Exhibit (h)(2)
FORM OF
PARTICIPATION AGREEMENT
Among
XXXXX VARIABLE ACCOUNT FUND, INC.
XXXXX DISTRIBUTORS, LLC.
and
[NAME OF THE INSURANCE COMPANY]
THIS AGREEMENT, made and entered into this xx day of xx , 199 xx_ by
and among xx , (hereinafter the "Insurance Company"), a xx corporation, on its
own behalf and on behalf of each segregated asset account of the Insurance
Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), XXXXX VARIABLE
ACCOUNT FUND, INC., a Maryland Corporation (the "Company") and Xxxxx
Distributors, LLC., a Colorado Limited Liability Company ("Xxxxx
Distributors").
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
variable annuity and life insurance contracts to be offered by separate
accounts of insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies") and for qualified retirement and pension plans ("Qualified Plans");
and
WHEREAS, the beneficial interest in the Company is divided into
several series of shares, each designated a "Fund" and representing the
interest in a particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated xxx, 1999 (File No. 812-xxxx), granting
Participating Insurance Companies and their separate accounts exemptions from
the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Company to be sold to and held by Qualified Plans and by variable annuity and
variable life insurance
1
separate accounts of life insurance companies that may or may not be affiliated
with one another (the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Company is registered as an open-end management
investment company under the 1940 Act and the offering of its shares is
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, Xxxxx Distributors is duly registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, (the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"); and
WHEREAS, Xxxxx Distributors is a wholly owned subsidiary of Xxxxx
Selected Advisers, L.P. which is duly registered as an investment adviser under
the Investment Advisers Act of 1940 and any applicable state securities law;
and
WHEREAS, the Insurance Company has registered under the 1933 Act, or
will register under the 1933 Act, certain variable annuity or variable life
insurance contracts identified by the form number(s) listed on Schedule B to
this Agreement, as amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds at
net asset value on behalf of each Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the
Insurance Company, the Company and Xxxxx Distributors agree as follows:
ARTICLE I. SALE OF COMPANY SHARES
1.1. Xxxxx Distributors agrees to sell to the Insurance Company those
shares of the Company which each Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Company
or its designee of the order for the shares of the Company. For purposes of
this Section 1.1, the Insurance Company shall be the designee of the Company
for receipt of such orders from the Accounts and receipt by such designee shall
constitute receipt by the Company; provided that the Company receives notice of
such order by 9:00 a.m., Eastern Time, on the next following Business Day. In
this Agreement, "Business Day" shall mean
2
any day on which the New York Stock Exchange is open for trading and on which
the Company calculates its net asset value pursuant to the rules of the SEC.
1.2. The Company agrees to make its shares available for purchase at
the applicable net asset value per share by the Insurance Company and its
Accounts on those days on which the Company calculates its Funds' net asset
values pursuant to rules of the SEC and the Company shall use reasonable
efforts to calculate its Funds' net asset values on each day on which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
directors of the Company may refuse to sell shares of any Fund to any person,
or suspend or terminate the offering of shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the directors of the Company 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 that Fund.
1.3. The Company agrees that shares of the Company will be sold only
to Accounts of Participating Insurance Companies and to Qualified Plans. No
shares of any Fund will be sold to the general public.
1.4. The Company will not sell its shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Sections 2.4, 3.4, 3.5, and Sections 7.1 - 7.7 of this Agreement is in
effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request,
any full or fractional shares of the Company held by the Account, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Company or its designee of the request for redemption. However,
if one or more Funds has determined to settle redemption transactions for all
of its shareholders on a delayed basis (more than one business day, but in no
event more than three Business Days, after the date on which the redemption
order is received, unless otherwise permitted by an order of the SEC under
Section 22(e) of the 1940 Act), the Company shall be permitted to delay sending
redemption proceeds to the Insurance Company by the same number of days that
the Company is delaying sending redemption proceeds to the other shareholders
of the Fund. For purposes of this Section 1.5, the Insurance Company shall be
the designee of the Company for receipt of requests for redemption from each
Account and receipt by that designee shall constitute receipt by the Company;
provided that the Company receives notice of the request for redemption by 9:00
a.m., Eastern Time, on the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund offered by the then-current prospectus of the Company in accordance
with the provisions of that prospectus.
