Exhibit 10(q)
MARKETING AGREEMENT
This Marketing Agreement is made and
entered into and effective as of the Effective Date (the
“Agreement”), by and between the parties as
follows:
Americom Life & Annuity Insurance
Company (“Americom”), a Texas corporation, and Legacy
Marketing Group (“LMG”), a California corporation, are
entering into this Agreement based on the following
facts:
A.
The objective of this Agreement is to
provide an arrangement pursuant to which LMG will sell an Equity
Indexed Annuity product identified as Legacy EIA 0001 (the
“Annuity”) and to establish a structure for LMG to sell
certain other annuity products that the parties may from time to
time agree. The Annuity is described in APPENDIX A ,
which may be modified from time to time by mutual agreement as the
parties agree to include other products. The Annuity and such
other products of Americom are hereinafter referred to as
“Products”.
B.
LMG is engaged in the business of
marketing insurance products nationally and has developed a
significant marketing operation and third party distribution
network, identified as Wholesalers and Producers.
C.
Americom and LMG are entering into a
separate agreement for the provision by LMG of certain insurance
processing and information technology services with respect to the
Products (the “TPA Agreement”).
D.
Americom desires to have LMG utilize its
marketing operation and third party distribution network for the
solicitation of the Products in the Territory and LMG desires to
perform such services, all on the terms and conditions as set forth
herein.
Based on the foregoing facts, LMG and
Americom (“the parties”) agree as follows:
1.
CERTAIN DEFINITIONS
1.1.
“Affiliate” shall mean, with
respect to any entity, any other entity Controlling, Controlled by
or under common Control with such entity.
1.2.
“Control” and its derivatives
shall mean with regard to any entity the right or power to dictate
the management of and otherwise control such entity by any of the
following: (a) holding directly or indirectly the majority of
the issued share capital or stock (or other ownership interest if
not a corporation) of such entity ordinarily having voting rights;
(b) controlling the majority of the voting rights in such entity;
or (c) having the right to appoint or remove directors holding a
majority of the voting rights at meetings of the board of directors
of such entity.
1.3.
“Contract” shall mean the
instrument under which a Policy is issued to an
applicant.
*Confidential information omitted and
filed separately with the SEC.
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1.4.
“Effective Date” shall mean 1
June, 2004.
1.5.
“Excused Failure” shall mean
a failure by LMG to achieve the Minimum Premium Volume for a
Measurement Period to the extent caused by the undercapitalization
of Americom or Americom’s A.M. Best rating falling below
A-.
1.6.
“Guidelines” shall mean
LMG’s policies, procedures and requirements relating to such
topics as: background checks of Producers and Wholesalers,
the circumstances under which LMG is to terminate the appointment
of Wholesalers and Producers, limits on appointment fees;
requirements for investigations and the obligations of the
Wholesalers and Producers with respect to such investigations.
Certain of the Guidelines as of the Effective Date are
attached hereto as APPENDIX B . LMG may only
change the Guidelines upon Americom’s prior review and
written approval.
1.7.
“Initial Term” shall have the
meaning given in Section 2.
1.8.
“Limitation Period” shall
mean the period commencing on the Effective Date and ending on the
date that is * (*) years after the last day of the Initial Term;
provided, however, that: (i) if the Agreement is terminated
by Americom for cause, the Limitation Period shall end on the
effective date of termination; (ii) if the Agreement otherwise
remains in force as of the first anniversary of the Effective Date,
the Limitation Period shall end on the date that is * * after the
last day of the Initial Term; (iii) and if the Agreement is renewed
under Section 2, the Limitation Period shall end on the date that
is * (*) * after the last day of the Initial Term.
1.9.
“Marketing Plan” shall
have the meaning given in Section 5.5.
1.10.
“Measurement Period” shall
mean the period commencing on each calendar year after 2004.
The final Measurement Period shall commence on January 1 and
end on the effective date of termination or expiration of this
Agreement.
1.11.
“Minimum Premium Volume” with
respect to a Measurement Period shall mean the amount set forth in
Appendix C.
1.12.
