EXHIBIT (h)(2)
PARTICIPATION AGREEMENT
BY AND AMONG
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.,
SEI INVESTMENTS DISTRIBUTION CO.,
[______________] INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
___________ DISTRIBUTION COMPANY, INC.
TABLE OF CONTENTS
DESCRIPTION PAGE
----------- ----
Section 1. Available Funds 4
1.1 Availability 4
1.2 Addition, Deletion or Modification of Funds 4
1.3 No Sales to the General Public 4
Section 2. Processing Transactions 4
2.1 Timely Pricing and Orders 4
2.2 Timely Payments 5
2.3 Applicable Price 5
2.4 Dividends and Distributions 6
2.5 Book Entry 6
Section 3. Costs and Expenses 6
3.1 General 6
3.2 Registration 6
3.3 Other (Non-Sales-Related) 7
3.4 Other (Sales-Related) 7
3.5 Parties To Cooperate 7
Section 4. Legal Compliance 8
4.1 Tax Laws 8
4.2 Insurance and Certain Other Laws 10
4.3 Securities Laws 10
4.4 Notice of Certain Proceedings and Other Circumstances 12
4.5 Company To Provide Documents; Information About FAIP 12
4.6 FAIP To Provide Documents; Information About Company 13
DESCRIPTION PAGE
----------- ----
Section 5. Mixed and Shared Funding 15
5.1 General 15
5.2 Disinterested Directors 15
5.3 Monitoring for Material Irreconcilable Conflicts 15
5.4 Conflict Remedies 16
5.5 Notice to Company 18
5.6 Information Requested by Board of Directors 18
5.7 Compliance with SEC Rules 18
5.8 Other Requirements 18
Section 6. Termination 19
6.1 Events of Termination 19
6.2 Notice Requirement for Termination 20
6.3 Funds To Remain Available 20
6.4 Survival of Warranties and Indemnifications 20
6.5 Continuance of Agreement for Certain Purposes 21
Section 7. Parties To Cooperate Respecting Termination 21
Section 8. Assignment 21
Section 9. Notices 21
Section 10. Voting Procedures 22
Section 11. Foreign Tax Credits 23
Section 12. Indemnification 23
12.1 Of FAIP and SEI by Company and Contract Underwriter 23
12.2 Of Company and Contract Underwriter by FAIP and SEI 25
12.3 Effect of Notice 28
12.4 Successors 28
Section 13. Applicable Law 28
Section 14. Execution in Counterparts 28
Section 15. Severability 28
Section 16. Rights Cumulative 29
Section 17. Headings 29
Section 18. Confidentiality 29
Section 19. Parties to Cooperate 30
Section 20. Amendments 30
Section 21. Assignment 30
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of _________,
2000 ("Agreement"), by and among First American Insurance Portfolios, Inc., a
Minnesota corporation ("FAIP"); SEI Investments Distribution Co., a Delaware
corporation ("SEI"), [____________] Insurance Company, a __________ life
insurance company ("Company"), on behalf of itself and each of its segregated
asset accounts listed in Schedule A hereto, as the parties hereto may amend said
Schedule A from time to time (each, an "Account," and collectively, the
"Accounts"); and [______] Distribution Company, an affiliate of Company and the
principal underwriter of the Contracts ("Contract Underwriter") (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, FAIP is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, FAIP currently consists of three separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and may be sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, FAIP will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend said Schedule A from time to time (each a
"Fund"; reference herein to "Fund" includes reference to each Fund, to the
extent the context requires) available for purchase by the Accounts; and
WHEREAS, SEI is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, Company will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend said Schedule A from time to
time, which Contracts, if required by applicable law, will be registered under
the 1933 Act; and
WHEREAS, Company will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, Company will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
64
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Company intends to purchase Shares in one or more of the Funds on
behalf of the Accounts to fund the Contracts; and
WHEREAS, Contract Underwriter is a broker-dealer registered with the
SEC under the Securities Exchange Act of 1934 ("1934 Act") and a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
FAIP will make Shares of each Fund available to Company for purchase
and redemption on behalf of the Accounts at net asset value and with no sales
charges, subject to the terms and conditions of this Agreement. The Board of
Directors of FAIP may refuse to sell Shares of any Fund to any person, or
suspend or terminate the offering of Shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Directors acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such action is
deemed in the best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
FAIP represents and warrants that no shares of the Funds have been or
will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) FAIP or its designated agent will use its best efforts to
provide Company with the net asset value per Share for each
Fund by 6:00 p.m. Central Time on each Business Day. As used
herein, "Business Day" shall mean any day on which (i) the New
York Stock Exchange is open for regular trading, (ii) FAIP
calculates the Fund's net asset value, and (iii) Company is
open for business.
65
(b) Company will use the data provided by FAIP each Business Day
pursuant to paragraph (a) immediately above to calculate
Account unit values and to process transactions that receive
that same Business Day's Account unit values. Company will
perform such Account processing the same Business Day, and
will place corresponding orders to purchase or redeem Shares
with FAIP by 9:00 a.m. Central Time the following Business
Day; provided, however, that FAIP shall provide additional
time to Company in the event that FAIP is unable to meet the
6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that
FAIP takes to make the net asset values available to Company.
(c) With respect to payment of the purchase price by Company and
of redemption proceeds by FAIP, Company and FAIP shall net
purchase and redemption orders with respect to each Fund and
shall transmit one net payment per Fund in accordance with
Section 2.2, below.
(d) If FAIP provides materially incorrect Share net asset value
information (as determined under SEC guidelines), Company
shall be entitled to an adjustment to the number of Shares
purchased or redeemed to reflect the correct net asset value
per Share. Any material error in the calculation or reporting
of net asset value per Share, dividend or capital gain
information shall be reported promptly upon discovery to
Company.
2.2 TIMELY PAYMENTS.
Company will wire payment for net purchases to a custodial account
designated by Fund by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. FAIP will wire payment for net
redemptions to an account designated by Company by 1:00 p.m. Central Time on the
same day as the Order is placed, to the extent practicable, but in any event
within three (3) calendar days after the date the order is placed in order to
enable Company to pay redemption proceeds within the time specified in Section
22(e) of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other
transactions under Contracts (collectively, "Contract
transactions") and that Company receives prior to the close of
regular trading on the New York Stock Exchange on a Business
Day will be executed at the net asset values of the
appropriate Funds next computed after receipt by Fund or its
designated agent of the orders. For purposes of this Section
2.3(a), Company shall be the designated agent of FAIP for
receipt of orders relating to Contract transactions on each
Business Day and receipt by such designated agent shall
constitute receipt by FAIP; provided that FAIP receives notice
of such orders by 9:00 a.m. Central Time on the next following
Business Day or such later time as computed in accordance with
Section 2.1(b) hereof.
66
(b) All other Share purchases and redemptions by Company will be
effected at the net asset values of the appropriate Funds next
computed after receipt by FAIP or its designated agent of the
order therefor, and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
FAIP will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to Company of any income dividends
or capital gain distributions payable on the Shares of any Fund. Company hereby
elects to reinvest all dividends and capital gains distributions in additional
Shares of the corresponding Fund at the ex-dividend date net asset values until
Company otherwise notifies FAIP in writing, it being agreed by the Parties that
the ex-dividend date and the payment date with respect to any dividend or
distribution will be the same Business Day. Company reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of FAIP Shares will be by book entry only. Stock
certificates will not be issued to Company. Shares ordered from FAIP will be
recorded in an appropriate title for Company, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) FAIP will bear the cost of its registering as a management
investment company under the 1940 Act and registering its
Shares under the 1933 Act, and keeping such registrations
current and effective; including, without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule
24f-2 Notices with respect to FAIP and its Shares and payment
of all applicable registration or filing fees with respect to
any of the foregoing.
(b) Company will bear the cost of registering, to the extent
required, each Account as a unit investment trust under the
1940 Act and registering units of interest under the Contracts
under the 1933 Act and keeping such registrations current and
effective; including, without limitation, the preparation and
filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment
of all applicable registration or filing fees with respect to
any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
67
(a) FAIP will bear, or arrange for others to bear, the costs of
preparing, filing with the SEC and setting for printing FAIP's
prospectus, statement of additional information and any
amendments or supplements thereto (collectively, the "FAIP
Prospectus"), periodic reports to shareholders, FAIP proxy
material and other shareholder communications.
(b) Company will bear the costs of preparing, filing with the SEC
and setting for printing each Account's prospectus, statement
of additional information and any amendments or supplements
thereto (collectively, the "Account Prospectus"), any periodic
reports to Contract owners, annuitants, insureds or
participants (as appropriate) under the Contracts
(collectively, "Participants"), voting instruction
solicitation material, and other Participant communications.
(c) Company will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b) above
and the prospectus provided by FAIP in camera ready form. FAIP
will print the FAIP statement of additional information, proxy
materials relating to FAIP and periodic reports of FAIP.
3.4 OTHER (SALES-RELATED).
Company will bear the expenses of distribution. These expenses would
include by way of illustration, but are not limited to, the costs of
distributing to Participants the following documents, whether they relate to the
Account or FAIP: prospectuses, statements of additional information, proxy
materials and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and advertising relating
to the Funds, as well as filing such materials with, and obtaining approval
from, the SEC, the NASD, any state insurance regulatory authority, and any other
appropriate regulatory authority, to the extent required.
3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of FAIP and the Accounts.
68
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) FAIP represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and represents that it will maintain
qualification of each Fund as a RIC. FAIP will notify Company
immediately upon having a reasonable basis for believing that
a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) FAIP represents that it will use its best efforts to comply
and to maintain each Fund's compliance with the
diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the
Code. FAIP will notify Company immediately upon having a
reasonable basis for believing that a Fund has ceased to so
comply or that a Fund might not so comply in the future. In
the event of a breach of this Section 4.1(b) by FAIP, it will
take all reasonable steps to adequately diversify the Fund so
as to achieve compliance within the grace period afforded by
Section 1.817-5 of the regulations under the Code.
(c) Notwithstanding Section 12.2 hereunder, Company agrees that if
the Internal Revenue Service ("IRS") asserts in writing in
connection with any governmental audit or review of Company
or, to Company's knowledge, of any Participant, that any Fund
has failed to comply with the diversification requirements of
Section 817(h) of the Code or Company otherwise becomes aware
of any facts that could give rise to any claim against FAIP or
its affiliates as a result of such a failure or alleged
failure:
(i) Company shall promptly notify FAIP of such assertion
or potential claim (subject to the Confidentiality
provisions of Section 18 as to any Participant);
(ii) Company shall consult with FAIP as to how to minimize
any liability that may arise as a result of such
failure or alleged failure;
(iii) Company shall use its best efforts to minimize any liability of
FAIP or its affiliates resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the IRS that such failure was
inadvertent;
(iv) Company shall permit FAIP, its affiliates and their
legal and accounting advisors to participate in any
conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS,
any Participant or any other claimant regarding any
claims that could give rise to liability to FAIP or
its affiliates as a result of such a failure or
alleged failure; provided,
69
however, that Company will retain control of the
conduct of such conferences discussions, proceedings,
contests or appeals;
(v) any written materials to be submitted by Company to
the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or
contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to
Treasury Regulations Section 1.817-5(a)(2)), (a)
shall be provided by Company to FAIP (together with
any supporting information or analysis); subject to
the confidentiality provisions of Section 18, at
least ten (10) business days or such shorter period
to which FAIP and Company agree prior to the day on
which such proposed materials are to be submitted,
and (b) shall not be submitted by Company to any such
person without the express written consent of FAIP
which shall not be unreasonably withheld;
(vi) Company shall provide FAIP or its affiliates and
their accounting and legal advisors with such
cooperation as FAIP shall reasonably request
(including, without limitation, by permitting FAIP
and its accounting and legal advisors to review the
relevant books and records of Company) in order to
facilitate review by FAIP or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a
failure or alleged failure;
(vii) Company shall not with respect to any claim of the
IRS or any Participant that would give rise to a
claim against FAIP or its affiliates (a) compromise
or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or
judicial appeals, without the express written consent
of FAIP or its affiliates, which shall not be
unreasonably withheld, provided that Company shall
not be required, after exhausting all administrative
remedies, to appeal any adverse judicial decision
unless FAIP or its affiliates shall have provided an
opinion of independent counsel to the effect that a
reasonable basis exists for taking such appeal; and
provided further that the costs of any such appeal
shall be borne equally by FAIP and Company hereto
except that Company shall not be liable for such
costs if the failure to comply with Section 817 (h)
arises from a failure to meet the requirements of
Treasury Regulation Section 1.817-5(b)(1) or (2) or
Treasury Regulation Section 1.817-5(f) through no
fault of Company; and
(viii) FAIP and its affiliates shall have no liability as a
result of such failure or alleged failure if Company
fails to comply with any of the foregoing clauses (i)
through (vii), and such failure could be shown to
have materially contributed to the liability.
70
As used in this Agreement, the term "affiliates" shall have
the same meaning as "affiliated person" as defined in Section
2(a)(3) of the 1940 Act.
(d) Company represents and warrants that the Contracts currently
are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it
will maintain such treatment; Company will notify FAIP
immediately upon having a reasonable basis for believing that
any of the Contracts have ceased to be so treated or that they
might not be so treated in the future.
(e) Company represents and warrants that each Account is a
"segregated asset account" and that interests in each Account
are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms
under Section 817 of the Code and the regulations thereunder.
Company will continue to meet such definitional requirements,
and it will notify FAIP immediately upon having a reasonable
basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) FAIP will comply with any applicable state insurance laws or
regulations, to the extent specifically requested in writing
by Company, including, the furnishing of information not
otherwise available to Company which is required by state
insurance law to enable Company to obtain the authority needed
to issue the Contracts in any applicable state.
(b) Company represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing
under the laws of the State of ___________ and has full
corporate power, authority and legal right to execute, deliver
and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established
and maintains each Account as a segregated asset account under
[State] Insurance Law and the regulations thereunder, and
(iii) the Contracts comply in all material respects with all
other applicable federal and state laws and regulations.
(c) FAIP represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Minnesota and has full power, authority,
and legal right to execute, deliver, and perform its duties
and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) Company represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the
1933 Act to the extent required by the 1933 Act, (ii) the
Contracts will be duly authorized for issuance and sold in
compliance with all applicable federal and state laws,
including, without limitation, the 1933
71
Act, the 1934 Act, the 1940 Act and [State] law, (iii) each
Account is and will remain registered under the 1940 Act, to
the extent required by the 1940 Act, (iv) each Account does
and will comply in all material respects with the requirements
of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement
relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects
with the requirements of the 1933 Act and the rules
thereunder, (vi) Company will amend the registration statement
for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to
effect the continuous offering of its Contracts or as may
otherwise be required by applicable law, and (vii) each
Account Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules
thereunder.
(b) Company will at its expense register and qualify the Contracts
for sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed advisable
by Company.
