AMENDED AND RESTATED
PARTICIPATION AGREEMENT
BY AND AMONG
AID ASSOCIATION FOR LUTHERANS
AND
AAL VARIABLE ANNUITY ACCOUNT I
AND
AAL VARIABLE ANNUITY ACCOUNT II
AND
AAL VARIABLE LIFE ACCOUNT I
AND
AAL VARIABLE PRODUCT SERIES FUND, INC.,
DATED SEPTEMBER 27, 1994, AMENDED DECEMBER 11, 1997
AND AS AMENDED MARCH 15, 1999
TABLE OF CONTENTS
Page
1. Sale of FUND Shares......................................................4
2. Representations and Warranties...........................................5
3. Prospectus and Proxy Statements: Voting..................................6
4. Sales Material and Information...........................................7
5. Fees and Expenses........................................................8
6. Diversification..........................................................8
7. Monitoring of Material Irreconcilable Conflicts..........................9
8. Indemnification..........................................................11
9. Term and Termination of This Agreement...................................14
10. Notices..................................................................16
11. Miscellaneous............................................................16
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, is made and entered into as of this 15th day of
March, 1999, by and among AID ASSOCIATION FOR LUTHERANS ("AAL"), on its own
behalf and on behalf of AAL VARIABLE ANNUITY ACCOUNT I, AAL VARIABLE ANNUITY
ACCOUNT II, and AAL VARIABLE LIFE ACCOUNT I (the "ACCOUNTS"), and AAL VARIABLE
PRODUCT SERIES FUND, INC. (the "FUND"), (collectively the "Parties").
WITNESSETH:
WHEREAS, AAL is a fraternal benefit society organized under the laws of the
State of Wisconsin engaged in the writing of life insurance, annuity contracts,
and other insurance products, and serves as sponsor and depositor of the
ACCOUNTS and as investment adviser of the FUND registered under the Investment
Advisers Act of 1940;
WHEREAS, the ACCOUNTS are legally segregated asset accounts of AAL,
established pursuant to the laws of the State of Wisconsin, and currently
consists of seven subaccounts (the "Subaccounts"), for the purpose of funding
certain variable universal life insurance contracts and variable annuity
contracts (collectively the "Certificates");
WHEREAS, the FUND, is registered with the Securities and Exchange
Commission (the "SEC"), as a diversified, open-end management investment company
under the Investment Company Act of 1940 (the "1940 Act"), and its shares are
registered with the SEC under the Securities Act of 1933 (the "1933 Act");
WHEREAS, the FUND is a series company, meaning its Board of Directors may
designate various series ("Portfolios") into which the FUND's authorized shares
are to be divided from time to time, with each such Portfolio consisting of a
specific number of the FUND's authorized shares, representing an interest in a
separate portfolio of securities and other assets, and having its own investment
objectives, policies and restrictions (the Board of Directors currently has
designated seven such Portfolios);
WHEREAS, to the extent permitted by applicable insurance, tax and other
laws and regulations, AAL intends to purchase shares in the FUND on behalf of
the ACCOUNTS to fund the Certificates or on its own behalf for related purposes,
and the FUND is authorized to sell such shares to the ACCOUNTS and to AAL at net
asset value;
WHEREAS, the FUND has entered into an Investment Advisory Agreement with
AAL, dated the twenty-seventh day of September, 1994, as amended, wherein AAL
has agreed to serve as investment adviser to the FUND, and to accept certain
obligations of the FUND as set forth herein, i.e., to compute the daily net
asset value and the net asset value per share for each Portfolio and to comply
with Subchapter M and Section 817(h) of the Internal Revenue Code of 1986 (the
"Code");
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein, and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the Parties agree as follows:
1. Sale of FUND Shares
1.1 The Certificates funded through the ACCOUNTS will provide for the
allocation of net amounts among certain Subaccounts for investment in
such shares of the Portfolios as may be offered from time to time in
the prospectus of the ACCOUNTS for the Certificates. The selection of
the particular Subaccount is to be made by the Certificate owner, and
such selection may be changed in accordance with the terms of the
Certificates.
