EXHIBIT 3(c)(iv)
PRINCIPAL VARIABLE CONTRACTS FUND, INC.
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 16th day of April, 2007 among PRINCIPAL VARIABLE
CONTRACTS FUND, INC., an open-end management investment company organized under
the laws of the State of Maryland ("PVC"), PRINCIPAL FUNDS DISTRIBUTOR, INC.
("PFDI"), a principal underwriter for the Class 1 shares of PVC, organized
under the laws of the State of Washington (and known as WM Funds Distributor,
Inc. prior to the time this Agreement becomes effective), and American General
Life Insurance Company, a life insurance company organized under the laws of
the State of Texas(the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A, as may be
amended from time to time (the "Accounts").
WITNESSETH:
WHEREAS, PVC 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 PVC has registered its
shares under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, PVC desires to act as an investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
to be offered by insurance companies that have entered into participation
agreements with PVC (the "Participating Insurance Companies"); and
WHEREAS, PVC issues shares of capital stock, divided into several series of
shares (the "Funds"), each Fund representing an interest in a particular
managed fund of securities and other assets; and
WHEREAS, the SEC has issued an order granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of
Funds of PVC for which PFDI is principal underwriter to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, Principal Management Corporation (the "Adviser") is duly registered
as an investment adviser under the Investment Advisers Act of 1940 and any
applicable state securities laws; and
WHEREAS, PFDI is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the Company desires to utilize shares of those Funds of PVC
identified on Schedule A as an investment vehicle for the variable life
insurance and/or variable annuity contracts issued by the Company and
identified on Schedule A (collectively, the "Contracts") funded by the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I.
Sale of PVC Shares
1.1. PVC shall make Class 1 shares of the Funds available to the Accounts at
the net asset value next computed after receipt of such purchase order by PVC
(or its agent), as established in accordance with the provisions of the then
current prospectus of PVC. Shares of a particular Fund of PVC shall be ordered
in such quantities and at such times as determined by the Company to be
necessary to meet the requirements of the Contracts. The Board of Directors of
PVC (the "Board") 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 is, in the
sole discretion of the directors of PVC (the "Directors") acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Fund.
1.2. PVC will redeem any full or fractional shares of any Fund when
requested by the Company on behalf of an Account at the net asset value next
computed after receipt by PVC (or its agent) of the request for redemption in
good order in accordance with the provisions of the then current prospectus of
PVC.
1.3. For the purposes of Sections 1.1 and 1.2, PVC hereby appoints the
Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investments in and payments under
the Contracts. Receipt by the Company shall constitute receipt by PVC provided
that (i) such orders are received by the Company in good order prior to the
time the net asset value of each Fund is determined in accordance with its
prospectus and (ii) PVC receives notice of such orders by fax by 9:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which PVC
calculates its net asset value pursuant to the rules of the SEC.
1.4. Purchase orders that are transmitted to PVC in accordance with
Section 1.3 shall be paid for by the Company no later than 4:00 p.m. New York
time on the same Business Day that PVC receives notice of the order. PVC shall
pay and transmit the proceeds of redemption orders that are transmitted to PVC
in accordance with Section 1.3 no later than 4:00 p.m. New York time on the
same Business Day that PVC receives notice of the redemption, except that PVC
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reserves the right to postpone payment upon redemption consistent with
Section 22(e) of the 1940 Act and any rules thereunder. Payments by the Company
for the purchase of shares of the Funds by its Accounts and payments by PVC of
the proceeds of the redemption of shares of the Funds by such Accounts may be
netted against one another on any Business Day for the purpose of determining
the amount of any wire transfer on that Business Day. Payments shall be made in
federal funds transmitted by wire.
1.5. Issuance and transfer of PVC's shares will be by book entry only. Share
certificates will not be issued to the Company or the Account. Shares purchased
from PVC will be recorded in the appropriate title for each Account or the
appropriate subaccount of each Account. PVC shall fax to the Company at the
number designated by the Company a copy of a transaction report and a
transaction history report on the Business Day following each trade.
1.6. PFDI shall furnish prompt notice to the Company of any income dividends
or capital gain distributions payable on PVC's shares at least five
(5) Business Days prior to the ex-dividend date. On the ex-dividend date or, if
not a Business Day on the first Business Day thereafter, PFDI shall notify the
Company of the actual amount of dividend or distribution payable per share. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Fund's shares in additional shares of that
Fund. PFDI shall, on the date of issuance or if not a Business Day on the first
Business Day thereafter, notify the Company of the number of shares so issued
in payment of such dividends and distributions.
1.7. PFDI shall fax the closing net asset value per share for each Fund to
the Company on a daily basis as soon as reasonably practicable after such
closing net asset value per share is calculated and shall use its best efforts
to make such net asset value per share available by 7:00 p.m. New York time.
Any material error in the calculation or reporting of the closing net asset
value per share shall be reported promptly to the Company upon discovery. In
such event the Company shall use reasonable efforts to assist PVC in adjusting
the number of shares purchased or redeemed or otherwise complying with PVC's
net asset value correction procedures as in effect from time to time. The
procedures currently in effect are attached as Exhibit 1.
In the event the closing net asset value per share is not made available
to the Company on a timely basis and as a result the Company is unable to
timely process its daily purchase and redemption orders, PFDI agrees to
reimburse the Company for any loss it incurs on account of such orders as well
as for the reasonable cost of Company personnel required to take any necessary
action.
In the event the Company receives materially incorrect calculation or
reporting of the closing net asset value per share, PFDI agrees to reimburse
the Company for any purchase and redemption losses and the reasonable cost of
Company personnel and actions required to correct the error.
1.8. Each Business Day, after it has received the fax listing the Company's
orders for purchasing and redeeming Fund shares, PFDI shall send the Company at
the number designated by the Company a fax confirming such orders and listing
the closing net asset value for the prior Business Day. In the event PFDI does
not provide the closing net asset value per share to the
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Company on a timely basis, or provides an incorrect calculation or reporting of
the closing net asset value per share due to the Company's failure to provide
the listing of the Company's orders for purchasing and redeeming Fund shares on
a timely basis or in a manner that results in an incorrect calculation or
reporting of the closing net asset value per share, PFDI shall be under no
obligation to reimburse the Company for any loss it incurs on account of such
orders or any cost incurred by the Company to take any necessary corrective
action.
1.9. PVC agrees that its shares will be sold only to Participating Insurance
Companies and their separate accounts, to certain qualified pension and
retirement plans ("Qualified Plans"), to the Adviser and to others only to the
extent permitted by the Exemptive Order. The Company agrees that PVC shares
will be used only for the purposes of funding the Contracts and Accounts listed
in Schedule A, as amended from time to time, and that it will perform the
obligations of a Participating Insurance Company under the Exemptive Order.
1.10. PVC agrees that all Participating Insurance Companies shall have the
obligations and responsibilities regarding pass-through voting and conflicts of
interest corresponding to those contained in Section 2.10 and Article IV of
this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. PVC shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses, profiles (if any) and statements of additional
information of PVC. PVC shall bear the costs of registration and qualification
of its shares, preparation and filing or the documents listed in this
Section 2.1. and all taxes to which an issuer is subject on the issuance and
transfer of its shares.
2.2. At the option of the Company, PVC shall (a) provide the Company with as
many copies of PVC's current prospectus, profile (if any), annual report,
semi-annual report and other shareholder communications, including any
amendments or supplements to any of the foregoing, as the Company shall
reasonably request; and (b) provide the Company with a camera-ready copy of
such documents in a form suitable for printing. PVC shall provide the Company
with a copy of its statement of additional information in a form suitable for
duplication by the Company. PVC shall also provide the Company with such other
assistance as is reasonably necessary in order for the Company once each year
(or as often as is required by the SEC) to have the prospectus for the
Contracts and the prospectus or profile (if any) for the Funds printed together
in one document. The prospectus, profile (if any) and statement of additional
information provided by PVC shall relate either to all funds of PVC or only the
Funds of PVC, as the Company shall reasonably request. PVC (at its expense)
shall provide the Company with copies of any PVC-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3. As among the parties, PVC will bear the costs of preparing, filing with
the SEC and setting for printing PVC's prospectus, statement of additional
information and any supplements thereto, periodic reports to shareholders,
proxy material and other shareholder communications.
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The Company will bear the costs of preparing, filing with the SEC and setting
for printing, the Separate Account D prospectus, statement of additional
information and any supplements thereto, periodic reports to owners, annuitants
or participants under the Contracts (collectively, "Participants"), and other
Participant communications. As among the parties, PVC and the Company 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 2.3, it being understood that reasonable cost allocations will be
made in cases where any such PVC and Company documents are printed or mailed on
a combined or coordinated basis. Subject to the above cost allocation
procedures, the Company will distribute all proxy material furnished by PVC to
Participants or will provide record owner data to PVC's proxy mailing service
for mailing and tabulation.
2.4. The Company shall furnish, or cause to be furnished, to PVC (or its
designee), a copy of the Contract prospectus and statement of additional
information in which PVC or PFDI is first named prior to the filing of such
document with the SEC. The Company shall furnish, or shall cause to be
furnished, to PVC (or its designee) a copy of each subsequent Contract
prospectus and statement of additional information in which PVC or PFDI is
named concurrently with the filing of such document with the SEC provided that
there are no material changes in disclosure related to PVC or PFDI. PVC may, in
its reasonable discretion, request that the Company modify any references to
PVC or PFDI in subsequent filings. The Company shall furnish, or shall cause to
be furnished, to PVC (or its designee), each piece of sales literature or other
promotional material in which PVC or PFDI is named, at least five Business Days
prior to its use or concurrently with the filing of such document with the
NASD, whichever is greater. No such material shall be used if PVC (or its
designee) reasonably objects to such use within five Business Days after
receipt of such material.
2.5. PVC shall furnish, or cause to be furnished, to the Company (or its
designee), a copy of any initial PVC prospectus and statement of additional
information in which the Company is first named prior to the filing of such
document with the SEC. PVC shall furnish, or shall cause to be furnished, to
the Company (or its designee) a copy of each subsequent PVC prospectus, profile
(if any) and statement of additional information in which the Company is named
concurrently with the filing of such document with the SEC provided that there
are no material changes in disclosure related to the Company. The Company may,
in its reasonable discretion, request that PVC modify any references to the
Company in subsequent filings. PVC shall furnish, or shall cause to be
furnished, to the Company (or its designee) each piece of sales literature or
other promotional material in which the Company is named, at least five
Business Days prior to its use or concurrently with the filing of such document
with the NASD, whichever is greater. No such material shall be used if the
Company (or its designee) reasonably objects to such use within five Business
Days after receipt of such material.
2.6. The Company shall not give any information or make any representations
or statements on behalf of PVC or PFDI or concerning PVC, PFDI or the Adviser
in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement, prospectus or profile (if any) for PVC shares (as such registration
statement, profile (if any) and prospectus may be amended or supplemented from
time to time), reports of PVC, PVC-sponsored proxy statements, or in sales
literature or
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other promotional material approved by PVC or its designee or PFDI, except as
required by legal process or regulatory authorities or with the written
permission of PVC or its designee or PFDI.
