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PARTICIPATION AGREEMENT
Among
XXXXXX VARIABLE TRUST
XXXXXX MUTUAL FUNDS CORP.
and
AMERICAN CENTURION LIFE ASSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 30th day of April,
1997, among AMERICAN CENTURION LIFE ASSURANCE COMPANY (the "Company"), a New
York corporation, on its own behalf and on behalf of each separate account of
the Company set forth on Schedule A hereto, as such Schedule may be amended from
time to time (each such account hereinafter referred to as the "Account"),
XXXXXX VARIABLE TRUST (the "Trust"), a Massachusetts business trust, and XXXXXX
MUTUAL FUNDS CORP. (the"Underwriter), a Massachusetts corporation.
WHEREAS, the Trust is an open-end diversified management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Trust and
the Underwriter (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, dated December 29, 1993 (File No. 812- 8612), granting the
Company and certain variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b)
of the Investment Company Act of 1940, as amended (the "1940 Act"), and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Trust to be sold to and held by variable annuity and variable life
insurance separate accounts of the Participating Insurance Companies (the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
life and/or variable annuity contracts under the 1933 Act and any applicable
state securities and insurance law; and
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WHEREAS, each Account is a duly organized, validly existing separate
account, established by resolution of the Board of Directors of the Company, on
the date shown for such Account on Schedule A hereto, to set aside and invest
assets attributable to the one or more variable life and annuity contracts; and
WHEREAS, the Company has registered or will register the subaccounts of
each Account together as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in certain Funds
("Authorized Funds") on behalf of each Account to fund certain of the aforesaid
variable life and variable annuity contracts and the Underwriter is authorized
to sell such shares to unit investment trusts such as each Account at net asset
value;
NOW, THEREFORE, in consideration of the promises herein, the Company,
the Trust and the Underwriter agree as follows:
ARTICLE I. Sale of Trust Shares
1.1 The Underwriter agrees, subject to the Trust's rights under Section
1.2 and otherwise under this Agreement, to sell to the Company those Trust
shares representing interests in Authorized Funds which each Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1.1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 9:00 a.m. Boston time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Trust calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission. The initial Authorized
Funds shall be Xxxxxx VT Diversified Income Fund, Xxxxxx VT Growth and Income
Fund, Xxxxxx VT High Yield Fund and Xxxxxx VT New Opportunities Fund.
1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Trust shall
use reasonable efforts to calculate such net asset value on each day on which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Trustees of the Trust (the "Trustees") may refuse to sell shares of any Fund
to the Company and any other person, or suspend or terminate the offering of
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shares of any Fund if such action is required by law or by regulatory
authorities having jurisdiction over the Trust or if the Trustees determine, in
the exercise of their fiduciary responsibilities, that to do so would be in the
best interests of shareholders.
1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.
1.4 The Trust shall redeem its shares in accordance with the terms of
its then current prospectus. For purposes of this Section 1.4, the Company shall
be the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption by 9:00
a.m., Boston time, on the next following Business Day.
1.5 The Company shall purchase and redeem the shares of each Fund
offered by the then current prospectus of the Trust and in accordance with the
provisions of such prospectus.
1.6 The Company shall pay for Trust shares on the next
Business Day after an order to purchase Trust shares is made in
accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire.
1.7 Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded as instructed by the Company to
the Underwriter in an appropriate title for each Account or the appropriate
subaccount of each Account.
1.8 The Underwriter shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Underwriter
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.9 The Underwriter shall make the net asset value per share for each
Fund available to the Company on a daily basis as soon as reasonably practical
after the Trust calculates its net asset value per share and each of the Trust
and the Underwriter shall use its best efforts to make such net asset value per
share available by 6:10 p.m. Boston time.
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ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that
(a) at all times during the term of this Agreement
the Contracts are or will be registered under the 1933 Act; that the Contracts
will be issued and sold in compliance in all material respects with all
applicable laws and the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a separate
account under applicable law and has registered or, prior to any issuance or
sale of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts; and
(b) the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code") and that it will make
every effort to maintain such treatment and that it will notify the Trust and
the Underwriter immediately upon having a reasonable basis for believing that
the Contracts have ceased to be so treated or that they might not be so treated
in the future.
2.2 The Trust represents and warrants that
(a) at all times during the term of this Agreement
Trust shares sold pursuant to this Agreement shall be registered under the 1933
Act, duly authorized for issuance and sold by the Trust to the Company in
compliance with all applicable laws, subject to the terms of Section 2.4 below,
and the Trust is and shall remain registered under the 1940 Act. The Trust shall
amend the Registration Statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering of
its shares. The Trust shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Trust or the Underwriter in connection with their sale by the
Trust to the Company and only as required by Section 2.4;
(b) it is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will use its best
efforts to maintain such qualification (under Subchapter M or any successor
provision) and that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it might
not so qualify in the future; and
(c) it is lawfully organized and validly existing
under the laws of Massachusetts and that it does and will comply in all material
respects with the 1940 Act.
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2.3 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Trust shares
in accordance with all applicable securities laws applicable to it, including
without limitation the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.4 Notwithstanding any other provision of this Agreement, the Trust
shall be responsible for the registration and qualification of its shares and of
the Trust itself under the laws of any jurisdiction only in connection with the
sales of shares directly to the Company through the Underwriter. The Trust shall
not be responsible, and the Company shall take full responsibility, for
determining any jurisdiction in which any qualification or registration of Trust
shares or the Trust by the Trust may be required in connection with the sale of
the Contracts or the indirect interest of any Contract in any shares of the
Trust and advising the Trust thereof at such time and in such manner as is
necessary to permit the Trust to comply.
2.5 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1 The Trust shall provide such documentation (including a final copy
of its prospectus as set in type at the Trust's expense) and other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Trust is amended) to have the prospectus
for the Contracts and the Trust's prospectus printed together in one document
(such printing to be at the Company's expense).
3.2 The Trust's prospectus shall state that the Statement of Additional
Information for the Trust is available from the Underwriter or its designee (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust), and the Underwriter (or the Trust), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.
3.3 The Trust, at its expense, shall provide the Company with reports to
shareholders set in type, for printing and distribution by the Company (such
printing and distribution to be at the Company's expense).
3.4 The Trust, at its expense, shall provide the Company with copies of
its proxy material and other communications to stockholders in such quantity as
the Company shall reasonably require for distribution to the Contract owners,
such distribution to be at the expense of the Company.
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3.5 The Company shall vote all Trust shares as required by law and the
Shared Funding Exemptive Order. The Company reserves the right to vote Trust
shares held in any separate account in its own right, to the extent permitted by
law and the Shared Funding Exemptive Order. The Company shall be responsible for
assuring that each of its separate accounts participating in the Trust
calculates voting privileges in a manner consistent with all legal requirements.
3.6 The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE IV. Sales Material and Information
4.1 Without limiting the scope or effect of Section 4.2, the Company
shall furnish, or shall cause to be furnished, to the Underwriter each piece of
sales literature or other promotional material in which the Trust, its
investment adviser or the Underwriter is named at least 15 days prior to its
use. No such material shall be used if the Underwriter objects to such use
within five Business Days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in annual or semi-annual reports or proxy
statements for the Trust, or in sales literature or other promotional material
approved by the Trust or its designee or by the Underwriter, except with the
written permission of the Trust or the Underwriter or the designee of either or
as required by law.
4.3 The Underwriter or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Underwriter in which the Company
and/or its separate account(s) is named at least 15 days prior to its use. No
such material shall be used if the Company or its designee objects to such use
within five Business Days after receipt of such material. The Company
acknowledges that the Underwriter does not currently intend to prepare sales
literature naming the Company or its separate account.
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4.4 Neither the Trust nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account or which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the written permission of the Company or as is required by
law.
4.5 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e. any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all registered representatives.
4.6 The Trust and the Underwriter hereby consent to the Company's use of
the names "Xxxxxx," "Xxxxxx Variable Trust" and "Xxxxxx VT" in connection with
marketing the Contracts, subject to the terms of Section 4.1 and 4.2. Such
consent shall terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1 The Trust and Underwriter shall pay no fee or other
compensation to the Company under this agreement.
5.2 All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall bear the expenses for the
cost of registration and qualification of the Trust's shares, preparation and
filing of the Trust's prospectus and registration statement, proxy materials and
reports, setting the prospectus and shareholder reports in type, setting in type
and printing the proxy materials, and the preparation of all statements and
notices required by any federal or state law, in each case as may be necessary
for the performance by it of its obligations under this Agreement.
5.3 The Company shall bear the expenses of (a) printing and distributing
the Trust's prospectus in connection with sales of the Contracts and (b)
printing and distributing the reports to Trust's shareholders and (c) of
distributing the Trust's proxy materials to owners of the Contracts.
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ARTICLE VI. Diversification
6.1 The Trust shall use its best efforts to cause each
Authorized Fund to maintain a diversified pool of investments that
would, if such Fund were a segregated asset account, satisfy the
diversification provisions of Treas. Reg. 1.817-5(b)(1) or (2).
ARTICLE VII. Potential Conflicts
7.1 The Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the Contract owners of
all separate accounts investing in the Trust. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities law or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
Contract owners; or (f) a decision by an insurer to disregard the voting
instructions of Contract owners. The Trust shall promptly inform the Company if
the Trustees determine that an irreconcilable material conflict exists and the
implications thereof
7.2 The Company will report any potential or existing conflicts of which
it is aware to the Trustees. The Company will assist the Trustees in carrying
out their responsibilities under the Shared Funding Exemptive Order, by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Trustees whenever Contract owner voting
instructions are disregarded.
7.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary to remedy or eliminate the irreconcilable material conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting such assets in a
different investment medium, including (but not limited to) another Fund of the
Trust, or submitting the question whether such segregation should be implemented
to a vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity Contract owners, life insurance
Contract owners, or variable Contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected Contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.
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7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position that would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected subaccount of
the Account's investment in one or more portfolios of the Trust and terminate
this Agreement with respect to such subaccount; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty shall be imposed as a result of
such withdrawal. Any such withdrawal and termination must take place within six
(6) months after the Trust gives written notice that this provision is being
implemented, and until the end of that six month period the Underwriter and
Trust shall, to the extent permitted by law and any exemptive relief previously
granted to the Trust, continue to accept and implement orders by the Company for
the purchase (or redemption) of shares of the Trust.
7.5 If a material irreconcilable conflict arises because of a particular
state insurance regulator's decision applicable to the Company to disregard
Contract owner voting instructions and that decision represents a minority
position that would preclude a majority vote, then the Company may be required,
at the Trust's direction, to withdraw the affected subaccount of the Account's
investment in one or more portfolios of the Trust; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of the foregoing six month period, the
Underwriter and Trust shall, to the extent permitted by law and any exemptive
relief previously granted to the Trust, continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Trust. No
charge or penalty will be imposed as a result of such withdrawal.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict. Neither the
Trust nor the Underwriter shall be required to establish a new funding medium
for the Contracts, nor shall the Company be required to do so, if an offer to do
so has been declined by vote of a majority of Contract owners materially
adversely affected by the irreconcilable material conflict. In the event that
the Trustees determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the subaccount
of the Account's investment in the affected portfolio or portfolios of the Trust
and terminate this Agreement within six (6) months (or such shorter period as
may be required by law or any exemptive relief previously granted to the Trust)
after the Trustees inform the Company in writing of the foregoing determination,
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined by a
majority of the disinterested Trustees. No charge or penalty will be imposed as
a result of such withdrawal.
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7.7 The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Section 7 shall be carried out with
a view only to the interests of Contract owners.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
7.9 The Company has reviewed the Shared Funding Exemption Order and
hereby assumes all obligations referred to therein which are required, as
conditions to such Order, to be assumed or undertaken by the Company.
ARTICLE VIII. Indemnification
8.1 Indemnification by the Company
8.1(a). The Company shall indemnify and hold harmless the Trust and the
Underwriter and each of the Trustees, and each person, if any, who controls the
Trust or the Underwriter within the meaning of Section 15 of the 1993 Act and
any trustee, director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company which consent may not be
unreasonably withheld) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Contracts or the performance by
the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Registration
Statement, Prospectus or Statement of Additional Information for the Contracts
or contained in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make
PAGE 11
the statements therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the Trust for use
in the Registration Statement, Prospectus or Statement of Additional Information
for the Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in the
Trust's Registration Statement or Prospectus, or in sales literature for Trust
shares not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to the sale or
distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, Prospectus,
or sales literature of the Trust or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Trust or the Underwriter by or on behalf of the Company; or
(iv) arise out of or result from any breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or result
from any other breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1 (b) and 8.1 (c) hereof
8.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party to the extent such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Trust, whichever is applicable.
8.1(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
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indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election to
assume the defense thereof the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d) The Underwriter shall promptly notify the Company of the
commencement of any litigation or proceedings against the Trust and the
Underwriter in connection with the issuance or sale of the Trust Shares or the
Contracts or the operation of the Trust.
8.1(e) The provisions of this Section 8.1 shall survive any
termination of this Agreement.
8.2 Indemnification by the Underwriter
8.2(a) The Underwriter shall indemnify and hold harmless
the Company and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act and any director, officer, empolyee or agent of
the foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Underwriter which
consent may not be unreasonably withheld) or litigation (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Trust's shares or the Contracts or the
performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the sales literature
of the Trust prepared by or approved by the Trust or Underwriter (or any
amendment or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
to the Underwriter or Trust by or on behalf of the Company for use in sales
literature (or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in the
Registration Statement, Prospectus, Statement of
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Additional Information or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) of the Underwriter or persons under
its control, with respect to the sale or distribution of the Contracts or Trust
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, Prospectus,
Statement of Additional Information or sales literature covering the Contracts,
or any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to the
Company by or on behalf of the Underwriter; or
(iv) arise out of or result from any breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise out of or
result from any other breach of this Agreement by the Underwriter; as limited by
and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof.
(v) arise out of or result from any failure to supply timely and
accurate net asset value information related to the Funds, as contemplated by
Section 2, which failure is the result of the gross negligence or willful
misconduct of the Underwriter or its affiliates (it being agreed that neither
the Underwriter nor such affiliates assume responsibility for the timing or
accuracy of prices supplied by independent third parties, such as pricing
services and market makers).
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Underwriter of any such claim
shall not relieve the Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Underwriter will be entitled to participate, at its
own expense, in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof,
PAGE 14
with counsel satisfactory to the party named in the action. After notice from
the Underwriter to such party of the Underwriter's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d) The Company shall promptly notify the Underwriter of the Trust of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.2(e) The provisions of this Section 8.2 shall survive any
termination of this Agreement.
8.3 Indemnification By the Trust
8.3(a) The Trust shall indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act and any director, officer and employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust which consent may not be
unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
operations of the Trust and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in a
Registration Statement, Prospectus and Statement of Additional
Information of the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on behalf of the
Company for use in the Registration Statement, Prospectus, or Statement
of Additional Information for the Trust (or any amendment or supplement)
or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust, as limited by and in accordance with the provisions of
Sections 8.3(b) and 8.3(c) hereof.
PAGE 15
8.3(b). The Trust shall not be liable under the indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Trust, the Underwriter or each
Account, whichever is applicable.
8.3(c). The Trust shall not be liable under this indemnification
provision with respect to any claim made against any Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Trust of any such claim shall
not relieve the Trust from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its officers
or, directors, in connection with this Agreement, the issuance or sale of the
Contracts or the sale or acquisition of shares of the Trust.
8.3(e) The provisions of this Section 8.3 shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may
PAGE 16
grant (including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance
written notice to the other parties; or
(b) at the option of the Trust or the Underwriter in
the event that formal administrative proceedings are instituted against the
Company by the NASD, the Securities and Exchange Commission, the Commerce
Commissioner of the State of New York or any other regulatory body regarding the
Company's duties under this Agreement or related to the sales of the Contracts,
with respect to the operation of any Account, or the purchase of the Trust
shares, provided, however, that the Trust or the Underwriter determines in its
sole judgment exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Company to perform
its obligations under this Agreement; or
(c) at the option of the Company in the event that
formal administrative proceedings are instituted against the Trust or
Underwriter by the NASD, the Securities and Exchange Commission, or any state
securities or insurance department or any other regulatory body in respect of
the sale of shares of the Trust to the Company, provided, however, that the
Company determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Trust or Underwriter to perform its obligations under this Agreement; or
(d) with respect to any Account, upon requisite vote
of the Contract owners having an interest in such Account (or any subaccount) to
substitute the shares of another investment company for the corresponding Fund
shares of the Trust in accordance with the terms of the Contracts for which
those Fund shares had been selected to serve as the underlying investment media.
The Company will give 30 days' prior written notice to the Trust of the date of
any proposed vote to replace the Trust's shares; or
(e) with respect to any Authorized Fund, upon 60
days advance written notice from the Underwriter to the Company, upon a decision
by the Underwriter or the Trust to cease offering shares of the Fund for sale.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1 (a) may be exercised for any
reason or for no reason.
PAGE 17
10.3 No termination of this Agreement shall be effective unless and
until the party terminating this Agreement gives prior written notice to all
other parties to this Agreement of its intent to terminate, which notice shall
set forth the basis for such termination. Such prior written notice shall be
given in advance of the effective date of termination as required by this
Article X.
10.4 Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement, the Trust and the Underwriter shall, at the
option of the Company, continue to make available additional shares of the Trust
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, subject
to Section 1.2 of this Agreement, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Trust, redeem investments in the
Trust and/or invest in the Trust upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.4 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Underwriter the opinion of counsel for the Company,
reasonably satisfactory to the Trust, to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, subject to Section 1.2
of this Agreement, the Company shall not prevent Contract owners from allocating
payments to a Fund that was otherwise available under the Contracts without
first giving the Trust or the Underwriter 90 days notice of its intention to do
so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust:
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
PAGE 18
If to the Underwriter:
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
If to the Company:
American Centurion Life Assurance Company
c/o American Express Financial Advisors Inc.
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: President
ARTICLE XII. Miscellaneous
12.1 A copy of the Agreement and Declaration of Trust of the Fund is on
file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of or arising out of this instrument, including without limitations Article VII
are not binding upon any of the Trustees or shareholders individually but
binding only upon the assets and property of the Trust.
12.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.5 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.6 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.7 Notwithstanding any other provision of this Agreement, the
obligations of the Trust and the Underwriter are several and, without limiting
in any way the generality of the foregoing, neither such party shall have any
liability for
PAGE 19
any action or failure to act by the other party, or any person acting on such
other party's behalf.
[Remainder of page intentionally left blank.]
PAGE 20
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below.
ATTEST: AMERICAN CENTURION LIFE
ASSURANCE COMPANY
Name: By its authorized officer,
Title:
Name: Xxxx Xxxxxx
Title: Vice President
XXXXXX VARIABLE TRUST
By its authorized officer,
Name: Xxxx X. Xxxxxx
Title: Vice President
XXXXXX MUTUAL FUNDS CORP.
By its authorized officer,
Name: Xxxxxxx Xxxxxxxx
Title: Managing Director
PAGE 21
Schedule A
Contracts
ACL Variable Annuity Account 2, established October 12, 1995.
ACL Personal PortfolioSM offers the following Authorized Funds as investment
options:
Xxxxxx VT Diversified Income Fund
Xxxxxx VT Growth and Income Fund
Xxxxxx VT New Opportunities Fund
Xxxxxx VT High Yield Fund
Date:
