FINANCIAL GUARANTY AGREEMENT
dated as of August 6, 1999
among
MBIA INSURANCE CORPORATION,
as Insurer,
AELTUS INVESTMENT MANAGEMENT, INC.,
as Adviser,
and
AETNA SERIES FUND, INC.
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
Section 1.1 General Definitions 1
Section 1.2 Generic Terms 15
Section 1.3 Valuation 15
ARTICLE II THE POLICIES 15
Section 2.1 Policies 15
Section 2.2 Procedure for Issuance of Policies 15
Section 2.3 Conditions Precedent to Effectiveness 16
Section 2.4 Premiums 19
Section 2.5 Reimbursement Obligations 19
Section 2.6 Indemnification 20
ARTICLE III MANAGEMENT OF PPFs 21
Section 3.1 Eligible Investments 21
Section 3.2 Investment Limitations 21
Section 3.3 Index Equity Selection Guidelines 22
Section 3.4 Index Equity Diversification and Capitalization
Requirements 23
Section 3.5 Asset Allocation and Rebalancing 23
ARTICLE IV EVENTS OF DEFAULT 25
Section 4.1 Default 25
Section 4.2 Remedies 25
ARTICLE V REPRESENTATIONS AND WARRANTIES 28
Section 5.1 Representations and Warranties Relating to Aeltus 28
Section 5.2 Representations and Warranties Relating to the Fund 29
ARTICLE VI COVENANTS 30
Section 6.1 Covenants of Investment Adviser 30
Section 6.2 Covenants of the Fund 31
ARTICLE VII FURTHER AGREEMENTS 33
Section 7.1 Obligations Absolute 33
Section 7.2 Reinsurance and Assignments 34
Section 7.3 Fund Liability 34
Section 7.4 Liability of the Insurer 34
Section 7.5 Fees and Expenses 34
ARTICLE VIII MISCELLANEOUS 34
Section 8.1 Amendments and Waivers 34
Section 8.2 Notices 34
Section 8.3 No Waiver, Remedies and Severability 35
Section 8.4 Payments 35
Section 8.5 Governing Law 36
Section 8.6 Counterparts 36
Section 8.7 Paragraph Headings, Etc 36
Section 8.8 Termination 36
Annex A The Equity Portfolio ("Index Plus Large Cap")
Annex B Sector List
Annex C Sample Calculation of Hypothetical Total Net Assets
Exhibit A Form of Policy-- Insurance Policy
Exhibit B Administrative Services Agreement
Exhibit C Articles of Amendment and Restatement
Exhibit D Form of Articles Supplementary
Exhibit E Form of Custodian Monitoring Agreement
Exhibit F Form of Custodian Service Agreement
Exhibit G Form of Registration Statement
Exhibit H Form of Investment Advisory Agreement
Exhibit I-1 Form of Preliminary Application
Exhibit I-2 Form of Final Application
Exhibit J Opinion of Xxx X. Doberman, Esq, as counsel to Aeltus,
dated the Effective Date
Exhibit K Opinion of Counsel to MBIA Insurance Corporation
Exhibit L Opinion of Xxx X. Doberman, Esq, as the Fund,
dated the Effective Date
Exhibit M Opinion of Xxx X. Doberman, Esq, as counsel to Aeltus,
dated the Inception Date
Exhibit N-1 Opinion of Counsel to Mellon Bank, N.A.,
dated the Inception Date
Exhibit N-2 Opinion of Xxxx Xxxxx Xxxx & XxXxxx LLP, dated the Inception Date
Exhibit O Opinion of Xxx X. Doberman, Esq, as counsel to the Fund,
dated the Inception Date
Exhibit P Form of Monthly Report
Exhibit Q Form of Daily Report
FINANCIAL GUARANTY AGREEMENT
FINANCIAL GUARANTY AGREEMENT, dated as of August 6, 1999 (the
"Agreement"), among MBIA INSURANCE CORPORATION, a New York monoline stock
insurance company (the "Insurer"), AELTUS INVESTMENT MANAGEMENT, INC., a
Connecticut corporation ("Aeltus"), and AETNA SERIES FUND, INC., a Maryland
corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is an open-end diversified, management
investment company registered under the Investment Company Act (as defined
herein), that intends to create one or more additional series, each to be called
an Aetna Principal Protection Fund (each a "PPF") and each to be advised by
Aeltus, which will include a promise by the Fund on behalf of each PPF (each a
"Repayment Obligation") to repay to the shareholders thereof (each a "PPF
Shareholder") at maturity the Aggregate Guarantee Amount (as defined herein)
with respect to each PPF; and
WHEREAS, the Insurer is authorized to transact a financial
guaranty insurance business in the State of Connecticut and the Fund has
requested the Insurer, and the Insurer has agreed, to issue a financial guaranty
in connection with each PPF, substantially in the form of Exhibit A hereto (each
a "Policy"), in the aggregate amount of $250,000,000, to assure the timely
payment by the Fund of the Repayment Obligation with respect to such PPF; and
WHEREAS, the parties hereto, among other things, desire to
specify the conditions precedent to the issuance by the Insurer of each Policy,
the payment of the premium and other amounts in respect thereof, the
reimbursement obligations of Aeltus, the investment adviser to the Fund, to the
Insurer, and to provide for certain other matters related thereto;
NOW, THEREFORE, in consideration of the promises and of the
agreements herein contained, the parties hereto agree as follows:
ARTICLE
DEFINITIONS
Section . General Definitions. The terms defined in this
Article I shall have the meanings provided herein for all purposes of this
Agreement, unless the context clearly requires otherwise, in both singular and
plural form, as appropriate.
"Acts" shall mean the Investment Company Act and the
Securities Act.
"Adjusted Total Net Assets" shall have the meaning set forth
in Section 3.5(a). "Administrative Services Agreement" shall mean the
Administrative Services Agreement, dated December 18, 1998, as amended
as of July 27, 1999, between the Fund and Aeltus, substantially in the
form of Exhibit B hereto, as the same may be amended, supplemented or
otherwise modified from time to time.
"Aggregate Guarantee Amount" shall mean, with respect to any
PPF, on any date of determination, the aggregate Guarantee Amounts with
respect to such PPF and all PPF Shareholders in such PPF on such date
of determination.
"Articles of Amendment and Restatement"shall mean the Articles
of Amendment and Restatement creating the Fund duly filed with the
State Department of Assessments and Taxation of Maryland and delivered
to the Insurer pursuant to Section 2.3(a), substantially in the form of
Exhibit C hereto.
"Articles Supplementary" shall mean, with respect to any PPF,
the Articles Supplementary creating such PPF duly filed with the State
Department of Assessments and Taxation of Maryland and delivered to the
Insurer pursuant to Section 2.3(b), substantially in the form of
Exhibit D hereto.
"Asset Allocation Test" shall have the meaning set forth in
Section 3.5(a).
"Asset Allocation Threshold" shall mean, with respect to any
PPF, on any Valuation Date, an amount equal to 98% of the sum of (i)
the Present Value of the Aggregate Guarantee Amount with respect to
such PPF plus (ii) the Present Value of Covered Expenses with respect
to such PPF on such Valuation Date; provided, however, that if the
Total Net Assets with respect to such PPF on such Valuation Date is
less than or equal to the sum of (i) the Present Value of the Aggregate
Guarantee Amount with respect to such PPF plus (ii) the Present Value
of Covered Expenses with respect to such PPF, the Asset Allocation
Threshold shall be an amount equal to 100% of the sum of (i) the
Present Value of the Aggregate Guarantee Amount with respect to such
PPF plus (ii) the Present Value of Covered Expenses with respect to
such PPF on such Valuation Date.
"Asset Reallocation" shall mean, with respect to any PPF, (i)
the sale of Index Equities or Index Futures held by such PPF and the
reinvestment of all or a portion of the proceeds therefrom in U.S.
Treasury Zeroes, U.S. Agency Zeroes, Corporate Bonds or U.S. Treasury
Futures or (ii) the sale of U.S. Treasury Zeroes, U.S. Agency Zeroes,
Corporate Bonds or U.S. Treasury Futures held by such PPF and the
reinvestment of all or a portion of the proceeds therefrom in Index
Equities or Index Futures.
"Business Day" shall mean any day that the New York Stock
Exchange is open.
"Cash Associated with Futures" shall mean, with respect to any
Index Future, on any Valuation Date, an amount of cash or Cash
Equivalents equal to the Market Value thereof on such Valuation Date.
"Cash Equivalents" shall mean the Eligible PPF Investments
described in Section 3.1(b)(i).
"Cash Margin" shall mean, with respect to the U.S. Treasury
Futures held by a PPF, on any Valuation Date, the Market Value of the
Cash Equivalents held by the Custodian in a segregated account of such
PPF in order to satisfy the margin requirements with respect to such
U.S. Treasury Futures on such Valuation Date.
"Cheapest-to-Deliver Bond" shall mean, with respect to any
U.S. Treasury Future, on any Valuation Date, the U.S. Treasury Note
eligible for delivery under such U.S. Treasury Future whose price on
such Valuation Date is closest to the product of the settlement price
of such U.S. Treasury Future and the price of such U.S. Treasury Note
as of the delivery date of such U.S. Treasury Future that would cause
such U.S. Treasury Note to yield 8% (or, in the case of any U.S.
Treasury Future with a delivery month after February 2000, 6%), as
published by Bloomberg, L.P.
"Class A Percentage" shall mean, with respect to any PPF, on
any Valuation Date, the excess, if any, of one over the Class B
Percentage with respect to such PPF.
"Class A Shares" shall mean, with respect to any PPF, the
shares of capital stock of the Fund designated as the Class A shares of
such PPF in the Articles Supplementary with respect to such PPF.
"Class B Percentage" shall mean, with respect to any PPF, on
any Valuation Date, the percentage equivalent of a fraction, the
numerator of which is the product of the NAV of the Class B Shares of
such PPF multiplied by the number of Class B Shares of such PPF
outstanding, and the denominator of which is the sum of (i) the product
of the NAV of the Class A Shares of such PPF multiplied by the number
of Class A Shares of such PPF outstanding plus (ii) the product of the
NAV of the Class B Shares of such PPF multiplied by the number of the
Class B Shares of such PPF outstanding.
"Class B Shares" shall mean, with respect to any PPF, the
shares of capital stock of the Fund designated as the Class B shares of
such PPF in the Articles Supplementary with respect to such PPF.
"Class of Shares" shall mean, with respect to any PPF, the
Class A Shares or Class B Shares of such PPF.
"Commission" shall mean the Securities and Exchange Commission.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or any agreement,
instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound.
"Corporate Bond" shall have the meaning set forth in Section
3.1(b)(iii).
"Covered Expenses" shall mean, for any Class of Shares of any
PPF, the annual fund operating expenses enumerated in the Final
Prospectus for such PPF.
"Covered Expense Ratio" shall mean, with respect to any PPF,
on any Valuation Date, the higher of (a) the expense ratio utilized by
Aeltus in its proprietary asset allocation computer model and (b) the
Lower Covered Expense Ratio with respect to such PPF; provided,
however, that if the percentage of the Total Net Assets of such PPF on
such date allocable to Index Equities and Index Futures according to
the Asset Allocation Test would be less than 30% using the Lower
Covered Expense Ratio in calculating the Present Value of Covered
Expenses with respect to such PPF on such Valuation Date, the Covered
Expense Ratio will equal the Higher Covered Expense Ratio with respect
to such PPF; and provided, further that the Covered Expense Ratio with
respect to any PPF having an Aggregate Guarantee Amount on the
Inception Date with respect to such PPF of less than $25,000,000 will
equal the Higher Covered Expense Ratio with respect to such PPF on any
Valuation Date.
"Custodian" shall mean Mellon Bank, N.A. or any successor or
assigns under the Custodian Agreement.
"Custodian Agreement" shall mean the custodial agreement by
and between the Fund and the Custodian with respect to the custody of
the assets of certain series of the Fund, including the PPFs, as the
same may be amended, supplemented or modified from time to time.
"Custodian Monitoring Agreement" shall mean, with respect to
each PPF, the custodian monitoring agreement among the Fund, the
Insurer and Xxxxxxx/Xxxxxx Analytical Services, LLC, substantially in
the form of Exhibit E hereto, as the same may be amended, supplemented
or otherwise modified from time to time, and any other agreement
substantially in the form of Exhibit E hereto with a successor
Custodian or any affiliate thereof.
"Custodian Service Agreement" shall mean, with respect to each
PPF, the custodian service agreement among the Fund, the Insurer and
the Custodian, substantially in the form of Exhibit F hereto, as the
same may be amended, supplemented or otherwise modified from time to
time, and any other agreement substantially in the form of Exhibit F
hereto with a successor Custodian.
"Default" shall mean any of the events specified in Section
4.1, whether or not any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"Default Period" shall have the meaning set forth in Section
4.2(a).
"Discount Rate" shall mean, with respect to any PPF, on any
Valuation Date, the quotient of (a) the sum of (i) the product of the
aggregate Market Value of the Fixed Income Portfolio with respect to
such PPF multiplied by the Fixed Income Portfolio Yield with respect to
such PPF on such Valuation Date plus (ii) the U.S. Treasury Futures
Spread for such PPF, divided by (b) the aggregate Market Value of the
Fixed Income Portfolio with respect to such PPF; provided, however,
that if such PPF does not have a Fixed Income Portfolio on such
Valuation Date, the Discount Rate with respect to such PPF shall equal
the Imputed Discount Rate with respect to such PPF on such Valuation
Date.
"Distribution Per Share" shall mean, with respect to any PPF
and any Class of Shares of such PPF, an amount equal to the quotient of
the amount of any distribution or payment by the Fund in respect of, or
allocated to, such Class of Shares that is not a Covered Expense or a
transaction related brokerage expense, and shall include, without
limitation, any distribution of income, dividends, capital gains or
principal to the PPF Shareholders of such Class of Shares and any
payment of income taxes or excise taxes allocated to such Class of
Shares divided by the number of shares of such Class of Shares
outstanding on the date of such distribution or payment.
"Effective Date" shall mean the date on which the conditions
set forth in Section 2.3 are satisfied.
"Eligible PPF Investments" shall have the meaning set forth
in Section 3.1(b).
"Equity Portfolio" shall mean, with respect to any PPF, all
investments of such PPF which are Eligible PPF Investments defined in
Sections 3.1(b)(v) or (vi).
"Event of Default" shall have the meaning set forth in
Section 4.1.
"FactSet" shall mean FactSet Data Systems, Inc. or any
successor thereto.
"Fee Payment Date" shall have the meaning set forth in
Section 2.4.
"Final Application" shall have the meaning set forth in
Section 2.2.
"Final Prospectus" shall mean for any PPF the prospectus
pursuant to which the shares of such PPF were offered for sale,
including the Statement of Additional Information with respect to such
PPF, delivered to the Insurer pursuant to Section 2.3(b) and filed with
the Commission pursuant to Rule 497 under the Securities Act,
substantially in the form of Exhibit G.
"Fixed Income Portfolio" shall mean, with respect to any PPF,
all investments of such PPF which are Eligible PPF Investments defined
in Sections 3.1(b)(ii), (iii) or (iv).
"Fixed Income Portfolio Yield" shall mean, with respect to any
PPF, on any Valuation Date, the sum of (a) the weighted average spread
over the Imputed Discount Rate with respect to such PPF, of the Fixed
Income Portfolio with respect to such PPF (excluding any U.S. Treasury
Futures), as calculated by the Investment Adviser of such PPF using the
Xxxxxx Brothers Analytics Model or a Substitute Valuation Source, as of
the close of business on the Business Day immediately preceding such
Valuation Date, based on the Market Value for each investment in such
Fixed Income Portfolio on such Valuation Date, plus (b) the Imputed
Discount Rate with respect to such PPF on such Valuation Date.
"Fund Sector Weight" shall mean, with respect to any PPF, for
any Sector, on any Valuation Date, the percentage equivalent of a
fraction, the numerator of which is the aggregate Market Value of all
Index Equities belonging to such Sector held by such PPF on such
Valuation Date and the denominator of which is the aggregate Market
Value of all Index Equities held by such PPF on such Valuation Date.
"Fund Weight" shall mean, with respect to any PPF and an Index
Equity, on any Valuation Date, the percentage equivalent of a fraction,
the numerator of which is the Market Value of such Index Equity held by
such PPF on such Valuation Date and the denominator of which is the
aggregate Market Value of all Index Equities held by such PPF on such
Valuation Date.
"Government Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantee Amount" shall mean, with respect to any PPF
Shareholder of any Class of Shares, on any date of determination, an
amount equal to the product of (i) the Guarantee per Share for such
Class of Shares held by such PPF Shareholder on such date and (ii) the
total number of such shares held by such PPF Shareholder on such date.
"Guarantee per Share" shall mean, with respect to any Class of
Shares of any PPF on any Valuation Date, (i) on the Inception Date with
respect to such PPF, the NAV for such Class of Shares at the close of
business on the last day of the Offering Period for such PPF; and (ii)
thereafter on any Valuation Date, the Guarantee per Share for such
Class of Shares on the immediately preceding Valuation Date divided by
the sum of one plus the quotient of (i) the amount of any Distribution
Per Share with respect to such Class of Shares and such PPF, effective
since the immediately preceding Valuation Date, divided by (ii) the NAV
for such Class of Shares at the close of business on the day on which
such Distribution Per Share was effective.
"Guarantee Period" shall mean, with respect to any PPF, the
period commencing on and including the Inception Date to and including
the Maturity Date with respect to such PPF.
"High Ranked Equities" shall mean, on any date of
determination, the Index Equities listed by the Investment Adviser of
each PPF as "High Ranked Stocks" in the report most recently delivered
by such Investment Adviser to the Insurer pursuant to Section 3.4.
"Higher Covered Expense Ratio" shall mean, with respect to any
PPF, on any Valuation Date, the sum of (a) 1.50% times the Class A
Percentage with respect to such PPF plus (b) 2.25% times the Class B
Percentage with respect to such PPF.
"Hypothetical Total Net Assets" shall mean, with respect to
any PPF, an amount equal to the Total Net Assets on the Business Day on
which a Permanent Deficit Event shall have occurred with respect to
such PPF, recalculated as follows: (a) the aggregate Market Value of
the Equity Portfolio with respect to such PPF on the Valuation Date for
such Business Day shall (i) first, be reduced to an amount such that
the Adjusted Total Net Assets with respect to such PPF would have
equaled the sum of the Present Value of the Aggregate Guarantee Amount
with respect to such PPF plus the Present Value of Covered Expenses
with respect to such PPF (calculated using the Higher Covered Expense
Ratio with respect to such PPF) on the Business Day immediately
preceding such Valuation Date and (ii) second, be reduced by the
percentage decline in the Market Value of the Equity Portfolio with
respect to such PPF on such Valuation Date and (b) the aggregate Market
Value of the Fixed Income Portfolio with respect to such PPF on such
Valuation Date shall (i) first, be increased in an amount equal to the
reduction in the aggregate Market Value of the Equity Portfolio with
respect to such PPF determined in clause (a)(i) above and (ii) second,
be increased or reduced by the percentage increase or reduction in the
aggregate Market Value of the Fixed Income Portfolio with respect to
such PPF on such Valuation Date. A sample calculation is set forth in
Annex C.
"Imputed Discount Rate" shall mean, with respect to any PPF on
any Valuation Date, a rate per annum equal to the interest rate derived
by calculating the internal rate of return for the Proxy U.S. Treasury
Zero with respect to such PPF, calculated based on the actual number of
days to maturity compounded on a semi-annual basis based on the Market
Value for such Proxy U.S. Treasury Zero as of such Valuation Date
compared with the dollar value for such Proxy U.S. Treasury Zero at
maturity.
"Inception Date" shall mean, with respect to a PPF, the
Business Day immediately following the last day of the Offering Period
with respect to such PPF.
"Indemnitee" shall have the meaning set forth in Section 2.6.
"Indemnified Liabilities" shall have the meaning set forth in
Section 2.6.
"Index Equity" shall mean, on any Valuation Date, the equity
securities of any company included in the S&P 500 Index on such
Valuation Date, as published by FactSet or a Substitute Valuation
Source.
"Index Equity Capitalization" shall mean, for any Index
Equity, on any Valuation Date, the product of the number of shares
outstanding of such Index Equity, as published by FactSet or a
Substitute Valuation Source, multiplied by the price per share of such
Index Equity, as published in Reuters America or any Substitute
Valuation Source.
"Index Future" shall mean a futures contract on the S&P 500
Index, as traded on the Chicago Mercantile Exchange.
"Index Weight" shall mean, for any Index Equity, on any
Valuation Date, the percentage equivalent of a fraction, the numerator
of which is the Index Equity Capitalization of such Index Equity on
such Valuation Date and the denominator of which is the Total Index
Capitalization on such Valuation Date.
"Investment Adviser" shall mean, with respect to each PPF,
Aeltus or any successor thereto appointed by the Board of Directors of
the Fund as adviser to such PPF.
"Investment Advisers Act" shall mean the Investment Advisers
Act of 1940, as amended.
"Investment Advisory Agreement" shall mean, with respect to
each PPF, the Investment Advisory Agreement, between the Fund on behalf
of such PPF, and Aeltus or any successor Investment Adviser,
substantially in the form of Exhibit H hereto, as the same may be
amended, supplemented or otherwise modified from time to time.
"Investment Company Act" shall mean the Investment Company
Act of 1940, as amended.
"Xxxxxx Brothers Analytics Model" shall mean the Xxxxxx
Brothers PC Product published by Xxxxxx Brothers Inc. or an affiliate
thereof or successor thereto.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), other charge or security interest, or any preference, priority
or other agreement or preferential arrangement of any kind or nature
whatsoever.
"Low Ranked Equities" shall mean, on any date of
determination, the Index Equities listed by the Investment Adviser of
each PPF as "Low Ranked Stocks" in the report most recently delivered
by such Investment Adviser to the Insurer pursuant to Section 3.4.
"Lower Covered Expense Ratio" shall mean, with respect to any
PPF, on any Valuation Date, 1.50% minus the lesser of (i) 0.5% and (ii)
the greater of (A) zero and (B) the percentage equivalent of an amount
equal to the excess of 1.015 over the product of (x) 0.96109 times (y)
one plus the Discount Rate with respect to such PPF on the last day of
the Offering Period with respect to such PPF.
"Market Value" shall mean on any date of determination:
(i) with respect to any Index Equity held by a PPF,
the product of (A) the price per share of such Index Equity at
the close of trading on such date, as published in Reuters
America or in a Substitute Valuation Source, times the number
of shares of such Index Equity held by such PPF;
(ii) with respect to any Corporate Bond held by a
PPF, the market value thereof at the close of trading on such
date obtained from the Xxxxxxx Xxxxx Pricing Product or a
Substitute Valuation Source plus the aggregate amount of
accrued and unpaid interest thereon as of such date;
(iii) with respect to Cash Equivalents held by a PPF
having a maturity date 60 days or less from such date, the
value of such security determined in accordance with the
"amortized cost" method of valuation which method values an
instrument at its cost and assumes a constant amortization of
premium or increase of discount;
(iv) with respect to Cash Equivalents held by a PPF
having a maturity date more than 60 days from such date, the
market value thereof at the close of trading on such date
obtained from the Xxxxxxxx Financial Securities Management
Service or a Substitute Valuation Source plus the aggregate
amount of accrued and unpaid interest thereon as of such date;
(v) with respect to any Index Future held by a PPF,
the product of (A) 500 (or such other index dollar multiplier
designated by the Chicago Mercantile Exchange as being in
effect on such date) times (B) the price of such Index Future
at the close of trading on such date, as published in Reuters
America or a Substitute Valuation Source, times (C) the number
of such Index Futures held by such PPF;
(vi) with respect to the U.S. Treasury Futures held
by a PPF, the aggregate Cash Margin with respect to such U.S.
Treasury Futures; and
(vii) with respect to any U.S. Treasury Zero or U.S.
Agency Zero held by a PPF, the market value thereof at the
close of trading on such date obtained from the Xxxxxxx Xxxxx
Pricing Product or a Substitute Valuation Source;
provided, however, that if on any date of determination the price or
value of any investment held by a PPF is not determinable as set forth
above, the Market Value thereof shall be determined on such date in
such manner as is determined in good faith by, or under the authority
of, the Board of Directors of the Fund.
"Maturity Date" shall have the meaning set forth in Section
2.1.
"Xxxxxxx Xxxxx Pricing Product" shall mean the Xxxxxxx Xxxxx
Securities Pricing Product published by Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated or an affiliate thereof or successor thereto.
"Modified Duration" shall mean, with respect to any Corporate
Bond, U.S. Treasury Zero or U.S. Treasury Future on any Valuation Date,
the quotient of (a) the weighted average term to maturity of the cash
flows generated by such security (or, in the case of a U.S. Treasury
Future, by the Cheapest-to-Deliver Bond with respect to such U.S.
