Securities, LLC ("Distributor"), a
Wisconsin Limited Liability Company.
WITNESSETH
WHEREAS, Distributor is registered as a broker/dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934 (the "1934 Act") and is a member of the National Association of
Securities Dealers, Inc. (the "NASD");
WHEREAS, Distributor acts as retail distributor for certain variable
insurance products (the "Variable Products") underwritten by and sold through
Distributor's registered representatives (the "Representatives"), who are also
appointed agents of American Family Life Insurance Company ("AFLIC");
WHEREAS, Distributor and AFLIC are affiliated companies under
control of a common parent corporation; and
WHEREAS, AFLIC desires to issue the Variable Products to the public
through Distributor acting as principal underwriter and distributor.
NOW, THEREFORE, in consideration of their mutual promises, and of other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Distributor and AFLIC hereby agree as follows:
1. DEFINITIONS
a. CONTRACTS. The class or classes of variable insurance products
set forth on Schedule 2 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 2
from time to time in accordance with Section 10.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 AFLIC 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 filed
with the SEC under the 1933 Act on a prescribed form, or
currently effective post-effective amendment thereto, as the
case may be, 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 8 of this Agreement, the term
"Registration
Statement" means any document that is or at any time was a
Registration Statement within the meaning of this Section 1.b.
c. PROSPECTUS. The prospectus included within a Registration
Statement, except that, if the most recently filed version
of the prospectus (including any supplements thereto) filed
pursuant to Rule 497 under the 1933 Act subsequent to the
date on which a Registration Statement became effective
differs from the prospectus included within such
Registration Statement at the time it became effective, the
term "Prospectus" shall refer to the most recently filed
prospectus filed under Rule 497 under the 1933 Act, from
and after the date on which it shall have been filed. For
purposes of Section 8 of this Agreement, the term "any
Prospectus" means any document that is or at any time was a
Prospectus within the meaning of this Section 1.c.
d. VARIABLE ACCOUNT. A separate account supporting a class or
classes of Contracts and specified on Schedule 1 as in
effect at the time this Agreement is executed, or as it may
be amended from time to time in accordance with Section
10.b of this Agreement.
e. 1933 ACT. The Securities Act of 1933, as amended.
f. 1934 ACT. The Securities Exchange Act of 1934, as amended.
g. 1940 ACT. The Investment Company Act of 1940, as amended.
h. SEC. The Securities and Exchange Commission.
i. NASD. The National Association of Securities Dealers, Inc.
j. REPRESENTATIVE. An individual who is an associated person
of Distributor, as that term is defined in the 1934 Act.
k. APPLICATION. An application for a Contract.
l. PREMIUM. A payment made under a Contract by an applicant
or purchaser to purchase benefits under the Contract.
2. AUTHORIZATION AND APPOINTMENT
a. SCOPE OF AUTHORITY. AFLIC hereby authorizes Distributor on
an exclusive basis, and Distributor accepts such authority,
subject to the registration requirements of the 1933 Act
and the 1940 Act and the provisions of the 1934 Act and
conditions herein, to be the distributor and principal
underwriter for the sale of the Contracts to the public in
each state and other jurisdiction in which the Contracts
may lawfully be sold during the term of this Agreement. The
Contracts shall be offered for sale and distribution at
Premium rates set from time to time by AFLIC.
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Distributor shall use its best efforts to market the
Contracts actively subject to compliance with applicable
law, including the rules of the NASD. However, Distributor
shall not be obligated to sell any specific number or
amount of Contracts. Completed Applications shall be
transmitted directly to AFLIC for acceptance or rejection
in accordance with the underwriting rules established by
AFLIC.
b. LIMITS ON AUTHORITY. Distributor shall act as an
independent contractor and nothing herein contained shall
constitute Distributor or its agents, officers or employees
as agents, officers or employees of AFLIC solely by virtue
of their activities in connection with the sale of the
Contracts hereunder. Distributor and its Representatives
shall not have authority, on behalf of AFLIC: to make,
alter or discharge any Contract or other insurance policy
or annuity 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 AFLIC). Distributor shall not expend, nor
contract for the expenditure of, the funds of AFLIC.
