1
EXHIBIT 8(xi)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES II
AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
DATED AS OF
NOVEMBER 1, 2000
2
TABLE OF CONTENTS
Page
----
ARTICLE I. Fund Shares.................................................................... 2
ARTICLE II. Representations and Warranties................................................. 4
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting.......................................... 6
ARTICLE IV. Sales Material and Information................................................. 10
ARTICLE V. [Reserved]..................................................................... 11
ARTICLE VI. Diversification................................................................ 11
ARTICLE VII. Potential Conflicts............................................................ 11
ARTICLE VIII. Applicable Law................................................................. 13
ARTICLE IX. Termination.................................................................... 13
ARTICLE X. Notices........................................................................ 16
ARTICLE XI. Miscellaneous.................................................................. 17
SCHEDULE A Portfolios of North American Funds Variable Product Series II
Available for Purchase by American General Annuity Insurance Company
Under This Agreement........................................................... 20
SCHEDULE B Separate Accounts and Contracts................................................ 21
SCHEDULE C Proxy Voting Procedures........................................................ 22
3
THIS AGREEMENT, made and entered into as of the 1st day of November,
2000 by and among AMERICAN GENERAL ANNUITY INSURANCE COMPANY (hereinafter the
"Company"), a Texas insurance company, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account"),
NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES II (hereinafter the "Fund"), a
Delaware business trust, and THE VARIABLE ANNUITY LIFE INSURANCE COMPANY (the
"Adviser"), a Texas corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to enter
into a participation agreement with the Fund and the Adviser (the "Participating
Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (hereinafter the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended
(hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Variable Insurance Products issued by the Accounts are
variable annuity contracts or are variable life insurance policies relying on
certain exemptions from the 1933 Act pursuant to Rule 6e-3(T), and not Rule
6e-2, thereunder; and
1
4
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall
execute orders placed for each Account on a daily basis at the
net asset value next computed after receipt by the Fund or its
designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund
receives notice of such order as soon as reasonably practical
(normally by 10:00 a.m. Eastern time) on the next following
Business Day. Notwithstanding the foregoing, the Company shall
use its best efforts to provide the Fund with notice of such
orders by 10:15 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the
New York Stock Exchange is open for trading and on which the
Fund calculates the net asset value pursuant to the rules of
the SEC, as set forth in the Fund's Prospectus and Statement
of Additional Information. Notwithstanding the foregoing, the
Board of Directors of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of
any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole
discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of
such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance
Products and to certain Qualified Plans. No shares of any
Portfolio will be sold to the general public.
1.3. The Fund will not make its shares available for purchase by
any insurance company or separate account unless an agreement
containing provisions substantially the same
2
5
as Sections 2.4, 2.9, 3.4 and Article VII of this Agreement is
in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset
value next computed after receipt by the Fund or its designee
of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Fund for receipt
of requests for redemption from each Account and receipt by
such designee shall constitute receipt by the Fund; provided
that the Fund receives notice of such request for redemption
on the next following Business Day in accordance with the
timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund
shall be made in accordance with the provisions of such
prospectus. The Accounts of the Company, under which amounts
may be invested in the Fund, are listed on Schedule B attached
hereto and incorporated herein by reference, as such Schedule
B may be amended from time to time by mutual written agreement
of all of the parties hereto. The Company will give the Fund
and the Adviser sixty (60) days written notice of its
intention to make available in the future, as a funding
vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net
amount of shares and dollar amount of each Portfolio to be
purchased or redeemed. In the event of net purchases, the
Company shall pay for Portfolio shares on the next Business
Day after an order to purchase Portfolio shares is made in
accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. In the event of
net redemptions, the Portfolio shall pay the redemption
proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is
made in accordance with the provision of Section 1.4 hereof.
Notwithstanding the foregoing, if the payment of redemption
proceeds on the next Business Day would require the Portfolio
to dispose of securities or otherwise incur substantial
additional costs, and if the Portfolio has determined to
settle redemption transactions for all shareholders on a
delayed basis, proceeds shall be wired to the Company within
seven (7) days and the Portfolio shall notify in writing the
person designated by the Company as the recipient for such
notice of such delay by 3:00 p.m. Eastern time on the same
Business Day that the Company transmits the redemption order
to the Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Shares ordered from the Fund will be
recorded in an appropriate title for each Account or the
appropriate subaccount of each Account.