“Officer” shall mean
LMG’s Chief Executive Officer, President, Chief Financial
Officer, Chief Information Officer, Chief Operating Officer, Vice
President of Marketing and Vice President of
Distribution.
1.13.
“Producer” shall mean a duly
licensed and appointed independent insurance agent who is
predominantly responsible for soliciting Contracts under this
Agreement.
1.14.
“Term” shall mean the Initial
Term, as it may be extended under Section 2 or terminated earlier
under Section 11.3.
1.15.
“Terms and Conditions” shall
mean shall mean Sections 1 through 15 of this document.
1.16.
“Territory” shall mean the
geographic territory specified in APPENDIX A .
*Confidential information omitted and
filed separately with the SEC.
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1.17.
“Third Party” shall mean an
entity other than Americom and its Affiliates or LMG and its
Affiliates.
1.18.
“Wholesaler” shall mean a
duly licensed and appointed independent insurance agent or agency
that is predominately responsible for recruiting, training,
supervising and monitoring Producers under this Agreement.
1.19.
“Wholesaler and Producer
Agreement” shall mean the agreement between LMG on the one
hand and a Wholesaler or Producer on the other hand, under which
the Wholesaler or Producer is to be appointed to solicit
applications for Contracts.
Captialized terms that are not defined in
the Agreement shall have the meaning given them in the insurance
industry.
2.
TERM
Subject to termination as provided in
Section 11.3 of this Agreement, this Agreement shall have an
initial term of two (2) years (the “Initial Term”).
After the Initial Term, this Agreement will automatically
renew for successive one-year periods unless terminated by either
party with twelve (12) months’ advance written notice.
3.
DESIGNATION OF LMG AND SCOPE OF
LMG’S AUTHORITY WITH RESPECT TO WHOLESALERS AND
PRODUCERS
3.1.
Americom designates LMG to recruit and,
subject to Americom approval which it may give or withhold in its
sole discretion, appoint Wholesalers and Producers for the
solicitation of the Contracts in the Territory. LMG shall not
appoint a Wholesaler or Producer without first performing an
investigation of the background of the Wholesaler or Producer in
accordance with the Guidelines. LMG shall not appoint as a
Wholesaler or Producer any person or entity that does not meet the
Guidelines without Americom’s consent, which can be withheld
in its sole discretion.
3.2.
Americom designates LMG to directly
solicit through LMG’s Wholesalers and Producers applications
by individuals for the Contracts.
3.3.
The parties understand and agree that LMG
is an independent contractor, and nothing herein shall be construed
to create the relationship of employer or employee between Americom
and LMG or between Americom and any officer, employee, Wholesaler,
Producer, or other person associated with LMG. LMG is solely
responsible for payment of: (1) all income, disability,
withholding, and other employment taxes; and (2) all medical
benefit premiums, severance, retention pay, vacation pay, sick pay,
or other fringe benefits for any of its officers, employees,
agents, or contractors.
3.4.
All Wholesalers and Producers who have
been recruited and are appointed to sell the Contracts shall
be identified by Americom as Wholesalers and Producers of LMG.
LMG will terminate its appointment of a Wholesaler or
Producer, prohibit one or more Wholesalers from recruiting,
training, supervising and monitoring Producers, and
prohibit
*Confidential information omitted and
filed separately with the SEC.
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Wholesalers and Producers from selling or
otherwise dealing with the Contracts, at Americom's reasonable
direction or for any reason otherwise set forth in the Guidelines.
3.5.
LMG shall not appoint any Wholesaler or
Producer unless the Wholesaler or Producer maintains adequate
insurance including a minimum of $1 million of errors and omissions
coverage. LMG shall provide Americom with a copy of the
insurance certificates for such coverage upon request.
3.6.
LMG will be the prime contractor for the
services to be provided hereunder and shall be Americom’s
single point of contact for such services.
3.7.
LMG will not:
3.7.1.
Incur any indebtedness, obligation or
liability on behalf of Americom;
3.7.2.
Make, alter, modify, endorse or discharge
any contract including any Contract except to the extent expressly
authorized under the TPA Agreement;
3.7.3.
Quote any rates except as authorized by
Americom;
3.7.4.
Extend the time of payment of any
premium;
3.7.5.