(c) FAIP represents and warrants that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the
extent required by the 1933 Act and duly authorized for
issuance and sold in compliance with Minnesota law, (ii) FAIP
is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) FAIP will amend the
registration statement for its Shares under the 1933 Act and
itself under the 1940 Act from time to time as required in
order to effect the continuous offering of its Shares, (iv)
FAIP does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v)
FAIP's 1933 Act registration statement, together with any
amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules
thereunder, and (vi) FAIP's Prospectus will at all times
comply in all material respects with the requirements of the
1933 Act and the rules thereunder.
(d) FAIP will at its expense register and qualify its Shares for
sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed advisable
by FAIP.
(e) FAIP currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940
Act or otherwise, although it reserves the right to make such
payments in the future. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, FAIP
undertakes to have its Board of Directors, a majority of whom
are not "interested" persons of FAIP, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
72
(f) FAIP represents and warrants that all of its directors,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Funds are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the
benefit of the Funds in an amount not less than the minimal
coverage as required currently by Rule 17g-(1) of the 1940 Act
or related provisions as may be promulgated from time to time.
The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) FAIP will immediately notify Company of (i) the issuance by
any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to FAIP's
registration statement under the 1933 Act or FAIP Prospectus,
(ii) any request by the SEC for any amendment to such
registration statement or Fund Prospectus that may affect the
offering of Shares of FAIP, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating
to the registration or offering of FAIP's Shares, or (iv) any
other action or circumstances that may prevent the lawful
offer or sale of Shares of any Fund in any state or
jurisdiction, including, without limitation, any circumstances
in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes
the use of such Shares as an underlying investment medium of
the Contracts issued or to be issued by Company. FAIP will
make every reasonable effort to prevent the issuance, with
respect to any Fund, of any such stop order, cease and desist
order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) Company will immediately notify FAIP of (i) the issuance by
any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to each
Account's registration statement under the 1933 Act relating
to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or
Account Prospectus that may affect the offering of Shares of
FAIP, (iii) the initiation of any proceedings for that purpose
or for any other purpose relating to the registration or
offering of each Account's interests pursuant to the
Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any
state or jurisdiction, including, without limitation, any
circumstances in which said interests are not registered and,
in all material respects, issued and sold in accordance with
applicable state and federal law. Company will make every
reasonable effort to prevent the issuance of any such stop
order, cease and desist order or similar order and, if any
such order is issued, to obtain the lifting thereof at the
earliest possible time.
73
4.5 COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT FAIP.
(a) Company will provide to FAIP or its designated agent at least
one (1) complete copy of all SEC registration statements,
Account Prospectuses, reports, any preliminary and final
voting instruction solicitation material, applications for
exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the
Contracts, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
(b) Company will provide to FAIP or its designated agent at least
one (1) complete copy of each piece of sales literature or
other promotional material in which FAIP or any of its
affiliates is named, at least five (5) Business Days prior to
its use or such shorter period as the Parties hereto may, from
time to time, agree upon. No such material shall be used if
FAIP or its designated agent objects to such use within five
(5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time,
agree upon.
(c) Neither Company nor any of its affiliates, will give any
information or make any representations or statements on
behalf of or concerning FAIP or its affiliates in connection
with the sale of the Contracts other than (i) the information
or representations contained in the registration statement,
including the FAIP Prospectus contained therein, relating to
Shares, as such registration statement and FAIP Prospectus may
be amended from time to time; or (ii) in reports or proxy
materials for FAIP; or (iii) in published reports for FAIP
that are in the public domain and approved by FAIP for
distribution; or (iv) in sales literature or other promotional
material approved by FAIP, except with the express written
permission of FAIP.
(d) Company shall adopt and implement procedures reasonably
designed to ensure that information concerning FAIP and its
affiliates that is intended for use only by brokers or agents
selling the Contracts (i.e., information that is not intended
for distribution to Participants) ("broker only materials") is
so used, and neither FAIP nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or
designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or
other public media, (e.g., on-line networks such as the
Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally
available to customers or the public, including brochures,
circulars, research reports, market letters, form letters,
seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article),
educational or training materials or other communications
distributed or made generally available to some or all agents
or employees,
74
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales literature
or advertising under the NASD rules, the 1933 Act or the 0000
Xxx.
4.6 FAIP TO PROVIDE DOCUMENTS; INFORMATION ABOUT COMPANY.
(a) FAIP will provide to Company at least one (1) complete copy of
all SEC registration statements, FAIP Prospectuses, reports,
any preliminary and final proxy material, applications for
exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to FAIP or the Shares of a
Fund, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
(b) FAIP will provide to Company camera ready or computer diskette
copies of all FAIP prospectuses and printed copies, in an
amount specified by Company, of FAIP statements of additional
information, proxy materials, periodic reports to shareholders
and other materials required by law to be sent to Participants
who have allocated any Contract value to a Fund. FAIP will
provide such copies to Company in a timely manner so as to
enable Company, as the case may be, to print and distribute
such materials within the time required by law to be furnished
to Participants.
