EXHIBIT (8)(q)
DRAFT COPY
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PARTICIPATION AGREEMENT
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Among
AYCO ASSET MANAGEMENT,
AYCO SERIES TRUST
and
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
THIS AGREEMENT, made and entered into as of this ____ day of __________,
2000 by and among THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW
YORK, (hereinafter the "Company"), organized under the laws of the State of
Texas, on its own behalf and on behalf of each segregated asset account of the
Company set forth on Schedule A hereto as such schedule may be amended from time
to time (each such account hereinafter referred to as the "Account"), and the
______________________________, a ______________ corporation (hereinafter the
"Fund") and ______________________________ (hereinafter the "Underwriter"), a
_______________ corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
to be offered by insurance companies which have entered into participation
agreements with the Fund and the Underwriter (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated _______________ (File No. 812-______), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule C, as may be amended form time to time by mutual agreement of the
parties hereto; under this Agreement to the Accounts of the Company; and
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WHEREAS,______________________________ (the "Adviser") is duly registered
as an investment adviser under the Investment Advisers Act of 1940 and any
applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule hereto, to set aside and
invest assets attributable to one or more variable life insurance policies
and/or variable annuity contracts; and
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Fund at net asset
value on behalf of each Account to fund certain of the aforesaid variable life
insurance policies and/or variable annuity contracts.
NOW THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
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1.1. The Fund agrees to make available to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 10:15 a.m. Eastern 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 the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.2 The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Accounts on
those days on which the Fund calculates its net asset value pursuant to rules of
the SEC and the Fund shall use reasonable efforts to calculate such net asset
value on each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Directors of the Fund (hereinafter
the "Board") may refuse to sell shares of the Fund to any person, or suspend or
terminate the offering of its shares if such action is required by law or by
regulatory authorities
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having jurisdiction. Notice of election to suspend or terminate shall be
furnished in writing, by the Fund, said termination to be effective 10 Business
Days after receipt of such notice by the Company in order to give the Company
sufficient time to take appropriate steps in response to such suspension or
termination.
1.3 The Fund and the Underwriter agree that shares of the Fund will only be
made available to Participating Insurance Companies, their separate accounts and
certain qualified retirement plans. No shares of the Fund will be sold to the
general public.
1.4 The Fund and the Underwriter will not make available Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.5,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption on the next following Business Day. Proceeds shall be wired to
Company within three (3) Business Days or such longer period permitted by the
Investment Company Act of 1940, as amended (the "1940 Act") or the rules, orders
or regulations thereunder, and the Fund shall notify the person designated in
writing by Company as the recipient for such notice of such delay by 3:00 p.m.
Central time the same Business Day that Company transmits the redemption order
to the Fund.
1.6 The Company agrees to purchase and redeem the shares of the Fund in
accordance with the provisions of this Agreement. The Company agrees that all
net amounts available under the variable life insurance policies and/or variable
annuity contracts with the form number(s) which are listed on Schedule B
attached hereto and incorporated herein by this reference, as such Schedule B
may be amended from time to time hereafter by mutual written agreement of all
the parties hereto, (the "Contracts") shall be invested in the Fund, in such
other Funds advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, in the Company's general account, or in an investment
company other than the Fund.
1.7 The Company shall pay for Fund shares on the next Business Day after an
order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
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1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. Notwithstanding this Section 1.9,
the Fund shall utilize its best efforts to provide the Company with at least ten
(10) Business Days advance notice of any forthcoming dividend or capital gain
distributions. The Company hereby elects to receive all such income dividends
and capital gain distributions as are payable on the Fund shares in additional
shares of the Fund. The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10 The Fund shall make its net asset value per share available to the
Company on a daily basis as soon as reasonably practical after the net asset
value per share is calculated and shall make such net asset value per share
available by 6:30 p.m. Eastern time. If the Fund is unable to meet the 6:30 p.m.
time stated herein, it shall provide additional time for the Company to place
orders for the purchase and redemption of shares and make any applicable
purchase payments.
1.11 If the Fund provides the Company with materially incorrect net asset
value information through no fault of the Company, the Company shall be entitled
to (1) an adjustment with respect to the Fund shares purchased or redeemed to
reflect the correct net asset value per share and (2) reimbursement of expenses
incurred by the Company in connection with the Company's responsibility to
adjust any Contract owners account value effected by the materially incorrect
net asset value. The determination of materiality of any net asset value pricing
error shall be based on the SEC's recommended guidelines regarding such errors.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
by the Fund to the Company.
1.12 The Fund shall provide written confirmation to the Company of the
amount of shares traded and the associated net asset value total trade amount
and the outstanding share balances held in the Account(s) as of the end of each
Business Day. Such information shall be furnished by 1:00 p.m. Eastern time on
the next Business Day.
ARTICLE II. Representations and Warranties
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2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under the Insurance Code of the State of Texas and has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
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2.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws of the State of __________, and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code of Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. The Fund
represents that, under the terms of its investment advisory agreements with
Adviser, the Adviser is and will be responsible for managing the Fund in
compliance with the Fund's investment objectives, policies and restrictions as
set forth in the Fund Prospectus. The Fund represents that these objectives,
policies and restrictions do and will include operating as a RIC in compliance
with Subchapter M of the Code and Section 817(h) of the Code and regulations
thereunder. The Fund has adopted and will maintain procedures for ensuring that
the Fund is managed in compliance with Subchapter M and Section 817(h) and
regulations thereunder. On request, the Fund shall also provide the Company with
such materials, cooperation and assistance as may be reasonably necessary for
the Company or any appropriate person designated by the Company to review from
time to time the procedures and practices of the Adviser or each sub-investment
adviser to the Fund for ensuring that the Fund is managed in compliance with
Subchapter M and Section 817(h) and regulations thereunder.
In the event of any noncompliance regarding its status as a RIC, the
Fund will pursue those efforts necessary to enable each affected series of the
Fund to qualify once again for treatment as a RIC in compliance with Subchapter
M, including cooperation in good faith with the Company. If the Fund does not so
cure the noncompliance regarding its status under Section 817(h), the Fund will
cooperate in good faith with the Company's efforts to obtain a ruling and
closing agreement, as provided in Revenue Procedure 92-25 issued by the Internal
Revenue Service (or any applicable ruling or procedure subsequently issued by
the Internal Revenue Service), that the Fund satisfies Section 817(h) for the
period or periods of non-compliance.
2.4 Subject to the Fund's compliance with applicable diversification
requirements, the Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
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2.5 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have a board of directors, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of __________, and the Fund and the Underwriter, represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of __________ to the extent required to perform this
Agreement.
2.7 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of __________ and that it does and will comply in
all material respects with the 1940 Act.
2.8 The Underwriter represents and warrants that it is duly organized and
in good standing under the laws of the State of __________. The Underwriter
represents and warrants that it is a member in good standing of the National
Association of Securities Dealers, Inc. and is registered as a broker-dealer
with the SEC. The Underwriter further represents that it will sell and
distribute the Fund shares in accordance with the laws of the State of
__________ and all applicable state and federal securities laws, including
without limitation the 1933 Act, the 1934 Act and the 0000 Xxx.
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal or
state securities laws and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
__________ and any applicable state and federal securities laws.
2.10 The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
coverage as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Fund are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, in an amount not less than two million dollars ($2 million). The aforesaid
Bond shall include coverage for larceny and embezzlement and shall be issued by
a reputable bonding company.
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ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1 The Underwriter shall provide the Company with as many copies of the
Fund's current prospectus as the Company may reasonably request. If requested by
the Company in lieu thereof, the Fund shall provide camera-ready film containing
the Fund's prospectus and Statement of Additional Information, and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus and/or Statement of Additional Information
for the Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document, and to
have the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements of additional information. The Company may also utilize the
Fund's current prospectus on the Company's internet sites and other electronic
and/or public media. Except as provided in the following three sentences, all
expenses of printing and distributing Fund prospectuses and Statements of
Additional Information shall be the expense of the Company. For prospectuses and
Statements of Additional Information provided by the Company to its existing
owners of Contracts in order to update disclosure as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the
Company chooses to receive camera-ready film in lieu of receiving printed copies
of the Fund's prospectus, the Fund will reimburse the Company in an amount equal
to the product of A and B where A is the number of such prospectuses distributed
to owners of the Contracts, and B is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or the Fund, at its
expense.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to Contract owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
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(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the above standards.
ARTICLE IV. Sales Material and Information
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4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund, the Adviser or the Underwriter is named, at least fifteen
Business Days prior to its use. No such material shall be used if the Fund or
its designee object to such use within fifteen Business Days after receipt of
such material. The Fund, the Adviser, the Underwriter, or its designee reserves
the right to reasonably object to the continued use of any such sales literature
or other promotional material in which the Fund, the Adviser or the Underwriter
is named, and no such material shall be used if the Fund, the Adviser, the
Underwriter, or its designee so object.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee or
by the Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3 The Fund, the Underwriter, or its designee 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 or its Account(s),
is named at least fifteen Business Days prior to its use. No such material shall
be used if the Company or its designee object to such use within fifteen
Business Days after receipt of such material. Notwithstanding that the Company
did not initially object, the Company reserves the right to object at any time
thereafter to the continued use of any such sales literature or other
promotional material in which the Company is named, and no such material shall
be used thereafter if the Company so objects.
4.4 The Fund and the Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or
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other promotional material approved by the Company or its designee, except with
the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and notices, orders
or responses relating thereto and all supplements and amendments to any of the
above, that relate to the Fund or its shares, contemporaneously with the filing
of such document with, or the issuance of such documents by, the SEC or other
regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and notices, orders or responses relating thereto and all supplements
and amendments to any of the above, that relate to the Contracts or each
Account, contemporaneously with the filing of such document with, or the
issuance of such documents by, the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, telephone directories (other than routine
listings, electronic or other public media), sales literature (i.e., any written
----
or electronic communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market letters,
performance reports or summaries, form letters, telemarketing scripts, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees, and
registration statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials.
4.8 The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for the Fund, and of any material change
in the Fund's registration statement or prospectus, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its registration
statement a prospectus, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
ARTICLE V. Fees and Expenses
-----------------
5.1 The Fund and Underwriter shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the
Page 10 of 25
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall be responsible for ensuring that all
its shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the Fund,
in accordance with applicable state laws prior to their sale. The Fund shall
bear the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3 The Fund shall bear the expenses of printing and distributing the
Fund's prospectus to existing owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Foreign Tax Credits
-------------------
6.1 The Fund agrees to consult in advance with the Company concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
ARTICLE VII. Potential Conflicts
-------------------
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. 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
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2 The Company will 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
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obligation by the Company to inform the Board whenever Contract owner voting
instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (a),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund and reinvesting such assets in a different investment medium or
submitting the question whether 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.
7.4 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 the Fund's election, to withdraw the affected Account's
investment in the Fund 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 members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.5 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 the Fund and terminate this Agreement with
respect to such Account within six 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 members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the Company for the purchase (and redemption) of
shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether 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 the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action
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does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by an such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7 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 Act
of the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund 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;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1 Indemnification By The Company
------------------------------
8.1(a) The Company agrees to indemnify and hold harmless the Fund and each
director of the Board and officers (collectively, the "Indemtified Parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts and:
(i) 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 the Contracts or contained in the
Contracts or advertisements or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged amazon to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in the
Registration Statement or prospectus for the Contracts or in the
Contracts or advertisements or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
Page 13 of 25
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
advertisements or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information furnished
to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any representation
or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of
Sections 8.1 (b) and 8.1 (c) hereof.
8.1(b) The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or dudes under this Agreement or to the Fund,
whichever is applicable.
8.1(c) The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate. at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be
liable to such 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.
Page 14 of 25
8.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2 Indemnification by the Underwriter
----------------------------------
8.2(a) The Underwriter agrees to indemnify and hold harmless the Company and
the principal underwriter for the Contracts and each of their respective
directors and officers and the principal underwriter for the Contracts 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 Section
8.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement or prospectus or advertisements or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Underwriter or Fund by or on behalf
of the Company for use in the Registration Statement or prospectus
for the Fund or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
advertisements or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; or
Page 15 of 25
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement, or to qualify as a regulated
investment company under Subchapter M of the Code); or
(v) arise as a result of the Fund's or Adviser's (or their designated
agent's) (i) incorrect calculation of the daily net asset value,
dividend rate or capital gain distribution rate; (ii) incorrect
reporting of the daily net asset value, dividend rate or capital gain
distribution rate; or (iii) untimely reporting of the net asset
value, dividend rate or capital gain distribution rate. Any gain
accruing to the Company attributable to the Fund's or Adviser's (or
their designated agent's) incorrect calculation or reporting of the
daily net asset value shall be returned to the Fund by the Company
upon receipt of notice from the Fund or the Adviser regarding such
incorrect calculation or reporting; or
(vi) arise out of or result from any material breach of any representation
or warranty made by the Fund or the Underwriter in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund or the Underwriter; as limited by and in
accordance with the provisions of Section 8.2(b) and 8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Underwriter to such party of the Underwriter's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Underwriter
will not be liable to such 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.
