Exhibit 3 (a)(iii)(B)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
WM VARIABLE TRUST
AND
WM FUNDS DISTRIBUTOR, INC.
DATED AS OF
July 12, 1999
TABLE OF CONTENTS
Section 1. Introduction............................................. 2
1.1 Availability of Separate Account Divisions.............. 2
1.2 Broker-Dealer Registration.............................. 3
Section 2. Processing Transactions.................................. 3
2.1 Timely Pricing and Orders............................... 3
2.2 Timely Payments......................................... 4
2.3 Redemption in Kind...................................... 4
2.4 Applicable Price........................................ 4
Section 3. Costs and Expenses....................................... 5
3.1 General................................................. 5
3.2 Registration............................................ 5
3.3 Other (Non-Sales-Related)............................... 5
3.4 Sales-Related........................................... 6
3.5 Parties to Cooperate.................................... 7
Section 4. Legal Compliance......................................... 7
4.1 Tax Laws................................................ 7
4.2 Insurance and Certain Other Laws........................ 9
4.3 Securities Laws......................................... 11
4.4 Notice of Certain Proceedings and Other Circumstances... 12
4.5 AGL to Provide Documents................................ 13
4.6 Trust to Provide Documents.............................. 13
Section 5. Mixed and Shared Funding................................. 13
5.1 General................................................. 13
5.2 Disinterested Trustees.................................. 14
5.3 Monitoring for Material Irreconcilable Conflicts........ 14
5.4 Conflict Remedies....................................... 15
5.5 Notice to AGL........................................... 17
5.6 Information Requested by Board of Trustees.............. 18
5.7 Compliance with SEC Rules............................... 18
5.8 Requirements for Other Insurance Companies.............. 19
Section 6. Termination.............................................. 19
6.1 Events of Termination................................... 19
6.2 Funds to Remain Available............................... 21
6.3 Survival of Warranties and Indemnifications............. 21
6.4 Continuance of Agreement for Certain Purposes........... 00
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Xxxxxxx 0. Parties to Cooperate Respecting Termination.............. 22
Section 8. Assignment............................................... 22
Section 9. Notices.................................................. 23
Section 10. Voting Procedures....................................... 23
Section 11. Foreign Tax Credits..................................... 24
Section 12. Indemnification......................................... 24
12.1 Indemnification of Trust and Distributor by AGL......... 24
12.2 Indemnification of AGL and AGSI by Distributor.......... 28
12.3 Effect of Notice........................................ 31
Section 13. Applicable Law.......................................... 31
Section 14. Execution in Counterparts............................... 32
Section 15. Severability............................................ 33
Section 16. Rights Cumulative....................................... 33
Section 17. Restrictions on Sales of Trust Shares................... 33
Section 18. Scope of Liability...................................... 34
Section 19. Headings................................................ 34
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 12th day of July, 1999
("Agreement"), by and among American General Life Insurance Company, a Texas
life insurance company ("AGL") (on behalf of itself and its "Separate Account,"
defined below), American General Securities Incorporated, a Texas corporation
("AGSI"), the principal underwriter with respect to the Contracts referred to
below, WM Variable Trust, a Massachusetts business trust (the "Trust"), and WM
Funds Distributor, Inc., a Washington corporation (the "Distributor"), the
Trust's principal underwriter (collectively, the "Parties"),
WITNESSETH THAT:
WHEREAS the Distributor and the Trust desire that shares of the investment
funds of the Trust set forth in Exhibit A to the Agreement (the "Funds";
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reference herein to the "Trust" includes reference to each Fund to the extent
the context requires) be made available by the Distributor to serve as
underlying investment media for those combination fixed and variable annuity
contracts of AGL that are the subject of AGL's Form N-4 registration statements
filed with the Securities and Exchange Commission (the "SEC"), File Nos. 33-
57730 and 333-25549 (the "Contracts").
