EXHIBIT 10.46
MARKETING AND DISTRIBUTION AGREEMENT
BETWEEN
U.S.I. HOLDINGS CORPORATION
AND
MINNESOTA LIFE INSURANCE COMPANY
Dated November 7, 2002
TABLE OF CONTENTS
Article Page
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ARTICLE I DEFINITIONS................................................1
1.1 Definitions................................................1
ARTICLE II GENERAL RESPONSIBILITIES OF THE PARTIES....................4
2.1 Responsibilities of Minnesota Life........................ 4
2.2 Responsibilities of USI....................................4
ARTICLE III DEVELOPMENT FEES...........................................4
3.1 Development Fees...........................................4
3.2 Accelerated Completion.....................................5
3.3 Waiver of Timely Performance...............................5
ARTICLE IV WEALTH MANAGEMENT DIVISION.................................5
4.1 Establishment of the WMD; Ongoing Operation................5
4.2 Contract Coordination......................................6
4.3 Reporting and Audit Records................................6
4.4 Exclusive Distribution.....................................6
ARTICLE V WMD PRODUCTS AND SERVICES..................................7
5.1 Minnesota Life Products....................................7
5.2 Competing Products.........................................8
5.3 Usage Fees.................................................8
5.4 Buyout of Usage Fee Obligation.............................9
ARTICLE VI PERSONNEL..................................................9
6.1 Responsibilities of USI....................................9
6.2 Securities Registration...................................10
6.3 Licenses and Appointments.................................12
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6.4 Contests and Trips........................................12
6.5 Non-Solicitation..........................................12
6.6 Non-Competition...........................................12
ARTICLE VII COMMISSIONS...............................................13
7.1 Commissions Schedules.....................................13
7.2 Schedules.................................................13
ARTICLE VIII USI GUARANTY OF AFFILIATE PERFORMANCE.....................13
8.1 Guaranty..................................................13
ARTICLE IX REPRESENTATIONS AND WARRANTIES OF USI.....................14
9.1 Organization and Standing.................................14
9.2 Authority.................................................14
9.3 Absence of Conflicts......................................14
9.4 Absence of Required Consents and Contractual
Restrictions.............................................14
9.5 Litigation................................................15
9.6 Licenses and Consents.....................................15
9.7 Financial Capability......................................15
ARTICLE X REPRESENTATIONS AND WARRANTIES OF MINNESOTA LIFE..........15
10.1 Organization and Standing.................................15
10.2 Authority.................................................15
10.3 Absence of Conflicts......................................16
10.4 Absence of Required Consents and Contractual
Restrictions.............................................16
10.5 Litigation................................................16
10.6 Financial Capability......................................16
ARTICLE XI CONFIDENTIALITY, NON-SOLICITATION AND PROPRIETARY
INFORMATION...............................................16
11.1 Confidentiality...........................................17
11.2 Intellectual Property Rights..............................17
11.3 Employee Non-Solicitation.................................18
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ARTICLE XII TERM AND TERMINATION OF AGREEMENT.........................19
12.1 Initial Term of Agreement; Renewal........................19
12.2 Termination of Agreement by Minnesota Life................19
12.3 Termination by USI........................................20
12.4 Insolvency Event..........................................20
ARTICLE XIII DISPUTE RESOLUTION........................................21
13.1 Intent....................................................21
13.2 Negotiation Procedures....................................22
13.3 Arbitration Procedures....................................22
13.4 Equitable Remedies........................................23
ARTICLE XIV INDEMNIFICATION...........................................23
14.1 Minnesota Life Indemnification............................23
14.2 USI Indemnification.......................................23
ARTICLE XV MISCELLANEOUS.............................................24
15.1 Entire Agreement, Amendments..............................24
15.2 Assignment................................................24
15.3 Headings..................................................24
15.4 Notices...................................................24
15.5 Governing Law.............................................25
15.6 Counterparts..............................................25
15.7 Waiver....................................................25
15.8 Severability..............................................25
15.9 Relationship of the Parties...............................25
15.10 Access....................................................26
15.11 Costs and Expenses........................................26
15.12 Public Announcements......................................26
15.13 Cooperation...............................................26
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MARKETING AND DISTRIBUTION AGREEMENT
This Marketing and Distribution Agreement ("Agreement"), dated the 7th
day of November, 2002, (the "Effective Date"), is between U.S.I. Holdings
Corporation, a Delaware corporation on behalf of itself and each of its
Affiliates ("USI"), and Minnesota Life Insurance Company, a Minnesota stock life
insurance company ("Minnesota Life").
WHEREAS, Minnesota Life, among other things, sells individual life
insurance and annuity policies and contracts and related products and services
designed for people with a high personal net worth (the "Target Market"); and
WHEREAS, Minnesota Life would like to expand the number and character of
distribution channels available to sell those products to its Target Market; and
WHEREAS, USI and its Affiliates operate in the United States as a fully
integrated insurance brokerage and related financial and other administrative
services organization, offering general and specialty property and casualty
insurance, insurance-related financial services, employee benefit, life
insurance, third party administration, and related consulting services; and
WHEREAS, USI, through its insurance agency and broker dealer Affiliates,
wishes to develop a new "Wealth Management Division" to market the Minnesota
Life products to Minnesota Life's Target Market, and Minnesota Life wishes to
engage USI to develop this new distribution channel.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings ascribed:
(a) "Affiliate" means any entity controlling, controlled by, or
under common control with a party of this Agreement.
(b) "Ancillary Agreements" means all of the documents and agreements
referred to, executed and delivered by the parties in connection
with this Agreement.
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(c) "Change of Control" means (i) with respect to Minnesota Life,
(A) any transaction or series of related transactions, as a
result of which persons owning the outstanding voting securities
of the company immediately prior to such transaction or series
of related transactions cease to own a majority of the
outstanding voting securities of the company thereafter, (B) the
consolidation or merger of the company with or into another
person, whether or not such person is the surviving entity of
such transaction, unless, immediately after such consolidation
or merger, persons owning the outstanding voting securities of
the company prior to the transaction own a majority of the
outstanding voting securities of such new or surviving entity,
or (C) the sale, assignment or other transfer of all or
substantially all of the business or assets of the company to
any person or entity other than an Affiliate in a single
transaction or series of related transactions; and (ii) with
respect to USI, the acquisition by any person or group of
related persons, in a single transaction or series of
transactions and whether in the open market or otherwise, of the
actual or beneficial ownership of any voting security of USI if,
after such acquisition, the person, directly or indirectly, or
by conversion or exercise of any right to acquire, would own,
control, hold with the power to vote, or hold proxies
representing forty-nine percent (49%) or more of the voting
securities of USI; provided, however, if the acquiring person or
any affiliate or subsidiary of the acquiring person underwrites
or issues individual life insurance policies, then the relevant
percentage of USI voting securities shall be twenty percent
(20%).
(d) "Competing Carrier" means an insurance company, broker/dealer,
bank, trust company or other financial institution other than
Minnesota Life that provides insurance or financial service
products or services through the WMD.
(e) "Competing Products" means the products or related services
underwritten or offered by or through Competing Carriers which
are available for sale through the Wealth Management Division,
including but not limited to life insurance and annuity
products.
(f) "Confidential Information" has the meaning set forth in Section
11.1 of this Agreement.
