INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is entered into this lst
day of June, 1999, by and among KEY ASSET MANAGEMENT INC., a New York
corporation ("KAM"), with a principal place of business in Cleveland, Ohio, and
XXXXXX INVESTORS LIFE INSURANCE COMPANY, an Illinois corporation (the
"Company"), with a principal place of business in 0 Xxxxxx Xxxxx, Xxxx Xxxxx,
Xxxxxxxx, on behalf of one or more separate accounts of the Company, as set
forth on Schedule A hereto, as it may be amended from time to time (the
"Account"), and THE VICTORY VARIABLE INSURANCE FUNDS, a Delaware business trust
(the "Fund").
WHEREAS, KAM is the investment adviser to the Fund, the beneficial
interest in which is divided into several series, each designated a "Portfolio,"
and representing the interest in a particular managed portfolio of securities,
each of which series has one class of shares of beneficial interest ("Shares");
and
WHEREAS, the purpose of the Fund is to act as the investment vehicle for
the separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies which have
entered into participation agreements, including the Participation Agreement
among the Fund, KAM, BISYS Fund Services Limited Partnership and the Company,
dated as of the 1st day of June, 1999 (the "Participation Agreement").
WHEREAS, the parties desire to express their agreement as to certain other
matters;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
1. Administration of Separate Accounts.
(a) Administrative services to owners of variable life insurance
policies and/or variable annuity contracts issued by the Company (collectively,
"Contracts") shall be the responsibility of the Company and shall not be the
responsibility of KAM. KAM recognizes the Company is the sole shareholder of
Fund Shares issued under the Participation Agreement. From time to time, the
Fund, pursuant to a Contract Owner Administrative Services Agreement ("Letter
Agreement") may pay amounts to the Company for providing certain administrative
services for the Fund or its Portfolios, or for providing owners of Contracts
with other services that relate to the Fund and are not otherwise the Company's
responsibility. These services are set forth in the Letter Agreement between the
Fund and the Company dated June 1, 1999, which Letter Agreement is incorporated
by reference herein.
(b) The parties intend that the Fund's payments under the Letter
Agreement are for administrative services only and do not constitute payment in
any manner for investment advisory services or for costs of distribution.
2. Duration.
This Agreement shall continue in force until terminated in
accordance with the following provisions:
(a) At the option of the Company or KAM at any time upon 60 days'
notice, unless a shorter time is agreed to by the parties;
(b) Contemporaneously with the termination of the Participation
Agreement;
(c) In the event this Agreement is assigned without the prior
written consent of the Company, the Fund and KAM. Termination shall be effective
immediately upon such occurrence without notice.
Provided, however, the obligation of each party hereto to indemnify the
other party hereto shall continue with respect to all losses, claims, damages,
liabilities or litigation based upon the acquisition of Shares purchased as the
funding vehicle for any Contract issued by the Company or any affiliated
insurance company.
3. Indemnification.
3.1 Indemnification By The Company
3.1(a) The Company agrees to indemnify and hold harmless KAM and each of
its directors and officers and each person, if any, who controls KAM within the
meaning of Section 15 of the Securities Act of 1933 (the "1933 Act")
(collectively, the "Indemnified Parties" for purposes of this Section 3.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or statement of additional information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
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alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission either (a) was made in reliance
upon and in conformity with information furnished in writing to the
Company or its designee by or on behalf of the Fund or (b) relates
to the Adviser and was made in reliance upon and in conformity with
information furnished in writing to the Company or its designee by
or on behalf of KAM; in either case for use in the registration
statement, prospectus or statement of additional information for the
Contracts or in the Contracts or sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares;
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus, statement of additional information or sales
literature of the Fund not supplied by the Company, or persons under
its control) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus,
statement of additional information or sales literature of the Fund
or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company.
as limited by and in accordance with the provisions of Sections 3.1(b) and
3.1(c) hereof.
3.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under the Participation
Agreement or to the Fund, whichever is applicable.
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3.1(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
3.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
3.2 Indemnification by KAM.
3.2(a) KAM agrees to indemnify and hold harmless the Company, and each of
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 3.2 and Section 3.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of KAM) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the operations of the Fund and:
(i) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, prospectus,
statement of additional information or sales literature covering the
Contracts, or any amendments thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or
statements therein not misleading, if such a statement or omission
relates to the Adviser and was made in reliance upon and
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conformity with information supplied in writing to the Company for
use therein; or (ii) arise out of any wrongful conduct by the
Adviser or persons under its control, with respect to the operation
of the Fund.
as limited by and in accordance with the provisions of Section 3.2(b) and 3.2(c)
hereof.
3.2(b) KAM shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under the Participation Agreement
or to the Company, the Fund, the Underwriter or each Account, whichever is
applicable.
3.2(c) KAM shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified KAM in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent) but failure to notify KAM of any such claim shall not relieve KAM from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, KAM will be
entitled to participate, at its own expense, in the defense thereof. KAM also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from KAM to such party of KAM's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and KAM will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
3.2(d) The Company agrees promptly to notify KAM of the commencement of
any litigation or proceedings against it or any of its officers or directors in
connection with this Agreement, the issuance or sale of the Contracts, the
operation of the Account, or the sale or acquisition of Shares of the Fund.
3.3 KAM agrees to indemnify and hold harmless the Fund, its trustees,
directors, officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act and the Indemnified Parties (as defined in
Section 3.2(a)) against any and all losses, claims, damages, liabilities or
litigation arising from the imposition of additional federal income taxes on the
Company or any policyholder
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and/or contract holder solely as a result of a Final Determination that any
Portfolio has failed to comply with the diversification requirements of section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), relating
to the diversification requirements for variable annuity, endowment and life
insurance contracts; provided, however, that
(i) KAM shall have no liability under this Section 3.3 if such failure
is caused by a third party who is not an employee or agent of KAM
(e.g., the Fund's custodian, or another service provider), and
(ii) in no case is KAM's indemnity under this Section 3.3 deemed to
protect any person against any liability to which that person would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of that person's duties or by
reason of reckless disregard by that person of obligations under the
Participation Agreement or this Agreement.
For purposes of this Section 3.3, "Final Determination" shall mean, with
respect to any claim, a settlement of such claim (including the acceptance of an
adjustment proposed by the IRS) or a decision of a court of competent
jurisdiction with respect to such claim that has become final after either the
(i) exhaustion of allowable appeals or (2) expiration of the time to take any
such appeal with respect to the claim.
4. Governing Law.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Illinois.
5. Notices.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to KAM:
Key Asset Management Inc.
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxx
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With a copy to:
Xxxxxxx X. Xxxxx, Esq.
Senior Vice President and Associate General Counsel
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
If to the Company:
Xxxxxx Investors Life Insurance Company
0 Xxxxxx Xxxxx Xxxx Xxxxx
Xxxxxxxx 00000
Attn: General Counsel
If to the Funds:
The Victory Variable Insurance Funds
c/o BISYS Fund Services, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attn: General Counsel
With a copy to:
Xxx X. Xxxxx, Esq.
Kramer, Levin, Naftalis & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
6. Miscellaneous.
The captions in the Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date set forth at the
beginning of this Agreement.
KEY ASSET MANAGEMENT INC.
By:/s/ Xxxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Senior Managing Director
XXXXXX INVESTORS LIFE
INSURANCE COMPANY
By: /s/ Xxxx X. Xxxxxxx Xx.
----------------------------------------
Name:
Title:
THE VICTORY VARIABLE INSURANCE FUNDS, on
behalf of its series portfolios,
individually and not jointly
By: /s/ J. Xxxxx Xxxxx
----------------------------------------
Name: J. Xxxxx Xxxxx
Title: Vice President
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Schedule A
to
Indemnification Agreement
Separate Account(s) of the Company
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KILICO Variable Separate Account - 2 (June 17, 1997)
KILICO Variable Series I Separate Account (August 6, 1996)
KILICO Variable Series II Separate Account (January 30, 1997)
KILICO Variable Annuity Separate Account - 2 (March 19, 1998)