(c) FAIP will provide to Company or its designated agent at least
one (1) complete copy of each piece of sales literature or
other promotional material in which Company, or any of its
respective affiliates is named, or that refers to the
Contracts, at least five (5) Business Days prior to its use or
such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if Company or
its designated agent objects to such use within five (5)
Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree
upon. Company shall receive all such sales literature until
such time as it appoints a designated agent by giving notice
to FAIP in the manner required by Section 9 hereof.
(d) Neither FAIP nor any of its affiliates will give any
information or make any representations or statements on
behalf of or concerning Company, each Account, or the
Contracts other than (i) the information or representations
contained in the registration statement, including each
Account Prospectus contained therein, relating to the
Contracts, as such registration statement and Account
Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in
the public domain and approved by Company for distribution; or
(iii) in sales literature or other promotional material
approved by Company or its affiliates, except with the express
written permission of Company.
(e) FAIP shall cause its principal underwriter to adopt and
implement procedures reasonably designed to ensure that
information concerning Company, and its respective affiliates
that is intended for use only by brokers or agents selling the
75
Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so
used, and neither Company, nor any of its respective
affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media,
(e.g., on-line networks such as the Internet or other
electronic messages), sales literature (i.e., any written
communication distributed or made generally available to
customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales literature
or advertising under the NASD rules, the 1933 Act or the 1940
Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to FAIP exempting it from certain
provisions of the 1940 Act and rules thereunder so that FAIP may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with Company,
and trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. FAIP hereby notifies Company that, in the event
that FAIP implements Mixed and Shared Funding, it may be appropriate to include
in the prospectus pursuant to which a Contract is offered disclosure regarding
the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
FAIP agrees that a majority of the Board of Directors of the FAIP
("Board") will consist of persons who are not "interested persons" of the
Company, as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder
and as modified by any applicable orders of the SEC ("Disinterested Directors"),
except that if this condition is not met by reason of the death,
disqualification, or bona fide resignation of any director, then the operation
of this condition shall be suspended (a) for a period of forty-five (45) days if
the vacancy or vacancies may be filled by the Board; (b) for a period of sixty
(60) days if a vote of shareholders is required to fill the vacancy or
vacancies; or (c) for such longer period as the SEC may prescribe by order upon
application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
76
FAIP agrees that its Board of Directors will monitor the Funds for the
existence of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing FAIP
("Participating Insurance Companies"), including each Account, and of
participants in qualified retirement and pension plans investing in the Funds
("Participating Plans") and determine what action, if any, should be taken in
response to such conflicts. A material irreconcilable conflict may arise for a
variety of reasons, including:
(a) an action by any state insurance or other 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 interpretative 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 investments of any Fund are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or
by Participants in Participating Plans;
(f) a decision by a Participating Insurance Company to disregard
the voting instructions of Participant; or
(g) a decision by a Participating Plan to disregard the voting
instructions of its Participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, FAIP and Company will
report any potential or existing conflicts to the Board and will be responsible
for assisting the Board in carrying out its responsibilities under these
conditions by providing the Board with all information reasonably necessary for
the Board to consider any issues raised. This responsibility includes, but is
not limited to, an obligation of Company to inform the Board whenever it has
determined to disregard Participant voting instructions. Company agrees that
such responsibilities will be carried out with a view only to the interests of
Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Directors or a majority of its
Disinterested Directors that a material irreconcilable
conflict exists, Company will, if it is a Participating
Insurance Company for which a material irreconcilable conflict
is relevant, at its own expense and to the extent reasonably
practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps
may include, but are not limited to:
77
(i) withdrawing the assets allocable to some or all of
the Accounts from FAIP or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of FAIP, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (e.g., variable annuity contract
owners or variable life insurance contract owners
that votes in favor of such segregation, or offering
to the affected contract owners the option of making
such a change; and
(ii) establishing a new registered management investment
company or a new separate account that is operated as
a management company.
(b) If the material irreconcilable conflict arises because of
Company's decision to disregard Participants' voting
instructions and that decision represents a minority position
or would preclude a majority vote, Company may be required, at
FAIP's election, to withdraw each Account's investment in FAIP
or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within
six (6) months after FAIP gives notice to Company that this
provision is being implemented, and until such withdrawal FAIP
shall continue to accept and implement orders by Company for
the purchase and redemption of Shares of FAIP.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
Company conflicts with the majority of other state regulators,
then Company will withdraw each Account's investment in FAIP
within six (6) months after FAIP's Board of Directors informs
Company that it has determined that such decision has created
a material irreconcilable conflict, and until such withdrawal
FAIP shall continue to accept and implement orders by Company
for the purchase and redemption of Shares of FAIP. No charge
or penalty will be imposed as a result of such withdrawal.
(d) Company agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried
out at its expense and with a view only to the interests of
Participants.
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately
remedies any material irreconcilable conflict. In no event,
however, will FAIP or any of its affiliates be required to
establish a new funding medium for any Contracts. Company will
not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been
declined by vote of a majority of Participants materially
adversely affected by the material irreconcilable conflict.
(f) The Board's determination of the existence of a material
irreconcilable conflict and its implications will be made
known promptly and in writing to all Participants.
78
5.5 NOTICE TO COMPANY.
FAIP will promptly make known in writing to Company the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Company and FAIP (or its investment adviser) will at least annually
submit to the Board of Directors of FAIP such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 COMPLIANCE WITH SEC RULES.
If and to the extent that Rules 6e-2 and 6e-3(T) under the 1940 Act are
amended (or if Rule 6e-3 under the 1940 Act is adopted) to provide exemptive
relief from any provision of the 1940 Act, or the rules thereunder, with respect
to mixed or shared funding on terms and conditions materially different from any
exemptions granted in the order obtained by FAIP, then the FAIP and/or Company,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, to the extent
applicable.
5.8 OTHER REQUIREMENTS.
FAIP will require that each Participating Insurance Company and
Participating Plan enter into an agreement with FAIP that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
79
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any Party, with or without cause with respect
to the Fund, upon six (6) months advance written notice to the
other Parties, or, if later, upon receipt of any required
exemptive relief from the SEC, unless otherwise agreed to in
writing by the Parties; or
(b) at the option of FAIP upon institution of formal proceedings
against Company or any of its affiliates by the NASD, the SEC,
any state insurance regulator or any other regulatory body
regarding Company's obligations under this Agreement or
related to the sale of the Contracts, the operation of any
Account, or the purchase of Shares, if, in each case, FAIP
reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material
likelihood of imposing material adverse consequences on the
Fund with respect to which the Agreement is to be terminated;
or
(c) at the option of Company upon institution of formal
proceedings against FAIP, its principal underwriter, or its
investment adviser by the NASD, the SEC, or any state
insurance regulator or any other regulatory body regarding
FAIP's obligations under this Agreement or related to the
operation or management of FAIP or the purchase of Fund
Shares, if, in each case, Company reasonably determines that
such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material
adverse consequences on Company, or the Subaccount
corresponding to the Fund with respect to which the Agreement
is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
Shares are not registered and, in all material respects,
issued and sold in accordance with any applicable federal or
state law, or (ii) such law precludes the use of such Shares
as an underlying investment medium of the Contracts issued or
to be issued by Company; or
(e) upon termination of the corresponding Subaccount's investment
in the Fund pursuant to Section 5 hereof; or
(f) at the option of Company if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or
similar provisions, or if Company reasonably believes that the
Fund may fail to so qualify; or
(g) at the option of Company if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar
provisions, or if Company reasonably believes that the Fund
may fail to so comply; or
80
(h) at the option of FAIP if the Contracts issued by Company cease
to qualify as annuity contracts or life insurance contracts
under the Code (other than by reason of the Fund's
noncompliance with Section 817(h) or Subchapter M of the Code)
or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are
not issued or sold in accordance with any applicable federal
or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 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 Parties
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 Sections 6.1(a) or 6.1(e) hereof, such prior written notice
shall be given at least six (6) months in advance of the
effective date of termination unless a shorter time is agreed
to by the Parties hereto;
(b) in the event that any termination is based upon the provisions
of Sections 6.1(b) or 6.1(c) hereof, such prior written notice
shall be given at least sixty (60) days in advance of the
effective date of termination unless a shorter time is agreed
to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions
of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) 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.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, FAIP will, at the
option of Company, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts."). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
81
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") nine (9) months following the Initial Termination Date,
except that Company may, by written notice shorten said nine (9) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund's shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attn: __________________________________
82
SEI INVESTMENTS DISTRIBUTION CO.
0 Xxxxxxx Xxxxxx Xxxxx
Xxxx, XX 00000
Attn:________________________
[________________] INSURANCE COMPANY
[Address]
Attn:
[__________________] DISTRIBUTION COMPANY
[Address]
Attn:
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, Company will distribute all proxy material furnished by FAIP to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. Company will vote Shares
in accordance with timely instructions received from Participants. Company will
vote Shares that are (a) not attributable to Participants to whom pass-through
voting privileges are extended, or (b) attributable to Participants, but for
which no timely instructions have been received, in the same proportion as
Shares for which said instructions have been received from Participants, so long
as and to the extent that the SEC continues to interpret the 1940 Act to require
pass through voting privileges for Participants. Neither Company nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. Company reserves the right to vote shares held in any Account in
its own right, to the extent permitted by law. Company shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by FAIP. FAIP will notify Company of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. FAIP
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, FAIP either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although Fund is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, FAIP
will act in accordance with the
83
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
FAIP agrees to consult in advance with Company concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF FAIP AND SEI BY COMPANY AND CONTRACT UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, Company and Contract Underwriter jointly and severally
agree to indemnify and hold harmless FAIP, SEI, and their
respective affiliates, and each person, if any, who controls
FAIP or SEI or their respective affiliates within the meaning
of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified
Parties" for purposes of this Section 12.1) against any and
all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of Company and
Contract Underwriter) or actions in respect thereof
(including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise;
provided, the Account owns or at the relevant time owned
shares of the Funds and insofar as such losses, claims,
damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts (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 shall 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 Company or Contract
Underwriter by or on behalf of FAIP specifically for
use in any Account's 1933 Act registration statement,
any Account Prospectus, the Contracts, or sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing)