(g) "Deliverables" means the deliverables, business benchmarks and
product-related requirements set forth on Exhibit A.
(h) "Development Fees" means the scheduled payments to be made by
Minnesota Life to USI as provided in Article III and Exhibit A
to this Agreement.
(i) "Dispute" has the meaning set forth in Section 13.1 of this
Agreement.
(j) "Effective Date" means the date set forth in the preamble of
this Agreement.
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(k) "Experienced Wealth Management Specialist" means a Wealth
Management Specialist who has production that would meet the
qualification standards for the Million Dollar Roundtable for
two of the preceding three calendar years.
(l) "First Year Gross Revenue" means Gross Revenues which relate to
the first twelve months of policies and contracts.
(m) "Gross Revenues" means, as to the WMD, all gross dealer
concessions, trails, first-year and renewal commissions,
overrides, earnings, fees, bonuses, allowances or other
remuneration paid to USI, any Affiliate of USI or any third
party, arising from or related to the sale of ML Products or
Competing Products through the WMD.
(n) "Initial Payment" has the meaning set forth in Section 3.1 of
this Agreement.
(o) "Initial Term" means the ten-year period beginning on the
Effective Date.
(p) "ML Products" means the insurance products, retail mutual funds,
or related services underwritten or offered through Minnesota
Life or any of its Affiliates which are available for sale
through the Wealth Management Division, and which are described
in Exhibit F to this Agreement, as modified from time to time.
(q) "Net Accrued Development Fees" means (i) the total Development
Fees paid by Minnesota Life to USI under Article III of this
Agreement, accumulated with interest at an effective annual
yield of 20%, less (ii) any amounts paid by USI to Minnesota
Life pursuant to Section 5.3 of this Agreement accumulated with
interest at an effective annual yield of 20%.
(r) "PV Usage Fees" means, as of the date USI's notice of its intent
to buy out the Usage Fees pursuant to Section 5.4 of this
Agreement is received by Minnesota Life, ("Notice Date") the
present value of the expected stream of future Usage Fees
payable by USI to Minnesota Life under Section 5.3 of this
Agreement, where the present value calculation assumes (i) that
the base revenue is the Gross Revenues during the twelve
calendar month period ending with the month prior to the Notice
Date (the "Base Period"), (ii) that the base revenue is
projected forward for 60 months using the Gross Revenues' annual
average growth rate for the previous 36 months (including the
Base Period and the 24 month period preceding the Base Period),
and (iii) that the expected stream of future Usage Fees is the
projected Gross Revenues multiplied by the applicable Usage Fee
rates scheduled during the 60 months and (iii) that the discount
rate is the three-month London Interbank Offering Rate (LIBOR)
as published in the Wall Street Journal, Eastern Edition, in
effect on the Notice Date.
(s) "Target Market" has the meaning set forth in the preamble to
this Agreement.
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(t) "Usage Fees" means the fees paid by USI to Minnesota life as
provided in Section 5.3 of this Agreement.
(u) "USI" means U.S.I. Holdings Corporation and all of its
Affiliates.
(v) "Wealth Management Division" or "WMD" means the operating
division of USI and one or more of its Affiliates through which
insurance agents and registered representatives of USI or its
Affiliates, identified as Wealth Management Specialists, will
offer insurance products and related financial products and
services, including the ML Products.
(w) "Wealth Management Specialist" means an individual agent or
registered representative employed or contracted by USI or one
of its Affiliates who sells ML Products or Competing Products
through the WMD.
ARTICLE II
GENERAL RESPONSIBILITIES OF THE PARTIES
2.1 Responsibilities of Minnesota Life. On and after the Effective
Date and, subject to all of the terms, conditions, and covenants
contained in this Agreement and any Ancillary Agreement,
Minnesota Life shall, or shall cause its Affiliates to (i) pay
the Development Fees set forth in Article III, (ii) make
available the ML Products in accordance with Article V, and
(iii) pay USI compensation as provided in Article VII.
2.2 Responsibilities of USI. On and after the Effective Date, and subject to
all of the terms, conditions, and covenants contained in this Agreement
and any Ancillary Agreement, USI shall, or shall cause its Affiliates to
(i) establish and operate the WMD in accordance with Article IV, (ii)
retain and compensate sales personnel in accordance with Article VI,
(iii) market and sell the ML Products as provided in Article V of this
Agreement, and (iv) pay Minnesota Life Usage Fees in accordance with
Article V.
ARTICLE III
DEVELOPMENT FEES
3.1 Development Fees. Minnesota Life will pay USI development fees for USI
to build the WMD. Except for the Initial Payment, payment by Minnesota
Life will be made only upon USI's completion of the Deliverables set
forth in Exhibit A to this Agreement. The development work will be
divided into nine independent phases, as described in the
Deliverables. One million dollars will be payable on the Effective
Date (the "Initial Payment") so that USI may begin the work necessary
to complete Phase One of the development. Subsequent payments will be
made by Minnesota Life upon USI's timely completion of all of the
Deliverables to Minnesota Life's reasonable satisfaction
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applicable to the preceding development phase. The amount of Development
Fees for each phase is set out in Exhibit A to this Agreement. By way of
illustration, the second installment of Development Fees, to be used by
USI to undertake Phase Two of the development, will be due from
Minnesota Life only if and only when USI completes all of the
Deliverables applicable to Phase One of the development process. The
maximum total amount of Development Fees is six million dollars.
3.2 Accelerated Completion. If USI completes all of the Deliverables for any
development phase prior to the date specified for that phase in Exhibit
A, Minnesota Life will promptly pay USI the Development Fees associated
with the subsequent development phase. The final date for performance
for the subsequent development phase, however, shall not be accelerated
and will remain as set forth in Exhibit A.
3.3 Waiver of Timely Performance. Time is of the essence in completion of
each Deliverable during each phase of development. However, if Minnesota
Life in its sole discretion waives the timeliness of completion of any
Deliverable during any phase of development, USI shall complete
performance of the Deliverable waived by the end of the next following
development phase.
ARTICLE IV
WEALTH MANAGEMENT DIVISION
4.1 Establishment of the WMD; Ongoing Operation.
(a) The intent of the parties is to build a new distribution channel
through which the parties intend to sell the ML Products as well
as Competing Products. In consideration of the payment of the
Development Fees, USI will establish the WMD in accordance with
the Deliverables, applicable law and regulations, and the terms
and conditions of this Agreement and any Ancillary Agreements,
including, without limitation, the terms and conditions set
forth in an "Agency Agreement" substantially in the form set out
in Exhibit B, and one or more "Selling Agreements" substantially
in the form set out in Exhibit C.
(b) Following the completion of the Deliverables, USI will operate
the WMD in a businesslike manner, consistent with applicable
laws and regulations and the terms of this Agreement and the
Ancillary Agreements, and agrees to meet the minimum sales
personnel and production requirements set forth in Exhibit D to
this Agreement.
