EXHIBIT 1.A.(3)(a)
First Union Securities, Inc. draft Agreements:
(i) Distribution Agreement
(ii) Selling Group Agreement
(ii) Commission Schedule
DISTRIBUTION AGREEMENT
With
First Union Securities, Inc.
Table of Contents
Section Page No.
Additional Definitions.................................................................................... 3
Distribution Activities Authority......................................................................... 4
Distribution Activities Appointment....................................................................... 5
Distribution Activities Duties............................................................................ 6
Limitations on Authority.................................................................................. 6
Sales Agreements.......................................................................................... 7
Forms, Applications, and Licensing........................................................................ 8
Marketing Materials....................................................................................... 10
The Distributor's Compensation............................................................................ 10
Representations and Warranties............................................................................ 11
Indemnification........................................................................................... 13
Records................................................................................................... 18
Investigations and Proceedings............................................................................ 18
Term and Termination...................................................................................... 18
Rights Upon Termination................................................................................... 20
Independent Contractor.................................................................................... 22
Notices................................................................................................... 22
Arbitration............................................................................................... 22
Confidentiality........................................................................................... 23
Severability.............................................................................................. 24
Choice of Law............................................................................................. 24
No Waiver................................................................................................. 24
Agreement Non-Assignable.................................................................................. 25
Exhibits and Schedules.................................................................................... 25
Headings.................................................................................................. 25
Schedules and Attachments ................................................................................ 25
Entire Agreement.......................................................................................... 25
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made as of the day of 1999, by and Between United
Investors Life, Inc (the "Insurance Company") and First Union Securities, Inc.,
a Delaware corporation (the "Distributor"), on its own behalf and on behalf of
the individuals and entities listed on Schedule 1 to this Agreement (the
"Distributor Agency Affiliates"), as that Schedule may be amended from time to
time in accordance with this Agreement.
RECITALS:
WHEREAS, the Insurance Company issues certain variable annuity
contracts and variable life insurance policies; and
WHEREAS, certain of the variable annuity contracts and variable life
insurance policies issued by the Insurance Company (the "Private Placements")
may be offered and sold in reliance upon exemptions from the registration
requirements of the Securities Act of 1933 (the "1933 Act") and the Investment
Company Act of 1940 (the "1940 Act"), while certain other variable annuity
contracts and variable life insurance policies issued by the Insurance Company
are being offered and sold pursuant to Registration Statements (the "Registered
Products") and their related Prospectuses filed with and declared effective by
the Securities and Exchange Commission (the "Commission") under the provisions
of the 1933 Act and the 1940 Act (collectively, the "Private Placements" and the
"Registered Products" are referred to as the "Variable Products") (Variable
Products are identified in Schedule 2 to this Agreement, as amended from time to
time); and
WHEREAS, the Distributor is registered as a broker-dealer with the
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") that engages in the distribution of
insurance products; and
WHEREAS, the Insurance Company desires to retain the Distributor to
distribute the Variable Products through registered broker-dealers ("Broker-
Dealers") and their registered representatives ("Representatives"); and
WHEREAS, the Distributor desires to be retained by the Insurance
Company to distribute the Variable Products on the terms and conditions
hereinafter set forth.
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NOW, THEREFORE, in consideration of mutual promises contained herein,
the parties hereto agree as follows:
1. Additional Definitions
----------------------
(a) Affiliate -- With respect to a person, any other person controlling,
controlled by, or under common control with, such person.
(b) Applications -- The forms used by the prospective purchaser to apply
for a variable life insurance policy or a variable annuity contract.
(c) Contracts -- The variable annuity contracts and certificates set forth
in Schedule 2 to this Agreement, as amended from time to time.
(d) Policies -- The variable life insurance policies set forth in Schedule
2 to this Agreement as in effect at the time this Agreement is executed,
and such other variable life insurance products that may be added to
Schedule 2 from time to time.
(e) Premium -- A payment made under a Policy by an applicant or purchaser
to purchase Variable Products.
(f) Private Placement Guidelines -- The guidelines set forth in Schedule 3
to this Agreement, as that Schedule may be amended from time to time.
(g) Private Placement Memorandum -- The document through which the
Insurance Company offers private placements. For purposes of Section 11 of
this Agreement, the term "any Private Placement Memorandum" means any
document which is or at any time was a Private Placement Memorandum within
the meaning of this Section 1(g).
(h) Private Placements -- Contracts and Policies being offered and sold in
reliance upon exemptions from the registration requirements of the 1933
Act and the 1940 Act for non-public offerings.
(i) Prospectus -- The prospectus if any, included within a Registration
Statement or, if more recent, the prospectus filed pursuant to Rule 497
under the 1933 Act. For purposes of Section 11 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(i).
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(j) Purchase Payment -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
(k) Registration Statement -- At any time that this Agreement is in effect,
each currently effective registration statement, or currently effective
post-effective amendment thereto, relating to the Contracts or Policies,
including financial statements included in, and all exhibits to, that
registration statement or post-effective amendment. For purposes of Section
11 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(k).
(1) Regulations -- The rules and regulations promulgated by the Commission
under the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time
this Agreement is executed or thereafter promulgated.
(m) Variable Accounts -- Separate accounts established pursuant to Missouri
state insurance law supporting the Variable Products specified in Schedule
2 as in effect at the time this Agreement is executed, or as it may be
amended from time to time.
2. Distribution Activities -- Authority
------------------------------------
(a) The Insurance Company authorizes the Distributor, and the Distributor
accepts the authority, to act as a distributor of the Variable Products,
subject to any applicable requirements of the 1933 Act and the 1940 Act.
The Insurance Company hereby authorizes the Distributor to select
persons that will be authorized to engage in solicitation activities with
respect to the Variable Products, including the recruitment and appointment
of Broker-Dealers and Representatives which in turn may be authorized to
engage in solicitation activities involving the solicitation of
Applications, Premiums and Purchase Payments directly from prospective
purchasers.
(b) The Distributor shall enter into separate written "Sales Agreements"
with Broker-Dealers for distribution of the Variable Products. These Sales
Agreements will be in a form mutually agreeable to the parties to this
Agreement.
(c) Nothing in this Agreement precludes additional mutually agreeable
distribution and compensation arrangements among the parties to this
Agreement, including ones that may have compensation arrangements that
reward the Insurance Company for identifying and recruiting new Broker-
Dealers to sell the Variable Products, for
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identifying potential purchasers of the Variable Products, or for providing
superior support under this Agreement.
3. Distribution Activities -- Appointment
--------------------------------------
(a) Where required by applicable state insurance law, the Insurance Company
hereby appoints the Distributor as its agent under that state insurance law
to represent the Insurance Company in the distribution activities
contemplated by this Agreement. The Insurance Company hereby authorizes the
Distributor under applicable securities laws to engage in the activities
contemplated by this Agreement relating to the distribution of the Variable
Products.
(b) In states where the Distributor is not licensed as an insurance agent
and applicable state insurance law requires that the Distributor be so
licensed, the Insurance Company hereby appoints each Distributor Agency
Affiliate listed on Schedule 1 to this Agreement (as that Schedule may be
amended from time to time by the Distributor when required by applicable
state insurance law to reflect changes in the licensing status of the
Distributor or the Distributor Agency Affiliates) as its agent under
applicable state insurance laws to represent the Insurance Company in the
distribution activities contemplated by this Agreement.
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4. Distribution Activities -- Duties
---------------------------------
(a) The Distributor shall use its best efforts to market the Variable
Products actively through Broker-Dealers and Representatives in accordance
with the terms and conditions of this Agreement, subject to applicable
material market and regulatory conditions.
(b) The Distributor shall assist and provide information to Broker-Dealers
and Representatives in connection with servicing the Variable Products sold
or marketed by those Broker-Dealers Representatives.
(c) Under no circumstances shall the Insurance Company or the Distributor
be responsible under this Agreement for any failure by Broker-Dealers or
Representatives to comply with applicable law.
(d) Under no circumstances shall the Distributor be responsible under this
Agreement for any failure by the Insurance Company to comply with
applicable law.
(e) Under no circumstances shall the Insurance Company be responsible under
this Agreement for any failure by the Distributor to comply with applicable
law.
5. Limitations on Authority
------------------------
(a) The Distributor shall not have the authority, and shall not grant
authority to Broker-Dealers or Representatives, on behalf of the Insurance
Company:
(1) to make, alter or discharge any Variable Product or other
contract entered into pursuant to a Variable Product;
(2) to waive any Variable Product forfeiture provision;
(3) to extend the time of paying any Purchase Payments, or Premiums
due under the Variable Products; and
(4) to receive any monies, Purchase Payments or Premiums (except for
the sole purpose of forwarding monies, Purchase Payments or Premiums
to the Insurance Company).
(b) The Distributor shall not expend, nor contract for the expenditure of,
funds of the Insurance Company.
(c) The Distributor shall not possess or exercise any authority on behalf
of the Insurance Company other than that expressly conferred on the
Distributor by this Agreement.
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6. Sales Agreements
----------------
(a) The Distributor shall not enter into any Sales Agreement with a Broker-
Dealer relating to the distribution of any Variable Product, unless that
Sales Agreement (i) is substantially identical to the form of Sales
Agreement mutually agreed to by the parties to this Agreement or (ii) is
approved by the Insurance Company, provided that the approval of the
Insurance Company shall be deemed to have been given if no written
objection to the Sales Agreement has been delivered by the Insurance
Company to the Distributor within five (5) business days after being
provided by facsimile or express courier with a copy of the proposed Sales
Agreement.
(b) The Distributor shall provide to the Insurance Company a copy of each
Sales Agreement entered into by the Distributor and a Broker-Dealer within
five (5) business days following execution thereof.
(c) The Insurance Company agrees to appoint Representatives of the Selling
Broker-Dealers as life insurance agents of the Insurance Company to the
extent that such Representatives satisfy the licensing and qualification
requirements of applicable state insurance laws, as well as the Insurance
Company's own standards applicable to life insurance agents of the
Insurance Company. The Insurance Company reserves the right, which right
shall not be exercised unreasonably, to refuse to appoint any
Representative as its life insurance agent. The Life Company reserves the
right to terminate immediately the appointment of any Representative as its
life insurance agent if such Representative fails to maintain his or her
registration, license or qualifications under federal and state securities
laws, as well as applicable state insurance laws, is subject to
disciplinary action by any governmental authority or self-regulatory
organization or fails, in the reasonable view of the Insurance Company, to
satisfy appropriate industry standards. The Insurance Company shall
promptly notify the Distributor and the Selling Broker-Dealer of its intent
to terminate a Representative and the reasons for such termination.
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(d) When appointing a Representative or an insurance agency of a Selling
Broker-Dealer as its life insurance agent, the Insurance Company agrees
only to enter into agent or agency agreements (an "Agent Agreement") that
(i) are substantially identical to the form of Agent Agreement mutually
agreed to by the parties to this Agreement or (ii) is otherwise approved by
the Distributor, provided that the approval of the Distributor shall be
deemed to have been given if no written objection to the Agent Agreement
has been delivered by the Distributor to the Insurance Company within five
(5) business days after being provided with a copy of the proposed Agent
Agreement. After entering into an Agent Agreement, the Insurance Company
shall not amend or supplement the Agent Agreement without the Distributor's
prior written consent, which consent shall not be unreasonably withheld.
The Insurance Company agrees to notify the Distributor and the Selling
Broker-Dealer promptly of its intent to terminate an Agent Agreement and
the reasons for such termination.
7. Forms, Applications, and Licensing
----------------------------------
(a) The Insurance Company, or its agent, shall forward to the Distributor,
Applications, Policies, Contracts, subscription agreements, certificates,
other administrative forms, and any amendments or supplements to the
foregoing, necessary to carry out the Distributor's distribution authority
and responsibilities with respect to the Variable Products.
(b) The Insurance Company shall obtain all requisite regulatory approvals
of such materials furnished to the Distributor and shall comply with all
applicable laws, rules, regulations and orders of any governmental
authority relating to the issuance or sale of the Variable Products.
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(c) All premiums and Purchase Payments paid by check or money order that
are collected by the Distributor, any agent or affiliate shall be remitted
promptly, and in any event not later than two business days, in full,
together with Applications, forms, and any other required documentation, to
the Insurance Company. Checks or money orders in payment of Premiums and
Purchase Payments shall be drawn to the order of "United Investors Life".
If any Premium or Purchase Payment is held at any time by the Distributor,
broker-dealers, registered representatives, agents, or any affiliates, the
Distributor, the broker-dealers, the registered representatives, the agents
or the affiliates shall hold that Premium or Purchase Payment in a
fiduciary capacity. All Premiums and Purchase Payments whether by check,
money order or wire, shall be the property of the Insurance Company.
(d) The Distributor acknowledges that the Insurance Company shall have the
unconditional right to reject, in whole or in part, any application. The
Insurance Company shall return any monies received by it or from an
applicant or purchaser whose Application has been rejected. The Insurance
Company shall notify the Distributor in writing one business day prior to
taking any action to return any such Monies, which notice shall identify,
if applicable, the agent who submitted the rejected Application.
(e) If a purchaser exercises its "free look right" under a Variable
Product, any refund of premiums or Purchase Payments due as provided in
that Variable Product, shall be made by the Insurance Company to the
purchaser. The Insurance Company shall notify the Distributor in writing
one business day prior to taking any action to refund any such Premiums or
Purchase Payments, which notice shall identify, if applicable the broker-
dealer, the registered representative or the agent through which the
Variable Product had been purchased.
(f) The Distributor agrees to maintain all registrations, licenses, and
qualifications under federal and state securities laws that are applicable
to its activities and those of its registered representatives in connection
with the performance of this Agreement. The Distributor also agrees to
maintain all registrations, licenses, and qualifications under state
insurance laws that are applicable to the activities of the Distributor,
the Insurance Agency Affiliates and their agents in performing this
Agreement.
(g) The Distributor agrees to notify the Insurance Company within [three
(3) business days] of obtaining actual knowledge of any changes in the
registrations, licenses, or qualifications of the Distributor, the
Insurance Agency Affiliates, or the agents or representatives of the
Distributor or Insurance Agency Affiliates that would adversely affect its
performance of this Agreement.
(h) The Insurance Company agrees to obtain and maintain all registrations,
licenses, qualifications and approvals under federal securities laws and
state blue sky and insurance laws in connection with qualifying the
Variable Products for sale.
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(i) The Insurance Company agrees to notify the Distributor within [three
(3) business days] of obtaining actual knowledge of any changes in the
registrations, licenses, qualifications, or approvals of the Variable
Products that would adversely affect the offering of the Variable
Contracts.
8. Marketing Materials
-------------------
The Insurance Company shall design, develop, produce, and make the
determination whether to file and, if necessary, file for and obtain all
necessary regulatory approvals for, all advertising, sales literature, and
other promotional materials required in connection with the distribution,
sale and marketing of the Variable Products. The Insurance Company shall
work closely with the Distributor to ensure that the marketing materials
achieve their desired purpose.
9. The Distributor's Compensation
------------------------------
(a) In consideration for the services rendered by the Distributor pursuant
to this Agreement, the Insurance Company shall pay the Distributor the
compensation set forth in Schedule 4 to this Agreement. Schedule 4 and/ or
Schedule 2 may be modified at any time, and from time to time, by adding or
deleting contracts and changing the compensation payable for those
contracts, provided, that, any such modifications are mutually agreed upon
by both the Insurance Company and the Distributor, in writing, and signed
by both parties. Modifications to the Variable Products listed in Schedule
2 and the compensation described in Schedule 4 may be requested by the
Insurance Company in the event that pricing objectives are not achieved due
to adverse experience, and the Distributor's consent shall not be
unreasonably withheld. Any such modification shall apply only to contracts
applied for after the effective date of each such modification.
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(b) With respect to Variable Products in connection with which the
Insurance Company has advanced sales commissions paid to the Distributor,
to a Broker-Dealer, or to a Representative, in the event a Contract or
Policy on a Variable Product terminates within twelve (12) months of the
date of issue, the Insurance Company reserves the right to recover: (1) one
hundred percent (100%) of the compensation paid to Distributor respecting
the sale of the Variable Product if that Variable Product terminates for
reasons other than death during the first twelve (12) months following
issue; (2) seventy five percent (75%) of the compensation paid to the
Distributor if a Variable Product terminates for reasons other than death
during the second twelve (12) months following issue; (3) fifty percent
(50%) of the compensation paid to the Distributor if a Variable Product
terminates for reasons other than death during the third twelve (12) months
following issue; (4) twenty five percent (25%) of the compensation paid to
the Distributor if a Variable Product terminates for reasons other than
death during the fourth twelve (12) months following issue; and (5) nothing
from the Distributor (i.e., no charge back) if the Variable Product
terminates thereafter. However, notwithstanding any other provision of this
Agreement, if termination of a Variable Product at any time is due to the
willful or negligent wrongful actions or representations of the
Distributor, Broker-Dealer or Representative, the Insurance Company
reserves the right to recover one hundred percent (100%) of the
compensation paid to Distributor respecting the sale of the Variable
Product.
With respect to any other terminations, the Insurance Company has no
right to recover any portion of the compensation paid to the Distributor.
In no event shall the Insurance Company have the right to recover any
portion of any compensation received by the Distributor as a basis point
charge against investment values under the contracts. The Insurance Company
shall have the right to set off any amounts owed by the Distributor under
this Section 9(b) against any amounts owed by the Insurance Company to the
Distributor.
10. Representations and Warranties
------------------------------
(a) By the Distributor
The Distributor represents and warrants to, and covenants with, the
Insurance Company as follows:
(1) The Distributor has taken all action necessary including without
limitation, those necessary under its articles of incorporation, by-
laws and applicable state corporate law, to authorize the execution,
delivery and performance of this Agreement and all transactions
contemplated hereunder.
(2) Prior to the sale of any Variable Product hereunder, the
Distributor will be, and shall thereafter remain during the term of
this Agreement, registered as a broker-dealer under the 1934 Act, a
member in good standing of the NASD, and duly registered under
applicable state securities laws.
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(3) Prior to the sale of any Variable Product hereunder, the
Distributor will be, and shall thereafter remain during the term of
this Agreement, in compliance with the eligibility requirements for
certain affiliated persons and underwriters found in Section 9(a) of
the ▇▇▇▇ ▇▇▇.
(4) Prior to the sale of any Variable Product hereunder, the
Distributor and each Distributor Agency Affiliate and Representative
will have all necessary licenses and regulatory approvals to perform
the services required by this Agreement and the Distributor will
notify the Insurance Company within three business days of obtaining
actual knowledge of any change in the status of such licenses or
regulatory approvals.
(5) During the term of this Agreement and for any reason, the
Distributor and the Distributor Agency Affiliates agree that they will
not take any action designed or calculated to result in the transfer
or exchange of the policies.
(b) By the Insurance Company
The Insurance Company represents and warrants to, and covenants with, the
Distributor as follows:
(1) All necessary regulatory approvals and licenses from any state or
federal governmental body having jurisdiction over the Insurance
Company or the Variable Products have been obtained, and the Insurance
Company will notify the Distributor within one business day of
obtaining actual knowledge of any change in the status of any
approvals or licenses related to the marketing, sale or distribution
of the Variable Products.
(2) The Insurance Company has taken all action necessary including,
without limitation, those necessary under its articles of
incorporation, bylaws and applicable state corporate law, to authorize
the execution, delivery and performance of this Agreement and all
transactions contemplated hereunder.
(3) The Insurance Company is and shall remain during the term of this
Agreement in compliance with the eligibility requirements for certain
affiliated persons and underwriters found in Section 9(a) of the 1940
Act.