Extend credit for the purpose of
purchasing insurance with Americom;
3.7.6.
Approve any application for insurance
other than the Products;
3.7.7.
Acknowledge or represent the existence of
any insurance with Americom for policies that are not in force;
3.7.8.
Adjust or settle a claim or make any
representation or state any opinion regarding the validity or
payment of a claim except to the extent expressly authorized under
the TPA Agreement;
3.7.9.
Assign this Agreement or any right
hereunder including any right to compensation without the prior
written consent of Americom, which can be withheld in its sole
discretion;
3.7.10.
Solicit applications for the Contracts:
(a) in a manner prohibited by, or inconsistent with any law,
regulation or rule of any entity having jurisdiction as such laws,
regulations and rules change from time to time; (b) in a manner
prohibited by, or inconsistent with LMG’s Market Conduct
Guide as it may be changed from time to time under Section 6.5, or
any other rules and regulations that Americom may from time to time
reasonably promulgate; (c) in a manner prohibited by, or
inconsistent with the terms and conditions of this Agreement; and
(d) in a manner otherwise inconsistent with ethical
standards;
*Confidential information omitted and
filed separately with the SEC.
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3.7.11.
Initiate, institute, or prosecute any
action or proceeding, whether or not brought in the name of
Americom, which may in any way involve, affect or relate to
Americom, its Affiliates, businesses, or operations, or any
Contract or Product. The foregoing shall not be construed as
a waiver of any right, at law or in equity, which LMG may have to
enter into dispute resolution with Americom under Section 15.12
hereof for the purpose of enforcing its rights under this
Agreement;
3.7.12.
Place into use, or distribute to any
person, any advertising, sales material, or other document
(including, without limitation, illustrations, telephone scripts,
and training materials) referring directly or indirectly to
Americom the Products or a Contract, or cause, authorize, or permit
any person to do so, without Americom’s prior written consent
which Americom may give or withhold in its sole discretion.
LMG will not use the name of Americom on any business card,
letterhead, website, or marquee or in any directory listing, or in
any other manner, or cause, authorize or permit any Wholesaler or
Producer or other person to do so, without Americom's prior written
consent; or
3.7.13.
Offer tax, legal or investment advice
regarding any of the Contracts or to customers contemplating the
acquisition of a Contract.
3.8.
LMG will use commercially reasonable
efforts, employing reasonable and standard industry practices, to
collect outstanding debit balances from Wholesalers and Producers.
If a debit balance is not collected within * (*) * of the
date it arises, LMG shall pay Americom * (*%) of the uncollected
portion of any such debit balance.
4.
AGREEMENTS BETWEEN LMG AND THE
WHOLESALERS AND PRODUCERS
4.1.
LMG shall include as provisions in each
Wholesaler and Producer Agreement the following:
4.1.1.
An obligation of the Wholesalers and
Producers to comply with the Guidelines;
4.1.2.
An obligation of the Wholesalers and
Producers to comply with the requirements of Sections 3.7, 6.4,
6.5, 6.9 and 7.11;
4.1.3.
A provision prohibiting the Wholesalers
and Producers from acknowledging the existence of insurance,
including a Contract;
4.1.4.
A provision prohibiting the Wholesalers
and Producers from approving any application for insurance,
including for a Product;
4.1.5.
An obligation of the Wholesalers and
Producers to deliver each Contract to the appropriate policyholder
within thirty (30) days of the Wholesaler or Producer’s
receipt of such Contract;
4.1.6.
A provision establishing that Americom
shall not be responsible for any of the expenses or compensation of
such Wholesalers or Producers and that either LMG or the Wholesaler
or Producer is responsible for such expenses; and
*Confidential information omitted and
filed separately with the SEC.
5
4.1.7.
An obligation of the Wholesalers and
Producers to maintain, and permit Americom to inspect, any and all
books, records, accounts, correspondence, or data relating to the
business of Americom, and to make extracts/copies of such materials
and data.
4.2.
LMG shall include in each Wholesaler and
Producer Agreement an obligation to indemnify and hold harmless
Americom from any and all liability, costs, and expenses, including
reasonable attorneys' fees, that Americom incurs as a result of
acts and omissions by Wholesalers and Producers, including a breach
of any of the provisions described in Section 4.1. This
indemnity shall not be subject to any limitation of liability set
forth in the Wholesaler and Producer Agreement.
4.3.
LMG shall include a provision in each
Wholesaler and Producer Agreement that expressly identifies
authorized carriers as a third party beneficiary of each of the
provisions required to be included in such Agreement under Sections
4.1 and 4.2. LMG shall take any other actions as may be
required to ensure that Americom will have rights under this
Section as a third party beneficiary under the Wholesaler and
Producer Agreements.
4.4.
LMG shall maintain copies of each
Wholesaler and Producer Agreement that is executed by LMG and
provide Americom access to such Agreements upon request for
purposes of verifying that LMG has complied with its obligations
under Sections 4.1 and 4.2. At the end of each calendar year
during the Term, a senior executive of LMG shall certify to
Americom that LMG has satisfied its obligations set forth in this
Section 4.
4.5.
LMG will use all reasonable efforts to
ensure that the Wholesalers and Producers comply with the terms of
the Wholesaler and Producer Agreements. Without limiting the
generality of the foregoing, LMG shall:
4.5.1.
Promptly notify Americom if a Wholesaler
or Producer has breached a Wholesaler or Producer Agreement or LMG
believes or reasonably should have believed that such a breach is
likely;
4.5.2.
Reasonably and diligently pursue any
claims arising from a breach by any Wholesaler or Producer of any
of the provisions described in Section 4 and assist Americom pursue
any rights it may have as a third party beneficiary under the
Wholesaler and Producer Agreements; and
4.5.3.
Maintain all correspondence (including
e-mails) between it and the Wholesalers and Producers regarding
LMG’s compliance with this Section 4.5 and the
Wholesaler’s and Producer’s compliance with the
Wholesaler and Producer Agreements. Upon Americom’s
request, LMG shall provide Americom and its third party designees
access to such correspondence for the purpose of verifying
LMG’s compliance with this Section and pursuing
Americom’s rights as a third party beneficiary under the
Wholesaler and Producer Agreements.
*Confidential information omitted and
filed separately with the SEC.
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5.
APPOINTMENT OF LMG AS EXCLUSIVE
DISTRIBUTOR OF ANNUITIES
5.1.
Subject to Section 5.2, LMG is appointed
as the exclusive distributor of Contracts to be solicited under
this Agreement in the Territory during the period commencing on the
Effective Date and ending on the effective date of termination or
expiration.
5.2.
LMG’s appointment as the exclusive
distributor of the Contracts under Section 5.1 shall terminate, and
automatically be replaced by a non-exclusive appointment, upon
LMG’s failure to meet the Minimum Premium Volume during any
Measurement Period, unless such failure is an Excused Failure.
All premiums received by Americom for the Annuity and any
derivatives thereof issued under this Agreement shall be counted
towards LMG meeting its obligations under this Section.
5.3.
During the Term, LMG shall develop fixed
annuity products exclusively for Americom. Subject to the
foregoing, and to the provisions of Sections 8.3 and 13, however,
nothing herein shall prevent LMG from developing products for its
other customers.
5.4.
The products developed by LMG under
Section 5.3 shall be designed to produce for Americom its required
internal rate of return, which rate of return will be generally
consistent with its required internal rate of return with respect
to similar products offered by Americom’s Affiliates.
The parties will in good faith negotiate such changes to the
Minimum Premium Volumes as are appropriate to reflect the
introduction of additional Products and removal of Products;
provided, however, that such Minimum Premium Volume will not be
below the Minimum Premium Volume required as of the Effective Date.
For this purpose, derivatives of the Annuity shall not be
treated as an “additional Product”. Americom will
consider in good faith the effect of Americom’s offering of
products that are competitive to a Product in determining changes
to the Minimum Premium Volume.
5.5.
