FUND PARTICIPATION AGREEMENT
Aetna Life Insurance and Annuity Company (the "Company") Xxxxxxxxxxx
Variable Account Funds (the "Fund") and OppenheimerFunds, Inc. (the "Adviser")
hereby agree to an arrangement whereby the Fund shall be made available to serve
as underlying investment media for Variable Annuity or Variable Life Contracts
("Contracts") to be issued by the Company.
1. Establishment of Accounts; Availability of Fund.
(a) The Company represents that it has established Variable Annuity
Accounts B, C, D and Variable Life Account B 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.
(b) The Fund and the Adviser represent and warrant that the
investments of the series of the Fund (each designated a
"Portfolio") specified in Schedule B attached hereto (as may be
amended from time to time with the mutual consent of the parties
hereto) will at all times be adequately diversified within the
meaning of Section 817(h) of the Internal Revenue Service Code of
1986, as amended (the "Code"), and the Regulations thereunder, and
that at all times while this agreement is in effect, all
beneficial interests will be owned by one or more insurance
companies or by any other party permitted under Section
1.817-5(f)(3) of the Regulations promulgated under the Code or by
the successor thereto, or by any other party permitted under a
Revenue Ruling or private letter ruling granted by the Internal
Revenue Service.
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 serve as underlying investment media,
provided, however, that the Board of Trustees of the Fund
(hereinafter the "Trustees") may upon reasonable notice to the
Company, refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio
if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees,
acting in good faith and in the best interests of the shareholders
of any Portfolio and is acting in compliance with their fiduciary
obligations under federal and/or any applicable state laws.
(b) The Fund will provide to the Company closing net asset value,
dividend and capital gain information at the close of trading each
Business Day, """"and in no event later than 7:00 p.m. Eastern
time on such business day. The Fund shall be liable to the Company
for systems and out of pocket costs incurred by the Company in
making a Contract owner's or a participant's account whole,
if such costs or expenses are a result of the Fund's failure to
provide timely or correct net asset values, dividend and capital
gains information or if such information is not corrected within
48 hours of releasing such incorrect information. If a mistake is
caused in supplying such information or confirmations, which
results in a reconciliation with incorrect information, the amount
required to make a Contract owner's or a Participant's account
whole shall be borne by the party providing the incorrect
information. 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 10:00 a.m. Eastern Time the following
business day. Payment for net purchases will be wired by the
Company to an account designated by the Fund to coincide with the
order for shares of the Fund.
(c) The Fund hereby appoints the Company as its agent for the limited
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 10 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 10 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 the Fund to an account designated by the Company. Payments for
net purchases of the Fund will be wired by the Company to an
account designated by the Fund on the same Business Day the
Company places an order to purchase Fund shares. Payments shall be
in federal funds transmitted by wire.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other
party), and shall not be liable in the event that an error is a
result of any misinformation supplied by the other party.
(f) The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule A 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. The Company shall not permit any person
other than a Contract owner or Participant to give instructions to
the Company which would require the Company to redeem or exchange
shares of the Fund. This provision shall not be construed to
prohibit the Company from substituting shares of another fund, as
permitted by law.
3. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by the Fund under this Agreement shall
be paid by 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 Adviser 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
Adviser, except as provided herein. 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) The Fund or the Adviser shall distribute to the Company a camera
ready copy of periodic fund reports to shareholders and other
materials that are required by law to be sent to Contract owners.
In addition, the Fund or the Adviser shall provide the Company
with a sufficient quantity of its prospectuses, and any
supplements thereto, to be used in connection with the offerings
and transactions contemplated by this Agreement. Subject to
subsection (c) and (d) below, 50% of the cost of preparing and
printing such materials shall be paid by the Fund or the Adviser,
and the cost of distributing such material plus 50% of the cost of
typesetting and printing such material shall be paid by the
Company. In addition, the Fund shall provide the Company, at the
Fund's expense, with a sufficient quantity of its proxy material
that is required to be sent to Contract owners. The Adviser shall
be permitted to review and approve the typeset form of such
material prior to such printing provided such material has been
provided by the Adviser to the Company within a reasonable period
of time prior to typesetting.
(c) In lieu of the Fund's providing printed copies of prospectuses,
supplements, and periodic fund reports to shareholders, the
Company shall have the right to request that the Fund transmit a
copy of such materials in an electronic format (PDF file
preferred), which the Company may use to have such materials
printed together with similar materials of other Account funding
media that the Company or any distributor will distribute to
existing or prospective Contract owners or participants. The
Adviser and the Company shall each bear 50% of the pro rata cost
for such materials determined by the same proportion of the total
printing expense for such materials as the number of pages in each
such printed document provided by the Fund bears to the total
number of pages in such printed document.
(d) The cost associated with proxy preparation, group authorization
letters, programming for tabulation and necessary materials
(including postage) will be paid by the Fund.
4. Representations.
The Company agrees that it and its agents shall not, without the written
consent of the Fund or the Adviser, 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 Adviser.
5. Termination.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company or the Fund, upon sixty days
advance written notice to the other;
(b) at the option of the Company, upon one week advance written notice
to the Fund, if Fund shares are not available for any reason to
meet the requirement of Contracts as determined by the Company.
Reasonable additional advance notice of election to terminate
shall be furnished by Company;
(c) at the option of either the Company 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 Adviser 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 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;
(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 either
party should such situation occur.
