1
EXHIBIT 6(b)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
THE SIERRA VARIABLE TRUST
AND
SIERRA INVESTMENT SERVICES CORPORATION
DATED AS OF
May 3, 1993
2
TABLE OF CONTENTS
SECTION 1
Introduction 2
1.1 Availability of Separate Account Divisions 2
1.2 Broker-Dealer Registration 3
SECTION 2
Processing Transactions 3
2.1 Timely Pricing and Orders 3
2.2 Timely Payments 4
2.3 Redemption in Kind 4
2.4 Applicable Price 4
SECTION 3
Costs and Expenses 5
3.1 General 5
3.2 Registration 5
3.3 Other (Non-Sales-Related) 5
3.4 Sales-Related 6
3.5 Parties to Cooperate 6
SECTION 4
Legal Compliance 7
4.1 Tax Laws 7
4.2 Insurance and Certain Other Laws 10
4.3 Securities Laws 11
4.4 Notice of Certain Proceedings and Other Circumstances 13
4.5 AGL to Provide Documents 13
4.6 Trust to Provide Documents 14
i
3
SECTION 5
Mixed and Shared Funding 14
5.1 General 14
5.2 Disinterested Trustees 15
5.3 Monitoring for Material Irreconcilable Conflicts 15
5.4 Conflict Remedies 16
5.5 Notice to AGL 18
5.6 Information Requested by Board of Trustees 18
5.7 Compliance with SEC Rules 19
5.8 Requirements for Other Insurance Companies 19
SECTION 6
Termination 20
6.1 Events of Termination 20
6.2 Funds to Remain Available 22
6.3 Survival of Warranties and Indemnifications 22
6.4 Continuance of Agreement for Certain Purposes 22
SECTION 7
Parties to Cooperate Respecting Termination 24
SECTION 8
Assignment 24
SECTION 9
Notices 24
SECTION 10
Voting Procedures 25
SECTION 11
Foreign Tax Credits 26
ii
4
SECTION 12
Indemnification 25
12.1 Of Trust and Distributor by AGL 25
12.2 Of AGL and AGSI by Distributor 29
12.3 Effect of Notice 32
SECTION 13
Applicable Law 32
SECTION 14
Execution in Counterparts 33
SECTION 15
Severability 33
SECTION 16
Rights Cumulative 33
SECTION 17
Restrictions on Sales of Trust Shares 33
SECTION 18
Scope of Liability 34
SECTION 19
Headings 34
iii
5
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 3rd day of May, 1993
("Agreement"), by and among American General Life Insurance Company, a Texas
life insurance company ("AGL") (on behalf of itself and its "Separate Account,"
defined below), American General Securities Incorporated, a Texas corporation
("AGSI"), the principal underwriter with respect to the Contracts referred to
below, The Sierra Variable Trust, a Massachusetts business trust (the "Trust"),
and Sierra Investment Services Corporation, a California corporation (the
"Distributor"), the Trust's principal underwriter (collectively, the
"Parties"),
WITNESSETH THAT:
WHEREAS the Distributor and the Trust desire that shares of the
Trust's Global Money Fund, Growth Fund, International Growth Fund, U.S.
Government Fund, Corporate Income Fund, and Short Term Global Government Fund
(the "Funds"; reference herein to the "Trust" includes reference to each Fund
to the extent the context requires) be made available by the Distributor to
serve as underlying investment media for those combination fixed and variable
annuity contracts of AGL that are the subject of AGL's Form N-4 registration
statement filed with the Securities and Exchange Commission (the "SEC"), File
No. 33-57730 (the "Contracts"), to be offered through the Distributor,
6
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Trust and the Distributor will make shares in the Funds
available to AGL for this purpose at net asset value and with no sales charges,
all subject to the following provisions:
Section 1. Introduction
1.1 Availability of Separate Account Divisions.
AGL represents that American General Life Insurance Company Separate
Account D (the "Separate Account") is and will continue to be available to
serve as an investment vehicle for its Contracts. The Contracts provide for
the allocation of net amounts received by AGL to separate series (the
"Divisions"; reference herein to the "Separate Account" includes reference to
each Division to the extent the context requires) of the Separate Account for
investment in the shares of corresponding Funds of the Trust that are made
available through the Separate Account to act as underlying investment media.