1.7. The Insurance Company shall pay for Company shares by 3:00 p.m.,
Eastern Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the
3
purpose of Sections 2.9 and 2.10, upon receipt by the Company of the federal
funds so wired, such funds shall cease to be the responsibility of the Insurance
Company and shall become the responsibility of the Company. Payment of net
redemption proceeds (aggregate redemptions of a Fund's shares by an Account
minus aggregate purchases of that Fund's shares by that Account) for a given
Business Day will be made by wiring federal funds to the Insurance Company on
the next Business Day after receipt of the redemption request. However, payment
may be postponed under unusual circumstances, such as when normal trading is not
taking place on the New York Stock Exchange, an emergency as defined by the SEC
exists, or as permitted by the SEC.
1.8. Issuance and transfer of the Company's shares will be by book
entry only. Stock certificates will not be issued to the Insurance Company or
any Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital
gain distributions payable on a Fund's shares in additional shares of that
Fund. The Insurance Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Company shall notify the Insurance Company of the number of shares issued as
payment of dividends and distributions.
1.10. The Company shall make the net asset value per share for each
Fund available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 7:00 p.m.,
Eastern Time.
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.1. The Insurance Company represents, warrants and agrees that the
offerings of the Contracts are, or will be, registered under the 1933 Act; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with applicable state insurance
suitability requirements. The Insurance Company further represents 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
issuance or sale thereof as a segregated asset account under Section xx of the
xx Insurance Code and has registered, or warrants and agrees that prior to any
issuance or sale of the Contracts it 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.
2.2. The Company warrants and agrees that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in
4
compliance with the laws of the State of Maryland and all applicable federal
securities laws and that the Company is and shall remain registered under the
1940 Act. The Company warrants and agrees that it 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
Company shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Company or Xxxxx Distributors.
2.3. The Company represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and warrants and agrees that it will make all
reasonable efforts to maintain its qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Insurance Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
2.4. The Insurance Company represents that the Contracts are currently
treated as annuity or life insurance contracts under applicable provisions of
the Code and warrants and agrees that it will make every effort to maintain
such treatment and that it will notify the Company and Xxxxx Distributors
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.
2.5. The Company may elect to make payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1, the Company
undertakes to have a board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Company makes no representation warranties as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) complies or will comply with the insurance laws or
regulations of the various states.
2.7. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and represents, warrants and
agrees that it does and will comply in all material respects with the 1940 Act.
2.8. Xxxxx Distributors represents that it is and warrants that it
shall remain duly registered as an broker-dealer under all applicable federal
and state securities laws and agrees that it shall perform its obligations for
the Company in compliance in all material respects with the laws of the State
of New Mexico and any applicable state and federal securities laws.
2.9. The Company and Xxxxx Distributors represent and warrant that all
of their officers, employees, investment advisers, investment sub-advisers, and
other individuals or entities described in Rule 17g-1 under the 1940 Act
dealing with the money and/or securities of the Company are, and shall continue
to be at all times, covered by a blanket fidelity bond or similar
5
coverage for the benefit of the Company in an amount not less than the minimum
coverage required currently by Rule 17g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. That fidelity bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.10. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
described in Rule 17g-1 under the 1940 Act are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Company, in an amount not less than the minimum coverage required currently
for entities subject to the requirements of Rule 17g-1 of the 1940 Act or
related provisions or may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
ARTICLE III. DISCLOSURE DOCUMENTS AND VOTING
3.1. Xxxxx Distributors shall provide the Insurance Company (at the
Insurance Company's expense) with as many copies of the Company's current
prospectus as the Insurance Company may reasonably request. If requested by the
Insurance Company in lieu thereof, the Company shall provide such documentation
(including a final copy of the new prospectus as set in type at the Company's
expense) and other assistance as is reasonably necessary in order for the
Insurance Company once each year (or more frequently if the prospectus for the
Company is amended) to have the prospectus for the Contracts and the Company's
prospectus printed together in one document (at the Insurance Company's
expense).