2.7. Neither PVC nor PFDI shall give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company for distribution including sales literature or other
promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.8. PVC or PFDI will provide the Company with as much advance notice as is
reasonably practicable of any material change affecting the Funds (including,
but not limited to, any material change in its registration statement or
prospectus affecting the Funds and any proxy solicitation sponsored by PVC or
PFDI affecting the Funds) and consult with the Company in order to implement
any such change in an orderly manner, recognizing the expenses of changes and
attempting to minimize such expenses by implementing them when reasonably
practicable in the view of PVC in conjunction with regular annual updates of
the prospectus for the Contracts.
2.9. PVC and PFDI agree to maintain a blanket fidelity bond or similar
coverage for the benefit of PVC in an amount not less than the minimum coverage
required by Rule 17g-1 under the 1940 Act or related provisions as may be
promulgated from time to time under the 0000 Xxx.
2.10. So long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for variable Contract owners, the
Company will provide pass-through voting privileges to owners of policies whose
cash values are invested, through the Accounts which are registered as
investment companies under the 1940 Act, in shares of PVC. The Company will
vote shares of PVC held by an Account and for which no timely voting
instructions from Contract owners are received, as well as shares that it owns
directly or indirectly through an Account, in the same proportion as those
shares for which voting instructions are received. The Company and its agents
will in no way recommend or oppose or interfere with the solicitation of
proxies for PVC shares held by Contract owners without the prior written
consent of PVC, which consent may be withheld in PVC's sole discretion, except
in the event that the Company determines, in reliance on an opinion of counsel,
that a proxy proposal would result in a violation of applicable insurance laws.
2.11. PVC shall use its best efforts to maintain qualification of each Fund
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code of 1986, as amended ("Code") and shall notify the 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. PVC and PFDI acknowledge that
compliance with Subchapter M is an essential element of compliance with
Section 817(h) by a corporation.
2.12. Each Fund shall comply with the requirements of Section 817(h) of the
Code and the regulations issued thereunder relating to the diversification
requirements for variable life
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insurance policies and variable annuity contracts, and PVC shall notify the
Company immediately upon having a reasonable basis for believing that any Fund
has ceased or might cease to so comply. In addition, PVC will immediately take
such steps as may reasonably be necessary to adequately diversify the Fund to
achieve compliance.
2.13. PVC shall provide the Company or its designee with reports certifying
compliance with the aforesaid Section 817(h) diversification and Subchapter M
qualification requirements on a quarterly basis.
2.14. PVC shall provide monthly statements of account as of the end of each
month for all of the Company's accounts by the fifteenth (15th) Business Day of
the following month.
2.15. The Company acknowledges that the Funds are intended for long-term
investment purposes and not for "market timing" or other forms of excessive
short-term trading, represents and warrants that it has adopted policies and
procedures reasonably designed to identify and curtail excessive short-term
trading in interests in the Accounts, agrees to furnish PVC such information as
may be reasonably requested to permit its Board to consider such policies and
procedures and further agrees to cooperate with PVC in implementing any
policies and procedures adopted by PVC to identify and curtail excessive
short-term trading in shares of the Funds of PVC in which the Accounts may
invest. The parties agree to adhere to the provisions set forth as Exhibit 2 in
order to comply with Rule 22c-2 under the 1940 Act.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is a life insurance company
duly organized or existing and in good standing under applicable law and has
legally and validly established and will maintain each Account as a segregated
asset account under relevant state insurance law.
3.2. The Company represents and warrants that each of the Accounts (1) has
been registered as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated asset account for its variable annuity or
variable life contracts, including the Contracts, or alternatively has not been
registered in proper reliance upon an exclusion from registration under the
1940 Act; (2) the Accounts comply, and will continue to comply, in all material
respects with applicable requirements of the 1940 Act and the rules thereunder;
(3) the Accounts' 1933 Act registration statements relating to the Contracts,
together with any amendments thereto, will at all times comply in all materials
respects with the requirements of the 1933 Act and the rules thereunder; and
(4) the prospectus for each Contract will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
3.3. The Company represents and warrants that the Contracts or interests in
the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under
the 1933 Act. The Company further represents and warrants that in all material
respects the
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Contracts or interests in the Accounts comply with, and will be issued and sold
in compliance with, all applicable federal and state laws.
3.4. The Company represents and warrants that the Contracts are currently
and at the time of issuance will be treated as modified endowment, annuity or
life insurance contracts under applicable provisions of the Code and agrees
that it will make every effort to maintain such treatment and will notify PVC
immediately upon having a reasonable basis for believing that its Contracts or
any of them have ceased to be so treated or might not be so treated in the
future.
3.5. The Company represents and warrants that it has adopted and implemented
internal controls reasonably designed to prevent the Company from aggregating
orders for the purchase or redemption of shares of a Fund received before the
time the net asset value of the Fund is determined in accordance with its
prospectus with orders received after that time and to minimize errors that
could result in late transmissions of orders to the Fund and agrees to furnish
PVC such information as may be reasonably requested to permit its Board to
consider such controls.
3.6. PVC represents and warrants that it is duly organized and validly
existing under the laws of the State of Maryland.
3.7. PVC represents and warrants that PVC shares offered and sold pursuant
to this Agreement are registered under the 1933 Act and PVC is registered under
the 1940 Act. PVC shall amend its registration statement under the 1933 Act and
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. PVC shall register and qualify its shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by PVC.