The Trust may from time to time add additional Funds, which will become subject
to this Agreement, if they are made available as investment media for the
Contracts. AGL will not unreasonably deny any request by the Distributor to
create new Divisions corresponding to such new Funds.
1.2 Broker-Dealer Registration.
The Distributor and AGSI each represents and warrants that it is
registered as a broker dealer with the SEC under the Securities Exchange Act of
1934, as amended, and is a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD").
2
7
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
The Trust or its designated agent will provide closing net asset
value, dividend and capital gain information for each Fund to AGL at the close
of trading on each day (a "Business Day") on which (a) the New York Stock
Exchange is open for regular trading, (b) the Trust calculates its net asset
value and (c) AGL is open for business. The Trust or its designated agent will
use its best efforts to provide this information by 5:00 p.m., Houston time.
AGL will use these data to calculate unit values, which in turn will be used to
process transactions that receive that same Business Day's Separate Account
unit value. The Separate Account processing will be done the same evening, and
corresponding orders with respect to Trust shares will be placed the morning of
the following Business Day. AGL will use its best efforts to place such orders
with the Trust by 9:00 a.m., Houston time.
2.2 Timely Payments.
AGL will transmit orders for purchases and redemptions of Trust
shares to the Distributor, and will wire payment for net purchases to a
custodial account designated by the Trust on the same day as the order for
Trust shares is placed, to the extent practicable. Payment for net redemptions
will be wired by the Trust to an account designated by AGL on the same day as
the order is placed, to the extent practicable, and in any event be made within
six calendar days after the date the order
3
8
is placed in order to enable AGL to pay redemption proceeds within the time
specified in Section 22(e) of the Investment Company Act of 1940, as amended
(the "1940 Act").
2.3 Redemption in Kind.
The Trust reserves the right to pay any portion of a redemption in
kind of portfolio securities, if the Trust's board of trustees (the "Board of
Trustees") determines that it would be detrimental to the best interests of
shareholders to make a redemption wholly in cash.
2.4 Applicable Price.
The Parties agree that orders resulting from purchase payments,
surrenders, partial withdrawals, routine withdrawals of charges, or other
transactions under Contracts will be executed at the net asset values as
determined as of the close of regular trading on the New York Stock Exchange on
the Business Day that AGL processes such transactions, which will be the
Business Day prior to the Distributor's receipt of such orders. All other
purchases and redemptions will be effected at the net asset values next
computed after receipt by the Trust of the order therefor, and such orders will
be irrevocable. AGL hereby elects to reinvest all dividends and capital gains
distributions in additional shares of the corresponding Fund at the record-date
net asset values until AGL otherwise notifies the Trust in writing, it being
agreed by the Parties that the record date and the payment date with respect to
any dividend or distribution will be the same Business Day.
4
9
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.
The Trust will pay the cost of its registering as a management
investment company under the 1940 Act and registering its shares under the
Securities Act of 1933, as amended (the "1933 Act"), and keeping such
registrations current and effective. AGL will pay the cost of registering the
Separate 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.
3.3 Other (Non-Sales-Related).
As among the Parties, the Trust will bear the costs of preparing,
filing with the SEC and setting for printing the Trust's prospectus, statement
of additional information and any supplements thereto (collectively, the "Trust
Prospectus"), periodic reports to shareholders, Trust proxy material and other
shareholder communications. AGL will bear the costs of preparing, filing with
the SEC and setting for printing, the Separate Account's prospectus, statement
of additional information and any supplements thereto (collectively, the
"Separate Account Prospectus"), periodic reports to owners, annuitants or
participants under the Contracts (collectively, "Participants"), voting
instruction solicitation material, and other Participant communications. As
among the Parties, the
5
10
Trust and AGL each will bear the costs of printing and delivering to existing
Participants the documents as to which it bears the cost of preparation as set
forth above in this Section 3.3, it being understood that reasonable cost
allocations will be made in cases where any such Trust and AGL documents are
printed or mailed on a combined or coordinated basis.