4.2 Contract Coordination. To facilitate the accomplishment of the mutual
undertakings provided under this Agreement, to provide operational
guidance as necessary, and to assist in the resolution of certain
Disputes as more fully explained in Section 13.2, USI and Minnesota Life
shall each select and appoint two (2) members to a contract coordinating
committee to be known as the "WMD Oversight Committee." ▇▇▇▇▇ ▇. ▇▇▇▇▇
may serve as an additional member of the Committee. At least one
representative
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of each party shall be a senior level executive. The initial members of
the WMD Oversight Committee are set forth in Exhibit E to this
Agreement. The committee shall meet as often as necessary to effectuate
the purposes of this Agreement, but no less frequently than monthly
during the first eighteen months of the Agreement and quarterly
thereafter. Meetings may be held by teleconference, videoconference or
in person.
4.3 Reporting and Audit Records.
(a) Reports. USI will prepare and deliver to Minnesota Life reports
regarding the operations and business prospects of the WMD
containing such information and in such form and frequency as
mutually agreed to by the parties from time to time. USI will
use its best efforts to assure that each report is true,
complete and accurate in all material respects and not contain
any material omissions or misstatements. Without limiting the
generality of the forgoing, USI will prepare and deliver to
Minnesota Life no less frequently than monthly a report
detailing all premiums collected and all Gross Revenue broken
out by carrier and Wealth Management Specialist.
(b) Records. Each party shall keep and maintain proper and complete
records and books of account documenting the business of the WMD
for at least the applicable statute of limitations under the
Internal Revenue Code plus any extensions of that limitation for
the time period to which the records relate.
(c) Audit Rights. Each party shall permit the other party or its
representatives to have access, at such party's own expense,
during regular business hours and upon not less than two (2)
weeks' prior written notice, (but not more frequently than
quarterly) to its records and books pertaining to the operation
of the WMD, including without limitation, books and records
relating to sales practices and training, and to sales
commissions and sales production.
(d) Confidentiality. Any information furnished to a party pursuant
to this Section and any information obtained by its
representative pursuant to this Section shall constitute
Confidential Information of such party as set forth in Section
11.1 of this Agreement.
4.4 Exclusive Distribution.
(a) USI. Except for the offer of Competing Products through the WMD
as provided in Article V of this Agreement and except to the
extent permitted under Section 6.2 of this Agreement, neither
USI nor any of its Affiliates will design, develop, offer,
administer, promote, arrange for the sale of, or sell, either
directly or indirectly, any insurance products or related
financial services which are substantially similar to those
offered through the WMD (including the ML Products and the
Competing Products) during the term of this Agreement. For
purposes of this Section 4.4(a), those insurance products or
related financial
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services which are sold in compliance with the requirements set
forth in Section 6.2(b) of this Agreement shall not be deemed
"substantially similar" to those products offered through the
WMD.
(b) Minnesota Life. USI does not have the exclusive right to market
the ML Products and nothing in this Agreement shall be construed
to limit Minnesota Life's ability to market the ML Products
through its existing or future channels of distribution, whether
or not in competition with USI.
ARTICLE V
WMD PRODUCTS AND SERVICES
5.1 Minnesota Life Products.
(a) Products Included. The ML Products will initially include
individual life insurance, retail mutual funds, defined
contribution plans, trust services, as set forth in Exhibit F to
this Agreement. Minnesota Life may add to Exhibit F new or
additional products and services developed by Minnesota Life or
its Affiliates that are appropriate for distribution through the
WMD. Minnesota Life will add individual annuities (both
immediate and deferred) to Exhibit F in 2003.
(b) Preferred Status. USI acknowledges that Minnesota Life's
commitment to pay for the development of the Wealth Management
Division is conditioned on the commitment of USI to market the
ML Products. Accordingly, USI will offer certain ML Products
through the WMD on a "preferred basis." That is, when an ML
Product is suitable to a customer or client's needs in the
reasonable judgment of USI, the ML Product or service will be
offered before Competing Products are offered. The ML Products
which are to be "preferred" as of the Effective Date are
identified in Exhibit F. Retail individual annuities, when added
to Exhibit F in 2003, will have preferred status. Any other new
ML Products added to Exhibit F shall have preferred status only
with the consent of USI, which consent shall not be unreasonably
withheld.
(c) Non-WMD Products. USI will make Minnesota Life's defined
contribution plans and trust services available to all of the
USI distribution systems on a non-preferred basis (i.e.,
"shelf space").
5.2 Competing Products. Subject to the "preferred status" of the ML Products
and payment of Usage Fees under Section 5.3, USI may offer its customers
and clients Competing Products through the WMD (but only through the
WMD, except as specified in Section 6.2 of this Agreement). Each
commission or compensation arrangement established by USI with any
Competing Carrier must provide for a rate of compensation to selling
agents or registered representatives and an internal allocation process
that is substantially equivalent to the rate paid to selling agents or
registered representatives for the sale of
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comparable ML Products. USI's internal allocation of Gross Revenues is
set forth in Exhibit G to this Agreement, which may be amended by USI at
any time, subject to (a) advance written notice to Minnesota Life, and
(b) continued compliance with the "compensation equivalency" requirement
set forth in this Section 5.2.
5.3 Usage Fees.
(a) General. In consideration of the ability to offer Competing
Products and ML Products through the WMD as provided in this
Article V, the creation of which is to be largely funded by
Minnesota Life's payment of Development Fees in accordance with
Article III of this Agreement, USI will pay Minnesota Life Usage
Fees as provided in this Section 5.3.
(b) Initial Term. During the first ten years of the Agreement, USI
will pay Minnesota Life, in the manner described in paragraph
(c) below, a Usage Fee equal to the greater of (i) 10% of the
Gross Revenues received from the sale of all products and
services sold through the WMD, or (ii) an amount equal to 8% of
the total Development Fees paid by Minnesota Life to USI.
(c) Monthly Payment; Annual Reconciliation. To simplify the payment
and accounting of the Usage Fee, USI will pay Minnesota Life as
follows:
(i) Monthly Remittance. By the twentieth day of each
calendar month, USI will pay to Minnesota Life an amount
equal to 10% of the Gross Revenues received by USI
during the preceding calendar month (the "Estimated
Fees").
(ii) Annual Reconciliation. By the fiftieth day following
each calendar year, USI will determine whether the
Estimated Fees for the preceding calendar year were
greater or lesser than an amount that would produce an
8% annual yield on the total Development Fees paid by
Minnesota Life to USI.
(a) If the amount is greater, no additional payment is
due.
(b) If the amount is lesser, then USI shall promptly pay
the amount of the difference to Minnesota Life.
(d) After the Initial Term. Beginning on the first day following the
tenth anniversary of the Effective Date of this Agreement, USI
will pay Minnesota Life, on a monthly basis, a Usage Fee equal
to 3% of the Gross Revenues. This amount shall be paid by USI by
the twentieth day of each calendar month, based on revenue
received during the prior calendar month.
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(e) Reports. USI will prepare reports to Minnesota Life regarding
the payment of Usage Fees as provided in this Section and in
accordance with Section 4.3(a) of this Agreement. Minnesota Life
will review each report and provide any objections to USI within
thirty days from the receipt of each report. Each report to
which no timely objections have been made shall be deemed
accepted by Minnesota Life.
(f) Disputes. Any dispute regarding the amount of Usage Fees due to
or to be returned by Minnesota Life shall be resolved in
accordance with Article XIII of this Agreement and neither party
shall be permitted to suspend performance of any obligations
under this Agreement during the pendancy of the dispute
resolution process, including without limitation the suspension
of any sales activity or the payment of any commissions, Usage
Fees, or Development Fees.
