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FUND PARTICIPATION AGREEMENT
AGREEMENT, made on this 29th day of March, 1988, as amended on January
22, 1998, between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life
insurance company organized under the laws of the State of California, on
behalf of itself and on behalf of VARIABLE SEPARATE ACCOUNT (f/k/a "AMERICAN
PATHWAY II - SEPARATE ACCOUNT OF ANCHOR NATIONAL LIFE INSURANCE COMPANY,")
("Variable Account"), a separate account of Anchor existing pursuant to the
laws of the State of California, and ANCHOR PATHWAY FUND ("Fund"), an open-end
management investment company established pursuant to the laws of the
Commonwealth of Massachusetts under a Declaration of Trust dated March 23,
1987, as amended on January 19, 1990, which is composed of multiple investment
series ("Portfolios").
WITNESSETH:
WHEREAS, Anchor, by resolution, has established the Variable Account
on its books of account for the purpose of funding certain variable annuity
contracts issued by it; and
WHEREAS, the Variable Account is divided into various portfolios
("Divisions") under which the income, gains and losses, whether or not
realized, from assets allocated to each such Division are, in accordance with
the applicable variable annuity contracts, credited to or charged against such
Division without regard to any income, gains or losses of other Divisions or
separate accounts of Anchor; and
WHEREAS, the Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940 ("Act"); and
WHEREAS, the Fund, a registered, open-end, diversified management
investment company, is divided into various Portfolios, each Portfolio being
subject to separate investment objectives and restrictions which may not be
changed without a majority vote of the shareholders of each such Portfolio: and
WHEREAS, the Variable Account desires to purchase shares of the Fund
in connection with the issuance of certain variable annuity contracts to be
marketed under the name Polaris (collectively with other contracts and policies
that may be funded through the Fund, "Contracts"); and
WHEREAS, the Fund agrees to make shares of certain of its Portfolios
available to serve as underlying investment media for the corresponding
Divisions of the Variable Account; and
WHEREAS, SUNAMERICA CAPITAL SERVICES, INC. ( "Distributor"), which
serves as the distributor for the Contracts funded in the Variable Account
pursuant to an agreement with Anchor on behalf of itself and the Variable
Account is a broker-dealer registered as such under the
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Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc.;
NOW, THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, Anchor (on behalf of itself and the Variable Account) and the
Fund hereby agree as follows:
1. The Contracts funded by the Variable Account will provide for
the allocation of net amounts among certain Divisions of the Variable Account
for investment in the shares of the particular portfolio of the Fund underlying
each such Division. The selection of a particular Division is to be made (and
such selection may be changed) in accordance with the terms of the applicable
Contract.
2. No representation is made as to the number or amount of such
Contracts to be sold. Anchor, pursuant to its agreement with Distributor, will
make reasonable efforts to market those Contracts it determines from time to
time to offer for sale and, although it is not required to offer for sale new
Contracts, Anchor will accept payments and otherwise service existing Contracts
funded in the Variable Account
3. Fund shares to be made available to the respective Divisions
of the Variable Account shall be sold by each of the respective Portfolios of
the Fund and purchased by Anchor for that Division at the net asset value next
computed after receipt of each order, as established in accordance with the
provisions of the then current prospectus of the Fund. Shares of a particular
Portfolio of the Fund shall be ordered in such quantities and at such times as
determined by Anchor to be necessary to meet the requirements of those
Contracts having amounts allocated to the Division for which the Fund Portfolio
shares serve as the underlying investment medium. Orders and payments for
shares purchased will be sent promptly to the Fund and will be made payable in
the manner established from time to time by the Fund for the receipt of such
payments. The Fund reserves the right to delay transfer of its shares until
the payment check has cleared. The Fund has the obligation to insure that its
shares to be made available to the appropriate Division(s) under the Contracts
are registered at all times under the Securities Act of 1933 ("1933 Act").
4. The Fund will redeem the shares of the various Portfolios when
requested by Anchor on behalf of the corresponding Division of the Variable
Account at the net asset value next computed after receipt of each request for
redemption, for the purpose of (a) paying to Anchor the Contract Administration
Charges, Premium Taxes, Contingent Deferred Sales Charges, Expense Risk
Charges, Distribution Expense Risk Charges, Mortality Risk Premiums and all
other amounts payable to Anchor as specified in the Contracts to be charged
against Variable Account or to be deducted from the Net Contract Value upon
withdrawal, and (b) funding all amounts due the holder of the Contract. The
Fund will make payment in the manner established from time to time by the Fund
for the receipt of such redemption requests, but in no event shall payment be
delayed for a greater period than is permitted by the Act.
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5. Transfer of the Fund's shares will be by book entry only. No
stock certificates will be issued to the Variable Account. Shares ordered from
a particular Portfolio to the Fund will be recorded in an appropriate title for
the corresponding Division of the Variable Account.
6. The Fund shall furnish notice promptly to Anchor of any
dividend or distribution payable on its shares which are subject to this
Agreement. All of such dividends and distributions as are payable on each of
the Portfolio shares in the title for the corresponding Division of the
Variable Account shall be automatically reinvested in additional shares of that
Portfolio of the Fund. The Fund shall notify Anchor of the number of shares so
issued.
7. All expenses incident to the performance of the Fund under
this Agreement shall be paid by the Fund. The Fund shall ensure that all of
its shares which are subject to this Agreement are registered and authorized
for issue in accordance with applicable federal and state laws prior to their
purchase by the Variable Account. Anchor shall bear none of the expenses for
the cost of registration of the Fund's shares, preparation of the Fund's
prospectuses, proxy materials and reports, the distribution of such items to
shareholders, the preparation of all statements and notices required by any
federal or state law or any taxes on the issue or transfer of the Fund's shares
subject to this Agreement.
8. Anchor, either directly or through Distributor, shall make no
representations concerning the Fund's shares which are subject to this
Agreement other than those contained in the then current prospectus of the Fund
and in printed information subsequently issued by the Fund as supplemental to
such prospects.
9. Anchor and the Fund acknowledge that in the future, the Fund's
shares may become available for investment by separate accounts of other
insurance companies, which may or may not be affiliated persons (as that term
is defined in the Act) of Anchor (collectively with Anchor, "Participating
Insurers"). In such event, (a) the Fund shall undertake that its Board of
Trustees ("Board") will monitor the Fund for the existence of material
irreconcilable conflicts that may arise between the Contract owners of
Participating Insurers, for the purpose of identifying and remedying any such
conflict and (b) paragraphs 10, 11 and 12 shall apply. In discharging its
responsibilities under paragraphs 10, 11 and 12 hereinafter, Anchor will
cooperate and coordinate, to the extent necessary, with the Board and with
other Participating Insurers. The Fund agrees that it will require, as a
condition to participation, that all Participating Insurers shall have
obligations and responsibilities regarding conflicts of interest corresponding
to those that are agreed to herein by Anchor pursuant to such paragraphs 10, 11
and 12 and pursuant to this paragraph 9.
10. Anchor shall provide pass-through voting privileges to all
variable Contract owners so long as the U.S. Securities and Exchange Commission
continues to interpret the Act to require pass-through voting privileges for
variable Contract owners. Anchor shall be responsible for assuring that the
Variable Account calculates voting privilege in a manner consistent with
separate accounts of other Participating Insurers, as determined by the Board.
Anchor will vote shares for
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which it has not received voting instructions in the same proportion as it
votes shares for which it has received instructions.
11. Anchor will report to the Board any potential or existing
conflicts of which it is or becomes aware between any of its Contract owners or
between any of its Contract owners and Contract owners of other Participating
Insurers. Anchor will be responsible for assisting the Board in carrying out
its responsibilities to identify material conflicts by providing the Board with
all information available to it that is reasonably necessary for the Board to
consider any issues raised, including information as to a decision by Anchor to
disregard voting instructions of its Contract owners.
12. The Board's determination of the existence of an
irreconcilable material conflict and its implications shall be made known
promptly by it to Anchor and other Participating Insurers. 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, 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 owners and variable life insurance Contract owners or by
Contract owners of different Participating Insurers; or (f) a decision by a
Participating Insurer to disregard the voting instructions of variable Contract
owners.
13. If it is determined by a majority of the Board or a majority
of its disinterested Trustees that a material irreconcilable conflict exists
that affects the interests of Anchor Contract owners, Anchor shall, in
cooperation with other Participating Insurers whose Contract owners' interests
are also affected by the conflict, take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, which steps could include:
(a) withdrawing the assets allocable to the Variable Account from the Fund or
any portfolio and reinvesting such assets in a different investment medium,
including another Portfolio of the Fund, or submitting the question of whether
such segregation should be implemented to a vote of all affected Contract
owners and, as appropriate, segregating the assets of any particular group
(e.g., annuity Contract owners or life insurance Contract owners) that votes in
favor of such segregation, or offering to the affected Contract owners of the
option of making such a change; and (b) establishing a new registered
management investment company or managed separate account. Anchor shall take
such steps at its expense if the conflict affects solely the interests of the
owners of Anchor Contracts, but shall bear only its equitable portion of any
such expense if the conflict also affects the interest of the Contract owners
of one or more Participating Insurers other than Anchor, provided: that this
sentence shall not be construed to require the Fund to bear any portion of such
expense. If a material irreconcilable conflict arises because of Anchor's
decision to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Anchor may be
required, at Fund's election, to withdraw the Variable Account's investment in
the Fund, and no charge or penalty will be imposed against the Variable Account
as a result of such a withdrawal. Anchor agrees to take such remedial action
as may be required under this paragraph 13 with a view only to
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the interests of its Contract owners. For purposes of this paragraph 13, a
majority of the disinterested members of the Board shall determine whether or
not any proposed action adequately remedies any irreconcilable conflict, but in
no event will Fund be required to establish a new funding medium for any
variable Contracts. Anchor shall not be required by this paragraph 13 to
establish a new funding medium for any variable Contract if an offer to do so
has been declined by vote of a majority of affected Contract owners.
14. This Agreement shall terminate:
(a) at the option of Anchor or the Fund upon 60 days'
advance written notice to all other parties to this
Agreement; or
(b) at the option of Anchor if any of the Fund's shares
are not reasonably available to meet the requirements
of the Contracts funded in the Variable Account as
determined by Anchor. Prompt notice of election to
terminate shall be furnished by Anchor; or
(c) at the option of Anchor upon institution of formal
proceedings against the Fund by the Securities and
Exchange Commission; or
(d) upon the vote of Contract owners having an interest
in a particular Division of the Variable Account to
substitute the shares of another investment company
for the corresponding Fund Portfolio shares in
accordance with the terms of the Contracts for which
those Fund shares had been selected to serve as the
underlying investment medium. Anchor will give 30
days' prior written notice to the Fund of the date of
any proposed action to replace the Fund's shares; or
(e) in the event the Fund's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of
such shares as the underlying investment medium of
the Contracts funded in the Variable Account. Prompt
notice shall be given by each party to all other
parties in the event that the conditions stated in
subsections (b), (c) or (d) of this Paragraph 14
should occur.
15. Notwithstanding any other provisions of this Agreement, the
obligations of the Fund hereunder are not personally binding upon any of the
trustees, shareholders, officers, employees or agents of the Fund; resort in
satisfaction of such obligations shall be had only to the assets and property of
the Fund and not to the private property of any of such Fund's trustees,
shareholders, officers, employees or agents.
16. This Agreement shall be construed in accordance with the laws
of the State of California.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By:
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Xxxxx X. Xxxxxx
Senior Vice President and Secretory
VARIABLE SEPARATE ACCOUNT
(f/k/a AMERICAN PATHWAY II - SEPARATE ACCOUNT
OF ANCHOR NATIONAL LIFE INSURANCE
COMPANY)
BY: ANCHOR NATIONAL LIFE INSURANCE
COMPANY
By:
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Xxxxx X. Xxxxxx
Senior Vice President and Secretary
ANCHOR PATHWAY FUND
By:
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Xxxxxx X. Xxxxx
Vice President and Assistant Secretary
Acknowledged and Agreed:
SUNAMERICA CAPITAL SERVICES, INC.
By: Dated: January 22, 1998
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J. Xxxxxx Xxxxxx
President
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