3.4 Sales-Related.
Except as may otherwise be agreed to by the Parties relating to an
initial period of time after the Contracts are first offered for sale, the
Distributor will bear the cost of preparing, printing and distributing all
Trust and Separate Account sales literature and advertising and filing it with
the SEC and NASD, printing and delivering to offerees Trust and Separate
Account Prospectuses, Trust and Separate Account periodic reports and Trust and
AGL sales literature, and placing any advertisements. AGL will bear the cost
of filing any Trust or AGL sales materials with, and obtaining approval from,
any state insurance regulatory authorities, to the extent required.
3.5 Parties to Cooperate.
The Trust, AGL, AGSI and the Distributor each agrees to cooperate with
the others, as applicable, in arranging to print, mail and/or deliver combined
or coordinated prospectuses or other materials of the Trust and Separate
Account.
6
11
Section 4. Legal Compliance
4.1 Tax Laws.
(a) The Trust represents that it will make every effort to qualify
and to maintain qualification of each Fund as a regulated investment company
("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Trust or the Distributor will notify AGL 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) AGL represents that it believes, in good faith, that the
Contracts will be treated as annuity contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment; AGL
will notify the Trust and the Distributor 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.
(c) The Trust represents that it will make every effort 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, and the Trust or the Distributor will notify AGL
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.
7
12
(d) AGL represents that it believes, in good faith, that the
Separate Account is a "segregated asset account" and that interests in the
Separate Account are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms under Section
817(h) of the Code and the regulations thereunder. AGL will make every effort
to continue to meet such definitional requirements, and it will notify the
Trust and the Distributor 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. Within 10 Business Days after the end of each calendar
quarter, AGL will certify in writing that such definitional requirements were
met during the preceding calendar quarter.
(e) The Trust represents that, under the terms of its investment
advisory agreements with Sierra Investment Advisors Corporation (the
"Adviser"), the Adviser is and will be responsible for managing the Trust in
compliance with the Trust's investment objectives, policies and restrictions as
set forth in the Trust Prospectus. The Trust represents that these objectives,
policies and restrictions do and will include operating as a RIC in compliance
with Subchapter M of the Code and Section 817(h) of the Code and regulations
thereunder. The Trust has adopted and will maintain procedures for ensuring
that the Trust is managed in compliance with Subchapter M and Section 817(h)
and regulations thereunder. On request, the Trust shall also provide AGL with
such materials, cooperation and assistance as may be reasonably necessary for
AGL or any person designated by AGL to review from time to time the procedures
and practices of the Adviser, each sub-investment adviser or other provider of
services to the Trust for ensuring that the Trust is managed in compliance with
Subchapter M and Section 817(h) and regulations thereunder.
8
13
(f) Independent public accountants (the "Auditors") will prepare a
report ("Report") for each Fund of the Trust in which the Separate Account
invests, within 15 Business Days after the end of each calendar quarter,
regarding whether any matter (the "Matter") has come to the attention of the
Auditors that has caused the Auditors to believe that the Trust was not a RIC
in compliance with Subchapter M of the Code and/or was not in compliance with
Section 817(h) of the Code and the regulations thereunder as of the last day of
such calendar quarter. A Report of no such Matter is referred to herein as a
"Non-Actionable Report," and a Report of such a Matter is referred to herein as
an "Actionable Report." Each Report will be prepared by Price Waterhouse or
other independent public accountants selected by the Trust. If such other
independent public accountants are not also the auditors approved with respect
to the Trust pursuant to Section 32(a) of the 1940 Act, such other independent
public accountants must be approved by AGL, which approval shall not be
unreasonably withheld. Each Report will be in a form and based on specified
procedures and work sheets agreed upon by the Trust and AGL, such agreement not
to be unreasonably withheld.
(g) The Trust will deliver to AGL a letter confirming any
Non-Actionable Report within 20 Business Days after the end of the quarter to
which it relates. On request, the Trust will also deliver to AGL a copy of any
Non-Actionable Report.
9
14
(h) Any Actionable Report shall be furnished immediately to AGL.
In the event of an Actionable Report, the Trust will take such action as is
necessary or appropriate to cure any noncompliance during a grace period of 30
calendar days after the end of the calendar quarter covered by the Report. If
the Trust so cures the noncompliance, it will furnish AGL with a Non-Actionable
Report by the last day of such grace period. If the Trust does not so cure the
noncompliance regarding its status as a RIC, the Trust will pursue those
efforts necessary to enable each affected Fund to qualify once again for
treatment as a RIC in compliance with Subchapter M, including cooperation in
good faith with AGL. If the Trust does not so cure the noncompliance regarding
its status under Section 817(h), the Trust will cooperate in good faith with
AGL's efforts to obtain a ruling and closing agreement, as provided in Revenue
Procedure 92-95 issued by the Internal Revenue Service (or any applicable
ruling or procedure subsequently issued by the Internal Revenue Service), that
the Trust satisfies Section 817(h) for the period or periods covered by the
Actionable Report.
4.2 Insurance and Certain Other Laws.
(a) The Trust will use its best efforts to comply with any
applicable state insurance laws or regulations, to the extent specifically
requested in writing by AGL.
(b) AGL 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 Texas 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 the
10
15
Separate Account as a segregated asset account under Article 3.75 of the Texas
Insurance Code, and (iii) the Contracts comply in all material respects with
all other applicable federal and state laws and regulations.
(c) AGL and AGSI represent and warrant that AGSI is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas and has full corporate power, authority and legal
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(d) The Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of California and has full corporate power, authority and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(e) The Distributor and the Trust represent and warrant that the
Trust is a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts 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) AGL represents and warrants that (i) it has registered the
Separate Account as a unit investment trust in accordance with the provisions
of the 1940 Act to serve as a segregated
11
16
investment account for its variable annuity contracts, including the Contracts,
(ii) the Separate Account does and will comply in all material respects with
the requirements of the 1940 Act and the rules thereunder, (iii) the Separate
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, and (iv) the
Separate Account Prospectus will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder.
(b) The Trust and the Distributor represent and warrant that (i)
Trust 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 Massachusetts law, (ii) the Trust is and will remain
registered under the 1940 Act to the extent required by the 1940 Act, and (iii)
the Trust 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.
(c) The Trust represents and warrants that (i) the Trust does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, (ii) its 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 (iii) the Trust
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
12
17
(d) The Trust will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction only if and to the
extent reasonably deemed advisable by the Trust, AGL or any other life
insurance company utilizing the Trust.
4.4 Notice of Certain Proceedings and Other Circumstances.
The Distributor or the Trust shall immediately notify AGL 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 the Trust's registration
statement under the 1933 Act or the Trust Prospectus, (ii) any request by the
SEC for any amendment to such registration statement or Trust Prospectus, (iii)
the initiation of any proceedings for that purpose or for any other purpose
relating to the registration or offering of the Trust's shares, or (iv) any
other action or circumstances that may prevent the lawful offer or sale of
Trust shares in any state or jurisdiction, including, without limitation, any
circumstances in which (x) the Trust's shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law or (y) such law precludes the use of such shares as an underlying
investment medium of the Contracts issued or to be issued by AGL. The
Distributor and the Trust will make every reasonable effort to prevent the
issuance of any 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.
4.5 AGL to Provide Documents.
AGL will provide to the Trust one complete copy of all SEC
registration statements, Separate Account Prospectuses, reports, any
preliminary and final voting instruction solicitation
13
18
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Separate Account or the
Contracts, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.6 Trust to Provide Documents.
The Trust will provide to AGL one complete copy of all SEC
registration statements, Trust 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 the Trust or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
Section 5. Mixed and Shared Funding
5.1 General.
The Trust may apply for an order exempting it from certain provisions
of the 1940 Act and rules thereunder so that, subject to compliance with
Section 17 of this Agreement, the Trust may be available for investment by
certain other entities, including, without limitation, separate accounts
funding variable life insurance policies, separate accounts of insurance
companies unaffiliated with AGL and trustees of qualified pension and
retirement plans ("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. If the Trust implements
Mixed and Shared Funding, pursuant to such an exemptive order or otherwise,
Sections 5.2 through 5.8 below shall apply, but not otherwise.
14
19
5.2 Disinterested Trustees.
The Trust agrees that the Board of Trustees shall at all times consist
of trustees a majority of whom (the "Disinterested Trustees") are not
interested persons of the Adviser or the Distributor within the meaning of
Section 2(a)(19) of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
The Trust agrees that the Board of Trustees will monitor for the
existence of any material irreconcilable conflict between the interests of the
Participants of all separate accounts of life insurance companies utilizing the
Trust, including the Separate Account. AGL agrees to inform the Board of
Trustees of the Trust of the existence of or any potential for any such
material irreconcilable conflict of which it is aware. The concept of a
"material irreconcilable conflict" is not defined by the 1940 Act or the rules
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory
authority;
15
20
(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 of different life insurance companies
utilizing the Trust; or
(f) a decision by a life insurance company utilizing the Trust to
disregard the voting instructions of participants.
Consistent with the SEC's requirements in connection with exemptive
proceedings of the type referred to in Section 5. 1 hereof, AGL will assist the
Board of Trustees in carrying out its responsibilities by providing the Board
of Trustees with all information reasonably necessary for the Board of Trustees
to consider any issue raised, including information as to a decision by AGL to
disregard voting instructions of Participants.
16
21
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Trustees or a majority of the Disinterested Trustees
that a material irreconcilable conflict exists, AGL and the other life
insurance companies utilizing the Trust will, at their own expense and to the
extent reasonably practicable (as determined by a majority of the Disinterested
Trustees), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps may include, but are not limited
to:
(i) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting
such assets in a different investment medium, including
another Fund of the Trust, 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., annuity contract owners
or participants, life insurance contract owners or all
contract owners and participants of one or more life insurance
companies utilizing the Trust) that votes in favor of such
segregation, or offering to the affected contract owners or
participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a Management
Company.
17
22
(b) If the material irreconcilable conflict arises because of
AGL's decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, AGL may be
required, at the Trust's election, to withdraw the Separate Account's
investment in the Trust. No charge or penalty will be imposed as a result of
such withdrawal. Any such withdrawal must take place within six months after
the Trust gives notice to AGL that this provision is being implemented, and
until such withdrawal the Distributor and Trust shall continue to accept and
implement orders by AGL for the purchase and redemption of shares of the Trust.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to AGL conflicts
with the majority of other state regulators, then AGL will withdraw the
Separate Account's investment in the Trust within six months after the Trust's
Board of Trustees informs AGL that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal the
Distributor and Trust shall continue to accept and implement orders by AGL for
the purchase and redemption of shares of the Trust.
(d) AGL 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.
18
23
(e) For purposes hereof, a majority of the Disinterested Trustees
will determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event, however, will the Trust or the
Distributor be required to establish a new funding medium for any Contracts.
AGL 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.
5.5 Notice to AGL.
The Trust will promptly make known in writing to AGL the Board of
Trustees' 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 Trustees.
AGL and the Trust will at least annually submit to the Board of
Trustees of the Trust such reports, materials or data as the Board of Trustees
may reasonably request so that the Board of Trustees may fully carry out the
obligations imposed upon them by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Trustees. All reports received by the Board of Trustees of
potential or existing conflicts, and all Board of Trustees actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Trust of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Trustees or
19
24
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, at any time during which the Trust is serving an investment medium
for variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to mixed and shared funding, the Parties agree that they will comply
with the terms and conditions thereof and that the terms of this Section 5
shall be deemed modified if and only to the extent required in order also to
comply with the terms and conditions of such exemptive relief that is afforded
by any of said rules that are applicable.
5.8 Requirements for Other Insurance Companies.
The Trust will require that each insurance company utilizing the Trust
enter into an agreement with the Trust that contains in substance the same
provisions as are set forth in Sections 2.3, 4. 1 (b), 4. 1 (d), 4.4, 4.3 (a),
4.5, 5, 10 and 18 of this Agreement. This provision is not intended to limit in
any way the obligations of the Trust and Distributor under Section 17 of this
Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
20
25
(a) at the option of AGL, the Distributor or the Trust upon (i) at
least six months' advance written notice to the other Parties, and (ii) the
approval by (x) a majority of the Disinterested Trustees or (y) a majority vote
of the shares of the affected Fund that are held in the corresponding Divisions
of the Separate Account (pursuant to the procedures set forth in Section 10 of
this Agreement for voting Trust shares in accordance with Participant
instructions); provided, however, that the approvals described in clauses (x)
and (y) above shall not be required if (1) the aggregate account value under
the Contracts is less than $300 million at the date the notice of termination
is delivered, (2) the aggregate month-end account value under the Contracts has
averaged less than $300 million for the 24 full calendar months immediately
preceding the date the notice of termination is delivered and (3) the notice of
termination is delivered no earlier than the end of the 60th full calendar
month following the date the first Contract is issued; or
(b) at the option of the Trust upon institution of formal
proceedings against AGL by the SEC, any state insurance regulator or any other
regulatory body regarding AGL's duties under this Agreement or related to the
sale of the Contracts, the operation of the Separate Account, or the purchase
of the Trust shares, if, in each case, the Trust reasonably determines that
such proceedings, or the facts on which such proceedings may be based, have a
material likelihood of imposing material adverse consequences on the Fund to be
terminated; or
(c) at the option of AGL upon institution of formal proceedings
against the Trust, the Adviser or any sub-investment adviser to the Trust, or
the Distributor by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body, if, in each case, AGL reasonably
determines that such proceedings, or the facts on which such proceedings may be
based,
21
26
have a material likelihood of imposing material adverse consequences on AGL,
AGSI or the Division corresponding to the Fund 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 applicable state and federal 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 AGL; or
(e) upon termination of the corresponding Division's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of AGL if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
AGL reasonably believes that the Fund may fail to so qualify; or
(g) at the option of AGL if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if AGL
reasonably believes that the Fund may fail to so comply.
22
27
6.2 Funds to Remain Available.
Except (i) as necessary to implement Participant initiated
transactions, (ii) as required by state insurance laws or regulations, (iii) as
required pursuant to Section 5 of this Agreement, or (iv) with respect to any
Fund as to which this Agreement has terminated, AGL shall not (x) redeem Trust
shares attributable to the Contracts (as opposed to Trust shares attributable
to AGL's assets held in the Separate Account), or (y) prevent Participants from
allocating payments to or transferring amounts from a Fund that was otherwise
available under the Contracts, until, in either case, 90 calendar days after
AGL shall have notified the Trust or Distributor of its intention to do so.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of
this Agreement.
6.4 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), or 6.1 (g) 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 the Separate Account owns no shares of the affected Fund or a date
(the "Final Termination Date") six months following the Initial Termination
Date, except that AGL may, by written notice to the other Parties, shorten said
six month period in the case of a termination pursuant to Sections 6.1 (d), 6.1
(f) or 6.1 (g).
23
28
Section 7. Parties to Cooperate Respecting Termination
The Parties agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that the Separate 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.
Section 8. Assignment
This Agreement may not be assigned, except with the written consent of
each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 2 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:
American General Life
Insurance Company
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxx
FAX: 000-000-0000
24
29
American General Securities
Incorporated
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxx
FAX: 000-000-0000
The Sierra Variable Trust
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
FAX: 000-000-0000
Sierra Investment Services Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
FAX: 000-000-0000
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3
hereof, AGL will distribute all proxy material furnished by the Trust to
Participants and will vote Trust shares in accordance with instructions
received from Participants. AGI, will vote Trust shares that are (a) not
attributable to Participants or (b) attributable to Participants, but for which
no instructions have been received, in the same proportion as Trust shares for
which said instructions have been received from Participants. AGL agrees that
it will disregard Participant voting instructions only to the extent it would
be permitted to do so pursuant to Rule 6e-3(T)(b)(15)(iii) under the 1940 Act
if the Contracts were variable life insurance policies subject to that rule.
Other participating life insurance
25
30
companies utilizing the Trust will be responsible for calculating voting
privileges in a manner consistent with that of AGL, as prescribed by this
Section 10.
Section 11. Foreign Tax Credits
The Trust agrees to consult in advance with AGL 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 Trust and Distributor by AGL.
(a) Except to the extent provided in Sections 12.l(b) and 12.l(c),
below, AGL agrees to indemnify and hold harmless the Trust and the Distributor,
each of their trustees, directors and officers, and each person, if any, who
controls the Trust or the Distributor within the meaning of Section 15 of the
1933 Act (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 AGL) 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, insofar as such losses,
claims, damages, liabilities or actions are related to the sale or acquisition
of the Trust's shares and:
26
31
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Separate Account's 1933 Act registration statement, the
Separate Account Prospectus, the Contracts or, to the extent
prepared by AGL or AGSI, 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 to AGL or AGSI by or on behalf of the Trust, the
Distributor or the Adviser for use in the Separate Account's
1933 Act registration statement, the Separate Account
Prospectus, the Contracts, or sales literature or advertising
(or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Trust's 1933 Act registration statement,
Trust Prospectus, sales literature or advertising of the
Trust, or any amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of AGL or AGSI)
or wrongful conduct of AGL or AGSI 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 Trust shares; or
27
32
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's
1933 Act registration statement, Trust Prospectus, sales
literature or advertising of the Trust, 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 to
the Trust by or on behalf of AGL or AGSI for use in the
Trust's 1933 Act registration statement, Trust Prospectus,
sales literature or advertising of the Trust, or any amendment
or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AGL or AGSI to perform the
obligations, provide the services and furnish the materials
required of them under the terms of this Agreement.
(b) AGL shall not be liable under this indemnification provision
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 its reckless disregard of obligations or duties
under this Agreement or to the Distributor or to the Trust.
(c) AGL shall not be liable under this indemnification provision
with respect to any action against an Indemnified Party unless the Trust or the
Distributor shall have notified AGL in
28
33
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 AGL of any such
action shall not relieve AGL from any liability which 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
an Indemnified Party, AGL shall be entitled to participate, at its own expense,
in the defense of such action. AGL 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 AGL to
such Indemnified Party of AGL's election to assume the defense thereof, the
Indemnified Party will cooperate fully with AGL and shall bear the fees and
expenses of any additional counsel retained by it, and AGL will not 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 AGL and AGSI by Distributor.