Treasury Future on such Valuation Date) divided by (b) the sum of (i)
one plus (ii) the quotient of (x) the yield to maturity of such
security (or, in the case of a U.S. Treasury Future, of the
Cheapest-to-Deliver Bond with respect to such U.S. Treasury Future)
divided by (y) the number of interest payments on such security per
year (or, in the case of a U.S. Treasury Future, on the
Cheapest-to-Deliver Bond with respect to such U.S. Treasury Future).
For the purposes of this calculation, the number of interest payments
on any U.S. Treasury Zero is assumed to be two per year.
"Moody's" shall mean Xxxxx'x Investors Service, Inc. and its
successors and assigns.
"NAV" shall mean, with respect to any Class of Shares of a
PPF, (a) on the commencement date of such PPF, the net asset value per
share of such Class of Shares established by the Fund for such date and
(b) on any date of determination thereafter the quotient of (i) the
excess of (x) the market value of the assets allocated to that Class of
Shares determined as of the close of regular trading on the NYSE by the
Fund in the manner described in the Final Prospectus with respect to
such PPF over (y) the market value of any liabilities allocated to
and/or associated with such Class of Shares determined as of the close
of regular trading on the NYSE by the Fund in the manner described in
the Final Prospectus with respect to such PPF divided by (ii) the
number of outstanding shares of that Class of Shares at such time. The
assets, income, gain, loss and liabilities (other than those
liabilities relating specifically to a Class of Shares) of each PPF
shall be allocated to each Class of Shares of such PPF on each date of
determination on a pro rata basis based on the NAV of such Class of
Shares on the preceding date of determination.
"Notional Value" shall mean, with respect to any U.S.
Treasury Future, the trading unit of such U.S. Treasury Future
designated by the Chicago Board of Trade.
"NYSE" shall mean the New York Stock Exchange.
"Offering Period" shall mean, with respect to any PPF, the
period during which the shares of such PPF are offered for sale to
investors described in the Final Prospectus with respect to such PPF.
"Permanent Deficit Event" shall have the meaning set forth in
Section 2.5.
"Permanent Deficit Reimbursement Ratio" shall mean, with
respect to any PPF as to which a Permanent Deficit Event shall have
occurred, on any Valuation Date, (A) if the Covered Expense Ratio for
such PPF on the Business Day immediately preceding the Business Day on
which such Permanent Deficit Event shall have occurred was greater than
or equal to 1.50%, 100%; (B) if the Covered Expense Ratio for such PPF
on the Business Day immediately preceding the Business Day on which
such Permanent Deficit Event shall have occurred was less than 1.50%
and greater than or equal to 1.17%, the quotient of (i) 0.75% divided
by (ii) 2.25% minus the Covered Expense Ratio for such PPF on such
Business Day; or (C) if the Covered Expense Ratio for such PPF on the
Business Day immediately preceding the Business Day on which such
Permanent Deficit Event shall have occurred was less than 1.17%, the
quotient of (i) 1.92% minus the Covered Expense Ratio for such PPF on
such Business Day divided by (ii) 2.25% minus the Covered Expense Ratio
for such PPF on such Business Day.
"Permanent Fee Deficit Amount" shall mean, with respect to any
PPF as to which a Permanent Deficit Event shall have occurred, on any
Valuation Date, the product of (A) the quotient of (i) the Permanent
Total Deficit Amount with respect to such PPF on the Business Day on
which such Permanent Deficit Event shall have occurred minus the
Permanent Principal Deficit Amount with respect to such PPF divided by
(ii) the Permanent Total Deficit Amount with respect to such PPF on the
Business Day on which such Permanent Deficit Event shall have occurred
times (B) the Permanent Total Deficit Amount with respect to such PPF
on such Valuation Date.
"Permanent Principal Deficit Amount" shall mean, with respect
to any PPF as to which a Permanent Deficit Event shall have occurred,
the excess, if any, of (a) the sum of the Present Value of the
Aggregate Guarantee Amount with respect to such PPF plus the Present
Value of Covered Expenses with respect to such PPF (calculated using
the Higher Covered Expense Ratio with respect to such PPF) on the
Business Day on which such Permanent Deficit Event shall have occurred
over (b) the Hypothetical Total Net Assets with respect to such PPF.
"Permanent Total Deficit Amount" shall mean, with respect to
any PPF, on any Valuation Date, the excess, if any, of (a) the sum of
the Present Value of the Aggregate Guarantee Amount with respect to
such PPF plus the Present Value of Covered Expenses with respect to
such PPF (calculated using the Higher Covered Expense Ratio with
respect to such PPF) over (b) the Total Net Assets with respect to such
PPF on such Valuation Date.
"Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
limited liability company, joint venture, Government Authority or other
entity of whatever nature.
"Policy" shall have the meaning set forth in the recitals.
"Policy Fee" shall have the meaning set forth in Section 2.4.
"Portfolio Duration" shall mean, with respect to the Corporate
Bonds and the U.S. Treasury Futures held by any PPF on any Valuation
Date, an amount equal to the average of the Modified Duration of each
such Corporate Bond and U.S. Treasury Future, weighted on the basis of
the Market Values thereof, calculated using the Xxxxxx Brothers
Analytics Model or a Substitute Valuation Source, as of the close of
business on such Valuation Date.
"Preliminary Application" shall have the meaning set forth in
Section 2.2.
"Present Value of the Aggregate Guarantee Amount" shall mean,
with respect to any PPF, on any Valuation Date, the quotient of (a) the
Aggregate Guarantee Amount with respect to such PPF divided by (b) the
sum, compounded over two times the time remaining to the Maturity Date
of such PPF, of one plus one half of the Discount Rate with respect to
such PPF on such Valuation Date.
"Present Value of Covered Expenses" shall mean, with respect
to any PPF, on any Valuation Date, the product of (a) the Present Value
of the Aggregate Guarantee Amount with respect to such PPF on such
Valuation Date times (b) the excess of (i) the sum of one plus the
Covered Expense Ratio with respect to such PPF on such date, compounded
over the time remaining to the Maturity Date of such PPF, over (ii)
one.
"Proxy U.S. Treasury Zero" shall mean, with respect to any PPF
on any Valuation Date, the U.S. Treasury Zero maturing on the date
closest to the Maturity Date with respect to such PPF, but in no event
later than such Maturity Date.
"Rebalancing" shall mean any divestiture of investments and
reinvestment of proceeds thereof required pursuant to Section 3.5(a) or
(b).
"Registration Statement" shall have the meaning set forth in
Section 2.3(b).
"Reimbursement Amount" shall mean, with respect to any PPF, on
any Valuation Date, the excess, if any, of (a) the aggregate amount of
reimbursement payments received as of such date by the Insurer from the
Investment Adviser of such PPF with respect to such PPF pursuant to
Section 2.5, plus interest on each such payment from the date such
payment was received by the Insurer to, but excluding, such Valuation
Date at the Discount Rate prevailing with respect to such PPF on the
date such payment was received by the Insurer, over (b) the sum of the
aggregate amount of any refunds made by the Insurer to the Investment
Adviser of such PPF with respect to such PPF pursuant to Section 2.5,
plus interest on each such refund from the date of such refund to, but
excluding, such Valuation Date at the Discount Rate prevailing with
respect to such PPF on the date of such refund.
"Repayment Obligation" shall have the meaning set forth in
the recitals.
"Requirements of Law" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule, or
regulation or determination of an arbitrator or a court or other
Government Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"Reuters America" shall mean Reuters America published by
Reuters America Inc. or any successor thereto
"Sector" shall mean one of the Sectors set forth in Annex B
hereto, as amended from time to time in accordance with Section 6.1
(k).
"Sector Index Weight" shall mean, on any Valuation Date, for
each Sector, the percentage equivalent of a fraction, the numerator of
which is the sum of the Index Equity Capitalizations for all Index
Equities belonging to such Sector on such Valuation Date and the
denominator of which is the Total Index Capitalization on such
Valuation Date.
"Securities Act"shall mean the Securities Act of 1933, as
amended.
"Selection Guidelines" shall mean the investment guidelines
described in Annex A.
"S&P" shall mean Standard and Poor's Ratings Service, a
division of McGraw Hill Companies, Inc.
"S&P 500 Index" shall mean the index of 500 equity securities
known as the Standard and Poor's 500 Composite Index as compiled by S&P
and published by FactSet or a Substitute Valuation Source.
"Substitute Valuation Source" shall mean any widely
recognized, reputable source. of valuation approved by the Board of
Directors of the Fund or a committee thereof and used by an Investment
Adviser of a PPF to value investments held by such PPF.
"Targeted Fed Funds Rate" shall mean, on any Valuation Date,
the rate on overnight federal funds set by the Federal Open Market
Committee of the Federal Reserve System in effect on such Valuation
Date, as published by Bloomberg, L.P.
"Theoretical Zero Modified Duration" shall mean, with respect
to any PPF on any Valuation Date, the Modified Duration of the U.S.
Treasury Zero maturing on the Maturity Date with respect to such PPF
or, if no such U.S. Treasury Zero exists, the Modified Duration of a
hypothetical U.S. Treasury Zero, maturing on such Maturity Date and
having a yield to maturity equal to the interpolated yield to maturity
on the two U.S. Treasury Zeroes which mature immediately before and
immediately after such Maturity Date on such Valuation Date.
"Xxxxxxxx Financial Securities Management Service" shall mean
the Xxxxxxxx Financial Securities Management Service published by
Xxxxxx Data Corporation or any successor thereto.
"Total Net Assets" shall mean, with respect to any PPF, on any
Valuation Date, an amount equal to the excess of (a) the sum of:
() the aggregate Market Value of all Index Equities
held by such PPF on such Valuation Date;
() the aggregate Market Value of all Cash Equivalents
held by such PPF (less Cash Associated with Futures and Cash
Margin with respect to such PPF) on such Valuation Date;
() the aggregate Market Value of all U.S. Treasury
Zeros and U.S. Agency Zeroes held by such PPF on such
Valuation Date;
() the aggregate Market Value of all Corporate Bonds
held by such PPF on such Valuation Date;
() the Market Value of all U.S. Treasury Futures held
by such PPF;
() the aggregate Market Value of all Index Futures held
by such PPF on such Valuation Date;
() to the extent not included in the Market Value of
the Equity Portfolio, Fixed Income Portfolio or the Cash
Equivalents of such PPF, an amount equal to the aggregate
amount of interest and dividend receivables and receivables
for securities sold payable to such PPF;
() an amount equal to the aggregate amount payable to
such PPF on such Valuation Date on account of a decrease in
the margin requirements with respect to the U.S. Treasury
Futures held by such PPF; and
() an amount equal to the aggregate amount payable to
such PPF by the Investment Adviser with respect to such PPF
pursuant to the Investment Advisory Agreement with respect
to such PPF on account of expenses incurred by such PPF that
are subject to reimbursement by such Investment Adviser;
over (b) an amount equal to the aggregate amount of the liabilities
allocated to such PPF, including all amounts payable by such PPF in
respect of securities purchased.
"Total Index Capitalization" shall mean, on any Valuation
Date, the sum of the Index Equity Capitalizations on such Valuation
Date for all Index Equities (other than Aetna Inc.).
"Transaction Documents" shall mean, with respect to a PPF,
this Agreement, the Final Prospectus with respect to such PPF, the
Articles of Amendment and Restatement, the Articles Supplementary with
respect to such PPF, the Investment Advisory Agreement with respect to
such PPF, the Administrative Services Agreement, the Custodian
Monitoring Agreement with respect to such PPF and the Custodian Service
Agreement with respect to such PPF, as each may be amended,
supplemented or otherwise modified from time to time.
"U.S. Agency Zeroes" shall mean non-callable non-interest
bearing obligations of any one of the following agencies of the Federal
Government of the United States of America: Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Federal Home Loan
Bank, Resolution Funding Corporation, Financing Corporation and
Tennessee Valley Authority; provided, however, that any such
obligations that are rated less than AAA by S&P or less than Aaa by
Moody's shall not be U.S. Agency Zeroes.
"U.S. Treasury Future" shall mean a futures contract on a U.S.
Treasury Note, having a maturity of no less than 2 and no more than 10
years, as traded on the Chicago Board of Trade.
"U.S. Treasury Futures Spread" shall mean, for any PPF, on any
Valuation Date, the sum of the product for each U.S. Treasury Future
held by such PPF of (a) the Notional Value of such U.S. Treasury Future
times (b) the excess of (i) the yield on the Cheapest-to-Deliver Bond
with respect to such U.S. Treasury Future over (ii) the Targeted Fed
Funds Rate on such Valuation Date.
"U.S. Treasury Zeroes" shall mean non-callable non-interest
bearing obligations of the United States Treasury backed by the full
faith and credit of the United States of America, including, without
limitation: Certificates of Accrual on Treasury Securities (CATS);
Treasury Investment Growth Receipts (TIGRs); Generic Treasury Receipts
(TRs); and Separate Trading of Registered Interest and Principal of
Securities (STRIPS).
"Valuation Date" shall mean, for any Business Day, as of the
close of trading on the immediately preceding Business Day.
Section . Generic Terms. All words used herein shall
be construed to be of such gender or number as the circumstances
require. The words "herein," "hereby," "hereof," "hereto,"
"hereinbefore" and "hereinafter," and words of similar import, refer to
this Agreement in its entirety and not to any particular paragraph,
clause or other subdivision, unless otherwise specified, and Section,
subsection, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
Section . Valuation. All calculations and valuations
to be made herein shall be made on a basis that assumes that all
acquisitions and dispositions of securities are accounted for on the
trade date plus one (T+1); provided, however that (i) any acquisition
or disposition of a security which settles on the trade date will be
accounted for on that day, (ii) any acquisition or disposition of a
security on a trade date which relates to an Asset Reallocation with
respect to a PPF will be accounted for on that trade date and (iii) all
acquisitions and dispositions of securities on a trade date on which
the S&P 500 Index declines 5% or more will be accounted for on that
trade date.
ARTICLE
THE POLICIES
Section . Policies. The Insurer agrees, subject to
the conditions hereinafter set forth, to issue up to six Policies to
the Fund during the period commencing on the Effective Date and ending
on December 31, 2000 in an aggregate amount up to $250,000,000. Each
Policy shall (i) be issued on an Inception Date with respect to a PPF,
(ii) guarantee the Aggregate Guarantee Amount with respect to such PPF
on the date which is five years from the issuance date of such Policy
(the "Maturity Date"), (iii) be in an amount equal to the Aggregate
Guarantee Amount on the Inception Date with respect to such PPF, (iv)
be in an amount not less than $10,000,000 and (v) terminate by its
terms on the earlier of (A) the second Business Day immediately
succeeding the Maturity Date with respect to such PPF, (B) any date on
which the Aggregate Guarantee Amount with respect to such PPF equals
zero or (C) the payment by the Insurer of all amounts owing under such
Policy.
Section . Procedure for Issuance of Policies. The
Fund may from time to time request that the Insurer issue a Policy by
delivering to the Insurer at its address for notices specified herein a
preliminary application therefor substantially in the form of Exhibit
I-1 (each a "Preliminary Application"), completed to the satisfaction
of the Insurer, and such other information or written documentation
relating to the PPF as the Insurer may reasonably request. Upon (i)
receipt of any Preliminary Application, (ii) receipt prior to 10 a.m.
(New York City time) on the Inception Date of a final application
substantially in the form of Exhibit I-2 (each a "Final Application")
and (iii) satisfaction of the conditions precedent therefor set forth
in Section 2.3(b), the Insurer shall promptly issue and deliver to the
Fund at its address for notices specified herein the Policy requested
thereby duly authorized and executed by the Insurer (but in no event
shall the Insurer send any Policy to the Fund later than five Business
Days after its receipt of the Preliminary Application therefor or be
required to send any Policy to the Fund earlier than two Business Days
after its receipt of the Preliminary Application therefor).
Section. Conditions Precedent to Effectiveness. () The
effectiveness of this Agreement is subject to the satisfaction of the
following conditions:
() This Agreement, the Administrative Services
Agreement and the Custodian Agreement shall be in full force and
effect and shall be in form and substance satisfactory to the Insurer
and an executed counterpart of each such agreement shall have been
delivered to the Insurer;
() The Insurer and the Fund shall have received a
certificate of the Secretary or Assistant Secretary of Aeltus, dated
as of the Effective Date, as to the incumbency and signature of the
officers or other employees of Aeltus authorized to sign this
Agreement and, the Administrative Services Agreement on behalf of
Aeltus, together with evidence of the incumbency of such Secretary or
Assistant Secretary, certified by the Secretary or Assistant Secretary
of Aeltus;
() The Insurer and Aeltus shall have received a
certificate of the Secretary or Assistant Secretary of the Fund, dated
as of the Effective Date, as to the incumbency and signature of the
officers or other employees of the Fund authorized to sign this
Agreement, the Administrative Services Agreement and the Custodian
Agreement on behalf of the Fund, together with evidence of the
incumbency of such Secretary or Assistant Secretary, certified by the
Secretary or Assistant Secretary of the Fund;
() Aeltus and the Fund shall have received a
certificate of the Secretary or Assistant Secretary of the Insurer,
dated as of the Effective Date, as to the incumbency and signature of
the officers or other employees of the Insurer authorized to sign this
Agreement and the Custodian Agreement on behalf of the Insurer,
together with evidence of the incumbency of such Secretary or
Assistant Secretary, certified by the Secretary or Assistant Secretary
of the Insurer;
() The Insurer shall have received certificates of the
Secretary or Assistant Secretary of Aeltus, dated as of the Effective
Date, certifying that attached thereto are true, complete and correct
copies of the resolutions duly adopted by the Board of Directors of
Aeltus authorizing the execution of this Agreement and all other
Transaction Documents entered into on or prior to the Effective Date
to which Aeltus is a party;
() The Insurer shall have received certificates of the
Secretary or Assistant Secretary of the Fund, dated as of the
Effective Date, certifying that attached thereto are true, complete
and correct copies of resolutions duly adopted by the Board of
Directors of the Fund authorizing the execution of this Agreement and
all Transaction Documents entered into on or prior to the Effective
Date to which it is a party and of the Articles of Amendment and
Restatement;
() Each party to this Agreement shall have received the
following executed legal opinions, in form and substance satisfactory
to each of the parties hereto, dated the Effective Date:
() the opinion of Xxx X. Doberman, Esq., counsel to
Aeltus, substantially to the effect set forth in
Exhibit J;
() the opinion of an Associate General Counsel and Vice
President of the Insurer, substantially to the effect
set forth in Exhibit K; and
() the opinion of Xxx X. Doberman, Esq., Counsel to the
Fund, substantially to the effect set forth in Exhibit
L;
() The Insurer shall have received a copy of the
Articles of Amendment and Restatement, certified by the State
Department of Assessments and Taxation of Maryland; and
() All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Transaction
Documents shall be satisfactory in form and substance to the Insurer,
and the Insurer shall have received such other documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
() The obligation of the Insurer to issue each Policy
is subject to the satisfaction of the following conditions on the
Inception Date with respect to the related PPF:
() The Insurer shall have received a certificate of the
Secretary or Assistant Secretary of Aeltus dated as of such Inception
Date certifying that (A) a registration statement on Form N-1A with
respect to each Class of Shares with respect to such PPF (1) has been
prepared by the Fund in conformity with the requirements of the Acts
and the rules and regulations of the Commission thereunder, (2) has
been filed with the Commission under the Acts, (3) has become
effective under the Acts, (B) if any post-effective amendment to such
registration statement has been filed prior to the Inception Date, the
most recent such amendment has been declared effective by the
Commission, (C) true and complete copies of such registration
statement as amended to the Inception Date are attached thereto (the
"Registration Statement"), excluding any exhibits thereto, (D) the
Commission has not issued any order preventing or suspending the use
of any preliminary prospectus relating to any Class of Shares with
respect to such PPF and the Fund has not received any notice from the
Commission pursuant to Section 8(e) of the Investment Company Act with
respect to the Registration Statement, (E) the Registration Statement
and the Final Prospectus contain, all statements which are required by
the Acts and the rules and regulations thereunder; (F) the
Registration Statement and the Final Prospectus do not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and (G) the shares of such PPF conform in all
material respects to the description thereof contained in the
Registration Statement and the Final Prospectus.
() The Investment Advisory Agreement, the Custodian
Monitoring Agreement and the Custodian Services Agreement with respect
to such PPF shall be in full force and effect and an executed
counterpart of each such agreement shall have been delivered to the
Insurer;
() A copy of the Articles Supplementary with respect to
such PPF, certified by the State Department of Assessments and
Taxation of Maryland, shall have been delivered to the Insurer;
() A copy of the Final Prospectus with respect to such
PPF shall have been delivered to the Insurer;
() Each party to this Agreement shall have received the
following executed legal opinions, in form and substance satisfactory
to each of the parties hereto, dated the Inception Date:
() the opinion of Xxx X. Doberman, Esq., counsel to
Aeltus, substantially to the effect set forth in
Exhibit M;
() the opinion of an Assistant General Counsel of Mellon
Bank, N.A., substantially to the effect set forth in
Exhibit N-1, and the opinion of Xxxx Xxxxx Xxxx &
XxXxxx LLP, counsel to Xxxxxxx/Xxxxxx Analytical
Services, LLC, substantially to the effect set forth in
Exhibit N-2; and
() the opinion of Xxx X. Doberman, Esq., Counsel to the
Fund, substantially to the effect set forth in Exhibit
O.
() The Insurer shall have received a certificate of the
Secretary or Assistant Secretary of the Fund certifying that attached
thereto are true, complete and correct copies of the resolutions duly
adopted by the Board of Directors of the Fund authorizing the creation
of such PPF and the execution by the Fund of the Investment Advisory
Agreement, the Custodian Monitoring Agreement and the Custodian
Service Agreement with respect to such PPF and of the Articles
Supplementary with respect to such PPF in the form filed with the
State Department of Assessments and Taxation of Maryland;
() The Insurer shall have received a certificate of the
Secretary or Assistant Secretary of Aeltus certifying that attached
thereto are true, complete and correct copies of the resolutions duly
adopted by the Board of Directors of Aeltus authorizing the execution
by Aeltus of the Investment Advisory Agreement with respect to such
PPF;
() The Insurer and the Fund shall have received a
certificate of the Secretary or Assistant Secretary of Aeltus as to
the incumbency and signature of the officers or other employees of
Aeltus authorized to sign the Investment Advisory Agreement with
respect to such PPF on behalf of Aeltus, together with evidence of the
incumbency of such Secretary or Assistant Secretary, certified by the
Secretary or Assistant Secretary of Aeltus;
() The Insurer and Aeltus shall have received a
certificate of the Secretary or Assistant Secretary of the Fund as to
the incumbency and signature of the officers or other employees of the
Fund authorized to sign the Investment Advisory Agreement, the
Custodian Monitoring Agreement and the Custodian Service Agreement
with respect to such PPF on behalf of the Fund, together with evidence
of the incumbency of such Secretary or Assistant Secretary, certified
by the Secretary or Assistant Secretary of the Fund;
() Each of the representations and warranties made by
Aeltus and the Fund in or pursuant to the Transaction Documents shall
be true and correct in all material respects on and as of such date;
() No Default or Event of Default shall have occurred
and be continuing on such date;
() No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any Government Authority
which would make the transactions contemplated by any of the
Transaction Documents illegal or otherwise prevent the consummation
thereof; and
() All proceedings, and all documents, instruments and
other legal matters in connection with the creation of such PPF shall
be satisfactory in form and substance to the Insurer.
Section . Premiums. In consideration of the issuance
by the Insurer of each Policy with respect to a PPF, the Fund, on
behalf of such PPF, shall pay to the Insurer a fee in an amount equal
to 0.33% per annum of the average daily Total Net Assets of such PPF
during each calendar month in the Guarantee Period with respect to such
PPF (the "Policy Fee") payable monthly in arrears on the first Business
Day of the following calendar month (each a "Fee Payment Date"). Policy
Fees payable on each Fee Payment Date will be calculated based on a
365- or 366-day year for the actual number of days elapsed and any
calendar month ending during a weekend will include the days during
such weekend falling in the next calendar month (which days will not be
included in the next calendar month).
Section . Reimbursement Obligations. () If, after any
Rebalancing on any Business Day pursuant to Section 3.5 with respect to
any PPF, (x) all of the assets of such PPF are, or are required to be,
invested solely in U.S. Treasury Zeroes, U.S. Agency Zeroes and Cash
Equivalents, and (y) the Covered Expense Ratio used to calculate the
Present Value of Covered Expenses with respect to such PPF was less
than the Higher Covered Expense Ratio with respect to such PPF on the
Valuation Date for such Business Day, a "Permanent Deficit Event" shall
be deemed to have occurred with respect to such PPF and the Investment
Adviser of such PPF shall calculate the Permanent Deficit Reimbursement
Ratio with respect to such PPF on such Business Day.
() After the occurrence of a Permanent Deficit Event
with respect to any PPF, the Investment Adviser of such PPF hereby
agrees to pay to the Insurer from time to time an amount equal to each
payment of any amount made for any reason by such PPF to such
Investment Adviser, within two Business Days of the date of such
Investment Adviser's receipt of such payment, until the first Valuation
Date on which the Reimbursement Amount with respect to such PPF equals
or exceeds the product of the Permanent Deficit Reimbursement Ratio
with respect to such PPF and the Permanent Fee Deficit Amount with
respect to such PPF on such Valuation Date. Thereafter, the Insurer
hereby agrees to pay to the Investment Adviser of such PPF, on a
quarterly basis, on the last Business Day of each calendar quarter and
on the Maturity Date of such PPF, the excess, if any, of (a) the
Reimbursement Amount with respect to such PPF over (b) the product of
the Permanent Deficit Reimbursement Ratio with respect to such PPF
times the Permanent Fee Deficit Amount with respect to such PPF as of
the last Valuation Date of such calendar quarter or such Maturity Date,
as the case may be.
Section . Indemnification. () In addition to any and
all rights of reimbursement or any other rights pursuant hereto or
under law or equity, Aeltus agrees (i) to pay, or reimburse, the
Insurer for all of its reasonable out-of-pocket costs and expenses
(including, without limitation as provided in Section 7.5, the
reasonable fees and disbursements of its counsel) incurred in
connection with the negotiation, preparation, execution and delivery of
this Agreement, the other Transaction Documents and any amendment,
supplement or modification thereof, or waiver or consent thereunder,
(ii) to pay, or reimburse, the Insurer for all of its reasonable
out-of-pocket costs and expenses (including, without limitation, the
reasonable fees and disbursements of its counsel) incurred in
connection with the enforcement or preservation of any rights under the
Transaction Documents, (iii) to pay, indemnify, and hold the Insurer
harmless from any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, that may be payable or
determined to be payable in connection with the execution and delivery
of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or
any waiver or consent under or in respect of the Transaction Documents
and (iv) to pay, indemnify and hold the Insurer and its officers,
directors and employees (each an "Indemnitee") harmless from and
against any and all out-of-pocket liabilities (including penalties),
obligations, losses, damages, actions, suits, demands, claims,
judgments, costs, expenses or disbursements of any kind or nature
whatsoever that arise out of, or in any way relate to or result from or
out of (A) the transactions contemplated by the Transaction Documents
or (B) any investigation or defense of, or participation in, any legal
proceeding relating to the execution, delivery, enforcement,
performance or administration of the Transaction Documents (whether or
not such Indemnitee is a party thereto) (all the foregoing in clauses
(i) through (iv) above, collectively, the "Indemnified Liabilities");
provided that Aeltus shall have no obligation hereunder to any
Indemnitee with respect to Indemnified Liabilities arising from the
gross negligence, bad faith or willful misconduct of any Indemnitee.
Any payments required to be made by Aeltus under this Section 2.6 shall
be due and payable by Aeltus on the 30th day after demand therefor.
() The indemnity provisions of this Section 2.6, as
well as the reimbursement provisions set forth in Section 2.5, shall
survive the termination of this Agreement.
ARTICLE
MANAGEMENT OF PPFs
Section . Eligible Investments. () The Investment Adviser of
each PPF shall segregate the assets of such PPF from all other series
of the Fund and ensure that the investment of the assets of each
independently satisfies the requirements of this Article III.
() The Investment Adviser of each PPF shall, subject to the
restrictions of Sections 3.2, 3.3, 3.4 and 3.5, invest the assets of
such PPF only in the following types of investments ("Eligible PPF
Investments"):
() cash and the following short-term securities
with remaining maturities of 180 days or less: (1) direct obligations
of, and obligations fully guaranteed as to full and timely payment by
the full faith and credit of, the United States of America, excluding
U.S. Treasury Zeroes and U.S. Agency Zeroes; (2) demand deposits, time
deposits or certificates of deposit of any depository institution or
trust company incorporated under the laws of the United States of
America or any state thereof; provided that at the time of investment
therein the commercial paper or other short-term unsecured debt
obligations thereof shall be rated at least A-1 by S&P or P-1 by
Xxxxx'x; (3) bankers acceptances issued by any depository institution
or trust company referred to in clause (2) above; and (4) commercial
paper having at the time of the investment therein a rating of at
least A-1 by S&P or P-1 by Xxxxx'x;
() U.S. Treasury Zeroes or U.S. Agency Zeroes
maturing on, or within the 90 days preceding, the Maturity Date with
respect to such PPF;
() Non-callable debt obligations of a corporation
maturing within the three years preceding or the three years following
the Maturity Date with respect to such PPF and having a rating of at
least AA- by S&P or Aa3 by Xxxxx'x; provided that if both Xxxxx'x and
S&P have issued a rating thereon, such rating shall be no less than
Aa3/AA- ("Corporate Bonds");
() U. S. Treasury Futures;
() Index Equities; and
(vi) Index Futures.
Section . Investment Limitations. The Investment
Adviser of each PPF shall invest the assets of such PPF subject to the
following limitations:
() all Cash Associated with Futures shall be
invested in Cash Equivalents;
() such PPF shall hold Cash Equivalents (excluding
Cash Margin) having an aggregate Market Value at all times at least
equal to Cash Associated with Futures with respect to such PPF;
() the aggregate Market Value of all Cash Equivalents
held by such PPF (less Cash Associated with Futures and Cash Margin
with respect to such PPF) on any Valuation Date shall not exceed 4% of
the Total Net Assets with respect to such PPF on such Valuation Date;
() no Cash Equivalent or U.S. Treasury Zero or U.S.
Agency Zero held by such PPF shall mature after the Maturity Date with
respect to such PPF;
() at the time of any investment in Corporate Bonds
by such PPF, no more than 2% of the Total Net Assets of such PPF shall
be invested in Corporate Bonds issued by a particular issuer or group
of affiliated issuers;
() the aggregate net Notional Value of all U.S.
Treasury Futures held by such PPF on any Valuation Date shall not
exceed an amount equal to 50% of the aggregate Market Value of all
Corporate Bonds held by such PPF on such Valuation Date;
() U.S. Treasury Futures shall be acquired by a PPF
only in order to shorten or lengthen the Portfolio Duration with
respect to the Corporate Bonds and U.S. Treasury Futures held by such
PPF; () on any Valuation Date, the Portfolio Duration with respect to
the Corporate Bonds and U.S. Treasury Futures held by such PPF shall
not be greater than the Theoretical Zero Modified Duration with
respect to such PPF nor less than the Theoretical Zero Modified
Duration with respect to such PPF minus 0.25;
() the aggregate Market Value of all Index Futures
held by such PPF on any Valuation Date shall not exceed 25% of the
aggregate Market Value of all Index Equities held by such PPF on such
Valuation Date;
() any Corporate Bond held by such PPF that is
rated less than AA- by S&P or less than Aa3 by Xxxxx'x shall be sold
by such PPF within 15 Business Days following the public announcement
of such rating;
() the aggregate Market Value of the Corporate
Bonds held by such PPF shall not exceed 45% of the aggregate Market
Value of the Fixed Income Portfolio (excluding U.S. Treasury Futures)
with respect to such PPF; and
() no investment shall be made in securities issued
by Aetna Inc.
Section . Index Equity Selection Guidelines. The
Investment Adviser of each PPF shall make each investment in Index
Equities in such PPF in accordance with the Selection Guidelines. Each
Investment Adviser shall not make any material change in the Selection
Guidelines, including without limitation, the investment selection
methodology described therein, without the prior written consent of the
Insurer.
Section . Index Equity Diversification and
Capitalization Requirements. The Investment Adviser of each PPF shall
invest the assets of such PPF, to the extent such PPF holds any Index
Equities, such that the following requirements are satisfied as of each
Valuation Date:
() each PPF shall be invested in at least 400 of the
500 Index Equities; provided that no investment in an Index Equity will
be included for the purposes of satisfying the requirements set forth
in this paragraph (a) unless the Fund Weight with respect to such PPF
and such Index Equity equals or exceeds 40% of the Index Weight for
such Index Equity;
() the aggregate of the Index Weights with respect to
each of the Index Equities which are held by such PPF and which
satisfy the requirements of paragraph (a) above shall not be less than
85%;
() the Fund Weight with respect to such PPF and each
Index Equity held by such PPF shall not exceed 200% of the Index
Weight for such Index Equity; and
() the Fund Sector Weight with respect to such PPF
for each Sector shall not: (i) exceed 135% of the Sector Index Weight
for such Sector or (ii) be less than 65% of the Sector Index Weight
for such Sector.
Each Investment Adviser of a PPF shall demonstrate
its compliance with the requirements and limitations set forth in this
Section 3.4 by providing to the Insurer, within 10 calendar days of the
end of each month, a report for such PPF as of such month end,
substantially in the form attached hereto as Exhibit P hereto.
Section . Asset Allocation and Rebalancing. () If,
with respect to any PPF, prior to the open of trading on the NYSE on
any Business Day, the excess of (1) the sum of:
() 70% of the aggregate Market Value of all Index
Equities held by such PPF on the Valuation Date for such Business Day,
() the aggregate Market Value of all Cash Equivalents
held by such PPF (less Cash Associated with Futures and Cash Margin
with respect to such PPF) on the Valuation Date for such Business Day,
() the aggregate Market Value of all U.S. Treasury
Zeroes and U.S. Agency Zeroes held by such PPF on the Valuation Date
for such Business Day,
() the aggregate Market Value of all Corporate Bonds
held by such PPF on the Valuation Date for such Business Day,
() the aggregate Market Value of all U.S. Treasury
Futures held by such PPF on the Valuation Date for such Business Day,
() 70% of the aggregate Market Value of all Index
Futures held by such PPF on the Valuation Date for such Business Day,
() to the extent not included in the Market Value of
the Equity Portfolio, Fixed Income Portfolio or the Cash Equivalents
of such PPF, an amount equal to the aggregate amount of interest and
dividend receivables and receivables for securities sold payable to
such PPF on the Valuation Date for such Business Day,
() an amount equal to the aggregate amount payable to
such PPF on such Valuation Date on account of a decrease in the margin
requirements with respect to the U.S. Treasury Futures held by such
PPF, and
() an amount equal to the aggregate amount payable to
such PPF by the Investment Adviser with respect to such PPF pursuant
to the Investment Advisory Agreement with respect to such PPF on
account of expenses incurred by such PPF that are subject to
reimbursement by such Investment Adviser, over (2) an amount equal to
the aggregate amount of the liabilities allocated to such PPF,
including all amounts payable by such PPF in respect of securities
purchased (the "Adjusted Total Net Assets") is less than the Asset
Allocation Threshold with respect to such PPF on such Business Day
(the foregoing determination an "Asset Allocation Test"), the
Investment Adviser of such PPF shall sell a portion of the Index
Equities and/or Index Futures held by such PPF and reinvest the
proceeds of such sale in U.S. Treasury Zeroes, U.S. Agency Zeroes,
Corporate Bonds and/or Cash Equivalents such that, after giving effect
to such sale and reinvestment of proceeds, the Adjusted Total Net
Assets with respect to such PPF would equal or exceed the sum of the
Present Value of the Aggregate Guarantee Amount with respect to such
PPF plus the Present Value of Covered Expenses with respect to such
PPF. An Asset Allocation Test shall be performed with respect to each
PPF by the Investment Adviser of such PPF prior to the open of trading
on the NYSE on each Business Day.
() If, with respect to any PPF, prior to the open of
trading on the NYSE on any Business Day, the Adjusted Total Net Assets
of such PPF is equal to or greater than the Asset Allocation Threshold
with respect to such PPF and, on such Business Day, the Investment
Adviser of such PPF effects an Asset Reallocation with respect to such
PPF, the Investment Adviser of such PPF shall reallocate the
investments held by such PPF such that, after giving effect to such
change in investments, the Adjusted Total Net Assets with respect to
such PPF would equal or exceed the sum of the Present Value of the
Aggregate Guarantee Amount with respect to such PPF plus the Present
Value of Covered Expenses with respect to such PPF.
() If, on any Business Day, the Investment Adviser of
any PPF shall fail to effect a Rebalancing required by this Section
3.5, such Investment Adviser shall provide the Insurer and the
Custodian with written notice of such failure prior to the next
succeeding Business Day.
() If, on any Business Day, with respect to any PPF,
the aggregate Market Value of all Index Equities permitted to be held
by such PPF in accordance with the Asset Allocation Test is less than
40% of the Total Net Assets of such PPF, the Investment Adviser of such
PPF shall sell all Corporate Bonds held by such PPF on such Business
Day and reinvest the proceeds thereof in U.S. Treasury Zeroes or U.S.
Agency Zeroes or Cash Equivalents.
() Each Investment Adviser of a PPF shall report the
results of each Asset Allocation Test with respect to such PPF for each
Business Day in a report substantially in the form attached hereto as
Exhibit Q hereto, and shall deliver each such report to the Insurer
prior to the opening of business on the next succeeding Business Day.
ARTICLE
EVENTS OF DEFAULT
Section . Default. If any of the following events
(each, an "Event of Default") shall occur and be continuing:
() Any Investment Adviser of a PPF shall default in
its observance or performance of any agreement or obligation contained
in Section 3.1, 3.2, 3.3, 3.4 or 3.5(d) and such default shall continue
unremedied for a period of three Business Days; provided, however that
such Investment Adviser shall not be in default of its obligations
contained in Section 3.2(c) on any Business Day on which the market for
Treasury obligations of the U.S. Government is closed;
() Any Investment Adviser of a PPF shall default in
its observance or performance of any agreement or obligation contained
in Section 3.5(a), (b), (c) or 3.5(e) and such default shall continue
unremedied for a period of one Business Day;
() Any Investment Adviser of a PPF or the Fund shall
default in the observance or performance of any agreement or obligation
contained in this Agreement (other than any obligation or agreement
referred to in paragraphs (a) or (b) above) and such default remains
unremedied for a period of 15 Business Days after the date on which
written notice thereof shall have been given by the Insurer to such
Investment Adviser or the Fund; or
() Any representation or warranty made or deemed made
by any Investment Adviser of a PPF or the Fund in this Agreement or
which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this
Agreement shall prove to have been incorrect in any material respect on
or as of the date made or deemed made and such breach remains
unremedied for a period of 15 Business Days after the date on which
written notice thereof shall have been given by the Insurer to such
Investment Adviser or the Fund;
then and only then the Insurer shall have the right to direct the
investment of funds in the particular PPF or PPFs pursuant to Section 3
of the Custodian Service Agreement in the manner and to the extent
provided in Section 4.2.
Section . Remedies. () After the occurrence and
during the continuance of an Event of Default with respect to a PPF or
an Event of Default not relating to a particular PPF, the Insurer shall
have the right to deliver to the Investment Adviser of such PPF (in the
case of an Event of Default with respect to a PPF) or the Investment
Adviser of each PPF (in the case of an Event of Default not relating to
a particular PPF) and the Custodian an Event of Default Notice (as
defined in the Custodian Service Agreement). During the period (the
"Default Period") from and including the date on which the Custodian
receives an Event of Default Notice from the Insurer to and excluding
the Business Day following the date on which the Insurer gives the
Custodian a Cure Notice (as defined in the Custodian Service
Agreement), the Insurer shall have the right to direct the investment
of the PPF as to which such Event of Default shall have occurred or all
PPFs, as the case may be, by delivering to the Custodian, pursuant to
Section 3 of the Custodian Service Agreement, written investment
instructions from the Investment Adviser of such PPF as described in
the next sentence of this Section 4.2(a) or, under the circumstances
described in Section 4.2(b), its own instructions in accordance with
Section 4.2(b). In the event that during the Default Period the Insurer
receives written investment instructions from the Investment Adviser of
the PPF as to which such Event of Default shall have occurred, the
Insurer shall promptly forward such instructions to the Custodian
unless the Insurer determines that the execution of such instructions
would result in the occurrence of another Default or, after the
occurrence and during the continuance of an Event of Default specified
in Section 4.1 (a) or (b), that the execution of such instructions
would not result in the cure of the breach causing such Event of
Default.
() In the event that during a Default Period and
after the occurrence and during the continuance of an Event of Default
with respect to a PPF specified in Section 4.1 (a) or (b) herein, the
Insurer shall not have received written investment instructions from
the Investment Adviser of such PPF with respect to such PPF in the
format set forth in the Custodian Service Agreement, the execution of
which would result in the cure of the breach causing such Event of
Default, without resulting in the occurrence of another Default, by
10:00 a.m., New York City time, on the later of the first day of such
Default Period and the Business Day after the occurrence of such Event
of Default, the Insurer shall have the right to provide the Custodian
with its own investment instructions pursuant to Section 3 of the
Custodian Service Agreement, subject to the following conditions:
() after giving effect to any changes to the
investments of such PPF at the direction of the Insurer, the
investments of such PPF shall be consistent with Article III;
() any changes made to the investments of such PPF
at the direction of the Insurer shall be limited to those that are
reasonably necessary to cure the breach causing such Event of Default;
() if such Event of Default is specified in Section
4.1(a), the specific investments causing such Event of Default shall
be sold;
() if such Event of Default is specified in Section
4.1(a) and Index Equities are required to be sold in order to cure the
breach causing such Event of Default, the proceeds of such sale shall
be reinvested, to the extent practicable, in a pro rata portion of the
Index Equities then held by the PPF as to which such Event of Default
shall have occurred, unless doing so would result in another Event of
Default pursuant to Section 4.1(b) or not result in the cure of the
existing Event of Default, in which case the proceeds thereof shall be
reinvested in U.S. Treasury Zeroes or U.S. Agency Zeroes;
() if such Event of Default is specified in Section
4.1(a) and Corporate Bonds, U.S. Treasury Futures, U.S. Treasury
Zeroes, U.S. Agency Zeroes or Cash Equivalents are required to be sold
in order to cure the breach causing such Event of Default, the
proceeds of such sale shall be reinvested, to the extent practicable,
in U.S. Treasury Zeroes or U.S. Agency Zeroes; and
() if such Event of Default is specified in Section
4.1(b), the minimum amount of Index Equities or Index Futures as is
reasonably necessary in the manner described in Section 4.2(b)(vii),
after giving effect to the reinvestment of the proceeds thereof in
U.S. Treasury Zeroes, U.S. Agency Zeroes or Cash Equivalents, to cause
the Adjusted Total Net Assets with respect to the PPF as to which such
Event of Default shall have occurred to equal the sum of the Present
Value of the Aggregate Guarantee Amount with respect to such PPF plus
the Present Value of Covered Expenses with respect to such PPF, shall
be sold;
() if such Event of Default is specified in Section
4.1(b), Index Futures and Index Equities will be sold, to the extent
practicable, in the following order of priority and manner, to the
extent reasonably necessary to satisfy Section 4.2(b)(vi):
(A) a pro rata portion of all Index Futures held by such PPF
shall be sold;
(B) all Index Futures held by such PPF shall be sold;
(C) a pro rata portion of all Index Equities shall be
sold; and
(D) all Index Equities shall be sold.
() In the event that, after the occurrence and
during the continuance of an Event of Default specified in Section
4.1(c) or (d), the Insurer shall not have received written
instructions from the Investment Adviser of each PPF or the written
instructions received from any Investment Adviser would result in the
occurrence of a Default, then the Insurer shall have no right to
direct the investment of such PPF pursuant to Section 3 of the
Custodian Service Agreement or otherwise, provided no Event of Default
specified in Section 4.1(a) or (b) shall have occurred and be
continuing. If an Event of Default specified in Section 4.1(c) or (d)
shall occur and be continuing, it shall be deemed to have occurred
with respect to all PPFs.
() After the occurrence and during the continuance of
an Event of Default, the Investment Adviser of the PPF as to which such
Event of Default shall have occurred (in case of an Event of Default
with respect to a PPF) or the Investment Adviser of each PPF (in the
case of an Event of Default not relating to a particular PPF) shall
deliver trade instructions only through the Insurer in accordance with
this Section 4.2 with respect to such PPF.
() Upon the cure of an Event of Default, the Insurer
shall give prompt written notice of such cure to each Investment
Adviser and, unless another Event of Default shall have occurred and be
continuing, shall promptly give a Cure Notice to the Custodian pursuant
to the Custodian Service Agreement. Other than after the occurrence and
during the continuance of an Event of Default, the Insurer shall have
no right to direct the investment of funds in the PPFs.
ARTICLE
REPRESENTATIONS AND WARRANTIES
Section . Representations and Warranties Relating to Aeltus.
To induce the Insurer to enter into this Agreement and to issue the
Policies, Aeltus hereby represents and warrants to the Insurer that:
() Aeltus (i) is a Connecticut corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut, (ii) has the corporate power and authority, and the legal
right, to own its assets and to transact the business in which it is
engaged, (iii) is duly qualified to do business and is in good
standing under the laws of each jurisdiction where its ownership or
lease of property or the conduct of its business requires such
qualification except where the failure to so qualify would not have a
material adverse effect on Aeltus' ability to perform its obligations
under the Transaction Documents and (iv) is in compliance with all
Requirements of Law except where non-compliance would not have a
material adverse effect on Aeltus' ability to perform its obligations
under the Transaction Documents or the validity or enforceability of
the Transaction Documents.
() Aeltus has the corporate power and authority, and the
legal right, to execute, deliver and perform the Transaction Documents
to which it is a party and has taken all necessary action required by
applicable Requirements of Law to authorize the execution, delivery
and performance of the Transaction Documents to which it is a party.
Except as has been obtained, no consent or authorization of, filing
with, or other act by or in respect of, any Government Authority or
any other Person is required in connection with the execution,
delivery, performance, validity or enforceability by or against Aeltus
of the Transaction Documents to which it is a party. This Agreement
has been, and each other Transaction Document to which Aeltus is a
party will be, duly executed and delivered on behalf of Aeltus. This
Agreement constitutes, and each other Transaction Document to which
Aeltus is a party, when executed and delivered, will constitute, a
legal, valid and binding obligation of Aeltus enforceable against
Aeltus in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
() The execution, delivery and performance of the
Transaction Documents to which Aeltus is a party will not violate any
Requirement of Law or Contractual Obligation of Aeltus and will not
result in, or require, the creation or imposition of any Lien on any
of its property, assets or revenues pursuant to any such Requirement
of Law or Contractual Obligation except where such violation would not
have a material adverse effect on Aeltus' ability to perform its
obligations under the Transaction Documents or the validity or
enforceability of the Transaction Documents.
() No litigation, proceeding or investigation of or before
any arbitrator or Governmental Authority is pending or threatened by
or against Aeltus or against any of its properties or revenues (i)
asserting the invalidity or unenforceability of any of the Transaction
Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by the Transaction Documents or (iii)
seeking any determination or ruling that might materially and
adversely affect (A) Aeltus' ability to perform its obligations under
the Transaction Documents, (B) the validity or enforceability of the
Transaction Documents or (C) the Insurer.
() Aeltus is duly registered and in good standing with the
Commission as an investment adviser under the Investment Advisers Act,
and there does not exist any proceeding or any facts or circumstances
the existence of which could lead to any proceeding which could
adversely affect the registration or good standing of Aeltus with the
Commission; Aeltus is not prohibited by any provision of the
Investment Advisers Act or the Investment Company Act, or the
respective rules and regulations thereunder, from acting as an
investment adviser of the Fund as contemplated hereunder.
Section . Representations and Warranties Relating to the
Fund. Aeltus and the Fund hereby, jointly and severally, represent and
warrant to the Insurer that:
() The Fund (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland; (ii) has the corporate power and authority, and the legal
right, to own its assets and to transact the business in which it is
engaged; (iii) is duly qualified to do business and is in good standing
under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification
except where the failure to so qualify would not have a material
adverse effect on the Fund's ability to perform its obligations under
the Transaction Documents; and (iv) is in compliance with all
Requirements of Law except where non-compliance would not have a
material adverse effect on the Fund's ability to perform its
obligations under the Transaction Documents or the validity or
enforceability of the Transaction Documents.
() The Fund has the corporate power and authority,
and the legal right, to execute, deliver and perform this Agreement and
has taken all necessary action required by applicable Requirements of
Law to authorize the execution, delivery and performance of this
Agreement. No consent or authorization of, filing with, or other act by
or in respect of, any Government Authority or any other Person is
required in connection with the execution, delivery, performance,
validity or enforceability by or against the Fund of the Transaction
Documents to which it is a party, other than a filing made under the
Securities Act of 1933 and the Investment Company Act of 1940. This
Agreement has been duly executed and delivered on behalf of the Fund
and constitutes a legal, valid and binding obligation of the Fund
enforceable against the Fund in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
() The execution, delivery and performance of the
Transaction Documents to which it is a party will not violate any
Requirement of Law or Contractual Obligation of the Fund and will not
result in, or require, the creation or imposition of any Lien on any of
its property, assets or revenues pursuant to any such Requirement of
Law or Contractual Obligation except where such violation would not
have a material adverse effect on the Fund's ability to perform its
obligations under the Transaction Documents to which it is a party or
the validity or enforceability of the Transaction Documents to which it
is a party.