1.2 The FUND will sell to AAL those shares of each available Portfolio
that AAL orders based on transactions under Certificates, effecting
such orders on a daily basis at the Portfolio's net asset value per
share next computed as provided in the FUND prospectus.
1.3 The Board of Directors of the FUND (the "Board") may refuse to sell
shares of any Portfolio to AAL, or suspend or terminate the offering
of shares of any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole
discretion of the Board, acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of the FUND.
1.4 The FUND agrees that its shares will be sold only to: (a) AAL, on its
own behalf and on behalf of separate accounts that it establishes from
time to time and maintains to fund variable annuity contracts and
variable life insurance contracts of AAL, including the ACCOUNTS; (b)
other life insurance companies, whether affiliated or unaffiliated
with AAL, on behalf of separate accounts funding variable annuity
contracts and variable life insurance contracts of such other
insurance companies; and (c) qualified pension or retirement plans,
whether for the benefit of employees of AAL and/or its affiliates or
for the benefit of unaffiliated entities ("Qualified Plans"). AAL
separate accounts (including the ACCOUNTS) and separate accounts of
other life insurance companies eligible to purchase shares of the FUND
are referred to in this Agreement as "Separate Accounts." No shares of
any Portfolio will be sold to the general public or to any life
insurance company (on its own behalf, as opposed to a Separate Account
maintained by such other insurance company) other than AAL.
1.5 The FUND will redeem for cash from AAL those full or fractional shares
of each Portfolio that AAL requests based on transactions under
Certificates, effecting such requests on a daily basis at the
Portfolio's net asset value per share next computed as provided in the
FUND prospectus.
1.6 Issuance and transfer of the FUND's shares will be by book entry only.
Stock certificates will not be issued to AAL. Shares ordered from the
FUND will be recorded in an appropriate title for AAL.
1.7 The FUND shall furnish notice promptly to AAL of any income, dividends
or capital gain distributions payable on the shares of any Portfolio.
AAL hereby elects to receive all such income, dividends and capital
gain distributions as are payable on FUND shares in additional shares
of that Portfolio. AAL reserves the right to revoke this election and
to receive all such income, dividends and capital gain distributions
in cash. The FUND shall notify AAL of the number of shares so issued
as payment of such income, dividends and distributions.
1.8 The FUND shall make the net asset value per share for each Portfolio
available to AAL on a daily basis, as soon as reasonably practical
after the net asset value per share is calculated.
1.9 The FUND may establish additional Portfolios to provide additional
funding media for the Certificates, or delete, combine, or modify
existing Portfolios. The shares of any additional Portfolio may be
made available to the ACCOUNTS by the FUND, pursuant to the terms of
this Agreement, and any applicable reference to any Portfolio, the
FUND or its shares herein shall include a reference to any such
Portfolio.
2. Representations and Warranties
2.1 AAL represents and warrants that interests in the ACCOUNTS under the
Certificates are or will be registered under the 1933 Act to the
extent required by the 1933 Act, that the Certificates will be issued
and sold in compliance in all material respects with all applicable
federal and state laws and that the sale of the Certificates will
comply in all material respects with state insurance and federal
securities law suitability requirements. AAL further represents and
warrants that it is a fraternal benefit society organized under the
laws of the State of Wisconsin and engaged in the writing of life
insurance, annuity contracts, and other insurance products; that it
has legally and validly established its ACCOUNTS as segregated asset
accounts under Wisconsin insurance law; and that it has registered or
will register the ACCOUNTS as unit investment trusts in accordance
with the provisions of the 1940 Act to serve as segregated investment
accounts for the Certificates, to the extent required by the 0000 Xxx.
2.2 AAL represents and warrants that any interests in the ACCOUNTS being
offered for sale under the Certificates are or will be registered
under the 1933 Act to the extent required by the 1933 Act, that the
Certificates will be issued and sold in compliance in all material
respects with all applicable federal and state laws, and that the sale
of the Certificates will comply in all material respects with state
insurance law, and federal securities laws, including the rules of the
National Association of Securities Dealers, Inc. ("NASD").
2.3 The FUND represents and warrants that its shares sold pursuant to this
Agreement are or will be registered under the 1933 Act to the extent
required by the 1933 Act, duly authorized for issuance and sold in
compliance with the laws of the state of Maryland and all applicable
federal securities laws and that the FUND is or will be registered
under the 1940 Act to the extent required by the 1940 Act. The FUND
will amend the registration statement for its shares under the 1933
Act, as well as its registration statement under the 1940 Act, as
required in order to effect the continuous offering of its shares. The
FUND will register or qualify the shares for sale in accordance with
the laws of the various states only if and to the extent deemed
advisable by the FUND.
2.4 AAL represents and warrants that its Certificates are currently
treated as annuity contracts and universal life insurance contracts
under applicable provisions of the Code and that it will make every
effort to maintain such treatment.
2.5 The FUND makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses) complies
with the insurance laws or regulations of the various states. On the
request of any state insurance department, the FUND agrees to provide
and furnish to the department any information or reports in connection
with the FUND's operations or services that will allow the insurance
department to determine if the variable product operations of AAL are
being conducted in a manner consistent with state laws. The FUND
intends to comply with the insurance laws of any relevant state
regarding any Portfolio's investment objectives, policies and
restrictions to the extent that AAL advises the FUND, in writing, of
such laws or any change in such laws, provided the FUND's Board of
Directors and/or shareholders approve such changes as required by the
0000 Xxx.
2.6 The FUND represents and warrants that each of its Portfolios will
qualify as a regulated investment company under Subchapter M of the
Code and that the investments of each of its Portfolios will comply
with the diversification requirements of Section 817(h) of the Code
and the regulations thereunder, and that it will notify AAL
immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
3. Prospectus and Proxy Statements: Voting
3.1 The FUND will provide such documentation (including a final copy of
any new prospectus, statement of additional information ("SAI"), or
supplement) and other assistance as is reasonably necessary in order
for AAL or its designee to timely distribute the current FUND
prospectus, SAI and any supplement thereto, or, in the alternative, to
have the prospectus of the ACCOUNTS for the Certificates and the
FUND's prospectus printed together in one document once each year (or
more frequently if the prospectus for the FUND is amended) (such FUND
prospectus printing to be at the FUND's expense, as provided in
Section 5.1).
3.2 The FUND will provide such documentation (including a final copy of
any proxy material, report to shareholders, and other communication to
shareholders) and other assistance as is reasonably necessary for AAL
or its designee to timely distribute the proxy material, report to
shareholders, and other communication (such printing and distribution
to be the FUND's expense, as provided in Section 5.1).
3.3 If, and to the extent required by law, AAL shall, at AAL's expense, as
provided in Section 5.2:
(a) solicit voting instructions from Certificate owners;
(b) vote Portfolio shares in accordance with instructions received
from Certificate owners;
(c) vote Portfolio shares for which no instructions have been
received, as well as Portfolio shares attributable to AAL other
than under Certificates, in the same proportion as shares of such
Portfolio for which instructions have been received, so long as
and to the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges. AAL reserves the
right to vote Portfolio shares held in any segregated asset
accounts or in general accounts in its own right, to the extent
permitted by law.
3.4 The FUND reserves the right to take all actions, including but not
limited to the dissolution, merger, and sale of all assets of the FUND
solely upon the authorization of its Board and/or shareholders as
required by the 1940 Act.
4. Sales Material and Information
4.1 AAL or its designee will furnish, or will cause to be furnished, to
the FUND or its designee, each piece of sales literature or other
promotional material in which the FUND or AAL is named, at least
fifteen (15) days prior to its intended use. No such material will be
used if the FUND or its designee objects to such intended use within
fifteen (15) days after receipt of such material.
