PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of August, 2007 by and
between XXXXXXX XXXXX TRUST, a statutory trust formed under the laws of Delaware
(the "Trust"), XXXXXXX, SACHS & CO., a New York limited partnership (the
"Distributor"), and COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY, a
Massachusetts life insurance company (the "Company"), on its own behalf and on
behalf of each separate account of the Company identified herein.
WHEREAS, the Trust engages in business as an open-end management investment
company of the series-type mutual fund offering shares of beneficial interest
(the "Trust shares") consisting of one or more separate series ("Series") of
shares, each such Series representing an interest in a particular investment
portfolio of securities and other assets (a "Fund"), and which Series is
subdivided into various classes ("Classes") with each such Class supporting a
distinct charge and expense arrangement; and
WHEREAS, the Trust is available for the purpose of serving as an investment
vehicle for life insurance company separate accounts supporting variable annuity
contracts and variable life insurance policies to be offered by insurance
companies and may also be utilized by qualified retirement plans; and
WHEREAS, the Distributor has the exclusive right to distribute Trust shares
to qualifying investors; and
WHEREAS, the Company desires that one or more Funds of the Trust serve as
an investment vehicle for a certain separate account(s) of the Company and the
Distributor desires to sell shares of certain Series and/or Class(es) to such
separate account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust, the
Distributor and the Company agree as follows:
ARTICLE I
ADDITIONAL DEFINITIONS
1.1. "Accounts" -- the separate accounts of the Company described more
specifically in Schedules 1A, 2A and 3A to this Agreement.
1.2. "Business Day"--each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.3. "Code"--the Internal Revenue Code of 1986, as amended, and any
successor thereto.
1.4. "Contracts"--the class or classes of variable annuity contracts and/or
variable life insurance policies issued by the Company and described more
specifically on Schedules 1B, 2B, or 3B to this Agreement.
1.5. "Contract Owners"--the owners of the Contracts, as distinguished from
all Product Owners.
1.6. "Participating Account"--a separate account investing all or a portion
of its assets in the Trust, including the Accounts.
1.7. "Participating Insurance Company"--any insurance company with a
Participating Account, including the Company.
1.8. "Participating Investor"--any Participating Account or Participating
Insurance Company, including the Accounts and the Company.
1.9. "Products"--variable annuity contracts and variable life insurance
policies supported by Participating Accounts, including the Contracts.
1.10. "Product Owners"--owners of Products, including Contract Owners.
1.11. "Trust Board"--the board of trustees of the Trust.
1.12. "Registration Statement"--with respect to the Trust shares or a class
of Contracts, the registration statement filed with the SEC to register such
securities under the 1933 Act, or the most recently filed amendment thereto, in
either case in the form in which it was declared or became effective. The
Contracts' Registration Statement for each class of Contracts is described more
specifically on Schedule 1B to this Agreement. The Trust's Registration
Statement is filed on Form N-1A (File No. 333-35883).
1.13. "1940 Act Registration Statement"--with respect to the Trust or the
Schedule 1 Accounts, the registration statement filed with the SEC to register
such person as an investment company under the 1940 Act, or the most recently
filed amendment thereto. The Schedule 1 Accounts' 1940 Act Registration
Statements are described more specifically on Schedule 1A to this Agreement. The
Trust's 1940 Act Registration Statement is filed on Form N-1A (File No.
811-08361).
1.14. "Prospectus"--with respect to shares of a Series (or Class) of the
Trust, each version of the definitive prospectus or supplement thereto filed
with the SEC pursuant to Rule 497 under the 1933 Act. With respect to the
Contracts, each version of the definitive prospectus or supplement thereto for a
Schedule 1 Contract filed with the SEC pursuant to Rule 497 under the 1933 Act,
or each version of any offering memorandum or supplement thereto for a Schedule
2 or Schedule 3 Contract. With respect to any provision of this Agreement
requiring a party to take action in accordance with a Prospectus, such reference
thereto shall be deemed to be to the version for the applicable Series, Class or
Contracts last so filed prior to the taking of such
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action. For purposes of Article IX, the term "Prospectus" shall include any
statement of additional information incorporated therein.
1.15. "Schedule 1 Accounts"--Accounts registered under the 1940 Act as unit
investment trusts and listed on Schedule 1A.
1.16. "Schedule 2 Accounts"--Accounts excluded from the definition of an
investment company as provided for by Section 3(c)(11) of the 1940 Act and
listed on Schedule 2A.
1.17. "Schedule 3 Accounts"--Accounts excluded from the definition of an
investment company as provided for by Section 3(c)(1) or Section 3(c)(7) of the
1940 Act and listed on Schedule 3A.
1.18. "Schedule 1 Contracts"--Contracts through which interests in Schedule
1 Accounts are offered and issued, which interests are registered as securities
under the 0000 Xxx.
1.19. "Schedule 2 Contracts"--Contracts through which interests in Schedule
2 Accounts are offered and issued to trustees of qualified pension and
profit-sharing plans and certain government plans identified in Section 3(a)(2)
of the 1933 Act (which interests are not registered as securities in reliance
upon Section 3(a)(2) of the 1933 Act).
1.20. "Schedule 3 Contracts"--Contracts through which interests in Schedule
3 Accounts are offered and issued to "accredited investors", as that term is
defined in Regulation D under the 1933 Act, or other investors permitted by
Regulation D (which interests are not registered as securities in reliance upon
Regulation D).
1.21. "Statement of Additional Information"--with respect to the shares of
the Trust or a class of Contracts, each version of the definitive statement of
additional information or supplement thereto filed with the SEC pursuant to Rule
497 under the 1933 Act. With respect to any provision of this Agreement
requiring a party to take action in accordance with a Statement of Additional
Information, such reference thereto shall be deemed to be the last version so
filed prior to the taking of such action.
1.22. "SEC"--the Securities and Exchange Commission.
1.23. "NASD"--The National Association of Securities Dealers, Inc.
1.24. "1933 Act"--the Securities Exchange Act of 1933, as amended.
1.25. "1940 Act"--the Investment Company Act of 1940, as amended.
ARTICLE II
SALE OF TRUST SHARES
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2.1. AVAILABILITY OF SHARES
(a) The Trust has granted to the Distributor exclusive authority to
distribute the Trust shares and to select which Series or Classes of Trust
shares shall be made available to Participating Investors. Pursuant to such
authority, and subject to Article IX hereof, the Distributor shall make
available to the Company for purchase on behalf of the Accounts, shares of
the Series and Classes listed on Schedules 1B, 2B, and 3B to this
Agreement, such purchases to be effected at net asset value in accordance
with Section 2.3 of this Agreement. The Distributor shall make such Series
and Classes available to the Company in accordance with the terms and
provisions of this Agreement until: (i) this Agreement is terminated
pursuant to Article IX, or (ii) the Distributor suspends or terminates the
offering of shares of such Series or Classes in the circumstances described
in Article IX.
(b) Notwithstanding clause (a) of this Section 2.1, Series or Classes
of Trust shares in existence now or in the future will be made available to
the Company only as the Distributor may so provide, subject to the
Distributor's rights set forth in Article X to suspend or terminate the
offering of shares of any Series or Class or to terminate this Agreement.
(c) The parties acknowledge and agree that: (i) the Trust may revoke
the Distributor's authority pursuant to the terms and conditions of its
distribution agreement with the Distributor, and (ii) the Trust reserves
the right in its sole discretion to refuse to accept a request for the
purchase of Trust shares.
2.2. REDEMPTIONS. The Trust shall redeem, at the Company's request, any
full or fractional Trust shares held by the Company on behalf of the Account,
such redemptions to be effected at net asset value in accordance with Section
2.3 of this Agreement. Notwithstanding the foregoing: (a) the Company shall not
redeem Trust shares attributable to Contract Owners except in the circumstances
permitted in Article IX of this Agreement, and (b) the Trust may delay
redemption of Trust shares of any Series or Class to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the Prospectus for
such Series or Class.