() No litigation, proceeding or investigation of or
before any arbitrator or Governmental Authority is pending or
threatened by or against the Fund or against any of its properties or
revenues (i) asserting the invalidity or unenforceability of this
Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by the Transaction Documents to which it is a
party or (iii) seeking any determination or ruling that might
materially and adversely affect (A) the Fund's ability to perform its
obligations under this Agreement, (B) the validity or enforceability of
this Agreement or (C) the Insurer.
() The Fund is duly registered with the Commission as
an open-end, diversified management investment company under the
Investment Company Act and the Fund has been operated in compliance in
all material respects with the Investment Company Act and the rules and
regulations thereunder.
ARTICLE
COVENANTS
Section . Covenants of Investment Adviser. The Investment
Adviser of each PPF hereby covenants and agrees that during the term
of this Agreement:
() it shall comply in all material respects with the terms
and conditions of the Transaction Documents to which it is a party and
shall provide the Insurer with written notice immediately upon
becoming aware of any material breach by it of the provisions of any
such agreements;
() it shall not amend, supplement or otherwise modify, or
agree to any waiver with respect to any provision of the
Administrative Services Agreement or the Investment Advisory Agreement
with respect to such PPF if such amendment, supplement or modification
would be reasonably likely to have a material impact on the Insurer,
any PPF Shareholder or any PPF, without the prior written consent of
the Insurer;
() it shall not elect to terminate the Investment Advisory
Agreement with respect to such PPF, without the prior written consent
of the Insurer;
() it shall not enter into a Subadvisory Agreement pursuant
to Article IV of the Investment Advisory Agreement to which it is a
party, without the prior written consent of the Insurer;
() other than in connection with the reinvestment of
dividends, it shall not allow the offering or sale of the shares of
such PPF after the Offering Period with respect to such PPF;
() it shall promptly notify the Insurer of any information
or event, to the knowledge of such Investment Adviser, that would be
reasonably likely to result, through passage of time or otherwise, in
the occurrence of an Event of Default;
() it shall notify the Insurer in the monthly report
delivered to the Insurer pursuant to Section 3.4 of the use of any
Substitute Valuation Source during the preceding month;
() it shall provide to the Insurer copies of the Final
Prospectus (including the Statement of Additional Information) with
respect to such PPF and such additional information with respect to
any PPF as the Insurer may from time to time reasonably request, and,
after the occurrence of an Event of Default with respect to such PPF,
at the expense of the Investment Adviser of such PPF, during normal
business hours with reasonable prior notice allow the Insurer to
inspect, audit and make copies of and abstracts from the Fund's
records regarding such PPF and to visit the offices of the Investment
Adviser of such PPF for the purpose of examining such records,
internal controls and procedures maintained by such Investment
Adviser;
() prior to filing with the Commission any amendment
to the Registration Statement with respect to such PPF or supplement to
the Final Prospectus with respect to such PPF, it shall furnish a copy
thereof to the Insurer and shall obtain the consent of the Insurer to
any such filing that would be reasonably likely to have a material
impact on the Insurer, any PPF Shareholder or any PPF, which consent
shall not be unreasonably withheld;
() it shall notify the Insurer promptly (i) of any
request or proposed request by the Commission for an amendment to the
Registration Statement with respect to such PPF or a supplement to the
Final Prospectus with respect to such PPF, (ii) of the issuance by the
Commission of any stop-order suspending the effectiveness of the
Registration Statement with respect to such PPF or the initiation or
threat of any such stop-order proceeding or (iii) of receipt by the
Fund of a notice from or order of the Commission pursuant to Section
8(e) of the Investment Company Act with respect to any Registration
Statement with respect to such PPF;
() it shall not amend or otherwise modify the Sectors
as set forth on Annex B or the Sector to which any Index Equity belongs
unless such change is the result of a material merger or a significant
acquisition or disposition by the issuer of such Index Equity, without
the prior written consent of the Insurer;
() it shall comply in all material respects with the terms
and provisions of the Acts and the Investment Adviser Act with respect
to such PPF; and
() it shall not terminate such PPF during the Guarantee
Period prior to the Maturity Date.
Section . Covenants of the Fund. The Fund hereby covenants
and agrees that during the term of this Agreement:
() it shall comply in all material respects with the terms
and conditions of the Transaction Documents to which it is a party and
shall provide the Insurer with written notice immediately upon
becoming aware of any material breach by it of the provisions of any
such agreements;
() it shall not amend, supplement or otherwise modify, or
agree to any waiver with respect to any provision of the Custodian
Monitoring Agreement or the Custodian Service Agreement, without the
prior written consent of the Insurer;
() it shall not amend, supplement or otherwise modify, or
agree to any waiver with respect to any provision of the
Administrative Services Agreement if such amendment, supplement or
modification would be reasonably likely to have a material impact on
the Insurer, any PPF Shareholder or any PPF, without the prior written
consent of the Insurer;
() it shall not amend, supplement or otherwise modify, or
agree to any waiver with respect to any provision of the Investment
Advisory Agreement with respect to any PPF if such amendment,
supplement or modification would be reasonably likely to have a
material impact on the Insurer, any PPF Shareholder or any PPF,
without the prior written consent of the Insurer;
() it shall not amend, supplement or otherwise modify any
provision of its Articles of Amendment and Restatement or the Articles
Supplementary with respect to any PPF if such amendment, supplement or
modification would be reasonably likely to have a material impact on
the Insurer, any PPF Shareholder or any PPF, without the prior written
consent of the Insurer;
() it shall not change the manner in which the general
liabilities of the Fund are allocated to any PPF or the assets of any
PPF are allocated to any Class of Shares of such PPF if such change
would be reasonably likely to have a material impact on the Insurer,
any PPF Shareholder or any PPF, without the prior written consent of
the Insurer;
() promptly after any amendment or waiver of any provision
of the Administrative Services Agreement or the Investment Advisory
Agreement with respect to any PPF or the filing of any amendment to
its Articles of Amendment and Restatement or the Articles
Supplementary with respect to any PPF, it shall provide the Insurer
with a copy of any such amendment or waiver;
() in the event that it elects to terminate the Investment
Advisory Agreement with Aeltus or any other Investment Adviser with
respect to any PPF, it shall cause the successor investment advisor
with respect to such PPF to enter into an Investment Advisory
Agreement with respect to such PPF and this Agreement prior to the
effective date of such termination;
() in the event that either it or the Custodian shall
terminate the Custodian Agreement or the Custodian Monitoring
Agreement and the Custodian Services Agreement, it shall enter into a
custodian agreement and a Custodian Monitoring Agreement and a
Custodian Service Agreement with a successor Custodian or an affiliate
thereof prior to the effective date of such termination;
() within 90 days of the end of each PPF's fiscal year, it
shall provide to the Insurer the financial statements for each PPF
with respect to such fiscal year, audited by independent public
accountants;
() it shall maintain insurance policies covering its
liabilities to its officers, directors, employees and agents under
subparagraph (d) of Article XII of its Articles of Amendment and
Restatement of the types and in the amounts as is customary for funds
similar to the Fund;
() it shall comply in all material respects with the terms
and provisions of the Acts with respect to each PPF; and
() other than in connection with the redemption of shares by
a PPF Shareholder or the reinvestment of dividends, it shall not
change the number of shares of any PPF outstanding.
ARTICLE
FURTHER AGREEMENTS
Section . Obligations Absolute. The obligations of Aeltus,
each Investment Adviser and the Fund pursuant to this Agreement are
absolute and unconditional and will be paid or performed strictly in
accordance with the respective terms thereof, irrespective of:
() any lack of validity or enforceability of, or any
amendment or other modification of, or waiver with respect to, the
Transaction Documents;
() any amendment or waiver of, or consent to departure from,
the Policies or any Transaction Document;
() the existence of any claim, set-off, defense or
other rights either may have at any time against the other, any
beneficiary or any transferee of the Policies (or any persons or
entities for whom any such beneficiary or any such transferee may be
acting), the Insurer or any other person or entity whether in
connection with the Policies, this Agreement or any unrelated
transactions;
() any statement or any other document presented
under the Policies (including any Notice for Payment (as defined in the
Policies)) proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
() the inaccuracy or alleged inaccuracy of any Notice
for Payment upon which any drawing under a Policy is based;
() payment by the Insurer under a Policy against
presentation of a draft of certificate which does not comply with the
terms of such Policy, provided that such payment shall not have
constituted gross negligence or willful misconduct or bad faith of the
Insurer;
() any default or alleged default of the Insurer
under a Policy other than a default with respect to payment
thereunder; or
() any other circumstance or happening whatsoever,
provided that the same shall not have constituted gross negligence,
willful misconduct or bad faith of the Insurer and to the extent that
such do not result in a default with respect to payments under the
Policies.
Section . Reinsurance and Assignments. The Insurer
shall have the right to give participation in its rights under this
Agreement and to enter into contracts of reinsurance with respect to
the Policies, provided that the Insurer agrees that any such
disposition will not alter or affect in any way whatsoever the
Insurer's direct obligations hereunder and under the Policies. Neither
Aeltus nor the Fund may assign its obligations under this Agreement
without the prior written consent of the Insurer.
Section . Fund Liability. Any other provision to the
contrary notwithstanding, any liability of the Fund under this
Agreement with respect to a PPF, or in connection with the transactions
contemplated herein with respect to a PPF, shall be discharged only out
of the assets of that PPF, and no other portfolio of the Fund shall be
liable with respect thereto.
Section . Liability of the Insurer. Aeltus, each
Investment Adviser and the Fund agree that neither the Insurer, nor any
of its officers, directors or employees shall be liable or responsible
for (except to the extent of its own or their gross negligence, willful
misconduct or bad faith) (a) the use which may be made of any Policy by
any Person or for any acts or omissions of another Person in connection
therewith or (b) the validity, sufficiency, accuracy or genuineness of
any documents delivered to the Insurer, or of any endorsement(s)
thereon, even if such documents should in fact prove to be in any or
all respects invalid, insufficient, fraudulent or forged. In
furtherance and not in limitation of the foregoing, the Insurer may
accept documents that appear on their face to be in order, without
responsibility for further investigation (except to the extent that the
Insurer acted with gross negligence, willful misconduct or bad faith).
Section . Fees and Expenses. Aeltus agrees to pay all
reasonable costs and expenses in connection with the preparation,
execution and delivery of the Transaction Documents and all other
documents delivered with respect thereto, including, without
limitation, the fees of Xxxxx'x and S&P incurred by the Insurer in
connection with this Agreement and the transactions contemplated hereby
and by the other Transaction Documents and the fees of Xxxxxxx Xxxxxxx
& Xxxxxxxx, counsel to the Insurer. All such fees, costs and expenses
shall be payable on or prior to the date which is 30 days from the date
on which an invoice for any such fees, costs and expenses shall have
been presented to Aeltus.
ARTICLE
MISCELLANEOUS
Section . Amendments and Waivers. No amendment or
waiver of any provision of this Agreement nor consent to any departure
therefrom, shall in any event be effective unless in writing and signed
by all of the parties hereto; provided that any waiver so granted shall
extend only to the specific event or occurrence so waived and not to
any other similar event or occurrence which occurs subsequent to the
date of such waiver.
Section . Notices. Except to the extent otherwise
expressly provided herein, all notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (and
if, sent by mail, certified or registered, return receipt requested) or
confirmed facsimile transmission and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when
delivered by hand, or three Business Days after being deposited in the
mail, postage prepaid, or, in the case of facsimile transmission, when
sent, addressed as follows:
If to Aeltus:
Aeltus Investment Management, Inc.
00 Xxxxx Xxxxx Xxxxxx, XX00
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Vice President & General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Fund:
00 Xxxxx Xxxxx Xxxxxx, XX00
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attn: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Insurer:
MBIA Insurance Corporation
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx Xxxxxxxx
Telephone: 914/000-0000
Facsimile: 914/765-3161
Section . No Waiver, Remedies and Severability. No
failure on the part of the Insurer to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right.
The remedies herein provided are cumulative and not exclusive of any
remedies provided by law. The parties further agree that the holding by
any court of competent jurisdiction that any remedy pursued by the
Insurer hereunder is unavailable or unenforceable shall not affect in
any way the ability of the Insurer to pursue any other remedy available
to it. In the event any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, the
parties hereto agree that such holding shall not invalidate or render
unenforceable any other provision hereof.