5.4 Buyout of Usage Fee Obligation. At any time after the fifth anniversary
of the Effective Date of this Agreement, USI may terminate its
obligation to make ongoing payments of Usage Fees by a single payment to
Minnesota Life, in cash, of an amount equal to the greater of (i) the
Net Accrued Development Fees, or (ii) the PV Usage Fees. Buy-out and
termination of the Usage Fee provisions of the Agreement by USI in
accordance with this Section 5.4 will not, in and of itself, terminate
any of the remaining provisions of the Agreement, including USI's
obligation to continue marketing the ML Products.
ARTICLE VI
WEALTH MANAGEMENT SPECIALISTS
6.1 Responsibilities of USI. In addition to any specific requirements set
forth in the Agent and Selling Agreements described in Section 4.1(a)
of this Agreement and any other requirements contained in this Agreement
and any Ancillary Agreements, USI will, with respect to its Wealth
Management Specialists:
(a) Recruit and retain a sufficient number of Wealth Management
Specialists to fulfill its obligations under this Agreement and
the Ancillary Agreements and to fulfill the intent of the
parties;
(b) Maintain a sufficient number of locations to fulfill its
obligations under this Agreement and the Ancillary Agreements
and to fulfill the intent of the parties, and to replace
promptly and carefully any vacancies which may arise;
(c) Assure that USI, its Affiliates and its Wealth Management
Specialists have and maintain the necessary licenses and
appointments to sell the ML Products and the Competing Products;
(d) Train and oversee the sales and service practices of the Wealth
Management Specialists and other WMD personnel to assure
compliance with the applicable
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rules and requirements of the NASD and any other governmental
authority or self-regulatory organization;
(e) Encourage persistency and discourage replacement of existing
business, unless not appropriate for the customer, and assure
that all applicable rules and procedures regarding replacement
are followed by the Wealth Management Specialists;
(f) Maintain reasonable production growth; and
(g) Not permit the use of any marketing or sales materials referring
or pertaining to the ML Products or Minnesota Life and its
Affiliates which are inaccurate or misleading, and to permit
Minnesota Life to review all such materials at its request and
to discontinue the use of any materials deemed inappropriate by
Minnesota Life.
6.2 WMD Participation.
(a) Subject to the exceptions contained in this Section 6.2 of this
Agreement, USI will require all current USI sales force
personnel who are engaged in the sale of individual life
insurance or individual annuities to become Wealth Management
Specialists within six months of the Effective Date, and those
who are registered to sell variable products to transfer their
registrations to USI Securities within the same time period. Any
of the current USI sales force personnel who become Wealth
Management Specialists during that time period ("Grandfathered
Personnel") will have access to all of the carriers and systems
available to newly hired Wealth Management Specialists and may
continue to write business with the Competing Carriers they used
prior to that time period. Any Gross Revenues derived from new
sales after the date of this Agreement by the Grandfathered
Personnel, whether from Minnesota Life or from Competing
Carriers, shall be subject to all of the provisions of this
Agreement, including but not limited to payment of Usage Fees in
accordance with Section 5.3 of this Agreement. Any Gross
Revenues derived from renewal commissions related to sales made
by the Grandfathered Personnel prior to the date of this
Agreement, however, shall not be subject to the payment of Usage
Fees.
(b) Notwithstanding the provisions of paragraph (a) of this Section
6.2, sales force personnel ("Exempt Personnel") associated with
those USI business units identified in Exhibit H ("Excluded
Entities") shall not be required to become Wealth Management
Specialists, and USI shall not be required to pay Usage Fees
pertaining to business sold by such personnel, so long as the
business sold by the Exempt Personnel falls within the scope of
the business model of the Excluded Entity, as described in
Exhibit H. The exemptions under this paragraph (b) shall
continue only so long as there are not material changes in the
business model of the Exempt Entity from that described in
Exhibit H. An Exempt Person may not produce sales of individual
life or annuity products outside of the business model
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described in Exhibit H except by becoming a Wealth Management
Specialist, in which case the provisions of Section 6.2(a) apply
(including, without limitation, the requirement for the payment
of Usage Fees in accordance with Section 5.3 of this Agreement)
and the person will no longer be "Exempt," or by referring the
customer(s) to a Wealth Management Specialist.
(c) No Wealth Management Specialist or affiliated office or
referring person will refer business to an Excluded Entity or to
Exempt Personnel that would otherwise be written within the
Wealth Management Division.
(d) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of USI Southeast, who is registered with M
Holdings Securities, Inc., and an owner-partner of M Financial
Group, and which interest precedes this Agreement, is exempt
from the requirement to become a Wealth Management Specialist
and from the requirement that he transfer his securities
registrations to USI Securities, Inc. Notwithstanding this
exemption, all revenue attributable to sales made by ▇▇. ▇▇▇▇▇▇
(i.e., all revenue flowing through USI Securities, Inc. or M
Holdings Securities, Inc., or any other broker/dealer) will be
subject to payment of Usage Fees by USI as provided in Section
5.3, with the exception of corporate owned business including 50
or more employees. Further, USI agrees that ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ will
only conduct business out of USI offices in Norfolk and
Alexandria, Virginia.
(e) The intent of the parties in this Section 6.2 (as more fully
described in Exhibit J of this Agreement) is that no individual
salesperson, or division, or Affiliate, or subsidiary of USI,
flow or refer business to an Exempt Entity or to Exempt
Personnel that would otherwise be placed by a Wealth Management
Specialist, for the purpose of avoiding the payment of Usage
Fees to Minnesota Life. Any question, request for clarification,
or dispute as to whether any past, current, or proposed business
activity is consistent with that intent, may be referred to the
WMD Oversight Committee at the request of either Party to this
Agreement. The WMD Oversight Committee will review the facts and
circumstances pertaining to any such request and shall provide a
recommendation to the Parties, which may include but is not
limited to guidance on how to rectify a prior act or to
implement revised business procedures. The recommendations of
the WMD Oversight Committee, including payment of any amount
due, shall be implemented within a commercially reasonable time
(which, in the case of payments due, shall be no longer than
twenty business days), unless, within twenty business days from
the date the Committee's recommendations are made, either party
elects to proceed to formal dispute resolution under Section
13.3 of this Agreement.
6.3 Licenses and Appointments. USI, its Affiliates, and its sales force
personnel will have and agree to maintain at USI's expense, all required
licenses, or registrations, or appointments necessary to sell the ML
Products and the Competing Products. In the event the appointment of any
USI Wealth Management Specialist is terminated by Minnesota Life, USI
agrees that it will not permit the Wealth Management Specialist
11
whose appointment is terminated to sell or offer Competing Products
through the WMD during the term of this Agreement.
6.4 Contests and Trips. USI, in its sole discretion and from time to time,
shall sponsor sales conventions or sales recognition trips for its
Wealth Management Specialists. USI shall use its best efforts to
discourage its Wealth Management Specialists from participating in
conventions or trips offered by Competing Carriers or by Minnesota Life.
In lieu of permitting the Wealth Management Specialists to participate
in Minnesota Life's own sales conventions or trips, Minnesota Life will
contribute to USI's cost of providing such trips through payment to USI
of that percentage of premiums received on account of the sales of ML
Products which is so designated in the Agency and Selling Agreements set
forth in Exhibits B and C to this Agreement; provided however, that no
such payments shall be made during or on account of any time period for
which USI does not provide such sales conventions or trips.