4.2 AAL will not give any information or make any representation or
statement, or cause such information to be given or representation to
be made, on behalf of the FUND or concerning any Portfolio in
connection with the sale of the Certificates other than the
information or representations contained in the registration
statement, prospectus, and SAI for FUND shares, as such registration
statement, prospectus, and SAI may be amended or supplemented from
time to time, or in reports or proxy materials for the FUND, or in
sales literature or other promotional material approved by the FUND or
its designee, except with the permission of the FUND or its designee.
4.3 The FUND or its designee will furnish, or will cause to be furnished,
to AAL or its designee, each piece of sales literature or other
promotional material of the FUND in which AAL and/or its ACCOUNTS is
named, at least fifteen (15) days prior to its intended use. No such
material will be used if AAL or its designee objects to such intended
use within fifteen (15) days after receipt of such material.
4.4 The FUND will not give any information or make any representations or
statements, or cause such information to be given or representations
to be made, on behalf of AAL or concerning AAL, its ACCOUNTS or its
Certificates other than the information or representations contained
in a registration statement or prospectus for such ACCOUNTS, as such
registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for the ACCOUNTS that are
in the public domain or approved by AAL for distribution to owners, or
in sales literature or other promotional material approved by AAL or
its designee, except with the permission of AAL or its designee .
4.5 The FUND will provide to AAL one complete copy of all registration
statements, prospectuses, SAI's, reports, proxy material, sales
literature and other promotional material, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the FUND or its shares, contemporaneously
with the filing of such document with the SEC or other regulatory
authorities.
4.6 AAL will provide to the FUND one complete copy of all registration
statements, prospectuses, SAI's, reports, solicitations for voting
instructions, sales literature and other promotional material,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the ACCOUNTS or its
Certificates, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
5. Fees and Expenses
5.1 The FUND will pay all expenses incident to the FUND's performance
under this Agreement. In addition to the investment advisory fee,
subject to the expense reimbursement arrangement discussed below, each
Portfolio will bear all of its operating expenses that are not
specifically assumed by AAL, including the following: (i) interest and
taxes (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses for those Directors who are not "interested"
persons under Section 2(a)(19) of the Act; (v) independent legal and
audit expenses; (vi) fees and expenses of the FUND's custodian,
shareholder servicing or transfer agent and accounting services agent;
(vii) expenses incident to the issuance of its shares, including stock
certificates and issuance of shares on the payment of, or reinvestment
of dividends; (viii) fees and expenses incident to the registration
under Federal or state securities laws of the FUND or its shares; (ix)
FUND or portfolio organizational expenses; (x) FUND expenses of
preparing, printing and mailing reports and notices, proxy material
and prospectuses to shareholders of the FUND; (xi) all other expenses
incidental to holding meetings of the FUND's shareholders; (xii) dues
or assessments of or contributions to the Investment Company Institute
or any successor or other industry association; (xiii) such
non-recurring expenses as may arise, including litigation affecting
the FUND and the legal obligations which the FUND may have to
indemnify its officers and Directors with respect thereto; and (xiv)
cost of daily valuation of each of the Portfolio's securities and net
asset value per share.
5.2 AAL will pay all expenses incident to AAL's performance under this
Agreement. In addition, AAL will bear the expenses of printing and
distributing to its Certificate owners the FUND proxy materials, proxy
cards and voting instruction forms (collectively "proxy information"),
tabulating the results of proxy solicitations to its Certificate
owners, printing and distributing to its Certificate owners the FUND
prospectus, SAI, supplement, proxy material, report to shareholders,
and other communication to shareholders, and any expenses associated
with administration of its Certificates.