3
6
1.8. The Fund shall make the dividends or capital gain
distributions payable on the Fund's shares available to the
Company as soon as reasonably practical after the dividends or
capital gains are calculated (normally by 6:30 p.m. Eastern
time) and shall use its best efforts to furnish same day
notice by 7:00 p.m. Eastern time (by wire or telephone,
followed by written confirmation) to the Company of any
dividends or capital gain distributions payable on the Fund's
shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The
Fund shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.9. The Fund 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 (normally by 6:30 p.m. Eastern time) and shall use
its best efforts to make such net asset value per share
available by 7:00 p.m. Eastern time. In the event that the
Fund is unable to meet the 7:00 p.m. time stated immediately
above, then the Fund shall provide the Company with additional
time to notify the Fund of purchase or redemption orders
pursuant to Sections 1.1 and 1.4, respectively, above. Such
additional time shall be equal to the additional time that the
Fund takes to make the net asset values available to the
Company; provided, however, that notification must be made by
10:15 a.m. Eastern time on the Business Day such order is to
be executed regardless of when the net asset value is made
available.
1.10. If the Fund provides materially incorrect share net asset
value information through no fault of the Company, the Company
shall be entitled to an adjustment with respect to the Fund
shares purchased or redeemed to reflect the correct net asset
value per share. The determination of the materiality of any
net asset value pricing error shall be based on the Fund's
policy on determining materiality. The correction of any such
errors shall be made at the Company level and shall be made
pursuant to the Fund's policy on determining materiality. Any
material error in the calculation or reporting of net asset
value per share, dividend or capital gain information shall be
reported promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will
maintain the registration under the 1933 Act and the
regulations thereunder to the extent required by the 1933 Act;
that the Contracts will be issued in compliance in all
material respects with all applicable federal and state laws
and regulations. The Company further represents and warrants
that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale
thereof as a segregated asset account under the Texas
Insurance Law and the regulations thereunder and has
registered or, prior to any issuance or sale of the
4
7
Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and
to the extent required by the provisions of the 1940 Act and
the regulations thereunder to serve as a segregated investment
account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act
and the 1940 Act from time to time as required in order to
effect the continuous offering of its Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933
Act and the regulations thereunder to the extent required by
the 1933 Act, duly authorized for issuance in accordance with
the laws of the State of Delaware and sold in compliance with
all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered
under the 1940 Act and the regulations thereunder to the
extent required by the 0000 Xxx. The Fund shall amend the
registration statement for its shares under the 1933 Act and
the 1940 Act from time to time as required in order to effect
the continuous offering of its shares. The Fund shall register
and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable
by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"),
and that the Fund and the Adviser (with respect to those
Portfolios for which such Adviser acts as investment adviser)
will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that
the Fund [or the appropriate Adviser] will notify the Company
immediately upon having a reasonable basis for believing that
a Portfolio has ceased to so qualify or that a Portfolio might
not so qualify in the future.
2.4. The Company represents that each Account is and will continue
to be a "segregated account" under applicable provisions of
the Code and that each Contract is and will be treated as a
"variable contract" under applicable provisions of the Code
and that it will make every effort to maintain such treatments
and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract
has ceased to be so treated or that they might not be so
treated in the future.
2.5. The Fund represents that to the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act, the Fund undertakes to have a board of directors, a
majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and
expenses and investment policies) complies with the insurance
laws or regulations of the various states.
5
8
2.7. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of the State of
Delaware and that the Fund does and will comply in all
material respects with the 1940 Act.
2.8. The Adviser represents and warrants that it is and shall
remain duly registered in all material respects under all
applicable federal and state securities laws and that it will
perform its obligations for the Fund in compliance in all
material respects with the laws and regulations of its state
of domicile and any applicable state and federal securities
laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment adviser, and other
individuals/entities dealing with the money and/or securities
of the Fund are covered by a blanket fidelity bond or similar
coverage, in an amount equal to the greater of $5 million or
any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and
embezzlement is issued by a reputable bonding company. The
Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in
effect, and agrees to notify the Fund in the event that such
coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1 (a) The Fund or its designee, at its option shall provide the
Company with as many printed copies of the Fund's current
prospectus, including the profile prospectus, (the "Fund
Prospectus") as the Company may reasonably request or in lieu
of providing printed copies of the Fund Prospectus, the Fund
shall provide camera-ready film or computer diskettes
containing the Fund Prospectus and such other assistance as is
reasonably necessary in order for the Company once each year
(or more frequently if the Fund Prospectus is materially
amended during the year) to have the prospectus for the
Contracts (the "Contract Prospectus") and the Fund Prospectus
printed together in one document or separately. The Company
may elect to print the Fund Prospectus in combination with
other fund companies' prospectuses. For purposes hereof, any
combined prospectus including the Fund Prospectus along with
the Contract Prospectus or prospectus of other fund companies
shall be referred to as a "Combined Prospectus." For purposes
hereof, the term "Fund Portion of the Combined Prospectus"
shall refer to the percentage of the number of Fund Prospectus
pages in the Combined Prospectus in relation to the total
number of pages of the Combined Prospectus.