(a) Except to the extent provided in Sections 12.2(b) and 12.2(c)
hereof, the Distributor agrees to indemnify and hold harmless AGL, AGSI, and
the Trust, each of their trustees, directors and officers, and each person, if
any, who controls AGL, AGSI or the Trust within the meaning of Section 15 of
the 1933 Act (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 the
Distributor) or actions in respect thereof (including, to the extent
29
34
reasonable, legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions are related to the sale or
acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's
1933 Act registration statement, Trust Prospectus, sales
literature or advertising of the Trust or, to the extent not
prepared by AGL or AGSI, 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 to the Distributor or Trust by or on behalf of AGL
or AGSI for use in the Trust's 1933 Act registration
statement, Trust Prospectus, or in sales literature or
advertising (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Separate Account's 1933 Act registration
statement, Separate Account Prospectus, sales literature or
advertising for the Contracts, or any amendment or supplement
to any of the foregoing, not
30
35
supplied for use therein by or on behalf of the Distributor,
Trust or Adviser) or wrongful conduct of the Trust or
Distributor or persons under their control (including, without
limitation, their employees and Associated Persons), in
connection with the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Separate Account's 1933 Act registration statement, Separate
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 to AGL or AGSI by or on
behalf of the Trust, the Adviser or the Distributor for use in
the Separate Account's 1933 Act registration statement,
Separate Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or supplement to any
of the foregoing; or
(iv) arise as a result of any failure by the Trust or the
Distributor to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement;
31
36
(b) The Distributor shall not be liable under this indemnification
provision 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 its reckless disregard of
obligations and duties under this Agreement or to AGL, AGSI or the Separate
Account.
(c) The Distributor shall not be liable under this indemnification
provision with respect to any action against an Indemnified Party unless AGL or
AGSI shall have notified the Distributor 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 the Distributor of any such action shall not
relieve the Distributor from any liability which 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 an
Indemnified Party, the Distributor will be entitled to participate, at its own
expense, in the defense of such action. The Distributor 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 the Distributor to such Indemnified Party of the Distributor's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with the Distributor and shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred
32
37
by such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 12.1 or 12.2 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.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Massachusetts 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.
33
38
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. Restrictions on Sales of Trust Shares
The Trust and the Distributor agree that, for a period of 24 months
following the initial sale of Contracts, shares of the Trust will not be made
available to any separate account of any other insurance company without AGL's
specific written consent. AGL agrees that the Trust thereafter will be
permitted (subject to the other terms of this Agreement) to make its shares
available to separate accounts of other life insurance companies. Without AGL's
express written consent, neither the Trust nor the Distributor, nor any of
their related persons and entities, will enter into any arrangement for
utilization of the Trust by any other life insurance company under which the
terms granted to that insurance company or its related persons and entities are
more favorable than those granted to AGL and its related persons and entities
hereunder. Other than as set forth above in this Section 17, neither the Trust
nor the Distributor will offer or issue Trust shares to any person or entity,
other than the Separate Account, without AGL's specific written consent, which
shall not be unreasonably withheld.
34
39
Section 18. Scope of Liability
It is understood and expressly agreed that the obligations and
liabilities of the Trust hereunder will not be binding upon any of the
trustees, shareholders, nominees, officers, agents or employees of the Trust,
as provided in the Declaration of Trust. The execution and delivery of this
Agreement have been authorized by the Board of Trustees and this Agreement has
been signed by an authorized officer of the Trust, acting as such, and neither
such authorization by the Board of Trustees nor such execution and delivery by
such officer will be deemed to have been made by any of the Trustees
individually or to impose any liability on any of them personally, but will
bind only the assets and property of the Trust, as provided in its Declaration
of Trust.
Section 19. 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.
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.
35
40
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:/s/ Xxxxxx X. Xxxxxxx, Xx.
________________________________
Title: Senior Vice President &
Chief Marketing Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By:/s/ Xxxxx X. Xxxxxx
________________________________
Title: President
THE SIERRA VARIABLE TRUST
By: /s/ F. Xxxxx Xxxxxx
---------------------------------
Title: Chairman of the Board & President
SIERRA INVESTMENT SERVICES CORPORATION
By: /s/ Xxxxx Xxxxx
------------------------------------
Title: Senior Vice President,
Chief Financial Officer
36