3.8. PVC represents and warrants that the investments of each Fund will
comply with the diversification requirements set forth in Section 817(h) of the
Code and the rules and regulations thereunder.
3.9. PVC represents and warrants that under the terms of its investment
advisory agreements with the Adviser that 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.
3.10. PFDI represents and warrants that it is a member in good standing of
the NASD and is registered as a broker-dealer with the SEC. PFDI further
represents that it will sell and distribute PVC shares in accordance with all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 0000 Xxx.
3.11. PFDI represents and warrants that the Adviser is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that the Adviser shall perform its obligations for PVC in
compliance in all material respects with the laws of the State of Maryland and
any applicable state and federal securities laws.
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3.12. Each party will keep confidential any information acquired as a result
of this Agreement regarding the business and affairs of the other parties to
this Agreement and their affiliates, except as required by legal process or
regulatory authorities or with the written permission of the other parties.
3.13. In addition, PVC and PFDI shall not, directly or indirectly, disclose
or use any nonpublic personal information regarding the consumers or customers
of the Company (as the terms "consumer" and "customer" are defined in Rule 3(g)
and 3(j), respectively, of Regulation S-P of the SEC) ("Confidential
Information"), other than to carry out the functions contemplated by this
Agreement. The foregoing obligation of confidentiality shall not extend to any
portion of the Confidential Information that is, or becomes, generally
available to the general public from: (a) federal, state or local governmental
records, (b) widely distributed media, or (c) disclosures to the general public
that are required to be made by federal, state or local law.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that PVC's shares may be made available for
investment to other Participating Insurance Companies and to Qualified Plans.
In such event, the Board will monitor PVC for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies and Qualified Plan investors. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or 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 owners, variable life
insurance contract owners and Qualified Plan participants; (f) a decision by an
insurer to disregard the voting instructions of contract owners; or (g) a
decision by a Qualified Plan to disregard participant voting instructions. PVC
shall promptly inform the Company if the Board determines that an
irreconcilable material conflict exists and the implications thereof.
4.2. The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Board. The Company will assist the Board
in carrying out its responsibilities under the Exemptive Order by providing the
Board with all information reasonably necessary for the Directors to consider
any issues raised including, but not limited to, information as to a decision
by the Company to disregard Contract owner voting instructions.
4.3. If it is determined by the Board, or a majority of the disinterested
Directors, that a material irreconcilable conflict exists that affects the
interests of Contract owners, the Company shall, in cooperation with Qualified
Plans to the extent applicable and other Participating Insurance Companies
whose contract owners are also affected, at its expense and to the extent
reasonably practicable (as determined by the Board) take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, which
steps could include: (a) withdrawing the assets allocable to some or all of the
Accounts from PVC or any Fund and reinvesting such
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assets in a different investment medium, including (but not limited to) another
fund of PVC, or submitting the question of whether or not such segregation
should be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (b) establishing a new registered management investment
company or managed separate account. The Company agrees that any remedial
action taken by it in resolving any material irreconcilable conflict will be
carried out with a view only to the interests of the owners of the Contracts.
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at PVC's election, to withdraw the affected Account's
investment in PVC and terminate this Agreement with respect to such Account;
provided, however that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested Directors. Any such withdrawal and
termination must take place within six (6) months after PVC gives written
notice that this provision is being implemented. Until the end of such six
(6) month period, PVC shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of PVC upon the terms set
forth above.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in PVC and terminate this Agreement with respect to such
Account within six (6) months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Directors. Until the end of such six (6) month period, PVC shall continue to
accept and implement orders by the Company for the purchase and redemption of
shares of PVC upon the terms set forth above.
4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contact owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Directors determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in PVC and terminate this Agreement within six (6) months
after the Directors inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Directors.
4.7. The Company shall at least annually submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out the duties
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imposed upon it by the Exemptive Order, and said reports, materials and data
shall be submitted more frequently if deemed appropriate by the Board.
4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then PVC and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
4.9. The Company will maintain at its home office available to the SEC a
list of its officers, directors and employees who participate directly in the
management and administration of any separate account organized as a unit
investment trust or of any Fund, which individuals will continue to be subject
to the automatic disqualification provisions of Section 9(a) of the 0000 Xxx.
4.10. PVC hereby notifies the Company that it may be appropriate to include
in prospectuses for the Contracts disclosure regarding potential conflicts as
described in Section 4.1 of this Agreement.
4.11 The parties acknowledge that the provisions of Article IV, as well as
other provisions of this Agreement, have been included for purposes of
implementing the terms and conditions of the Exemptive Order. They agree that
the terms and conditions of the Exemptive Order shall govern to the extent they
address matters not covered by this Agreement or may be inconsistent with the
provisions of this Agreement. The parties acknowledge that the terms and
conditions of the Exemptive Order are noted in the notice and order issued by
the SEC with respect to the Exemptive Order (Release Nos. IC-24679 (October 5,
2000) (notice) and IC 24723 (October 31, 2000) (order).
ARTICLE V.
Indemnification
5.1 Indemnification by the Company. The Company agrees to indemnify and hold
harmless PVC, PFDI, and each of their directors, officers, employees and agents
and each person, if any, who controls PVC or PFDI within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in a registration statement,
prospectus or profile (if any) for the Contracts or in the Contracts themselves
or in sales literature generated or approved by the
11
Company on behalf of the Contracts or Accounts (or any amendment or supplement
to any of the foregoing) (collectively, "Company Documents" for the purposes of
this Article V), 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
indemnity 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
was accurately derived from written information furnished to the Company by or
on behalf of PVC or PFDI for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or PVC shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from PVC
Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or
persons under its control, with respect to the sale or acquisition of the
Contracts or PVC shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in PVC Documents as defined in
Section 5.2(a) 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
accurately derived from written information furnished to PVC or PFDI by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company to perform its
obligations under this Agreement; or
(e) arise out of or result from any material breach of any
representation/and or warranty made by the Company or arise out of or result
from any other material breach of this Agreement.
