EXHIBIT 99-B.8.71
FUND PARTICIPATION AGREEMENT
BETWEEN
FUND AND ALIAC
Aetna Life Insurance and Annuity Company (the "Company"), the registered
investment companies specified in Schedule B, (each individually referred to as
("Fund"), INVESCO Funds Group, Inc. and INVESCO Distributors, Inc.
(collectively, the "Fund Party") hereby agree to an arrangement whereby the Fund
shall be made available to serve as underlying investment media for Variable
Annuity Contracts ("Contracts") to be issued by the Company.
1. ESTABLISHMENT OF ACCOUNTS; AVAILABILITY OF FUND.
The Company represents that it has established Variable Annuity Accounts B,
C, D and F and may establish such other accounts as may be set forth in
Schedule A attached hereto and as may be amended from time to time with the
mutual consent of the parties hereto (the "Accounts"), each of which is a
separate account under Connecticut Insurance law, and has registered or
will register each of the Accounts (except for such Accounts for which no
such registration is required) as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"), to serve as an investment
vehicle for the Contracts. Each Contract provides for the allocation of net
amounts received by the Company to an Account for investment in the shares
of one of more specified open-end management investment companies available
through that Account as underlying investment media. Selection of a
particular investment management company and changes therein from time to
time are made by the participant or Contract owner, as applicable under a
particular Contract.
2. PRICING INFORMATION; ORDERS; SETTLEMENT.
(a) The Fund will make Fund shares available to be purchased by the
Company, and will accept redemption orders from the Company, on behalf
of each Account at the net asset value applicable to each order on
those days on which the Fund calculates its net asset value (a
"Business Day"). Fund shares shall be purchased and redeemed in such
quantity and at such time determined by the Company to be necessary to
meet the requirements of those Contracts for which the Fund(s) serve
as underlying investment media, provided, however, that the Board of
Directors of the Fund (hereinafter the "Directors") may upon
reasonable notice to the Company, refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole
discretion of the Directors, acting in good faith and in the best
interests of the shareholders of any Portfolio and is acting in
compliance with their fiduciary obligations under federal and/or any
applicable state laws.
(b) The Fund will provide to the Company closing net asset value, dividend
and capital gain information at the close of trading each day that the
New York Stock Exchange (the "Exchange") is open (each such day a
"Business Day"), and in no event later than 7:00 p.m. Eastern Standard
time on such Business Day.
(c) The Fund hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares
relating to the Contracts from Contract owners or participants. Orders
from Contract owners or participants received from any distributor of
the Contracts (including affiliates of the Company) by the Company,
acting as agent for the Fund, prior to the close of the Exchange on
any given business day will be executed by the Fund at the net asset
value determined as of the close of the Exchange on such Business Day,
provided that the Fund receives written (or facsimile) notice of such
order by 10 a.m. Eastern Standard Time on the next following Business
Day. Any orders received by the Company acting as agent on such day
but after the close of the Exchange will be executed by the Fund at
the net asset value determined as of the close of the Exchange on the
next business day following the day of receipt of such order, provided
that the Fund receives written (or facsimile) notice of such order by
10 a.m. Eastern Standard Time within two days following the day of
receipt of such order.
(d) Payments for redemptions of shares of the Fund will be wired by the
Fund to an account designated by the Company on the same Business Day
the Company places an order to redeem Fund Shares. Payments for
purchases of the Fund will be wired by the Company to an account
designated by the Fund on the same Business Day the Company places an
order to purchase Fund shares. Payments shall be in federal funds
transmitted by wire.
(e) In lieu of applicable provisions set forth in paragraphs 2(a) through
2(d) above, the parties may agree to provide pricing information,
execute orders and wire payments for purchases and redemptions through
National Securities Clearing Corporation's Fund/SERV system in which
case such activities will be governed by the provisions set forth in
Exhibit 3 to this Agreement.
(f) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other party),
and shall not be liable in the event that an error is a result of any
misinformation supplied by the other party.