Page 16 of 25
8.2(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3 Indemnification By the Fund
---------------------------
8.3(a) The Fund agrees to indemnify and hold harmless the Company and the
principal underwriter for Contracts and each of their respective directors and
officers 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 Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement, or to qualify as a
regulated investment company under Subchapter M of the Code); or
(ii) arise as a result of the Fund's (or its designated agent's) (i)
incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate; (ii) incorrect reporting of the daily
net asset value, dividend rate or capital gain distribution rate; or
(iii) untimely reporting of the net asset value, dividend rate or
capital gain distribution rate. Any gain accruing to the Company
attributable to the Fund's (or its designated agent's) incorrect
calculation or reporting of the daily net asset value shall be
returned to the Fund by the Company upon receipt of notice from the
Fund regarding such incorrect calculation or reporting; or
(iii) arise out of or result from any material breach of any
representations or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against on Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c) The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified
Page 17 of 25
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent). but failure to notify
the Fund of any such claim shall not relieve the Fund from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Fund to such party of the Fund's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Fund will
not be liable to such 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.
8.3(d) The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
9.2 This Agreement shall be subject to the provisions of the 1933 Act,
1934 Act and 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by one hundred
eighty (180) day's advance written notice delivered to the
other parties; or
(b) termination by the Company by written notice to the Fund and
Underwriter based upon the Company's determination that
shares of such Fund are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter in the event the Fund's shares are not
registered, issued or sold in accordance with applicable
state or federal law or such law
Page 18 of 25
precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund and
the Underwriter in the event that the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to do so
qualify; or
(e) termination by the Company by written notice to the Fund and
the Underwriter in the event that the Fund fails to meet the
diversification requirements specified in Article VI hereof;
or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company or its
affiliated companies has suffered a material adverse change
in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund, the
Adviser or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(h) termination by any party by written notice upon the
institution of formal proceedings against the Company, the
Fund, the Adviser or the Underwriter by the NASD, the SEC or
other regulatory body; or
(i) termination by the Company or the Fund by written notice to
the other party upon a determination by the majority of the
Fund's Board that a material irreconcilable conflict exists
among the interests of (i) all contract owners of all
separate accounts or (ii) the interests of the Participating
Insurance Companies; or
(j) termination by any party by advance written notice upon the
"assignment" of the Agreement (as defined under the 0000
Xxx) unless made with the written consent of each party to
the Agreement; or
(k) termination by the Company by written notice upon the sale,
acquisition or change of control of the Adviser; or
Page 19 of 25
(l) termination by the Company arising from the substitution of
Fund shares with the shares of another investment company
for the Contracts for which the Fund shares have been
selected to serve as the underlying investment medium,
subject to compliance with applicable regulations of the
SEC, Company will give 60 day's written notice to the Fund
and the Underwriter of any proposed action to replace Fund
shares; or
(m) termination by the Company, the Fund or the Underwriter by
written notice to the other parties upon a material breach
of the Agreement by the other party; or
(n) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision
of this Agreement; provided, however any termination under
this Section 10.1(n) shall be effective forty five (45) days
after the notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation. the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight delivery or facsimile 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 the Fund:
__________________________________
__________________________________
Attention:________________________
Fax No.___________________________
Page 20 of 25
If to the Underwriter:
_________________________________
_________________________________
Attention: ______________________
Fax No.__________________________
If to the Company:
0000 Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxx
Fax No. (000) 000-0000
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 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.
12.6 Each party hereto 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 to
the extent practicable and except where a party's respective interests are
adverse to or in conflict with another party's interests.
12.7 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.
Page 21 of 25
12.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior consent of all parties hereto;
provided, however, that the Underwriter may assign this Agreement or any rights
or obligations hereunder to any affiliate of or company under common control
with the Underwriter, if such assignee is duly organized, licensed and
registered to perform the obligations of the Underwriter under this Agreement.
IN WITNESS HEREOF, each of the parties has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed as of the date specified below.
THE UNITED STATES LIFE INSURANCE COMPANY
_____________________________________
IN THE CITY OF NEW YORK
_____________________________________
By:______________________________ By: _________________________________
Title:___________________________ Title:_______________________________
Date:____________________________ Date: _______________________________
_____________________________________
_____________________________________
By: _________________________________
Title:_______________________________
Date: _______________________________
Page 22 of 25
Schedule A
----------
Accounts
--------
-------------------------------------------------------------------------------
Name of Account Date of Resolution of Company's Board
which Established the Account
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Page 23 of 25
Schedule B
----------
Contracts
---------
Page 24 of 25
Schedule C
----------
series of the Fund
------------------
Page 25 of 25