3.1 (b) The Fund, at its option, shall provide the Company with as
many printed copies of the Fund's current statement of
additional information (the "Fund SAI") as the Company may
reasonably request or in lieu of providing printed copies of
the Fund SAI, the Fund shall provide camera-ready film or
computer diskettes containing the Fund SAI, and such other
assistance as is reasonably necessary in order for the
6
9
Company once each year (or more frequently if the Fund SAI is
materially amended during the year) to have the statement of
additional information for the Contracts (the "Contract SAI")
and the Fund SAI printed together or separately. The Company
may also elect to print the Fund SAI in combination with other
fund companies' statements of additional information. For
purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI
or statement of additional information of other fund companies
shall be referred to as a "Combined SAI." For purposes hereof,
the term "Fund Portion of the Combined SAI" shall refer to the
percentage of the number of Fund SAI pages in the Combined SAI
in relation to the total number of pages of the Combined SAI.
3.1 (c) The Fund, at its option, shall provide the Company with as
many printed copies of the Fund's annual report and
semi-annual report (collectively, the "Fund Reports") as the
Company may reasonably request or in lieu of providing printed
copies of the Fund Reports, the Fund shall provide
camera-ready film or computer diskettes containing the Fund's
Reports, and such other assistance as is reasonably necessary
in order for the Company once each year to have the annual
report and semi-annual report for the Contracts (collectively,
the "Contract Reports") and the Fund Reports printed together
or separately. The Company may also elect to print the Fund
Reports in combination with other fund companies' annual
reports and semi-annual reports. For purposes hereof, any
combined annual reports and semi-annual reports including the
Fund Reports along with the Contract Reports or annual reports
and semi-annual reports of other fund companies shall be
referred to as "Combined Reports." For purposes hereof, the
term "Fund Portion of the Combined Reports" shall refer to the
percentage of the number of Fund Reports pages in the Combined
Reports in relation to the total number or pages of the
Combined Reports.
3.2 Expenses
3.2 (a) Expenses Borne by Company. Except as otherwise provided in
this Section 3.2., all expenses of preparing, setting in type
and printing and distributing (i) Contract Prospectuses, Fund
Prospectuses, and Combined Prospectuses; (ii) Fund SAIs,
Contract SAIs, and Combined SAIs; (iii) Fund Reports, Contract
Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity
to be sent to Contract owners, annuitants, or participants
under Contracts (collectively, the "Participants"), shall be
the expense of the Company.
3.2 (b) Expenses Borne by Fund
Fund Prospectuses
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
7
10
Participants, in the event the Company elects to prepare a Combined Prospectus,
the Fund shall pay the cost of setting in type, printing and distributing the
Fund Portion of the Combined Prospectus made available by the Company to its
existing Participants in order to update disclosure as required by the 1933 Act
and/or the 1940 Act. In such event, the Fund shall bear the cost of typesetting
to provide the Fund Prospectus to the Company in the format in which the Fund is
accustomed to formatting prospectus. Notwithstanding the foregoing, in no event
shall the Fund pay for any such costs that exceed by more than five (5) percent
what the Fund would have paid to print such documents. The Fund shall not pay
any costs of typesetting, printing and distributing the Fund Prospectus (or
Combined Prospectus, if applicable) to prospective Participants.
Fund SAIs, Fund Reports and Proxy Material
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined SAI
or Combined Reports, the Fund shall pay the cost of setting in type and printing
the Fund Portion of the Combined SAI or Combined Reports, respectively, made
available by the Company to its existing Participants. In such event, the Fund
shall bear the cost of typesetting to provide the Fund SAI or Fund Reports to
the Company in the format in which the Fund is accustomed to formatting
statements of additional information and annual and semi-annual reports.
Notwithstanding the foregoing, in no event shall the Fund pay for any such costs
that exceed by more than five (5) percent what the Fund would have paid to print
such documents. The Fund shall pay one half the cost of distributing Fund SAIs,
Fund Reports and Fund proxy statements and proxy-related material to such
existing Participants. The Fund shall pay the cost of distributing the Fund
Portion of the Combined SAIs and the Fund Portion of the Combined Reports to
existing Participants. The Fund shall not pay any costs of distributing Fund
SAIs, Combined SAIs, Fund Reports, Combined Reports or proxy statements or
proxy-related material to prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of typesetting, printing or distributing any of
the foregoing documents other than those actually distributed to existing
Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the Fund or
the Fund's underwriter may make payments to the Company or the Company's
underwriter or distributor.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale.
8
11
3.2 (c) Certain Administrative Expenses of the Company. The
Adviser will reimburse the Company on a calendar quarterly
basis, for certain of the administrative costs and expenses
incurred by the Company as a result of operations necessitated
by the beneficial ownership of shares of the Portfolios of the
Fund by owners of those Contracts which are subject to such
reimbursement as indicated on Schedule B hereto. Such
reimbursement shall be in an amount equal to twenty-five (25)
basis points per annum of the net assets of the Funds
attributable to such Contracts. The determination of
applicable assets shall be made by averaging assets in
applicable Portfolios of the Fund as of the last Business Day
of each calendar month falling within the applicable calendar
quarter. In no event shall such fee be paid by the Fund, its
shareholders or by any Contract owner.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall
distribute all proxy material furnished by the Fund to
Participants to whom voting privileges are required to be
extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions received
from Participants; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Portfolio for
which instructions have been received,
so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contract owners. The Company reserves
the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The
Fund and the Company shall follow the procedures, and shall
have the corresponding responsibilities, for the handling of
proxy and voting instruction solicitations, as set forth in
Schedule C attached hereto and incorporated herein by
reference. Participating Insurance Companies shall be
responsible for ensuring that each of their separate accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule C,
which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund
will either provide for annual meetings (except insofar as the
Securities and Exchange Commission may interpret Section 16
not to require such meetings) or comply with Section 16(c) of
the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will
9
12
act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or
other promotional material prepared by the Company or any
person contracting with the Company in which the Fund or the
Adviser is named, at least ten Business Days prior to its use.
No such material shall be used if the Fund, the Adviser, or
their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the
Company shall give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the
information or representations contained in the registration
statement or the Fund Prospectus, as such registration
statement or Fund Prospectus may be amended or supplemented
from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material
approved by the Fund or its designee, except with the
permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material prepared by the Fund
in which the Company or its Account(s) are named at least ten
Business Days prior to its use. No such material shall be used
if the Company or its designee reasonably objects to such use
within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or
concerning the Company, each Account, or the Contracts, other
than the information or representations contained in a
registration statement or prospectus for the Contracts, as
such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports or
solicitations for voting instructions for each Account which
are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other
promotional material approved by the Company or its designee,
except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments
to any of the above,
10
13
that relate to the Fund or its shares, contemporaneously with
the filing of such document with the SEC or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, solicitations for voting
instructions, sales literature and other promotional
materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate
to the investment in an Account or Contract contemporaneously
with the filing of such document with the SEC or other
regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited
to, any of the following: 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), 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, and registration statements, prospectuses,
statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser represents, as to the Portfolios for which it acts
as investment adviser, that it will use its best efforts at
all times to comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications
to such Section or Regulations. In the event a Portfolio
ceases to so qualify, the Adviser will take all reasonable
steps (a) to notify the Company of such breach and (b) to
adequately diversify the Portfolio so as to achieve compliance
within the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the
contract owners of all separate accounts investing in the
Fund. 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
11
14
similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments
of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and
variable life insurance contract owners; or (f) a decision by
a Participating Insurance Company to disregard the voting
instructions of Contract owners. The Board shall promptly
inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested directors, that a material irreconcilable
conflict exists, the Company and other Participating Insurance
Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the disinterested
directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and
including: (1) withdrawing the assets allocable to some or all
of the Separate Accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund,
or submitting the question whether 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 policy
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 (2) establishing a new
registered management investment company or managed separate
account. No charge or penalty will be imposed as a result of
such withdrawal. The Company agrees that it bears the
responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the
cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract
owners.
7.4. 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 Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement
with respect to such Account (at the Company's expense);
provided, however that such withdrawal and termination shall
be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will
be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in
the event of a Board determination of an irreconcilable
material conflict and the cost of such remedial action, and
these responsibilities will
12
15
be carried out with a view only to the interests of Contract
owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a
majority of the disinterested members of the Board shall
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the
Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 or
7.4 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.
7.6. The Company and the Adviser shall at least annually submit to
the Board of the Fund such reports, materials or data as the
Board may reasonably request so that the Board may fully carry
out the obligations imposed upon them by the provisions
hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board.
All reports received by the Board of potential or existing
conflicts, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance
Companies of a conflict, and determining whether any proposed
action adequately remedies a conflict, shall be properly
recorded in the minutes of the Board or other appropriate
records, and such minutes or other records shall be made
available to the SEC upon request.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State
of Texas.
8.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes,
rules and regulations as the SEC may grant and the terms
hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason upon
six-months advance written notice delivered to the
other parties; or
(b) termination by the Company by written notice to the
Fund and the Adviser with respect to any Portfolio
based upon the Company's determination that shares of
such Portfolio are not reasonably available to meet
the requirements of the Contracts. Reasonable advance
notice of election to terminate shall be furnished by
the Company, said termination to be effective ten
(10) days after
13
16
receipt of notice unless the Fund makes available a
sufficient number of shares to reasonably meet the
requirements of the Account within said ten (10) day
period; or
(c) termination by the Company by written notice to the
Fund and the Adviser with respect to any Portfolio in
the event any of the Portfolio's shares are not
registered, issued or sold in accordance with
applicable state and/or federal law or such law
precludes the use of such shares as the underlying
investment medium of the Contracts issued or to be
issued by the Company. The terminating party shall
give prompt notice to the other parties of its
decision to terminate; or
(d) termination by the Company by written notice to the
Fund and the Adviser with respect to any Portfolio 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 or A.G. Distributors reasonably
believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the
Fund and the Adviser with respect to any Portfolio in
the event that such Portfolio fails to meet the
diversification requirements specified in Article VI
hereof; or
(f) termination by either the Fund or the Adviser by
written notice to the Company if the Adviser or the
Fund shall determine, in its sole judgment exercised
in good faith, that the Company, and/or their
affiliated companies 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, provided that the Fund or the Adviser will
give the Company sixty (60) days' advance written
notice of such determination of its intent to
terminate this Agreement, and provided further that
after consideration of the actions taken by the
Company and any other changes in circumstances since
the giving of such notice, the determination of the
Fund or the Adviser shall continue to apply on the
60th day since giving of such notice, then such 60th
day shall be the effective date of termination; or
(g) termination by the Company by written notice to the
Fund and the Adviser, if the Company shall determine,
in its sole judgment exercised in good faith, that
either the Fund or the Adviser (with respect to the
appropriate Portfolio) 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; provided that the Company will give the
Fund or the Adviser sixty (60) days' advance written
notice of such determination of its intent to
terminate this Agreement, and provided further that
after consideration of the actions taken by the
Company and any other changes in
14
17
circumstances since the giving of such notice, the
determination of the Company shall continue to apply
on the 60th day since giving of such notice, then
such 60th day shall be the effective date of
termination; or
(h) termination by the Fund or the Adviser by written
notice to the Company, if the Company gives the Fund
and the Adviser the written notice specified in
Section 2.4 hereof and at the time such notice was
given there was no notice of termination outstanding
under any other provision of this Agreement;
provided, however any termination under this Section
10.1(h) shall be effective sixty (60) days after the
notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's
breach of any representation in Section 2 or any
material provision of this Agreement, which breach
has not been cured to the satisfaction of the
terminating party within ten (10) days after written
notice of such breach is delivered to the Fund or the
Company, as the case may be; or
(j) termination by the Fund or the Adviser by written
notice to the Company in the event an Account or
Contract is not registered or sold in accordance with
applicable federal or state law or regulation, or the
Company fails to provide pass-through voting
privileges as specified in Section 3.4.
9.2. Notwithstanding any termination of this Agreement, the Fund
shall at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on
the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts") unless such
further sale of Fund shares is proscribed by law, regulation
or applicable regulatory body, or unless the Fund determines
that liquidation of the Fund following termination of this
Agreement is in the best interests of the Fund and its
shareholders. Specifically, without limitation, the owners of
the Existing Contracts shall be permitted to direct
reallocation of investments in the Fund, redemption of
investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of
such Article VII terminations shall be governed by Article VII
of this Agreement.