5.2. Indemnification by PFDI. PFDI and the Adviser jointly and severally
agree to indemnify and hold harmless the Company and each of its Trustees,
officers, employees and agents and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Article V) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of PFDI) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal counsel fees incurred in correction therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus for PVC (or any amendment or supplement thereto), (collectively,
"PVC Documents" for the purposes of this Article V), 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 indemnity 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 was accurately derived from written
information furnished to PVC by or on behalf of the Company
12
for use in PVC Documents or otherwise for use in connection with the sale of
the Contracts or PVC shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from Company
Documents, provided that such statements or representations are other than
those described in (c) below) or wrongful conduct of PFDI, the Adviser, PVC or
persons under their control, with respect to the sale or acquisition of the
Contracts or PVC shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents 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 accurately derived from written
information furnished to the Company by or on behalf of PVC; or
(d) arise out of or result from any failure by PVC or PFDI or the Adviser to
provide the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by PVC or PFDI or the Adviser in this Agreement or arise
out of or result from any other material breach of this Agreement by PVC or
PFDI or the Adviser (including a failure whether unintentional, or in good
faith, or otherwise, to comply with the diversification and other qualification
requirements specified in Article II of this agreement).
5.3. None of the parties to this Agreement shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's fraud, willful misfeasance, bad faith or negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
5.4. None of the parties to this Agreement shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other parties in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice
of service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
the action. After notice from the indemnifying party to the Indemnified Party
of an election to assume such defense, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be
13
liable to the Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
ARTICLE VI.
Termination
6.1 This Agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of any party, for any reason upon ninety (90) days advance
written notice to the other parties, unless a shorter time period is agreed to
in writing by the parties to this Agreement;
(b) at the option of the Company, upon one week advance written notice to
PVC, if PVC shares are not reasonably available to meet the requirements of the
Contracts as determined by the Company;
(c) at the option of the Company, immediately upon institution of formal
proceedings against PVC, PFDI, or the Adviser by the NASD, SEC, or any other
regulatory body that are deemed by the Company to materially affect the
performance of the obligations under this Agreement;
(d) at the option of PVC or PFDI, immediately upon institution of formal
proceedings against the broker-dealer or broker-dealers marketing the
Contracts, the Accounts, or the Company by the NASD, SEC, or any other
regulatory body that are deemed by PVC or PFDI to materially affect the
performance of the obligations under this Agreement;
(e) upon the requisite vote of Contract owners having the right to give
voting instructions with respect to PVC Shares, or SEC approval of an
application pursuant to Section 26(c) of the 1940 Act, to substitute for PVC's
shares the shares of another investment company in accordance with the terms of
the applicable Contacts. The Company will give forty-five (45) days written
notice to PVC of any proposed application or vote to replace PVC's shares. PVC,
the Adviser, and PFDI shall cooperate with the Company in connection with such
application;
(f) upon assignment (as defined in Section 2(a)(4) of the 0000 Xxx) of the
Agreement, unless made with the written consent of all other parties hereto;
(g) at the option of the Company, if PVC's shares are not registered, issued
or sold in conformance with federal law or such law precludes the use of PVC's
shares as an underlying investment medium for Contracts issued or to be issued
by the Company. Prompt notice shall be given by each party should such
situation occur;
(h) by any party to the Agreement upon a determination by a majority of the
Board of PVC, or a majority of its disinterested Directors, that an
irreconcilable material conflict exists;
14
(i) at the option of PVC or PFDI, if the Contracts cease to qualify as
annuity contracts or life insurance contracts, as applicable, under the Code or
if the Contracts are not registered, issued or sold in accordance with
applicable state and/or federal law;
(j) at the option of the Company, if the need for substitution of the shares
of another investment company, pursuant to Section 26(c) of the 1940 Act,
arises out of PVC's failure to have its shares registered, issued or sold in
conformance with federal law, including applicable tax law, the expenses of
obtaining such order shall be reimbursed by PFDI. PVC, the Adviser, and PFDI
shall cooperate with the Company in connection with such application; or
(k) at the option of the Company by written notice to PVC with respect to
any Fund in the event that such Fund ceases to qualify as a Regulated
Investment Company under Subchapter M, if such Fund is taxable as a
corporation, or fails to comply with the Section 817(h) diversification
requirements specified in Article II hereof, or if the Company reasonably
believes that such Fund may fail to so qualify or comply.
6.2 Notwithstanding any termination of this Agreement, PVC shall, at the
option of the Company, continue to make available additional shares of PVC (or
any Fund) pursuant to the terms and conditions of this Agreement for all
Contracts in effect on the effective date of termination of this Agreement
provided that the Company continues to pay the costs set forth in Section 2.3.
This Section 6.2 shall not apply to any terminations under Article IV of this
Agreement. Terminations under Article IV shall be governed by that Article.
6.3 The provisions of Articles III and V shall survive the termination of
this Agreement, and the provisions of Article IV and Section 2.10 shall survive
the termination of this Agreement as long as shares of PVC are held on behalf
of Contract Owners in accordance with Section 6.2. Specifically, without
limitation, the owners of any existing Contracts shall, subject to the terms
and conditions of this Agreement and the PVC prospectus, be permitted to
transfer or reallocate investment under the Contracts, redeem investments in
any Fund and/or invest in PVC upon the making of additional premium payments
under the existing Contracts.