Distributor shall not possess or exercise any authority on
behalf of AFLIC other than that expressly conferred on
Distributor by this Agreement.
3. SOLICITATION ACTIVITIES
a. REPRESENTATIVES. No Representative shall solicit the sale
of a Contract unless at the time of such solicitation such
individual is duly registered with the NASD and duly
licensed with all applicable state insurance and securities
regulatory authorities, and is duly appointed as an
insurance agent of AFLIC.
b. SOLICITATION ACTIVITIES. All solicitation and sales activities
engaged in by Distributor and its Representatives with respect
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, and compliance
manuals provided by AFLIC. In particular, without limiting the
generality of the foregoing:
(1) Distributor, along with appropriate AFLIC registered
principals, shall train, supervise and be solely responsible
for the conduct of Representatives in their solicitation of
Applications and Premiums and distribution of the Contracts
under the federal securities laws and the rules of the NASD,
and shall supervise their compliance with, applicable rules
and regulations of any securities regulatory agencies that
have jurisdiction over variable insurance product activities.
(2) Neither Distributor nor any Representative shall offer,
attempt to offer, or solicit Applications for, the Contracts
or deliver the Contracts, in any state or other jurisdiction
unless AFLIC has notified Distributor that such Contracts may
lawfully be sold or offered for sale in such state, and has
not subsequently revised such notice.
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(3) Neither Distributor nor any 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 Prospectus for
such class of Contracts, or in current advertising materials
for such class of Contracts authorized by AFLIC.
(4) All Premiums paid by check or money order that are
collected by Distributor or any of its Representatives shall
be remitted promptly, and in any event by noon of the next
business day after receipt in full, together with any
Applications, forms and any other required documentation, to
AFLIC. Checks or money orders in payment of Premiums shall be
drawn to the order of "American Family Life Insurance
Company." If any Premium is held at any time by Distributor,
Distributor shall hold such Premium in a fiduciary capacity
and such Premium shall be remitted promptly, and in any event
within two business days, to AFLIC. Distributor acknowledges
that all such Premiums, whether by check, money order or wire,
shall be the property of AFLIC. Distributor acknowledges that
AFLIC shall have the unconditional right to reject, in whole
or in part, any Application or Premium.
c. SUITABILITY. AFLIC and Distributor wish to ensure that the
Contracts sold by Distributor will be issued to purchasers
for whom the Contracts are suitable. Distributor shall
require that the Representatives have reasonable grounds to
believe that a recommendation to an applicant to purchase a
Contract is suitable for that applicant. Distributor shall
review all applications for suitability in accordance with
Rule 2310 of the NASD Conduct Rules and interpretations and
guidance relating thereto. AFLIC will review all
Applications under the suitability standards set forth in
variable life insurance regulations adopted by states where
the Contracts are sold, and standards adopted by AFLIC or
as set forth in compliance and operational manuals.
d. REPRESENTATIONS AND WARRANTIES OF DISTRIBUTOR. Distributor
represents and warrants to AFLIC that Distributor is and
during the term of this Agreement shall remain registered
as a broker-dealer under the 1934 Act, admitted as a member
with the NASD, and duly registered under applicable state
securities laws, and that Distributor is and shall remain
during the term of this Agreement in compliance with
Section 9(a) of the 1940 Act.
4. MARKETING MATERIALS
a. PREPARATION AND FILING. AFLIC and Distributor shall
together design and develop all promotional, sales and
advertising material (including any illustrations) relating
to the Contracts and any other marketing-related documents
for use in the sale of the Contracts, subject to review and
approval by Distributor of such material and documents in
accordance with Section 2210 of the NASD Conduct Rules.
Distributor shall be responsible for filing such material
with the
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NASD and any state securities regulatory authorities
requiring such filings. AFLIC shall be responsible for
filing all promotional, sales or advertising material
(including illustrations), as required, with any state
insurance regulatory authorities. AFLIC shall be
responsible for preparing the Contract forms and filing
them with applicable state insurance regulatory
authorities, and for preparing the Prospectuses and
Registration Statements and filing them with the SEC and
state regulatory authorities, to the extent required. The
parties shall notify each other expeditiously of any
comments provided by the SEC, NASD or any securities or
insurance regulatory authority on such material, and will
cooperate expeditiously in resolving and implementing any
comments, as applicable.
b. USE IN SOLICITATION ACTIVITIES. AFLIC shall be responsible for
furnishing Distributor with such Applications, Prospectuses
and other materials for use by Distributor and Representatives
in their solicitation activities with respect to the
Contracts. AFLIC shall notify Distributor of those states or
jurisdictions that require delivery of a statement of
additional information with a Prospectus to a prospective
purchaser. Distributor or its Representatives shall not use
any promotional, sales or advertising materials that have not
been approved by AFLIC.
5. COMPENSATION AND EXPENSES
a. PAYMASTER ARRANGEMENT. American Family Mutual Insurance
Company ("AFMIC"), an affiliate of both Distributor and
AFLIC, all of which are under control of a common parent
company, will pay commissions payable to designated
Representatives of Distributor as paying agent on behalf of
Distributor and will maintain the books and records
reflecting such payments in accordance with the
requirements of the 1934 Act on behalf of Distributor. Such
payments may include certain amounts to Representatives as
an advance on commissions payable by Distributor. In
accordance with the terms of a Paymaster Agreement dated
the same date as this Agreement between AFMIC and
Distributor, AFMIC has acknowledged and agreed that its
services in this regard are purely ministerial and clerical
in nature and shall not interfere with the control and
supervision exercised by Distributor over its
Representatives with regard to the Contracts. AFMIC has
further acknowledged and agreed that Distributor shall not
be liable to any party for commissions payable hereunder.
AFMIC shall have no right to compensation for the
performance of any activities described in this Section
5.a. Representatives of Distributor shall have no interest
in this Agreement or right to any compensation to be paid
by or on behalf of Distributor hereunder prior to their
receipt thereof.
b. EXPENSES. AFLIC shall pay all expenses, except for
commissions to Representatives, in connection with the
variable products including, but not limited to, the
preparation and filing of the Contracts, Registration
Statements, and promotional materials.
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6. COMPLIANCE
a. MAINTAINING REGISTRATION AND APPROVALS. AFLIC shall be
responsible for maintaining the registration of the Contracts
with the SEC and any state securities regulatory authority
with which such registration is required, and for gaining and
maintaining approval of the Contract forms where required
under the insurance laws and regulations of each state or
other jurisdiction in which the Contracts are to be offered.
b. CONFIRMATIONS AND 1934 ACT COMPLIANCE. AFLIC, as agent for
Distributor, 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. AFLIC shall
maintain and preserve 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. The books, accounts and records of
AFLIC, the Variable Account and Distributor as to all
transactions hereunder shall be maintained so as to
disclose clearly and accurately the nature and details of
the transactions. AFLIC shall maintain, as agent for
Distributor, such books and records of Distributor
pertaining to the offer and sale of the Contracts and
required by the 1934 Act as may be mutually agreed upon by
AFLIC and Distributor, including but not limited to
maintaining a record of Representatives and of the payment
of commissions and other payments or service fees to
Representatives. In addition, AFLIC, as agent for
Distributor, shall maintain and preserve such additional
accounts, books and other records as are required of AFLIC
and Distributor by the 1934 Act. AFLIC shall maintain all
such books and records and hold such books and records on
behalf of and as agent for Distributor 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 all other regulatory bodies having jurisdiction. To the
extent AFLIC employs electronic storage media in connection
with books and records created, maintained and stored on
behalf of Distributor, AFLIC agrees to comply with the
requirements set forth in Rule 17a-4(f)(3)(vii) and
17a-4(i). With respect to any books and records maintained
or preserved on behalf of Distributor, AFLIC hereby
undertakes to permit examination of such books and records
at any time or from time to time during business hours by
representatives or designees of the SEC, and to promptly
furnish to the SEC or its designee true, correct, complete
and current hard copy of any or all of any part of such
books and records. Subject to Distributor's approval, AFLIC
reserves the right to delegate the duties set forth in this
Section 6.b to a third party administrator mutually
agreeable to both parties.
c. REPORTS. Distributor shall cause AFLIC to be furnished
with such reports as AFLIC may reasonably request for the
purpose of meeting its reporting and record keeping
requirements under the 1933 Act, the 1934 Act and the 1940
Act
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and regulations thereunder as well as the insurance
laws of the State of Wisconsin and any other applicable
states or jurisdictions.
d. ISSUANCE AND ADMINISTRATION OF CONTRACTS. AFLIC shall be
responsible for issuing the Contracts and administering the
Contracts and the Variable Account, provided, however, that
Distributor shall have full responsibility for the securities
activities of all persons employed by AFLIC, engaged directly
or indirectly in the Contract operations, and for the
training, supervision and control of such persons to the
extent of such activities. Subject to Distributor's approval,
AFLIC reserves the right to delegate the duties set forth in
this Section 6.d to a third party administrator mutually
agreeable to both parties.
7. INVESTIGATIONS AND PROCEEDINGS
a. COOPERATION. Distributor and AFLIC shall cooperate fully in
any securities or insurance regulatory investigation or
proceeding or judicial proceeding arising in connection with
the offering, sale or distribution of the Contracts
distributed under this Agreement. Without limiting the
foregoing, AFLIC and Distributor 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 the Contracts.
b. CUSTOMER COMPLAINTS. AFLIC agrees that it will assist
Distributor with complying with the reporting requirements
imposed by Section 3070 of the NASD Rules of Conduct with
regard to the sales of the Contracts. Without limiting the
foregoing, AFLIC agrees to notify the Distributor if persons
associated with AFLIC are the subject of any written customer
complaint involving allegations of theft, forgery or
misappropriation of funds or securities, or is the subject of
any claim for damages by a customer, broker, or dealer which
is settled for an amount exceeding $15,000.
8. INDEMNIFICATION
a. BY AFLIC. AFLIC shall indemnify and hold harmless Distributor
and any officer, director, or employee of Distributor 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 Distributor 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
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light of the circumstances in which they were made,
contained in any Registration Statement or in any
Prospectus; provided that AFLIC 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 AFLIC by Distributor specifically
for use in the preparation of any such Registration
Statement or any amendment thereof or supplement thereto;
(2) result from any breach by AFLIC of any provision of this
Agreement.
This indemnification agreement shall be in addition to any
liability that AFLIC 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 DISTRIBUTOR. Distributor shall indemnify and hold harmless
AFLIC and any officer, director, or employee of AFLIC 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 AFLIC 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 in order to make the statements
therein not misleading, in light of the circumstances in which
they were made, contained in any Registration Statement or in
any Prospectus; in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon
information furnished in writing by Distributor to AFLIC
specifically for use in the preparation of any such
Registration Statement or any amendment thereof or supplement
thereto;
(2) result from any breach by Distributor of any provision of
this Agreement;
This indemnification shall be in addition to any liability
that Distributor 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. Promptly after receipt by a party entitled to
indemnification ("indemnified person") under this Section 8
of notice of the commencement of any action as to which a
claim will be made against any person obligated to
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provide indemnification under this Section 8 ("indemnifying
party"), such indemnified person shall notify the
indemnifying party in writing of the commencement thereof
as soon as practicable thereafter, but failure to so notify
the indemnifying party shall not relieve the indemnifying
party from any liability which it may have to the
indemnified person otherwise than on account of this
Section 8. The indemnifying party will be entitled to
participate in the defense of the indemnified person but
such participation will not relieve such indemnifying party
of the obligation to reimburse the indemnified person for
reasonable legal and other expenses incurred by such
indemnified person in defending himself or itself.
