EXHIBIT 99-B.8.83
FUND PARTICIPATION AGREEMENT
BETWEEN
FUND AND ALIAC
Aetna Life Insurance and Annuity Company (the "Company"), X. Xxxx Price
Investment Services, Inc. (the "Distributor") and X. Xxxx Price Services, Inc.
("Transfer Agent") (collectively "X. Xxxx Price") hereby agree to an arrangement
whereby the X. Xxxx Price Funds-Advisor Class shares ("Funds") shall be made
available to serve as underlying investment media for Variable Annuity Contracts
("Contracts") to be issued by the Company.
1. ESTABLISHMENT OF ACCOUNTS; AVAILABILITY OF FUND.
The Company represents that it has established Variable Annuity Accounts B,
C D and F and may establish such other accounts as may be set forth in
Schedule A attached hereto and as may be amended from time to time with the
mutual consent of the parties hereto (the "Accounts"), each of which is a
separate account under Connecticut Insurance law, and has registered or
will register each of the Accounts (except for such Accounts for which no
such registration is required) as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"), to serve as an investment
vehicle for the Contracts. Each Contract provides for the allocation of net
amounts received by the Company to an Account for investment in the shares
of one of more specified open-end management investment companies available
through that Account as underlying investment media. Selection of a
particular investment management company and changes therein from time to
time are made by the participant or Contract owner, as applicable under a
particular Contract.
2. PRICING INFORMATION; ORDERS; SETTLEMENT.
(a) The Fund will make Fund shares available to be purchased by the
Company, and will accept redemption orders from the Company, on behalf
of each Account at the net asset value applicable to each order on
those days on which the Fund calculates its net asset value (a
"Business Day"). Fund shares shall be purchased and redeemed in such
quantity and at such time determined by the Company to be necessary to
meet the requirements of those Contracts for which the Fund(s) serve
as underlying investment media, provided, however, that the Board of
Directors of the Fund (hereinafter the "Directors") may upon
reasonable notice to the Company, 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 or its
designee, acting in good faith and in the best interests of the
shareholders of any Fund and is acting in compliance with their
fiduciary obligations under federal and/or any applicable state laws.
(b) Transfer Agent will provide to the Company closing net asset value,
dividend and capital gain information at the close of trading each day
that the New York Stock Exchange (the "Exchange") is open (each such
day a "Business Day"), and shall use its best efforts to provide such
information by 6:30 p.m. Eastern Standard time on such Business Day
and shall provide such information in no event later than 8:00 p.m.
Eastern Standard Time absent extraordinary circumstances. The Company
will send via facsimile or electronic transmission to the Fund or its
specified agent orders to purchase and/or redeem Fund shares by 7:30
a.m. Eastern Standard Time the following business day. Payment for net
purchases will be wired by the Company to an account designated by the
Fund by 4 p.m. Eastern Standard Time to coincide with the order for
shares of the Fund. If payment is not received by the Fund by the
close of business on TD+1, the Fund shall have the right to cancel the
purchase in the Fund and hold the Company responsible for any
reasonable charges, costs, fees, interest, or other expenses incurred
by the Fund in connection with any advances to, or borrowings or
overdrafts by transfer agent, or any similar expense incurred by the
Funds, as a result of portfolio transactions effected by the Funds
based upon such purchase orders for the Accounts.
(c) Transfer Agent hereby appoints the Company as its agent for the
purpose of accepting purchase and redemption orders for Fund shares
relating to the Contracts from Contract owners or participants. Orders
from Contract owners or participants received from any distributor of
the Contracts (including affiliates of the Company) by the Company,
acting as agent for the Fund, prior to the close of the Exchange on
any given business day will be executed by the Fund at the net asset
value determined as of the close of the Exchange on such Business Day,
provided that the Fund receives written (or facsimile) notice of such
order by 7:30 a.m. Eastern Standard Time on the next following
Business Day. Any orders received by the Company acting as agent on
such day but after the close of the Exchange will be executed by the
Fund at the net asset value determined as of the close of the Exchange
on the next business day following the day of receipt of such order,
provided that the Fund receives written (or facsimile) notice of such
order by 7:30 a.m. Eastern Standard Time within two days following the
day of receipt of such order.