(g) The Fund Party shall indemnify and hold the Company harmless, from the
effective date of this Agreement, against any amount the Company is
required to pay to Contract owners or participants due to: (i) a
materially (according to the Fund's materiality standards) incorrect
calculation of a Fund's daily net asset value, dividend rate, or
capital gains distribution rate or (ii) incorrect or unreasonably late
reporting, within the control of Fund Party, of the daily net asset
value, dividend rate, or capital gain distribution rate of a Fund,
upon written notification by the Company, with supporting data, to the
Fund Party. In addition, the Fund Party shall be liable to the Company
for systems and out of pocket costs incurred by the Company in making
a
2
Contract owner's or a participant's account whole, if such costs or
expenses are a result of the Fund Party's failure to provide timely or
correct net asset values, dividend and capital gains or financial
information and if such information is not corrected by 4:00 p.m. East
Coast time of the next business day after releasing such incorrect
information provided the incorrect NAV as well as the correct NAV for
each day that the error occurred is provided. If a mistake is caused
in supplying such information or confirmations, which results in a
reconciliation with incorrect information, the amount required to make
a Contract owner's or a participant's account whole shall be borne by
the party providing the incorrect information, regardless of when the
error is corrected. The following limits shall apply to the collective
liabilities of Fund Party for systems and out of pocket costs incurred
by the Company if such costs or expenses are a result of the Fund
Party's failure to provide the Company with correct or timely
information: (i) $1000 per day for each day that incorrect information
provided by the Fund Party is not corrected, if such period does not
include a month-end or a fiscal quarter-end, (ii) $1500 per day for
each day that such information provided by the Fund Party is not
corrected, if such period does include a month-end or fiscal
quarter-end, and (iii) up to $50,000 per occurrence in the aggregate
under (i) or (ii) above. Any incorrect information that has as a
common nexus any single error shall be deemed to be one occurrence for
these purposes provided all corrections are provided at the same time.
(h) The Company agrees to purchase and redeem the shares of the Funds
named in Schedule B offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information.
3. SERVICES; FEES.
(a) During the term of this Agreement, Company will perform services as
set forth in Exhibit 2 hereto (the "Services"). Such Exhibit may be
amended from time to time with mutual consent of the parties.
(b) For performance of Services, Company shall receive a fee (the "Fee")
which will be calculated and paid as provided in Schedule C attached
hereto. Fees are solely for shareholder servicing and other
administrative services provided by the Company and do not constitute
payment in any manner for investment advisory, trustee, or custodial
services.
(c) Fund Party represents that fees paid to Company will be paid out of
transfer agency, Rule 12b-1, management or other fees or expenses
presently being charged to the Funds pursuant to the terms of their
current prospectuses, or out of Fund Party's profits or any other
non-Fund source legally available to Fund Party.
(d) In the event that Exhibit 2 is revised, the parties agree, in good
faith, to negotiate a revision of fees set forth in Schedule C.
3
(e) The parties acknowledge and agree that the Services under this
Agreement are distribution, recordkeeping, shareholder communications,
administrative and related services only and are not the services of
an underwriter or principal underwriter within the meaning of the
Securities Act of 1933, as amended, or the 1940 Act. This Agreement
does not constitute Company an agent of the Fund Party for purposes of
selling shares of any Fund to any dealer or to the public. To the
extent Company is involved in the purchase of shares of any Fund by
contract owners or participants, such involvement in these purchases
will be as agent of such contract owners or participants.
4. EXPENSES.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by the Fund under this Agreement shall be paid by
the Fund, including the cost of registration of Fund shares with the
Securities and Exchange Commission (the "SEC") and in states where
required. The Fund and Fund Party shall pay no fee or other
compensation to the Company under this Agreement, and the Company
shall pay no fee or other compensation to the Fund or Fund Party,
except as provided herein and in Schedule C attached hereto and made a
part of this Agreement as may be amended from time to time with the
mutual consent of the parties hereto. All expenses incident to
performance by each party of its respective duties under this
Agreement shall be paid by that party, unless otherwise specified in
this Agreement.