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Trust and the Distributor will make shares in the Funds
available to AGL for this purpose at net asset value and with no sales charges,
all subject to the following provisions:
Section 1. Introduction
------------------------
1.1 Availability of Separate Account Divisions.
------------------------------------------
AGL represents that American General Life Insurance Company Separate
Account D (the "Separate Account") is and will continue to be available to serve
as an investment vehicle for its Contracts. The Contracts provide for the
allocation of net amounts received by AGL to separate series (the "Divisions";
reference herein to the "Separate Account" includes reference to each Division
to the extent the context requires) of the Separate Account for investment in
the shares of corresponding Funds of the Trust that are made available through
the Separate Account to act as underlying investment media. The Trust may from
time to time add additional Funds, which will become subject to this Agreement,
if they are made available as investment media for the Contracts. The investment
funds of the Trust which are subject to this Agreement are set forth in Exhibit
-------
A to the Agreement. Exhibit A shall be amended from time to time as necessary
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to identify all investment funds offered under this Agreement. AGL will not
unreasonably deny any request by the Distributor to create new Divisions
corresponding to such new Funds.
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1.2 Broker-Dealer Registration.
--------------------------
The Distributor and AGSI each represents and warrants that it is registered
as a broker dealer with the SEC under the Securities Exchange Act of 1934, as
amended, and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD").
Section 2. Processing Transactions
-----------------------------------
2.1 Timely Pricing and Orders.
-------------------------
The Trust or its designated agent will provide closing net asset value,
dividend and capital gain information for each Fund to AGL at the close of
trading on each day (a "Business Day") on which (a) the New York Stock Exchange
is open for regular trading, (b) the Trust calculates its net asset value and
(c) AGL is open for business. The Trust or its designated agent will use its
best efforts to provide this information by 5:00 p.m., Houston time. AGL will
use these data to calculate unit values, which in turn will be used to process
transactions that receive that same Business Day's Separate Account unit value.
The Separate Account processing will be done the same evening, and corresponding
orders with respect to Trust shares will be placed the morning of the following
Business Day. AGL will use its best efforts to place such orders with the Trust
by 9:00 a.m., Houston time.
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2.2 Timely Payments.
---------------
AGL will transmit orders for purchases and redemptions of Trust shares to
the Distributor, and will wire payment for net purchases to a custodial account
designated by the Trust on the same day as the order for Trust shares is placed,
to the extent practicable. Payment for net redemptions will be wired by the
Trust to an account designated by AGL on the same day as the order is placed, to
the extent practicable, and in any event be made within six calendar days after
the date the order is placed in order to enable AGL to pay redemption proceeds
within the time specified in Section 22(e) of the Investment Company Act of
1940, as amended (the "1940 Act").
2.3 Redemption in Kind.
------------------
The Trust reserves the right to pay any portion of a redemption in kind of
portfolio securities, if the Trust's board of trustees (the "Board of Trustees")
determines that it would be detrimental to the best interests of shareholders to
make a redemption wholly in cash.
2.4 Applicable Price.
----------------
The Parties agree that orders resulting from purchase payments, surrenders,
partial withdrawals, routine withdrawals of charges, or other transactions under
Contracts will be executed at the net asset values as determined as of the close
of regular trading on the New York Stock Exchange on the Business Day that AGL
processes such transactions, which will be the Business Day prior to the
Distributor's receipt of such orders. All other purchases and redemptions will
be effected at the net asset values next computed after receipt by the Trust of
the order therefor, and such orders will be irrevocable. AGL hereby elects to
reinvest all dividends
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and capital gains distributions in additional shares of the corresponding Fund
at the record-date net asset values until AGL otherwise notifies the Trust in
writing, it being agreed by the Parties that the record date and the payment
date with respect to any dividend or distribution will be the same Business Day.
Section 3. Costs and Expenses
------------------------------
3.1 General.
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Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 Registration.
------------
The Trust will pay the cost of its registering as a management investment
company under the 1940 Act and registering its shares under the Securities Act
of 1933, as amended (the "1933 Act"), and keeping such registrations current and
effective. AGL will pay the cost of registering the Separate Account as a unit
investment trust under the 1940 Act and registering units of interest under the
Contracts under the 1933 Act and keeping such registrations current and
effective.
3.3 Other (Non-Sales-Related).
-------------------------
As among the Parties, the Trust will bear the costs of preparing, filing
with the SEC and setting for printing the Trust's prospectus, statement of
additional information and any supplements thereto (collectively, the "Trust
Prospectus"), periodic reports to shareholders, Trust
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proxy material and other shareholder communications. AGL will bear the costs of
preparing, filing with the SEC and setting for printing, the Separate Account's
prospectus, statement of additional information and any supplements thereto
(collectively, the "Separate Account Prospectus"), periodic reports to owners,
annuitants or participants under the Contracts (collectively, "Participants"),
voting instruction solicitation material, and other Participant communications.
As among the Parties, the Trust and AGL each will bear the costs of printing and
delivering to existing Participants the documents as to which it bears the cost
of preparation as set forth above in this Section 3.3, it being understood that
reasonable cost allocations will be made in cases where any such Trust and AGL
documents are printed or mailed on a combined or coordinated basis.
3.4 Sales-Related.
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Except as may otherwise be agreed to by the Parties relating to an initial
period of time after the Contracts are first offered for sale, the Distributor
or, where required by applicable federal or state law, its designee, will bear
the cost of preparing, printing and distributing all Trust and Separate Account
sales literature and advertising and filing it with the SEC and NASD, printing
and delivering to offerees Trust and Separate Account Prospectuses, Trust and
Separate Account periodic reports and Trust and AGL sales literature, and
placing any advertisements. AGL will bear the cost of filing any Trust or AGL
sales materials with, and obtaining approval from, any state insurance
regulatory authorities, to the extent required.
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3.5 Parties to Cooperate.
--------------------
The Trust, AGL, AGSI and the Distributor each agrees to cooperate with the
others, as applicable, in arranging to print, mail and/or deliver combined or
coordinated prospectuses or other materials of the Trust and Separate Account.
Section 4. Legal Compliance
----------------------------
4.1 Tax Laws.
--------
(a) The Trust represents that it will make every effort to qualify and to
maintain qualification of each Fund as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Trust or the Distributor will notify AGL 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.
(b) AGL represents that it believes, in good faith, that the Contracts
will be treated as annuity contracts under applicable provisions of the Code and
that it will make every effort to maintain such treatment; AGL will notify the
Trust and the Distributor immediately upon having a reasonable basis for
believing that any of the Contracts have ceased to be so treated or that they
might not be so treated in the future.
(c) The Trust represents that it will make every effort to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code
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and Section 1.817- 5(b) of the regulations under the Code, and the Trust or the
Distributor will notify AGL immediately upon having a reasonable basis for
believing that a Fund has ceased to so comply or that a Fund might not so comply
in the future.
(d) AGL represents that it believes, in good faith, that the Separate
Account is a "segregated asset account" and that interests in the Separate
Account are offered exclusively through the purchase of or transfer into a
"variable contract," within the meaning of such terms under Section 817(h) of
the Code and the regulations thereunder. AGL will make every effort to continue
to meet such definitional requirements, and it will notify the Trust and the
Distributor immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
(e) The Trust represents that, under the terms of its investment advisory
agreements with WM Advisors, Inc. (the "Adviser"), the Adviser is and will be
responsible for managing the Trust in compliance with the Trust's investment
objectives, policies and restrictions as set forth in the Trust Prospectus. The
Trust represents that these objectives, policies and restrictions do and will
include operating as a RIC in compliance with Subchapter M of the Code and
Section 817(h) of the Code and regulations thereunder. The Trust has adopted
and will maintain procedures for ensuring that the Trust is managed in
compliance with Subchapter M and Section 817(h) and regulations thereunder. On
request, the Trust shall also provide AGL with such materials, cooperation and
assistance as may be reasonably necessary for AGL or any person designated by
AGL to review from time to time the procedures and practices of the Adviser,
each
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sub-adviser or other provider of services to the Trust for ensuring that the
Trust is managed in compliance with Subchapter M and Section 817(h) and
regulations thereunder.