or was consented to by FAIP pursuant to Section
4.5(c); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in FAIP's 1933 Act
registration statement, FAIP Prospectus, sales
literature or advertising of
84
FAIP, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on
behalf of Company, Contract Underwriter or their
respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of Company, Contract Underwriter
or their respective affiliates or persons under their
control (including, without limitation, their
employees and "Associated Persons," as that term is
defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale or distribution
of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in FAIP's 1933 Act registration statement,
FAIP Prospectus, sales literature or advertising of
FAIP, or any amendment or supplement to any of the
foregoing, 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 and in conformity with
information furnished in writing to FAIP or its
affiliates by or on behalf of Company, Contract
Underwriter or their respective affiliates
specifically for use in FAIP's 1933 Act registration
statement, FAIP Prospectus, sales literature or
advertising of FAIP, or any amendment or supplement
to any of the foregoing or was consented to by
Company pursuant to Section 4.6 (d); or
(iv) arise as a result of any failure by Company or
Contract Underwriter to perform the obligations,
provide the services and furnish the materials
required of them under the terms of this Agreement,
or any material breach of any representation and/or
warranty made by Company or Contract Underwriter in
this Agreement or arise out of or result from any
other material breach of this Agreement by Company or
Contract Underwriter; or
(v) arise as a result of failure by the Contracts issued
by Company to qualify as annuity contracts or life
insurance contracts under the Code, otherwise than by
reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither Company nor Contract Underwriter shall be liable under
this Section 12.1 with respect to any losses, claims, damages,
liabilities or actions to which an Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or
duties (i) under this Agreement, or (ii) to FAIP.
(c) Neither Company nor Contract Underwriter shall be liable under
this Section 12.1 with respect to any action against an
Indemnified
85
Party unless the Indemnified Party shall have notified Company
and Contract Underwriter in writing within a reasonable time
after the summons or other first legal process giving
information of the nature of the action 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 Company and Contract Underwriter
of any such action shall not relieve Company and Contract
Underwriter from any liability which they may have to the
Indemnified Party against whom such action is brought unless
the ability of Company and Contract Underwriter to defend such
action is materially impaired thereby, except as otherwise
provided herein, in case any such action is brought against an
Indemnified Party, Company and Contract Underwriter shall be
entitled to participate, at their own expense, in the defense
of such action and also shall be entitled to assume the
defense thereof, with counsel approved by the Indemnified
Party named in the action, which approval shall not be
unreasonably withheld. After notice from Company or Contract
Underwriter to such Indemnified Party of Company's or Contract
Underwriter's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Company and
Contract Underwriter and shall bear the fees and expenses of
any additional counsel retained by it, and neither Company nor
Contract Underwriter will be liable to such Indemnified Party
under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 OF COMPANY AND CONTRACT UNDERWRITER BY FAIP AND SEI.
(a) Except to the extent provided in Sections 4.1(c), 12.2(c),
12.2(d) and 12.2(e), below, FAIP and SEI agree to indemnify
and hold harmless Company, Contract Underwriter, their
respective affiliates, and each person, if any, who controls
Company, Contract Underwriter or their respective affiliates
within the meaning of Section 15 of the 1933 Act and each of
their respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent
of FAIP and/or SEI) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses), to which
the Indemnified Parties may become subject under any statute,
regulation, at common law, or otherwise; provided, insofar as
such losses, claims, damages, liabilities or actions are
related to the sale or acquisition of FAIP's shares and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in FAIP's 1933 Act registration statement,
FAIP Prospectus or sales literature or advertising of
FAIP (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 shall not apply as to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon
86
and in conformity with information furnished in
writing to FAIP or its affiliates by or on behalf of
Company specifically, Contract Underwriter or their
respective affiliates for use in FAIP's 1933 Act
registration statement, FAIP Prospectus, or in sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing)
or was consented to by Company pursuant to Section
4.6(d); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of FAIP or
SEI or their respective affiliates and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of FAIP or SEI or their
respective affiliates or persons under their control
(including, without limitation, their employees and
"Associated Persons" as that Term is defined in
Section (q) of Article 1 of the NASD By-Laws), in
connection with the sale or distribution of FAIP
Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, 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 statement or omission was made in
reliance upon and in conformity with information
furnished in writing to Company, Contract Underwriter
or their respective affiliates specifically by or on
behalf of FAIP or SEI for use in any Account's 1933
Act registration statement, any Account Prospectus,
sales literature or advertising covering the
Contracts, or any amendment or supplement to any of
the foregoing or was consented to by FAIP pursuant to
Section 4.5(c); or
(iv) arise as a result of any failure by FAIP to perform
the obligations, provide the services and furnish the
materials required of it under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by FAIP in this
Agreement or arise out of or result from any other
material breach of this Agreement by FAIP.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, FAIP and SEI agree to indemnify and hold
harmless the Indemnified Parties from and against any and all
losses, claims, damages, liabilities (including amounts paid
in settlement thereof with, the written consent of FAIP) or
actions in respect thereof (including, to the extent
reasonable, legal and other expenses) to which the
87
Indemnified Parties may become subject directly or indirectly
under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or
indirectly result from or arise out of the failure of any Fund
to operate as a regulated investment company in compliance
with (i) Subchapter M of the Code and regulations thereunder,
or (ii) Section 817(h) of the Code and regulations thereunder,
including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to
Participants asserting liability against Company pursuant to
the Contracts, the costs of any ruling and closing agreement
or other settlement with the IRS, and the cost of any
substitution by Company of Shares of another investment
company or portfolio for those of any adversely affected Fund
as a funding medium for each account that Company reasonably
deems necessary or appropriate as a result of the
noncompliance.