(b) The Fund or the Fund Party shall provide to the Company, at the
location designated by the Company, periodic fund reports to
shareholders and other materials that are required by law to be sent
to Contract owners or participants. In addition, the Fund or the Fund
Party shall provide the Company with a sufficient quantity of its
prospectuses, statements of additional information and any supplements
to any of these materials, to be used in connection with the offerings
and transactions contemplated by this Agreement.
The Fund or Fund Party shall provide the company with a sufficient
quantity of its proxy material that is required to be sent to Contract
owners or participants. The cost associated with proxy preparation,
group authorization letters, programming for tabulation and necessary
materials (including postage) will be paid by the Fund or Fund Party.
5. REPRESENTATIONS.
(a) Company represents and warrants that it is an insurance company duly
organized under the laws of the state of Connecticut and has the
requisite authority to enter into this Agreement and to carry out the
services.
(b) The execution and delivery of this Agreement and the performance of
the services have been duly authorized by all necessary corporate
action on the part of Company, and this Agreement constitutes the
valid and binding obligation of Company.
4
(c) The Company agrees that it and its agents shall not, without the
written consent of the Fund or the Fund Party, make representations
concerning the Fund, or its shares except those contained in the then
current prospectuses and in current printed sales literature approved
by or deemed approved by the Fund or the Fund Party.
(d) The Fund and Fund Party represent and warrant that (i) they have
examined and tested their systems and made reasonable inquiry of their
business partners and other entities with whom they conduct business
with respect to Year 2000 problems and (ii) their ability to perform
their obligations under this Agreement will not be interrupted or
disrupted as a result of any business interruptions or other business
problems relating to specific dates or days before, during and after
the Year 2000.
6. TERMINATION.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company, the Fund Party or the Fund, upon
sixty (60) days advance written notice to the other parties;
(b) at the option of the Company, upon thirty (30) days advance written
notice to the Fund Party and the Fund, if Fund shares are not
available for any reason to meet the requirement of Contracts as
determined by the Company;
(c) at the option of either the Company, the Fund Party or the Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the Account,
the Company, the Fund or the Fund Party by the National Association of
Securities Dealers, Inc. (the "NASD"), the SEC or any other regulatory
body;
(d) upon the determination of the Accounts to substitute for the Fund's
shares the shares of another investment company in accordance with the
terms of the applicable Contracts. The Company will give 60 days
written notice to the Fund and the Fund Party of any decision to
replace the Fund's shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if Fund shares are not registered, issued or sold in conformance with
Federal law or such law precludes the use of Fund shares as an
underlying investment medium for Contracts issued or to be issued by
the Company. Prompt notice shall be given by the appropriate party
should such situation occur.
7. CONTINUATION OF AGREEMENT.
5
Termination as the result of any cause listed in Section 6 shall not affect
the Fund's obligation to furnish its shares to Contracts then in force for
which its shares serve or may serve as the underlying medium unless such
further sale of Fund shares is prohibited by law or the SEC or other
regulatory body.
8. ADVERTISING MATERIALS; FILED DOCUMENTS.
(a) Company acknowledges and agrees that Fund Party and/or its affiliates
own all right, title and interest in and to the name INVESCO and the
INVESCO open circle design, and covenants not, at any time, to
challenge the rights of Fund Party and/or its affiliates to such name
or design, or the validity or distinctiveness thereof. Subject to the
foregoing sentence, advertising and sales literature with respect to
the Fund Party prepared by the Company or its agent for use in
marketing its Contracts (except when the names of the Funds simply
appear in a list of Funds) shall be submitted to the Fund or its
designee for review before such material is submitted to any
regulatory body for review. Fund Party shall advise the submitting
party in writing within ten (10) business days of receipt of such
materials of its approval or disapproval of such materials.
(b) Fund Party hereby authorizes the Company to use the names and other
identifying marks of Fund Party and each Fund in connection with the
provision of services under this Agreement by the Company. Fund Party
or any Fund may withdraw this authorization as to any particular use
of any such name or identifying marks at any time (1) upon Fund
Party's or the Fund's reasonable determination that such use would
have a material adverse effect on the reputation or marketing efforts
of the Fund Party or such Fund; or (2) if Fund Party or the Fund
reasonably determines that materials using such names and identifying
marks are inaccurate or misleading and the Company fails to correct
such inaccurate or misleading materials; or (3) if the Company is no
longer providing services to Contract owners or participants. The
Company agrees that, at the request of Fund Party or a Fund, the
Company shall discuss with Fund Party and/or the Fund, and consider in
good faith, any standards or specifications relating to the Company's
use (or proposed use) hereunder of the names and other identifying
marks of the Fund Party and/or the Fund.
(c) Fund Party will provide to the Company at least one copy of all
prospectuses, statements of additional information, annual and
semiannual reports and proxy statements, other related documents, and
all amendments or supplements to any of the above documents that
relate to the Funds promptly after the filing of such document with
the SEC or other regulatory authorities.
(d) The Fund or the Fund Party will provide via Excel spreadsheet diskette
format or in electronic transmission to the Company at least quarterly
portfolio information necessary to update Fund profiles within ten
(10) business days following the end of
6
each quarter.
9. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges on Fund
shares held by registered separate accounts to all Contract owners and
participants to the extent the SEC continues to interpret the 1940 Act
as requiring such privileges. The Company shall provide pass-through
voting privileges on Fund shares held by unregistered separate
accounts to all Contract owners.
(b) The Company will distribute to Contract owners and participants, as
appropriate, all proxy material furnished by the Fund and will vote
Fund shares in accordance with instructions received from such
Contract owners and participants. If and to the extent required by
law, the Company, with respect to each group Contract and in each
Account, shall vote Fund shares for which no instructions have been
received in the same proportion as shares for which such instructions
have been received. The Company and its agents shall not oppose or
interfere with the solicitation of proxies for Fund shares held for
such Contract owners and participants.
10. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Fund and the
Fund Party, and its directors, officers, employees, agents and each
person, if any, who controls the Fund or its Fund Party within the
meaning of the Securities Act of 1933 (the "1933 Act") against any
losses, claims, damages or liabilities to which the Fund or any such
director, officer, employee, agent, or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, prospectus or sales literature of the Company 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, or arise out of or as a
result of conduct, statements or representations (other than
statements or representations contained in the prospectuses or sales
literature of the Fund) of the Company or its agents, with respect to
the sale and distribution of Contracts for which Fund shares are the
underlying investment. The Company will reimburse any legal or other
expenses reasonably incurred by the Fund and the Fund party, and any
such director, officer, employee, agent, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company will
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon (i) an
untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written
materials furnished to the Company by the Fund specifically for use
therein or (ii) the willful misfeasance, bad faith, or gross
negligence by the Fund or Fund Party in the performance of its duties
or the Fund's or
7
Fund Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable. This indemnity
agreement will be in addition to any liability which Company may
otherwise have.
(b) The Fund and the Fund Party agree to indemnify and hold harmless the
Company and its directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of the
1933 Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer, employee, agent or
controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in the Registration Statement, prospectuses or sales literature of the
Fund 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 material fact required to be stated therein or necessary to
make the statements therein not misleading. The Fund will reimburse
any legal or other expenses reasonably incurred by the Company or any
such director, officer, employee, agent, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Fund will not
be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or omission or alleged omission made in such Registration Statement or
prospectuses which are in conformity with written materials furnished
to the Fund by the Company specifically for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
otherwise than under this Section 10. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish to, assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section 10 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
8
11. MISCELLANEOUS.
(a) AMENDMENT AND WAIVER. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
(b) NOTICES. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by
telex, telecopier or registered or certified mail, postage prepaid,
return receipt requested, or recognized overnight courier service to
the party or parties to whom they are directed at the following
addresses, or at such other addresses as may be designated by notice
from such party to all other parties.
To the Company:
Aetna Life Insurance and Annuity Company
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Counsel
To the Fund and Fund Party:
INVESCO Funds Group, Inc./
INVESCO Distributors, Inc.
0000 X. Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Senior Vice President
Any notice, demand or other communication given in a manner prescribed in
this subsection (b) shall be deemed to have been delivered on receipt.
(c) SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted
successors and assigns.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by signing
any such counterpart.
(e) SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
9
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
(g) GOVERNING LAW. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Connecticut.
(h) NON EXCLUSIVITY. It is understood by the parties that this Agreement
is not an exclusive arrangement in any respect.
(i) CONFIDENTIALITY. The terms of this Agreement and the Schedules thereto
will be held confidential by each party except to the extent that
either party or its counsel may deem it necessary to disclose such
terms.
12. LIMITATION ON LIABILITY OF TRUSTEES, ETC.
This agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his or her capacity as an officer of the Fund. The
obligations of this agreement shall be binding upon the assets and property
of the Fund only and shall not be binding on any Director, officer or
shareholder of the Fund individually.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 30th day of October, 2000.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxxxx
----------------------------------
Name Xxxxxx X. Xxxxxxxxxxx
---------------------------------
Title: Vice President
-------------------------------
INVESCO FUNDS GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
INVESCO DISTRIBUTORS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
10
SCHEDULE A
(For any future separate accounts - See Section 1(a)
11
SCHEDULE B
(List of funds available--See Section 1(b))
INVESCO Balanced Fund - Investor Class
INVESCO Blue Chip Growth Fund - Investor Class
INVESCO Dynamics Fund - Investor Class
INVESCO Endeavor Fund - Investor Class
INVESCO Energy Fund - Investor Class
INVESCO Equity Income Fund - Investor Class
INVESCO European Fund - Investor Class
INVESCO Financial Services Fund - Investor Class
INVESCO Gold Fund - Investor Class
INVESCO Growth & Income Fund - Investor Class
INVESCO Health Sciences Fund - Investor Class
INVESCO High Yield Fund - Investor Class
INVESCO International Blue Chip Value Fund - Investor Class
INVESCO Latin American Growth Fund - Investor Class
INVESCO Leisure Fund - Investor Class
INVESCO Pacific Basin Fund - Investor Class
INVESCO Real Estate Opportunity Fund - Investor Class
INVESCO S&P 500 Index Fund - Investor Class
INVESCO Select Income Fund - Investor Class
INVESCO Small Company Growth Fund - Investor Class
INVESCO Tax-Free Long-Term Bond Fund - Investor Class
INVESCO Technology Fund - Investor Class
INVESCO Telecommunications Fund - Investor Class
INVESCO Total Return Fund - Investor Class
INVESCO U.S. Government Securities Fund - Investor Class
INVESCO Utilities Fund - Investor Class
INVESCO Value Equity Fund - Investor Class
12
SCHEDULE C
Fees to the Company
In consideration of services provided by the Company under this Agreement, the
Fund Party shall pay the Company fees calculated as follows:
1. SERVICING FEES.
With respect to accounts in which the average shareholder account balance
exceeds $1000 per Fund and combined total omnibus investment amount per Company
with respect to the Funds under this Fund Participation Agreement and the
Selling and Services Agreement between the Company, Aetna Investment Services,
Inc., INVESCO Funds Group, Inc. and INVESCO Distributors, Inc. dated January 1,
1999 exceeds $1,000,000, Fund Party shall pay an annual service fee rate of $___
per participant, not to exceed ___% on an annual basis of the average net assets
invested in the funds through the Contracts. The Company shall send an invoice
to the Fund Party on a monthly basis showing the number of participants per Fund
and Fund Party shall make payment to the Company within 30 days after receipt of
the invoice. Each payment will be accompanied by a statement showing the
calculation of the fee payable to the Company for the month and such other
supporting data as may be reasonably requested by the Company.
2. 12B-1 FEES.
In accordance with the Fund's plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund Party will make payments to the Company
at an annual rate of ____% of the average net assets invested in the Funds
through the Contracts. Fund Party will pay such amounts on a quarterly basis.
Each payment will be accompanied by a statement showing the calculation of the
fee payable to the Company for the quarter and such other supporting data as may
be reasonably requested by the Company.
13
EXHIBIT 1
Operational Procedures Relevant to the Agreement.
Unless processed using the NSCC Fund/SERV and/or Networking interfaces in the
customary manner as prescribed by the NSCC, or as amended by mutual agreement
whether verbally or writing, operational responsibilities will be executed as
outlined below in paragraphs (1), (2), and (3)
1. THE ACCOUNTS.
Company will open one or will utilize one already opened omnibus account
per Fund, providing for the cash payment of all capital gains and dividends.
Company may open additional omnibus accounts in the future.
2. PURCHASE AND REDEMPTION ORDERS.
Company will aggregate and calculate purchase and redemption orders for
shares of a Fund that it has accepted as placed by contract owners or
participants prior to the close of trading on the New York Stock Exchange, and
will communicate to Fund Party such orders for each Fund for each Business Day
the New York Stock Exchange was open. Such orders will receive the applicable
Fund's closing net asset value for that Business Day, provided they are
communicated to Fund Party within agreed upon time frames.
3. SETTLEMENT OF TRADES.
Both Company and the Fund Party will use their best efforts to cause to
be transmitted by wire before 4 p.m. Eastern time on the Business Day following
Trade Date (settlement date) to an account as directed by the counterpart, the
proceeds of all redemption orders and the purchase price of all purchase orders.
4. PRICE ERRORS.
If contract owners or participants of Company or its participating
correspondents have received material amounts in excess of the amounts to which
they otherwise would have been entitled prior to an adjustment for a price
error, Company or its participating correspondents, unless Fund Party and the
Fund otherwise agree, will make a good faith attempt to collect such excess
amounts from such contract owners or participants. In no event however, shall
Company or a participating correspondent be liable to Fund or Fund Party for any
such amounts provided the overpayment was not caused by Company or the
participating correspondent.
14
5. ACCOUNT ACTIVITY AND DISTRIBUTION INFORMATION.
a. Fund Party shall cause to be provided to Company confirmations of
Fund activity in the form of statements detailing activity no less frequently
than monthly, as well as other information as may reasonably be requested by
Company.
b. Fund Party shall cause to be provided to Company all distribution
announcement information (ex dates, record dates, payable dates, distribution
rate per share, record date share balances, etc.) as soon as it is announced by
each Fund.
c. All distribution data furnished to Company under this section shall
be held by Company in confidence, and Company agrees to refrain from disclosing
any such information until such time as Fund Party or the Fund either consents
to such disclosure by Company or makes such information publicly available.
Company will maintain and enforce rules and policies designed to protect against
unauthorized access to, or use of, the information during such period by anyone
other than Company employees who have a need to know the information for the
purposes described above.
6. SHAREHOLDER COMMUNICATION.
a. The Fund Party shall provide the following shareholder communications
material to Company, its participating correspondent or to their mailing
Companys, as directed by Company, in quantities sufficient to allow mailing
thereof to all customers of Company and its participating correspondents who are
beneficial owners of the Fund's shares.
i. All proxy statements prepared for circulation to shareholders of
record of such Fund.
ii. Annual reports.
iii. Semi- annual reports.
iv. All updated prospectuses, supplements and amendments thereto.
b. The Fund Party or the Fund shall provide without charge the
above-mentioned materials to Company, its participating correspondents or to
their mailing Agents. Company will distribute, or will cause its participating
correspondents to distribute, all materials to their respective contract owners
or participants.
7. MARKET TIMERS.
In the event that active traders or market timers become a problem for
the Funds in the Company's contracts, the parties will negotiate in good faith
to develop a solution. Possible solutions include, but are not limited to,
limiting the size of purchase orders placed by such contract owners or
participants or prohibiting the same from investing in some or all of the Funds.
15
8. CONFIDENTIALITY.
Each party acknowledges and understands that any and all technical,
trade secret or business information including, without limitation, financial
information, business or marketing strategies or plans, or product development
or customer information, which is disclosed to the other or is otherwise
obtained by the other during the term of the Agreement (the "Proprietary
Information") is confidential and proprietary, constitutes trade secrets of the
owner, and is of great value and importance to the success of the owner's
business. Each party agrees to use its best efforts (the same being not less
than those employed to protect its own proprietary information) to safeguard the
other's Proprietary Information and to prevent the unauthorized, negligent or
inadvertent use or disclosure thereof. Neither party shall, without the prior
written approval of an authorized officer of the other, directly or indirectly,
disclose the Proprietary Information to any person or entity except for its
employees, attorneys, accountants and other advisers on a need-to-know basis or
as may be required by law or regulation or demanded by any court or
administrative agency of competent jurisdiction. Each party shall promptly
notify the other in writing of any unauthorized, negligent or inadvertent use or
disclosure of the other's Proprietary Information. This section shall continue
in full force and effect notwithstanding the termination of this Agreement.
16
EXHIBIT 2
Schedule of services to be performed by Company pursuant to this Agreement.
1. Company represents and warrants that it has and will continue at all
times to have the necessary facilities, equipment and personnel to perform the
services hereunder in a businesslike and competent manner and its system
complies with any applicable laws, rules and regulations related to the services
to be provided under this Agreement, including the maintenance and preservation
of all records and registrations required by any applicable laws, rules and
regulations.
2. Contract owners or participants are aware that they are transacting
business with Company and not the Fund, and will look to Company and not the
Fund for resolution of problems or discrepancies in their accounts.
3. Company agrees that it will perform various services for the contract
owners or participants in those accounts, including where applicable:
- Establishing and maintaining records of contract owners' or
participants' accounts;
- Processing purchase and redemption transactions;
- Confirming contract owners or participant transactions and sending
periodic statements;
- Answering routine client inquires regarding the Funds;
- Assisting contract owners or participants in changing account
designations and addresses;
- Withholding taxes on non-resident alien accounts;
- Preparing and delivering to contract owners and participants and state
and federal authorities, including the United States Internal Revenue
Service, such information respecting dividends and distributions paid
by the Funds as may be required by law, rule or regulation;
- Providing Fund prospectuses upon request and contemporaneously with
transaction confirmations to the extent required by law;
- And such other services as Fund Party may reasonably request.
4. Company shall maintain all historical contract owner and participant
records, consistent with requirements of all applicable laws, rules and
regulations. (a) Upon the request of the Fund Party, Company shall provide
copies of all the historical records relating to transactions between the
17
Funds and the contract owners and participants, written communications regarding
the Funds to or from the contract owners and participants and other materials,
in each case (1) as are maintained by Company in the ordinary course of its
business, and (2) as may reasonably be requested to enable the Fund Party
including without limitation its auditors or legal counsel to (A) monitor and
review the Services, (B) comply with any request of a governmental or self
regulatory organization, (C) verify compliance by Company with the terms of this
agreement, (D) make required regulatory reports, or (E) perform general customer
supervision. Company agrees that it will permit the Fund Party to have
reasonable access to its personnel and records in order to facilitate the
monitoring of the services. Upon the request of Company, Fund Party shall
provide copies of all the historical records relating to transactions between
the Funds and Company, written communications regarding the Funds to or from
Company and other materials, in each case (1) as are maintained by the Fund
Party in the ordinary course of its business and in compliance with applicable
law, and (2) as may be requested to enable Company to (A) comply with the
request of any governmental body or self regulatory organization, (B) verify
compliance by the Fund Party with the terms of this Agreement, (C) make required
regulatory reports, or (D) perform general customer supervision.
5. Company shall make available to Fund Party (if requested) records or
communications necessary to determine the number of contract owners and
participants in each correspondent omnibus account, if applicable.
18
EXHIBIT 3
Procedures for Pricing and Order/Settlement Through National Securities Clearing
Corporation's Mutual Fund Profile System and Mutual Fund Settlement, Entry and
Registration Verification System
1. As provided in Section 2(e) of the Fund Participation Agreement, the
parties hereby agree to provide pricing information, execute orders and wire
payments for purchases and redemptions of Fund shares through National
Securities Clearing Corporation ("NSCC") and its subsidiary systems as follows:
(a) Fund Party or the Funds will furnish to the Company or its affiliate
through NSCC's Mutual Fund Profile System ("MFPS") (1) the most current net
asset value information for each Fund, (2) a schedule of anticipated
dividend and distribution payment dates for each Fund, which is subject to
change without prior notice, ordinary income and capital gain dividend
rates on the Fund's ex-date, and (4) in the case of fixed income funds that
declare daily dividends, the daily accrual or the interest rate factor. All
such information shall be furnished to the Company or its affiliate by 7:00
p.m. Eastern Time on each business day that the Fund is open for business
(each a "Business Day") or at such other time as that information becomes
available. Changes in pricing information will be communicated to both NSCC
and the Company.
(b) Upon receipt of Fund purchase, exchange and redemption instructions for
acceptance as of the time at which a Fund's net asset value is calculated
as specified in such Fund's prospectus ("Close of Trading") on each
Business Day ("Instructions"), and upon its determination that there are
good funds with respect to Instructions involving the purchase of Shares,
the Company or its affiliate will calculate the net purchase or redemption
order for each Fund. Orders for net purchases or net redemptions derived
from Instructions received by the Company or its affiliate prior to the
Close of Trading on any given Business Day will be sent to the Defined
Contribution Interface of NSCC's Mutual Fund Settlement, Entry and
Registration Verification System ("Fund/SERV") by 5:00 a.m. Eastern Time on
the next Business Day. Subject to the Company's or its affiliate's
compliance with the foregoing, the Company or its affiliate will be
considered the agent of the Fund Party and the Funds, and the Business Day
on which Instructions are received by the Company or its affiliate in
proper form prior to the Close of Trading will be the date as of which
shares of the Funds are deemed purchased, exchanged or redeemed pursuant to
such Instructions. Instructions received in proper form by the Company or
its affiliate after the Close of Trading on any given Business Day will be
treated as if received on the next following Business Day. Dividends and
capital gains distributions will be automatically reinvested at net asset
value in accordance with the Fund's then current prospectuses.
(c) The Company or its affiliate will wire payment for net purchase orders by
the Fund's NSCC Firm Number, in immediately available funds, to an NSCC
settling bank account designated by the Company or its affiliate no later
than 5:00 p.m. Eastern time on the same Business Day such purchase orders
are communicated to NSCC. For purchases of shares of daily dividend
19
accrual funds, those shares will not begin to accrue dividends until the
day the payment for those shares is received.
(d) NSCC will wire payment for net redemption orders by Fund, in immediately
available funds, to an NSCC settling bank account designated by the Company
or its affiliate, by 5:00 p.m. Eastern Time on the Business Day such
redemption orders are communicated to NSCC, except as provided in a Fund's
prospectus and statement of additional information.
(e) With respect to (c) or (d) above, if Fund Party does not send a
confirmation of the Company's or its affiliate's purchase or redemption
order to NSCC by the applicable deadline to be included in that Business
Day's payment cycle, payment for such purchases or redemptions will be made
the following Business Day.
(f) If on any day the Company or its affiliate, or Fund Party is unable to meet
the NSCC deadline for the transmission of purchase or redemption orders, it
may at its option transmit such orders and make such payments for purchases
and redemptions directly to Fund Party or the Company or its affiliate, as
applicable, as is otherwise provided in the Agreement.
(a) These procedures are subject to any additional terms in each Fund's
prospectus and the requirements of applicable law. The Funds reserve the
right, at their discretion and without notice, to suspend the sale of
shares or withdraw the sale of shares of any Fund.
2. The Company or its affiliate, Fund Party and clearing agents (if
applicable) are each required to have entered into membership agreements with
NSCC and met all requirements to participate in the MFPS and Fund/SERV systems
before these procedures may be utilized. Each party will be bound by the terms
of their membership agreement with NSCC and will perform any and all duties,
functions, procedures and responsibilities assigned to it and as otherwise
established by NSCC applicable to the MFPS and Fund/SERV system and the
Networking Matrix Level utilized.
3. Except as modified hereby, all other terms and conditions of the Agreement
shall remain in full force and effect. Unless otherwise indicated herein, the
terms defined in the Agreement shall have the same meaning as in this Exhibit.
20
