Exhibit (1)(b)
Form of
PRINCIPAL UNDERWRITING AGREEMENT
Product: Custom Annuity
This Principal Underwriting Agreement (hereinafter "Agreement") is made and
entered into as of this ___ day of ______, 2000, by and between Allstate Life
Insurance Company of New York ("ALICNY") a life insurance company organized
under the laws of the state of New York, and ALFS, Inc. ("ALFS"), a corporation
organized under the laws of the state of Delaware.
In consideration of the mutual promises and covenants exchanged by the parties
in this Agreement, ALICNY grants to ALFS the right to be and ALFS agrees to
serve as Principal Underwriter for the sale of insurance and investment products
during the term of this Agreement and the parties agree as follows:
ARTICLE I
ALFS DUTIES AND OBLIGATIONS
1.01 ALFS, a broker-dealer registered under the Securities Exchange Act of 1934
(the "1934 Act") and a member of the National Association of Securities Dealers,
Inc. ("NASD"), will serve as principal underwriter and distributor for the
insurance and investment products listed in Attachment A, herein the
"Contracts") which will be issued by ALICNY.
1.02 ALFS shall be duly registered or licensed or otherwise qualified under the
insurance and securities laws of the states in which the Contracts are
authorized for sale.
1.03 ALFS proposes to act as principal underwriter on an agency best efforts
basis in the marketing and distribution of the Contracts. ALFS will use its best
efforts to provide information and marketing assistance to licensed insurance
agents and broker-dealers ("Selling Broker-Dealers") on a continuing basis.
1.04 ALFS shall be responsible for compliance with the requirements of state
broker-dealer regulations and the 1934 Act as each applies to ALFS in connection
with its duties as distributor of the Contracts. Moreover, ALFS shall conduct
its affairs in accordance with the Rules of Fair Practice of the NASD.
1.05 As a principal underwriter, ALFS shall permit the offer and sale of
Contracts to the public only by and through persons who are appropriately
licensed under the securities laws and who are appointed in writing by ALICNY to
be authorized insurance agents (unless such persons are exempt from such
licensing and appointment requirements);
1.06 To the extent that any statements made in the registration statement, or
any amendment or supplement thereto, are made in reliance upon and in conformity
with written information furnished to ALICNY by ALFS expressly for use therein,
such statements will, when they become effective or are filed with the SEC, as
the case may be, conform in all material respects to the requirements of the
1933 Act and the rules and regulations of the Commission thereunder, and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
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1.07 Subject to agreement with ALICNY, ALFS may enter into selling agreements
with broker-dealers which are registered under the 1934 Act and/or authorized by
applicable law or exemptions to sell the Contracts. Any such contractual
arrangement is expressly made subject to this Agreement, and ALFS will at all
times be responsible to ALICNY for supervision of compliance with federal
securities laws regarding distribution of the Contracts.
ARTICLE II
ALICNY'S DUTIES AND OBLIGATIONS
2.01 ALICNY is validly existing as a stock life insurance company in good
standing under the laws of the State of New York, and has been duly qualified
for the transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business.
2.02 ALICNY represents that registration statements for each of the Contracts
identified in Attachment A shall have been filed with the Securities and
Exchange Commission ("SEC") in the form previously delivered to ALFS and that
copies of any and all amendments thereto will be forwarded to ALFS at the time
that they are filed with the SEC.
2.03 The registration statement and any further amendments or supplements
thereto will, when they became effective, conform in all material respects to
the requirements of the Securities Act of 1933 (the "1933 Act") and the 1940
Act, as applicable, and the rules and regulations of the Commission under such
Acts and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this representation
and warranty shall not apply to any statement or omission made in reliance upon
and in conformity with information furnished in writing to ALICNY by ALFS
expressly for use therein.
2.04 ALICNY shall be responsible for the licensing and appointing of registered
representatives of Selling Broker-Dealers as required by state insurance laws.
ARTICLE III
RECORDS
3.01 ALFS shall keep, in a manner and form approved by ALICNY and in accordance
with Rules 17a-3 and 17a-4 under the 1934 Act, accurate records and books of
account as required to be maintained by a registered broker-dealer, acting as
principal underwriter, of all transactions entered into on behalf of ALICNY with
respect its activities under this Agreement. ALFS shall make such records of
account available for inspection by the SEC and ALICNY shall have the right to
inspect, make copies of or take possession of such records and books of account
at any time upon demand.
3.02 Subject to applicable SEC or NASD restrictions, ALICNY will send
confirmations of Contract transactions to Contract owners. ALICNY will make such
confirmations and records of transactions available to ALFS upon request. ALICNY
will also maintain Contract Owner records on behalf of ALFS to the extent
permitted by applicable securities law.
3.03 ALFS and ALICNY shall keep confidential the records, books of account and
other information concerning the Contract owners, annuitants, insureds,
beneficiaries or any persons who have rights arising out of the Contracts. ALFS
or ALICNY may disclose the Records and such information only if the other has
authorized disclosure and if the disclosure is required by applicable law. In
the event ALFS or ALICNY is served with a subpoena, court order or demand from a
regulatory organization which mandates disclosure of the Records or such
information, such party must notify the other and allow such other party
sufficient time to authorize disclosure or to intervene in the judicial
proceeding or matter so as to protect its interest.