3.2. The Company's prospectus shall state that the Statement of
Additional Information for the Company (the "SAI") is available from the
Company, and Xxxxx Distributors (or the Company), at its expense, shall print
and provide the SAI free of charge to the Insurance Company and to any owner of
a Contract or prospective owner who requests the SAI.
3.3. The Company, at its expense, shall provide the Insurance Company
with copies of its proxy material, reports to shareholders and other
communications to shareholders in such quantity as the Insurance Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company
shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions
received from Contract owners; and
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of that Fund
for which instructions have been received;
6
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. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each
of their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligation under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Company will either
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or, as the Company currently
intends, comply with Section 16(c) of the 1940 Act as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the SEC
may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Insurance Company shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company, Xxxxx Selected Advisers, L.P.,
or Xxxxx Distributors is named, at least fifteen calendar days prior to its
use. No such material shall be used if the Company or its designee objects to
such use within ten calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company in connection with the sale of the Contracts other than the information
or representations contained in the Company's registration statement,
prospectus or SAI, as that registration statement, prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements
for the Company, or in sales literature or other promotional material approved
by the Company or its designee or by Xxxxx Distributors, except with the
permission of the Company or Xxxxx Distributors.
4.3. The Company, Xxxxx Distributors, or its designee shall furnish,
or shall cause to be furnished, to the Insurance Company or its designee, each
piece of sales literature or other promotional material in which the Insurance
Company or the Account is named at least fifteen calendar days prior to its
use. No such material shall be used if the Insurance Company or its designee
objects to such use within ten calendar days after receipt of that material.
4.4. The Company and Xxxxx Distributors shall not give any information
or make any representations on behalf of the Insurance Company or concerning
the Insurance Company, any
7
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus or statement of additional
information for the Contracts, as that registration statement, prospectus or
statement of additional information may be amended or supplemented from time to
time, or in published reports for any Account which are in the public domain or
approved by the Insurance Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Insurance Company
or its designee, except with the permission of the Insurance Company.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or
its shares, contemporaneously with the filing of the document with the SEC, the
National Association of Securities Dealers, Inc. ("NASD"), or other regulatory
authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no-action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the SEC, the NASD, or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, shareholder
newsletters, 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, statements of
additional information, shareholder reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representative of the appropriate regulatory agencies, all records, data and
access to operating procedures that may be reasonably requested.
8
ARTICLE V. FEES AND EXPENSES
5.1. The Company and Xxxxx Distributors shall pay no fee or other
compensation to the Insurance Company under this agreement, except as set forth
in Section 5.4 and except that if the Company or any Fund adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, Xxxxx
Distributors or the Company may make payments to the Insurance Company in
amounts consistent with that 12b-1 plan, subject to review by the directors of
the Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that any
offering of its shares is registered and that all of its shares are authorized
for issuance in accordance with applicable federal law and, if and to the
extent deemed advisable by the Company or Xxxxx Distributors, in accordance
with applicable state laws prior to their sale. The Company shall bear the cost
of registration and qualification of the Company's shares, preparation and
filing of the Company'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, the preparation of all statements
and notices required by any federal or state law, and all taxes on the issuance
or transfer of the Company's shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing
to Contract owners the Company's prospectus, proxy materials and reports.
5.4. The Insurance Company bears the responsibility and correlative
expense for administrative and support services for Contract owners. Xxxxx
Distributors recognizes the Insurance Company as the sole shareholder of shares
of the Company issued under this Agreement. From time to time, Xxxxx
Distributors may pay amounts from its past profits to the Insurance Company for
providing certain administrative services for the Company or for providing
other services that relate to the Company. In consideration of the savings
resulting from such arrangement, and to compensate the Insurance Company for
its costs, Xxxxx Distributors agrees to pay to the Insurance Company an amount
equal to 20 basis points (0.20%) per annum of the average aggregate amount
invested by the Insurance Company in the Company under this Agreement. Such
payments will be made monthly, and only when the average aggregate amount
invested exceeds $1,000,000. The parties agree that such payments are for
administrative services and investor support services, and do not constitute
payment for investment advisory, distribution or other services. Payment of
such amounts by Xxxxx Distributors shall not increase the fees paid by the
Company or its shareholders.
9
ARTICLE VI. DIVERSIFICATION
6.1. The Company will comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5 relating to the diversification requirements for
variable annuity, endowment, modified endowment or life insurance contracts and
any amendments or other modifications to that Section or Regulation at all
times necessary to satisfy those requirements.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The directors of the Company will monitor the Company for the
existence of any material irreconcilable conflict between the interests of the
variable Contract owners of all separate accounts investing in the Company and
the participants of all Qualified Plans investing in the Company. 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 interpretive letter, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Fund are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of variable contract owners. The
directors of the Company shall promptly inform the Insurance Company if they
determine that an irreconcilable material conflict exists and the implications
thereof. The directors of the Company shall have sole authority to determine
whether an irreconcilable material conflict exists and their determination
shall be binding upon the Insurance Company.
7.2. The Insurance Company and Xxxxx Distributors each will report
promptly any potential or existing conflicts of which it is aware to the
directors of the Company. The Insurance Company and Xxxxx Distributors each
will assist the directors of the Corporation in carrying out their
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the directors of the Corporation with all information reasonably
necessary for them to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the directors of
the Corporation whenever Contract owner voting instructions are to be
disregarded. These responsibilities shall be carried out by the Insurance
Company with a view only to the interests of the Contract owners and by Xxxxx
Distributors with a view only to the interests of Contract holders and
Qualified Plan participants.
7.3. If it is determined by a majority of the directors of the
Corporation, or a majority of the directors who are not interested persons of
the Corporation, any of its Funds, or Xxxxx Distributors (the "Independent
Directors"), that a material irreconcilable conflict exists, the Insurance
Company and/or other Participating Insurance Companies or Qualified Plans that
have executed participation agreements shall, at their expense and to the
extent reasonably practicable (as determined by a majority of the Independent
Directors), take whatever steps are necessary to remedy or eliminate the
10
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Corporation
or any Fund and reinvesting those assets in a different investment medium,
including (but not limited to) another Fund of the Corporation, or submitting
the question whether such segregation should be implemented to a vote of all
affected variable contract owners and, as appropriate, segregating the assets
of any appropriate group (e.g., 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 variable contract owners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account and obtaining any necessary approvals or orders of the SEC in
connection therewith.
7.4. If a material irreconcilable conflict arises because of a
decision by the Insurance Company to disregard Contract owner voting
instructions and that decision represents a minority position or would preclude
a majority vote, the Insurance Company may be required, at the Corporation's
election, to withdraw the affected Account's investment in the Corporation and
terminate this Agreement with respect to that 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
Independent Directors. Any such withdrawal and termination must take place
within six (6) months after the Corporation gives written notice that this
provision is being implemented, and, until the end of that six month period,
the Corporation shall continue to accept and implement orders by the Insurance
Company for the purchase (and redemption) of shares of the Corporation.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Corporation and
terminate this Agreement with respect to that Account within six months after
the directors of the Corporation inform the Insurance Company in writing that
they have determined that the state insurance regulator's decision has created
an irreconcilable material conflict; 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 Independent
Directors. Until the end of the foregoing six month period, the Corporation
shall continue to accept and implement orders by the Insurance Company for the
purchase (and redemption) of shares of the Corporation.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Corporation be required to establish a new funding medium for
the Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the directors of the
Corporation determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Insurance Company will withdraw
11
the Account's investment in the Corporation and terminate this Agreement within
six (6) months after the directors of the Corporation inform the Insurance
Company in writing of the foregoing determination, provided, however, that the
withdrawal and termination shall be limited to the extent required by the
material irreconcilable conflict, as determined by a majority of the Independent
Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Corporation 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 those rules are applicable; and (b) Sections 3.4, 3.5, 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 those Sections are
contained in the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(a). The Insurance Company agrees to indemnify and hold harmless
the Corporation and each director, officer, employee or agent of the
Corporation, and each person, if any, who controls the Corporation 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, damages,
liabilities (including amounts paid in settlement with the written consent of
the Insurance Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale, acquisition, or redemption of the Corporation'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 or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact
required to be stated therein or necessary to make 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 in writing to the
12
Insurance Company by or on behalf of the Corporation for use
in the registration statement or prospectus for the Contracts
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or shares of the Corporation;
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Corporation not supplied by the Insurance
Company, or persons under its control) or wrongful conduct of
the Insurance Company or persons under its control, with
respect to the sale or distribution of the Contracts or
Corporation Shares;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Corporation
or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in
writing to the Corporation by or on behalf of the Insurance
Company;
(iv) arise as a result of any failure by the Insurance
Company to provide the services and furnish the materials
under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance
Company in this Agreement or arise out of or result from any
other material breach of this Agreement by the Insurance
Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party
that may arise from that Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of that Indemnified Party's duties or by
reason of that Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Corporation, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall
13
have notified the Insurance 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 that Indemnified Party (or after the
Indemnified Party shall have received notice of such service on any designated
agent). Notwithstanding the foregoing, the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Insurance Company of its
obligations hereunder except to the extent that the Insurance Company has been
prejudiced by such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Insurance Company of any such claim shall not
relieve the Insurance Company from any liability which it may have to the
Indemnified Party against whom the action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Insurance Company shall be entitled to participate,
at its own expense, in the defense of the action. The Insurance Company also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action; provided, however, that if the Indemnified Party
shall have reasonably concluded that there may be defenses available to it which
are different from or additional to those available to the Insurance Company,
the Insurance Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Insurance
Company be liable for the fees and expenses of more than one counsel for
Indemnified Parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances). After notice from the Insurance Company to the
Indemnified Party of the Insurance Company's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurance Company will not be liable to that party under
this Agreement for any legal or other expenses subsequently incurred by the
party independently in connection with the defense thereof other than reasonable
costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Corporation's shares or the
Contracts or the operation of the Corporation.
8.2. INDEMNIFICATION BY XXXXX DISTRIBUTORS
8.2(a). Xxxxx Distributors agrees to indemnify and hold harmless the
Insurance Company and each of its directors, officers, employees or agents, and
each person, if any, who controls the Insurance 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,
liabilities (including amounts paid in settlement with the written consent of
Xxxxx Distributors) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale, acquisition
or redemption of the Corporation's shares or the Contracts and:
14
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Corporation (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 the statement or omission or alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to Xxxxx Distributors or the
Corporation by or on behalf of the Insurance Company for use
in the registration statement or prospectus for the
Corporation or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Corporation shares;
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Contracts not supplied by Xxxxx
Distributors or persons under its control) or wrongful
conduct of the Corporation, Xxxxx Distributors or persons
under their control, with respect to the sale or distribution
of the Contracts or shares of the Corporation;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished in writing to the Insurance Company by or on behalf
of the Corporation;
(iv) arise as a result of any failure by the Corporation 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 requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by Xxxxx
Distributors in
15
this Agreement or arise out of or result from any other
material breach of this Agreement by Xxxxx Distributors;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b) Xxxxx Distributors shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party
that may arise from the Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of the Indemnified Party's duties or by
reason of the Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Insurance Company or the Account, whichever is
applicable.
8.2(c) Xxxxx Distributors shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless the Indemnified Party shall have notified Xxxxx Distributors 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 the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve Xxxxx Distributors of its obligations hereunder except to the extent
that Xxxxx Distributors has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party to notify Xxxxx Distributors of
any such claim shall not relieve Xxxxx Distributors from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, Xxxxx Distributors will be entitled to
participate, at its own expense, in the defense thereof. Xxxxx Distributors
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; provided, however, that if the Indemnified
Party shall have reasonably concluded that there may be defenses available to
it which are different from or additional to those available to Xxxxx
Distributors, Xxxxx Distributors shall not have the right to assume said
defense, but shall pay the costs and expenses thereof (except that in no event
shall Xxxxx Distributors be liable for the fees and expenses of more than one
counsel for Indemnified Parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances). After notice from Xxxxx Distributors to
the Indemnified Party of Xxxxx Distributors' election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Xxxxx Distributors will not be liable to that party under
this Agreement for any legal or other expenses subsequently incurred by that
party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d) The Insurance Company agrees to notify Xxxxx Distributors
promptly of the commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or sale of the
Contracts or the operation of the Account.
16
8.3 INDEMNIFICATION BY THE CORPORATION
8.3(a). The Corporation agrees to indemnify and hold harmless the
Insurance Company, and each of its directors, officers, employees and agents,
and each person, if any, who controls the Insurance 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, damages,
liabilities (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as those losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of any director(s) of the Corporation, are related to the
operations of the Corporation and:
(i) arise as a result of any failure by the Corporation to
provide the services and furnish the materials under the
terms of this Agreement (including a failure to comply with
the diversification requirements specified in Article VI of
this Agreement); or
(ii) arise out of or result from any material breach of any
representation, warranty or agreement made by the Corporation
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Corporation;
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Corporation shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party that may arise
from the Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of the Indemnified Party's duties or by reason of
the Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Insurance Company, the Corporation, Xxxxx Distributors or
the Account, whichever is applicable.
8.3(c). The Corporation shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
the Indemnified Party shall have notified the Corporation 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 the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Corporation of its obligations hereunder except to the extent that
the Corporation has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party to notify the Corporation of any
such claim shall not relieve the Corporation from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Corporation will be entitled to
participate, at its own expense,
17
in the defense thereof. The Corporation also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action;
provided, however, that if the Indemnified Party shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to the Corporation, the Corporation shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Corporation be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
the Corporation to the Indemnified Party of the Corporation's election to assume
the defense thereof, and in the absence of such a reasonable conclusion that
there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Corporation will not be liable to that party
under this Agreement for any legal or other expenses subsequently incurred by
that party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Insurance Company and Xxxxx Distributors agree promptly to
notify the Corporation of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in connection with
this Agreement, the issuance or sale of the Contracts, the operation of the
Account, or the sale or acquisition of shares of the Corporation.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof
interpreted under and in accordance with the laws of the State of New Mexico.
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 any exemptions from those statutes, rules and regulations the SEC may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice to
the other parties; provided, however, such notice shall not be given
earlier than one year following the date of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares
of Funds are not reasonably available to meet the requirements of the
Contracts as determined by the
18
Insurance Company, provided, however, that such a termination shall
apply only to the Fund(s) not reasonably available. Prompt written
notice of the election to terminate for such cause shall be furnished
by the Insurance Company to the Corporation and Xxxxx Distributors; or
(c) at the option of the Corporation or Xxxxx Distributors, in the
event that formal administrative proceedings are instituted against
the Insurance Company by the NASD, the SEC, an insurance commissioner
or any other regulatory body regarding the Insurance Company's duties
under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Corporation's shares,
provided, however, that the Corporation determines in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Insurance Company to perform its obligations under this Agreement;
or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Corporation or
Xxxxx Distributors by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided, however,
that the Insurance Company determines in its sole judgement exercised
in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Corporation or Xxxxx
Distributors to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the
Contracts for which those Fund shares had been selected to serve as
the underlying investment media. The Insurance Company will give at
least 30 days' prior written notice to the Corporation of the date of
any proposed vote to replace the Corporation's shares; or
(f) at the option of the Insurance Company, in the event any of the
Corporation's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or exemptions therefrom, or
such law precludes the use of those shares as the underlying
investment media of the Contracts issued or to be issued by the
Insurance Company; or
(g) at the option of the Insurance Company, if the Corporation ceases
to qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the Insurance
Company reasonably believes that the Corporation may fail to so
qualify; or
(h) at the option of the Insurance Company, if the Corporation fails
to meet the diversification requirements specified in Article VI
hereof; or
19
(i) at the option of either the Corporation or Xxxxx Distributors, if
(1) the Corporation or Xxxxx Distributors, respectively, shall
determine, in their sole judgment reasonably exercised in good faith,
that the Insurance Company has suffered a material adverse change in
its business or financial condition or is the subject of material
adverse publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of either the Corporation or Xxxxx Distributors, (2) the
Corporation or Xxxxx Distributors shall notify the Insurance Company
in writing of that determination and its intent to terminate this
Agreement, and (3) after considering the actions taken by the
Insurance Company and any other changes in circumstances since the
giving of such a notice, the determination of the Corporation or Xxxxx
Distributors shall continue to apply on the sixtieth (60th) day
following the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised in
good faith, that either the Corporation or Xxxxx Distributors has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and that
material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of the
Insurance Company, (2) the Insurance Company shall notify the
Corporation and Xxxxx Distributors in writing of the determination and
its intent to terminate the Agreement, and (3) after considering the
actions taken by the Corporation and/or Xxxxx Distributors and any
other changes in circumstances since the giving of such a notice, the
determination shall continue to apply on the sixtieth (60th) day
following the giving of the notice, which sixtieth day shall be the
effective date of termination.
10.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 10.1(a) may be exercised for
any reason or for no reason.
10.3. No termination of this Agreement shall be effective unless and
until the party terminating this Agreement gives prior written notice to all
other parties to this Agreement of its intent to terminate, which notice shall
set forth the basis for the termination. Furthermore,
(a) In the event that any termination is based upon the
provisions of Article VII, or the provision of Section 10.1(a), 10.1(i),
10.1(j), or 10.1(k) of this Agreement, the prior written notice shall be given
in advance of the effective date of termination as required by those
provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, the prior written
notice shall be given at least ninety (90) days before the effective date of
termination.
10.4. Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement and for so long as the Corporation continues to
exist, the Corporation and Xxxxx
20
Distributors shall at the option of the Insurance Company, continue to make
available additional shares of the Corporation pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement ("Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Corporation, redeem investments in the Corporation
and/or invest in the Corporation upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.4 shall not
apply to any terminations under Article VII and the effect of Article VII
terminations shall be governed by Article VII of this Agreement.
10.5. The Insurance Company shall not redeem Corporation shares
attributable to the Contracts (as opposed to Corporation shares attributable to
the Insurance Company's assets held in the Account) except (i) as necessary to
implement Contract-owner-initiated transactions, or (ii) as required by state
and/or federal laws or regulations or judicial or other legal precedent of
general application (a "Legally Required Redemption"). Upon request, the
Insurance Company will promptly furnish to the Corporation and Xxxxx
Distributors the opinion of counsel for the Insurance Company (which counsel
shall be reasonably satisfactory to the Corporation and Xxxxx Distributors) to
the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, the Insurance Company shall not prevent new
Contract owners from allocating payments to a Fund that formerly was available
under the Contracts without first giving the Corporation or Xxxxx Distributors
90 days notice of its intention to do so.
21
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Corporation:
000 X. Xxxxx Xxxxxx
Xxxxx Xx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
If to the Insurance Company:
Attention:
If to Xxxxx Distributors:
000 X. Xxxxx Xxxxxx
Xxxxx Xx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
ARTICLE XII. MISCELLANEOUS
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the affected party unless and until that information may
come into the public domain.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
22
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit those authorities
reasonable access to its books and records in connection with any lawful
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.7. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns; provided, that no
party may assign this Agreement without the prior written consent of the
others.
23
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 as of the date specified below.
Insurance Company:
xx
------------------
By its authorized officer,
By: __________________
Title: _______________
Date: ________________
Corporation:
XXXXX VARIABLE ACCOUNT FUND
By its authorized officer,
By: __________________
Title: _______________
Date: ________________
Xxxxx Distributors:
XXXXX DISTRIBUTORS, LLC.
By its authorized officer,
By: __________________
Title: _______________
Date: ________________
24
SCHEDULE A
ACCOUNTS
NAME OF ACCOUNT DATE OF RESOLUTION OF INSURANCE COMPANY'S
BOARD WHICH ESTABLISHED THE ACCOUNT
25
SCHEDULE B
CONTRACTS
1. Contract Form____________
26
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Corporation by Xxxxx Distributors, the
Corporation and the Insurance Company. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term
"Insurance Company" shall also include the department or third party assigned
by the Insurance Company to perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by
Xxxxx Distributors as early as possible before the date set by the
Corporation for the shareholder meeting to facilitate the
establishment of tabulation procedures. At this time Xxxxx
Distributors will inform the Insurance Company of the Record, Mailing
and Meeting dates. This will be done verbally approximately two months
before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a
"tape run", or other activity, which will generate the names,
addresses and number of units which are attributed to each
contract-owner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this date
that could affect the status of the Customers' accounts of the Record
Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best efforts to call
in the number of Customers to Xxxxx Distributors, as soon as possible, but no
later than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Insurance Company by the Corporation. The
Insurance Company, at its expense, shall produce and personalize the
Voting Instruction cards. Xxxxx Distributors must approve the Card
before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the
Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as
printed by the Corporation).
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
27
4. During this time, Xxxxx Distributors will develop, produce, and the
Corporation will pay for the Notice of Proxy and the Proxy Statement
(one document). Printed and folded notices and statements will be sent
to Insurance Company for insertion into envelopes (envelopes and
return envelopes are provided and paid for by the Insurance Company).
Contents of envelope sent to customers by Insurance Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance
Company) addressed to the Insurance Company or its
tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is
a small, single sheet of paper that requests
Customers to vote as quickly as possible and that
their vote is important. One copy will be supplied by
the Corporation.)
e. Cover letter - optional, supplied by Insurance
Company and reviewed and approved in advance by
Xxxxx Distributors.
5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date. Individual in charge
at Insurance Company reviews and approves the contents of the mailing
package to ensure correctness and completeness. Copy of this approval
sent to Xxxxx Distributors.
6. Package mailed by the Insurance Company.
* The Corporation must allow at least a 15-day solicitation
time to the Insurance Company as the shareowner. (A 5-week
period is recommended.) Solicitation time is calculated as
calendar days from (but not including) the meeting, counting
backwards.
7. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure.
8. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to the Customer with an
explanatory letter, a new Card and return envelope. The mutilated or
illegible Card is disregarded and considered to be not received for
purposes of vote tabulation. Such mutilated or illegible Cards are
"hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied
individually.
28
9. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
10. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Corporation
receives the tabulations stated in terms of a percentage and the
number of shares.) Xxxxx Distributors must review and approve
tabulation format.
11. Final tabulation in shares is verbally given by the Insurance Company
to Xxxxx Distributors on the morning of the meeting not later than
1:00 p.m. Eastern time. Xxxxx Distributors may request an earlier
deadline if required to calculate the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be
required from the Insurance Company as well as an original copy of the
final vote. Xxxxx Distributors will provide a standard form for each
Certification.
13. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged
or if otherwise necessary for legal, regulatory, or accounting
purposes, Xxxxx Distributors will be permitted reasonable access to
such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
29