6. Diversification
6.1 The Portfolios will at all times invest money from the Certificates in
such a manner as to ensure that the Certificates will be treated as
variable life insurance contracts and variable annuity contracts under
the Code and the regulations thereunder insofar as such investment is
required for such treatment. Without limiting the scope of the
foregoing, the Portfolios will at all times comply with Section 817(h)
of the Code and Treasury Regulations Section 1.817-5 relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such
Section or Regulations.
6.2 The FUND shall furnish to AAL on a regular basis reports of all of the
investments of each Portfolio in a form sufficient to permit AAL to
determine whether each Portfolio is in compliance with the
diversification requirements of Section 817(h) of the Code and the
Regulations thereunder and shall take immediate action, on learning
through its own monitoring, or on advice from AAL, that any Portfolio
is not in compliance with such requirements, to return to compliance
with such requirements.
6.3 If any Portfolio is found not to comply with the diversification
requirements at the end of a calendar quarter and the 30-day grace
period allowed under the Regulations, the FUND shall take all
appropriate efforts immediately to restore any such Portfolio to
compliance and shall fully cooperate with AAL in any effort to correct
such diversification failure under procedures established by the
Internal Revenue Service, including those set forth in Revenue
Procedure 92-25.
7. Monitoring for Material Irreconcilable Conflicts
7.1 The FUND's Board of Directors will monitor the FUND for the existence
of any material irreconcilable conflict between and among the
interests of the certificateholders of the Separate Accounts
(including the ACCOUNTS) investing in the FUND and the participants of
any of the Qualified Plans investing in the FUND. A material
irreconcilable conflict may arise for a variety of reasons, including:
(a) action by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling , private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investment of the FUND are being managed; (e) a difference in voting
instructions given by the Separate Accounts vis-a-vis voting
instructions provided by the trustees of the Qualified Plans; (f) a
decision by AAL or another life insurance company to disregard the
voting instructions of Certificate owners in one or more Separate
Accounts; or (g) if applicable, a decision by the trustee of a
Qualified Plan to disregard the voting instructions of the
participants of such Qualified Plan. A determination by the FUND's
Board that a material irreconcilable conflict exists will be a final
determination.
7.2 If it is determined by a majority of the FUND's Board, or by a
majority of its disinterested directors, that a material
irreconcilable conflict exists, AAL (on behalf of the ACCOUNTS) shall,
at its expense and to the extent reasonably practicable (as determined
by a majority of the disinterested directors of the FUND), take
whatever steps are necessary to remedy or eliminate the material
irreconcilable conflict. Such steps could include: (a) withdrawing the
assets allocable to some or all of the ACCOUNTS from the FUND or any
Portfolio of the FUND and reinvesting such assets in a different
investment medium, including another portfolio of the FUND; (b)
submitting the question as to whether such segregation should be
implemented to a vote of all affected Certificate owners and, as
appropriate, segregating the assets of any appropriate (i.e., variable
annuity Certificate owners or variable life insurance Certificate
owners of one or more of AAL and any other insurance companies with
Separate Accounts investing in the FUND) that votes in favor of such
segregation, or offering to the affected Certificate owners the option
of making such change; or (c) establishing a new registered management
investment company or managed separate account. If a material
irreconcilable conflict arises because of a decision by AAL to
disregard voting instructions of owners of Certificates in one or more
of the ACCOUNTS, and that decision represents a minority position or
would preclude a majority vote with respect to the vote being taken by
shareholders of the FUND, then AAL shall, at the election and
direction of the FUND's Board, withdraw each affected ACCOUNT's
investment in the FUND (but no charge or penalty shall be imposed as a
result of such withdrawal).
7.3 AAL is responsible, to the extent permitted by applicable law, for
taking remedial action on behalf of the affected ACCOUNT(s) in the
event that the FUND's Board determines a material irreconcilable
conflict exists. AAL will take remedial action only as it pertains to
assets of the affected ACCOUNT(s) and in accordance with its fiduciary
responsibility to Certificate owners in such affected ACCOUNT(s). AAL,
as the sponsor of the affected ACCOUNT(s), will be responsible for the
cost of any such remedial action. For the purpose of this Section, a
majority of the disinterested members of the FUND's Board will
determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event shall the FUND, or AAL
in its capacity as advisor to the FUND, be required to establish a
Portfolio or new funding medium for any Certificate or any ACCOUNT.
Nor, in its capacity as sponsor of any ACCOUNT, shall AAL be required
to establish a new funding medium for any Certificate or any ACCOUNT
if any offer to do so has been declined by a vote of a majority of the
Certificate owners materially and adversely affected by the material
irreconcilable conflict.
7.4 The FUND promptly shall notify AAL in writing of any determination by
the FUND's Board as to the existence of a material irreconcilable
conflict and its implications
7.5 All reports of potential or existing conflicts received by the FUND's
Board and all Board actions with regard to or determining the
existence of a conflict of interest, notifying AAL of a conflict, and
determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the FUND's Board
or other appropriate records, and such minutes or other records will
be made available to the SEC upon request.
7.6 The FUND will disclose in its prospectus that (a) shares of the FUND
may be offered to Separate Accounts and Qualified Plans; (b) material
irreconcilable conflicts may arise between the interest of various
certificateholders investing in the Separate Accounts and the
interests of participants in the Qualified Plans investing in the
FUND; and (c) the FUND's Board will monitor events in order to
identify the existence of any material conflict and determine what
action, if any, should be taken in response to such material
irreconcilable conflict.
7.7 No less than annually, AAL will submit to the FUND's Board such
reports, materials and data as the Board may reasonably request so
that the Board may carry out fully its obligations under this Section.
Such reports, materials and data will be submitted more frequently if
deemed appropriate by the FUND's Board. In any event, AAL will
promptly notify the FUND's Board in writing if it becomes aware of any
facts or circumstances that could give rise to a material
irreconcilable conflict between the interests of various Certificate
owners in the ACCOUNTS and the interests of Qualified Plan
participants investing in the FUND. All reports submitted to the
FUND's Board under this Section 7.7 shall include all information
reasonably necessary for the Board to consider the conflict issues
raised. In this regard, AAL promptly shall notify the FUND's Board
whenever AAL has determined to disregard voting instructions of the
Certificate owners of any ACCOUNT(s) on any matter submitted to a vote
of shareholders of the FUND.
8. Indemnification
8.1 Indemnification By AAL
(a) AAL will indemnify and hold harmless the FUND and each of its
Directors, officers, and employees and each person, if any, who
controls the FUND within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of AAL) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, and
which:
(i) arise out of or are based upon any failure by AAL to perform
the duties or assume the general business responsibilities
of AAL with respect to the design, drafting, state
approvals, issuance, servicing and administration of the
Certificates, or the establishment and maintenance of the
ACCOUNTS; or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement, prospectus, or SAI for the
Certificates, or the ACCOUNTS, or contained in the
Certificates or sales literature for the Certificates (or
any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this Agreement to indemnify
will not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made
in reliance upon and in conformity with information
furnished in writing to AAL by or on behalf of the FUND for
use in the registration statement, prospectus, or SAI for
the Certificates or the ACCOUNTS or in the Certificates or
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Certificates or FUND shares; or
(iii)arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI, or
sales literature of the FUND not supplied by AAL, or persons
under its control) or wrongful conduct of AAL or persons
under its control, or failure to supervise persons under
AAL's control or entities or individuals with which AAL
contracts, with respect to the sale or distribution of the
Certificates or FUND shares; or
(iv) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the FUND or
any amendment thereof or supplement thereto or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in
writing to the FUND by or on behalf of AAL; or
(v) arise out of or result from any failure by AAL to provide
the services and furnish the materials contemplated by this
Agreement; or
(vi) arise out of or result from any material breach of any
representation and/or warranty made by AAL in this Agreement
or arise out of or result from any other material breach of
this Agreement by AAL, as limited by and in accordance with
the provisions of Sections 8.1(b). and 8.1(c) hereof.