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11. Indemnification
-------------------
(a) By the Distributor
(1) The Distributor agrees to indemnify and hold harmless the Insurance
Company and each director, officer, employee or agent of the Insurance
Company, and each person, if any, who controls the Insurance Company within
the meaning of the federal securities laws (collectively, the "Indemnified
Parties" for purposes of this Section 11 (a)) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Insurance Company) or litigation (including 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 offer or sale of the Variable
Products or the operation of the Variable Accounts and:
(i) arise out of, or are based upon, violation(s) by the Distributor
of federal or state securities law(s) or regulation(s), applicable
banking law(s) or regulation(s), insurance law(s) or regulation(s) or
any rule or requirement of the NASD; or
(ii) arise out of, or are based upon, any tortious conduct (including
oral or written misrepresentation), or any unlawful sales practices
concerning the Variable Products by the Distributor; or
(iii) 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
advertising, sales literature, or other promotional material
designed, developed, and produced by the Distributor and used by it
in the distribution of the Variable Products; provided that the
Distributor shall not be liable in any such case to the extent that
such losses, claims, damages, liabilities or expenses arises out of,
or are based upon, an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon information
furnished in writing to the Distributor by the Insurance Company
specifically for use in the preparation of any such promotional
material; or
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(iv) arise out of, or are based upon, claims by the Representatives or
agents or representatives of the Distributor for commissions or other
compensation or remuneration of any type; or
(v) arise as a result of any failure on the part of the Distributor to
submit Premiums, Purchase Payments, or Applications to the Insurance
Company, or to submit the correct amount of a Premium or Purchase
Payment, on a timely basis and in accordance with this Agreement,
subject to applicable law; or
(vi) arise as a result of any failure on the part of the Distributor
to deliver the Variable Products to purchasers thereof on a timely
basis; provided that the Distributor shall not be liable in any such
case to the extent that such losses, claims, damages, liabilities or
expenses arise as a result of any failure on the part of the Insurance
Company to perform its obligations under this Agreement on a timely
basis; or
(vii) arise as a result of a material breach by the Distributor of any
provisions of this Agreement; or
(viii) arise as a result of actions of a Broker-Dealer or its
Representatives;
as limited by and in accordance with the provisions of Sections 11(a)(2)
and 11 (a)(3) hereof.
(2) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation ("Losses" for purposes of this Section 11 (a)(2)) incurred or
assessed against an Indemnified Party that may arise from any Indemnified
Party's willful misfeasance or bad faith. The Distributor's liability for
Losses in the event of its breach of this Agreement shall be limited to
that portion of Losses
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caused by its breach, and the Distributor shall not be liable for that
portion of Losses caused by breach of this Agreement by an Indemnified
Party or from any act or omission by an Indemnified Party.
(3) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless that Indemnified Party shall have notified the Distributor 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 that Indemnified Party (or after the Indemnified Party shall
have received notice of such service on any designated agent).
Notwithstanding the foregoing, the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Distributor of its
obligations hereunder except to the extent that the Distributor has been
prejudiced by such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Distributor of any such claim shall not
relieve the Distributor from any liability which it may have to the
Indemnified Party against whom the action is brought otherwise than on
account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Distributor shall be entitled
to participate, at its own expense, in the defense of the action. The
Distributor also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action; provided, however,
that if the Indemnified Party shall have reasonably concluded that there
may be defenses available to it which are different from or additional to
those available to the Distributor, the Distributor shall not have the
right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Distributor be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances).
After notice from the Distributor to the Indemnified Party of the
Distributor's election to assume the defense thereof, and in the absence of
such a reasonable conclusion that there may be different or additional
defenses available to the Indemnified Party, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and
the Distributor will not be liable to that party under this Agreement for
any legal or other expenses subsequently incurred by the party
independently in connection with the defense thereof other than reasonable
costs of investigation.
(4) The Indemnified Parties will notify the Distributor within a reasonable
time, not to exceed fifteen (15) business days, of the receipt of service
of process in any litigation or proceedings against them in connection with
the offer or sale of the Variable Products or the operation of the Variable
Accounts.
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(b) By the Insurance Company
(1) The Insurance Company agrees to indemnify and hold harmless the
Distributor and each director, officer, employee or agent of the
Distributor, and each person, if any, who controls the Distributor within
the meaning of the federal securities laws (collectively, the "Indemnified
Parties" for purposes of this Section 11(b)) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Insurance Company) or litigation (including 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 offer or sale of the Variable
Products or the operation of the Variable Accounts and:
(i) 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: (A)
Registration Statement or Prospectus; (B) blue-sky application or
other document executed by the Insurance Company specifically for the
purpose of exempting the Private Placements from, or qualifying any
or all of the Registered Products for sale under, the securities laws
of any jurisdiction; or (C) information furnished in writing to the
Distributor specifically for the purpose of being included in any
advertising, sales literature, or other promotional material to be
used in connection with the distribution of the Variable Products;
provided that the Insurance Company shall not be liable in any such
case to the extent that such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, an untrue statement or
alleged untrue statement or omission or alleged omission made in
reliance upon information furnished in writing to the Insurance
Company by the Distributor specifically for use in the preparation of
any such document, application, or promotional material; or
(ii) result because of the provisions of any Variable Product or
because of any material breach by the Insurance Company of any
provision of this Agreement or of any Variable Product or which
result from any wrongful activities of the Insurance Company's
officers, directors, employees or agents or their
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wrongful failure to take any action in connection with the sale,
processing or administration of the Variable Products including,
without limitation, obtaining auditors' reports, computing accurate
separate account and/or underlying fund performance data, preparation
and timely filing and delivery, as required, of annual and semiannual
reports and reports on Form NSAR and the timely payment of all state
and federal registration fees; as limited by and in accordance with
the provisions of Sections 11 (b)(1) and 11 (b)(2) hereof.
(2) The Insurance Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation ("Losses" for purposes of this Section 11 (b)(2)) incurred or
assessed against an Indemnified Party that may arise from any Indemnified
Party's willful misfeasance or bad faith. The Insurance Company's liability
for Losses in the event of its breach of this Agreement shall be limited to
that portion of Losses caused by its breach, and that party shall not be
liable for that portion of Losses caused by breach of this Agreement by an
Indemnified Party or from any act or omission by an Indemnified Party.
(3) The Insurance Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless the Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after receiving the summons or other first
legal process giving information of the nature of the claim against the
Indemnified Party (a "Claim"). Notwithstanding the foregoing, the failure
of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the
extent that the Insurance Company has been prejudiced by the failure of the
Indemnified Party to give notice. In addition, any failure by the
Indemnified Party to notify the Insurance Company of any Claim shall not
relieve the Insurance Company from any liability which it may have to the
Indemnified Party against whom the action is brought otherwise than on
account of this indemnification provision. In case any Claim is brought
against the Indemnified Parties, the Insurance Company shall be entitled to
participate, at its own expense, in the defense of the Claim. The Insurance
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the Claim. After notice from the
Insurance Company to the Indemnified Party of the Insurance Company's
election to assume a defense to a Claim, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
Insurance Company will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by the
Indemnified Party independently in connection with the defense of a Claim
other than the reasonable costs of investigation.
17
12. Records
-------
The parties to this Agreement shall maintain such accounts, books and
records and other documents as are required to be maintained under
applicable laws and regulations and shall preserve such accounts, books and
records, and other documents for the periods prescribed by such laws and
regulations. Each party shall have the right to inspect and audit the
accounts, books and records and other documents of the other party that
pertain to the Variable Products during normal business hours upon
reasonable written notice to the other party. Any party requesting such an
audit shall bear the expense of the audit, including the reasonable costs
(other than overhead costs or costs for time spent on audit-related matters
by officers, directors, or employees of the other party) borne by the other
party in connection with the audit.
13. Investigations and Proceedings
------------------------------
The parties to this Agreement shall notify each other promptly of any
insurance or securities regulatory investigation, administrative or
judicial proceeding, or material complaint arising in connection with the
offer or the sale of the Variable Products. The parties shall cooperate
fully in the resolution of any insurance or securities investigation,
administrative or judicial proceeding, or material complaint.
14. Term and Termination
--------------------
(a) Term -- This Agreement shall be effective from the date hereof through
December 31, 2002, which term shall automatically be extended for a period
of 3 years unless this Agreement is sooner terminated in accordance with
the termination provisions in Section 14(b) of this Agreement.
(b) Termination -- No party hereto may terminate this Agreement except as
expressly provided in this Section 14(b).
(1) Any party hereto may terminate this Agreement effective the date
that the term of this Agreement would otherwise automatically be
renewed upon written notice delivered to the other party not less than
30 nor more than 60 days prior to such effective date, which notice
shall specify that it is being given pursuant to this Section
14(b)(1).
18
(2) A party (the "Terminating Party") may terminate this Agreement
for cause if:
(i) another party (the "Breaching Party") materially breaches
this Agreement,
(ii) the Terminating Party has delivered to the Breaching Party a
notice specifying the nature of the breach and that this notice
is being given pursuant to this Section 14(b)(2), and
(iii) the Breaching Party has not cured the breach within 30
days after the delivery of the notice.
(3) A Terminating Party may terminate this Agreement immediately for
cause in the event of:
(i) the voluntary institution by the Distributor of bankruptcy
proceedings or the voluntary institution by the Insurance Company
of insolvency or rehabilitation proceedings under any state
insurance laws or regulations (each an "Insolvent Party") or
(ii) a formal order or written finding by a court of competent
jurisdiction that the Insolvent Party is bankrupt or insolvent,
there is a degradation of the Insolvent Party's reputation that
would materially impair the ability of the Insolvent Party to
carry out its obligations under this Agreement or
(iii) the Securities and Exchange Commission ("SEC") institutes
a formal cease and desist order or proceeding prohibiting the
offer of the sale of the Variable Products or the operation of
the Separate Account, or a governmental or regulatory authority
of a state or other jurisdiction institutes a formal order or
proceeding prohibiting the offer or the sale of the Variable
Products or the operation of the Separate Account; provided that,
this Agreement will be terminated only with respect to the
particular state or jurisdiction issuing such order or proceeding
or
(iv) the SEC, the NASD, or any other government authority or
self-regulatory organization revokes or suspends the registration
or license of the Distributor, or the Distributor's ability to do
business is so materially impaired, in the reasonable view of the
Insurance Company,
19
that it could not perform its obligations under this Agreement or
(v) a state insurance commissioner suspends or revokes the
Insurance Company's ability to do business or the Insurance
Company's ability to do business is so materially impaired, in
the reasonable view of the Distributor, that it could not perform
its obligations under this Agreement.
(c) Solicitation after Termination -- Upon termination of this Agreement
for any reason, the Distributor and the Distributor Agency affiliates agree
that they will not take any action designed or calculated to result in the
transfer or exchange of the policies.
(d) Survival -- The provisions of Sections 10, 11, 15, 18 and 19
(Representations and Warranties, Indemnification, Rights Upon Termination,
Arbitration, and Confidentiality, respectively) shall survive the
termination of this Agreement.
15. Rights Upon Termination
-----------------------
(a) In no event will any further compensation be paid to the Distributor
should the Insurance Company terminate this Agreement for cause pursuant to
Section 14(b)(2) or Section 14(b)(3).