3.04 Unless otherwise agreed to, no party to this Agreement shall voluntarily
disclose to any third party, any books, reference manuals, instructions,
information or data which concern the other party's business and which are
exchanged during the negotiation and performance of this Agreement. When this
Agreement terminates or expires, the parties shall return all such books,
reference manuals, instructions, information or data in their possession.
3.05 For the purpose of determining the other party's compliance with this
Agreement, each party to this Agreement shall have reasonable access during
normal business hours to any records and books of account which concern the
Contracts and which are maintained by the other party.
3.06 Both ALICNY and ALFS agree to keep all information required by applicable
laws, to maintain the books, accounts and records as to clearly and accurately
disclose the precise nature and details of the transaction and to assist one
another in the timely perpetration of any reports required by law.
3.07 ALFS and ALICNY shall furnish to the other any reports and information
which the other may request for the purpose of meeting reporting and
recordkeeping requirements under the laws of Illinois or any other state or
jurisdiction.
<PAGE>
ARTICLE IV
SALES MATERIALS
4.01 ALFS will utilize the currently effective prospectus relating to the
Contracts in connections with its underwriting, marketing and distribution
efforts. As to other types of sales material, ALFS hereby agrees and will
require Selling Broker-Dealers to agree to use only sales materials which have
been authorized for use by ALICNY, which conform to the requirements of federal
and state laws and regulations, and which have been filed where necessary with
the appropriate regulatory authorities including the NASD.
4.02 ALFS will not distribute any prospectus, sales literature or any other
printed matter or material in the underwriting and distribution or any Contract
if, to the knowledge of ALFS, any of the foregoing misstates the duties,
obligation or liabilities of ALICNY or ALFS.
ARTICLE V
COMPENSATION
5.01 ALICNY shall pay to ALFS commissions described in Attachment B, attached
hereto and made a part hereof. ALFS shall not be obligated to pay another
broker/dealer for sales of Contracts pursuant to its selling agreement with such
broker/dealer until ALFS has received its commissions for the sale of such
Contracts from ALICNY.
5.02 In compensating ALFS, ALICNY reserves the right to withhold commissions
from ALFS if it determines ALFS is not paying commissions to its Selling
Broker-Dealers in accordance with applicable laws.
5.03 ALFS shall direct how commissions are paid, provided such direction is in
accordance with applicable law.
5.04 ALICNY agrees to pay ALFS for direct expenses incurred on behalf of ALICNY.
Such direct expenses shall include, but not be limited to, the costs of goods
and services purchased from outside vendors, travel expenses and state and
federal regulatory fees incurred on behalf of ALICNY.
5.05 ALFS shall present a statement after the end of the quarter showing the
apportionment of services rendered and the direct expenses incurred. Settlements
are due and payable within thirty days.
ARTICLE VI
UNDERWRITING TERMS
6.01 ALFS makes no representations or warranties regarding the number of
contracts to be sold by Selling Broker-Dealer and the registered representatives
of Selling Broker-Dealer or the amount to be paid thereunder. ALFS does,
however, represent that it will actively engage in its duties under this
Agreement on a continuous basis while there is an effective Registration
statement with the SEC.
6.02 ALFS will use its best efforts to ensure that the Contracts shall be
offered for sale by registered broker-dealers and registered representatives
(who are duly licensed as insurance agents) on the terms described in the
currently effective prospectus describing such Contracts.
<PAGE>
6.03 ALICNY will use its best efforts to assure that the Contracts are
continuously registered under the 1933 Act (and under any applicable state "blue
sky" laws) and to file for approval under state insurance laws when necessary.
ARTICLE VII
LEGAL AND REGULATORY ACTIONS
7.01 ALICNY agrees to advise ALFS immediately of:
any request by the SEC for amendment of the Registration statement or for
additional information relating to the Contracts;
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration statement relating to the Contracts or the initiation of any
proceedings for that purpose; and
the happening of any known material event which makes untrue any statement made
in the Registration statement relating to the Contracts or which requires the
making of a change therein in order to make any statement made therein not
misleading.
7.02 Each of the undersigned parties agrees to notify the other in writing upon
being apprised of the institution of any proceeding, investigation or hearing
involving the offer or sale of the subject Contracts.
7.03 During any legal action or inquiry, ALICNY will furnish to ALFS such
information with respect to the Contracts in such form and signed by such of its
officers as ALFS may reasonably request and will warrant that the statements
therein contained when so signed are true and correct.
7.04 If changes in insurance laws or regulations could reasonably be expected to
affect the sales and administration of Contracts under this Agreement, ALICNY
shall notify ALFS within a reasonable time after ALICNY receives notice of those
changes. Such notice shall be in writing except, if circumstances so require,
the notice may be communicated by telephone or facsimile and confirmed in
writing.
<PAGE>
ARTICLE VIII
TERMINATION
8.01 This Agreement shall terminate at either Party's option, without penalty:
(a) without cause, on not less than 180 days' prior written notice to the
other Party;
(b) upon the mutual written consent of the Parties;
(c) upon written notice of one Party to the other in the event of bankruptcy
or insolvency of the Party to which notice is given;
(d) upon the suspension or revocation of any material license or permit
held by a Party by the appropriate governmental agency or authority;
however, such termination shall extend only to the jurisdiction(s)
where the Party is prohibited from doing business; or
(e) upon the finding by any regulatory body in a formal proceeding of
material wrongdoing by a Party regarding its duties under this Agreement.
8.02 If either Party breaches this Agreement or is in default in the performance
of any of its duties and obligations hereunder (the "defaulting Party"), the
non-defaulting Party may give written notice thereof to the defaulting Party,
and if such breach or default is not remedied within 60 days after such written
notice is given, then the non-defaulting Party may terminate this Agreement by
giving 30 days' prior written notice of such termination to the defaulting
Party.
8.03 The Parties agree to cooperate and give reasonable assistance to one
another in effecting an orderly transition following termination.
ARTICLE IX
INDEMNIFICATION
9.01 Scope of Indemnification
(a) Each Party (the "Indemnifying Party") agrees to indemnify and hold harmless
the other (the "Indemnified Party") against any loss, liability, claim, damage
or expense (including the reasonable cost of investigating or defending any
alleged loss, liability, claim, damage or expense, and reasonable counsel fees
incurred in connection therewith) arising by reason of any person's acquiring
any Contract, which may be based upon any law:
(i) on the ground that the Indemnifying Party, its directors, officers,
employees, agents, or subcontractors failed to comply with any applicable laws
and regulations in connection with its rendering of duties or services under
this Agreement; or
(ii) on the ground of negligence or misconduct by the Indemnifying
Party or its directors, officers, employees, agents, or subcontractors, in the
performance of its duties hereunder, or breach by the Indemnifying Party of any
representation or warranty hereunder.
The foregoing indemnities shall, upon the same terms and conditions, extend to
and inure to the benefit of each director, officer and employee of the
Indemnified Party and any person controlling or controlled by the Indemnified
Party within the meaning of Section 15 of the Securities Act of 1933 or Section
20 of the 1934 Act.
<PAGE>
(b) In no case shall the indemnity in favor of the Indemnified Party, including
such controlling or controlled persons, be deemed to protect the Indemnified
Party against any liability to the Indemnifying Party to which it would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement. In addition, in no case
shall the Indemnifying Party be liable under its indemnity agreement contained
in Section 4.1(a) hereof with respect to any claim made against an Indemnified
Party, unless the Indemnified Party shall have notified the Indemnifying Party
in writing by fax or overnight mail giving information of the nature of the
claim within two (2) business days after the summons or other first legal
process shall have been served upon the Indemnified Party (or after the
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Indemnifying Party of any such claim shall not
relieve it from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of its indemnity agreement
contained in Section 4.1(a) hereof. The Indemnifying Party shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce such liability. If the Indemnifying
Party elects to assume the defense, such defense shall be conducted by counsel
chosen by it and satisfactory to the Indemnified Party. In the event the
Indemnifying Party elects to assume the defense of any such suit and retains
such counsel, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, but, in case the Indemnifying Party does not
elect to assume the defense of any such suit, it shall reimburse the Indemnified
Party for the reasonable fees and expense of any counsel retained by the
Indemnified Party. The Indemnifying Party shall promptly notify the Indemnified
Party of the commencement of any litigation or proceedings against the
Indemnifying Party or any of its officers, directors, employees or
subcontractors in connection with the issuance or sale of the Contracts.
9.02 Limitation on Liability
In no event shall either Party be liable for lost profits or for exemplary,
special, punitive or consequential damages alleged to have been sustained by the
other Party, as opposed to a third party.
<PAGE>
9.03 Injunctive Relief
The Parties each agree that monetary damages may be an inadequate remedy in the
event of a breach by either Party of any of the covenants in this Agreement, and
that any such breach by a Party may cause the other Party great and irreparable
injury and damage. Accordingly, nothing in this Agreement shall limit a Party's
right to obtain equitable relief when appropriate.
ARTICLE X
GENERAL PROVISIONS
10.01 This Agreement shall be subject to the laws of the state of New York.
10.02 This Agreement, along with any schedules attached hereto and incorporated
herein by reference, may be amended from time to time by mutual agreement and
consent of the under signed parties.
10.03 In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be
duly executed, to be effective as of ____________ __, 2000.
Allstate Life Insurance Company of New York
By: ___________________________ ______________________
Title Date
ALFS, Inc.
By: ___________________________ _______________________
Title Date
ATTACHMENT A
Insurance or Investment Contract Effective Date Form #
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The Custom Annuity 9/15/00
ATTACHMENT B