6.5 Non-Solicitation. During the term of this Agreement and for a two-year
period thereafter, neither Minnesota Life nor USI shall solicit, hire,
employ, or contract as an independent contractor any person who is (or
during the six month period prior to the date of solicitation,
employment, hiring or contracting, was) a full or part time agent or
registered representative of the other party or of any Affiliate of the
other party, including without limitation, Securian Financial Services,
Inc.
6.6 Preservation of Business. Each agreement between USI and any Wealth
Management Specialist must contain, to the extent permitted by
applicable law, a preservation of business provision substantially
similar to that set forth in Exhibit I to this Agreement, or which is
otherwise acceptable to Minnesota Life. USI agrees to actively enforce
those provisions, to the full extent available under applicable law,
including, without limitation, by bringing suit for judicial
enforcement. USI's enforcement obligations under this Section 6.6 shall
survive the termination of this Agreement for a period of one year.
ARTICLE VII
COMMISSIONS
7.1 Commissions. Minnesota Life will pay commissions on the ML Products to
USI in accordance with commission schedules established by Minnesota
Life in its sole discretion from time to time. Commissions will be paid
to USI with the same frequency that Minnesota Life pays commissions to
other general agents. USI will be solely responsible for the payment of
commissions and any other compensation to Wealth Management Specialists
and any other individual insurance agents, registered representatives,
and for any payments to any other third party.
7.2 Schedules. The initial commission schedules are set forth as appendices
to the Agency and Selling Agreements attached as Exhibits to this
Agreement. Minnesota Life will not amend any commission schedules for
any Minnesota Life Product sold as of the Effective Date of this
Agreement (except as to the Selling Agreement for Advantus Mutual Funds
set forth in Exhibit C-l) during the term of this Agreement without the
consent of USI
12
(which consent shall not be unreasonably withheld) unless USI has
exercised its buyout option pursuant to Section 5.4 of this Agreement.
If the commission schedule for the Advantus Mutual Funds is amended or
is proposed to be amended by Minnesota Life or its Affiliates, USI shall
have 30 days from the date USI receives notice of the amendment or
proposed amendment to provide reasonable written objections to Minnesota
Life. If such objections are given, the Advantus Mutual Funds will no
longer have "preferred status" under Section 5.1 (b) of this Agreement,
effective on the date USI's objection is received by Minnesota Life. The
amended commission schedule, however, will become effective as proposed
by Minnesota Life or its Affiliate without regard to USI's objection.
The dispute resolution procedures under Article XIII of this Agreement
shall not apply to any dispute regarding amendments to the commission
schedules for the Advantus Mutual Funds under this Section 7.2.
ARTICLE VIII
USI GUARANTY OF AFFILIATE PERFORMANCE
8.1 Guaranty. USI hereby absolutely and unconditionally guarantees to
Minnesota Life the full and prompt performance of each obligation of
this Agreement delegated by USI to, or undertaken by, any Affiliate of
USI.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF USI
USI hereby represents and warrants to Minnesota Life on behalf of itself
and any Affiliates performing services under this Agreement or any Ancillary
Agreement (collectively, the "USI Companies") as follows:
9.1 Organization and Standing. Each USI Company performing services under
this Agreement is a corporation duly organized, validly existing and in
good standing under the laws of the state of incorporation of such
corporation, with the requisite power to enter into and perform its
obligations under this Agreement and the Ancillary Agreements in
accordance with their respective terms.
9.2 Authority. USI has the full right, power and authority to execute and
deliver this Agreement and the Ancillary Agreements on its own behalf or
on behalf of its Affiliates performing services under this Agreement,
and to perform or cause to be performed their respective terms. USI has
taken all required actions to approve and adopt this Agreement and the
Ancillary Agreements. This Agreement and each of the Ancillary
Agreements are duly authorized, valid and binding agreements of USI
enforceable against USI in accordance with their respective terms,
subject as to enforcement to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles. The person or persons executing this
Agreement and the
13
Ancillary Agreements on its behalf is duly authorized and empowered to
do so on behalf of USI.
9.3 Absence of Conflicts. The execution and delivery of this Agreement and
the Ancillary Agreements by USI and the consummation of the transactions
required under such agreements (a) do not violate or conflict with any
statute, regulation, judgment, order, writ, decree or injunction
currently applicable to the USI Companies or any of their respective
property or assets, and (b) do not violate or conflict with any charter
provision or bylaw of the USI Companies or any existing mortgage,
indenture, contract, licensing agreement, financing statement or other
agreement binding on the USI Companies.
9.4 Absence of Required Consents and Contractual Restrictions. No consent or
approval of the stockholders of USI or any third party is required to be
obtained by USI in connection with the execution and delivery of this
Agreement, or the Ancillary Agreements, or the performance of the
transactions contemplated under these agreements. No contract or
agreement to which any USI Company restricts the ability of USI or its
Affiliates to fulfill its obligations and responsibilities under this
Agreement or any Ancillary Agreement or to carry out the activities
contemplated by such agreements.
9.5 Litigation. There is no threatened or actual material legal action or
other proceeding pending before any court or any governmental or
administrative agency, or any threatened or actual governmental
investigation pending or any claim pending against or relating to the
business of the USI Companies which would have a material adverse impact
on the USI Companies performing services under this Agreement, or upon
their ability to perform their respective obligations under this
Agreement.
9.6 Licenses and Consents. The USI Companies, and any sales personnel
employed by or under contract with a USI Company have all licenses,
appointments or permits necessary for the conduct of the business in
each state where such a license, appointment or permit is required,
including without limitation, licensure as an insurance agency and
registration as a broker/dealer. All governmental and other consents
that are required to be obtained by any USI Company with respect to this
Agreement have been obtained by USI or its Affiliate and are in full
force and effect, and each USI Company has complied with all conditions
contained in any such consents.
9.7 Financial Capability. Taking into account the timely payment of
Development Fees by Minnesota Life pursuant to Article III of this
Agreement, USI has sufficient capital, available funds, or existing
credit lines to successfully undertake, complete and perform its
obligations, indemnifications, and guaranties under this Agreement and
the Ancillary Agreements.
14
ARTICLE X
REPRESENTATIONS AND WARRANTIES
OF MINNESOTA LIFE
Minnesota Life hereby represents and warrants to USI on behalf of itself
or any Affiliate performing services under this Agreement or any Ancillary
Agreement (collectively, the "Minnesota Life Companies") as follows:
10.1 Organization and Standing. Each Minnesota Life Company performing
services under this Agreement is a corporation duly organized, validly
existing and in good standing under the laws of the state of
incorporation of such corporation with the requisite power to enter into
and perform its obligations under this Agreement and the Ancillary
Agreements in accordance with their respective terms.
10.2 Authority. Minnesota Life has the full right, power and authority to
execute and deliver this Agreement and the Ancillary Agreements, and to
perform or cause to be performed their respective terms. Minnesota Life
has taken all required actions to approve and adopt this Agreement and
the Ancillary Agreements. This Agreement and each of the Ancillary
Agreements are duly authorized, valid and binding agreements of
Minnesota Life enforceable against Minnesota Life in accordance with
their respective terms, subject as to enforcement to bankruptcy,
insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles. The person
or persons executing this Agreement and the Ancillary Agreements on its
behalf is duly authorized and empowered to do so on behalf of Minnesota
Life.
10.3 Absence of Conflicts. The execution and delivery of this Agreement and
the Ancillary Agreements by Minnesota Life and the consummation of the
transactions required under such agreements (a) do not violate or
conflict with any statute, regulation, judgment, order, writ, decree or
injunction currently applicable to any Minnesota Life Company, or any of
their respective property or assets, and (b) do not violate or conflict
with any charter provision or bylaw of any Minnesota Life Company or any
existing mortgage, indenture, contract, licensing agreement, financing
statement or other agreement binding on any Minnesota Life Company.
10.4 Absence of Required Consents and Contractual Restrictions. No consent or
approval of the sole stockholder of Minnesota Life or any third party is
required to be obtained by Minnesota Life in connection with the
execution and delivery of this Agreement or the Ancillary Agreements or
the performance of the transactions contemplated under these agreements.
No contract or agreement to which any Minnesota Life Company is a party
restricts the ability of any Minnesota Life Company to fulfill its
obligations and responsibilities under this Agreement or the Ancillary
Agreements or to carry out the activities contemplated by such
agreements.
10.5 Litigation. There is no material legal action or other proceeding
presently before any court or any governmental or administrative agency
or any governmental investigation
15
pending or any claim pending against or relating to the business of the
Minnesota Life Companies which would have a material adverse impact on
any Minnesota Life Company, or their operations or ability to perform
their respective obligations under this Agreement or the Ancillary
Agreements.
10.6 Financial Capability. Minnesota Life has sufficient capital or available
funds to successfully undertake, complete and perform its obligations
and indemnifications under this Agreement and the Ancillary Agreements.
ARTICLE XI
CONFIDENTIALITY, NON-SOLICITATION AND
PROPRIETARY INFORMATION
11.1 Confidentiality.
(a) "Confidential Information" means all information furnished by
Minnesota Life or USI, or their respective directors, officers,
employees, agents or representatives, including without
limitation, attorneys, accountants, consultants, financial
advisors and family members (collectively "representatives") and
all analysis, compilations, data, studies or other documents
prepared by Minnesota Life, USI, or their respective
representatives, containing or based in whole or in part on any
such furnished information. Confidential Information does not
include information which (i) is or becomes generally available
to the public other than as a result of disclosure by Minnesota
Life or USI or their respective representatives; (ii) becomes
available to Minnesota Life, USI, or their representatives, on a
non-confidential basis from a source other than Minnesota Life,
USI, or their representatives; or (iii) was known to Minnesota
Life, USI, or their representatives, on a non-confidential basis
prior to disclosure by Minnesota Life, USI, or their
representatives.
(b) The parties agree to keep all Confidential Information
confidential. Confidential Information will not, without the
prior written consent of the other parties hereto, be disclosed
by a party or its representatives to any other person or entity,
in any manner whatsoever, in whole or in part, and will not be
used by a party or its representative directly or indirectly for
any purpose other than such activities necessary to complete the
transactions contemplated by this Agreement. Moreover, the
parties agree to transmit Confidential Information only to those
representatives who need to know the information for the purpose
of evaluating the transactions contemplated by this Agreement,
it being understood that each representative shall be informed
of the confidential nature of such information and that each
party shall be responsible for any breach by its
representatives.
(c) In the event that Minnesota Life, USI, or any one to whom
Confidential Information is transmitted pursuant to this
Agreement is requested or becomes
16
legally compelled (by oral questions, interrogatories, requests
for information or documents, subpoenas, civil investigative
demand or a similar process) to disclose any of the Confidential
Information, the parties so compelled will provide the other
parties with prompt written notice so that the other parties may
seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. In the event
that such protective order or other remedy is not obtained, or
that a party waives compliance with the provisions of this
Agreement, the compelled party will furnish only that portion of
the Confidential Information which is legally required and will
exercise its best efforts to obtain reasonable assurance that
confidential treatment will be accorded to the Confidential
Information.
11.2 Intellectual Property Rights.
(a) All right, title and interest in and to any written, electronic
or visual materials, created or developed jointly by Minnesota
Life and USI, or solely by Minnesota Life, in connection with
the marketing of the ML Products shall belong to Minnesota Life,
including, without limitation, all copyrights, trademarks and
service marks (collectively, the "Marketing Rights"). Except as
provided in this Section 11.2, USI will acquire no rights to the
Marketing Rights. If USI acquires any ownership of such rights,
whether by operation of law or otherwise, USI hereby assigns and
transfers such rights to Minnesota Life. Minnesota Life hereby
grants USI the right to use the Marketing Rights, trademark or
any other name selected to identify the Program or the Products,
as well as other words or symbols identifying Minnesota Life,
but only on USI's advertising and promotional materials used to
market or promote the Program during the term of this Agreement.
Each use will conform to rules of Minnesota Life or Minnesota
Life regarding reproduction or reference to such words or
symbols. USI shall not use any Minnesota Life trademarks or any
variations thereof for any other purpose, without the prior
written consent of Minnesota Life. USI hereby grants to
Minnesota Life the right to use the USI name, as well as any
words or symbols identifying USI, in Minnesota Life's
advertising and promotional materials used to market or promote
the Program. Each use will conform to the rules of USI regarding
reproduction or reference to such words or symbols. Minnesota
Life shall not use any USI trademarks or variations thereof for
any other purpose, without the prior written consent of USI.
(b) If this Agreement is terminated or nonrenewed by USI in
accordance with Sections 12.1 or 12.3 (a) or (c), Minnesota Life
will grant USI a non-exclusive license to use those the
Marketing Rights which were jointly developed by Minnesota Life
and USI (and only those Marketing Rights) in connection with
USI's future sales of ML Products.
17
11.3 Employee and Agent.
(a) For a period of two (2) years from the Effective Date of this
Agreement, neither party, directly or indirectly, will hire any
officer or employee of the other party or any Affiliate of that
party to become an employee or consultant or otherwise interfere
with any such officer's or employee's current employment status.
Notwithstanding the foregoing, this provision shall not prohibit
employing any such employees or officers who contact a party to
this Agreement on his or her own initiative or in response to a
general solicitation not specifically directed to such employee
or officer.
(b) During the term of this Agreement and for a period of 6 months
thereafter, neither party shall employ or appoint, or solicit
for appointment or employment, any insurance agent or registered
representative who is, or who at any time during the preceding
six months had been, associated with or employed by the other
party or any General Agent of the other party, nor to encourage
such a person to leave his or her association with the other
party or its General Agent, or assist anyone else to do any of
the foregoing.
ARTICLE XII
TERM AND TERMINATION OF AGREEMENT
12.1 Initial Term of Agreement; Renewal. Unless sooner terminated pursuant to
Sections 12.2, 12.3 or 12.4, this Agreement shall commence on the
Effective Date and shall continue for an initial term ending on the
tenth anniversary date thereof (the "Initial Term"). Following
completion of the Initial Term, this Agreement shall automatically renew
for successive one-year terms, unless (a) notice is given by either
party of its determination not to renew, which notice must be given at
least ninety (90) days prior to the end of the Initial Term or any
annual renewal term, and (b), in the case of USI, USI pays Minnesota
Life an amount equal to the buy-out fee described in Section 5.4 of this
Agreement (unless USI has previously made such a payment to Minnesota
Life).