6. Continuation of Agreement.
Termination as the result of any cause listed in Section 6 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 unless such
further sale of Fund shares is prohibited by law or the SEC
or other regulatory body, or is determined by the Fund's Board to be necessary
to remedy or eliminate an irreconcilable conflict pursuant to Section 10 hereof.
7. Advertising Materials; Filed Documents.
(a) All advertising or 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
before such material is submitted to any regulatory body for
review or placed in use. No such material shall be used if the
Fund or its designee reasonably object to such use in writing,
transmitted by facsimile within five business days after receipt
of such material.
(b) The Fund will provide at least one complete copy 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 Fund's
request, the Company will provide to the Fund 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 will provide via Excel spreadsheet diskette format to the
Company at least quarterly portfolio information necessary to
update Fund profiles.
8. 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 cooperate with the solicitation of proxies for
Fund shares held for such Contract owners and participants.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Fund and the
Adviser, and each of their directors, officers, employees, agents
and each person, if any, who
controls the Fund or its Adviser within the meaning of the
Securities Act of 1933 (the "1933 Act") against any losses,
claims, damages or liabilities to which the Fund or the Adviser 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 any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectus or sales
literature of the Company or the Contracts, 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, 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. The Company will reimburse
any legal or other expenses reasonably incurred by the Fund or any
such director, officer, employee, agent, investment adviser, or
controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; 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 gross negligence by the Fund or Adviser
in the performance of its duties or the Fund's or Adviser's
reckless disregard of obligations or duties under this Agreement
or to the Company, whichever is applicable. This indemnity
agreement will be in addition to any liability which Company may
otherwise have.
(b) The Fund and the Adviser agree 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 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. The Fund will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
employee, 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 Fund or the
Adviser, whichever is applicable. This indemnity agreement will be
in addition to any liability which the Fund or the Adviser may
otherwise have.
(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.
10. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by the Fund on March 28, 1986 and on
June 9, 1986 with the SEC and the order issued by the SEC dated
July 16, 1986 (File No. 812-6324) in response thereto (the "Shared
Funding Exemptive Order"). The Company has reviewed the conditions
to the requested relief set forth in such application for
exemptive relief. As set forth in such application, the Board of
Directors of Fund (the "Board") will monitor the Fund for the
existence of any material irreconcilable conflict between the
interests of the contractholders of all separate accounts
("Participating Companies") investing in the Fund. An
irreconcilable material conflict may arise for a variety of
reasons, including: (i) an action by any state insurance
regulatory authority; (ii) 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 actions by insurance, tax or securities regulatory
authorities; (iii) an administrative or judicial decision in any
relevant proceeding; (iv) the manner in which the investments of
any portfolio are being managed; (v) a difference in voting
instructions given by variable annuity contractholders and
variable life insurance contractholders; or (vi) a decision by an
insurer to disregard the voting instructions of contractholders.
The Board shall promptly inform the Company if it determines that
an irreconcilable material conflict exists and the implications
thereof.
(b) The Company agrees to be bound by the responsibilities of a
participating insurance company as set forth in the Mixed and
Shared Funding Exemptive Order, including without limitation the
requirement that the Company 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
Shared Funding Exemptive Order by providing the Board with all
information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to,
an obligation by the Company to inform the Board whenever
contractholder voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested
Board members, determines that a material irreconcilable conflict
exists with regard to contractholder investments in a Fund, the
Board shall give prompt notice to all Participating Companies. If
the Board determines that the Company is responsible for causing
or creating said conflict, the Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined
by a majority of the disinterested Board members), take such
action as is necessary to remedy or eliminate the irreconcilable
material conflict. Such necessary action may include but shall not
be limited to:
(i) withdrawing the assets allocable to the Account from the Fund
and reinvesting such assets in a different investment medium
or submitting the question of whether such segregation should
be implemented to a vote of all affected contractholders 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 Companies) that votes in favor of such
segregation, or offering to the affected contractholders the
option of making such a change; and/or
(ii) establishing a new registered management investment company or
managed separate account.
(d) If a material irreconcilable conflict arises as a result of a
decision by the Company to disregard its contractholder voting
instructions and said decision represents a minority position or
would preclude a majority vote by all of its contractholders
having an interest in the Fund, the Company at its sole cost, may
be required, at the Board's election, to withdraw an Account's
investment in the Fund and terminate this Agreement; 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 members
of the Board.
(e) For the purpose of this Section 11, a majority of the
disinterested Board members shall determine whether or not any
proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a
new funding medium for any Contract. The Company shall not be
required by this Section 11 to establish a new funding medium for
any Contract if an offer to do so has been declined by vote of a
majority of the Contract owners or participants materially
adversely affected by the irreconcilable material conflict.
11. 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, 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
To the Fund:
Xxxxxxxxxxx Variable Account Fund
c/o OppenheimerFunds, Inc.
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Legal Department
To the Adviser:
OppenheimerFunds, Inc.
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Executive VP and
General Counsel
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) It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.
12. Limitation on Liability of Trustees, etc.
This agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The Company and
the Adviser each understand and agree that the obligations of the Fund under
this Agreement are not binding upon any shareholder of the Fund personally, but
bind only the Fund and the Fund's property; the Company and the Adviser each
represent that it has notice of the provisions of the Declaration of Trust of
the Fund disclaiming shareholder and Trustee liability for acts or obligations
of the Fund.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the ____ day of _________, 1997.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By:________________________________
Name:
Title:
XXXXXXXXXXX VARIABLE ACCOUNT FUNDS
By:________________________________
Name:
Title:
OPPENHEIMERFUNDS, INC.
By:________________________________
Name:
Title:
