EXHIBIT 8 (l)
PARTICIPATION AGREEMENT
Among
X. XXXX PRICE EQUITY SERIES, INC.,
X. XXXX PRICE INVESTMENT SERVICES, INC.,
and
OM FINANCIAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 2nd day of January,
2007 (the "Agreement") by and among OM Financial Life Insurance Company
(hereinafter, the "Company"), a Maryland 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 (each account hereinafter
referred to as the "Account"), and the undersigned funds, each, a corporation
organized under the laws of Maryland (each hereinafter referred to as the
"Fund"), and X. Xxxx Price Investment Services, Inc. (hereinafter the
"Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is or will be available to act as the investment vehicle
for separate accounts established for variable life insurance and variable
annuity contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), l3(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b )(15) and
6e-3(T) (b )(15) thereunder, to the extent necessary to permit shares of the
Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, certain of such Funds have issued multiple classes of shares
for the purpose of paying the Company for its distribution expenses pursuant to
the a plan under Rule 12b-l under the 1940 Act; and
WHEREAS, X. Xxxx Price Associates, Inc. and X. Xxxx Price International,
Inc. (each hereinafter referred to as the "Adviser") are each duly registered as
an investment adviser under the Investment Advisers Act of 1940, as amended, and
any applicable state securities laws; and
WHEREAS, the Company has registered or will register certain variable
life insurance or variable annuity contracts supported wholly or partially by
the Account (the "Contracts") under the 1933 Act, and said Contracts are listed
in Schedule A hereto, as it may be amended from time to time by mutual written
agreement of the parties hereto; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company to set aside and invest assets attributable to the aforesaid Contracts;
and
WHEREAS, the Company has registered or will register the Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement of the parties hereto (the "Designated Portfolios") on behalf of the
Account to fund the aforesaid Contracts, and the Underwriter is authorized to
sell such shares to unit investment trusts such as the Account at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Fund, through the Underwriter, agrees to sell to the Company
those shares of the Designated Portfolios which the Account orders, executing
such orders on a daily basis at the net asset value (and with no sales charge)
next computed after receipt by the Fund or its designee of the order for the
shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios
available continuously for purchase at the applicable net asset value per share
by the Company and the Account on those days on which the Fund calculates its
net asset value pursuant to rules of the SEC, and the Fund shall use its best
efforts to calculate such net asset value on each day which the New York Stock
Exchange is open for regular trading. Notwithstanding the foregoing, the Board
of Directors of the Fund (hereinafter the "Board") may refuse to sell shares of
any Designated Portfolio to any person, or suspend or terminate the offering
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of shares of any Designated Portfolio if such action is required by law or by
regulatory authorities having jurisdiction, or is, in the sole discretion of the
Board acting in good faith and in light of their fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the
shareholders of such Designated Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Designated Portfolios will be sold to the general public. The Fund
and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III, V, VI, and VII of this Agreement are in effect to
govern such sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption, as permitted by
applicable law, or postpone the date of payment or satisfaction of redemption
proceeds, but in no event may any such delay by the Fund in paying redemption
proceeds cause Company or any Account to fail to meet its obligations under
Section 22(e) of the 0000 Xxx.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company or its designee receives the order by 4:00 p.m.
Baltimore time and the Fund receives notice of such order by 10:30 a.m.
Baltimore time on the next following Business Day (or such later time as
permitted by Section 1.10 hereof). "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus to the extent not inconsistent
with the terms and conditions of this Agreement.
1.7 The Company will place separate orders to purchase or redeem shares
of each Designated Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Designated Portfolio to be purchased or redeemed. In
the event of net purchases, the Company shall pay for net purchase orders of
Fund shares by wiring federal funds to Fund or its designated custodial account
(by 3:00 pm EST) on the next Business Day after receipt of an order to purchase
Fund shares is made in accordance with the provisions of Section 1.5 hereof (or
such later time as permitted by Section 1.10 hereof). If payment in Federal
Funds for any purchase is not received or is received by the Fund after 3 :00
p.m. Baltimore time on such Business Day (or such later time as permitted by
Section 1.10 hereof), the Company shall promptly, upon the Fund's request,
reimburse the Fund for any reasonable charges, costs, fees, interest or other
expenses incurred by the Fund in connection with any advances to, or borrowings
or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. For purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund of
the federal funds so wired,. such funds shall cease to be the responsibility of
the Company and shall
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become the responsibility of the Fund. In the event of net redemptions, the Fund
shall pay the net redemption proceeds by wiring federal funds to the Company or
its designated custodial account (by 3:00 pm EST) on the next Business Day after
an order to redeem a Designated Portfolio's shares is made in accordance with
the provision of Section 1.5 hereof. Upon receipt by the Company of the payment,
such funds shall cease to be the responsibility of the Fund and shall become the
responsibility of the Company.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares. The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional shares
of that Portfolio at the ex-dividend date net asset values. The Company reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such income, dividends and
distributions.
1.10 The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company via electronic means on each
Business Day as soon as reasonably practical after the net asset value per share
is calculated (normally by 6:30 p.m. Baltimore time) and shall use its best
efforts to make such net asset value per share available by 7:00 p.m. Baltimore
time each Business Day. If the net asset value is materially incorrect, the Fund
shall make an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value in accordance with Fund
procedures consistent with SEC guidelines. Any corrections to underlying
Contract owner accounts shall be made pursuant to Schedule B. Underwriter shall
reimburse the Company for any expenses incurred related to correction of the net
asset value (including correcting Contract owner accounts) in accordance with
Schedule B. Any material error in the net asset value shall be reported to the
Company promptly upon discovery. Any administrative or other costs or losses
incurred for correcting underlying Contract owner accounts shall be at Company's
expense.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act or are exempt from registration thereunder;
that the Contracts will be issued and sold and distributed in compliance in all
material respects with all applicable federal and state laws, and that the sale
of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established the Account prior to any
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issuance or sale thereof as a segregated asset account under the Maryland
insurance laws and 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 are exempt from registration thereunder.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the state of Maryland and all
applicable federal and state securities laws and that the Fund is and shall
remain registered as an open-end management investment company under the 1940
Act for as long as such shares of the Designated Portfolio(s) are sold. The Fund
shall amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares of the
Designated Portfolios for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Fund or the Underwriter.
2.3 The X. Xxxx Price Equity Series, Inc. (the "Equity Fund") currently
is authorized to issue a class of shares with respect to which the Equity Fund
has adopted a plan for purposes of paying for distribution services under Rule
12b-l of the 1940 Act. To the extent that another Fund decides to finance
distribution expenses pursuant to Rule 12b-l, the Fund will undertake to have
the Board, a majority of whom are not interested persons of the Fund, formulate
and approve any plan pursuant to Rule 12b-l under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Maryland to the extent required to perform this Agreement. The
Fund will use its best efforts to comply with the laws of its state of domicile,
and, to the extent specifically requested in writing by the Company, any other
applicable state insurance laws or regulations, but only to the extent such laws
and regulations apply to the investment objectives, policies and restrictions of
the Designated Portfolios.
2.5 The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Maryland and that it does and
will comply in all material respects with the 1940 Act and any applicable
regulations thereunder.
2.6 The Underwriter represents and warrants that it is lawfully
organized and validly existing under the laws of its state of organization, is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC and will remain duly registered under all applicable federal and state
securities laws. The Underwriter further represents and warrants that it serves
as principal underwriter/distributor of the Fund and that it will perform its
obligations for the Fund in accordance with the laws of the State of Maryland
and any applicable state and federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is lawfully
organized and validly existing under the laws of its state of organization, it
is duly registered as an investment adviser under the Investment
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Advisers Act of 1940, as amended, and shall remain duly registered under all
applicable federal and state securities laws and that the Adviser shall perform
its obligations for the Fund in compliance in all material respects with the
laws of the State of Maryland and any applicable state and federal securities
laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities having access to 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 17 g-l of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund. The Company agrees to make all reasonable efforts to see
that this bond or another bond containing these provisions is always in effect,
and agrees to notify the Fund and the Underwriter in the event that such
coverage no longer applies. The Company agrees to exercise its best efforts to
ensure that other individuals/entities not employed or controlled by the Company
and dealing with the money and/or securities of the Fund maintain a similar bond
or coverage in a reasonable amount.
2.10 The Fund represents and warrants that the Fund is and shall
maintain compliance with Rule 38a-1 under the 1940 Act.
ARTICLE Ill. PROSPECTUSES. STATEMENTS OF ADDITIONAL INFORMATION. AND
PROXY STATEMENTS~ VOTING
3.1 At least annually (or in the case of a prospectus supplement, when
that supplement is issued), the Fund, through the Underwriter, shall provide the
Company with as many copies of the Fund's current prospectus (describing only
the Designated Portfolios listed on Schedule A) and any supplements thereto as
the Company may reasonably request, at the Fund's expense, to distribute to
existing Contract owners (including at the time of Contract fulfillment and
confirmation). The Fund will provide the copies of said prospectus to the
Company or to its mailing agent. The Company will distribute the prospectus to
existing Contract owners. The Fund shall provide the Company, at the Company's
expense, with as many copies of the current Fund prospectus (describing only the
Designated Portfolios) and any supplement thereto, as the Company may reasonably
request for distribution to prospective purchasers of Contracts. If requested by
the Company in lieu thereof, the Fund shall provide such documentation
(including a final copy of the new prospectus as set in type or on a diskette,
at the Fund'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 Fund's
prospectus printed together in one document, in which case the
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Fund agrees to pay its proportionate share of reasonable expenses directly
related to the required disclosure of information concerning the Fund; provided,
such costs do not exceed the costs for such Fund to print its own prospectus.
The Fund will, upon request, provide the Company with a copy of the Fund's
prospectus through electronic means to facilitate the Company's efforts to
provide Fund prospectuses via electronic delivery.
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide sufficient copies
of such SAI and any supplements thereto free of charge to the Company for
itself, and for any owner of a Contract who requests such SAI. The Fund will
provide the Company, at the Fund's expense, with as many copies of the SAI and
any supplements thereto as the Company may reasonably request for distribution,
at the Company's expense, to prospective Contract owners and applicants. The
Company shall send an SAI to any such Contract owner promptly upon receipt of a
request.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders/Contract owners, and other
communications to shareholders/Contract owners in such quantity as the Company
shall reasonably require for distributing to Contract owners in the Fund. The
Company will distribute this proxy material, reports and other communications to
existing Contract owners. The Underwriter (at the Company's expense) shall
provide the Company with copies of the Fund's annual and semi-annual reports in
such quantity as the Company shall reasonably request for use in connection with
offering the Variable Contracts issued by the Company. If requested by the
Company in lieu thereof, the Underwriter shall provide such documentation (which
may include a final copy of the Fund's annual and semi-annual reports as set in
type or on diskette) and other assistance as is reasonably necessary in order
for the Company (at the Company's expense) to print such shareholder
communications for distribution to Contract owners, in which case the Fund
agrees to pay its proportionate share of reasonable expenses directly related to
the required disclosure of information concerning the Fund; provided, such costs
do not exceed' the costs for such Fund to print its own shareholder
communications. The Company shall send a copy of the Fund's annual or
semi-annual report promptly upon request by a Contract owner.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares held in the Account in accordance
with instructions received from Contract owners; and
(iii) vote Fund shares held in the Account for which no timely
instructions have been received in the same proportion as
Fund shares of such Designated Portfolio for which
instructions have been received from Contract owners,
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.
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The Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
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 Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or uses and in which the Fund (or a Portfolio
thereof) or the Adviser or the Underwriter is named, at least ten calendar days
prior to its use. No such material shall be used if the Fund or its designee
reasonably objects to such use within ten calendar 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 Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in the published reports for the Fund which are in the public
domain or approved by the Fund or the Adviser or their designees for
distribution, or in sales literature or other promotional material approved by
the Fund or its designee or by the Underwriter, except with the permission of
the Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
ten calendar days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within ten calendar days
after receipt of such material. The Company reserves the right to reasonably
object to the continued use of such material and no such material shall be used
if the Company so objects.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration 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 provided by the Company or its
designee, except with the written permission of the Company.
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4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, 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 the Fund or its shares, within a reasonable time after the filing of
such document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all definitive prospectuses, definitive 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, within a reasonable time
after the filing of such document( s) with the SEC or other regulatory
authorities (except that with respect to post-effective amendments to such
prospectuses and SAIs and sales literature and promotional material, only those
prospectuses and SAIs and sales literature and promotional material that relate
to or refer to the Fund will be provided).
4.7 For purposes of this Article IV, the phrase "sales literature and
other promotional materials" 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, 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 material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 0000
Xxx.
4.8 The Fund and Underwriter will provide the Company with as much
notice as is reasonably practicable of any proxy solicitation for any Designated
Portfolio, and of any material change in the Fund's registration statement
(other than changes that take place at the time of the annual prospectus
update), particularly any change resulting in a change to the registration
statement or prospectus or statement of additional information for any Account,
to the extent such notice is permissible under the law and the Fund's selective
disclosure policies. The Fund and Adviser will cooperate with the Company so as
to enable the Company to solicit proxies from Contract owners or to make changes
to its prospectus, statement of additional information or registration
statement, in an orderly manner. Company will be seeking to combine mailings to
Contract owners to reduce costs to the extent practicable.
ARTICLE V. FEES AND EXPENSES
5.1 The Underwriter shall pay a fee to the Company or to the underwriter
for the Contracts pursuant to Rule 12b-l to finance personal services expenses
as set forth in the Letter Agreement entered into between OM Financial Life
Insurance Company and X. Xxxx Price Investment Services, Inc. dated December 27,
2006.
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5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, except as otherwise provided herein. The
Fund shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws prior to
their sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The parties shall bear the expenses of printing the Fund's
prospectus, SAI and other documents and of distributing the Fund's prospectus,
SAI, proxy materials, and reports to Contract owners and prospective Contract
owners as described in Section 3.1 through 3.3.
ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1 The Fund represents and warrants that for each quarter each
Designated Portfolio does and will invest the assets of each Designated
Portfolio in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations issued thereunder (or any successor provisions).
Without limiting the scope of the foregoing, the Fund represents and warrants
that each Designated Portfolio of the Fund will comply with the diversification
requirements of Section 817(h) of the Code and any regulations thereunder
applicable to variable contracts as defined in Section 817 (d) of the Code , and
any amendments or other modifications or successor provisions to such Sections
or Regulations (and any revenue rulings, revenue procedures, notices, and other
published announcements of the Internal Revenue Service interpreting those
Sections or regulations), as if those requirements applied directly to each such
Portfolio. The Fund will notify the Company immediately upon having a reasonable
basis for believing that the Fund or a Designated Portfolio thereunder has
ceased to comply with the diversification requirements or that the Fund or
Designated Portfolio might not comply with the diversification requirements in
the future. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps to adequately diversify the Designated Portfolios so
as to achieve compliance within the grace period afforded by Regulation 1.817-5.
The Fund agrees to provide the Company with a certificate or statement
indicating compliance by each Designated Portfolio of the Fund with Section
817(h) of the Code, such certificate or statement to be sent to the Company no
later than thirty (30) days following the end of each calendar quarter.
6.2 The Fund represents and warrants that each Designated Portfolio is
currently qualified as a Regulated Investment Company under Subchapter M of the
Code, and that they will maintain such qualification (under Subchapter M or any
successor or similar provisions) and that no other Participating Insurance
Company will purchase shares in any Designated Portfolio for any purpose or
under any circumstances that would preclude the Company from "looking through"
to the investments of each Designated Portfolio in which it invests, pursuant to
the "look through" rules found in Treasury Regulation 1.817-5.
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The Fund will notify the Company immediately upon having a reasonable basis for
believing that any Designated Portfolio has ceased to so qualify or that any
might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance, endowment contracts, or
annuity insurance contracts, under applicable provisions of the Code, and that
it will make every effort to maintain such treatment, and that it will notify
the Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future; provided, however, that the Company makes no
representation or undertaking regarding any Contract to the extent such
representation or undertaking is dependent on compliance by any investment
vehicle in which the Company or an Account may invest with the requirements of
Subchapter M or Section 8l7(h) of the Code, the regulations thereunder, or any
successor provision. The Company agrees that any prospectus offering a contract
that is a "modified endowment contract" as that term is defined in Section 7702A
of the Code (or any successor or similar provision), shall identify such
contract as a modified endowment contract.
ARTICLE VII. POTENTIAL CONFLICTS.
7.1 The Fund agrees that the Board will monitor each Designated
Portfolio for the existence of any irreconcilable material conflict between the
interests of the contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded. The Fund Board will record in its minutes, or other appropriate
records, all reports received by it and all action with regard to a conflict.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take 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 Fund or any Portfolio and reinvesting such assets in a different
11
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be submitted 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.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected sub-account of
the Account's investment in the Fund and terminate this Agreement with respect
to such sub-account provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented or such
period as may be required to obtain any necessary exemptive relief from the
Commission with regard to the substitution of underlying funds, and until the
end of that period the Fund and the Underwriter shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected sub-account's investment in the Fund and terminate this Agreement with
respect to such sub-account; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice to the Company that this provision is
being implemented or such period as may be required to obtain any necessary
exemptive relief from the Commission with regard to the substitution of
underlying funds. Until the end of the foregoing period, the Fund and the
Underwriter shall continue to accept and implement orders by the company for the
purchase (and redemption) of shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners affected by the irreconcilable material
conflict.
7.7 If and to the extent 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 Fund 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;
12
and (b) Sections 3.4, 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.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANV
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
the Underwriter and each of their officers, directors, employees and agents and
each person, if any, who controls the Fund or the Underwriter within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.1) against any and all losses, claims, expenses,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or actions in respect thereof (including legal and other
expenses), to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, in so far as such losses, claims,
damages, liabilities, expenses or actions in respect thereof, or settlements are
related to the sale, holding or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the Registration Statement, prospectus, or statement
of additional information ("SAI") for the Contracts or
contained in the Contracts or sales literature or other
promotional material 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 statement or
omission was made in reliance upon and in conformity
with information furnished to the Company by or on
behalf of the Fund or the Underwriter for use in the
Registration Statement, prospectus or SAI for the
Contracts or in the Contracts or sales literature or
other promotional material (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 by or on behalf of the Company (other
than statements or representations contained in the
Registration Statement, prospectus, SAI, or sales
literature or other promotional material of the Fund, or
any amendments or supplements to the foregoing, not
supplied by the Company or persons under its control) or
wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, SAI, or sales literature or other
promotional material of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required
13
to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission
was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf
of the Company or its designee; 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
Article VI 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 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, expenses, damages, liabilities or
actions in respect thereofto 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 under
this Agreement or by reason of such Indemnified Party's reckless disregard of
its obligations or duties under this Agreement.
8.1( c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision, except to the extent that the failure
to notify results in the failure of actual notice to the Company and the Company
is damaged solely as a result of failure to give such notice. 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 and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. 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, unless:
14
(i) the Company and the Indemnified Party will have mutually
agreed to the retention of such counsel; or
(ii) the named parties to any such proceeding (including any
impleaded parties) include both the Company and the
Indemnified Party and representation of both parties by
the same counsel would be inappropriate due to actual or
potential differing interests between them. The Company
will not be liable for any settlement of any proceeding
effected without its written consent but if settled with
such consent or ifthere is a final judgment for the
plaintiff, the Company agrees to indemnify the
Indemnified Party from and against any loss or liability
by reason of such settlement or judgment.
8.1 (d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance, holding or sale of the Fund Shares or the Contracts or the
operation of the Fund.
8.2 INDEMNIFICATION BV THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees and agents and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, damages, expenses, liabilities
(including amounts paid in settlement with the written consent of the Adviser
and Underwriter) or actions in respect thereof (including legal and other
expenses) (for purposes of this Section 8.2, collectively as a "Loss") to which
the Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, in so far as such Loss is related to the sale, holding
or acquisition of the Fund's shares or the Contracts; and
(i) arises out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the Registration Statement or prospectus or SAI or
sales literature or other promotional material of the
Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the
Adviser, Underwriter or Fund by or on behalf of the
Company for use in the Registration Statement,
prospectus, or SAI for the Fund or in sales literature
or other promotional material of the Fund (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arises 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 or other promotional
material for the Contracts (or any amendments or
supplements to the foregoing) not supplied by the Fund,
the Adviser, or the Underwriter or persons under their
respective control) or wrongful conduct of the Fund, the
Adviser or Underwriter or persons under their control,
with respect to the sale or distribution of the
Contracts or Fund shares; or
15
(iii) arises out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, SAI, or sales literature or other
promotional material 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 and in
conformity with information furnished to the Company by
or on behalf of the Fund, Adviser or Underwriter or
persons under their respective control; or
(iv) arises as a result of any material failure by the Fund,
the Adviser, or the Underwriter or persons under their
respective control, to provide the services and furnish
the materials under the terms of this Agreement
(including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
and other qualification requirements specified in
Article VI of this Agreement); or
(v) arises out of or result from any material breach of any
representation and/or warranty made by the Fund, the
Adviser or the Underwriter in this Agreement or arise
out of or result from any other material breach of this
Agreement by the Fund or the Underwriter (including a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of
this Agreement);
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
For purposes of this Section 8.2, Loss shall include, without limitation, all
costs associated with or arising out of any failure of the Fund or any
Designated Portfolio to comply with the diversification and other qualification
requirements specified in Article VI, including, without limitation, all costs
associated with correcting or responding to any such failure.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any Loss 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 or such Indemnified Party's duties under
this Agreement or by reason of such Indemnified Party's reckless disregard of
its obligations and duties under this Agreement.
16
8.2 (c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision, except to the extent that the
failure to notify results in the failure of actual notice to the Indemnifying
Party and such Indemnifying Party is damaged solely as a result of failure to
give such notice. 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 and
to settle the claim at its own expense; provided, however, that no such
settlement shall, without the Indemnified Parties' written consent, include any
factual stipulation referring to the Indemnified Parties or their conduct. 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, unless:
(i) the Indemnifying Party and the Indemnified Party will
have mutually agreed to the retention of such counsel;
or
(ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due
to actual or potential differing interests between them.
The Indemnifying Party will not be liable for any
settlement of any proceeding effected without its
written consent but if settled with such consent or if
there is a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify the Indemnified
Party from and against any loss or liability by reason
of such settlement or judgment.
8.2( d). The Company agrees promptly to notify the Adviser and
Underwriter of the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issuance, holding or
sale of the Contracts or the operation of the Account.
8.3 INDEMNIFICATION BY THE FUND
8.3( a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors, officers, employees and agents and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or actions in
respect thereof (including legal and other expenses) (for purposes of this
Section 8.3, collectively as a "Loss") to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation,
17
at common law or otherwise, insofar as such Loss is related to the sale, holding
or acquisition of the Fund's shares or the Contracts or the operations of the
Fund and:
(i) arises as a result of any material failure by the Fund
to provide the services and furnish the materials under
the terms of this Agreement; or
(ii) arises out of or results from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arises out of or results from any other
material breach of this Agreement by the Fund (including
a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of
this Agreement).
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof. For purposes of this Section 8.3, Loss shall include, without
limitation, all costs associated with or arising out of any failure of the Fund
or any Designated Portfolio to comply with the diversification and other
qualification requirements specified in Article VI of this Agreement, including,
without limitation, all costs associated with correcting or responding to any
such failure.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any Loss 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 under
this Agreement or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement.
8.3( c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision, except to the extent that the failure
to notify results in the failure of actual notice to the Fund and such Fund is
damaged solely as a result of failure to give such notice. In case any such
action is brought against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The Fund also shall be
entitled to assume the expense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Fund to such party of the Fund's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation, unless:
18
(i) the Fund and the Indemnified Party will have mutually
agreed to the retention of such counsel; or
(ii) the named parties to any such proceeding (including any
impleaded parties) include both the Fund and the
Indemnified Party and representation of both parties by
the same counsel would be inappropriate due to actual or
potential differing interests between them. The Fund
will not be liable for any settlement of any proceeding
effected without its written consent but if settled with
such consent or if there is a final judgment for the
plaintiff, the Fund agrees to indemnify the Indemnified
Party from and against any loss or liability by reason
of such settlement or judgment.
8.3( d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance, holding or sale of the Contracts, the operation of the Account, or the
sale, holding or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
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 SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to some or
all Designated Portfolios, by six (6) months' advance written
notice delivered to the other parties or, if later, upon receipt
of any required exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among the
parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio based upon
the Company's determination that shares of the Designated
Portfolio are not reasonably available to meet the requirements
of the Contracts; provided that such termination shall apply
only to the Designated Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Fund and the
Underwriter in the event any of the Designated Portfolio's
shares are not
19
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 the Fund or Underwriter, upon written notice to
the other parties, in the event that formal 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 Fund shares; provided,
however, that the Fund or Underwriter determines in its sole
judgment exercised in good faith, that any such 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, upon written notice to the other
parties, in the event that formal proceedings are instituted
against the Fund, the Adviser, or 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 proceedings will have a material adverse effect upon
the ability of the Fund, the Adviser or Underwriter to perform
its obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio in the
event that such Designated Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M or fails to
comply with the Section 817(h) diversification requirements
specified in Article VI hereof, or if the Company reasonably
believes that such Designated Portfolio may fail to so qualify
or comply; or
(g) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material
breach of any provision of this Agreement; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company 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 by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund, the Adviser, or
the Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity.
20
(j) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract
owners having an interest in the Account (or any sub-account) to
substitute the shares of another investment company for the
corresponding Designated Portfolio's shares of the Fund in
accordance with the terms of the Contracts for which those
Designated Portfolio shares had been selected to serve as the
underlying portfolio. The Company will give sixty (60) days'
prior written notice to the Fund of the date of any proposed
vote or other action taken to replace the Fund's shares or of
the filing of any required regulatory approval(s); or
(k) At the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested
Fund Board members, that an irreconcilable material conflict
exists among the interests of: (1) all contract owners of
variable insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies investing in
the Fund as set forth in Article VII of this Agreement.
10.2 NOTICE REQUIREMENT.
(a) No termination of this Agreement will be effective unless and
until the party terminating this Agreement gives prior written notice to all
other parties of its intent to terminate, which notice will set forth the basis
for the termination.
(b) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice will be given in
advance of the effective date of termination as required by such provisions.
10.3 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.3 shall not apply to any termination under Article VII and the effect
of such Article VII termination shall be governed by Article VII of this
Agreement.
21
10.4 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund 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 permitted by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Permitted Redemption"), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act. Upon request, the Company will promptly furnish to the Fund and
the Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Permitted Redemption.
10.5 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive. In
addition, with respect to Existing Contracts, all provisions of this Agreement
also will survive and not be affected by any termination of this Agreement.
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 Fund:
X. Xxxx Price Associates, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to the Company:
Fidelity and Guaranty Life Insurance
Company 000 X Xxxxx Xxxxxx - 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Securities Counsel: Xxx Xxxxx
If to Underwriter:
X. Xxxx Price Investment Services
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
ARTICLE XII. MISCELLANEOUS
12.1 All references herein to the Fund are to each of the undersigned
Funds as if this agreement were between such individual Fund and the Underwriter
and the Company. All references herein to the Adviser relate solely to the
Adviser of such individual Fund, as appropriate. All persons dealing with a Fund
must look solely to the property of such Fund, and in the case of a series
company, the respective Designated Portfolio listed on Schedule A hereto as
though such Designated Portfolio had separately contracted with the Company and
the Underwriter for the enforcement of any claims against the Fund.
22
The parties agree that neither the Board, officers, agents or
shareholders assume any personal liability or responsibility for obligations
entered into by or on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential all information
reasonably identified as confidential in writing by any party hereto and, except
as permitted by this Agreement or as otherwise required by applicable law or
regulation, shall not disclose, disseminate or utilize such other confidential
information without the express written consent of the affected party until such
time as it may come into the public domain. Notwithstanding anything to the
contrary in this Agreement, in addition to and not in lieu of other provisions
in this Agreement:
(a) "Confidential Information" includes without limitation all
information regarding the customers of the Company, the Fund,
Adviser, Underwriter or any of their subsidiaries, affiliates or
licensees; or the accounts, account numbers, names, addresses,
social security numbers or any other personal identifier of such
customers; or any information derived therefrom.
(b) Neither the Company, the Fund, Adviser or Underwriter may
disclose Confidential Information for any purpose other than to
carry out the purpose for which Confidential Information was
provided to the Company, the Fund, Adviser or Underwriter as set
forth in this Agreement; and the Company, the Fund, Adviser and
Underwriter agree to cause their employees, agents and
representatives, or any other party to whom the Company, the
Fund, Adviser or Underwriter may provide access to or disclose
Confidential Information to limit the use and disclosure of
Confidential Information to that purpose.
(c) The Company, the Fund, Adviser and Underwriter agree to
implement appropriate measures designed to ensure the security
and confidentiality of Confidential Information, to protect such
information against any anticipated threats or hazards to the
security and integrity of such information, and to protect
against unauthorized access to, or use of, Confidential
Information that could result in substantial harm to any of the
customers of the Company or any of its subsidiaries, affiliates
or licensees; the Company, the Fund, Adviser and Underwriter
further agree to cause all their respective agents,
representatives or subcontractors, or any other party to whom
they provide access to or disclose Confidential Information, to
implement appropriate measures to meet the objectives set forth
in this Section 12.2.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
23
12.5 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Maryland 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 annuity
operations of the Company are being conducted in a manner consistent with
Maryland variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8 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.
12.9 The Company shall furnish or cause to be furnished, to the Fund or
its designee copies of the following reports at the request of the Fund:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year.
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days after
the end of each quarterly period.
12.10 Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate or board action, as applicable,
by such party and when so executed and delivered this Agreement will be the
valid and binding obligation of such party enforceable in accordance with its
terms.
12.11 The schedules to this Agreement (each, a "Schedule," collectively,
the "Schedules") form an integral part hereof and are incorporated herein by
reference. The parties to this Agreement may agree in writing to amend the
Schedules to this Agreement from time to time to reflect changes in or relating
to the Contracts, the Accounts or the Designated Portfolios of the Fund or other
applicable terms of this Agreement. References herein to any Schedule are to the
Schedule then in effect, taking into account any amendments thereto.
12.12 The parties have entered into or shall enter in to a Shareholder
Information Agreement as required by Rule 22c-2 under 1940 Act in connection
with the Contracts.
24
This Agreement shall control with regard to the terms of the business
relationship described in this Agreement. To the extent that the terms of the
Shareholder Information Agreement conflict with the terms of this Agreement,
the terms of the Shareholder Information Agreement shall control to the extent
required by Rule 22c-2.
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.
COMPANY: OM FINANCIAL LIFE INSURANCE COMPANY
By its authorized officer
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Date:
------------------------------------
FUND: X. XXXX PRICE EQUITY SERIES, INC.
By its authorized officer
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Date:
------------------------------------
UNDERWRITER: X. XXXX PRICE INVESTMENT SERVICES, INC.
By it's authorized officer
By:
------------------------------------
Name: XXXXXXX X. XXXXXX
------------------------------------
Title: VICE PRESIDENT
------------------------------------
Date:
------------------------------------
SCHEDULE A
Name of Separate Account and Contracts Funded by
DATE ESTABLISHED BY BOARD OF DIRECTORS SEPARATE ACCOUNT DESIGNATED PORTFOLIOS
-------------------------------------- ----------------- ---------------------
Old Mutual Financial Network Beacon Navigator X. Xxxx Price Equity
Separate Account VA Series, Inc.
Established January 3, 2007 X.Xxxx Price Blue Chip
Growth Portfolio-II
X. Xxxx Price Equity
Income Portfolio-II
X. Xxxx Price
Health Sciences
Portfolio-II
SCHEDULE B
COMPENSATING CONTRACT OWNERS FOR LOSSES CAUSED BY PRICING ERROR. In the event
the Underwriter provides a materially incorrect price for one of the Designated
Portfolios, through no fault of the Company and such error results from causes
reasonably within Underwriter's or its affiliate's control, and Underwriter
adjusts shareholder accounts, Underwriter will adjust the account with the
Designated Portfolio ("Designated Portfolio Account") on a net basis to correct
the shares. If the Company adjusts the underlying Contract owner accounts,
those Contract owner's accounts with gains shall be used to offset those
Contract owner's accounts with losses, including those Contract owners who
received underpaid distributions ("Contract owner Adjustments"). After the
Contract owner Adjustments, the Company will identify those Contract owners who
received distributions or made exchanges into other investment options during
the time period affected by the incorrect price. The Company will then notify
Underwriter of the amount of losses suffered as a result of (1) for an
overstated price, Contract owners whose accounts had a loss that could not be
offset by the overpayments (gains) made to Contract owners who took
distributions; or (2) for an understated price, Contract owners who received
underpaid distributions that could not be offset by gains in other Contract
owner accounts; or (3) for exchanges into other investment options, Contract
owners whose accounts had a loss due to the adjustment in the other investment
option (caused by market fluctuation of the other investment option) and such
loss cannot be offset by the gains received by Contract owners who exchanged
into other investment options where such fluctuation caused a gain. Upon
receipt of appropriate documentation verifying such losses, Underwriter shall
reimburse the Designated Portfolio Account with the appropriate number of
additional shares. Provided however, after the Contract owner Adjustments, the
Company must make reasonable attempts to recover the overpayments made to those
Contract owners who received distributions with a gain, but in no event in
connection with payment of any death benefit. Should the Company fail to
collect any such overpayments that exceeds $50,000, the Company agrees to
subrogate its claim against such Contract owners to Underwriter, provided that
before the Underwriter takes legal action to enforce its subrogation right it
will obtain the Company's consent which consent shall not be unreasonably
withheld. Any net gains calculated after Contract owner Adjustments will be
returned by the Company to Underwriter.
COMPENSATING COMPANY FOR ITS EXPENSES INCURRED AS A RESULT OF A PRICING ERROR.
Set forth below is the criteria that must be met before Underwriter will
reimburse Company for expenses incurred due to pricing errors:
o Company must provide a full accounting of expenses;
o A $10,000 cap will be imposed on each occurrence;
o Expenses may include payroll overtime, system fees, postage and
stationery (if separate mailing is required); and
o The Company must use its best efforts to mitigate all expenses
which may be reimbursable.
A-I