12.2 Termination of Agreement by Minnesota Life. This Agreement and each
Ancillary Agreement may be terminated by Minnesota Life:
(a) Delay. Upon written notice to USI, in the event that USI fails
to complete all of the Deliverables for any development phase by
the completion date specified in Exhibit A, termination to be
effective thirty (30) days from the date of Minnesota Life's
notice.
(b) Other Material Breach. In the event of a material breach of this
Agreement or any Ancillary Agreement by USI other than those
material breaches identified in Section 12.2(a), upon sixty (60)
days' notice to USI identifying such breach in reasonable
detail, unless such breach is cured within such notice period,
provided,
18
however, the terms of any Ancillary Agreement provide for a
shorter notice period or for immediate termination, the terms of
the Ancillary Agreement shall control.
(c) Late Payment. Upon notice to USI, in the event that USI fails to
pay any Usage Fee when due and such failure continues for a
period of fifteen (15) days after notice by Minnesota Life;
(d) Change of Control. Within one year of the effective date of a
Change of Control of USI, upon ninety (90) days advance written
notice.
(e) Failure of Production. Upon notice to USI, in the event USI
fails to meet the minimum sales personnel and production
requirements set forth in Section 4.1(b) of this Agreement and
such non-performance continues for a period of sixty (60) days
from the date of notice.
(f) Liquidated Damages.
(i) If the Agreement is terminated by Minnesota Life during
the Initial Term for any reason set forth in paragraphs
(a), (b) or (c) of this Section 12.2, USI will pay to
Minnesota Life liquidated damages equal to the total
Development Fees paid by Minnesota Life to USI pursuant
to Article III of this Agreement, plus interest accrued
at 8% compounded annually. The parties specifically
intend that the liquidated damages under clause (i) of
this paragraph (f) are to be based upon the Development
Fees paid by Minnesota Life, and not upon the Net
Accrued Development Fees.
(ii) If the Agreement is terminated by Minnesota Life after
the Initial Term for any reason set forth in paragraphs
(a), (b), or (c) of this Section 12.2, or at any time
for the reason set forth in paragraphs (d) or (e) of
this Section 12.2, USI or its successors or assigns will
pay Minnesota Life liquidated damages equal to the Usage
Fee buyout amount described in Section 5.4 of this
Agreement.
(g) Payments Due. Payment of the liquidated damages described in
this Section 12.2 are due thirty days after the effective date
of termination, and will accrue interest beginning on the
effective date of termination and ending on the date of payment
at the pre-judgment interest rate set forth in Minnesota
Statutes.
12.3 Termination by USI. This Agreement may be terminated by USI:
(a) Non-Payment. Upon written notice to Minnesota Life, in the event
that Minnesota Life fails to pay any of the Development Fees,
commissions, or other amounts due under any Ancillary Agreement,
when due and such failure shall continue for a period of fifteen
(15) days after notice by USI.
19
(b) Other Material Breach. By USI in the event of a material breach
of this Agreement or any Ancillary Agreement by Minnesota Life
upon sixty (60) days' notice to Minnesota Life identifying such
breach in reasonable detail, unless such breach is cured within
such notice period.
(c) Change of Control. Within one year of the effective date of
Change of Control of Minnesota Life, upon ninety (90) days
advance written notice, but only if USI pays Minnesota Life an
amount equal to the amount payable under Section 5.4.
12.4 Insolvency Event. This Agreement may be terminated by either party, upon
the occurrence of an insolvency event with respect to the other party.
The term "Insolvency Event" with respect to a party shall mean that such
party: (1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay its
debts or fails or admits in writing its inability generally to pay its
debts as they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes or
has instituted against it a proceeding seeking a judgment of insolvency
or bankruptcy or any other relief under any bankruptcy or insolvency law
or other similar law affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in the case of any
such proceeding or petition instituted or presented against it, such
proceeding or petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the making of an order
for its winding-up or liquidation or (B) is not dismissed, discharged,
stayed or restrained in each case within sixty (60) days of the
institution or presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject to
the appointment of an administrator, provisional liquidator,
conservator, rehabilitator, receiver, trustee, custodian or other
similar official for it or for all or substantially all of its assets;
(7) has a secured party take possession of all or substantially all its
assets or has a distress, execution attachment, sequestration or other
legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed or
restrained, in each case within sixty (60) days thereafter; (8) causes
or is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect to any of
the events specified in clauses (1) to (7) (inclusive); or (9) takes any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 Intent. USI and Minnesota Life desire to amicably resolve any disputes
and disagreements between them with respect to the interpretation of any
provisions of this Agreement or the Ancillary Agreements or with respect
to performance under this Agreement or the Ancillary Agreements. Toward
that end, USI and Minnesota Life agree that any controversy, claim,
dispute or other matter in question (whether Minnesota
20
Life's or USI's respective rights and/or remedies are governed by the
laws of contract, tort or otherwise), arising out of or related to this
Agreement or the Ancillary Agreements, the performance of this Agreement
or the Ancillary Agreements, or the breach thereof, between Minnesota
Life and USI (or any of their affiliates) (hereinafter "Dispute"), shall
be negotiated between Minnesota Life and USI in accordance with the
procedures established under this Article XIII; provided, however, that
any Dispute arising out of or relating to Article XIII or Sections 4.4,
6.5, 6.6, and 11.2 of this Agreement or the breach, termination or
validity thereof shall entitle any party at any stage of the dispute
resolution to pursue equitable remedies in a court of equity.
13.2 Negotiation Procedures. Minnesota Life and USI agree that in the event
any Dispute arises that cannot be resolved at the operating level by the
employee or representative of each party having direct responsibility
for the performance or operating function in question, the parties shall
promptly meet for the purpose of negotiating in good faith to resolve
such Dispute before resorting to arbitration. The negotiation will be
conducted by the WMD Oversight Committee described in Section 4.2 of
this Agreement. The negotiations shall be held, alternately, first at
the office of USI, then at Minnesota Life's place of business, or at any
other location agreeable to USI and Minnesota Life.
13.3 Arbitration Procedures. If the negotiation process described in Sections
13.1 and 13.2 is not successful, then the Dispute shall be settled by
binding arbitration pursuant to the Federal Arbitration Act, 9 U.S.C.
Sections 3 and 4, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association.
(a) The arbitration shall be held in St. ▇▇▇▇, Minnesota, or at any
other location agreeable to USI and Minnesota Life.
(b) Arbitration shall be by a single arbitrator, who shall be an
executive or professional in the insurance industry drawn from
the National Panel of Commercial Arbitrators. Within thirty (30)
days after receipt of a demand for arbitration, each party shall
designate a suggested arbitrator. If the arbitrator has not been
selected within fifteen (15) days from the time each party has
submitted its suggestions, the parties shall apply to a court of
competent jurisdiction, which shall appoint the arbitrator from
the persons nominated who meet the qualifications described in
this Agreement.
(c) Discovery shall be allowed in accordance with the United States
Federal Rules of Civil Procedure which are applicable in the
United States District Courts. All discovery shall be completed
within sixty (60) days from the appointment of the arbitrator.