(b) As of the date of termination, the Insurance Company shall have the
right to set off against any monies it owes the Distributor any amounts
owed by the Distributor to the Insurance Company. In the event that the
amounts owed by the Distributor exceed the amounts owed by the Insurance
Company, the difference shall become immediately due and payable by the
Distributor.
(c) In the event that either party does not pay within 45 days after
resolution of net amount payable, then the net amount owed will accrue
interest, compounded daily, at the fluctuating prime interest rate charged
by The Chase Manhattan Bank, N.A., plus two percent (2%).
(d) The Insurance Company agrees to pay the termination fees identified in
Schedule 5 in the event (i) the Insurance Company terminates this Agreement
for any reason other than those set forth in Sections 14(b)(2) or 14(b)(3)
of this Agreement, or (ii) the Distributor terminates this Agreement for
the reasons set forth in Sections 14(b)(2) or 14(b)(3) of this Agreement.
In no event shall the Insurance Company be liable for the
20
termination fees identified in Schedule 5 to this Agreement if the
Distributor voluntarily terminates this Agreement under Section 14(b)(1) of
this Agreement. The parties agree that such termination fees only apply to
the Variable Product policies that have not lapsed, due to 1035 exchanges
or other means, whether such lapse occurred before or after the termination
date.
(e) If the Insurance Company terminates this Agreement pursuant to Section
14(b)(1), the Insurance Company shall continue to:
(1) pay the Distributor the compensation set forth in Schedule 4 to
this Agreement; and
(2) offer all of the Variable Products then identified on Schedule 2
to this Agreement for a period of [one (1) year] from the date of
termination of this Agreement, during which period of time (i) the
Insurance Company shall employ at least the same level of efforts in
offering and supporting the Variable Products as it did before the
termination of this Agreement and (ii) the terms of this Agreement
shall remain in full force and effect as though the Agreement had not
been terminated. The parties further agree that such compensation
shall only be based on the Variable Product policies that have not
lapsed, due to 1035 exchanges or other means, whether such lapse
occurred before or after the termination date.
(f) If the Distributor terminates this Agreement pursuant to Section
14(b)(1), the Insurance Company shall continue to pay the Distributor the
compensation set forth in Schedule 4 to this Agreement. The parties further
agree that such compensation shall only be based on the Variable Product
policies that have not lapsed, due to 1035 exchanges or other means,
whether such lapse occurred before or after the termination date.
21
16. Independent Contractor
----------------------
The Distributor shall act as an independent contractor in the performance
of its duties and obligations under this Agreement and nothing herein contained
shall constitute the Distributor, Broker-Dealers, Representatives or employees
or officers of the Distributor or Broker-Dealers as employees of the Insurance
Company in connection with the distribution of the Variable Products.
17. Notices
-------
Any notice required or permitted under this Agreement shall be delivered
personally or sent by facsimile or by registered or certified mail, return
receipt requested, with all postage prepaid:
(a) To the Distributor:
First Union Securities, Inc.
Attention:
(b) To the Insurance Company:
United Investors Life, Inc
Attention:
Fax:
A party may change its address or fax number for the delivery of notices by
delivering a written notice to the other party at its last specified address.
All notices shall be effective upon delivery; provided that any notice sent by
facsimile shall be deemed ineffective unless a copy of the notice is also
delivered personally or sent by express courier or mail for delivery on the same
or next business day.
18. Arbitration
-----------
Any dispute between the Distributor and the Insurance Company arising under
or relating to this Agreement shall be settled by compulsory arbitration before
a single arbitrator experienced in the insurance industry in accordance with the
Commercial Arbitration Rules then in force of the American Arbitration
Association. The arbitration shall take place in Charlotte, North Carolina
22
unless some other location is mutually agreed upon by the parties in dispute.
Each party shall bear its own costs and expenses in any such arbitration, except
that the Distributor and the Insurance Company shall bear the expenses of the
arbitrators' services equally.
19. Confidentiality
---------------
(a) Generally. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will safeguard it as
provided herein. The party receiving Confidential Information will not,
directly or indirectly, report, publish, distribute, disclose, or otherwise
disseminate the Confidential Information, or any portion thereof, to any
third party including its affiliates, and will not use the Confidential
Information, or any portion thereof, for the benefit of itself or any third
party including its affiliates or for any purpose, except only as necessary
to perform its duties and exercise its rights hereunder, or as expressly
authorized in writing by the party who owns such Confidential Information.
Disclosure of Confidential Information internally by a recipient will be
limited to those of its and its affiliates' officers, directors, employees,
and agents on a "need to know" basis who must have access to the
Confidential Information to enable such party to perform its duties and
exercise its rights hereunder. In order to safeguard the Confidential
Information, each party shall (i)-inform each recipient of the Confidential
Information of the confidential nature thereof and of the requirements of
this Agreement, (ii) direct such recipients to comply with the terms of
this Agreement, and (iii) exercise any other precautions necessary to
prevent any improper use or disclosure of Confidential Information.
(b) Definition. "Confidential Information" shall mean: (i) information
regarding a party's or such party's affiliates', financial condition,
information systems, business operations, plans and strategies, products or
services, customers and prospective customers, and marketing and
distribution plans, methods and techniques; (ii) information that is marked
"confidential", "proprietary" or in like words, or that is summarized in
writing as being confidential Prior to or promptly after disclosure to the
other party; (iii) any and all related research; and (iv) any and all
designs, ideas, concepts, and technology embodied therein. Confidential
Information of the Distributor or its affiliates that is to be kept
confidential by the Insurance Company shall also include: (v) any
information regarding the pricing strategies of each Broker-Dealer; (vi)
specific marketing and training materials of each Broker-Dealer; (vii) any
information of the Distributor or its affiliates in any form whatsoever
that is covered by a patent issued by the United States Patent and
Trademark Office;
23
Information is not considered confidential or proprietary if such
information: (1) is or becomes generally available to the public other than
as a result of disclosure by the recipient; (2) was available to or already
known by the recipient on a non-confidential basis prior to its receipt
from the party claiming confidentiality; (3) is developed by the recipient
independently of any information or data acquired from the party claiming
confidentiality; or (4) is, or is required to be, disclosed pursuant to a
court order or the requirement of any federal or state regulatory,
judicial, or government authority.
(c) Remedies. Each party acknowledges and agrees that monetary damages
would not be a sufficient or adequate remedy for a breach or anticipated
breach of this Section and that, in addition to any other legal or
equitable remedies which may be available, each party shall be entitled to
specific performance and injunctive relief for any breach or anticipated
breach of this Section.
(d) Survival. The provisions of this Section shall survive the expiration
or other termination of this Agreement.
20. Severability
------------
If any provision of this Agreement is held to be unenforceable or invalid,
that provision shall be severed from this Agreement and the remainder of this
Agreement shall remain in full force and effect.
21. Choice of Law
-------------
This Agreement and any disputes, actions or other proceedings arising under
or relating to it shall be governed by law of the State of North Carolina
without regard to its principles of conflicts of law.
22. No Waiver
---------
No failure or delay on the part of any party hereto in exercising any power
or right under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No waiver by any
party of any provision of this Agreement, nor of any breach or default, shall be
effective unless in writing and signed by the party against whom such waiver is
to be enforced.
24
23. Agreement Non-Assignable
------------------------
Any assignment of this Agreement in whole or in part by a party without the
prior written consent of the other parties thereto shall be void and shall vest
no rights in the assignee.
24. Exhibits and Schedules
----------------------
The Exhibits and Schedules to this Agreement are a part of this Agreement
as if set forth in full herein.
25. Headings
--------
The headings herein are for the purpose of convenience only and have no
legal force, meaning or effect.
26. Schedules and Attachments
-------------------------
With the exception of Schedules 4 and 5, all other schedules attached to
this agreement may be revised by the Insurance Company subject to review by the
Distributor.
27. Entire Agreement
----------------
This Agreement constitutes the entire agreement of the parties with respect
to the subject matter hereof and supersedes all prior and contemporaneous
agreements (other than on matters related to confidentiality), understandings,
negotiations and discussions, whether oral or written, of the parties and there
are no warranties, representations and/or agreements between the parties in
conjunction with the subject matter hereof except as set forth in this
Agreement. This Agreement, including any Schedule or Exhibit hereto, may be
amended or modified only by written instrument, executed by duly authorized
officers of the parties.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be
executed as of the date first above written.
First Union Securities, Inc. United Investors Life, Inc
By: By:
Name: Name:
Title: Title:
25
SCHEDULE 1
DISTRIBUTOR AGENCY AFFILIATES
First Union Securities
Correspondent Bank Broker-Dealers
Other Broker-Dealers
26
SCHEDULE 2
VARIABLE PRODUCTS
Product Policy/Certificate Description
Number
Titanium Investor VUL
Titanium Investor VA
27
SCHEDULE 3
PRIVATE PLACEMENT GUIDELINES
The Insurance Company relies on exemptions under the 1933 Act and the 1940
Act in the issuance of certain of its variable annuity contracts and variable
life insurance policies. Reliance on these exemptions generally depends upon the
number and identity of the purchasers, the number of securities offered, the
size of the offering, the manner of the offering, and whether the securities are
being purchased only for investment purposes (and not for the purpose of
distributing or reselling them).
Section 3(c)(7)
Section 3(c)(7) exempts from the registration requirements of the 1940 Act
certain companies owned exclusively by an unlimited number of "qualified
purchasers", as defined in amended Section 2(a)(51) of the 1940 Act. Section
2(a)(51) establishes asset tests for four categories of "qualified purchasers":
(1) a natural person who owns at least $5 million in investments; (2) a family
investment vehicle that owns at least $5 million in investments; (3) a trust
whose trustees and settlers are qualified persons, provided that the trust was
not formed for the purpose of investing in the Section 3(c)(7) company; and (4)
any other person who owns and invests on a discretionary basis, for itself or
other qualified purchasers, at least $25 million in "investments."
In order to preserve its right to rely on Section 3(c)(7) of the 1940 Act,
the Insurance Company requires, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(a) or 2(b) of this Agreement
that each Broker-Dealer require, each prospective purchaser to represent and
warrant (in response to a questionnaire) that it owns sufficient "investment
securities" (as defined in Rule 2(a)(51-1) under the ▇▇▇▇ ▇▇▇) to meet the
financial requirements and otherwise meet the requirements of the appropriate
definition of "qualified purchaser" in Section 2(a)(51) of the 1940 Act.