d. DURATION. The indemnification provisions contained in this
Section 8 shall remain operative in full force and effect,
regardless of any termination of this Agreement. A
successor by law of Distributor or AFLIC, as the case may
be, shall be entitled to the benefits of the
indemnification provisions contained in this Section 8.
9. TERMINATION. This Agreement shall terminate automatically if it is
assigned by the Distributor without the prior written consent of the other
party. (The term "assigned" shall not include any transaction exempted from
Section 15(b)(2) of the 1940 Act.) This Agreement may be terminated at any
time for any reason by either party upon 60 days' written notice to the other
party, without payment of any penalty. 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 or
warranty made in this Agreement, unless such breach has been cured within 10
days after receipt of notice of breach from the non-breaching party. Upon
termination of this Agreement, all authorizations, rights and obligations
shall cease except the following:
(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
AFLIC prior to termination;
(2) the provisions contained in Section 8 regarding indemnification;
and
(3) the provisions contained in Section 3(b)(4) regarding the
remittance of premiums.
In the event of any termination for any reason, all books and records and sales
or marketing materials held by Distributor shall promptly be returned to AFLIC
free from any claim or retention of rights by Distributor.
10. MISCELLANEOUS
a. BINDING EFFECT. This Agreement shall be binding on and shall
inure to the benefit 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.
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b. SCHEDULES. The parties to this Agreement may amend Schedules 1
and 2 to this Agreement from time to time to reflect additions
of any class of Contracts and Variable Accounts. The
provisions of this Agreement shall be equally applicable to
each such class of Contracts and each Variable Account that
may be added to the Schedule, unless the context otherwise
requires. Any other change in the terms or provisions of this
Agreement shall be by written agreement between AFLIC and
Distributor.
c. RIGHTS, REMEDIES, AND OBLIGATIONS 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 AFLIC, to:
Name
Title
Address
with a copy to:
Name
Title
Address
if to Distributor, to:
Name
Title
Address
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, or by overnight mail by a nationally
recognized courier, and shall be effective upon delivery.
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e. INTERPRETATION; JURISDICTION. This Agreement constitutes
the whole agreement between the parties hereto 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 is made in the State of
Wisconsin, and all questions concerning its validity,
construction or otherwise shall be determined under the
laws of Wisconsin without giving effect to principals of
conflict of laws.
f. 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 prohibit 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.
g. SECTION AND OTHER HEADINGS. The headings 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.
h. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which taken together shall
constitute one and the same instrument.
i. REGULATION. This Agreement shall be subject to the
provisions of the 1933 Act, 1934 Act, and 1940 Act and the
regulations thereunder 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, the parties hereto have caused this Agreement to be duly
executed by such authorized officers on the date specified above.
AMERICAN FAMILY LIFE INSURANCE COMPANY
AFLIC
By: _________________________________
Name:
Title:
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AMERICAN FAMILY SECURITIES, LLC
Distributor
By: _________________________________
Name:
Title:
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SCHEDULE 1
For purposes of the Distribution Agreement between AFLIC and Distributor entered
into on the ____day of _________, 2000, the separate accounts are as follows:
American Family Variable Account I
American Family Variable Account II
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SCHEDULE 2
For purposes of the Distribution Agreement between AFLIC and Distributor entered
into on the ____day of _________, 2000, the variable products are as follows:
American Family Flexible Premium Variable Annuity Contract
American Family Flexible Premium Variable Universal Life Insurance Policy
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