(d) The arbitrator shall be required to apply the contractual
provisions hereof in deciding the matter submitted to him or her
and shall not have any authority, by reason of this Agreement or
otherwise, to render a decision that is contrary to the mutual
intent of the parties as set forth in this Agreement. The
arbitrator may in
21
his or her discretion grant pre-award and post-award interest at
commercial rates. The arbitrator shall have no authority to
award punitive damages or any other damages not measured by the
prevailing party's actual damages. The arbitrator may in his or
her discretion award reasonable attorneys' fees to the
prevailing party.
(e) A judgment upon the award entered by the arbitrator may be
entered and enforced in any court having jurisdiction thereof.
(f) Except as provided in paragraph (d) of this Section, each party
shall bear its own costs and counsel fees, and the cost of the
arbitration shall be shared equally by the parties; provided,
however, that in the event that a party fails to comply with the
orders or decision of the arbitrator, then such noncomplying
party shall be liable for all costs and expenses (including,
without limitation, attorneys fees) incurred by the other party
in its effort to obtain either an order to compel, or an
enforcement of an award, from a court of competent jurisdiction.
13.4 Equitable Remedies. With respect to any claim, dispute or controversy
arising out of or relating to Article XIII or Sections 4.4, 6.5, 6.6 and
11.2 of this Agreement, each party acknowledges and agrees that (a) its
respective covenants as licensor or licensee, or as a disclosing or
receiving party, or otherwise, as the case may be, are special, unique
and related to matters of extreme importance to each party, and, in the
event that one party fails to perform, observe or discharge any of its
obligations thereunder, the second party will be irreparably harmed and
that no remedy at law will provide adequate relief to that party, and
(b) the second party shall be entitled to a temporary restraining order
and permanent injunction and other equitable relief in the case of any
failure of the first party to perform, observe or discharge any of its
covenants or obligations hereunder and without the necessity of proving
actual damages. The remedies provided herein shall be cumulative and
shall not preclude asserting by any party of any other rights or the
seeking of any other remedies, either legal or equitable, against any
other party hereto.
ARTICLE XIV
INDEMNIFICATION
14.1 Minnesota Life Indemnification. Minnesota Life agrees to indemnify and
hold harmless USI and its Affiliates and each of the officers,
directors, employees and agents of USI and its Affiliates, from and
against any third party claims and losses, including, in each case, all
direct costs and expenses (including, without limitation, reasonable
attorneys' fees, all interest, penalties and costs of investigation or
preparation of defense), judgments, fines, losses, claims, damages,
liabilities, demands, assessments and amounts paid in settlement (but
excluding punitive damages), arising from the negligence of
22
Minnesota Life, its Affiliates or its employees in connection with the
performance of, or breach of, its obligations under this Agreement or
the Ancillary Agreements.
14.2 USI Indemnification. USI agrees to indemnify and hold harmless Minnesota
Life and its Affiliates and each of the officers, directors, employees
and agents of Minnesota Life and its Affiliates, from and against any
third party claims and losses, including, in each case, all direct costs
and expenses (including, without limitation, reasonable attorneys' fees,
all interest, penalties and costs of investigation or preparation of
defense), judgments, fines, losses, claims, damages, liabilities,
demands, assessments and amounts paid in settlement (but excluding
punitive damages), arising from the negligence of USI or its Affiliates,
employees or agents in connection with the performance of, or breach of,
its obligations under this Agreement or the Ancillary Agreements.
ARTICLE XV
MISCELLANEOUS
15.1 Entire Agreement, Amendments. This Agreement and the Ancillary
Agreements contain the entire understanding of the parties with respect
to the subject matter and are intended to supersede and govern all
discussions and agreements of the parties hereto, including but not
limited to the Letter of Intent dated May 21, 2002 between the Minnesota
Life and USI.
15.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement, and each and every covenant and
condition herein, shall be personal to the parties hereto and shall
not be assigned, without the prior written consent of the other
parties, which consent may be withheld at their sole discretion.
15.3 Headings. Headings of the Articles and Sections of this Agreement are
for convenience of reference only and are not to be considered in
construing this Agreement.
15.4 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to be given if
delivered in person, when transmitted by facsimile machine, when sent by
overnight delivery service or mailed by registered first class mail,
postage prepaid, return receipt requested, addressed as follows:
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U.S.I. Holdings Corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President, Chairman and CEO, USI
With copies to: General Counsel, USI
President, USI Securities, Inc.
Minnesota Life Insurance Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
With a copy to: General Counsel
15.5 Governing Law. This Agreement shall be governed and construed under the
internal laws of the State of Minnesota, without regard to conflicts of
laws principles.
15.6 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.7 Waiver. No failure or delay on the part of any party in the exercise of
any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude
other or further exercise thereof or of any other right or power. The
waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach hereunder. All rights and remedies existing under this
Agreement, including rights to terminate this Agreement, are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
15.8 Severability. If any one or more of the provisions contained in this
Agreement or in any document executed in connection herewith shall be
invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired.
15.9 Relationship of the Parties. The parties agree that each is acting as an
independent contractor with respect to the other and nothing contained
in this Agreement is intended, or is to be construed, to constitute USI
or its Affiliates, and Minnesota Life or its Affiliates as partners or
joint venturers, or USI or its Affiliates or Minnesota Life or its
Affiliates as an agent of the other. Neither party hereto shall have any
express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other party or to bind
the other party to any contract, agreement or undertaking. Except for
any payments of Usage Fees, Development Fees or Commissions contemplated
by
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this Agreement or any Ancillary Agreement, the financial gain and loss
directly associated with the operation of the WMD will accrue to USI,
and the WMD shall not be considered a joint venture or partnership
between USI and Minnesota Life from a legal, tax or financial reporting
point of view.
15.10 Access. Each party will provide the other party with access to such
information, records and personnel as may be reasonably requested by the
other party for purposes of monitoring such party's activities pursuant
to this Agreement. In addition, representatives of USI and Minnesota
Life may, upon reasonable notice and at times reasonably acceptable to
the other party, visit the facilities where activities pursuant to this
Agreement are being conducted, and consult informally, during such
visits and by telephone, with personnel of the other party involved in
the performance of such activities. Any information made available
pursuant to this Section 15.10 shall be subject to the confidentiality
provisions set forth in Article XI.
15.11 Costs and Expenses. Each party shall bear its own expenses incident to
the preparation, negotiation, execution and delivery of this Agreement
and the performance of its obligations hereunder.
15.12 Public Announcements. No press releases or public announcements
regarding the existence or terms of this Agreement shall be made by USI
or Minnesota Life without the prior written approval of the other, which
approval shall not be unreasonably withheld, except as may be necessary
in the opinion of counsel, to meet the requirements or regulations of
any governmental law or regulation in which event counsel either for the
other party will be notified before and after any action is taken
thereon.
15.13 Cooperation. The parties agree to cooperate and act in good faith to
effectuate the intent and objectives of this Agreement and the Ancillary
Agreements. Except as specifically provided, neither party shall
unreasonably withhold any consent, agreement or determination expressly
required under this Agreement or the Ancillary Agreements.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and effective as of the Effective Date.
U.S.I. HOLDINGS CORPORATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its CHAIRMAN, PRESIDENT & CEO
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MINNESOTA LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its EXECUTIVE VICE PRESIDENT
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