2.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Trust hereby appoints the Company as an agent of the Trust for
the limited purpose of receiving purchase and redemption requests on behalf
of the Schedule 1 Accounts (but not on behalf of the Schedule 2 Accounts,
Schedule 3 Accounts, or the Company's general account for shares of those
Series or Classes made available hereunder, based on transactions in
Account units of the Schedule 1 Accounts under the Schedule 1 Contracts.
Receipt of any such requests (or effectuation of such transaction or
processing) on any Business Day by the Company as such limited agent of the
Trust prior to the Trust's close of business as defined from time to time
in the applicable Prospectus for such Series or Class (which as of the date
of execution of this Agreement
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is the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. New York Time)) shall constitute receipt by the Trust on that
Business Day, provided that the Trust receives actual and sufficient notice
of such request by 9:00 a.m. New York Time on the next following Business
Day. Such notice may be communicated by telephone to the office or person
designated for such notice by the Trust and shall be confirmed by
facsimile.
(b) The Company shall pay for shares of each Series or Class on the
same day that it provides actual notice to the Trust of a purchase request
for such shares. Payment for Series or Class shares shall be made in
federal funds transmitted to the Trust by wire by 12:00 p.m. New York Time
on the day the Trust receives actual notice of the purchase request for
Series or Class shares (unless the Trust determines and so advises the
Company that sufficient proceeds are available from redemption of shares of
other Series or Classes effected pursuant to redemption requests tendered
by the Company on behalf of the Account). In no event may proceeds from the
redemption of shares requested pursuant to an order received by the Company
after the Trust's close of business on any Business Day be applied to the
payment for shares for which a purchase order was received prior to the
Trust's close of business on the same day. If the issuance of Trust shares
is canceled because federal funds are not timely received, the Company
shall indemnify the respective Fund and Distributor with respect to all
costs, expenses and losses relating thereto. Upon the Trust's receipt of
federal funds so wired, such funds shall cease to be the responsibility of
the Company and shall become the responsibility of the Trust. If federal
funds are not received on time, such funds will be invested, and Trust
shares purchased thereby will be issued, as soon as practicable after
actual receipt of such funds but in any event not on the same day that the
purchase order was received.
(c) Payment for Trust shares redeemed by the Accounts or the Company
shall be made in federal funds transmitted by wire to the Company or any
other person properly designated in writing by the Company, such funds
normally to be transmitted by 6:00 p.m. New York Time on the next Business
Day after the Trust receives actual notice of the redemption order for such
shares (unless redemption proceeds are to be applied to the purchase of
Trust shares of other Series or Classes in accordance with Section 2.3(b)
of this Agreement), except that the Trust reserves the right to redeem its
shares in assets other than cash and to delay payment of redemption
proceeds to the extent permitted by the 1940 Act, any rules or regulations
or orders thereunder, or the applicable Prospectus. The Trust shall not
bear any responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds by the Company or the Accounts; the Company alone
shall be responsible for such action.
(d) Any purchase or redemption request for Trust shares held or to be
held by Schedule 2 Accounts, Schedule 3 Accounts, or in the Company's
general account, shall be effected at the net asset value per share next
determined after the Trust's actual receipt of such request, provided that,
in the case of a purchase request, payment for Trust shares so requested is
received by the Trust in federal funds prior to close of business for
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determination of such value, as defined from time to time in the Prospectus
for such Series or Class.
(e) Prior to the first purchase of any Trust shares hereunder, the
Company and the Trust shall provide each other with all information
necessary to effect wire transmissions of federal funds to the other party
and all other designated persons pursuant to such protocols and security
procedures as the parties may agree upon. Should such information change
thereafter, the Trust and the Company, as applicable, shall notify the
other in writing of such changes, observing the same protocols and security
procedures, at least three Business Days in advance of when such change is
to take effect. The Company and the Trust shall observe customary
procedures to protect the confidentiality and security of such information,
but the Trust shall not be liable to the Company for any breach of
security.
(f) The procedures set forth herein are subject to any additional
terms set forth in the applicable Prospectus for the Series or Class or by
the requirements of applicable law.
2.4. NET ASSET VALUE. The Trust shall use its best efforts to inform the
Company of the net asset value per share for each Series or Class available to
the Company as soon as reasonably practicable after the net asset value per
share for such Series or Class is calculated. The Trust shall calculate such net
asset values in accordance with the Prospectus for such Series or Class.
2.5. DIVIDENDS AND DISTRIBUTIONS. The Trust shall furnish notice to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Accounts, hereby elects to receive all such
dividends and distributions as are payable on any Series or Class shares in the
form of additional shares of that Series or Class. The Company reserves the
right, on its behalf and on behalf of the Accounts, to revoke this election and
to receive all such dividends and capital gain distributions in cash; to be
effective, such revocation must be made in writing and received by the Trust at
least ten Business Days prior to a dividend or distribution date. The Trust
shall notify the Company promptly of the number of Series or Class shares so
issued as payment of such dividends and distributions.
2.6. BOOK ENTRY. Issuance and transfer of Trust shares shall be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Purchase and redemption orders for Trust shares shall be recorded in
an appropriate ledger for each Account.
2.7. PRICING ERRORS. Any material errors in the calculation of the net
asset value of a Fund, the net asset value per share of any Series or Class of
Trust shares, dividends or capital gain information shall be reported to the
Company immediately upon discovery. An error shall be deemed "material" based on
the Trust's interpretation of the SEC's position and policy with regard to
materiality, as it may be modified from time to time. Neither the Trust, any
Fund, the Distributor, nor any of their affiliates shall be liable for any
information provided to the
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Company pursuant to this Agreement, which information is based on incorrect
information supplied by or on behalf of the Company or any other Participating
Company to the Trust or the Distributor.
2.8. DISRUPTIVE TRADING.
(a) The Trust has adopted policies designed to prevent frequent
purchases and redemptions of any Series of Trust shares in quantities great
enough to: (i) disrupt orderly management of the corresponding Fund's
investment portfolio, or (ii) dilute the value of the outstanding Trust
shares of that Series ("Disruptive Trading Policies"). These policies are
disclosed in the Trust's prospectus. From time to time, the Trust and the
Distributor implement procedures reasonably designed to enforce the Trust's
Disruptive Trading Policies and shall provide a written description of such
procedures (and revisions thereto) to the Company. As a procedure in
furtherance of its Disruptive Trading Policies, the Trust may assess fees,
to be paid by one or more Accounts or by the Company, upon redemption one
or more Series or Classes of Trust shares within certain stated time
periods after such shares have been purchased.
(b) The Company agrees to develop, adopt and maintain policies
regarding transactions in Account units reasonably designed to complement
the Trust's Disruptive Trading Policies and, from time to time, to
implement procedures regarding transactions in Account units reasonably
designed to effectuate the Trust's procedures for preventing disruptive
trading in Trust shares. In particular, in the event that the Trust or the
Distributor has identifies a particular Contract Owner as having engaged in
transactions in Account units that directly or indirectly violate the
Trust's Disruptive Trading Policies, the Company agrees, at the written
request of the Trust or the Distributor, to restrict or prohibit further
transactions in Account units by that Contract Owner which could result in
additional purchases and redemptions of a specified Series and/or Class of
Trust shares in violation of the Trust's Disruptive Trading Policies.
(c) In furtherance of Section 2.8(b), above, and Rule 22c-2 under the
Investment Company Act of 1940, the Company, the Trust and the Distributor
have entered into a "Rule 22c-2 Information Access Agreement," pursuant to
which the Trust and the Distributor may, from time to time, investigate
purchases and redemptions of any Series or Class of Trust shares by the
Company on behalf of the Accounts that appears to violate, or has the
potential to violate, the Trust's Disruptive Trading Policies. When
requested by the Trust or the Distributor in writing, the Company agrees to
provide the information and follow the procedures set forth in the Rule
22c-2 Information Access Agreement. To the extent the terms of the Rule
22c-2 Information Access Agreement conflict with the terms of this
Agreement, the Rule 22c-2 Information Access Agreement shall control.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. COMPANY. The Company represents and warrants that: (a) it is an
insurance company duly organized and in good standing under the laws of the
jurisdiction of its organization, (b) it has legally and validly established
each Account as a segregated asset account under applicable state law to serve
as segregated investment accounts for the Contracts, (c) each Schedule 1 Account
is duly registered as a unit investment trust under the 1940 Act and each such
Account's 1940 Act Registration Statement has been filed with the SEC in
accordance with the 1940 Act, (d) the Schedule 2 Accounts and Schedule 3
Accounts each qualify for the exclusions on which they rely for not registering
as investment companies under the 1940 Act, (e) it has registered, or will
register, all Schedule 1 Contracts offered and sold pursuant to this Agreement
under the 1933 Act and has effective Registration Statements for that purpose,
(f) it will offer and sell the Contracts in compliance in all material respects
with all applicable federal and state laws and regulations, including, but not
limited to, state insurance law and federal securities law suitability
requirements, (g) the Contracts have been filed, qualified and/or approved for
sale, as applicable, under the insurance laws and regulations of the states in
which the Contracts will be offered, (h) sales of the Schedule 2 Contracts and
Schedule 3 Contracts properly qualify for exemptions on which the Company relies
in not registering such Contracts, or interests in the Account through which
each is issued, under the 1933 Act, (i) its activities and those of its
employees in promoting the sale and distribution of the Contracts and effecting
Contract Owner transactions in Account units have not caused, and will not
cause, the Company to be deemed a broker-dealer, (j) orders it places for the
purchase and redemption of Trust shares pursuant to Article 2.3 of this
Agreement are the net result of transactions in units issued by an Account,
instructions for which are received by the Company prior to the Trust's close of
business as defined from time to time in the applicable Prospectus for such
Series or Class (which as of the date of execution of this Agreement is the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New
York Time)), and (k) it will notify the Distributor and the Trust promptly if
for any reason it is unable to perform its obligations under this Agreement.
3.2. TRUST. The Trust represents and warrants that: (a) it is a statutory
trust duly organized and validly existing under Delaware law, (b) it is duly
registered under the 1940 Act as an open-end management investment company and
has filed a 1940 Act Registration Statement with the SEC in accordance with the
provisions of the 1940 Act, (c) Trust shares issued pursuant to this Agreement
have been, or will be, duly authorized and validly issued in accordance with
applicable law, (d) it will offer and sell Trust shares pursuant to this
Agreement in compliance in all material respects with all applicable federal and
state laws and regulations, (e) it has registered, or will register, all Trust
shares offered and sold pursuant to this Agreement under the 1933 Act and has an
effective Registration Statement for that purpose, (f) as long as this Agreement
remains in effect, it shall remain in continuous compliance with Article 6.1 of
this Agreement, and (g) the Trust's Board, a majority of whom are not interested
persons of the Trust, have formulated and approved the plan under Rule 12b-1
("Rule 12b-1 Plan") to finance distribution expenses.
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3.3. DISTRIBUTOR. The Distributor represents and warrants that: (a) it is a
limited partnership duly organized and in good standing under New York law, and
(b) it is registered as a broker-dealer under federal and applicable state
securities laws and is a member of the NASD.
3.4. LEGAL AUTHORITY. Each party represents and warrants that the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary corporate,
partnership or trust action, as applicable, by such party, and, when so executed
and delivered, this Agreement will be the valid and binding obligation of such
party enforceable in accordance with its terms.
3.5. BONDING REQUIREMENT. Each party represents and warrants that all of
its directors, officers, partners and employees are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage in an amount
not less than the amount required by the applicable rules of the NASD and the
federal securities laws. The aforesaid bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable bonding company. All parties
shall make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, shall provide evidence thereof
promptly to any other party upon written request therefor, and shall notify the
other parties promptly in the event that such coverage no longer applies.
ARTICLE IV
REGULATORY REQUIREMENTS
4.1. TRUST FILINGS. The Trust shall amend the Trust's Registration
Statement from time to time and maintain its effectiveness as required in order
to effect the continuous offering of Trust shares in compliance with applicable
law. Notwithstanding the foregoing, the Trust shall register and qualify Trust
shares for sale in accordance with the laws of various states if, and to the
extent, deemed advisable by the Trust or the Distributor. The Trust shall amend
its 1940 Act Registration Statement as required by the 1940 Act to maintain its
registration under the 1940 Act for as long as Trust shares are outstanding. The
Trust shall file Form 24F-2 and pay 1933 Act registration fees for all Series
and Classes of Trust shares as required by Rule 24f-2 under the 1940 Act. The
Trust shall comply in all material respects with the 1940 Act.
4.2. ACCOUNT FILINGS. The Company shall amend the Registration Statement
for each Schedule 1 Contract from time to time and maintain its effectiveness as
required in order to effect the continuous offering of such Contracts in
compliance with applicable law for as long as purchase payments are made under
such Contracts. Notwithstanding the foregoing, the Company: (a) may permit the
effectiveness of a Schedule 1 Contract's Registration Statement expire if the
Company has supplied the Trust with an SEC "no-action" letter or opinion of
counsel satisfactory to the Trust's counsel to the effect that maintaining such
Registration Statement on a current basis is no longer required, and (b) shall
register and qualify the Contracts for sale in accordance with the securities
laws of the various states only if, and to the extent, it considers such
registration and qualification necessary. The Company shall amend each Schedule
1 Account's 1940 Act Registration Statement as required by the 1940 Act to
maintain the Account's registration under the 1940 Act for as long as the
Schedule 1 Contracts issued
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through that Account are in force. With regard to each Schedule 1 Account, the
Company shall comply in all material respects with the 1940 Act.
The Company shall be responsible for filing all Contract forms,
applications, marketing materials and other documents relating to the Contracts
and/or the Accounts with state insurance commissions, as required or customary,
and shall use its best efforts: (a) to obtain any and all approvals thereof,
under applicable state insurance law, of each state or other jurisdiction in
which Contracts are or may be offered for sale, and (b) to keep such approvals
in effect for so long as the Contracts are outstanding.
4.3 DELIVERY OF PROSPECTUSES BY THE COMPANY. The Company shall deliver (or
arrange for delivery of) an appropriate Prospectus to each prospective Contract
Owner describing in all material respects the terms and features of the Contract
being offered. The Company also shall deliver (or arrange for delivery of) a
Prospectus for each Fund that a prospective Contract Owner identifies on his or
her application as an intended investment option under a Contract or to which a
Contract Owner allocates premium payments to or transfers Contract value. The
Company shall deliver (or arrange for delivery of) Trust Prospectuses and
Prospectuses for Schedule 1 Contracts at the times required by applicable
provisions of the 1933 Act and rules or regulations thereunder.
4.4. VOTING OF TRUST SHARES. The extent required by applicable law,
whenever the Trust shall have a meeting of holders of any Series or Class of
Trust shares, the Company shall:
- solicit voting instructions from Contract Owners
- vote Trust shares held in each Account at such shareholder
meetings in accordance with instructions received from Contract
Owners, and
- vote Trust shares held in each Account for which it has not
received timely instructions in the same proportion as it votes
the applicable Series or Class of Trust shares for which it has
received timely instructions.
Except with respect to matters as to which the Company has the right to vote
Trust shares without regard to voting instructions from Contract Owners, neither
the Company nor any of its affiliates will recommend action in connection with,
or oppose or interfere with, the actions of the Trust Board to hold shareholder
meetings for the purpose of obtaining approval or disapproval from shareholders
(and, indirectly, from Contract Owners) of matters put before the shareholders.
4.5. STATE INSURANCE LAW RESTRICTIONS. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness of
such determination. Schedule 4 sets forth the investment restrictions that the
Company and/or other
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Participating Insurance Companies have determined are applicable to any Fund and
with which the Trust has agreed to comply as of the date of this Agreement. The
Company shall inform the Trust of any investment restrictions imposed by state
insurance law that the Company determines may become applicable to the Trust or
a Fund from time to time as a result of the Accounts' investment therein, other
than those set forth on Schedule 4 to this Agreement. Upon receipt of any such
information from the Company or any other Participating Insurance Company, the
Trust shall determine whether it is in the best interests of shareholders to
comply with any such restrictions. If the Trust determines that it is not in the
best interests of shareholders (which, for this purpose, shall mean Product
Owners) to comply with a restriction determined to be applicable by the Company,
the Trust shall so inform the Company, and the Trust and the Company shall
discuss alternative accommodations in the circumstances. If the Trust determines
that it is in the best interests of shareholders to comply with such
restrictions, the Trust and the Company shall amend Schedule 4 to this Agreement
to reflect such restrictions, subject to obtaining any required shareholder
approval thereof.
4.6. INTERPRETATION OF LAW. Under no circumstances will the Trust, the
Distributor or any of their affiliates (excluding Participating Investors) be
held responsible or liable in any respect for any statements or representations
made by them or their legal advisers to the Company or any Contract Owner
concerning the applicability of any federal or state laws, regulations or other
authorities to the activities contemplated by this Agreement. Under no
circumstances will the Company or any of its affiliates be responsible or liable
in any respect for any statements or representations made by them or their legal
advisers to the Trust, the Distributor, or any of their affiliates, concerning
the applicability of any state insurance law or regulation, federal or state
laws, regulations other authorities to the activities contemplated by this
Agreement.
4.7. DISCLOSURE. The Trust's Prospectus shall state that the statement of
additional information for the Trust is available from either the Distributor or
the Trust.
4.8. DRAFTS OF FILINGS. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, prepared by or on behalf of either of them
and that mentions the other party by name. Such drafts shall be provided to the
other party sufficiently in advance of filing such materials with regulatory
authorities in order to allow such other party a reasonable opportunity to
review the materials.
4.9. COPIES OF FILINGS. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations of voting instructions,
applications for exemptions, requests for "no-action" letters, and all
amendments or supplements to any of the above, that relate to the Trust, the
Contracts or the Accounts, as the case may be, promptly after the filing by or
on behalf of each such party of such document with the SEC or other regulatory
authorities (it being understood (a) that this
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provision is not intended to require the Trust to provide to the Company copies
of any such documents prepared, filed or used by Participating Investors other
than the Company and the Accounts and (b) that this provision is not intended to
require the Company to provide to the Trust copies of any such documents that do
not name or otherwise relate to the Trust).
4.10. REGULATORY RESPONSES. Each party shall promptly provide to all other
parties copies of responses to no-action requests, notices, orders and other
rulings received by such party with respect to any filing covered by Section 4.9
of this Agreement.
4.11. COMPLAINTS AND PROCEEDINGS
(a) The Trust and/or the Distributor shall 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 (but not including an
order of a regulatory body exempting or approving a proposed transaction or
arrangement) with respect to the Trust's Registration Statement or the
Prospectus of any Series or Class, (ii) any request by the SEC for any
amendment to the Trust's Registration Statement or the Prospectus of any
Series or Class, (iii) the initiation of any proceedings for that purpose
or for any other purposes relating to the registration or offering of the
Trust shares, or (iv) any other action or circumstances that may prevent
the lawful offer or sale of Trust shares or any Class or Series in any
state or jurisdiction, including, without limitation, any circumstance 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 for the Contracts. The Trust 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.
(b) The Company shall immediately notify the Trust and the Distributor
of: (i) the issuance by any court or regulatory body of any stop order,
cease and desist order, or other similar order (but not including an order
of a regulatory body exempting or approving a proposed transaction or
arrangement) with respect to the Contracts' Registration Statement or the
Contracts' Prospectus, (ii) any request by the SEC for any amendment to the
Contracts' Registration Statement or Prospectus, (iii) the initiation of
any proceedings for that purpose or for any other purposes relating to the
registration or offering of the Contracts, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of the Contracts or
any class of Contracts in any state or jurisdiction, including, without
limitation, any circumstance in which such Contracts are not registered,
qualified and approved, and, in all material respects, issued and sold in
accordance with applicable state and federal laws. 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.
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(c) Each party shall immediately notify the other parties when it
receives notice, or otherwise becomes aware of, the commencement of any
litigation or proceeding against such party or a person affiliated
therewith in connection with the issuance or sale of Trust shares or the
Contracts.
(d) The Company shall provide to the Trust and the Distributor any
complaints it has received from Contract Owners pertaining to the Trust or
a Fund, and the Trust and Distributor shall each provide to the Company any
complaints it has received from Contract Owners relating to the Contracts.
4.12. COOPERATION. Each party hereto shall cooperate with the other parties
and all appropriate government authorities (including without limitation the
SEC, the NASD and state securities and insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry by any such authority relating to this Agreement or
the transactions contemplated hereby. However, such access shall not extend to
attorney-client privileged information.
ARTICLE V
SALE, ADMINISTRATION AND SERVICING OF THE CONTRACTS
5.1. SALE OF THE CONTRACTS. The Company shall be fully responsible as to
the Trust and the Distributor for the sale and marketing of the Contracts. The
Company shall provide Contracts, the Contracts' and Trust's Prospectuses,
Contracts' and Trust's Statements of Additional Information, and all amendments
or supplements to any of the foregoing to Contract Owners and prospective
Contract Owners, all in accordance with federal and state laws. Without limiting
the generality of the foregoing, the Company shall: (1) enter into and enforce
agreements with affiliated and unaffiliated parties to, and (2) adopt and
implement written compliance policies and procedures reasonably designed to,
ensure that:
- all persons offering or selling the Contracts are duly licensed
and registered under applicable insurance and securities laws,
- all individuals offering or selling the Contracts are duly
appointed agents of the Company and are registered
representatives of a NASD member broker-dealer,
- each sale of a Contract satisfies applicable suitability
requirements under insurance and securities laws and regulations,
including without limitation the rules of the NASD,
- persons offering or selling the Contracts disclose to prospective
Contract Owners remuneration each expects to receive in
connection with sales of the Contracts and any conflicts of
interest arising therefrom as required by applicable law, and
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- persons offering or selling the Contracts do not intend to engage
in Account unit transactions that would violate the Company's or
the Trust's Disruptive Trading Policies.
5.2. ANTI-MONEY LAUNDERING. The Company shall comply with all applicable
laws and regulations designed to prevent money "laundering", and if required by
such laws or regulations, to share with the Trust information about individuals,
entities, organizations and countries suspected of possible terrorist or money
"laundering" activities in accordance with Section 314(b) of the USA Patriot
Act. In particular, the Company agrees that to the extent required by applicable
laws or regulations:
- as part of processing an application for a Contract, it will
verify the identity of applicants and, if an applicant is not a
natural person, will verify the identity of prospective principal
and beneficial owners submitting an application for a Contract,
- as part of its ongoing compliance with the USA Patriot Act, it
will, from time to time, reverify the identity of Contract
Owners, including the identity of principal and beneficial owners
of Contracts held by non-natural persons,
- as part of processing an application for a Contract, it will
verify that no applicant, including prospective principal or
beneficial Contract Owners, is a "specially designated national"
or a person from an embargoed or "blocked" country as indicated
by the Office of Foreign Asset Control ("OFAC") list of such
persons,
- as part of its ongoing compliance with the USA Patriot Act, it
will, from time to time, reverify that no Contract Owner,
including a principal or beneficial Contract Owners, is a
"specially designated national" or a person from an embargoed or
"blocked" country as indicated by the OFAC list of such persons,
- it will ensure that money tendered to the Trust as payment for
Trust shares did not originate with a bank lacking a physical
place of business (I.E., a "shell" bank) or from a country or
territory named on the list of high-risk or non-cooperating
countries or jurisdictions published by the Financial Action Task
Force, and
- if any of the foregoing cease to be true, the Trust or its
agents, in compliance with the USA Patriot Act or Bank Secrecy
Act, may seek authority to block transactions in Account units
arising from accounts of one or more such Contract Owners with
the Company or of one or more of the Company's accounts with the
Trust.
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The Trust and the Distributor shall comply with all applicable laws and
regulations designed to prevent money "laundering", and if required by such laws
or regulations, to share with the Company information about individuals,
entities, organizations and countries suspected of possible terrorist or money
"laundering" activities in accordance with Section 314(b) of the USA Patriot
Act.
5.3. ADMINISTRATION AND SERVICING OF THE CONTRACTS. The Company shall be
fully responsible for the underwriting, issuance, service and administration of
the Contracts and for the administration of the Account, including, without
limitation, the calculation of performance information for the Contracts, the
timely payment of Contract Owner redemption requests and processing of Contract
transactions, and the maintenance of a service center, such functions to be
performed in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. The Company shall provide to
Contract Owners all Trust reports, solicitations for voting instructions
including any related Trust proxy solicitation materials, and updated Trust
Prospectuses as required under the federal securities laws.
5.4. CUSTOMER COMPLAINTS. The Company shall promptly address all complaints
from Contract Owners and resolve such complaints consistent with high ethical
standards and principles of ethical conduct.
5.5. TRUST PROSPECTUSES AND REPORTS. In order to enable the Company to
fulfill its obligations under this Agreement and the federal securities laws,
the Trust shall provide the Company with a copy, in camera-ready form or form
otherwise suitable for printing or duplication of: (a) the Trust's Prospectus
for the Series and Classes listed on Schedules 1B, 2B, and 3B and any supplement
thereto; (b) any Trust proxy soliciting material for such Series or Classes; and
(c) any Trust periodic shareholder reports. The Trust and the Company may agree
upon alternate arrangements, but in all cases, the Trust reserves the right to
approve the printing of any such material. The Trust shall make available to the
Company on the Trust's website each Statement of Additional Information and
supplement thereto. The Trust shall provide the Company at least 10 days advance
written notice when any such material shall become available, provided, however,
that in the case of a supplement, the Trust shall provide the Company notice
reasonable in the circumstances, it being understood that circumstances
surrounding such supplement may not allow for advance notice. The Company may
not alter any material so provided by the Trust or the Distributor (including,
without limitation, presenting or delivering such material in a different medium
such as electronic mail or attachments thereto) without the prior written
consent of the Distributor. Notwithstanding the foregoing, the Company may
deliver any of the material set forth in this Section 5.4 to any Contract owner
electronically, including through the internet, pursuant to and in compliance
with applicable federal and state securities laws and any applicable rules and
regulations of state insurance departments.
5.6. TRUST ADVERTISING MATERIAL. Neither the Company or any person directly
or indirectly authorized by the Company (including, without limitation,
underwriters, distributors, and sellers of the Contracts) shall use any piece of
advertising, sales literature or other promotional material in which the Trust,
the Distributor, or an affiliate of either is named, except
15
with the prior written consent of the Trust or the Distributor. The Company
shall furnish to the Trust or the Distributor each such piece of advertising,
sales literature or other promotional material at least ten (10) days prior to
its use. The Trust or the Distributor shall respond to any request for written
consent on a prompt and timely basis, but failure to respond shall not relieve
the Company of the obligation to obtain the prior written consent of the Trust
or the Distributor. After receiving the Trust's or Distributor's consent to the
use of any such material, no further changes may be made without obtaining the
Trust's or Distributor's consent to such changes. The Trust or Distributor may
at any time in its sole discretion revoke such written consent, and upon
notification of such revocation, the Company shall no longer use the material
subject to such revocation. The Company shall not be responsible for filing any
materials with the NASD as applicable.
5.7. CONTRACTS ADVERTISING MATERIAL. The Trust and the Distributor shall
not use any piece of advertising or sales literature or other promotional
material in which the Company, an Account or a Contract is named, except with
the prior written consent of the Company. The Trust or the Distributor shall
furnish to the Company each such piece of advertising, sales literature or other
promotional material at least ten (10) days prior to its use. The Company shall
respond to any request for written consent on a prompt and timely basis, but
failure to respond shall not relieve the Trust or the Distributor of the
obligation to obtain the prior written consent of the Company. After receiving
the Company's consent to the use of any such material, no further changes may be
made by the Trust or Distributor without obtaining the Company's consent to such
changes. The Company may at any time in its sole discretion revoke any written
consent, and upon notification of such revocation, neither the Trust nor the
Distributor shall use the material subject to such revocation. The Trust and the
Distributor shall not be responsible for filing any such materials with the NASD
as applicable.
5.8. TRADE NAMES. No party shall use any other party's names, logos,
trademarks or service marks, whether registered or unregistered, without the
prior written consent of such other party, or after written consent therefor has
been revoked. The Company shall not use in advertising, publicity or otherwise
the name of the Trust, Distributor, or any of their affiliates nor any trade
name, trademark, trade device, service xxxx, symbol or any abbreviation,
contraction or simulation thereof of the Trust, Distributor, or their affiliates
without the prior written consent of the Trust or the Distributor in each
instance.
5.9. REPRESENTATIONS BY COMPANY. Except with the prior written consent of
the Trust, the Company shall not give any information or make any
representations or statements about the Trust or the Funds nor shall it
authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in reports or proxy statements for the Trust, or in
advertisements, sales literature or other promotional material approved in
writing by the Trust or its designee in accordance with this Article V, or in
published reports or statements of the Trust in the public domain.
The Company agrees to ensure that advertisements, sales literature or other
promotional material for the Contracts prepared by the Company or its affiliates
will be consistent with every law, rule, and regulation of any regulatory agency
or self-regulatory agency that applies to the
16
Contracts or to the sale of the Contracts, including, but not limited to, NASD
Conduct Rule 2210 and XX-0000-0, XX-0000-0 and IM-2210-3 thereunder.
The Company has adopted and implemented, or shall adopt and implement,
written compliance procedures reasonably designed to ensure that information
concerning the Trust, the Distributor, or any of their affiliates which is
intended for use by brokers or agents selling the Contracts (I.E., information
that is not intended for distribution to Contract Owners or prospective Contract
Owners) is so used. Neither the Trust, the Distributor, nor any of their
affiliates shall be liable for any losses, damages, or expenses relating to the
improper use of such "broker only" materials by agents of the Company or its
affiliates who are unaffiliated with the Trust or the Distributor. The parties
agree that this Section 5.9 is not intended to designate nor otherwise imply
that the Company is an underwriter or distributor of the Trust's shares.
5.10. REPRESENTATIONS BY TRUST. Except with the prior written consent of
the Company, the Trust shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Accounts
or the Contracts other than the information or representations contained in the
appropriate Contract Registration Statement or Contract Prospectus or in
published reports of the Company or the Accounts which are in the public domain
or in advertisements, sales literature or other promotional material approved in
writing by the Company in accordance with this Article V.
The Trust agrees to ensure that advertisements, sales literature or other
promotional material for the Trust prepared by the Distributor or its affiliates
in connection with the sale of the Contracts will be consistent with every law,
rule, and Regulation of any regulatory agency or self regulatory agency that
applies to the Trust or to the sale of Trust shares, including, but not limited
to, NASD Conduct Rule 2210 and XX-0000-0, XX-0000-0 and IM-2210-3 thereunder.
The Trust or the Distributor shall xxxx information produced by or on
behalf of the Trust which is intended for use by brokers or agents selling the
Contracts (I.E., information that is not intended for distribution to Contract
Owners or prospective Contract Owners) "FOR BROKER USE ONLY," and neither the
Company nor any of its affiliates shall be liable for any losses, damages, or
expenses arising on account of the use by brokers of such information with third
parties in the event that it is not so marked.
5.11. ADVERTISING. For purposes of this Article V, the phrase "advertising,
sales literature or other promotional material" includes, but is not limited to,
any material constituting sales literature or advertising under the NASD Conduct
rules, the 1940 Act or the 1933 Act. Such material includes, without limitation,
the following materials for prospective Contract Owners, existing Contract
Owners, wholesalers and other broker-dealers, rating or ranking agencies, or the
press:
- advertisements (such as material published, or designed for use
in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape
17
recording, videotape display, signs or billboards, motion
pictures, websites, 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, seminar texts, reprints or excerpts of any other
advertisement, sales literature, electronic mail, 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.
ARTICLE VI
COMPLIANCE WITH CODE
6.1. SUBCHAPTER M. The Trust shall maintain the qualification of each Fund
as a regulated investment company (under Subchapter M or any successor or
similar provision), and the Trust shall notify the Company immediately upon
having a reasonable basis for believing that a Fund has ceased to so qualify or
that it might not so qualify in the future.
ARTICLE VII
EXPENSES
7.1. EXPENSES. All expenses incident to each party's performance under this
Agreement (including expenses expressly assumed by such party pursuant to this
Agreement) shall be borne by such party. The Trust and the Distributor shall pay
no fee or other compensation to the Company under this Agreement. Each party,
however, shall, in accordance with the allocation of expenses specified in this
Agreement, reimburse other parties for expenses paid by such other parties, but
allocated to it. Notwithstanding the foregoing, ancillary agreements that are
exhibits to this Agreement may provide that the Distributor or the Trust's
investment adviser compensate the Company or its affiliates for the Company's
performance of certain of its obligations under this Agreement.
18
7.2. ANCILLARY AGREEMENTS. Pursuant to the distribution plan adopted by the
Trust under Rule 12b-1 under the 1940 Act, and as contemplated by Article 3.2(g)
of this Agreement, the Trust or any Series or Class thereof may pay the
Distributor, and the Distributor may pay the principal underwriter or
distributor of one or more classes of Contracts, for activities primarily
intended to result in the sale of Trust shares to the Accounts through which
such Contracts are issued. Likewise, if the Trust or any Series or Class adopts
and implements a shareholder service plan pursuant to Rule 12b-1 under the 1940
Act, or otherwise, then the Trust or the appropriate Series or Class may pay the
Distributor and the Distributor may pay the principal underwriter or distributor
of one or more classes of Contracts, or the Company, for activities related to
personal service and/or maintenance of Contract Owner accounts, as permitted by
such plan. To facilitate such payments, the Distributor may enter into
agreements with the principal underwriter of one or more classes of Contracts,
which agreement is attached to this Agreement as an exhibit.
7.3. TRUST EXPENSES. Expenses incident to the Trust's performance of its
duties and obligations under this Agreement include, but are not limited to, the
costs of:
(a) registration and qualification of the Trust shares under the
federal securities laws;
(b) preparation and filing with the SEC of the Trust's Prospectuses,
Trust's Statement of Additional Information, Trust's Registration
Statement, Trust proxy materials and shareholder reports, and preparation
of a "camera-ready" copy of the foregoing;
(c) preparation of all statements and notices required by any federal
or state securities law;
(d) printing of all proxy materials, shareholder reports, prospectuses
and other documents required to be provided by the Trust to its existing
shareholders, and providing sufficient copies of the same to the Company
for distribution to Contract Owners currently invested in the Trust;
provided, however, that if the Company prints copies of the Trust's
prospectus (or portions thereof) as part of a larger document containing
prospectuses of other investment companies, the Trust shall bear the
expense only of its share of the cost of printing the document (for this
purpose, the Trust's share shall be the percentage of the total cost of the
document represented by the ratio that the number of pages of the Trust's
prospectus bears to the total number of pages);
(e) all taxes on the issuance or transfer of Trust shares;
(f) payment of all applicable fees relating to the Trust, including,
without limitation, all fees due under Rule 24f-2 in connection with sales
of Trust shares to qualified retirement plans, custodial, auditing,
transfer agent and advisory fees, fees for insurance coverage and Trustees'
fees; and
19
(g) any expenses permitted to be paid or assumed by the Trust pursuant
to a Rule 12b-1 under the 1940 Act.
7.4. COMPANY EXPENSES. Expenses incident to the Company's performance of
its duties and obligations under this Agreement include, but are not limited to,
the costs of:
(a) registration and qualification of the Schedule 1 Contracts under
the federal securities laws;
(b) preparation Contract Prospectuses, and filing with the SEC of the
Prospectuses and Registration Statements for Schedule 1 Contracts;
(c) the sale, marketing and distribution of the Contracts, including
printing and dissemination of Contract Prospectuses to current and
prospective Contract owners [and of the Trust's Prospectuses to prospective
Contract Owners] as well as compensation for Contract sales;
(d) administration of the Contracts;
(e) payment of all applicable fees relating to Accounts and the
Contracts;
(f) preparation, printing and dissemination of all statements and
notices to Contract Owners required by any federal or state insurance law
other than those paid for by the Trust; and
(g) preparation, printing and dissemination of all marketing materials
for the Contracts and Trust except where other arrangements are made in
advance.
ARTICLE VIII
INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to, and
shall, indemnify and hold harmless the Trust, the Distributor and each person
who controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any Participating
Insurance Companies or Qualified Persons) and any officer, trustee, partner,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages, expenses or
liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact or alleged untrue statement of material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales literature or
other promotional material for the
20
Contracts or the Contracts themselves (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances in
which they were made; provided that this obligation to indemnify shall not
apply if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by the
Trust or the Distributor for use in the Contracts Registration Statement,
Contracts Prospectus or in the Contracts or sales literature or promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Trust Registration Statement, any Prospectus
for Series or Classes or sales literature or other promotional material of
the Trust (or any amendment or supplement to any of the foregoing), or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made, if such statement or omission was
made in reliance upon and in conformity with information furnished to the
Trust or Distributor in writing by or on behalf of the Company; or
(c) arise out of or are based upon any wrongful conduct of, or
violation of federal or state law by, the Company or persons under its
control or subject to its authorization, including without limitation, any
broker-dealers or agents authorized to sell the Contracts, with respect to
the sale, marketing or distribution of the Contracts or Trust shares,
including, without limitation, any impermissible use of broker-only
material, unsuitable or improper sales of the Contracts or unauthorized
representations about the Contracts or the Trust; or
(d) arise as a result of any failure by the Company or persons under
its control (or subject to its authorization) to provide services, furnish
materials or make payments as required under this Agreement; or
(e) arise out of any material breach by the Company or persons under
its control (or subject to its authorization) of this Agreement; or
(f) any breach of any warranties contained in Article III hereof, any
failure to transmit a request for redemption or purchase of Trust shares or
payment therefor on a timely basis in accordance with the procedures set
forth in Article II, or any unauthorized use of the names or trade names of
the Trust or the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage, expense or liability is caused by
the wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
21
8.2. INDEMNIFICATION BY THE TRUST. The Trust hereby agrees to, and shall,
indemnify and hold harmless the Company and each person who controls or is
affiliated with the Company within the meaning of such terms under the 1933 Act
or 1940 Act and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact or alleged untrue statement of material fact contained in the
Trust Registration Statement, any Prospectus for Series or Classes or sales
literature or other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission was made in
reliance upon and in conformity with information furnished in writing by
the Company to the Trust or the Distributor for use in the Trust
Registration Statement, Trust Prospectus or sales literature or promotional
material for the Trust (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact or alleged
untrue statement of material fact contained in the Contracts Registration
Statement, Contracts Prospectus or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in writing by the
Trust to the Company; or
(c) arise out of or are based upon wrongful conduct of the Trust or
its Trustees or officers with respect to the sale of Trust shares; or
(d) arise as a result of any failure by the Trust to provide services,
furnish materials or make payments as required under the terms of this
Agreement; or
(e) arise out of any material breach by the Trust of this Agreement
(including any breach of warranties contained in Article III hereof);
it being understood that in no way shall the Trust be liable to the Company with
respect to any violation of insurance law, compliance with which is a
responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Trust in accordance with Section 4.5 hereof.
This indemnification is in addition to any liability that the Trust may
22
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification.
8.3. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor hereby agrees to,
and shall, indemnify and hold harmless the Company and each person who controls
or is affiliated with the Company within the meaning of such terms under the
1933 Act or 1940 Act and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact or alleged untrue statement of material fact contained in the
Trust Registration Statement, any Prospectus for Series or Classes or sales
literature or other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission was made in
reliance upon and in conformity with information furnished in writing by
the Company to the Trust or Distributor for use in the Trust Registration
Statement, Trust Prospectus or sales literature or promotional material for
the Trust (or any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of any untrue statement of a material fact or alleged
untrue statement of material fact contained in the Contracts Registration
Statement, Contracts Prospectus or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in writing by the
Distributor to the Company; or
(c) arise out of or are based upon wrongful conduct of the Distributor
or persons under its control with respect to the sale of Trust shares; or
(d) arise as a result of any failure by the Distributor or persons
under its control to provide services, furnish materials or make payments
as required under the terms of this Agreement; or
23
(e) arise out of any material breach by the Distributor or persons
under its control of this Agreement (including any breach of warranties
contained in Article III hereof);
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law, compliance with which is
a responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Distributor in accordance with Section 4.5
hereof. This indemnification is in addition to any liability that the
Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is caused
by the willful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
8.4. RULE OF CONSTRUCTION. It is the parties' intention that, in the event
of an occurrence for which the Trust has agreed to indemnify the Company, the
Company shall seek indemnification from the Trust only in circumstances in which
the Trust is entitled to seek indemnification from a third party with respect to
the same event or cause thereof.
8.5. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
24
ARTICLE IX
RELATIONSHIP OF THE PARTIES; TERMINATION
9.1. RELATIONSHIP OF PARTIES. The Company is to be an independent
contractor vis-a-vis the Trust, the Distributor, or any of their affiliates for
all purposes hereunder and will have no authority to act for or represent any of
them (except to the limited extent the Company acts as agent of the Trust
pursuant to Section 2.3(a) of this Agreement). In addition, no officer or
employee of the Company will be deemed to be an employee or agent of the Trust,
Distributor, or any of their affiliates. The Company will not act as an
"underwriter" or "distributor" of the Trust, as those terms variously are used
in the 1940 Act, the 1933 Act, and rules and regulations promulgated thereunder.
Likewise, the Company is not a "transfer agent" of the Trust as that term is
used in the 1934 Act and rules and regulations thereunder. Consistent with the
foregoing, the Company is not an "administrator" to the Trust as that term is
used in Rule 38a-1 under the 1940 Act. [9.2. NON-EXCLUSIVITY AND
NON-INTERFERENCE. The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Trust shares may be sold to
other insurance companies and investors and the cash value of the Contracts may
be invested in other investment companies, provided, however, that until this
Agreement is terminated pursuant to this Article IX:
(a) the Company shall promote the Trust and the Funds made available
hereunder on the same basis as other funding vehicles available under the
Contracts;
(b) the Company shall not, without prior notice to the Distributor
(unless otherwise required by applicable law), take any action to operate
the Account as a management investment company under the 1940 Act;
(c) the Company shall not, without the prior written consent of the
Distributor (unless otherwise required by applicable law), solicit, induce
or encourage Contract Owners to change or modify the Trust to change the
Trust's distributor or investment adviser, to transfer or withdraw Contract
Values allocated to a Fund, or to exchange their Contracts for contracts
not allowing for investment in the Trust;
(d) the Company shall not substitute another investment company for
one or more Funds without providing written notice to the Distributor at
least 60 days in advance of effecting any such substitution; and
(e) the Company shall not withdraw the Account's investment in the
Trust or a Fund of the Trust except as necessary to facilitate Contract
Owner requests and routine Contract processing.
9.3. TERMINATION OF AGREEMENT. This Agreement shall not terminate until:
(a) the Trust is dissolved, liquidated, or merged into another entity, or (b) as
to any Fund that has been made available hereunder, the Account no longer
invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends to
invest in such Fund, or (c) with or without cause, on 180 days written notice by
any
25
party to the other parties. However, certain obligations of, or restrictions on,
the parties to this Agreement may terminate as provided in Sections 9.4 through
9.6. Article VIII and Sections 5.7 and 9.8 shall survive any termination of this
Agreement.
9.4. TERMINATION OF OFFERING OF TRUST SHARES. The obligation of the Trust
and the Distributor to make Trust shares available to the Company for purchase
pursuant to Article II of this Agreement shall terminate at the option of the
Distributor upon written notice to the Company as provided below:
(a) upon institution of formal proceedings against the Company, or the
Distributor's reasonable determination that institution of such proceedings
is being considered by the NASD, the SEC, the insurance commission of any
state or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the operation of
the Account, the administration of the Contracts or the purchase of Trust
shares, or an expected or anticipated ruling, judgment or outcome which
would, in the Distributor's reasonable judgment exercised in good faith,
materially impair the Company's or Trust's ability to meet and perform the
Company's or Trust's obligations and duties hereunder, such termination
effective upon 15 days prior written notice;
(b) in the event any of the Contracts are not registered, issued or
sold in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written notice;
(c) if the Distributor shall determine, in its sole judgment exercised
in good faith, that either (1) the Company shall have suffered a material
adverse change in its business or financial condition or (2) the Company
shall have been the subject of material adverse publicity which is likely
to have a material adverse impact upon the business and operations of
either the Trust or the Distributor, such termination effective upon 30
days prior written notice;
(d) if the Distributor suspends or terminates the offering of Trust
shares of any Series or Class to all Participating Investors or only
designated Participating Investors, if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of
the Distributor acting in good faith, suspension or termination is
necessary in the best interests of the shareholders of any Series or Class
(it being understood that "shareholders" for this purpose shall mean
Product Owners), such notice effective immediately upon receipt of written
notice, it being understood that a lack of Participating Investor interest
in a Series or Class may be grounds for a suspension or termination as to
such Series or Class and that a suspension or termination shall apply only
to the specified Series or Class;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the Account to another
insurance company
26
pursuant to an assumption reinsurance agreement) unless the Trust consents
thereto, such termination effective upon 30 days prior written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction of the Trust
within 30 days after written notice of such breach has been delivered to
the Company, such termination effective upon expiration of such 30-day
period; or
(g) upon the determination of the Trust's Board to dissolve, liquidate
or merge the Trust as contemplated by Section 9.3(a), upon termination of
the Agreement pursuant to Section 9.3(b), or upon notice from the Company
pursuant to Section 9.5 or 9.6, such termination pursuant hereto to be
effective upon 15 days prior written notice.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to new Contracts and the Distributor shall
continue to make Trust shares available to the extent necessary to permit owners
of Contracts in effect on the effective date of such termination (hereinafter
referred to as "Existing Contracts") to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts.
9.5. TERMINATION OF INVESTMENT IN A FUND. The Company may elect to cease
investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment or the Account's investment in a Fund,
subject to compliance with applicable law, upon written notice to the Trust
within 15 days of the occurrence of any of the following events (unless provided
otherwise below):
(a) if the Trust informs the Company pursuant to Section 4.4 that it
will not cause such Fund to comply with investment restrictions as
requested by the Company and the Trust and the Company are unable to agree
upon any reasonable alternative accommodations; or
(b) if shares in such Fund are not reasonably available to meet the
requirements of the Contracts as determined by the Company (including any
non-availability as a result of notice given by the Distributor pursuant to
Section 9.4(d)), and the Distributor, after receiving written notice from
the Company of such non-availability, fails to make available, within 10
days after receipt of such notice, a sufficient number of shares in such
Fund or an alternate Fund to meet the requirements of the Contracts.
Such termination shall apply only as to the affected Fund and shall not apply to
any other Fund in which the Company or the Account invests.
9.6. TERMINATION OF INVESTMENT BY THE COMPANY. The Company may elect to
cease investing in all Series or Classes of the Trust made available hereunder,
promoting the Trust as an investment option under the Contracts, or withdraw its
investment or the Accounts' investment in the Trust, subject to compliance with
applicable law, upon written notice to the
27
Trust within 15 days of the occurrence of any of the following events (unless
provided otherwise below):
(a) upon institution of formal proceedings against the Trust or the
Distributor (but only with regard to the Trust) by the NASD, the SEC or any
state securities or insurance commission or any other regulatory body;
(b) if, with respect to the Trust or a Fund, the Trust or the Fund
ceases to qualify as a regulated investment company under Subchapter M of
the Code, as defined therein, or any successor or similar provision, or if
the Company reasonably believes that the Trust may fail to so qualify, and
the Trust, upon written request, fails to provide reasonable assurance that
it will take action to cure or correct such failure within 30 days; or
(c) if the Trust or Distributor is in material breach of a provision
of this Agreement, which breach has not been cured to the satisfaction of
the Company within 30 days after written notice of such breach has been
delivered to the Trust or the Distributor, as the case may be.
9.7. CONFIDENTIALITY. The Company will keep confidential any information
acquired as a result of this Agreement regarding the business and affairs of the
Trust, the Distributor, and their affiliates.
ARTICLE X
APPLICABILITY TO NEW ACCOUNTS AND NEW CONTRACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company and Accounts therefor investing in the Trust. Such
amendments may be made effective by executing the form of amendment included on
each schedule attached hereto. The provisions of this Agreement shall be equally
applicable to each such class of Contracts, Series, Class or separate account,
as applicable, effective as of the date of amendment of such Schedule, unless
the context otherwise requires. The parties to this Agreement may amend this
Agreement from time to time by written agreement signed by all of the parties.
ARTICLE XI
NOTICE, REQUEST OR CONSENT
Any notice, request or consent to be provided pursuant to this Agreement is
to be made in writing and shall be given:
If to the Trust:
----------------------------------------
President
28
Xxxxxxx Xxxxx Variable Insurance Trust
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
If to the Distributor:
----------------------------------------
Vice President
Xxxxxxx Sachs & Co.
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
If to the Company:
Xxxxxxx X. Xxxxxxx
President and CEO
[Title]
Commonwealth Annuity and Life Insurance
Company
000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier, and shall be
effective upon receipt. Notices pursuant to the provisions of Article II may be
sent by facsimile to the person designated in writing for such notices.
ARTICLE XII
MISCELLANEOUS
12.1. INTERPRETATION. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the state of
Delaware, without giving effect to the principles of conflicts of laws, subject
to the following rules:
(a) This Agreement shall be subject to the provisions of the 1933 Act,
1940 Act and Securities Exchange Act of 1934, as amended, and the rules,
regulations and rulings thereunder, including such exemptions from those
statutes, rules, and regulations as the SEC may grant, and the terms hereof
shall be limited, interpreted and construed in accordance therewith.
(b) 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.
(c) 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.
29
(d) 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.
12.2. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which together shall constitute one and the same
instrument.
12.3. NO ASSIGNMENT. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or the
Trust without the prior written consent of the other parties.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
XXXXXXX XXXXX TRUST
(Trust)
Date: By:
---------- ------------------------------------
Name:
Title:
XXXXXXX, SACHS & CO.
(Distributor)
Date: By:
---------- ------------------------------------
Name:
Title:
COMMONWEALTH ANNUITY AND LIFE INSURANCE
COMPANY
(Company)
Date: By:
---------- ------------------------------------
Name:
Title:
30
SCHEDULE 1
SCHEDULE 1A
SEPARATE ACCOUNTS OF THE COMPANY REGISTERED UNDER THE 1940 ACT AS UNIT
INVESTMENT TRUSTS
The following separate accounts of the Company are subject to the Agreement:
DATE ESTABLISHED BY
BOARD OF DIRECTORS OF SEC 1940 ACT TYPE OF PRODUCT
NAME OF ACCOUNT THE COMPANY REGISTRATION NUMBER SUPPORTED BY ACCOUNT
--------------------- --------------------- ------------------- --------------------
Commonwealth Annuity
Separat Account A February __, 2007 811-22024 Variable Annuity
SCHEDULE 1B
VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE CONTRACTS REGISTERED
UNDER THE SECURITIES ACT OF 1933
The following Contracts are subject to the Agreement:
1933 ACT TYPE OF PRODUCT
NAME OF CONTRACT AVAILABLE FUNDS REGISTRATION NUMBER SUPPORTED BY ACCOUNT
--------------------- --------------------- ------------------- --------------------
Advantage IV 333-141045 Variable Annuity
Preferred Plus 333-141019 Variable Annuity
31
SCHEDULE 2
SCHEDULE 2A
SEPARATE ACCOUNTS OF THE COMPANY EXCLUDED FROM THE DEFINITION OF
AN INVESTMENT COMPANY AS PROVIDED FOR BY SECTION 3(c)(11) OF THE 1940 ACT
The following separate accounts of the Company are subject to the Agreement:
DATE ESTABLISHED BY
BOARD OF DIRECTORS TYPE OF PRODUCT
NAME OF ACCOUNT OF THE COMPANY SUPPORTED BY ACCOUNT
--------------------- --------------------- --------------------
Variable Annuity
Variable Annuity
Variable Annuity
Variable Life
Insurance
SCHEDULE 2B
VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE CONTRACTS NOT
REGISTERED UNDER THE SECURITIES ACT OF 1933 IN RELIANCE UPON SECTION 3(a)(2) OF
THE ACT
The following Contracts are subject to the Agreement:
TYPE OF PRODUCT
NAME OF CONTRACT AVAILABLE FUNDS GROUP OR INDIVIDUAL SUPPORTED BY ACCOUNT
--------------------- --------------------- ------------------- --------------------
None
32
SCHEDULE 3
SCHEDULE 3A
SEPARATE ACCOUNTS OF THE COMPANY EXCLUDED FROM THE DEFINITION OF AN
INVESTMENT COMPANY AS PROVIDED FOR BY SECTION 3(c)(1) OR 3(c)(7) OF THE 1940 ACT
The following separate accounts of the Company are subject to the Agreement:
DATE ESTABLISHED BY
BOARD OF DIRECTORS TYPE OF PRODUCT
NAME OF ACCOUNT OF THE COMPANY SUPPORTED BY ACCOUNT
--------------------- ------------------- --------------------
None
SCHEDULE 3B
VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE CONTRACTS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 IN RELIANCE UPON SECTION 4(2) OF THE ACT AND
REGULATION D THEREUNDER
The following Contracts are subject to the Agreement:
TYPE OF PRODUCT
NAME OF CONTRACT AVAILABLE FUNDS GROUP OR INDIVIDUAL SUPPORTED BY ACCOUNT
--------------------- --------------------- ------------------- --------------------
None
33
SCHEDULE 4
STATE INSURANCE LAW INVESTMENT RESTRICTIONS.
None
34