ARTICLE VII
Notices
Any notice required under this Agreement shall be sufficiently given when
sent by registered or certified mail, by facsimile transmission (provided that
a copy is also sent by registered or certified mail) or by a nationally
recognized overnight delivery service, to the other party at the address of
such party set forth below or at such other address as such party may from time
to time specify in writing to the other party.
If to PVC or PFDI:
Principal Variable Contracts Fund, Inc.
000 0xx Xxxxxx
Xxx Xxxxxx, Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, President
15
with a copy to:
Xxxxxxx X. Xxxxxxxx, Esq.
Counsel
Principal Variable Contracts Fund, Inc.
000 Xxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000-0000
If to the Company:
American General Life Insurance Company
0000-X Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: General Counsel
with a copy to:
Xxxxxxxxx Xxxxxx
Vice President, Associate General Counsel and Corporate Secretary
The Variable Annuity Life Insurance Company
0000 Xxxxx Xxxxxxx, X0-00
Xxxxxxx, Xxxxx 00000
ARTICLE VIII.
Unregistered Separate Accounts
Pursuant to Section 12(d)(1)(E) of the 1940 Act, the Company will comply
with the following conditions for it to hold shares of any Fund in one or more
unregistered separate accounts that is an investment company:
8.1. The Company represents that either the Company or the principal
underwriter of any unregistered separate account holding Fund shares is a
broker or dealer registered under the 1934 Act or is controlled (as defined in
the 0000 Xxx) by a broker or dealer registered under the 0000 Xxx.
8.2. The Company will not hold any other investment security (as defined in
Section 3 of the 0000 Xxx) in the corresponding subaccount of an unregistered
separate account that holds shares of a Fund.
8.3. The Company will seek instructions from holders of interests in an
unregistered separate account holding Fund shares with regard to the voting of
all proxies solicited in connection with a Fund and will vote those proxies
only in accordance with those instructions, or the Company will vote Fund
shares held in its unregistered separate accounts in the same proportion as the
vote of all of the Fund's other shareholders.
16
8.4. The Company will not substitute another security for shares of a Fund
held in an unregistered separate account unless the SEC approves the
substitution in the manner provided in Section 26 of the 1940 Act.
ARTICLE IX.
Miscellaneous
9.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
9.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
9.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
9.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of State of Iowa.
9.5. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
9.6. 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, which the parties hereto are entitled to under state and
federal laws.
9.7. The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
9.8. Neither this Agreement nor any rights or obligations hereunder may be
assigned by a party without the prior written approval of the other parties.
9.9. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
parties.
9.10. The parties are entering into this Agreement in anticipation of
certain Funds of PVC acquiring substantially all the assets and assuming
certain liabilities of the funds of WM Variable Trust, an open-end management
investment company registered under the laws of the Commonwealth of
Massachusetts (the "Fund Combinations"). This Agreement shall become effective
as to each Fund listed on Schedule A as of the time that the corresponding fund
of WM Variable Trust is combined with that Fund. At the time this Agreement
becomes effective with respect to a Fund, any comparable agreement to which the
Company and PFDI are parties and which relates to the corresponding fund of WM
Variable Trust shall terminate. The Fund
17
Combinations will be effected after the Adviser has acquired all the
outstanding shares of WM Advisors, Inc. ("WMA"), the adviser to WM Variable
Trust. WM Variable Trust and WMA are the applicants which requested the
Exemptive Order, which, subject to compliance with its terms and conditions,
provides exemptive relief from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
for the variable annuity and variable life insurance separate accounts of any
insurance company which invest in the shares of an investment company that is
designed to fund insurance products and for which an affiliate of WMA serves as
the principal underwriter. PFDI represents that it was at the time the
Exemptive Order was issued and has been since then an affiliate of WMA and the
principal underwriter for WM Variable Trust and that, while this Agreement is
in effect, it will continue to be an affiliate of WMA and will be a principal
underwriter for the Class 1 shares of all the Funds of PVC to which this
Agreement applies.
9.11. Force Majeure. Either party is excused from performance and shall not
be liable for any delay in performance or non-performance, in whole or in part,
caused by the occurrence of any event or contingency beyond the control of the
parties including, but not limited to, work stoppages, fires, civil
disobedience, riots, rebellions, natural disasters, acts of God, and acts of
war or terrorism. The party who has been so affected shall promptly give
written notice to the other Party and shall use its best efforts to resume
performance. Upon receipt of such notice, all obligations under this Agreement
shall be immediately suspended for the duration of such force majeure event.
9.12. Dispute Resolution. The parties hereby mutually agree to use their
best efforts to seek an amicable solution to any controversy or dispute
regarding the subject matter hereof. Any unresolved controversy, claim or
dispute shall be submitted to binding arbitration in accordance with the
Commercial Rules of the American Arbitration Association and judgment upon any
such award may be entered in any court having jurisdiction thereof. Arbitration
shall be conducted by a single arbitrator who shall have the authority to grant
any and all appropriate relief, including, but not limited to, granting
injunctive relief or demanding specific performance. The arbitrator may make an
initial determination of the location of the arbitration or whether proceedings
may ensue based entirely upon documentary evidence. Unless otherwise mutually
agreed in writing by the parties, said determination by the arbitrator shall
become final and binding 3 days after the arbitrator's ruling. Arbitration
costs and expenses shall be borne equally by the parties. Each party hereby
agrees to waive and suspend enforcement of any and all rights pursuant to this
and all related agreements during the pendency of such arbitration proceedings.
18
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: /S/ XXXX ISRAEL
-----------------------------------
Name: Xxxx Israel
Title: Senior Vice President Product
Development
PRINCIPAL VARIABLE CONTRACTS FUND, INC.
By: /S/ XXXXX X. XXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxx
Title: President and Chief Executive Officer
PRINCIPAL FUNDS DISTRIBUTOR, INC.
By: /S/ XXXXX XXXXXX
-----------------------------------
Name: Xxxxx Xxxxxx
Title:
19
Schedule A
Separate Accounts, Associated Contracts, and Available Funds
Name of Separate Account and Contracts Funded
Date Established By Separate Account
---------------------------- ---------------------------------------
American General Life Insurance WM Strategic Asset Manager
Company Separate Account D, WM Advantage Flexible Payment Variable
established November 19, 1973 and Fixed Individual Deferred Annuity
Class 1 Shares of the following Funds of PVC will be made available to the
Company as the sponsor of the Accounts:
Principal Variable Contracts Fund, Inc.
Diversified International Account
Equity Income Account I
Growth Account
Income Account
LargeCap Blend Account
MidCap Stock Account
Money Market Account
Mortgage Securities Account
Real Estate Securities Account
Short-Term Income Account
SmallCap Growth Account
SmallCap Value Account
West Coast Equity Account
Balanced Portfolio
Conservative Balanced Portfolio
Conservative Growth Portfolio
Flexible Income Portfolio
Strategic Growth Portfolio
20
Exhibit 1
PVC
NAV ERROR CORRECTION PROCEDURES
NAV Error Identification
If an NAV error is less than $.01 per share on a given day, it is immaterial
and no corrective action is necessary. If the error equals or exceeds $.01 per
share, then it is considered material and corrective action must be taken. The
procedure for analyzing the per share impact of an error will be to divide the
amount of error by shares outstanding on each day the error exists.
NAV Error Resolution/Correction
Once an error is determined to equal or exceed $.01 per share, a second
decision point must be analyzed to determine the appropriate corrective action.
If the difference in NAV is less than 0.5% of the corrected NAV, then the fund
must be made whole, but individual transactions do not need to be reprocessed.
The payment for making the fund whole will be based on net shareholder
transactions on each day the error exists.
If the difference in NAV equals or exceeds 0.5% of the corrected NAV, then the
fund must be made whole and individual transactions also must be reprocessed.
However, if the dollar amount per shareholder is equal to or less than $10,
then that transaction need not be reprocessed.
Procedure
Principal Management Corporation's Fund Accounting Group will review each NAV
error on a case-by-case basis and apply the methodology discussed above. A file
will be maintained that contains all of the information and decisions made
regarding each NAV error occurrence. A summary of NAV errors is reviewed at
least annually by the Audit Committee of the Board.
21
Exhibit 2
PROCEDURES FOR
COMPLIANCE WITH RULE 22c-2
UNDER THE 1940 ACT
These procedures are included in this Agreement to effect compliance with
Rule 22c-2 under the 1940 Act, which requires every mutual fund (or on the
fund's behalf, the principal underwriter or transfer agent) to enter into a
written agreement with each financial intermediary which sells shares, or
otherwise maintains accounts which hold shares, of the fund for the benefit of
a shareholder, pursuant to which the intermediary agrees, upon request by the
fund, to provide certain shareholder and account information, and to execute
any instructions from the fund to restrict or prohibit further purchases or
exchanges by a shareholder who has been identified by the fund as having
engaged in transactions that violate policies established by the fund for the
purpose of eliminating or reducing any dilution of the value of the outstanding
securities issued by the fund (the "Procedures").
1. Definitions. For purposes of these Procedures, the following terms shall
have the following meanings, unless a different meaning is clearly required by
the contexts:
The tem "Intermediary" shall mean (i) any broker, dealer, bank, or other entity
that holds securities of record issued by the Fund in nominee name; (ii) in the
case of a participant-directed employee benefit plan that owns securities
issued by the Fund (1) a retirement plan administrator under ERISA or (2) any
entity that maintains the plan's participant records; and (iii) an insurance
company separate account.
The tem "Fund" shall mean either (i) an investment adviser to or administrator
for the Funds; (ii) the principal underwriter or distributor for the Funds; or
(iii) the transfer agent for the Funds. The term not does include any "excepted
funds" as defined in SEC Rule 22c-2(b) under the Investment Company Act of 1940.
The term "Shares" means the interests of Shareholders corresponding to the
redeemable securities of record issued by the Fund under the Investment Company
Act of 1940 that are held by the Intermediary.
The term "Shareholder" means the holder of interests in a variable annuity or
variable life insurance contract issued by the Intermediary ("Contract"), or a
participant in an employee benefit plan with a beneficial interest in a
contract.
The term "Shareholder-Initiated Transfer Purchase" means a transaction that is
initiated or directed by a Shareholder that results in a transfer of assets
within a Contract to a Fund, but does not include transactions that are
executed: (i) automatically pursuant to a contractual or systematic program or
enrollment such as transfer of assets within a Contract to a Fund as a result
of "dollar cost averaging" programs, asset allocation programs, or automatic
rebalancing programs; (ii) pursuant to a Contract death benefit; (iii) one-time
step-up in Contract value pursuant to a Contract death benefit; or
(iv) allocation of assets to a Fund through a Contract as a
22
result of payments such as loan repayments, scheduled contributions, retirement
plan salary reduction contributions, or planned premium payments to the
Contract.