Section . Payments. All payments to the Insurer
hereunder shall be made in lawful currency of the United States in
immediately available funds and shall be made prior to 2:00 p.m. (New
York City time) on the date such payment is due by wire transfer to
The Chase Manhattan Bank, ABA #021-000021, MBIA Insurance Corporation
Account Number 910-2-721-728 or to such other office or account as the
Insurer may direct. All payments to Aeltus hereunder shall be made in
lawful currency of the United States and in immediately available
funds on the date such payment is due by wire transfer to The Chase
Manhattan Bank, ABA #021-000021, Aeltus Investment Management Inc.
Account Number 910-2-709-186, or to such other office or account as
Aeltus may direct.
Whenever any payment under this Agreement shall be
stated to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension
of time shall in such cases be included in computing interest or fees,
if any, in connection with such payment.
Section . Governing Law. This Agreement shall be
construed, and the obligations, rights and remedies of the parties
hereunder shall be determined, in accordance with the laws of the
State of New York.
Section . Counterparts. This Agreement may be
executed in counterparts of the parties hereto, and each such
counterpart shall be considered an original and all such counterparts
shall constitute one and the same instrument.
Section . Paragraph Headings, Etc. The headings of
paragraphs contained in this Agreement are provided for convenience
only. They form no part of this Agreement and shall not affect its
construction or interpretation.
Section . Termination. This Agreement shall terminate
on the earlier of: (a) the first date as of which the final
outstanding Policy has terminated in accordance with the provisions
thereof and the Insurer has recovered all amounts owing to it
hereunder or (b) the date on which the Aggregate Guarantee Amount with
respect to each PPF equals zero. Any termination of this Agreement
will be effective only upon the delivery to the Insurer of all
Policies, whereupon the Policies will be cancelled and the Insurer's
liabilities thereunder will cease.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement, all as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION,
as Insurer
By: /s/ Xxx X. XxXxxxx
Name: Xxx X. XxXxxxx
Title: Assistant Secretary
AELTUS INVESTMENT MANAGEMENT, INC.
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Managing Director
AETNA SERIES FUND, INC.
By: /s/ J. Xxxxx Xxx
Name: J. Xxxxx Xxx
Title: President
Annex A
Annex B
Sector List
Annex C
Sample Calculation of Hypothetical Total Net Assets
EXHIBIT A
FORM OF POLICY
INSURANCE POLICY
MBIA Insurance Corporation
Xxxxxx, Xxx Xxxx 00000
Policy No. ____-____-___
MBIA Insurance Corporation (the "Insurer"), in consideration
of the payment of the premium and subject to the terms of this Policy,
hereby unconditionally and irrevocably guarantees to the Aetna Series
Fund, Inc. (the "Fund"), on behalf of the shareholders (the "PPF
Shareholders") of the capital stock of the Fund designated the Aetna
Principal Protection Fund _ (the "PPF"), the payment by the Fund of the
Deficit (as defined below) on _____________, ______ (the "Maturity
Date") in an amount up to $__________ (the "Initial Aggregate Guarantee
Amount"), for which a Demand for Payment in the form attached hereto as
Attachment 1 and made a part of this Policy (the "Demand for Payment")
has been presented to State Street Bank and Trust Company, N.A. (the
"Fiscal Agent") in accordance with the terms of this Policy. As used
herein, the term "Deficit" refers to the sum of the product with
respect to each Class of Shares (as defined below) of (a) the number of
shares of such Class of Shares on the Maturity Date times (b) amount,
if any, by which the Guarantee Per Share (as defined below) with
respect to such Class of Shares on the Maturity Date exceeds (ii) the
NAV (as defined below) for such Class of Shares on the Maturity Date.
Payments under this Policy shall be made only at the time set forth in
this Policy, and no accelerated payments shall be made.
1. One (1) Business Day (as defined below) after receipt by
the Fiscal Agent of a Demand for Payment, duly executed by the Fund,
the Insurer will make a deposit of funds immediately available in an
account with State Street Bank and Trust Company, N.A., in New York,
New York, or its successor, sufficient for the payment to the Fund of
the Deficit.
2. Demand for Payment hereunder may be made by telecopy, telex
or telegram of the executed Demand for Payment in care of the Fiscal
Agent. If a Demand for Payment made hereunder does not, in any
instance, conform to the terms and conditions of this Policy, the
Insurer shall give notice to the Fund, as promptly as reasonably
practicable, that such Demand for Payment was not effected in
accordance with the terms and conditions of this Policy and briefly
state the reason(s) therefor. Upon being notified that such Demand for
Payment was not effected in accordance with this Policy, the Fund may
attempt to correct any such nonconforming Demand for Payment if, and to
the extent that, the Fund is entitled and able to do so.
3. The amount payable by the Insurer under this Policy shall
be limited to the Initial Aggregate Guarantee Amount.
4. Any service of process on the Insurer or notice to the
Insurer may be made to the Insurer at its offices located at 000 Xxxx
Xxxxxx, Xxxxxx, Xxx Xxxx 00000, Attention: Insured Portfolio Management
-- Structured Finance, and such service of process shall be valid and
binding.
5. The term of this Policy shall expire upon the earliest to
occur of (a) the second Business Day immediately succeeding the
Maturity Date, (b) the payment by the Insurer of the Deficit and (c)
the date on which the Aggregate Guarantee Amount (as defined herein)
equals zero (the "Expiration Date").
6. This Policy shall be governed by and interpreted under the
laws of the State of New York. Any suit hereunder in connection with
any payment may be brought only by the Fund within three years after ()
a Demand for Payment, with respect to such payment, is made pursuant to
the terms of this Policy and the Insurer has failed to make such
payment or () payment would otherwise have been due hereunder but for
the failure on the part of the Fund to deliver to the Insurer a Demand
for Payment pursuant to the terms of this Policy.
7. This Policy, including Attachments 1 and 2 hereto, sets
forth in full the terms of the obligations of the Insurer. Reference in
this Policy to other documents or instruments is for identification
purposes, and such reference shall not modify or affect the terms
hereof or cause such documents or instruments to be deemed incorporated
herein.
8. This Policy is noncancelable.
. This Policy is neither transferable nor assignable.
. This Policy shall be returned to the Insurer by the Fund
on the Expiration Date together with a notice substantially in the
form of Attachment 2 hereto.
. The terms defined in this paragraph shall have the
meanings provided herein for all purposes of this Policy:
"Aeltus" means Aeltus Investment Management, Inc. a
Connecticut corporation.
"Aggregate Guarantee Amount" means, on any date of
determination, the aggregate Guarantee Amounts with respect to all PPF
Shareholders on such date.
"Business Day means any day other than a day on which banks
located in the City of New York, New York are authorized by law to
close or on which the New York Stock Exchange is closed for business.
"Class A Shares" means the shares of capital stock of the
Fund designated as the Class A shares of the PPF in the Articles
Supplementary creating the PPF.
"Class B Shares" means the shares of capital stock of the
Fund designated as the Class B shares of such PPF in the Articles
Supplementary creating the PPF.
"Class of Shares" means the Class A Shares or Class B
Shares.
"Covered Expenses" means, for any Class of Shares, the
annual fund operating expenses enumerated in the Final Prospectus
relating to such PPF as of the last day of the Offering Period.
"Distribution Per Share" means, with respect to any Class of
Shares, an amount equal to the quotient of the amount of any
distribution or payment by the Fund in respect of, or allocated to,
such Class of Shares that is not a Covered Expense or a transaction
related brokerage expense, and shall include, without limitation, any
distribution of income, dividends, capital gains or principal to the
PPF Shareholders of such Class of Shares and any payment of income
taxes or excise taxes allocated to such Class of Shares divided by the
number of shares of such Class of Shares outstanding on the date of
such distribution or payment.
"Final Prospectus" means the prospectus pursuant to which the
shares of the PPF were offered for sale, including the Statement of
Additional Information with respect to the PPF filed with the
Securities and Exchange Commission pursuant to Rule 497 under the
Securities Act on or prior to the last day of the Offering Period.
"Guarantee Amount" means, with respect to any PPF Shareholder
of any Class of Shares, on any date of determination, an amount equal
to the product of (i) the Guarantee per Share for such Class of Shares
held by such PPF Shareholder on such date and (ii) the total number of
such shares held by such PPF Shareholder.
"Guarantee per Share" means, with respect to any Class of
Shares (i) the NAV for such Class of Shares at the close of business on
the last day of the Offering Period and (ii) thereafter on any Business
Day, the Guarantee per Share for such Class of Shares on the
immediately preceding Business Day divided by the sum of one plus the
quotient of (A) the amount of any Distribution Per Share with respect
to such Class of Shares effective since the immediately preceding
Business Day divided by (B) the NAV for such Class of Shares at the
close of business on the day such Distribution Per Share was effective.
"NAV" means, with respect to any Class of Shares of a PPF, (a)
on the commencement date of such PPF, the net asset value per share of
such Class of Shares established by the Fund for such date and (b) on
any date of determination thereafter the quotient of (i) the excess of
(x) the market value of the assets allocated to that Class of Shares
determined as of the close of regular trading on the NYSE by the Fund
in the manner described in the Final Prospectus with respect to such
PPF over (y) the market value of any liabilities allocated to and/or
associated with such Class of Shares determined as of the close of
regular trading on the NYSE by the Fund in the manner described in the
Final Prospectus with respect to such PPF divided by (ii) the number of
outstanding shares of that Class of Shares at such time. The assets,
income, gain, loss and liabilities (other than those liabilities
relating specifically to a Class of Shares) of each PPF shall be
allocated to each Class of Shares of such PPF on each date of
determination on a pro rata basis based on the NAV of such Class of
Shares on the preceding date of determination.
"Offering Period" means the period during which the shares of
the PPF were offered for sale to investors described in the Final
Prospectus.
THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE FUND
SPECIFIED IN ARTICLE SEVENTY-SIX OF THE NEW YORK STATE INSURANCE LAW.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be
executed in facsimile on its behalf by its duly authorized officers
this ____ day of _______, 1999.
MBIA INSURANCE CORPORATION
By
President
Attachment 1
Insurance Policy No. ____-____-___
DEMAND FOR PAYMENT
State Street Bank and Trust Company, N.A.
as Fiscal Agent for MBIA Insurance
Corporation
00xx Xxxxx
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: [Municipal Registrar and
Paying Agency]
MBIA Insurance Corporation
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: President
Reference is made to the Insurance Policy No. ____-____-___ (the
"Policy") issued by MBIA Insurance Corporation (the "Insurer"). The terms which
are capitalized herein and not otherwise defined have the meanings specified in
the Policy unless the context otherwise requires.
Aetna Series Fund, Inc. (the "Fund) hereby certifies that: [Choose one
of the following]
() The Fund, on behalf of the shareholders (the "PPF
Shareholders") of the capital stock of the Fund designated the Aetna
Principal Protection Fund _ (the "PPF"), is the beneficiary under the
Policy.
() The Fund, on behalf of the PPF Shareholders, demands
payment of $___________________, the amount by which (i) the Aggregate
Guarantee Amount exceeds (ii) the Total Net Assets as of the Maturity
Date, and directs that payment under the Policy be made to the
following account by bank wire transfer of federal or other immediately
available funds one (1) Business Day after receipt by the Fiscal Agent
of this Demand for Payment in accordance with the terms of the Policy:
____________.
Aetna Series Fund, Inc.
By:__________________________________
Name:
Title:
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company Or
Other Person Files An Application for Insurance Or Statement Of Claim Containing
Any Materially False Information, Or Conceals For The Purpose Of Misleading
Information Concerning Any Fact Material Thereto, Commits A Fraudulent Insurance
Act, Which Is A Crime, And Shall Also Be Subject To A Civil Penalty Not To
Exceed Five Thousand Dollars And The Stated Value Of The Claim For Each Such
Violation.
EXPIRATION DATE
MBIA Insurance Corporation
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: President
Reference is made to the Insurance Policy No. ____-____-___ (the
"Policy") issued by MBIA Insurance Corporation (the "Insurer"). The terms which
are capitalized herein and not otherwise defined have the meanings specified in
the Policy unless the context otherwise requires.
[The undersigned hereby certifies and confirms that on the Maturity
Date the Aggregate Guarantee Amount was equal to or less than the Total Net
Assets as of the Maturity Date.] [The Insurer has paid $________, the Deficit,
under the Policy.] [The undersigned hereby certifies and confirms that the
Aggregate Guarantee Amount equals zero.]
The original of the Policy is enclosed herewith.
AETNA SERIES FUND, INC.
By:________________________
Name:
Title:
