Exhibit 27(h)
Participation Agreement Between Access Variable Insurance Trust
and Western Reserve dated May 1, 2003
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of May 1, 2003, between Access Variable
Insurance Trust, an open-end management investment company organized as an Ohio
business trust (the "Trust"), and Western Reserve Life Assurance Co. of Ohio, a
life insurance company organized under the laws of the State of Ohio (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as the parties hereto may amend it from
time to time (the "Accounts") (individually, a "Party", and collectively, the
"Parties").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares ("Shares") under the Securities Act of 1933, as amended
(the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that enter into participation
agreements with the Trust (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust may be divided into
several series of Shares, each series representing an interest in a particular
managed portfolio of securities and other assets, and the Trust will make Shares
listed on Schedule A hereto as the Parties hereto may amend from time to time
(each a "Portfolio"; reference herein to the "Trust" includes reference to each
Portfolio, to the extent the context requires) available for purchase by the
Accounts; and
WHEREAS, the Trust, to the extent required, intends to apply for an
order from the Securities and Exchange Commission ("SEC") 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 1940 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit Shares of the
Trust to be sold to and held by variable annuity and variable life insurance
separate accounts of life insurance companies and certain qualified pension and
retirement plans (the "Exemptive Order"); and
WHEREAS, the Company will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), will be registered under
the 1933 Act; and
WHEREAS, the Company will fund the Contracts through the Accounts, each
of which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, the Company will serve as the depositor of the Accounts, each
of which is registered as a unit investment trust investment company under the
1940 Act, and the security interests deemed to be issued by the Accounts under
the Contracts will be registered as securities under the 1933 Act; and
WHEREAS, the Company intends to utilize Shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust shall make Shares of its Portfolios available to the
Accounts at the net asset value of the applicable Portfolio next computed after
receipt of such purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust.
Shares of a particular Portfolio of the Trust shall be ordered in such
quantities and at such times as determined by the Company to be necessary to
meet the requirements of the Contracts. Notwithstanding anything to the contrary
herein, the Trustees of the Trust (the "Trustees") may 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 deemed in the sole discretion of the Trustees acting
in good faith and in light of their fiduciary duties under federal and any
applicable state laws, in the best interests of the shareholders of such
Portfolio.
The Parties hereto may agree, from time to time, to add other
Portfolios to provide additional funding media for the Contracts, or to delete,
combine, or modify existing Portfolios, by amending Schedule A hereto. Upon such
amendment to Schedule A, any applicable reference to a Portfolio, the Trust, or
its Shares herein shall include a reference to any such additional Portfolio.
Schedule A, as amended from time to time, is incorporated herein by reference
and is a part hereof.
1.2 The Trust will redeem any full or fractional Shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value of the applicable Portfolio next computed after receipt by the Trust (or
its agent) of the request for redemption, as established in accordance with the
provisions of the then current prospectus of the Trust. With respect to payment
of the purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with respect
to each Portfolio and shall transmit one net payment per Portfolio in accordance
with this Section 1.2 and Section 1.4. The Trust shall make payment no later
than 12:00 noon New York time on the same day as the order is placed, to the
extent practicable, but in no event shall payment be delayed for a greater
period than is permitted by the 0000 Xxx.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby
appoints the Company as its agent for the limited purpose of receiving and
accepting purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company shall
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constitute receipt by the Trust provided that i) such orders are received by the
Company in good order prior to the time the net asset value of each Portfolio is
priced in accordance with its prospectus and ii) the Trust receives notice of
such orders by 10:00 a.m. New York time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for regular trading, on which the Trust calculates the Portfolio's net asset
value pursuant to the rules of the SEC and on which the Company is open for
business.
1.4 The Company shall wire payment for net purchase orders that
are transmitted to the Trust in accordance with Section 1.3 to a custodial agent
designated by the Trust no later than 12:00 noon New York time on the same
Business Day that the Trust receives notice of the order. Payments shall be made
in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's Shares will be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Trust's Shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on a Portfolio's Shares in additional Shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
dividends and capital gain distributions in cash. The Trust shall notify the
Company of the number of Shares so issued as payment of such dividends and
distributions.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the 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 such net asset value per share available by 6 p.m. New York
time.
1.8 The Company shall use the data provided by the Trust each
Business Day pursuant to Section 1.7 above immediately to calculate Account unit
values and to process transactions that receive that same Business Day's Account
unit values. The Company shall perform such Account processing the same Business
Day, and shall place corresponding orders to purchase or redeem Shares with the
Trust by 10:00 a.m. New York time the following Business Day.
1.9 The Trust agrees that its Shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans ("Plans") to the extent permitted by the
Exemptive Order. No Shares of any Portfolio will be sold directly to the general
public. The Company agrees that Trust Shares will be used only for the purposes
of funding the Contracts and Accounts listed in Schedule A, as amended from time
to time.
1.10 The Trust agrees that all Participating Insurance Companies
shall have the obligations and responsibilities regarding pass-through voting
and conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
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1.11 The Trust shall use its best efforts to provide closing net
asset value, dividend and capital gain information on a per-share basis to the
Company on each Business Day. Any material errors in the calculation of net
asset value, dividend and/or capital gain information shall be reported to the
Company immediately upon discovery. Material errors will be corrected in the
applicable Business Day's net asset value per share. The Company will adjust the
number of shares purchased or redeemed for the Accounts to reflect the correct
net asset value per share. The Trust or its service providers will be
responsible for the costs related to any correction except to the extent the
Company has caused the error.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the
SEC and any state regulators requiring such filing all shareholder reports,
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional information
of the Trust. The Trust shall bear the costs of registration and qualification
of its Shares, preparation and filing of the documents listed in this Section
2.1 and all taxes to which an issuer is subject on the issuance and transfer of
its Shares.
2.2 At the option of the Company, the Trust (at its expense) shall
either (a) provide the Company with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request for Contract owners for whom Shares are
held by an Account; or (b) provide the Company with a camera ready copy of such
documents in a form suitable for printing. The Trust shall provide the Company
with a copy of its statement of additional information in a form suitable for
duplication by the Company. The Trust (at its expense) shall provide the Company
with copies of any Trust-sponsored proxy materials in such quantity as the
Company shall reasonably require for distribution to Contract owners. The Trust
shall provide the materials described in this Section 2.2 within a reasonable
time prior to required printing and distribution of such materials.
2.3 (a) The Trust shall bear the costs of distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to Contract owners of and applicants for
policies for which the Trust is serving or is to serve as an investment vehicle.
The Trust shall bear the costs of distributing proxy materials (or similar
materials such as voting solicitation instructions) to Contract owners. The
Company assumes sole responsibility for ensuring that such materials are
delivered to Contract owners on a timely basis in accordance with applicable
federal and state securities laws.
(b) If the Company elects to include any materials
provided by the Trust, specifically prospectuses, statements of additional
information, shareholder reports and proxy materials, on its web site or in any
other computer or electronic format, the Company assumes sole responsibility for
maintaining such materials in the form provided by the Trust and for promptly
replacing such materials with all updates provided by the Trust.
2.4 The Company agrees and acknowledges that it has no rights to
the name and xxxx "Access" and that all use of any designation comprised in
whole or part of Access (an "Access
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Xxxx") under this Agreement shall inure to the benefit of the Trust. Except as
provided in Section 2.5, the Company shall not use any Access Xxxx on its own
behalf or on behalf of the Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating to the Accounts or
Contracts without the prior written consent of the Trust. Upon termination of
this Agreement for any reason, the Company shall cease all use of any Access
Xxxx as soon as reasonably practicable.
2.5 (a) The Company shall furnish, or cause to be furnished,
to the Trust or its designee, a copy of each Contract prospectus or statement of
additional information in which the Trust or its investment adviser is named
prior to the filing of such document with the SEC. The Company shall furnish, or
shall cause to be furnished, to the Trust or its designee, each piece of sales
literature or other promotional material, reports, any preliminary and final
voting instruction solicitation materials, applications for exemptions, requests
for no-action letters, and all amendments to any of the above in which the Trust
or its investment adviser is named, or which relates to the Accounts or
Contracts, at least fifteen Business Days prior to its use. No such material
shall be used if the Trust or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
(b) The Trust 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, the Accounts or the Contracts
are named, at least fifteen Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within fifteen Business Days after receipt of such material.
2.6 The Company and its affiliates shall not give any information
or make any representations or statements on behalf of the Trust or concerning
the Trust or any of its affiliates or its investment adviser(s) in connection
with the sale of the Contracts other than information or representations
contained in and accurately derived from the registration statement, including
the prospectus and statement of additional information, for the Trust Shares (as
such registration statement, prospectus and statement of additional information
may be amended or supplemented from time to time), reports of the Trust,
Trust-sponsored proxy statements, or in sales literature or other promotional
material approved by the Trust or its designee, except as required by legal
process or regulatory authorities or with the written permission of the Trust or
its designee.
2.7 The Trust and its affiliates shall not give any information or
make any representations or statements on behalf of the Company or concerning
the Company or any of its affiliates, the Contracts or the Accounts other than
information or representations contained in and accurately derived from the
registration statement, including the prospectus and statement of additional
information, for the Contracts (as such registration statement, prospectus, and
statement of additional information may be amended or supplemented from time to
time), or in materials approved by the Company or its designee for distribution
including sales literature or other promotional materials, except as required by
legal process or regulatory authorities or with the written permission of the
Company or its designee.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
owners of variable life insurance policies and/or variable annuity contracts,
the Company will provide pass-through
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voting privileges to Contract owners whose cash values are invested, through the
Accounts, in Shares of the Trust. The Trust shall require all Participating
Insurance Companies to calculate voting privileges in the same manner and the
Company shall be responsible for assuring that the Accounts calculate voting
privileges in the manner established by the Trust. With respect to each Account,
the Company will vote Shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received, as well as Shares it
owns that are held by that Account or directly, in the same proportion as those
Shares for which timely voting instructions are received. The Company and its
affiliates and agents will in no way recommend or oppose or interfere with the
solicitation of proxies for Trust Shares held by Contract owners without the
prior written consent of the Trust, which consent may be withheld in the Trust's
sole discretion.
2.9 The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws.
2.10 The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Trust and its affiliates that
is intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Contract owners) ("broker
only materials") is so used, and neither the Trust nor any of its affiliates
shall be liable for any losses, damages or expenses relating to the improper use
of such broker only materials.
2.11 For purposes of Sections 2.6 and 2.7, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media,
(e.g., on-line networks such as the Internet or other electronic messages),
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, 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, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 0000 Xxx.
2.12 The Trust will immediately notify the Company of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Trust's registration statement
under the 1933 Act or the Trust prospectus, (ii) any request by the SEC for any
amendment to such registration statement or the Trust prospectus that may affect
the offering of Shares of the Trust, (iii) the initiation of any proceedings for
that purpose or for any other purpose relating to the registration or offering
of the Trust's Shares, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of Shares of any Portfolio in any state or
jurisdiction, including, without limitation, any circumstances in which (a) such
Shares are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law, or (b) such law precludes the
use of such Shares as an underlying investment medium of the Contracts issued or
to be issued by the Company. The
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Trust will make every reasonable effort to prevent the issuance, with respect to
any Portfolio, of any such stop order, cease and desist order or similar order
and, if any such order is issued, to obtain the lifting thereof at the earliest
possible time.
2.13 The Company will immediately notify the Trust of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account prospectus that may affect the offering of Shares of the
Trust, (iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. The Company will make every reasonable effort
to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants (i) that it is an
insurance company duly organized and in good standing under the laws of the
State of Ohio and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) that it has legally and validly established and maintained
each Account as a segregated asset account under such law and the regulations
thereunder, and (iii) that the Contracts comply in all material respects with
all other applicable federal and state laws and regulations.
3.2 The Company represents and warrants that (i) each Account has
been registered or, prior to any issuance or sale of the Contracts, will be
registered and each Account will remain registered as a unit investment trust in
accordance with the provisions of the 1940 Act, (ii) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, (iii) each Account's 1933 Act registration statement relating
to the Contracts, together with any amendments thereto, will at all times comply
in all material respects with the requirements of the 1933 Act and the rules
thereunder, (iv) the Company will amend the registration statement for its
Contracts under the 1933 Act and for its Accounts under the 1940 Act from time
to time as required in order to effect the continuous offering of its Contracts
or as may otherwise be required by applicable law, and (v) each Account
prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
3.3 The Company represents and warrants that the Contracts or
interests in the Accounts are or, prior to issuance, will be registered as
securities under the 1933 Act. The Company further represents and warrants that:
(i) the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws, and (ii) the sale of the Contracts,
and the allocation of purchase payments under the Contracts to any Portfolio of
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the Trust, shall comply in all material respects with federal and state
securities and insurance suitability requirements.
3.4 The Trust represents and warrants (i) that it is duly
organized and validly existing under the laws of the State of Ohio, (ii) that it
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (iii) that its 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (iv)
that its Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
3.5 The Trust represents and warrants that the Trust Shares
offered and sold pursuant to this Agreement shall be registered under the 1933
Act to the extent required by the 1933 Act and the Trust shall be registered
under the 1940 Act to the extent required by the 1940 Act prior to any issuance
or sale of such Shares. The Trust shall amend its registration statement for its
shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The Trust
shall register and qualify its Shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Trust.
3.6 The Trust represents and warrants that each Portfolio intends
to comply with the diversification requirements set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended, (the "Code") and the regulations
thereunder and that the Trust will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio does not so comply or that a
Portfolio might not so comply in the future. In the event of any such
non-compliance, the Trust will take all reasonable steps to adequately diversify
the Portfolio so as to achieve compliance within the grace period afforded by
Section 1.817-5 of the regulations under the Code.
Notwithstanding any other provision of this Agreement, the
Company agrees that if the Internal Revenue Service ("IRS") asserts in writing
in connection with any governmental audit or review of the Company or, to the
Company's knowledge, of any Contract owners or annuitants, insureds or
participants under the Contracts (as appropriate) (collectively,
"Participants"), that any Portfolio has failed to comply with the
diversification requirements of Section 817(h) of the Code or the Company
otherwise becomes aware of any facts that could give rise to any claim against
the Trust or its affiliates as a result of such a failure or alleged failure:
(a) the Company shall promptly notify the Trust of such
assertion or potential claim;
(b) the Company shall consult with the Trust as to how to
minimize any liability that may arise as a result of such failure or alleged
failure.
(c) the Company shall use its best efforts to minimize
any liability of the Trust or its affiliates resulting from such failure,
including, without limitation, demonstrating,
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pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of
the IRS that such failure was inadvertent;
(d) the Company shall permit the Trust, its affiliates
and their legal and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial proceeding or
contests (including judicial appeals thereof) with the IRS, any Participant or
any other claimant regarding any claims that could give rise to liability to the
Trust or its affiliates as a result of such a failure or alleged failure;
provided, however, that the Company will retain control of the conduct of such
conferences discussions, proceedings, contests or appeals;
(e) any written materials to be submitted by the Company
to the IRS, any Participant or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to Treasury Regulations Section
1.817-5(a)(2)), (a) shall be provided by the Company to the Trust (together with
any supporting information or analysis) at least ten (10) business days or such
shorter period to which the Parties hereto agree prior to the day on which such
proposed materials are to be submitted, and (b) shall not be submitted by the
Company to any such person without the express written consent of the Trust
which shall not be unreasonably withheld;
(f) the Company shall provide the Trust or its affiliates
and their accounting and legal advisors with such cooperation as the Trust shall
reasonably request (including, without limitation, by permitting the Trust and
its accounting and legal advisors to review the relevant books and records of
the Company) in order to facilitate review by the Trust or its advisors of any
written submissions provided to it pursuant to the preceding clause or its
assessment of the validity or amount of any claim against its arising from such
a failure or alleged failure;
(g) the Company shall not with respect to any claim of
the IRS or any Participant that would give rise to a claim against the Trust or
its affiliates (a) compromise or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or judicial appeals, without
the express written consent of the Trust or its affiliates, which shall not be
unreasonably withheld; provided that the Company shall not be required, after
exhausting all administrative remedies, to appeal any adverse judicial decision
unless the Trust or its affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for taking such appeal; and
provided further that the costs of any such appeal shall be borne equally by the
Parties hereto; and
(h) the Trust and its affiliates shall have no liability
as a result of such failure or alleged failure if the Company fails to comply
with any of the foregoing clauses (a) through (g), and such failure could be
shown to have materially contributed to the liability.
Should the Trust or any of its affiliates refuse to give its
written consent to any compromise or settlement of any claim or liability
hereunder, the Company may, in its discretion, authorize the Trust or its
affiliates to act in the name of the Company in, and to control the conduct of,
such conferences, discussions, proceedings, contests or appeals and all
administrative or judicial appeals thereof, and in that event the Trust or its
affiliates shall bear the fees and expenses associated with the conduct of the
proceedings that it is so authorized to
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control; provided, that in no event shall the Company have any liability
resulting from the Trust's refusal to accept the proposed settlement or
compromise with respect to any failure caused by the Trust. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 0000 Xxx.
3.7 The Trust represents that each Portfolio intends to qualify as
a Regulated Investment Company under Subchapter M of the Code and that it will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.8 The Trust's Shares currently do not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or otherwise, although they may make such payments in the future. To the
extent that the Trust decides to finance distribution expenses for the Shares
pursuant to Rule 12b-1, the Trust undertakes to have a board of trustees, a
majority of whom are not interested persons of the Trust, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
3.9 The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) under the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
3.10 The Company represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it will make every
effort to maintain such treatment; the Company will notify the Trust immediately
upon having a reasonable basis for believing that any of the Contracts have
ceased to be so treated or that they might not be so treated in the future.
3.11 The Company represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. The Company will make every effort to continue to meet
such definitional requirements, and it will notify the Trust immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
3.12 Each of the Parties represents and warrants that it shall
perform its obligations hereunder in compliance with any applicable state and
federal laws.
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ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's Shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance policyowners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or
existing conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists that affects the interests of Contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract owners
are also affected, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees) take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, which
steps could include: (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a change; and
(b) establishing a new registered management investment company or managed
separate account.
4.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to withdraw each affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required to adequately remedy the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Any such withdrawal and termination must take place within six (6)
months after the Trust gives written notice that this provision is
-11-
being implemented. Until the end of such six (6) month period, the Trust shall
continue to accept and implement orders by the Company for the purchase and
redemption of Shares of the applicable Portfolio.
4.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the Trustees
inform the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required to adequately
remedy the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Until the end of such six (6) month
period, the Trust shall continue to accept and implement orders by the Company
for the purchase and redemption of Shares of the applicable Portfolio.
4.6 The Company agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Contract owners.
4.7 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required 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 Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination.
4.8 The Company shall at least annually submit to the Trustees
such reports, materials or data as the Trustees may reasonably request so that
the Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.9 As of the date of this Agreement, the Trust has not received
the Exemptive Order. If and when the Exemptive Order is granted, the parties
shall take all such steps as may be necessary to amend this Agreement to conform
with the provisions and conditions of the Exemptive Order, as granted. In
addition, the parties shall take all such steps as may be necessary to amend
this Agreement to assure compliance with all federal and state laws to the
extent any Trust Shares are to be sold to any unregistered accounts or to any
Plan.
4.10 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 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Exemptive Order) on terms and conditions
materially different from those contained in the Exemptive Order, then the Trust
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be
-12-
necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to
indemnify and hold harmless the Trust, its affiliates and each of its Trustees,
officers, employees and agents and each person, if any, who controls the Trust
or any of its affiliates within the meaning of Section 15 of the 1933 Act
(collectively, the "Trust Indemnified Parties" for purposes of this Article V)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or expenses (including
the reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Trust Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts themselves or in
advertising or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing) (collectively, "Company Documents" for the
purposes of this Article V), 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 indemnity shall not apply as to any Trust Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and was accurately derived from written information furnished to the
Company or its affiliates by or on behalf of the Trust or its affiliates for use
in Company Documents or otherwise for use in connection with the sale of the
Contracts or Trust Shares; or
(b) arise out of or result from statements or
representations (other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section 5.2(a)) or the
negligent or wrongful conduct of the Company, or persons under its control
(including, without limitation, its employees), in connection with the sale or
distribution of the Contracts or Trust Shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust Documents as
defined in Section 5.2(a) 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 statement or omission was made in reliance upon
and accurately derived from written information furnished to the Trust or its
affiliates by or on behalf of the Company or its affiliates; or
(d) arise out of or result from any failure by the
Company to perform the obligations, provide the services or furnish the
materials required under the terms of this Agreement; or
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(e) arise out of or result from any material breach of
any representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify
and hold harmless the Company its affiliates and each of its directors,
officers, employees and agents and each person, if any, who controls the Company
or any of its affiliates within the meaning of Section 15 of the 1933 Act
(collectively, the "Company Indemnified Parties" for purposes of this Article V)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses"), to which the Company Indemnified Parties
may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) 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 Trust or in advertising or sales literature for
the Trust (or any amendment or supplement to any of the foregoing),
(collectively, "Trust Documents" for the purposes of this Article V), 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 indemnity shall not apply as to any
Company Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately derived from
written information furnished to the Trust or its affiliates by or on behalf of
the Company or its affiliates for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust Shares; or
(b) arise out of or result from statements or
representations (other than statements or representations contained in and
accurately derived from Company Documents) or the negligent or wrongful conduct
of the Trust or persons under its control (including, without limitation, its
employees), in connection with the sale or distribution of the Contracts or
Trust Shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company Documents 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 statement or omission was made in reliance upon and accurately derived from
written information furnished to the Company or its affiliates by or on behalf
of the Trust or its affiliates; or
(d) arise out of or result from any failure by the Trust
to perform the obligations, provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of
any representation and/or warranty made by the Trust in this Agreement or arise
out of or result from any other material breach of this Agreement by the Trust.
-14-
5.3 No Party shall be liable under the indemnification provisions
of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or
assessed against a Trust Indemnified Party or a Company Indemnified Party, as
applicable (as to each, an "Indemnified Party") to the extent the Losses arise
from such Indemnified Party's willful misfeasance, bad faith or negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
5.4 No Party shall be liable under the indemnification provisions
of Sections 5.1 or 5.2, as applicable, with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the party or
parties against whom Indemnification is sought (the "Indemnifying Party") in
writing within a reasonable time after the summons, or other first written
notification, giving information of the nature of the claim shall have been
served upon or otherwise received by such Indemnified Party (or after such
Indemnified Party shall have received notice of service upon or other
notification to any designated agent), but failure to notify the Indemnifying
Party of any such claim shall not relieve such Indemnifying Party from any
liability which it may have to the Indemnified Party in the absence of Sections
5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified
Parties, the Indemnifying Party shall be entitled to participate, at its own
expense, in the defense of such action. The Indemnifying Party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the Indemnifying Party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall cooperate with the Indemnifying Party and bear the fees and expenses of
any additional counsel retained by it, and the Indemnifying Party will not be
liable to the Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI
Confidentiality
6.1 The Trust acknowledges that the identities of the customers of
Company or any of its affiliates (collectively, the "Company Protected Parties"
for purposes of this Article VI), information maintained regarding those
customers, and all computer programs and procedures or other information
developed by the Company Protected Parties or any of their employees or agents
in connection with Company's performance of its duties under this Agreement are
the valuable property of the Company Protected Parties. The Trust agrees that if
it comes into possession of any list or compilation of the identities of or
other information about the Company Protected Parties' customers, or any other
information or property of the Company Protected Parties, other than such
information as may be independently developed or compiled by the Trust from
information supplied to it by the Company Protected Parties' customers who also
maintain accounts directly with the Trust, the Trust will hold such information
or property in confidence and refrain from using, disclosing or distributing any
of such information or other property except: (a) with Company's prior written
consent; or (b) as required by law or judicial process. The Company acknowledges
that the identities of the customers of the Trust or any of its affiliates
(collectively, the "the Trust Protected Parties" for purposes of this Article
VI), information maintained regarding those customers, and all computer programs
and procedures or
-15-
other information developed by the Trust Protected Parties or any of their
employees or agents in connection with the Trust's performance of its duties
under this Agreement are the valuable property of the Trust Protected Parties.
The Company agrees that if it comes into possession of any list or compilation
of the identities of or other information about the Trust Protected Parties'
customers or any other information or property of the Trust Protected Parties,
other than such information as may be independently developed or compiled by
Company from information supplied to it by the Trust Protected Parties'
customers who also maintain accounts directly with the Company, the Company will
hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property except: (a)
with the Trust's prior written consent; or (b) as required by law or judicial
process. Each party acknowledges that any breach of the agreements in this
Article VI would result in immediate and irreparable harm to the other parties
for which there would be no adequate remedy at law and agree that in the event
of such a breach, the other parties will be entitled to equitable relief by way
of temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
ARTICLE VII
Termination
7.1 (a) This Agreement may be terminated by either party
for any reason by ninety (90) days advance written notice delivered to the
other party.
(b) This Agreement may be terminated by the Company
immediately upon written notice to the Trust with respect to any Portfolio:
(i) based upon the Company's determination that
Shares of such Portfolio are not reasonably available to meet the requirements
of the Contracts; or
(ii) in the event any of the Portfolio's Shares
are not registered, and in all material respects issued or sold in accordance
with applicable state and/or federal law or such law precludes the use of such
Shares as the underlying investment media of the Contracts issued or to be
issued by the Company; or
(iii) in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Trust may fail to so qualify; or
(iv) in the event that such Portfolio fails to
meet the diversification requirements specified in this Agreement.
7.2 Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available additional
Shares of the Trust (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement, provided that the Company continues to pay the costs set
forth in Section 2.3 and meet all obligations of the Company under this
Agreement (treating it as being in full force and effect), and further provided
that Shares of the Trust (or any Portfolio) shall only be required to be made
available with respect to owners of the Contracts for whom Shares are held by an
Account on the effective date of the termination. Such Contract owners
-16-
will be permitted to reallocate investments in the Portfolio and/or invest in
the Portfolio upon the making of additional purchase payments under the
Contracts. The provisions of this Section 7.2 shall not apply to any termination
pursuant to Article IV or in the event the Trust determines to liquidate the
Portfolio and end the Portfolio's existence.
7.3 The provisions of Articles V and VI shall survive the
termination of this Agreement, and the provisions of Articles II and IV shall
survive the termination of this Agreement as long as Shares of the Trust are
held on behalf of Contract owners in accordance with Section 7.2.
7.4 This Agreement will terminate as to a Portfolio upon at least
ninety (90) days advance written notice:
(a) at the option of the Trust upon institution of formal
proceedings against the Company by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body if the Trust shall determine,
in its sole judgment exercised in good faith, that the Company has suffered a
material adverse change in its business, operations, financial condition, or
prospects since the date of this Agreement or is the subject of material adverse
publicity; or
(b) at the option of the Company upon institution of
formal proceedings against the Trust, its principal underwriter, or its
investment adviser by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust, its principal
underwriter, or its investment adviser has suffered a material adverse change in
its business, operations, financial condition, or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
7.5 This Agreement will terminate as to a Portfolio immediately
upon prior written notice which shall be given as soon as possible within
twenty-four (24) hours after the terminating Party learns of the event causing
termination to be required:
(a) at the option of the Trust if the Contracts issued by
the Company cease to qualify as annuity contracts or life insurance contracts
under the Code (other than by reason of the Portfolio's noncompliance with
Section 817(h) or Subchapter M of the Code) or if interests in an Account under
the Contracts are not registered, or, in all material respects, are not issued
or sold in accordance with any applicable federal or state law; or
(b) upon another Party's material breach of any provision
of this Agreement.
7.6 The Parties hereto agree to cooperate and give reasonable
assistance to one another in taking all necessary and appropriate steps for the
purpose of ensuring that an Account owns no Shares of a Portfolio after the
effective date of this Agreement's termination with respect to such Shares or,
if such ownership following termination cannot be avoided, that the duration
thereof is as brief as reasonably practicable. Such steps may include, for
example, combining the affected Account with another Account, substituting other
portfolio shares for those of the affected Portfolio, or otherwise terminating
participation by the Contracts in such Portfolio.
-17-
ARTICLE VIII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust: Xxxxxxx X. Xxxxxxxx
Access Variable Insurance Trust
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
with a copy to: Xxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxx Xxxx LLP
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000
If to the Company: Xxxx X. Xxxxxx, Esq.
Vice President and Senior Counsel
Western Reserve Life Assurance Co. of Ohio
000 Xxxxxxxx Xxxxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
ARTICLE IX
Miscellaneous
9.1 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.
9.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
9.3 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.
9.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Ohio without
regard for that state's principles of conflict of laws.
9.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of Shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
-18-
9.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
9.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the Parties hereto are entitled to under
state and federal laws.
9.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
9.9 Neither this Agreement nor any of its rights or obligations
hereunder may be assigned by any party without the prior written approval of the
other parties.
9.10 No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by all
Parties hereto.
IN WITNESS WHEREOF, the Parties have caused their duly authorized
officers to execute this Agreement as of the date and year first above written.
ACCESS VARIABLE INSURANCE TRUST
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title:
WESTERN RESERVE LIFE ASSURANCE
CO. OF OHIO
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President and Senior Counsel
-19-
SCHEDULE A
Separate Accounts and Associated Contracts
AVIT Portfolios:
Potomac Dow 30 Plus Portfolio
Potomac OTC Plus Portfolio
Access U.S. Government Money Market Portfolio
Xxxxx S&P REIT Index Portfolio
NAME OF SEPARATE ACCOUNT AND CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
WRL SERIES LIFE ACCOUNT (EST. JULY 16, 1985)
WRL Freedom Elite Advisor VL30
WRL Freedom Wealth Protector JLS01
WRL Freedom Elite Builder VL95
WRL SERIES ANNUITY ACCOUNT (EST. APRIL 12, 1988)
WRL Freedom Premier WL18
WRL Freedom Premier II VA30
WRL Freedom Enhancer VA25
WRL Freedom Enhancer II VA32
WRL Freedom Access WL17
WRL Freedom Access II VA31
WRL Freedom Wealth Creator VA16
WRL Freedom Select JA01
WRL Xxxxxxx Xxxxxxxx XX00000
WRL Freedom Bellwether VA00010
WRL Freedom Conqueror VA00010
WRL Freedom Variable Annuity VA.02.06.88