9.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the
Company's assets held in the Account) except (i) as necessary
to implement Contract Owner initiated or approved
transactions, or (ii) as required by state and/or federal laws
or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required
Redemption") or (iii) as permitted by an order of the SEC
pursuant to Section 26(b)
15
18
of the 1940 Act. Upon request, the Company will promptly
furnish to the Fund the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Fund
and the Adviser) to the effect that any redemption pursuant to
clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms
of the Contracts, the Company shall not prevent Contract
Owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving
the Fund or the Adviser 90 days prior written notice of its
intention to do so.
ARTICLE X. 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 FUND:
North American Funds Variable Product Series II
0000 Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
IF TO ADVISER:
The Variable Annuity Life Insurance Company
0000 Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
IF TO THE COMPANY:
American General Annuity Insurance Company
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
16
19
ARTICLE XI. MISCELLANEOUS
11.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against
the Fund as neither the Board, officers, agents or
shareholders assume any personal liability for obligations
entered into on behalf of the Fund.
11.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the
names and addresses of the owners of the Contracts and all
information reasonably identified as confidential in writing
by any other party hereto and, except as permitted by this
Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until
such time as it may come into the public domain without the
express written consent of the affected party.
11.3. 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.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute
one and the same instrument.
11.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without
limitation the SEC, the NASD and state insurance regulators)
and shall permit 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.
11.7. 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.
11.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written
consent of all parties hereto; provided, however, that the
Adviser may assign this Agreement or any rights or obligations
hereunder to any affiliate of or company under common control
with the Adviser, if such assignee is duly licensed and
registered to perform the obligations of the Adviser under
this Agreement.
11.9 The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
17
20
(a) The Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year;
(b) The Company's June 30th quarterly statements
(statutory) (and GAAP, if any), as soon as practical
and in any event within 45 days after the end of each
semi-annual period:
(c) Any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the
delivery thereof to stockholders;
(d) Any registration statement (without exhibits) and
financial reports of the Company filed with the SEC
or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other public report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of the
books of the Company, as soon as practical after the
receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY on behalf of itself and each
of its Accounts named in Schedule B hereto, as amended from time to
time.
By:
---------------------------------
Name:
Title:
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
18
21
NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES II
By:
---------------------------------
Name:
Title:
19
22
SCHEDULE A
PORTFOLIOS OF NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES II
AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL ANNUITY
INSURANCE COMPANY UNDER THIS AGREEMENT
FUND NAME SEPARATE ACCOUNT
--------- ----------------
North American-International Growth Fund A.G. Separate Account A
North American-Xxxxxxx Xxxxx Large Cap Growth Fund
North American-Invesco Mid Cap Growth Fund
North American-X.X. Xxxxxx Small Cap Growth Fund
North American-State Street Large Cap Value Fund
North American-Xxxxxxxxx Xxxxxx Mid Cap Value Fund
North American-Small Cap Value Fund
North American-AG Socially Responsible Fund
North American-AG High Yield Bond Fund
North American-AG Strategic Bond Fund
North American-AG Core Bond Fund
North American-AG Money Market Fund
North American-AG Aggressive Growth Lifestyle Fund
North American-AG Moderate Growth Lifestyle Fund
North American-AG Conservative Growth Lifestyle Fund
20
23
SCHEDULE B
SEPARATE ACCOUNTS AND CONTRACTS
NAME OF SEPARATE ACCOUNT AND REGISTRATION NUMBERS AND NAMES OF CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
-------------------------------------- ---------------------------------------------------
Registration Nos.: Name of Contract:
----------------- ----------------
A.G. Separate Account A 333-70801 The One Multi-Manager
Established: November 9, 1994 811-8862 Annuity variable annuity
033-86464 ElitePlus Bonus
811-8862 variable annuity
333-67605 ElitePlus Value
811-8862 variable annuity
21
24
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to
call in the number of Customers to the Fund, as soon as possible, but
no later than two weeks after the Record Date.
3. Assuming that the Fund has called an annual meeting, then in that event
the Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
22
25
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The proxy notice and statement as provided by the Fund should be
received by the Company approximately 3-5 business days before mail
date. Individual in charge at Company reviews and approves the contents
of the mailing package to ensure correctness and completeness. Copy of
this approval should be sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "Xxxx X. Xxxxx,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates
23
26
and the actual vote do not coincide, then an internal audit of that
vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) The Fund
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
24