(d) Payments for net redemptions of shares of the Fund will be wired by
Transfer Agent to an account designated by the Company on the same
Business Day the Company places an order to redeem Fund Shares.
Payments for net purchases of the Fund will be wired by the Company to
an account designated by the Fund by 4 p.m. Eastern Standard Time on
the same Business Day the Company places an order to purchase Fund
shares. Payments shall be in federal funds transmitted by wire.
(e) In lieu of applicable provisions set forth in paragraphs 2(a) through
2(d) above, the parties may agree to provide pricing information,
execute orders and wire payments for purchases and redemptions through
National Securities Clearing Corporation's Fund/SERV system in which
case such activities will be governed by Exhibit 1 to this Agreement.
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(f) X. Xxxx Price shall indemnify and hold the Company harmless, from the
effective date of this Agreement, against any amount the Company is
required to pay to Contract owners or participants due to: (i) an
incorrect calculation of a Fund's daily net asset value, dividend
rate, or capital gains distribution rate or (ii) incorrect reporting
of the daily net asset value, dividend rate, or capital gain
distribution rate of a Fund, upon written notification by the Company,
with supporting data, to Distributor, pursuant to Schedule D.
(g) The Company agrees to purchase and redeem the shares of the Funds
named in Schedule B offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information.
(h) In the event that active traders or market timers become a problem for
the Funds in the Company's contracts, the parities will negotiate in
good faith to develop a solution. Possible solutions include, but are
not limited to, limiting the size of purchase orders placed by such
contract owners or participants or prohibiting the same from investing
in some or all of the Funds.
3. DISTRIBUTION AND OTHER CLIENT RELATED SERVICES
In consideration of the Distributor paying Company fee pursuant to the
Distributor's 12b-1 plan, the Company agrees to provide, and incur all expenses
incident to providing, services which include any activities primarily intended
to result in the sale of shares of one or more Funds including but not limited
to:
(a) distribution of prospectuses, SAI and shareholder reports for the
Funds for other than existing shareholders of such Funds;
(b) the preparation and distribution of sales literature and advertising
materials for the Funds;
(c) provision to each Contract owner or participant of access to one or
more of Company's representatives who will provide personal service
and attention with respect to the foregoing; and
(d) provision of information to Contract owners or participants regarding
the Funds supplied to the Company by Distributor or its affiliates;
(e) telephonic support to respond to questions about the Funds; and
(f) other distribution services as mutually agreed upon by both parties.
4. ADMINISTRATIVE SERVICES
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In consideration of the Transfer Agent on behalf of the Funds paying
Company for performing various recordkeeping and administrative services
("Administrative Services"), pursuant to the Administrative Fee Program
instituted by the Funds, the Company agrees to provide, and incur all
expenses incident to providing, administrative services with respect to
investment in the Funds by its Contract owners or participants. The parties
to this Agreement recognize and agree that each Fund's payment for
Administrative Services does not constitute payment in any manner for
investment advisory services or for costs of distribution of the Fund's
shares. It is anticipated that such services will include but shall not be
limited to:
(a) Mailing of Fund prospectuses, reports, notices, proxies and proxy
statements and other informational materials to existing Contract
owners or participants;
(b) Transmission of net purchase and redemption orders to X. Xxxx Price
Services, Inc.;
(c) Recordkeeping of separate records for each Contract owner or
participant reflecting shares purchased and redeemed and share
balances;
(d) Mailing of Contract owners or participants confirmations and periodic
statements;
(e) Telephonic support to respond to questions regarding services
described in a. through d. above;
(f) Provision of other Administrative Services as shall be mutually agreed
upon from time to time by the parties; and
(g) The Company agrees to promptly notify Distributor if it ceases to
perform any of the Administrative Services described in this Paragraph
4.
5. FEES.
(a) In consideration of services provided by the Company under this
Agreement, the Transfer Agent on behalf of the Funds or Distributor
shall pay fees to the Company as set forth in Schedule B. The Company
is not entitled to fee from any Fund in which Company has less than $1
million invested.
(b) In consideration of the Administrative Services fees, the fees are the
responsibility of the applicable Fund, not X. Xxxx Price or any of its
affiliates and the obligations of each Fund is several and not joint;
no Fund is responsible for the fee of any other Fund. The number of
underlying participant accounts in each omnibus account must equal or
exceed 50.
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6. EXPENSES.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by X. Xxxx Price under this Agreement shall be paid
byT. Xxxx Price or the Fund, including the cost of registration of
Fund shares with the Securities and Exchange Commission (the "SEC")
and in states where required. The Fund and Distributor shall pay no
fee or other compensation to the Company under this Agreement, and the
Company shall pay no fee or other compensation to the Fund or
Distributor, except as provided herein and in Schedule B attached
hereto and made a part of this Agreement as may be amended from time
to time with the mutual consent of the parties hereto. All expenses
incident to performance by each party of its respective duties under
this Agreement shall be paid by that party, unless otherwise specified
in this Agreement.
(b) X. Xxxx Price shall provide to the Company, at the location designated
by the Company, periodic fund reports to shareholders and other
materials that are required by law to be sent to Contract owners or
participants. In addition, upon request, the Fund or the Distributor
shall provide the Company with a sufficient quantity of its
prospectuses, statements of additional information and any supplements
to any of these materials, to be used in connection with the offerings
and transactions contemplated by this Agreement.
(c) The Fund or Distributor shall provide the company with a sufficient
quantity of its proxy material that is required to be sent to Contract
owners or participants. The cost associated with proxy preparation,
group authorization letters, programming for tabulation and necessary
materials (including postage) will be paid by the Fund or Distributor.
7. REPRESENTATIONS.
(a) The Company represents and warrants that it is an insurance company
duly organized, existing in good standing under the laws of the State
of Connecticut.
(b) The Company represents and warrants that its acceptance of the fees is
in compliance with all applicable rules and regulations, including the
Employee Retirement Income Security Act ("ERISA").
(c) The Company agrees that it and its agents shall not, without the
written consent of the Fund or the Distributor, make representations
concerning the Fund, or its shares except those contained in the then
current prospectuses and in current printed sales literature approved
by or deemed approved by the Fund or the Distributor.
8. TERMINATION.
This agreement shall terminate as to the sale and issuance of new
Contracts:
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(a) at the option of either the Company, the Distributor or the Fund, upon
sixty days advance written notice to the other parties;
(b) at the option of the Company, upon one week advance written notice to
the Distributor and the Fund, if Fund shares are not available for any
reason to meet the requirement of Contracts as determined by the
Company. Reasonable advance notice of election to terminate shall be
furnished by Company;
(c) at the option of either the Company, the Distributor or the Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the Account,
the Company, the Fund or the Distributor by the National Association
of Securities Dealers, Inc. (the "NASD"), the SEC or any other
regulatory body;
(d) upon the determination of the Accounts to substitute for the Fund's
shares the shares of another investment company in accordance with the
terms of the applicable Contracts. The Company will give 60 days
written notice to the Fund and the Distributor of any decision to
replace the Fund's' shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto; and
(f) if Fund shares are not registered, issued or sold in conformance with
Federal law or such law precludes the use of Fund shares as an
underlying investment medium for Contracts issued or to be issued by
the Company. Prompt notice shall be given by the appropriate party
should such situation occur.
9. CONTINUATION OF AGREEMENT.
Termination as the result of any cause listed in Section 8 shall not affect
the Fund's obligation to furnish its shares to Contracts then in force for
which its shares serve or may serve as the underlying medium, except as
provided for in Section 2 a., unless such further sale of Fund shares is
prohibited by law or the SEC or other regulatory body.
10. ADVERTISING MATERIALS; FILED DOCUMENTS.
(a) Advertising and sales literature with respect to the Fund prepared by
the Company or its agents for use in marketing its Contracts will be
submitted to the Fund or its designee for review at least fifteen
calendar days prior to use before such material is submitted to any
regulatory body for review. The Fund shall advise the submitting party
in writing within ten (10) Business Days of receipt of such materials
of its approval or disapproval of such materials.
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(b) The Fund will provide additional copies of its financials as soon as
available to the Company and at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements and all
amendments or supplements to any of the above that relate to the Fund
promptly after the filing of such document with the SEC or other
regulatory authorities. At the Distributor's request, the Company will
provide to the Distributor at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, and all
amendments or supplements to any of the above that relate to the
Account promptly after the filing of such document with the SEC or
other regulatory authority.
(c) The Fund or the Distributor will provide via Excel spreadsheet
diskette format or in electronic transmission to the Company at least
quarterly portfolio information necessary to update Fund profiles
within fifteen business days following the end of each quarter.
11. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges on Fund
shares held by registered separate accounts to all Contract owners and
participants to the extent the SEC continues to interpret the 1940 Act
as requiring such privileges. The Company shall provide pass-through
voting privileges on Fund shares held by unregistered separate
accounts to all Contract owners.
(b) The Company will distribute to Contract owners and participants, as
appropriate, all proxy material furnished by the Fund and will vote
Fund shares in accordance with instructions received from such
Contract owners and participants. If and to the extent required by
law, the Company, with respect to each group Contract and in each
Account, shall vote Fund shares for which no instructions have been
received in the same proportion as shares for which such instructions
have been received. The Company and its agents shall not oppose or
interfere with the solicitation of proxies for Fund shares held for
such Contract owners and participants.
12. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Fund and the
Distributor, and its directors, officers, employees, agents and each
person, if any, who controls the Fund or its Distributor within the
meaning of the Securities Act of 1933 (the "1933 Act") against any
losses, claims, damages or liabilities to which the Fund or any such
director, officer, employee, agent, or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon; (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, prospectus or sales literature of the Company or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated
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therein or necessary to make the statements therein not misleading, or
arise out of or as a result of conduct, statements or representations
(other than statements or representations contained in the
prospectuses or sales literature of the Fund) of the Company or its
agents, with respect to the sale and distribution of Contracts for
which Fund shares are the underlying investment.; (ii) any sale of
shares of the Fund by Company where the Fund or its shares are not
properly registered or qualified for sale in any state, any US
territory or the District of Columbia after Distributor has notified
Company in writing that the Fund and its shares are not qualified for
sale in such jurisdiction; (iii) any material breach by Company of any
representation, warranty, covenant, or agreement contained in this
Agreement; and (iv) any actions of Company in connection with its
performance of the services to the extent such actions constitute
willful misfeasance, bad faith or negligence by Company; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon (i) an untrue statement or omission or alleged omission
made in such Registration Statement or prospectus in conformity with
written materials furnished to the Company by the Fund specifically
for use therein or (ii) the willful misfeasance, bad faith, or
negligence by X. Xxxx Price in the performance of its duties or X.
Xxxx Price's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable. The Company will
reimburse any legal or other expenses reasonably incurred by the Fund
or any such director, officer, employee, agent, investment
Distributor, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability which Company
may otherwise have.
(b) X.Xxxx Price agrees to indemnify and hold harmless the Company and its
directors, officers, employees, agents and each person, if any, who
controls the Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which the Company or any
such director, officer, employee, agent or controlling person may
become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, prospectuses or sales literature of the Fund 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 material fact
required to be stated therein or necessary to make the statements
therein not misleading; (ii) any failure of Distributor or the Fund
for the Fund's shares to be properly registered or qualified for sale
and available for sale to the public under any applicable federal law
and regulation or the applicable laws and regulations of any state,
any US territory or the District of Columbia unless Distributor has
notified Company in writing that the Fund and its shares are not
qualified for sale in a particular jurisdiction and Company sells
shares of the Fund in such jurisdiction after such notification; and
(iii) any material breach by Distributor of any representation,
warranty, covenant, or agreement contained in this Agreement. The
Distributor will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, employee,
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agent, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Fund will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon (i) an untrue statement or omission or alleged omission
made in such Registration Statement or prospectuses which are in
conformity with written materials furnished to the Fund by the Company
specifically for use therein or (ii) the willful misfeasance, bad
faith, or gross negligence by the Company in the performance of its
duties or the Company's reckless disregard of obligations or duties
under this Agreement or to the Company, whichever is applicable.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
otherwise than under this Section 10. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish to, assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section 10 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
13. MISCELLANEOUS.
(a) AMENDMENT AND WAIVER. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
(b) NOTICES. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by
telex, telecopier or registered or certified mail, postage prepaid,
return receipt requested, or recognized overnight courier service to
the party or parties to whom they are directed at the following
addresses, or at such other addresses as may be designated by notice
from such party to all other parties.