(b) AAL will not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the FUND,
whichever is applicable.
(c) AAL will not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified AAL in writing within
a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any
designated agent), but failure to notify AAL of any such claim
will not relieve AAL from any liability that it may have to the
Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, AAL shall
be entitled to participate, at its own expense, in the defense
thereof. AAL also will be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from AAL to such party of AAL's election to assume the
defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and AAL will
not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable
costs of investigation.
(d) The Indemnified Party will promptly notify AAL of the
commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
8.2 Indemnification By the FUND
(a) The FUND will indemnify and hold harmless AAL and each of its
directors, officers and employees and each person, if any, who
controls AAL within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of FUND) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, which:
(i) arise out of or are based upon any failure by the FUND to
perform the duties or assume the general business
responsibilities required by this Agreement with respect to
the sale of shares of the FUND to AAL; or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the sales literature for the FUND and/or the Certificates,
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify will not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished in writing to the FUND by or on behalf of AAL for
use in the registration statement, prospectus, or SAI for
use in the sales literature or otherwise for use in
connection with the sale of Portfolio shares; or
(iii)arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI, or
sales literature of the FUND not supplied by the FUND, or
persons under its control) or wrongful conduct of the FUND
or persons under its control, or failure to supervise
persons under the FUND's control or entities or individuals
with which the FUND contracts, with respect to the sale or
distribution of the Certificates or FUND shares; or
(iv) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the FUND or
any amendment thereof or supplement thereto or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in
writing to AAL by or on behalf of AAL; or
(v) arise out of or result from any failure by the FUND to
provide the services and furnish the materials contemplated
by this Agreement; or
(vi) arise out of or result from any material breach of any
representation and/or warranty made by the FUND in this
Agreement or arise out of or result from any other material
breach of this Agreement by the FUND, except to the extent
provided in Section 8.2(b) and 8.2(c) hereof.
(b) The FUND will not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would be subject by
reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the
FUND, whichever is applicable.
(c) The FUND will not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the FUND in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the FUND of any such
claim will not relieve the FUND from any liability that it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties,
the FUND shall be entitled to participate, at its own expense, in
the defense thereof. The FUND also will be entitled to assume the
defense thereof, with counsel satisfactory to the party named in
the action. After notice from the FUND to such party of the
FUND's election to assume the defense thereof, the Indemnified
Party will bear the fees and expenses of any additional counsel
retained by it, and the FUND will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
(d) The Indemnified Party will promptly notify the FUND of the
commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
9. Term and Termination Of This Agreement
9.1 This Agreement will terminate:
(a) as to any party hereto, at the option of that party, upon prior
written notice to the other party as provided in Section 9.3
herein; or
(b) at the option of the FUND in the event that formal administrative
proceedings are instituted against AAL by the NASD, the SEC, any
state securities or insurance commissioner or any other
regulatory body regarding AAL's duties under this Agreement or
related to the sale of the Certificates, the operation of the
ACCOUNTS, or the purchase of FUND shares, provided, however, that
the FUND determines, in its sole judgment exercised in good
faith, that any such administrative proceedings will have a
material adverse effect upon the ability of AAL to perform its
obligations under this Agreement; or
(c) at the option of AAL in the event that formal administrative
proceedings are instituted against the FUND by the NASD, the SEC,
or any state securities or insurance commission or any other
regulatory body, regarding the FUND's duties under this Agreement
or related to the sale of FUND shares or the operation of the
FUND, provided, however, that AAL determines, in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability
of the FUND to perform its obligations under this Agreement; or
(d) at the option of AAL with respect to the ACCOUNTS, upon requisite
authority to substitute the shares of another investment company
for shares of the FUND in accordance with the terms of the
Certificates or in accordance with the ACCOUNTS investment policy
or standards of conduct; or
(e) at the option of AAL, in the event any of the FUND's shares are
not registered, issued, or sold in accordance with applicable
federal and any state law or such law precludes the use of such
shares as the underlying investment media of the Certificates
issued or to be issued by AAL; or
(f) at the option of AAL, if the FUND fails to meet the requirements
specified in Sections 2.3 or 2.6 hereof; or
(g) at the option of the FUND, if the investments of the ACCOUNTS
fail to satisfy the diversification requirements of the Code and
the regulations thereunder, or
(h) at the option of AAL, if the FUND dissolves or becomes otherwise
unable to sell shares to fund the ACCOUNTS.