(c) Neither FAIP nor SEI shall be liable under this Section 12.2
with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its
duties or by reason of such Indemnified Party's reckless
disregard of its obligations and duties (i) under this
Agreement, or (ii) to Company, Contract Underwriter, each
Account or Participants.
(d) Neither FAIP nor SEI shall be liable under this Section 12.2
with respect to any action against an Indemnified Party unless
the Indemnified Party shall have notified FAIP and/or SEI in
writing within a reasonable time after the summons or other
first legal process giving information of the nature of the
action 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
FAIP or SEI of any such action shall not relieve FAIP or SEI
from any liability which it may have to the Indemnified Party
against whom such action is brought unless the ability of
Company and Contract Underwriter to defend such action is
materially impaired thereby, except as otherwise provided
herein, in case any such action is brought against an
Indemnified Party, FAIP and/or SEI will be entitled to
participate, at its own expense, in the defense of such action
and also shall be entitled to assume the defense thereof
(which shall include, without limitation, the conduct of any
ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the
Indemnified Party named in the action, which approval shall
not be unreasonably withheld. After notice from FAIP and/or
SEI to such Indemnified Party of FAIP's and/or SEI's election
to assume the defense thereof, the Indemnified Party will
cooperate fully with FAIP and SEI and shall bear the fees and
expenses of any additional counsel retained by it, and neither
FAIP nor SEI will be liable to such Indemnified Party under
this Agreement for any legal or other expenses subsequently
incurred by such Indemnified Party independently in connection
with the defense thereof, other than reasonable costs of
investigation.
88
(e) In no event shall FAIP or SEI be liable under the
indemnification provisions contained in this Agreement to any
individual or entity, including, without limitation, Company,
Contract Underwriter or any other Participating Insurance
Company or any Participant, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or
result from (i) a breach of any representation, warranty,
and/or covenant made by Company or Contract Underwriter
hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by Company or any
Participating Insurance Company to maintain its segregated
asset account (which invests in any Fund) as a legally and
validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under
the provisions of the 1940 Act (unless exempt therefrom); or
(iii) the failure by Company or any Participating Insurance
Company to maintain its variable annuity or life insurance
contracts (with respect to which any Fund serves as an
underlying funding vehicle) as annuity contracts or life
insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Minnesota law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
89
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
FAIP acknowledges that the identities of the customers of Company or
any of its affiliates (collectively, the "Company Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
Company Protected Parties or any of their employees or agents in connection with
Company's performance of its duties under this Agreement are the valuable
property of the Company Protected Parties. FAIP agrees that if it comes into
possession of any list or compilation of the identities of or other information
about the Company Protected Parties' customers, or any other information or
property of the Company Protected Parties, other than such information as may be
independently developed or compiled by FAIP from information supplied to it by
the Company Protected Parties' customers who also maintain accounts directly
with FAIP, FAIP will hold such information or property in confidence and refrain
from using, disclosing or distributing any of such information or other property
except: (a) with Company's prior written consent; or (b) as required by law or
judicial process. Company acknowledges that the identities of the customers of
FAIP or any of its affiliates (collectively the "FAIP Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
FAIP Protected Parties or any of their employees or agents in connection with
FAIP's performance of its duties under this Agreement are the valuable property
of the FAIP Protected Parties. Company agrees that if it comes into possession
of any list or compilation of the identities of or other information about the
FAIP Protected Parties' customers or any other information or property of the
FAIP Protected Parties, other than such information as may be independently
developed or compiled by Company from information supplied to it by the FAIP
Protected Parties' customers who also maintain accounts directly with Company,
Company will hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other property
except: (a) with FAIP's prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach of the agreements in
this Section 18 would result in immediate and irreparable harm to the other
parties for which there would be no adequate remedy at law and agree that in the
event of such a
90
breach, the other parties will be entitled to equitable relief by way of
temporary and permanent injunctions, as well as such other relief as any court
of competent jurisdiction deems appropriate.
SECTION 19. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 20. AMENDMENTS
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
SECTION 21. ASSIGNMENT
This Agreement may not be assigned without the prior written consent of
all parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
By ______________________________________
Its _________________________________
SEI INVESTMENTS DISTRIBUTION CO.
By ______________________________________
Its _________________________________
[____________] INSURANCE COMPANY
By ______________________________________
Its _________________________________
[_____________] DISTRIBUTION COMPANY
By ______________________________________
Its _________________________________
91
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o First American Insurance Portfolios, Inc.:
Growth Equity Fund
Value Equity Fund
Bond Fund
Technology Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o Contract Form # ______________
o Contract Form # ______________
92