(f) Whenever any matter (a "Matter") comes to the attention of the Trust
that causes it to believe that any of its Funds was not a RIC in compliance with
Subchapter M of the Code and/or was not in compliance with Section 817(h) of the
Code and the regulations thereunder as of the last day of a calendar quarter,
the Trust shall furnish a report of such Matter immediately to AGL. The Trust
will then take such action as is necessary or appropriate to cure any
noncompliance during a grace period of 30 calendar days after the end of the
calendar quarter covered by the report. If the Trust does not so cure the
noncompliance regarding each affected Fund's status as a RIC, the Trust will
pursue those efforts necessary to enable each affected Fund to qualify once
again for treatment as a RIC in compliance with Subchapter M, including
cooperation in good faith with AGL. If the Trust does not so cure the
noncompliance regarding a Fund's status under Section 817(h), the Trust will
cooperate in good faith with AGL's efforts to obtain a ruling and closing
agreement, as provided in Revenue Procedure 92-95 issued by the Internal Revenue
Service (or any applicable ruling or procedure subsequently issued by the
Internal Revenue Service), that the affected Fund satisfies Section 817(h) for
the period or periods covered by the Actionable Report.
4.2 Insurance and Certain Other Laws.
--------------------------------
(a) The Trust will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by AGL.
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(b) AGL represents and warrants that (i) it is an insurance company duly
organized, validly existing and in good standing under the laws of the State of
Texas and has full corporate power, authority and legal right to execute,
deliver and perform its duties and comply with its obligations under this
Agreement, (ii) it has legally and validly established and maintains the
Separate Account as a segregated asset account under Article 3.75 of the Texas
Insurance Code, and (iii) the Contracts comply in all material respects with all
other applicable federal and state laws and regulations.
(c) AGL and AGSI represent and warrant that AGSI is a business corporation
duly organized, validly existing, and in good standing under the laws of the
State of Texas and has full corporate power, authority and legal right to
execute, deliver, and perform its duties and comply with its obligations under
this Agreement.
(d) The Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Washington and has full corporate power, authority and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(e) The Distributor and the Trust represent and warrant that the Trust is
a business trust duly organized, validly existing, and in good standing under
the laws of the Commonwealth of Massachusetts and has full power, authority, and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
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4.3 Securities Laws.
---------------
(a) AGL represents and warrants that (i) it has registered the Separate
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for its variable annuity
contracts, including the Contracts, (ii) the Separate Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, (iii) the Separate Account's 1933 Act registration statement
relating to the Contracts, together with any amendments thereto, will at all
times comply in all material respects with the requirements of the 1933 Act and
the rules thereunder, and (iv) the Separate Account Prospectus will at all times
comply in all material respects with the requirements of the 1933 Act and the
rules thereunder.
(b) The Trust and the Distributor represent and warrant that (i) Trust
shares sold pursuant to this Agreement will be registered under the 1933 Act to
the extent required by the 1933 Act and duly authorized for issuance and sold in
compliance with Massachusetts law, (ii) the Trust is and will remain registered
under the 1940 Act to the extent required by the 1940 Act, and (iii) the Trust
will amend the registration statement for its shares under the 1933 Act and
itself under the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
(c) The Trust represents and warrants that (i) the Trust does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, including the exemptive order issued by the Commission as
Release No. IC-22047, which the Trust further
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represents and warrants is applicable to the Trust, (ii) its 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (iii) the Trust Prospectus will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder.
(d) The Trust will register and qualify its shares for sale in accordance
with the laws of any state or other jurisdiction only if and to the extent
reasonably deemed advisable by the Trust, AGL or any other life insurance
company utilizing the Trust.
4.4 Notice of Certain Proceedings and Other Circumstances.
-----------------------------------------------------
The Distributor or the Trust shall immediately notify AGL of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Trust's registration statement
under the 1933 Act or the Trust Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Trust Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Trust's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Trust shares in
any state or jurisdiction, including, without limitation, any circumstances in
which (x) the Trust's shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or (y) such
law precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by AGL. The Distributor and the Trust will
make every reasonable effort to prevent the issuance of any stop
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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.