9.2 It is understood and agreed that the right of any party hereto to terminate
this Agreement pursuant to Section 9.1(a) may be exercised for any reason
or for no reason.
9.3 Notice Requirement for Termination
No termination of this Agreement will be effective unless and until the party
terminating this Agreement gives prior written notice to the other party to this
Agreement of its intent to terminate, and such notice shall set forth the basis
for such termination. Furthermore,
(a) in the event that any termination is based upon the provisions of
Section 9.1(a) hereof, such prior written notice shall be given
at least one hundred eighty (180) days in advance of the
effective date of termination as required by such provision;
(b) in the event that any termination is based upon the provisions of
Section 9.1(b) or Section 9.1(c) hereof, such prior written
notice shall be given at least ninety (90) days in advance of the
effective date of termination;
(c) in the event that any termination is based upon the provisions of
Section 9.1(d) hereof, AAL will give at least sixty (60) days
prior written notice to the FUND of the date of any proposed
action to substitute FUND shares, including the filing of any
applicable exemptive application under the 1940 Act relating to
the ACCOUNTS; and AAL will provide the FUND with a copy of any
such exemptive application; and
(d) in the event that any termination is based upon the provisions of
Section 9.1(e), Section 9.1(f), or Section 9.1(g) hereof, such
prior written notice shall be given as soon as possible within
twenty-four (24) hours after the terminating party learns of the
event causing termination to be required.
9.4 Partial Termination
It is also understood that this Agreement may be terminated with regard to a
specific Portfolio or Portfolios of the FUND, or the entire FUND at the
discretion of the terminating party. Notwithstanding any termination of this
Agreement, the FUND, or any Portfolio, provided its shares are then available
for sale to any persons, shall at the option of AAL, continue to make available
additional shares of the FUND pursuant to the terms and conditions of this
Agreement, for all Certificates in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Certificates").
Specifically, without limitation, the owners of the Existing Certificates shall
be permitted to transfer or reallocate investments under the Certificates,
redeem investments in the FUND and/or invest in the FUND upon the making of
additional purchase payments under the Existing Certificates.
10. Notices
Any notice will be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to AAL: 0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxx
If to the FUND: 0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
11. Miscellaneous
11.1 This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Maryland, where
the sale of any FUND share shall be deemed to have been made;
provided, however, that if such laws or any of the provisions of this
Agreement conflict with applicable Provisions of the 1940 Act, the
latter shall control.
11.2 If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement will not be effected thereby.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the 15th day of March, 1999.
AID ASSOCIATION FOR LUTHERANS and
AAL VARIABLE ANNUITY ACCOUNT I,
AAL VARIABLE ANNUITY ACCOUNT II and
AAL VARIABLE LIFE ACCOUNT I
By: /s/Xxxx X. Xxxxxxx
-------------------------------------
Xxxx X. Xxxxxxx
President and Chief Executive Officer
By: /s/Xxxxxxx X. Xxx
-------------------------------------
Xxxxxxx X. Xxx
Senior Vice President,
Secretary and General Counsel
AAL VARIABLE PRODUCT SERIES FUND, INC.
By: /s/Xxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxx
President
By: /s/Xxxxxx Xxxxxxxxx
-------------------------------------
Xxxxxx Xxxxxxxxx
Secretary