The term "Shareholder-Initiated Transfer Redemption" means a transaction that
is initiated or directed by a Shareholder that results in a transfer of assets
within a Contract out of a Fund, but does not include transactions that are
executed: (i) automatically pursuant to a contractual or systematic program or
enrollments such as transfers of assets within a Contract out of a Fund as a
result of annuity payouts, loans, systematic withdrawal programs, asset
allocation programs and automatic rebalancing programs; (ii) as a result of any
deduction of charges or fees under a Contract; (iii) within a Contract out of a
Fund as a result of scheduled withdrawals or surrenders from a Contract; or
(iv) as a result of payment of a death benefit from a Contract.
The term "written" includes electronic writings and facsimile transmissions.
2. Agreement to Provide Information. Beginning no later than April 17, 2007 or
such other date as the SEC may designate as the date by which mutual funds must
be in compliance with Rule 22c-2, the Intermediary agrees to provide the Fund
or its designee, upon written request, the taxpayer identification number
("TIN"), the Individual/International Taxpayer Identification Number ("ITIN"),
or other government-issued identifier ("GII") and the Contract owner number or
participant account number associated with the Shareholder, if known, of any or
all Shareholder(s) of the account, and the amount, date and transaction type
(purchase, redemption, transfer, or exchange) of every purchase, redemption,
transfer, or exchange of Shares held through an account maintained by the
Intermediary during the period covered by the request. Unless otherwise
specifically requested by the Fund, this section shall be read to require
Intermediary to provide only that information relating to Shareholder-Initiated
Transfer Purchases or Shareholder-Initiated Transfer Redemptions.
(a) Period Covered by Request. Requests must set forth a specific period, not
to exceed ninety (90) days from the date of the request, for which transaction
information is sought. The Fund may request transaction information older than
ninety (90) days from the date of the request as it deems necessary to
investigate compliance with policies established by the Fund for the purpose of
eliminating or reducing any dilution of the value of the outstanding shares
issued by the Fund.
(b) Timing of Requests. Fund requests for Shareholder information shall be made
no more frequently than quarterly except as the Fund deems necessary to
investigate compliance with policies established by the Fund for the purpose of
eliminating or reducing any dilution of the value of the outstanding shares
issued by the Fund.
(c) Form and Timing of Response. (a) Intermediary agrees to provide, promptly
upon request of the Fund or its designee, the requested information specified
in paragraph 2. If requested by the Fund or its designee, Intermediary agrees
to use best efforts to determine promptly whether any specific person about
whom it has received the identification and transaction information specified
in paragraph 2 is itself a financial intermediary ("indirect intermediary")
and, upon further request of the Fund or its designee, promptly either
(i) provide (or arrange to have provided) the information set forth in
paragraph 2 for those shareholders who hold an account with an indirect
intermediary or (ii) restrict or prohibit the indirect intermediary from
purchasing,
23
in nominee name on behalf of other persons, securities issued by the Fund.
Intermediary additionally agrees to inform the Fund whether it plans to perform
(i) or (ii). Responses required by this paragraph must be communicated in
writing and in a format mutually agreed upon by the Fund or its designee and
the Intermediary. To the extent practicable, the format for any transaction
information provided to the Fund should be consistent with the NSCC
Standardized Data Reporting Format.
(d) Limitations on Use of Information. The Fund agrees not to use the
information received pursuant to this Agreement for any purpose other than as
necessary to comply with the provisions of Rule 22c-2 or to fulfill other
regulatory or legal requirements subject to the privacy provisions of Title V
of the Xxxxx-Xxxxx-Xxxxxx Act (Public Law 106-102) and comparable state laws.
(e) Agreement to Restrict Trading. Intermediary agrees to execute written
instructions from the Fund to restrict or prohibit further purchases or
exchanges of Shares by a Shareholder that has been identified by the Fund as
having engaged in transactions of the Fund's Shares (directly or indirectly
through the Intermediary's account) that violate policies established by the
Fund for the purpose of eliminating or reducing any dilution of the value of
the outstanding Shares issued by the Fund. Unless otherwise directed by the
Fund, any such restrictions or prohibitions shall only apply to
Shareholder-Initiated Transfer Purchases or Shareholder-Initiated Transfer
Redemptions that are effected directly or indirectly through Intermediary.
Instructions must be received by us at the following address, or such other
address that Intermediary may communicate to you in writing from time to time,
including, if applicable, an e-mail and/or facsimile telephone number:
American General Life Insurance Company
Annuity Administration Department
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
(f) Form of Instructions. Instructions must include the TIN, ITIN, or GII and
the specific individual Contract owner number or participant account number
associated with the Shareholder, if known, and the specific restriction(s) to
be executed, including how long the restriction(s) is(are) to remain in place.
If the TIN, ITIN, GII or the specific individual Contract owner number or
participant account number associated with the Shareholder is not known, the
instructions must include an equivalent identifying number of the
Shareholder(s) or account(s) or other agreed upon information to which the
instruction relates. Upon request of the Intermediary, Fund agrees to provide
to the Intermediary, along with any written instructions to prohibit further
purchases or exchanges of Shares by Shareholder, information regarding those
trades of the contract holder that violated the Fund's policies relating to
eliminating or reducing any dilution of the value of the Fund's outstanding
Shares.
(g) Timing of Response. Intermediary agrees to execute instructions as soon as
reasonably practicable, but not later than five business days after receipt of
the instructions by the Intermediary.
24
(h) Confirmation by Intermediary. Intermediary must provide written
confirmation to the Fund that instructions have been executed. Intermediary
agrees to provide confirmation as soon as reasonably practicable, but not later
than ten business days after the instructions have been executed.
25