To the Company:
Aetna Life Insurance and Annuity Company
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Counsel
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To the Distributor:
X. Xxxx Price
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxx
Copy to: Xxxxx Xxxxxxx, Esquire
Any notice, demand or other communication given in a manner prescribed in
this subsection (b) shall be deemed to have been delivered on receipt.
(c) SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted
successors and assigns.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by signing
any such counterpart.
(e) SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
(g) GOVERNING LAW. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Connecticut.
(h) NON EXCLUSIVITY. It is understood by the parties that this Agreement
is not an exclusive arrangement in any respect.
(i) CONFIDENTIALITY. The terms of this Agreement and the Schedules thereto
will be held confidential by each party except to the extent that
either party or its counsel may deem it necessary to disclose such
terms.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 10th day of October, 2000.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
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By: /s/Xxxxxx X. Xxxxxxxxxxx
------------------------------------
Name:: Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Title: Vice President
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X. XXXX PRICE INVESTMENT SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name:: Xxxxx X. Xxxxxxx
-----------------------------------
Title:Vice President
-----------------------------------
X. XXXX PRICE SERVICES, INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Name:: Xxxxx Xxxxxxx
-----------------------------------
Title:V.P.
-----------------------------------
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SCHEDULE A
(For any future separate accounts - See Section 1
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SCHEDULE B
Fees to the Company
1. ADMINISTRATIVE SERVICE FEES.
Administrative Services to Contract owners and participants shall be the
responsibility of the Company and shall not be the responsibility of the Fund or
the Distributor. The Distributor recognizes the Company as the sole shareholder
of Fund shares issued under the Fund Participation Agreement, and that
substantial savings will be derived in administrative expenses, such as
significant reductions in postage expense and shareholder communications, by
virtue of having a sole shareholder for each of the Accounts rather than
multiple shareholders. In consideration of the administrative savings resulting
from such arrangement, Distributor agrees to pay to the Company a servicing fee
based on the annual rate of ___% (____% quarterly) of the average net assets
invested in the Funds through the Contracts in each calendar quarter.
Distributor will make such payments to the Company within thirty (30) days after
the end of each calendar quarter. To calculate this payment, the Company's
aggregate investment in the Funds (net asset value per share of each Fund
multiplied by total number of shares held by the Company in each Fund) will be
calculated for each calendar day during the entire quarter, and divided by the
total number of calendar days during such quarter. Each payment will be
accompanied by a statement showing the calculation of the fee payable to the
Company for the quarter and such other supporting data as may be reasonably
requested by the Company. The Funds reserve the right to decrease the payment
made by any Fund with 30 days written notice to the Company.
- There is a 1 basis point reduction if X. Xxxx Price mails prospectuses and
reports to Clients.
- There is a 2 basis point reduction if Company utilizes NSCC Fund/Serv
NETWORKING at the participant level.
- There is a 1 basis point reduction if Company utilizes NSCC's Defined
Contribution Clearance & Settlement Service.
2. 12b-1 FEES.
In accordance with the Fund's plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Distributor will make payments to the
Company at an annual rate of 0.25% (0.0625% quarterly) of the average net assets
invested in the Funds through the Contracts in each calendar quarter.
Distributor will make such payments to the Company within thirty (30) days after
the end of each calendar quarter. To calculate this payment, the Company's
aggregate investment in the Funds (net asset value per share of each Fund
multiplied by total number of shares held by the Company in each Fund) will be
calculated for each calendar day during the entire quarter, and divided by the
total number of calendar days during such quarter. Each payment will be
accompanied by a statement showing the calculation of the fee payable to the
Company for the quarter and such other supporting data as may be reasonably
requested by the Company.
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SCHEDULE C
PARTICIPANT LOSSES CAUSED BY PRICING ERRORS
COMPENSATING PARTICIPANTS FOR LOSSES CAUSED BY PRICING ERROR. In the event X.
Xxxx Price ("PRICE") provides a materially incorrect price (as defined by
guidelines set forth by the Securities and Exchange Commission)for one of the X.
Xxxx Price Funds ("FUNDS"), through no fault of Company, Price will adjust the
Company's omnibus account with the Fund on a net basis to correct the shares in
the account. If the Company adjusts the underlying participant accounts, those
participant's accounts with gains shall be used to offset those participant's
accounts with losses, including those participants who received underpaid
redemptions ("PARTICIPANT ADJUSTMENTS"). After the Participant Adjustments, the
Company will identify those participants who received distributions or made
exchanges into other investment options during the time period affected by the
incorrect price. The Company will then notify Price of the amount of losses
suffered as a result of (1) for an overstated price, participants whose accounts
had a loss that could not be offset by the overpayments (gains) made to
participants who took distributions; or (2) for an understated price,
participants who received underpaid distributions that could not be offset by
gains in other participant accounts; or (3) for exchanges into other investment
options, participants whose accounts had a loss due to the adjustment in the
other investment option (caused by market fluctuation of the other investment
option) and such loss cannot be offset by the gains received by participants who
exchanged into other investment options where such fluctuation caused a gain.
Upon receipt of appropriate documentation verifying such losses, Price shall
reimburse the Company's omnibus Account with the appropriate number of
additional shares. Provided however, after the Participant Adjustments, the
Company must make reasonable attempts to recover the overpayments made to those
participants who received distributions with a gain. Should the Company fail to
collect such overpayments, the Company agrees to subrogate its claim against
such participants to Price. Any net gains calculated after Participant
Adjustments will be returned by the Company to Price. In the event Price fails
to provide a price to the Company by 8:00 p.m. on any business day and such
failure results from causes reasonably within Price's or its affiliates'
control, the Company shall be reimbursed for to any losses it must pay in making
the Plan's or a participant's account whole, where such losses cannot be offset
by gains in other participant's accounts, in accordance with the procedures
outlined above.
Compensating the Company for its expenses incurred as a result of a pricing
error. Set forth below is the criteria that must be met before X. Xxxx Price
will reimburse the Company for expenses incurred due to pricing errors:
- The Company must provide a full accounting of expenses;
- If the pricing error is reported to the Company before 12:00 p.m. on the
business day after the incorrect price is provided, no expenses will be
reimbursed;
- A $5,000 cap on the Company's expenses will be imposed in each occurrence;
- Expenses may include payroll overtime, system fees, postage and stationery
(if separate mailing is required);
- The Company must use its best efforts to mitigate all expenses which may be
reimbursable; and
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- Expenses and payroll overtime shall not include any time spent programming
computers or otherwise customizing the Company's systems to correct the
error.
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EXHIBIT 1
Procedures for Pricing and Order/Settlement Through National Securities Clearing
Corporation's Mutual Fund Profile System and Mutual Fund Settlement, Entry and
Registration Verification System
1. As provided in Section 2(e) of the Fund Participation Agreement, the
parties hereby agree to provide pricing information, execute orders and wire
payments for purchases and redemptions of Fund shares through National
Securities Clearing Corporation ("NSCC") and its subsidiary systems as follows:
(a) Distributor or the Funds will furnish to the Company or its affiliate
through NSCC's Mutual Fund Profile System ("MFPS") (1) the most current net
asset value information for each Fund, (2) a schedule of anticipated
dividend and distribution payment dates for each Fund, which is subject to
change without prior notice, ordinary income and capital gain dividend
rates on the Fund's ex-date, and (4) in the case of fixed income funds that
declare daily dividends, the daily accrual or the interest rate factor. All
such information shall be furnished to the Company or its affiliate by 6:30
p.m. Eastern Time on each business day that the Fund is open for business
(each a "Business Day") or at such other time as that information becomes
available. Changes in pricing information will be communicated to both NSCC
and the Company.
(b) Upon receipt of Fund purchase, exchange and redemption instructions for
acceptance as of the time at which a Fund's net asset value is calculated
as specified in such Fund's prospectus ("Close of Trading") on each
Business Day ("Instructions"), and upon its determination that there are
good funds with respect to Instructions involving the purchase of Shares,
the Company or its affiliate will calculate the net purchase or redemption
order for each Fund. Orders for net purchases or net redemptions derived
from Instructions received by the Company or its affiliate prior to the
Close of Trading on any given Business Day will be sent to the Defined
Contribution Interface of NSCC's Mutual Fund Settlement, Entry and
Registration Verification System ("Fund/SERV") by 5:00 a.m. Eastern Time on
the next Business Day. Subject to the Company's or its affiliate's
compliance with the foregoing, the Company or its affiliate will be
considered the agent of the Distributor and the Funds, and the Business Day
on which Instructions are received by the Company or its affiliate in
proper form prior to the Close of Trading will be the date as of which
shares of the Funds are deemed purchased, exchanged or redeemed pursuant to
such Instructions; provided, however, the Distributor reserves the right to
refuse, cancel or rescind a purchase Instruction pursuant to the terms of
the then current prospectus. Instructions received in proper form by the
Company or its affiliate after the Close of Trading on any given Business
Day will be treated as if received on the next following Business Day.
Dividends and capital gains distributions will be automatically reinvested
at net asset value in accordance with the Fund's then current prospectuses.
(c) The Company shall be solely responsible for the accuracy of each
Instruction and the issuance of any Instruction will constitute the
Company's representation and warranty to Distributor and the Fund that the
Instruction is accurate, complete, and issued as duly authorized by the
participant whose Fund shares are the subject of the Instructions.
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(d) The Company or its affiliate will wire payment for net purchase orders by
the Fund's NSCC Firm Number, in immediately available funds, to an NSCC
settling bank account designated by the Company or its affiliate no later
than 5:00 p.m. Eastern time on the same Business Day such purchase orders
are communicated to NSCC. For purchases of shares of daily dividend accrual
funds, those shares will not begin to accrue dividends until the day the
payment for those shares is received.
(e) NSCC will wire payment for net redemption orders by Fund, in immediately
available funds, to an NSCC settling bank account designated by the Company
or its affiliate, by 5:00 p.m. Eastern Time on the Business Day such
redemption orders are communicated to NSCC, except as provided in a Fund's
prospectus and statement of additional information.
(f) With respect to (c) or (d) above, if Distributor does not send a
confirmation of the Company's or its affiliate's purchase or redemption
order to NSCC by the applicable deadline to be included in that Business
Day's payment cycle, payment for such purchases or redemptions will be made
the following Business Day.
(g) If on any day the Company or its affiliate, or Distributor is unable to
meet the NSCC deadline for the transmission of purchase or redemption
orders, it may at its option transmit such orders and make such payments
for purchases and redemptions directly to Distributor or the Company or its
affiliate, as applicable, as is otherwise provided in the Agreement.
(h) These procedures are subject to any additional terms in each Fund's
prospectus and the requirements of applicable law. The Funds reserve the
right, at their discretion and without notice, to suspend the sale of
shares or withdraw the sale of shares of any Fund.
2. The Company or its affiliate, Distributor and clearing agents (if
applicable) are each required to have entered into membership agreements with
NSCC and met all requirements to participate in the MFPS and Fund/SERV systems
before these procedures may be utilized. Each party will be bound by the terms
of their membership agreement with NSCC and will perform any and all duties,
functions, procedures and responsibilities assigned to it and as otherwise
established by NSCC applicable to the MFPS and Fund/SERV system and the
Networking Matrix Level utilized.
3. Except as modified hereby, all other terms and conditions of the Agreement
shall remain in full force and effect. Unless otherwise indicated herein, the
terms defined in the Agreement shall have the same meaning as in this Exhibit.
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