At least thirty (30) days prior to each
Measurement Period, LMG shall develop for Americom’s review a
“Marketing Plan” for each Measurement Period that sets
forth the steps LMG shall take to promote and market the Contracts
during such Measurement Period. Each Marketing Plan shall be
reasonably designed to promote sales of products during the
applicable Measurement Period in excess of the Minimum Premium
Volume. LMG shall provide the first Marketing Plan for the
first Measurement Period within thirty (30) days after the
Effective Date. LMG shall implement the Marketing Plan at its
sole cost and expense except as expressly provided otherwise in
this Agreement. During a Measurement Period, LMG may amend
the applicable Marketing Plan from time to time so long as the
Marketing Plan continues to meet the requirements of this
Section.
6.
CERTAIN RIGHTS AND OBLIGATIONS OF
LMG
6.1.
LMG shall enter into Wholesaler and
Producer Agreements with Wholesalers and Producers to solicit
applications for the Contracts. LMG shall provide appropriate
Product specific training to Wholesalers and Producers. LMG
shall invest such resources, take such steps, and perform such
tasks as are required for LMG to achieve the Minimum Premium
Volumes in each Measurement Period.
*Confidential information omitted and
filed separately with the SEC.
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6.2.
LMG will itself, and will communicate to
and cause each Wholesaler and Producer to, use only forms,
applications, advertising (as such term is generally defined by the
regulation of the state or other jurisdiction in which Contracts,
referenced in APPENDIX A , are solicited), guides, and rules
furnished, authorized, or promulgated by Americom. LMG shall
not authorize any advertising or sales materials, including sales
illustrations or recruiting materials, which reference the
Contracts or Americom, until after such advertising or materials,
whichever the case may be, have been approved by Americom.
LMG will provide such materials with sufficient lead-time to
allow appropriate review by Americom. LMG shall provide
Americom such assistance as Americom may reasonably request with
respect to the filing and maintaining of advertising materials in
those states that require that such materials be filed.
6.3.
LMG shall have and maintain at all times
during the Term the following insurance coverages:
6.3.1.
LMG will also maintain an adequate surety
bond(s) as so required in the states in which it is compelled to do
so. LMG will file such bond, if so required, with the
appropriate agency. The bond shall be executed by a corporate
insurer authorized to transact business in the states that mandate
the maintenance of such bond.
6.3.2.
Errors and omissions and excess coverage
for liability of loss or damage due to an act, error, omission or
negligence with a minimum aggregate limit per event of $* or such
higher limit as may be required by law or regulation.
6.3.3.
Comprehensive General Liability
Insurance, including Products, Completed Operations, Premises
Operations Personal and Advertising Injury, Contractual and Broad
Form Property Damage liability coverages, on an occurrence basis,
with a minimum combined single limit per occurrence of $* and a
minimum combined single aggregate limit of $*.
LMG shall provide Americom with a copy of
the insurance certificates for such coverages upon
request.
6.4.
LMG shall cooperate at all times with
Americom in any inquiry or investigation as it may relate to the
business of Americom, including any judicial or administrative
proceeding. LMG shall, and shall require that its Wholesalers
and Producers, promptly notify Americom of the receipt of any
complaint or other similar communication relating to the business
of Americom.
6.5.
LMG shall at all times during the Term
perform its obligations hereunder in compliance with: (i) all
present and future laws, rules, regulations and the like of any
entity or body having jurisdiction; and (ii) LMG’s Market
Conduct Guide to the extent consistent with the foregoing.
6.5.1.
LMG’s Market Conduct Guide, as it
may be revised from time to time, shall be at least as rigorous and
comprehensive as Americom’s Market Conduct Guide, as it may
be revised from time to time.
6.5.2.
LMG acknowledges that it has received a
copy of the current version of Americom’s Market Conduct
Guide, that it has read such Guide, and that it agrees
*Confidential information omitted and
filed separately with the SEC.
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to execute and deliver to Americom such
further written acknowledgements of the Market Conduct Guide as
Americom may reasonably request.
6.5.3.
Americom acknowledges that LMG’s
Market Conduct Guide as of the Effective Date is at least as
rigorous and comprehensive as Americom’s Market Conduct Guide
as of the Effective Date.
6.5.4.
Each party shall promptly provide the
other party a copy of any revision to their Market Conduct Guide.
No material revision to a party’s Market Conduct Guide
shall be effective with respect to performance under this Agreement
until the other party approves such revision unless required by
law.
6.6.
Without limiting the generality of the
foregoing, LMG will maintain reasonable and appropriate procedures
to minimize the risk that the Wholesalers and Producers breach any
present or future rule or regulation of any entity having
jurisdiction or the provisions of the LMG Market Conduct Guide.
6.7.
At all times during the Term, LMG (or the
licensed individual who is acting on behalf of LMG in the capacity
of an Officer in such states that do not permit the licensing of
corporations) shall be: (i) properly licensed, as required,
under applicable laws, regulations and rules of any entity having
jurisdiction; and (ii) properly appointed with the approval of
Americom in each state or other jurisdiction within the Territory
before engaging in any activity with respect to the Contracts or
any other activity that under the applicable laws, regulations and
rules makes such licensing and appointment necessary.
6.7.1.
LMG shall ensure, before appointing
a Wholesaler or Producer, that the Wholesaler or Producer is
properly licensed, as required, under applicable laws, regulations
and rules of any entity having jurisdiction. LMG shall also
properly appoint, with the approval of Americom, the Wholesalers
and Producers in each state or other jurisdiction within the
Territory before authorizing the Wholesaler or Producer to engage
in any activity with respect to the Contracts or any other activity
that under the applicable laws, regulations and rules makes such
appointment necessary. LMG shall comply with the process for
appointment set forth in the Guidelines.
6.7.2.
LMG shall not process any applications
for Contracts received from a Wholesaler or Producer after the date
the Wholesaler’s or Producer’s license has lapsed or
after receipt by LMG of notification that the Wholesaler’s or
Producer’s license has been suspended or revoked by any
entity having jurisdiction.
6.7.3.
Unless otherwise approved by Americom,
LMG shall not process any applications for Contracts received from
a Wholesaler or Producer until the Wholesaler or Producer has been
appointed or after their appointment has been revoked.
Americom may give or withhold its approval in its sole
discretion.
6.7.4.
Americom shall have no responsibility for
any costs of, or associated with, the acquisition or maintenance by
Producers and Wholesalers of licenses required under laws,
regulations and rules of any entity having jurisdiction.
*Confidential information omitted and
filed separately with the SEC.
9
6.8.
LMG shall appoint Wholesalers and
Producers in accordance with the Guidelines.
6.9.
LMG shall maintain accurate and complete
books, records, accounts, correspondence or other data relating to
the Americom business.
6.10.
LMG shall bear and be fully responsible
for all expenses incurred by it in connection with its performance
of the services under this Agreement except as otherwise provided
under Sections 7.3, 7.5, 7.6, 7.7 and 7.10 of this Agreement.
6.11.
LMG shall designate a single person as
the “LMG Account Executive” to be the LMG executive
responsible for the Services including Americom’s
satisfaction therewith. Among other things, the LMG Account
Executive shall: (i) serve as the single point of
accountability for LMG for the Services; and (ii) have day-to-day
authority for undertaking to ensure Americom’s
satisfaction.
6.11.1.
The LMG Account Executive shall have the
corporate authority necessary to perform his or her functions,
including as necessary to ensure that LMG provides a scale and
scope of resources that are sufficient to meet Americom’s
requirements under the Agreement.
6.11.2.
The LMG Account Executive shall devote
time and effort that is sufficient to provide the Services to
Americom so that Americom is reasonably satisfied with the
Services.
6.11.3.
Before assigning an individual to be the
LMG Account Executive, LMG will notify Americom of the proposed
assignment and provide Americom with such information about the
individual as may be reasonably requested by Americom.
6.12.
LMG shall consult with Americom in the
development of any fixed annuity products under Section
5.3.
7.
CERTAIN RIGHTS AND OBLIGATIONS OF
AMERICOM
7.1.
LMG’s successful performance of the
services required of it under this Agreement is only dependent on
Americom's performance of the functions and tasks set forth in
APPENDIX D. Accordingly, Americom agrees to perform
the functions and tasks set forth in APPENDIX D.
For purposes of clarity, this Section shall not limit
Americom’s other responsibilities under the Agreement
(including obligations of confidentiality under Section 13) which
are not required for LMG to perform the Services.
7.2.
Americom will compensate LMG as set forth
in Section 10.
*Confidential information omitted and
filed separately with the SEC.
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7.3.
Once Americom has filed a Contract in a
state or other jurisdiction, Americom may withdraw such Contract
from such state or other jurisdiction on reasonable notice to LMG.
Americom shall use reasonable efforts to provide LMG at
least * days’ notice of any such withdrawal. Further,
if Americom withdraws any Product in any state or other
jurisdiction that is actively marketed by LMG within * days of the
first date LMG began marketing such Product, Americom shall
reimburse LMG for all reasonable, actual and direct costs of the
marketing materials actually used in such state or other
jurisdiction.
7.4.
Americom may at any time rescind a
Contract. LMG shall do nothing to limit Americom’s
rights in this regard. Any Contract rescinded by Americom
will be treated as if it were never accepted.
7.5.
Americom shall have the sole
responsibility for filing advertising materials (and any updates
thereto) in those states that so require prior to approving their
use by LMG. Any costs associated with such filings shall be
for Americom’s account.
7.6.
Americom shall file with applicable
regulatory authorities the Contract forms with respect to the
Contracts, and obtain “opinion letters” on Products.
“Contract forms” shall include, but are not
limited to, master contract forms, riders, endorsements,
certificates, notices, disclosures, or administrative forms.
In addition, Americom shall draft any required group trusts.
Any filing costs with respect to Contract forms, the costs of
obtaining opinion letters and the cost of drafting any required
group trusts shall be for Americom’s account.
7.7.
LMG will assist in the drafting,
completion and preparation of filing of Contract forms. Such
assistance shall be provided at no additional cost to Americom
except to the extent (i) Americom authorizes LMG to contract with
outside consultants to assist in the Contract form preparation or
to expedite the Department of Insurance approval process; or (ii)
expressly permitted under the TPA Agreement. In such case,
Americom shall reimburse LMG for the reasonable, actual and direct
charges of such consultants.
7.8.
Americom shall use commercially
reasonable efforts to respond in a timely fashion to LMG’s
submission of marketing materials requiring approval by Americom.
7.9.
Appendix E sets forth a list of Americom
personnel authorized to provide LMG authorization under the
Agreement. Americom shall provide LMG with reasonable and
timely written notice of any changes to Appendix E .
7.10.
Americom shall be responsible for payment
of all appointment fees, for all Wholesalers and Producers
appointed to sell Americom products, including but not limited to
initial and renewal appointment fees as well as any termination of
appointment fees, to the extent such fees are incurred in
accordance with the Guidelines.
7.11.
Americom shall have the right, directly
or by use of a third party designated by it, to inspect any and all
books, records, accounts, correspondence, or data maintained by LMG
under this Agreement and to make extracts/copies of such materials
to the extent related to this Agreement for the purpose
of:
*Confidential information omitted and
filed separately with the SEC.
11
7.11.1.
verifying the accuracy of LMG’s
fees and invoices and the payment of commissions and Pass Through
Expenses;
7.11.2.
examining the practices and procedures
employed by LMG, Wholesalers and Producers to perform the
Services;
7.11.3.
examining general controls and security
practices and procedures to the extent relevant to the
Services;
7.11.4.
verifying LMG’s compliance with the
Guidelines and the terms of this Agreement;
7.11.5.
satisfying the requirements of any
legislative, judicial, regulatory or other governmental authority
having jurisdiction; and
7.11.6.
any other audits reasonably required by
Americom and related to this Agreement.
7.12.
LMG shall provide the auditors under
Section 7.11 any assistance they may reasonably require.
7.13.
Americom shall require its internal and
external auditors to conduct audits in such a fashion so as to not
unreasonably interfere with LMG’s normal course of business,
and to agree to confidentiality provisions equivalent to those set
forth in Section 13. LMG shall provide reasonable access
during normal business hours to any location from which LMG
conducts its business and provides services to Americom pursuant to
this Agreement to auditors designated in writing by Americom for
the purpose of performing audits for Americom. Americom shall
give thirty (30) days written notice for any normal and customary
audits under Section 7.11 other than security audits or audits
where there is a good faith suspicion of fraud. An agenda
including the matters that it will audit (other than in the case of
security audits, audits where there is a good faith suspicion of
fraud, or audits by state or federal government entities) shall be
provided at least twenty-one (21) days in advance. LMG shall
provide the auditors any assistance they may reasonably require.
Americom will notify LMG of any state or federal government
audit of Americom that will require audits of LMG facilities or
personnel as promptly as is reasonably possible after receiving
notice of such audit from the applicable state or federal agency to
the extent permitted by such agency and provide LMG an agenda of
the audit by the state or federal agency as promptly as reasonably
possible to the extent the state or federal agency provides
Americom such an agenda.
7.14.
At the end of each calendar year,
Americom will determine its capitalization limits to support the
sale of the Contracts and notify LMG of such limits as promptly as
possible under the circumstances.
7.15.
Americom shall provide LMG such
assistance as LMG may reasonably require with respect to the
development of fixed annuity Products under Section 5.3.
7.16.
Americom shall designate a single person
as the “Americom Contract Manager” to be the individual
who serves as LMG’s single point of contact for Americom with
respect to Americom’s performance of its obligations under
this Agreement.
*Confidential information omitted and
filed separately with the SEC.
12
8.
LIMITATION ON AMERICOM RIGHT TO
INTRODUCE THE EIA PRODUCT
8.1.
Prior to agreeing to market a Product
under this Agreement, LMG will (i) develop a description of any
features of the Product that are unique and provide the parties
with a competitive advantage over similar products (a
“Proprietary Product Design Schedule”); and (ii) obtain
Americom’s approval of such Schedule. The Proprietary
Product Design Schedule approved by Americom with respect to the
Annuity is set forth in APPENDIX F .
8.2.
Subject to Section 8.3, during the
Limitation Period neither party or their Affiliates will market a
product in the Territory that is identical to the Products sold
under the Contracts. A Product shall be “identical to
the Products sold under the Contracts” only if it contains
all the features set forth in a Proprietary Product Design
Schedule.
8.3.
Either party shall be free to market any
Product, even if such product contains all of the features set
forth in a Proprietary Product Design Schedule, upon the expiration
of the nine (9) month period commencing on the date Americom first
issues the product that has the features described in the
Proprietary Product Design Schedule.
8.4.
There shall be no restrictions on the
right of a party or its Affiliates to develop and market products
except as set forth in this Section 8 and Section 13.
9.
CHANGES TO CONTRACTS
Americom shall provide LMG with
reasonable written notice of any intent to make significant changes
or modifications to any Contract or Contract form for the Annuity
and any other Product offered under this Agreement. Americom
shall use reasonable efforts to provide LMG at least * (*)
days’ notice of such changes or modifications and * (*)
days’ notice for changes to the commission structure for
Producers and Wholesalers. Although Americom will consider in
good faith any changes suggested by LMG, Americom shall retain sole
discretion to change or not change the Contract forms.
10.
COMMISSIONS AND FEES AND TIMING OF
PAYMENT AND FEES
10.1.
Americom shall pay LMG, as full
compensation for the services provided under this Agreement, the
commissions set forth in APPENDIX G , for each Contract
written and effected with Americom that are accepted by Americom
and for which the premiums are actually collected and paid to
Americom, even if this Agreement is terminated or expires.
10.2.
Americom shall pay LMG commissions and
fees on a weekly basis.
10.3.
No commissions will be paid in advance.
LMG warrants that it will pay to Wholesalers and Producers
any commissions/compensation due them with respect to the Contracts
during the Term and thereafter. This obligation shall survive
termination or expiration of the Agreement. It is
specifically acknowledged and agreed that Americom shall have no
obligation with respect to commissions other than to pay LMG the
commissions set forth in APPENDIX G , as they may be changed
from time to time under Section 10.4.
*Confidential information omitted and
filed separately with the SEC.
13
10.4.
The commissions specified in APPENDIX
G shall be modified whenever necessary to conform to the legal
requirements of any state or as otherwise requested by Americom
upon reasonable notice to LMG. In addition, Americom and LMG
shall in good faith consider such amendments to
APPENDIX