In addition, if the Private Placement will be used by a corporation to
assist it in funding its obligation to employees under a non-funded deferred
compensation plan, the Insurance Company therefore, will impose certain
additional conditions on the purchase and will request additional information
from the purchaser in order to insure compliance with Section 3(c)(7). These
additional requirements also are designed to insure that the employer is and
remains the sole beneficial owner of the Private Placement for purposes of the
1940 Act.
28
Section 3(c)(1)
Certain of the Variable Accounts for the Private Placements are not
registered under the 1940 Act in reliance on Section 3(c)(1) of the 1940 Act.
Section 3(c)(1) exempts from the registration requirements of the 1940 Act
certain companies who is an issuer whose outstanding securities (other than
short-term paper) are beneficially owned by not more than one hundred persons
and which is not making and does not presently propose to make a public offering
of its securities.
In order to preserve its right to rely on Section 3(c)(1) of the 1940 Act,
the Insurance Company requires, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(b) of this Agreement that
each Broker-Dealer require, Representatives to comply with the requirements of a
non-public offering and monitor the number of prospective purchasers to whom
offers of sales have been made.
Regulation D - Rule 501
With respect to the Private Placements, each prospective purchaser must
also be qualified as an "accredited investor" or otherwise be a "suitable
investor," prior to offering the Private Placements to that prospective
purchaser. An "accredited investor" is: (a) a natural person, (i) whose
individual net worth, or joint net worth with the person's spouse, at the time
of purchase exceeds $1,000,000; or (ii) who has had individual income in excess
of $200,000 in each of the two (2) most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and who reasonably
expects an income in excess of such amounts in the current year; (b) a bank or
savings and loan association, whether acting in an individual or fiduciary
capacity; (c) a registered broker or dealer; (d) an insurance company; (e) a
registered investment company; (f) a Small Business Investment Company; (g) any
plan established by a state or municipal agency or government for the benefit of
its employees, with total assets in excess of $5,000,000; (h) certain employee
benefit plans (within the meaning of ERISA) with total assets in excess of
$5,000,000; (i) a private business development company; (j) a charitable
organization, corporation, business trust, any trust whose purchase is directed
by a person with knowledge and experience in financial and business matters, or
partnerships, not formed to acquire the securities offered, with total assets in
excess of $5,000,000; or (k) an entity in which all of the equity owners are
accredited investors.
Because resales of securities acquired in a private offering generally are
prohibited (with the exception of offerings pursuant to Rule 144A of the 1933
Act, which expressly permits resales to certain institutional investors),
Representatives must ensure that each prospective purchaser understands the
long-term nature of the Private Placement investment, does not intend to resell
the investment and is financially able to retain the securities purchased.
29
SCHEDULE 4
COMPENSATION SCHEDULE
Variable Universal Life - Titanium Investor VUL
Target Premium %
Year 1:
Up to Target Premium 135.0%
(maximum payout)
Excess Premium 4.0%
Years 2-10:
Up to Target Premium 4.0%
Excess Premium 4.0%
Years 11+: 0.00%
[Replacements: (Six month window before
or after issue of a new policy) - New
first year commission will only be paid
on any increase in premium over that on
which first year commissions was paid on
the old policy.]
Plus;
50% of the Revenue Sharing paid by
Investment Managers in excess of 15
basis points annually. Revenue Sharing
means the fees received by the Insurance
Company from the Investment Managers
under the respective participation
agreements as reimbursement for
administrative services performed by the
Insurance Company. This amount will be
calculated after each calendar year
based on the aggregate amounts received
from all Investment Managers using the
average assets in the separate accounts
underlying the product.
Plus;
50% of the target premium acquisition
expense priced into the product on all
target premium written in excess of $10
million in any calendar year. In
addition, an extra 25% of the target
premium acquisition expense priced into
the product will be paid on all target
premium written in excess of $15
million in any calendar year. (The
target premium acquisition expense
30
priced into the Titanium Investor
Variable Universal Life Product is 14%.)
For any Variable Product, the Insurance
Company may elect from time to time to
make advances of compensation to
Distributor. Any such advance shall be
deemed a loan, payable upon demand, and
secured by a first lien (security
interest) upon compensation payable by
Insurance Company to Distributor,
without the necessity of execution of
any further document, and Insurance
Company shall be entitled to set off any
amounts owed to it by Distributor
against any amounts owed to the
Distributor by the Insurance Company.
Please note that the above compensation
structure only applies to all business
written through the Distributor.
Variable Annuity - Titanium Investor VA
10.50% of Purchase Payments Ages 0-70,
8.50% Ages 71-80, 6.50% Ages 81+, plus,
beginning in the 2nd contract year, 20
bps trail based on assets in the
separate account underlying the product;
plus
50% of the Revenue Sharing paid by
Investment Managers in excess of 15
basis points annually. Revenue Sharing
means the fees received by Insurance
Company from the Investment Managers
under the respective participation
agreements as reimbursement for
administrative services performed by the
Insurance Company. This amount will be
calculated after each calendar year
based on the aggregate amounts received
from all Investment Managers using the
average assets in the separate accounts
underlying the product.
31
SELLING GROUP AGREEMENT
-----------------------
THIS AGREEMENT ("Agreement") is made as of ___________, 1999 by and between
First Union Securities Inc., a Delaware corporation ("FUS"), and the undersigned
broker-dealer ("Broker-Dealer").
RECITALS:
A. FUS, pursuant to the provisions of a distribution agreement (the
"Distribution Agreement") between FUS and United Investors Life ("Insurance
Company"), acts as a distributor of the variable annuity contracts and/or, as
the case may be, variable life insurance policies of Insurance Company which are
anticipated to be registered under the Securities Act of 1933, as amended (the
"1933 Act"), identified on the Schedule of Products attached hereto as Exhibit
-------
"A" and may in the future act as distributor of other valuable annuity contracts
--
and/or, as the case may be, variable annuity policies of Insurance Company
registered under the 1933 Act which would be identified on a supplement to such
Schedule of Products pursuant to Section ___, below (such contracts and policies
are hereinafter collectively referred to as the "Products").
B. FUS desires that Broker-Dealer distribute the Products in those
jurisdictions in which Broker-Dealer, FUS, Insurance Company and the Products
are appropriately licensed, qualified or approved, as the case may be, and
Broker-Dealer desires to sell the Products, through its agents in such
jurisdictions, on the terms and conditions set forth hereinafter.
C. Insurance Company, pursuant to an Agreement (the "General Agent
Agreement"), has authorized Broker-Dealer or affiliates of the Broker-Dealer to
act as a general agent ("General Agent") and to engage in the distribution
activities contemplated by this Agreement and the General Agent Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants hereinafter set forth, the parties agree as follows:
1. Authority to Sell Products.
--------------------------
1.1 General. FUS, subject to the terms and conditions contained
-------
herein, hereby authorizes Broker-Dealer as an independent contractor, on a non-
exclusive basis, to offer and sell the Products. Broker-Dealer hereby agrees to
use its best efforts to sell the Products.
1.2 Compensation; Expenses. Except as otherwise provided herein,
----------------------
Broker-Dealer shall be entitled to commissions and allowances with respect to
sales of the Products made by Broker-Dealer, the Registered Representatives and
the Downstream Broker-Dealers (as defined in Section _____, below) in accordance
with the Schedule of Commissions and Allowances attached to this Agreement as
Exhibit "B", as such Schedule may be amended from time to time. The commissions
----------
and allowance shall be payable by the Insurance Company or as otherwise
permitted by law or regulations. Broker-Dealer shall be responsible for the
payment of all expenses incurred by Broker-Dealer in connection with this
Agreement and the performance of its obligations, and the exercise of its rights
hereunder.
2. Representations and Warranties.
------------------------------
Broker-Dealer represents and warrants to, and covenants with, FUS
that:
(a) Broker-Dealer (i) is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"), (ii) is duly
registered as a broker-dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and registered in each state or other jurisdiction in which Broker-Dealer is
required to be registered in order to sell the Products; (iii) is licensed to
sell the Products under the insurance laws of each state or other jurisdiction
in which Broker-Dealer is required to be registered in order to sell the
Products and (iv) otherwise maintains in effect all governmental and other
registrations, licenses and permits necessary for it to carry out its
obligations, and the transactions contemplated hereunder (the "Required
Registrations");
(b) Broker-Dealer conducts its operations is in compliance in all
material respects, with all applicable federal and state securities laws and
regulations, the requirements of the NASD and any applicable securities
exchanges of which it is a member and all codes of conduct and codes of ethics
applicable to its activities (collectively, the "Regulations").
(c) Broker-Dealer is a corporation duly organized and in good
standing under the law of its jurisdiction of organization and is qualified to
do business as a corporation in those states or jurisdictions where it is, or
will be doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby (i)
have been duly approved by all required corporate action on the part of Broker-
Dealer and (ii) not conflict with any law, regulation, court order or agreement
to which Broker-Dealer is subject or Broker-Dealer's properties are bound.
3. Covenants of Broker-Dealer.
--------------------------
3.1 Sale of Products. Broker-Dealer agrees that (a) offers and
----------------
sales of the Products will be made only through the use of a then current
prospectus which is a part of a registration statement which is then effective
under the 1933 Act (each a "Prospectus"), (b) a Prospectus relating to the
Product in question will be delivered prior to, or concurrently with any sales
presentation or other offer of such Product, (c) no oral or written statements
will be made by or on behalf of Broker-Dealer to a prospective purchaser of a
Product other than statements identical to, or based solely on information set
forth in the Prospectus (d) in connection with offers and sales of the Products,
Broker-Dealer will at all times comply with the Regulations and offer and sell
the Products only in those jurisdictions, and in the manner in which the
Products may be lawfully sold.
3.2 Representations and Warranties True, etc. At all times during
----------------------------------------
the term hereof the representations and warranties of Broker-Dealer contained
in Section 2, above, shall be true.
3.3 Registered Representatives. Broker-Dealer may recommend persons
--------------------------
associated with it who are duly licensed and qualified under applicable law and
regulation to act in the offer or sale of the Products (the "Registered
Representatives") for appointment as insurance agents of Insurance Company,
provided that such person: (a) has not been subject to any civil,
administrative or criminal actions or sanctions by, or entered into any
settlement agreements with
any governmental or quasi-governmental regulatory authority or sell regulatory
organization, (b) has not been precluded or restricted for any period of time by
any entity from selling any securities, insurance products or other products of
such entity; (c) otherwise is qualified to offer and sell the Products; (d)
agrees in writing (i) to comply with all of the obligations of Broker-Dealer and
the Registered Representatives hereunder, (ii) not to make any recommendation to
an applicant or prospective purchaser to purchase a Product without having
reasonable grounds to believe that the purchase of the Product is suitable for
the prospective purchaser, (iii) to report promptly in writing to Insurance
Company and FUS all customer or regulatory complaints or inquiries with respect
to such Registered Representative, whether written or oral, and to assist
Insurance Company and FUS in resolving any complaint to the satisfaction of all
parties involved and (e) possesses all Required Registrations and agrees to
maintain in force during the term hereof all Required Registrations; and (f) has
been appointed as an insurance agent of Insurance Company. Broker-Dealer is
authorized, except as hereinafter specifically provided, to cause the Registered
Representatives to offer and sell the Products in the states and jurisdictions
in which the Products, Broker-Dealer and such Registered Representatives are
registered, licensed or otherwise appropriately qualified. Broker-Dealer shall
be solely responsible for the supervision of the Registered Representatives and
shall enforce written supervisory procedures to assure strict compliance with
NASD rules and applicable rules and regulations under the 1934 Act, and other
applicable federal and state statutes and regulations. Broker-Dealer agrees to
provide to the Registered Representatives instructions sufficient to provide
them with information needed to offer and sell the Products in compliance with
this Agreement and the Regulations. Broker-Dealer shall direct the sales
activities of the Registered Representatives and shall be solely responsible for
the conduct of the Registered Representatives in the offer and sale of the
Products.
3.4 No Authority to Modify, Etc. Broker-Dealer acknowledges and
---------------------------
agrees that neither Broker-Dealer nor any of the Registered Representatives
shall have the authority, on behalf of FUS or Insurance Company or otherwise, to
(a) modify any of the terms of the Products, including, but not limited to, any
forfeiture provisions thereof, or (b) extend the time of payment of any premiums
with respect to a Product. Broker-Dealer acknowledges that neither Broker-
Dealer nor any Registered Representative may receive any premiums or other funds
from applicants for, or purchasers of the Products (except for the sole purpose
of forwarding such funds to Insurance Company). If Broker-Dealer or a
Registered Representative inadvertently receives any funds from applicants for,
or purchasers of the Products they shall hold such funds in a fiduciary capacity
on behalf of the Insurance Company and promptly submit them to Insurance
Company.
3.5 Rejection of Product Applications. Broker-Dealer acknowledges
---------------------------------
and agrees that (a) Insurance Company, in its sole discretion, may reject any
application for a Product submitted to it by Broker-Dealer or any of the
Registered Representatives; (b) nothing herein contained shall constitute
Broker-Dealer or any of its Registered Representatives as employees of FUS or
Insurance Company; and (c) the Schedule of Products may be amended by FUS at its
sole discretion from time to time to add
other Products distributed by FUS pursuant to the Distribution Agreement or
other distribution agreements with Insurance Company, or to delete Products
therefrom.
3.6 Access to Information. Broker-Dealer shall give FUS full access
---------------------
upon reasonable advance notice during Broker-Dealer's normal business hours to
all information in the possession or control of Broker-Dealer or any Registered
Representative relating to, arising out of or in connection with the offer and
sale of Products pursuant to this Agreement, and shall be required to provide to
FUS copies of any documents relating thereto within ten (10) days after a
written request therefor by FUS. Broker-Dealer shall be entitled to
reimbursement of the expenses it incurs in connection with providing documents
to FUS as required by the preceding sentence.
3.7 Basis for Recommendations. Broker-Dealer shall be solely
-------------------------
responsible for the approval of suitability determinations for the purchase of
any Product or the selection of any investment option thereunder, in compliance
with the Regulations and shall appropriately supervise the Registered
Representatives in determining client suitability. Broker-Dealer, through the
Registered Representatives or otherwise, shall not make any recommendations to a
prospective purchaser to purchase a Product without having reasonable grounds to
believe that the purchase of that Product is suitable for such prospective
purchaser. Among other things, a determination of suitability shall be based on
information supplied to a Registered Representative after a reasonable inquiry
concerning the prospective purchaser's insurance and investment objectives,
financial situation and needs.
3.8 No Misrepresentations; Disclosure. Broker-Dealer, through the
---------------------------------
Registered Representatives or otherwise, shall not (a) make any
misrepresentation of a material fact with respect to the Products or omit to
state a material fact necessary to make statements made with respect to a
Product in light of the circumstances in which they were made, not misleading or
(b) otherwise engage in any deceptive or misleading practice or activity in
connection with the offer and the sale of the Products. Broker-Dealer, through
the Registered Representatives or otherwise, shall not: (a) give any oral
information or make any representations or statements in connection with the
offer or sale of a Product that is not the same as, or based solely on the then
current version provided by FUS or Insurance Company of the registration
statement, Prospectus or statement of additional information, as the case may
be, relating to the such Product, or (b) provide prospective purchasers of the
Products or otherwise utilize in connection with the offer of sale of the
Products any advertising materials, sales literature, signage or other
promotional material written, electronic, graphic or audio visual materials
other than materials supplied by, or approved in writing in advance by FUS or
Insurance Company (the "Disclosure Material"). Broker-Dealer shall not modify
in any way any Disclosure Material which as been approved for use by Broker-
Dealer by FUS or Insurance Company. Broker-Dealer shall, and shall cause the
Registered Representatives to immediately cease using any Disclosure Materials
previously approved by FUS or Insurance Company upon receipt of an oral or
written instruction to do so by FUS or Insurance Company. FUS agrees to follow-
up in writing within three business days any such oral instruction from FUS to
discontinue such use. Broker-Dealer
will maintain complete records indicating the manner and extent of distribution
of any such Disclosure Materials, will make such records available to Insurance
Company, FUS and state insurance departments, the NASD the SEC and other
regulatory agencies, which have regulatory authority over Insurance Company or
FUS.
3.9 Exchange of Products. Broker-Dealer or the Registered
--------------------
Representatives may solicit exchanges of other insurance contracts for Products
only when Broker-Dealer can demonstrate that the exchange would be beneficial to
the prospective purchaser or class of purchasers, as the case may be, and
provided that the exchange offer is approved in advance by an NASD-licensed
principal of Broker-Dealer. Broker-Dealer shall maintain records of the basis
for any determination that an exchange would be beneficial to a prospective
purchaser, including the name of such principal approving the exchange offer.
3.10 Other Broker-Dealers. Broker-Dealer may recruit other broker-
--------------------
dealers that are registered on the 1934 Act to offer and sell the Products
provided that: (a) such broker-dealer enters into an agreement in the form of
this Agreement which agreement is delivered to FUS for its review, and (b) FUS
has the right, in its sole discretion, to accept or reject such broker-dealer as
authorized to sell the Products. Any such other broker-dealer which is approved
by FUS to sell the Products is referred to herein as a "Downstream Broker-
Dealer." Broker-Dealer shall be entitled to receive commissions from a
Downstream Broker-Dealer based on the sales of the Products made by such
Downstream Broker-Dealer upon such arrangements as may be agreed to by Broker-
Dealer and such Downstream Broker-Dealer (the "Downstream Agreement");
provided, however, that such arrangements are subject to review and approval by
FUS in its sole discretion. Broker-Dealer acknowledges that Broker-Dealer shall
not be entitled to any commissions or other compensation from FUS or the
Insurance Company in connection with the recruiting, or any activities of a
Downstream Broker-Dealer and shall only be entitled to receive payments in
connection with the activities of a Downstream Broker-Dealer from such
Downstream Broker-Dealer pursuant to any arrangements that may be agreed to
between Broker-Dealer and such Downstream Broker-Dealer. Broker-Dealer shall
take all reasonable actions to insure that each Downstream Broker-Dealer
complies with the terms of its Downstream Agreement and all laws, rules and
regulations applicable to the Downstream Broker-Dealer in connection with such
Downstream Broker-Dealer's offers and sales of the Products. Any breach by a
Downstream Broker-Dealer of its Downstream Agreement shall be deemed for all
purposes, including, but not limited to, indemnification provided in Section 9,
below, to be a breach by Broker-Dealer of this Agreement.
3.11 Complaints and Investigation. Broker-Dealer shall report in
----------------------------
writing within three (3) business days after the occurrence thereof in writing
to Insurance Company and FUS all customer complaints or inquiries relating to
the offer, sale or ownership of the Products or made by or on behalf of any
prospective purchaser or owner of a Product, whether written or oral, and shall
assist Insurance Company and FUS in resolving those complaints to the
satisfaction of such prospective purchaser, owner, FUS and Insurance Company.
Broker-Dealer shall cooperate
fully with FUS in connection with any governmental or other investigation or
proceeding relating to any complaint related to the Products by any prospective
purchaser or owner of the Products.
3.12 Notice of Claims. If any action or proceeding shall be brought
----------------
against Broker-Dealer or any of its Registered Representatives or affiliates
relating to the Products Broker-Dealer shall give prompt written notice to FUS.
3.13 Fidelity Bond. Broker-Dealer represents that all directors,
-------------
officers and employees of Broker-Dealer (including the Registered
Representative) who have access to funds of the Insurance Company are, and will
continue to be covered by a blanket fidelity bond including coverage for
larceny, embezzlement and other defalcation, issued by a reputable bonding
company in an amount at least equivalent to the minimal coverage required under
the NASD Rules of Fair Practice, and endorsed to extend coverage to life
insurance and annuity transactions. Broker-Dealer acknowledges that the
Insurance Company may require evidence that such coverage is in force and
Broker-Dealer shall promptly give notice to the Insurance Company of any notice
of cancellation or change of coverage. Broker-Dealer hereby assigns any
proceeds received from the fidelity bond company to the Insurance Company to the
extent of the Insurance Company's loss due to activities covered by such bond.
If the payment to the Insurance Company under the fidelity bond is insufficient
to cover the Insurance Company's loss, Broker-Dealer will promptly pay the
Insurance Company amount equal to the balance of such loss on demand. Broker-
Dealer indemnifies and holds harmless the Insurance Company from any deficiency
and from the cost of collection thereof.
4. Representations and Warranties of FUS.
-------------------------------------
(a) FUS is (i) a member in good standing of the NASD, (ii) duly
registered as a broker-dealer with the SEC under the 1934 Act, and registered in
each state or other jurisdiction in which FUS is required to be registered in
order to sell the Products and otherwise maintains in effect all Required
Registrations;
(b) FUS conducts its operations is in compliance in all material
respects, with all applicable federal and state securities laws and regulations
and the requirements of the NASD and any applicable securities exchanges of
which it is a member;
(c) FUS is a corporation duly organized and in good standing
under the law of its jurisdiction of organization and is qualified to do
business as a corporation in those states or jurisdictions where it is, or will
be doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby (i)
have been duly approved by all required corporate action on the part of FUS and
(ii) not conflict with any law, regulation, court order or agreement to which
FUS is subject or FUS's properties are bound.
5. Covenants of FUS. FUS covenants with Broker-Dealer that:
----------------
5.1 Products. The Products, when they are made available to Broker-
--------
Dealer for offer and Sale, will be duly registered under applicable federal and
state securities laws.
5.2 Insurance Compliance. The Products, when they are made
--------------------
available to Broker-Dealer for offer and sale, will be in compliance with
applicable state insurance laws.
5.3 Disclosure. With respect to the Product it purports to
----------
describe, each Prospectus, provided to Broker-Dealer by FUS or Insurance Company
(a) will be true, accurate and complete in all material respects;
(b) will not contain any false or misleading statements of
material fact or omit any material facts necessary to make statements contained
therein not misleading in light of the circumstances under which they are made;
and
(c) will fully and adequately disclose all material terms,
conditions, limitations and restrictions with respect to the Products.
5.4 Representations and Warranties True, Etc. At all times during
----------------------------------------
the term hereof, the representations and warranties of FUS contained in Section
4, above, shall be true. FUS agrees to abide by the Code of Conduct.
5.5 Documents. FUS shall provide Broker-Dealer with quantities of
---------
Prospectuses reasonably sufficient for Broker-Dealer to effectively market the
Products.
6. Term and Termination of Agreement
---------------------------------
6.1 Term. Unless sooner terminated pursuant to this Section 6, this
----
Agreement shall terminate on the earlier to occur of the date of termination of
the Distribution Agreement and the __________ anniversary of the date hereof.
6.2 Termination. This Agreement shall be subject to immediate
-----------
termination at any time by Broker-Dealer, or by FUS, with or without cause upon
the giving of written notice to such effect to the other party.
6.3 Effect of Termination.
---------------------
(a) Except as provided in Sections 6.3(b), in the event this
Agreement is terminated, (i) Broker-Dealer and the Registered Representatives
shall immediately cease to have the right to offer or sell any of the Products;
(ii) Broker-Dealer shall return forthwith, upon the request of FUS or Insurance
Company, all written materials related to the Products delivered to Broker-
Dealer or the Registered Representatives by or on behalf of FUS or Insurance
Company on or before the date of such termination; (ii) all compensation
required to be paid to Broker-Dealer shall be paid in accordance with Schedule
____ hereto; (iii) all amounts due from Broker-Dealer to FUS or Insurance
Company shall be immediately due and payable to FUS or the Insurance Company, as
the case may be, notwithstanding any other terms of such payments that may have
been in effect during the term of this Agreement; (iv) Broker-Dealer shall carry
out all residual obligations, if any, which arose while this Agreement was in
effect and
(b) In the event that this Agreement is terminated by FUS after a
breach by Broker-Dealer of any of its representations and warranties or
covenants hereunder, then FUS may offset against any amounts owed to Broker-
Dealer hereunder an amount equal to the (i) damages, losses and expenses
(including reasonable attorneys' fees) incurred by FUS as a result of such
breach and (ii) amount that may be owed by Broker-Dealer to FUS under Section 9,
below.
7. Confidentiality
---------------
7.1 Generally. Each party will hold the other party's Confidential
---------
Information (as defined below) in confidence and will safeguard such
Confidential Information as provided herein. The party receiving Confidential
Information (a "Recipient") will not, directly or indirectly, report, publish,
distribute, disclose, or otherwise disseminate the Confidential Information, or
any portion thereof, to any individual or entity for any purpose, except as
necessary to perform such Party's duties hereunder, or as expressly authorized
in writing by the party providing the Confidential Information (the "Provider").
Disclosure of Confidential Information internally by the recipient thereof will
be limited to those of its officers, directors, employees and agents who are
required to have access to the Confidential Information to enable the party to
perform its duties hereunder. In order to safeguard Confidential Information,
the Recipient shall (a) inform each party to whom it discloses Confidential
Information of the confidential nature thereof and of the requirements of this
Agreement, (b) direct such recipients to comply with the terms of this
Agreement, and (c) exercise any other precautions reasonably necessary to
prevent any improper disclosure of such Confidential Information.
7.2 Definition. For purposes of the Agreement, "Confidential
----------
Information" shall mean information: (a) regarding the Provider's or any
affiliate of the Provider's financial condition, information systems, business
operations, plans and strategies, products or services, customers or prospective
customers, and marketing and distribution plans, methods and techniques; (b)
that is marked confidential," "proprietary" or in like words, or that is
indicated in writing as being confidential prior to or promptly after disclosure
to the Recipient; and (c) any and all research and designs, ideas, concepts, and
technology embodied in the items described in clauses 9.2(a) or (b). Information
shall not be deemed to be Confidential Information hereunder if that information
(a) is or becomes generally available to the public other than as a result of
disclosure by the Recipient; (b) was available to, or already known by the
Recipient on a non-confidential basis prior to its receipt from the Provider;
(c) is developed by the Recipient independently of any information or data
acquired from the Provider; or (d) is disclosed pursuant to a court order or the
requirement of any federal or state regulatory, judicial, or government
authority.
7.3 Remedies. Each party acknowledges and agrees that monetary
--------
damages would riot be a sufficient or adequate remedy for a breach or
anticipated breach of this Section 7 and that, in addition to any other legal or
equitable remedies which may be available, each party shall be entitled to
specific performance and injunctive relief, without the posting of a bond, for
any breach or anticipated breach of this Section.
7.4 Survival. The provisions of this Section 7 shall survive the
--------
expiration or other termination of this Agreement.
8. Modification of Agreement
-------------------------
This Agreement may not be modified in any way unless by written
agreement signed by both of the parties, except for any amendment of the
Schedule of Products pursuant to the terms of Section ____________ hereof or of
the Schedule of Commissions and Allowances pursuant to the terms of Section 4
hereof, which shall be deemed to be modified upon the giving by FUS to Broker-
Dealer of revised versions thereof.
9. Indemnification
---------------
9.1 General. Broker-Dealer will indemnify FUS, each affiliate (as
-------
defined in Rule 405 under the ▇▇▇▇ ▇▇▇) of FUS and each shareholder, officer,
director, employee, agent and attorney of FUS and such affiliate (each an
"Indemnified Party") against, and hold each Indemnified Party harmless from and
in respect of, all losses, damages, costs, (expenses including reasonable
attorneys' fees) judgments, fines, penalties, settlements resulting from claims,
demands, actions, cases, proceedings, suits or investigations conducted by, or
pending before any governmental agency or authority or any arbitration
proceeding based on, arising from, related to or otherwise attributable to (a)
any breach of the representations and warranties of Broker-Dealer set forth in
this Agreement or (b) any nonfulfillment of any covenant or agreement on the
part of Broker-Dealer under this Agreement.
9.2 Conditions of Indemnification.
-----------------------------
(a) All claims for indemnification under this Agreement shall be
asserted and resolved as provided in this Section 9.2. An Indemnified Party
claiming indemnification under this Agreement shall promptly (i) notify the
Broker-Dealer (in this Section 9, the "Indemnifying Party") of any third-party
------------------
claim or claims asserted against the Indemnified Party (a "Third Party Claim")
-----------------
that could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Party a written notice ("Claim Notice") describing
in reasonable detail the nature of the Third Party Claim, a copy of all papers
served with respect to that claim (if any), and the basis for the Indemnified
Party's request for indemnification under this Agreement. The failure to
promptly deliver a Claim Notice shall not relieve the Indemnifying Party of its
obligations to the Indemnified Party with respect to the related Third Party
Claim except to the extent that the resulting delay is materially prejudicial to
the defense of that claim. Within fifteen (15) days after receipt of any Claim
Notice (the "Election Period"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Section 9 with respect to that
Third Party Claim and (ii) if the Indemnifying Party does not dispute its
potential liability to the Indemnified Party with respect to that Third Party
Claim, whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against that Third Party
Claim.
(b) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 9, and the Indemnified Party
will furnish the Indemnifying Party with all information in its possession with
respect to that Third Party Claim and otherwise cooperate with the Indemnifying
Party in the defense of that Third Party Claim; provided, however, that the
Indemnifying Party shall not enter into any settlement with respect to any Third
Party Claim that purports to limit the activities of, or otherwise restrict in
any way, any Indemnified Party or any Affiliate of any Indemnified Party without
the prior consent of that Indemnified Party (which consent may be withheld in
the sole discretion of that Indemnified Party). The Indemnified Party may
participate in, but not control, any defense or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this Section 9 and will
bear its own costs and expenses with respect to that participation; provided,
however, that if the named parties to any such action (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party, and the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Indemnifying Party, then the Indemnified Party may employ
separate counsel at the expense of the Indemnifying Party, and, on its written
notification of that employment, the Indemnifying Party shall not have the right
to assume or continue the defense of such action on behalf of the Indemnified
Party.
(c) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this Section 9,
(B) elects not to defend the Indemnified Party as described, above, or (C) fails
to notify the Indemnified Party that the Indemnifying Party elects to defend the
Indemnified Party as provided above, or (ii) elects to defend the Indemnified
Party as provided, above, but fails diligently and promptly to prosecute or
settle the Third Party Claim, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party (if the
Indemnified Party is entitled to indemnification hereunder), the Third Party
Claim by all appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnified Party to a final conclusion or settled.
The Indemnified Party shall have full control of such defense and proceedings.
Notwithstanding the foregoing, if the Indemnifying Party has delivered a written
notice to the Indemnified Party to the effect that the Indemnifying Party
disputes its potential liability to the Indemnified Party under this Section 9
and if that dispute is resolved in favor of the Indemnifying Party, the
Indemnifying Party shall not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section 9, or of the Indemnifying
Party's participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses of such participation. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 9, and the Indemnifying Party shall
bear its own costs and expenses with respect to that participation.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of Damages attributable to that claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of that claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party within fifteen (15) days from its receipt of the Indemnity
Notice that the Indemnifying Party disputes the claim specified by the
Indemnified Party in the Indemnity Notice, that claim shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed that claim, as provided above, that dispute shall be resolved by
proceedings in an appropriate court of competent jurisdiction if the parties do
not reach a settlement of that dispute within thirty (30) days after notice of
that dispute is given (the "Indemnity Notice Period").
-----------------------
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this Section 9 relating to a Third Party Claim shall be made within
thirty (30) days after the latest of (i) the settlement of that Third Party
Claim, (ii) the expiration of the period for appeal of a final adjudication of
that Third Party Claim and (iii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement in respect of that Third Party Claim. Payments of all
amounts owing by an Indemnifying Party with respect to claims other this third
party claims shall be made within thirty (30) days after the later of the
expiration of (i) the Indemnity Notice Period and (ii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's liability
to the Indemnified Party under this Agreement.
9.3 Survival. The provisions of this Section shall survive the
--------
expiration or other termination of this Agreement.
10. Remedies Cumulative; Non-Waiver. The rights and remedies of the
-------------------------------
parties contained in this Agreement are cumulative and are in addition to any
and all rights and remedies at law or in equity, which the parties hereto are
entitled to under applicable law. 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.
11. Mitigation of Losses. In the event of any dispute between an owner of
--------------------
a Product (a "Disputing Owner") and FUS, Insurance Company, Broker-Dealer, a
Registered Representative or any other party with respect to such Product, FUS
shall have the right, with prior written notice and consultation with Broker-
Dealer, to take such action as FUS may deem necessary to promptly effect a
mitigation of damages or limitation of losses, and without waiving or electing
to relinquish any
rights or remedies FUS may have against Broker-Dealer. FUS shall have the right
to settle any dispute with respect to a Product between a Disputing Owner and
FUS or Broker-Dealer without the prior consent of Broker-Dealer and without
waiving or electing to relinquish any rights or remedies FUS may have against
Broker-Dealer.
12. Governing Law, etc.. This Agreement shall be governed by and
-------------------
construed in accordance with the laws of _______ without regard to choice of law
provisions and the venue for all actions or proceedings brought by _______
arising out of or relating to this Agreement shall be in the state or federal
courts, as the case may be, located in _______ County, _______ (collectively,
the "Courts"). Broker-Dealer hereby irrevocably waives any objection which
Broker-Dealer now or hereafter may have to the laying of venue of any action or
proceeding arising out of or relating to this Agreement brought in any of the
Courts and any objection on the ground that any such action or proceeding in any
of the Courts has been brought in an inconvenient forum. Nothing in this
Section ___ shall affect the right of FUS to bring any action or proceeding
against Broker-Dealer in the courts of other jurisdictions. In the event of any
litigation between the parties hereto with respect to this Agreement, the
prevailing party therein shall be entitled to receive from the other party all
of such prevailing party's expenses in connection with such litigation,
including, but not limited, to reasonable attorneys' fees.
13. Notices. Any notices or demands given in connection herewith shall be
-------
in writing and deemed given when (i) personally delivered, (ii) sent by
facsimile transmission to a number provided in writing by the addressee and a
confirmation of the transmission is received by the sender or (iii) three (3)
days after being deposited for delivery with a recognized overnight courier,
such as FedEx, and addressed or sent, as the case may be, to the address or
facsimile number set forth below or to such other address or facsimile number as
such party may in writing designate:
(a) To FUS:
FUS Securities
(b) To Broker-Dealer:
14. Arbitration
-----------
14.1 Any disagreement, dispute, claim or controversy arising out of
or relating to this Agreement, performance hereunder or the breach hereof, or
otherwise arising between Broker-Dealer and FUS, shall be subject to mandatory
arbitration under the auspices, rules and bylaws of the NASD, to the full extent
applicable and as may be amended from time to time.
14.2 Where the NASD Code of Arbitration Procedure is not applicable,
any dispute between Broker-Dealer and FUS arising under or relating to this
Agreement shall be settled by compulsory arbitration before one arbitrator in
accordance with the Commercial Arbitration Rules then in force of the American
Arbitration Association. The arbitration shall take place in, unless the
parties agree on another location. The arbitrator shall have no authority to
issue any decision or award for punitive damages or for treble or any other type
of multiple
damages, consequential damages, or any compensatory damages based on a claim of
lost profits or similar claim. Each party shall bear its own costs and expenses
incurred by it in any such arbitration, except that the parties shall bear the
expenses of the arbitrator's services equally. The provisions of this Section
shall survive the expiration or other termination of this Agreement.
15. Entire Agreement; Certain Terms. This Agreement, together with the
-------------------------------
exhibits and schedules hereto, constitutes and contains the entire agreement of
the parties with respect to the matters addressed herein and supersedes any and
all prior negotiations, correspondence, understandings and agreements between
the parties respecting the subject matter hereof. No waiver of any rights under
this Agreement, nor any modification or amendment of this Agreement shall be
effective or enforceable unless in writing and signed by the party to be charged
therewith. When used in this Agreement, the terms "hereof," "herein" and
"hereunder" refer to this Agreement in its entirety, including any exhibits or
schedules attached to this Agreement and not to any particular provisions of
this Agreement, unless otherwise indicated.
16. 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.
17. Counterparts
------------
This Agreement may be executed in two counterparts, each of which
together shall be deemed an original, but both of which together shall
constitute one and the same instrument.
18. Severability. It is the intention of the parties hereto that any
------------
provision of this Agreement found to be invalid or unenforceable be reformed
rather than eliminated. If any of the provisions of this Agreement, or any part
thereof, is hereinafter construed to be invalid or unenforceable, the same shall
not affect the remainder of such provision or the other provisions of this
Agreement, which shall be given full effect, without regard to the invalid
portions. In the event that the courts of any one or more jurisdictions shall
hold such provisions wholly or partially unenforceable by reason of the scope
thereof or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the parties' rights provided for
herein in the courts of any other jurisdictions as to breaches or threatened
breaches of such provisions in such other jurisdictions, the above provisions as
they relate to each jurisdiction being, for this purpose, severable into diverse
and independent covenants.
19. Assignment Except as specifically set forth herein, Broker-Dealer may
----------
not assign any of its rights or obligations hereunder without the prior written
approval of FUS.
20. No Third Party Beneficiaries. This Agreement is exclusively for, and
----------------------------
shall inure to the benefit of the parties hereto, their successors and assigns,
and shall not be deemed to create any rights for the benefit of third parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first indicated above.
FUS
By:
Name:
Title:
BROKER-DEALER
By:
Name:
Title:
SCHEDULE OF COMMISSIONS AND ALLOWANCES
to
First Union Securities
SELLING GROUP AGREEMENT
-----------------------
Effective _________, ___, 2000
I. PURPOSE
This Schedule of Commissions and Allowances ("Schedule") is adopted
pursuant to Section 1.2 of the Selling Group Agreement (the "Agreement")
and governs the determination and payment by FUS of commissions and
allowances ("Compensation") to the Broker-Dealer in connection with premium
payments received under the products specified herein.
II. COVERED PRODUCTS
The only products covered by this Schedule ("Covered Products") are the
following private placement variable universal life insurance policies:
Covered Product Policy Form
VUL
VA
III. COMPENSATION
The Compensation to the Broker-Dealer under this Selling Group Agreement
shall as outlined below:
Variable Annuity
Variable Universal Life
Target Premium %
Year 1:
Up to Target Premium 6.0% (maximum payout)
Excess Premium 6.0%
Years 2-4:
Up to Target Premium 6.0%
Excess Premium 6.0%
Years 5-10:
Up to Target Premium 3.0%
Excess Premium 3.0%
Years 11+: 1.50%
The foregoing amounts shall be payable by FUS within five (5) business days
after FUS receives such amounts from the Insurance Company.
To the extent any Covered Product is issued as a replacement for any
insurance policy issued by the Insurance Company within six (6) months
prior to the issuance of such Covered Product (the "Replaced Product"), no
first year commission will be payable with respect to that Covered Product
except to the extent, if any, that the first year premiums with respect to
such Covered Product are greater than the first year premium on the
Replaced Product. To the extent a Covered Product is issued as a
replacement for any previously-issued Covered Product within six (6) months
after issuance of such previously-issued Covered Product, no first year
commission will be payable to Broker-Dealer with respect to such later -
issued Covered Product, except to the extent if any, that the first year
premiums for such later - issued Covered Product are greater than the first
year premiums of the previously-issued Covered Product.
IV. CHARGEBACK OF COMPENSATION
A. Termination of, or withdrawal of premium received in connection with, a
Covered Product will result in a charge-back of Compensation, the amount of
which shall be determined in accordance with the following table:
Time Elapsed Since Payment Attributable Compensation
To Amount Withdrawn Was Made Charge-back
First 12 months 100%
Second 12 months 75%
Third 12 months 50%
Fourth 12 months 25%
Thereafter 0%
B. Compensation charge-backs will be due within 60 days of notification by
FUS. Compensation will be charged back by credit against Compensation to be
paid in the future and/or by requiring cash repayment to be made by the
Broker-Dealer.
C. Compensation will be charged back on a "first-in, first-out" basis
according to the date premium payments were received.
V. MODIFICATIONS AND TERMINATION
A. No Compensation shall be paid on Covered Products that are changed from
their original version, either under a policy provision or otherwise, or on
Covered Products that are issued using cash values of Insurance Company
policies, either under a policy provision or otherwise.
B. Except as otherwise provided in the Agreement Termination of the
Agreement for any reason, shall not impair the right of the Broker-Dealer
to receive Compensation accrued and payable on account of premium received
under Covered Products issued on applications procured by the Broker-
Dealer, or by Registered Representatives operating under supervision of the
Broker-Dealer, prior to the termination of the Selling Group Agreement.
VI. APPLICABILITY
This Schedule supersedes and replaces any and all previous Schedules of
Commissions and Allowances.
By signing this Schedule, the Broker-Dealer and FUS agree to comply with its
terms.
BROKER-DEALER
Name of Broker-Dealer:
-----------------------------------------------
By: Date:
------------------------------------------------------ ------------
Title:
---------------------------------------------------------------------
SCHEDULE OF PRODUCTS
to
First Union Securities
SELLING GROUP AGREEMENT
-----------------------
--------------------------------------------------------------------------------
Product Description Policy/Certificate
Form
--------------------------------------------------------------------------------
Titanium Variable Universal Life
Investor VUL
--------------------------------------------------------------------------------
Titanium Variable Annuity
Investor VA
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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