4.5 AGL to Provide Documents.
------------------------
AGL will provide to the Trust one complete copy of all SEC registration
statements, Separate Account Prospectuses, reports, any preliminary and final
voting instruction solicitation material, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate to
the Separate Account or the Contracts, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.6 Trust to Provide Documents.
--------------------------
The Trust will provide to AGL one complete copy of all SEC registration
statements, Trust Prospectuses, reports, any preliminary and final proxy
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Trust or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
Section 5. Mixed and Shared Funding
------------------------------------
5.1 General.
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The Trust may apply for an order exempting it from certain provisions of
the 1940 Act and rules thereunder so that, subject to compliance with Section 17
of this Agreement, the Trust may
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be available for investment by certain other entities, including, without
limitation, separate accounts funding variable life insurance policies, separate
accounts of insurance companies unaffiliated with AGL and trustees of qualified
pension and retirement plans ("Mixed and Shared Funding"). The Parties recognize
that the SEC has imposed terms and conditions for such orders that are
substantially identical to many of the provisions of this Section 5. If the
Trust implements Mixed and Shared Funding, pursuant to such an exemptive order
or otherwise, Sections 5.2 through 5.8 below shall apply, but not otherwise.
5.2 Disinterested Trustees.
----------------------
The Trust agrees that the Board of Trustees shall at all times consist of
trustees a majority of whom (the "Disinterested Trustees") are not interested
persons of the Adviser or the Distributor within the meaning of Section 2(a)(19)
of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
------------------------------------------------
The Trust agrees that the Board of Trustees will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants of all separate accounts of life insurance companies utilizing the
Trust, including the Separate Account. AGL agrees to inform the Board of
Trustees of the Trust of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder,
but the Parties recognize that such a conflict may arise for a variety of
reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
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(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-
action or interpretative letter, or any similar action by insurance,
tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract participants or by participants
of different life insurance companies utilizing the Trust; or
(f) a decision by a life insurance company utilizing the Trust to
disregard the voting instructions of participants.
Consistent with the SEC's requirements in connection with exemptive
proceedings of the type referred to in Section 5.1 hereof, AGL will assist the
Board of Trustees in carrying out its responsibilities by providing the Board of
Trustees with all information reasonably necessary for the Board of Trustees to
consider any issue raised, including information as to a decision by AGL to
disregard voting instructions of Participants.
5.4 Conflict Remedies.
-----------------
(a) It is agreed that if it is determined by a majority of the members of
the Board of Trustees or a majority of the Disinterested Trustees that a
material irreconcilable conflict exists, AGL and the other life insurance
companies utilizing the Trust will, at their own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Trustees), take
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whatever steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Fund and reinvesting such assets in a
different investment medium, including another Fund of the Trust, or
submitting the question whether such segregation should be implemented
to a vote of all affected participants and, as appropriate,
segregating the assets of any particular group (e.g., annuity contract
owners or participants, life insurance contract owners or all contract
owners and participants of one or more life insurance companies
utilizing the Trust) that votes in favor of such segregation, or
offering to the affected contract owners or participants the option of
making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the 1940 Act or a
new separate account that is operated as a Management Company.
(b) If the material irreconcilable conflict arises because of AGL's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, AGL may be
required, at the Trust's election, to withdraw the Separate Account's investment
in the Trust. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after the
Trust gives notice to AGL that this provision is being implemented, and until
such withdrawal the Distributor and Trust shall continue to accept and implement
orders by AGL for the purchase and redemption of shares of the Trust.
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(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to AGL conflicts with the
majority of other state regulators, then AGL will withdraw the Separate
Account's investment in the Trust within six months after the Trust's Board of
Trustees informs AGL that it has determined that such decision has created a
material irreconcilable conflict, and until such withdrawal the Distributor and
Trust shall continue to accept and implement orders by AGL for the purchase and
redemption of shares of the Trust.
(d) AGL agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Trust or the Distributor
be required to establish a new funding medium for any of the Contracts. AGL will
not be required by the terms hereof to establish a new funding medium for any of
the Contracts if an offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
5.5 Notice to AGL.
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The Trust will promptly make known in writing to AGL the Board of Trustees'
determination of the existence of a material irreconcilable conflict, a
description of the facts that give rise to such conflict and the implications of
such conflict.
