EXHIBIT (8)(e)
MLIM DRAFT 09/19/02
PARTICIPATION AGREEMENT
BETWEEN
XXXXXXX XXXXX LIFE INSURANCE COMPANY,
AND
FAM DISTRIBUTORS, INC.
THIS AGREEMENT, dated as of the _____ day of _________, 2002, between
Xxxxxxx Xxxxx Life Insurance Company (the "Company"), an Arkansas life insurance
company, on its own behalf and on behalf of each segregated asset account of the
Company set forth on Schedule A hereto as may be amended from time to time
(hereinafter referred to individually and collectively as the "Account"), and
FAM DISTRIBUTORS, INC. (the "Underwriter"), a Delaware corporation.
WHEREAS, the Underwriter, which serves as distributor to the registered
investment companies listed on Schedule B hereto, as may be amended from time to
time (hereinafter referred to as the "Funds"), is registered as a broker-dealer
with the Securities and Exchange Commission (the "SEC") 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");
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to
variable annuity contracts set forth in Schedule A hereto, as it may be amended
from time to time by mutual written agreement (the "Contracts");
WHEREAS, each Fund issues shares to the general public and to the
separate accounts of insurance companies ("Participating Insurance Companies")
to, among other uses, fund variable annuity contracts sold to certain qualified
pension and retirement plans;
WHEREAS, the Company intends to purchase shares of other open-end
management investment companies that offer shares to the general public to fund
the Contracts;
WHEREAS, the Underwriter knows of no reason why shares in any Fund may
not be sold to Participating Insurance Companies to fund variable annuity
contracts sold to certain qualified pension and retirement plans; and
WHEREAS, to the extent permitted by applicable insurance and taxation
laws and regulations, the Company intends to purchase shares in the Funds (and
classes thereof) listed in Schedule B hereto, as it may be amended from time to
time by mutual written agreement on
1
behalf of the Account to fund the aforesaid Contracts, and the Underwriter is
authorized to sell such shares in the Funds, and classes thereof, to the Account
at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company
and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. Underwriter has exclusive authority to distribute the Funds'
shares, and has agreed to make available to the Company for purchase on behalf
of the Account shares of the Funds and classes thereof listed on Schedule B to
this Agreement (the "Shares"). Pursuant to such authority, and subject to
Article IX hereof, the Underwriter agrees to make the Shares available to the
Company for purchase on behalf of the Account, such purchases to be effected at
net asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, the Underwriter or a Funds' board of directors (a
"Board") may suspend or terminate the offering of Shares of any Fund or class
thereof, if such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of either Underwriter or the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, suspension or termination is necessary in the best
interests of the shareholders of such Fund.
1.2. Underwriter shall cause each Fund to redeem, at the Company's
request, any full or fractional Shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Company
shall not redeem Shares attributable to Contract owners except in the
circumstances permitted in Section 9.3 of this Agreement, and (ii) a Fund may
delay redemption of Shares to the extent permitted by the 1940 Act, and any
rules, regulations, or orders thereunder.
1.3. Purchase and Redemption Procedures
Underwriter hereby appoints the Company as its agent for the limited purpose of
receiving purchase and redemption requests on behalf of the Account (but not
with respect to any Fund shares that may be held in the general account of the
Company) for the Shares made available hereunder, based on allocations of
amounts to the Account or subaccounts thereof under the Contracts and other
transactions relating to the Contracts or the Account. All transactions in
Account shares shall be executed through the Omnibus Accounts of Company's
affiliate Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx, Inc. ("Omnibus Accounts").
Receipt of any such request (or relevant transactional information therefor) on
any day the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC (a "Business
Day") by the Company as such limited agent of the Fund prior to the time that
the Fund ordinarily calculates its net asset value as described from time to
time in the Fund Prospectus (which as of the date of execution of this Agreement
is 4:00 p.m. Eastern Time) shall constitute receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such request by 11 a.m.
Eastern Time
2
on the next following Business Day. Company will provide to the Fund or its
designee via the NSCC Fund SERV DCC & S platform (which utilizes the "as of"
record layout within Fund/SERV) one or more files detailing the instructions
received with respect to each Plan prior to 4:00 p.m. ET on the prior Business
Day for each of the Funds. If for any reason Xxxxxxx Xxxxx is unable to transmit
the file(s) with respect to any Business Day, Xxxxxxx Xxxxx will notify the Fund
or its designee by 11:00 a.m. ET on the next following Business Day.
(b) The Company shall pay for Shares on the same day that it
notifies the Fund of a purchase request for such Shares. Payment for Shares
shall be made in federal funds transmitted to the Fund via the NSCC Fund/SERV
DCC&S platform to be received by the Fund by 6:30 p.m. Eastern Time on the day
the Fund is notified of the purchase request for Shares (unless the Fund
determines and so advises the Company that sufficient proceeds are available
from redemption of Shares of other Funds effected pursuant to redemption
requests tendered by the Company on behalf of the Account). Upon receipt of
federal funds transmitted via the NSCC Fund/SERV DCC&S platform, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund. Notwithstanding any provision of this Agreement to
the contrary, for purchase and redemption instructions with respect to any
Shares, Company and the Fund will settle the purchase and redemption
transactions referred to herein, via the NSCC Fund/SERV platform settlement
process on the next Business Day following the effective trade date. The Fund
will provide to Company a daily transmission of positions and trading activity
taking place in the Omnibus Accounts using Company's affiliate's proprietary
Inventory Control System ("ICS").
(c) Payment for Shares redeemed by the Account or the Company
shall be made in federal funds transmitted via the NSCC Fund/SERV DCC&S platform
to the Company or any other designated person on the next Business Day after the
Fund is properly notified of the redemption order of such Shares (unless
redemption proceeds are to be applied to the purchase of Shares of other Funds
in accordance with Section 1.3(b) of this Agreement), except that Underwriter,
on behalf of the Funds, reserves the right to redeem Shares in assets other than
cash and to delay payment of redemption proceeds to the extent permitted under
Section 22(e) of the 1940 Act and any Rules thereunder, and in accordance with
the procedures and policies of the Funds as described in the then current
prospectus. Neither Underwriter nor Fund shall bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds by
the Company; the Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Shares held or to be
held in the Company's general account shall be effected at the closing net asset
value per share next determined after a Funds' receipt of such request as set
forth in Section 1.3(a) herein.
1.4. Underwriter shall use its best efforts to make the closing net
asset value per Share for each Fund available to the Company by 6:30 p.m.
Eastern Time each Business Day via the
3
NSCC Profile 1 platform, and in any event, as soon as reasonably practicable
after the closing net asset value per Share is calculated, and shall calculate
such closing net asset value, including any applicable daily dividend factor, in
accordance with the Funds' Prospectus. In the event the Underwriter is unable to
make the 6:30 p.m. deadline stated herein, it shall provide additional time for
the Company to place orders for the purchase and redemption of Shares (that have
already been placed by Company's customers prior to the market's close on that
Business Day). Such additional time shall be equal to the additional time that
the Fund takes to make the closing net asset value available to the Company.
Neither the Fund, the Underwriter, nor any of their affiliates shall be liable
for any information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company to the
Fund or the Underwriter. Any material error in the calculation or reporting of
the closing net asset value, including any applicable daily dividend factor per
Share shall be reported immediately upon discovery to the Company. In such event
the Company shall be entitled to an adjustment to the number of Shares purchased
or redeemed to reflect the correct closing net asset value, including any
applicable daily dividend factor per Share, and Underwriter shall bear the cost
of correcting such errors. Any error of a lesser amount shall be corrected in
the next Business Day's net asset value per Share.
1.5. Notwithstanding anything to the contrary contained in this
Agreement, Underwriter will make available for purchase by the Company, on its
behalf and on behalf of the Account, a class of shares available at net asset
value which are not subject to a contingent deferred sales charge or redemption
fee. In addition, no exchange fees will be applicable to shares of the Funds
purchased by the Company, on its behalf and on behalf of the Account.
Underwriter shall furnish notice (via the NSCC Profile II platform) to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Shares. The form of payment of dividends and
capital gains distributions will be determined in accordance with the Company's
operational procedures in effect at the time of the payment of such dividend or
distribution. At this time, the Company, on its behalf and on behalf of the
Account, hereby elects to receive all such dividends and distributions as are
payable on any Shares in the form of cash. Company will reinvest a portion or
all of the cash proceeds for additional Shares of that Fund through a trade
processed via the NSCC platform. The Company reserves the right, on its behalf
and on behalf of the Account, to revoke this election and to receive all such
dividends and capital gain distributions in the form of additional Shares of
that Fund. Underwriter shall notify the Company promptly of the number of Shares
so issued as payment of such dividends and distributions. All transactions of
Account shares contemplated herein shall be executed through the Omnibus
Accounts.
1.6. Issuance and transfer of Shares shall be by book entry only and
executed through the Omnibus Accounts. Stock certificates will not be issued to
the Company or the Account. Purchase and redemption orders for Shares shall be
recorded in an appropriate ledger for the Account or the appropriate subaccount
of the Account.
1.7 Fund Information.
(a) Underwriter will provide (or cause to be provided) to Company the
information set forth
4
in Schedule C hereto. In addition, notwithstanding anything contained in this
Agreement to the contrary, Underwriter hereby agrees that Company may use such
information in communications prepared for the Contracts, including, but not
limited to, application, marketing, sales and other communications materials.
Underwriter will provide timely notification to Company of any change to the
information described in Part I of Schedule C, including without limitation any
change to the CUSIP number or symbol designation of a Fund. Such notification
shall be given to Company at least ten (10) Business Days prior to the effective
date of the change or the effect of the change with respect to transactions by
the Account in any affected Fund shall be delayed for a reasonable time
following notification hereunder.
(b) Notwithstanding anything to the contrary in this Agreement, upon
request, Underwriter will provide Company with prospectuses, proxy materials,
financial statements, reports and other materials relating to each Fund in
sufficient quantity for each Contract owner invested in the Fund.
(c) With the exception of (i) listings of product offerings; (ii)
materials in the public domain (e.g., magazine articles and trade publications);
and (iii) materials used on an internal basis only, Company agrees not to
furnish or cause to be furnished to any third parties or to display publicly or
publish any information or materials relating to the Funds, except such
materials and information as may be distributed to Company by Fund or approved
for distribution by Underwriter and upon Company's request.
1.8. The parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Shares may be sold to other investors
and the cash value of the Contracts may be invested in other investment
companies.
5
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts (a) are, or
prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under Arkansas insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the 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, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company shall register and qualify the Contracts or
interests therein as securities in accordance with the laws of the various
states only if and to the extent deemed advisable by the Company.
2.2. Underwriter, on behalf of each Fund, represents and warrants that
Shares sold pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for issuance and sold in compliance with applicable state and
federal securities laws and that the Fund is and shall remain registered under
the 1940 Act. Underwriter shall amend the registration statement for the Funds'
respective Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its respective Shares.
Underwriter shall register and qualify the shares for sale in accordance with
the laws of the various states only if and to the extent deemed advisable by the
Fund, its adviser or the Underwriter.
2.3. Underwriter agrees to comply with any applicable state insurance
laws or regulations (including the furnishing of information not otherwise
available to the Company which is required by state insurance law to enable the
Company to obtain the authority needed to issue the Contracts in any applicable
state, and including cooperating with the Company in any filings of sales
literature for the Contracts), to the extent notified thereof in writing by the
Company.
2.4. Underwriter represents that each Fund is lawfully organized and
validly existing under the laws of the state of its respective incorporation or
creation and that it does and will comply in all material respects with the 1940
Act.
2.6. 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 Fund Shares
in accordance with any applicable state and federal securities laws.
6
2.7. Underwriter represents and warrants, on its own behalf and on
behalf of each Fund, that all of its and the Funds' trustees/directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimum coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many copies of
the Funds' current prospectuses describing only the Classes of the Funds listed
on Schedule B as the Company may reasonably request. Underwriter shall bear the
expense of printing copies of the current prospectus and profiles for the Fund
that will be distributed to existing Contract owners, and the Company shall bear
the expense of printing copies of the Funds' prospectuses and profiles that are
used in connection with offering the Contracts issued by the Company. If
requested by the Company in lieu thereof, Underwriter shall provide such
documentation (including a final copy of the new prospectus on diskette at
Underwriter'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
Fund is amended) to have the prospectus for the Contracts and the Funds'
prospectuses printed together in one document (such printing of the Funds'
prospectuses and profiles for existing Contract owners to be at the
Underwriter's expense, unless combination of prospectuses is requested, for
which Company shall bear all related costs).
3.2. The Funds' prospectuses shall state that the current Statements of
Additional Information ("SAI") for each Fund is available, and the Underwriter,
at its expense, shall provide a reasonable number of copies of such SAI free of
charge to the Company for itself and for any owner of a Contract who requests
such SAI.
3.3. Underwriter shall provide the Company with information regarding
each Fund's expenses, which information may include a table of fees and related
narrative disclosure for use in any prospectus or other descriptive document
relating to a Contract.
3.4. Underwriter, at its expense, shall provide the Company with copies
of each Fund's proxy materials, reports to shareholders, and other
communications to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.5. The Company shall:
(i) solicit voting instructions from Contract owners;
7
(ii) vote the Shares in accordance with instructions received
from Contract owners; and
(iii) vote Shares for which no instructions have been received
in the same proportion as Shares of such Fund for which
instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company will vote Shares held in any
segregated asset account in the same proportion as Shares of such Fund for which
voting instructions have been received from Contract owners, to the extent
permitted by law.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
Underwriter or its designee, each piece of sales literature or other promotional
material that the Company develops and in which a Fund or its adviser or the
Underwriter is named. No such material shall be used until approved by
Underwriter or its designee. Underwriter or its designee reserves the right to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund, its adviser or the Underwriter is named,
and no such material shall be used if the Fund or its designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of a Fund or concerning a Fund or its
adviser or the Underwriter in connection with the sale of the Contracts other
than the information or representations contained in the registration statement
or profiles or prospectus or SAI for the Fund shares, as such registration
statement and profiles and prospectus or SAI may be amended or supplemented from
time to time, or in reports or proxy statements for a Fund, or in sales
literature or other promotional material approved by Underwriter or its
designee, except with the permission of Underwriter.
4.3. Underwriter or its designee shall furnish, or cause to be
furnished, to the Company, each piece of sales literature or other promotional
material that it develops and in which the Company, and/or its Account, is
named. No such material shall be used until approved by the Company. The Company
reserves the right to reasonably object to the continued use of any such sales
literature or other promotional material in which the Company and/or its Account
is named, and no such material shall be used if the Company so objects.
4.4. Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement and prospectus (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), or SAI for the Contracts, as such
registration
8
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the Account 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 permission of the Company.
4.5. Underwriter will provide to the Company at least one complete copy
of all registration statements, profiles, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to a Fund or its shares, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to Underwriter at least one complete copy
of all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to Underwriter any complaints received from the Contract owners
pertaining to a Fund.
4.7. Underwriter will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Fund, and of any
material change in a Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. Underwriter will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner.
4.8. For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: 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, 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 agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to a Fund.
ARTICLE V. Fees and Expenses
5.1. All expenses incident to performance by a Fund under this
Agreement shall be paid by such Fund. Underwriter shall see to it that all of a
Fund's shares are registered and
9
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. Underwriter (or the Funds, as applicable) shall bear
the expenses for the cost of registration and qualification of the Funds'
shares, preparation and filing of the Funds' prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Funds' shares.
5.2. The Company shall bear the expenses of distributing the Funds'
prospectuses to owners of Contracts issued by the Company and of distributing
the Funds' proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1. Underwriter represents that each Fund is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
maintain such qualification (under Subchapter M or any successor or similar
provisions) and that it will notify the Company immediately upon having a
reasonable basis for believing that a Fund has ceased to so qualify or that it
might not so qualify in the future.
ARTICLE VII. Indemnification
7.1. Indemnification By the Company
7.1(a). The Company agrees to indemnify and hold harmless each
Fund and the Underwriter and each of its respective trustees/directors and
officers, and each person, if any, who controls a Fund or the Underwriter within
the meaning of Section 15 of the 1933 Act or who is under common control with
the Underwriter (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statements of any material fact
contained in the registration statement, prospectus (which
shall include a written description of a Contract that is
not registered under the 1933 Act), or SAI for the Contracts
or contained in 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 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
10
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by the
Underwriter for use in the registration statement,
prospectus or SAI 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 Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI, or
sales literature of a Fund not supplied by the Company or
persons under its control) or wrongful conduct of the
Company or its agents or persons under the Company's
authorization or control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI, or sales literature
of a Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to
a Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the
Company to provide the services and furnish the materials
under the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise, to
comply with the qualification requirements specified in
Section 6.1 of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company;
as limited by and in accordance with the provisions of Sections 7.1(b) and
7.1(c) hereof.
7.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
7.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the
11
Company from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against an Indemnified Party, 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.
7.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of Fund shares or the Contracts or the
operation of a Fund.
7.2. Indemnification by the Underwriter
7.2(a). The Underwriter agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or profile or
prospectus or SAI or sales literature of a Fund (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Underwriter by or on behalf of the Company
for use in the registration statement, profile, prospectus
or SAI for such Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI or
sales literature for the Contracts not supplied by the
Underwriter or persons under their control) or wrongful
conduct of Underwriter or persons under
12
its control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI 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
Underwriter; or
(iv) arise as a result of any failure by Underwriter to
provide the services and furnish the materials under the
terms of this Agreement (including a failure of a Fund,
whether unintentional or in good faith or otherwise, to
comply with the qualification requirements specified in
Section 6.1 of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by Underwriter; or
(vi) arise out of or result from the materially
incorrect or untimely calculation or reporting of the daily
net asset value per share or dividend or capital gain
distribution rate;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
7.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, 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, 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
13
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.
7.2(d). The Indemnified Party will promptly notify the
Underwriter of the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issuance or sale of the
Contracts or the operation of the Account.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
8.2. 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 SEC
may grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. Termination
9.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party, for any reason with respect
to some or all Funds, by three (3) months advance
written notice delivered to the other parties; or
(b) termination by the Company, with respect to a Fund,
by written notice to Underwriter based upon the
Company's determination that shares of such Fund are
not reasonably available to meet the requirements of
the Contracts; or
(c) termination by the Company by written notice to
Underwriter in the event any of the Shares are not
registered, issued, or sold in accordance with
applicable state and/or federal law or such law
precludes the use of such Shares as the underlying
investment media of the Contracts issued or to be
issued by the Company; or
(d) termination by Underwriter in the event that formal
administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance
Commissioner, or like official of any state or any
other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the
purchase of the Shares; provided, however, that
Underwriter determines in
14
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
(e) termination by the Company in the event that formal
administrative proceedings are instituted against
Underwriter by the NASD, the SEC, or any state
securities or insurance department, or any other
regulatory body; 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
Underwriter to perform its obligations under this
Agreement; or
(f) termination by the Company by written notice to
Underwriter with respect to any Fund in the event
that such Fund ceases to qualify as a Regulated
Investment Company under Subchapter M as specified in
Section 6.1 hereof, or if the Company reasonably
believes that such Fund may fail to so qualify or
comply; or
(g) termination by Underwriter by written notice to the
Company, if Underwriter shall determine in its sole
judgment exercised in good faith, that the Company
has suffered a material adverse change in its
business, operations, financial condition, or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) termination by the Company by written notice to
Underwriter, if the Company shall determine, in its
sole judgment exercised in good faith, that the
Funds' investment adviser or the Underwriter has
suffered a material adverse change in its business,
operations, financial condition, or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or
(i) termination by the Company upon any substitution of
the shares of another investment company or series
thereof for Shares in accordance with the terms of
the Contracts, provided that the Company has given at
least 45 days prior written notice to Underwriter of
the date of substitution.
9.2. Notwithstanding any termination of this Agreement, Underwriter
shall, at the option of the Company, continue to make available additional
Shares 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"), unless the Underwriter requests that the
Company seek an order pursuant to Section 26(c) of the 1940 Act to permit the
substitution of other securities for the Shares. Specifically, the owners of the
Existing Contracts may be permitted to reallocate investments in an affected
Fund, redeem investments in an affected Fund, and/or invest in an affected Fund
upon the making of additional purchase
15
payments under the existing Contracts (subject to any such election by the
Underwriter). The parties agree that this Section 9.2 shall not apply to any
terminations under Section 9.1(i) of this Agreement.
9.3. The Company shall not redeem Shares attributable to the
Contracts (as opposed to Shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (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"), (iii) upon 45 days
prior written notice to Underwriter, as permitted by an order of the SEC
pursuant to Section 26(c) of the 1940 Act, but only if a substitution of other
securities for the Shares is consistent with the terms of the Contracts, or (iv)
as permitted under the terms of the Contract. Upon request, the Company will
promptly furnish to Underwriter reasonable assurance that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contacts, the Company
shall not prevent Contract owners from allocating payments to a Fund that was
otherwise available under the Contracts without first giving Underwriter 45 days
notice of its intention to do so.
9.4. Notwithstanding any termination of this Agreement, each party's
obligation under Article VII to indemnify the other parties shall survive.
ARTICLE X. 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 Company: Xxxxx X. Xxxxxxxx, Esq.
Senior Vice President and General Counsel
Xxxxxxx Xxxxx Life Insurance Company
0 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
If to the Underwriter: Xxxxx X. Xxxxx, Esq.
Director, Legal Advisory
Xxxxxxx Xxxxx Investment Managers
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
16
ARTICLE XI. Miscellaneous
11.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information has come into the
public domain.
11.2. 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.
11.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.4. 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.
11.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Arkansas Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable contract
operations of the Company are being conducted in a manner consistent with the
Arkansas variable annuity laws and regulations and any other applicable law or
regulations.
11.6. 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.
11.7. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto.
17
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.
XXXXXXX XXXXX LIFE INSURANCE COMPANY:
By its authorized officer
By: Xxxx X. Xxxxx
Title: Vice President & Secretary
Date:
------------------------------------
FAM DISTRIBUTORS, INC.
By its authorized officer
By:
------------------------------------
Title:
------------------------------------
Date:
------------------------------------
18
SCHEDULE A
SEPARATE ACCOUNTS OF THE COMPANY
Dated: , 2002
------------------
SCHEDULE B
FUNDS AND CLASSES
Dated: , 2002
------------------
SCHEDULE C
FUND MATERIALS
PART I. Fund Description
- Underwriter will provide to Company or a common service provider
designated by Company within ten (10) days of the end of each month,
each Funds' average annual return for the 1, 5, and 10 year periods
ending the current month on a Net Asset Value basis.
- Underwriter will provide to Company a description of each Fund
including holdings, portfolio composition, largest sectors and
geographical allocation and a statement of objective in a mutually
acceptable format.
Part II. Fund Information and Materials
Underwriter will provide to Company the following information and
materials on an as needed basis, as reasonably requested by Company:
- A supply of materials relating to the Funds (prospectuses,
quarterly reports and other brochures) to include with
contract application sales, marketing and communication
materials.
- Specific investment performance information that may be
requested that cannot be obtained from the prospectus. This
would include specific calculations on various performance
parameters and will require an aggressive turnaround time
(usually 5 business days).
- A supply of one (1) page fund profiles (fact sheets) with current fund
performance information, that Underwriter has had approved by the NASD.
This supply will be made available in sufficient quantities to a
fulfillment center of Company's choosing, by the last business day of the
month following every calendar quarter-end (March, June, September, and
December).
