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.

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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 regul