5.6 Information Requested by Board of Trustees.
------------------------------------------
AGL and the Trust will at least annually submit to the Board of Trustees of
the Trust such reports, materials or data as the Board of Trustees may
reasonably request so that the Board of Trustees may fully carry out the
obligations imposed upon them by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Trustees. All reports received by the Board of Trustees of
potential or existing conflicts, and all Board of Trustees actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Trust of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Trustees or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
-------------------------
If, at any time during which the Trust is serving an investment medium for
variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
mixed and shared funding, the Parties agree that they will comply with the terms
and conditions thereof and that the terms of this Xxxxxxx 0
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xxxxx xx deemed modified if and only to the extent required in order also to
comply with the terms and conditions of such exemptive relief that is afforded
by any of said rules that are applicable.
5.8 Requirements for Other Insurance Companies.
------------------------------------------
The Trust will require that each insurance company utilizing the Trust
enter into an agreement with the Trust that contains in substance the same
provisions as are set forth in Sections 2.3, 4.1 (b), 4.1 (d), 4.4, 4.3 (a),
4.5, 5, 10 and 18 of this Agreement. This provision is not intended to limit in
any way the obligations of the Trust and Distributor under Section 17 of this
Agreement.
Section 6. Termination
-----------------------
6.1 Events of Termination.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of AGL, the Distributor or the Trust upon (i) at least
six months' advance written notice to the other Parties, and (ii) the approval
by (x) a majority of the Disinterested Trustees or (y) a majority vote of the
shares of the affected Fund that are held in the corresponding Divisions of the
Separate Account (pursuant to the procedures set forth in Section 10 of this
Agreement for voting Trust shares in accordance with Participant instructions);
provided, however, that the approvals described in clauses (x) and (y) above
shall not be required if (1) the aggregate account value under the Contracts is
less than $300 million at the date the notice of termination is delivered, (2)
the aggregate month-end account value under the Contracts
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has averaged less than $300 million for the 24 full calendar months immediately
preceding the date the notice of termination is delivered and (3) the notice of
termination is delivered no earlier than the end of the 60th full calendar month
following the date the first Contract is issued; or
(b) at the option of the Trust upon institution of formal proceedings
against AGL by the SEC, any state insurance regulator or any other regulatory
body regarding AGL's duties under this Agreement or related to the sale of the
Contracts, the operation of the Separate Account, or the purchase of the Trust
shares, if, in each case, the Trust reasonably determines that such proceedings,
or the facts on which such proceedings may be based, have a material likelihood
of imposing material adverse consequences on the Fund to be terminated; or
(c) at the option of AGL upon institution of formal proceedings against
the Trust, the Adviser or any sub-adviser to the Trust, or the Distributor by
the NASD, the SEC, or any state securities or insurance department or any other
regulatory body, if, in each case, AGL reasonably determines that such
proceedings, or the facts on which such proceedings may be based, have a
material likelihood of imposing material adverse consequences on AGL, AGSI or
the Division corresponding to the Fund to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law or (ii) such law precludes the use of such
shares as an underlying investment medium of the Contracts issued or to be
issued by AGL; or
-20-
(e) upon termination of the corresponding Division's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of AGL if the Fund ceases to qualify as a RIC under
Subchapter M of the Code or under successor or similar provisions, or if AGL
reasonably believes that the Fund may fail to so qualify; or
(g) at the option of AGL if the Fund fails to comply with Section 817(h)
of the Code or with successor or similar provisions, or if AGL reasonably
believes that the Fund may fail to so comply.
6.2 Funds to Remain Available.
-------------------------
Except (i) as necessary to implement Participant initiated transactions,
(ii) as required by state insurance laws or regulations, (iii) as required
pursuant to Section 5 of this Agreement, or (iv) with respect to any Fund as to
which this Agreement has terminated, AGL shall not (x) redeem Trust shares
attributable to the Contracts (as opposed to Trust shares attributable to AGL's
assets held in the Separate Account), (y) prevent Participants from allocating
payments to or transferring amounts from a Fund that was otherwise available
under the Contracts, or (z) apply for an order of the Securities and Exchange
Commission pursuant to Section 26(b) of the 1940 Act.
6.3 Survival of Warranties and Indemnifications.
-------------------------------------------
-21-
All warranties and indemnifications will survive the termination of this
Agreement.
6.4 Continuance of Agreement for Certain Purposes.
---------------------------------------------
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1 (b), 6.1 (c), 6.1 (d), 6.1 (f), or 6.1 (g) hereof, this Agreement
shall nevertheless continue in effect as to any shares of that Fund that are
outstanding as of the date of such termination (the "Initial Termination Date").
This continuation shall extend to the earlier of the date as of which the
Separate Account owns no shares of the affected Fund or a date (the "Final
Termination Date") six months following the Initial Termination Date, except
that AGL may, by written notice to the other Parties, shorten said six month
period in the case of a termination pursuant to Sections 6.1 (d), 6.1 (f) or 6.1
(g).
Section 7. Parties to Cooperate Respecting Termination
--------------------------------------------------------
The Parties agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that the Separate Account owns no shares of a Fund after the Final
Termination Date with respect thereto, or, in the case of a termination pursuant
to Section 6. 1 (a), the termination date specified in the notice of
termination.
Section 8. Assignment
----------------------
This Agreement may not be assigned, except with the written consent of each
other Party.
-22-
Section 9. Notices
-------------------
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
American General Life
Insurance Company
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxx
FAX: 000-000-0000
American General Securities
Incorporated
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: F. Xxxx Xxxxxx
FAX: 000-000-0000
WM Variable Trust
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
FAX: 000-000-0000
WM Funds Distributor, Inc.
0000 Xxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx
FAX: 000-000-0000
Section 10. Voting Procedures
------------------------------
-23-
Subject to the cost allocation procedures set forth in Section 3 hereof,
AGL will distribute all proxy material furnished by the Trust to Participants
and will vote Trust shares in accordance with instructions received from
Participants. AGL, will vote Trust shares that are (a) not attributable to
Participants or (b) attributable to Participants, but for which no instructions
have been received, in the same proportion as Trust shares for which said
instructions have been received from Participants. AGL agrees that it will
disregard Participant voting instructions only to the extent it would be
permitted to do so pursuant to Rule 6e-3(T)(b)(15)(iii) under the 1940 Act if
the Contracts were variable life insurance policies subject to that rule. Other
participating life insurance companies utilizing the Trust will be responsible
for calculating voting privileges in a manner consistent with that of AGL, as
prescribed by this Section 10.
Section 11. Foreign Tax Credits
--------------------------------
The Trust agrees to consult in advance with AGL concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
----------------------------
12. Indemnification of Trust and Distributor by AGL.
-----------------------------------------------
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
AGL agrees to indemnify and hold harmless the Trust and the Distributor, each of
their trustees, directors and
-24-
officers, and each person, if any, who controls the Trust or the Distributor
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 12.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of AGL) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or actions are related to
the sale or acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Separate
Account's 1933 Act registration statement, the Separate Account
Prospectus, the Contracts or, to the extent prepared by AGL or AGSI,
sales literature or advertising for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to AGL or AGSI by or
on behalf of the Trust, the Distributor or the Adviser for use in the
Separate Account's 1933 Act registration statement, the Separate
Account Prospectus, the Contracts, or sales literature or advertising
(or any amendment or supplement to any of the foregoing); or
-25-
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in
the Trust's 1933 Act registration statement, Trust Prospectus, sales
literature or advertising of the Trust, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on behalf
of AGL or AGSI) or wrongful conduct of AGL or AGSI or persons under
their control (including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph (m) of
Article I of the NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Trust shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's 1933
Act registration statement, Trust Prospectus, sales literature or
advertising of the Trust, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon and in conformity with information furnished to
the Trust by or on behalf of AGL or AGSI for use in the Trust's 1933
Act registration statement, Trust Prospectus, sales literature or
advertising of the Trust, or any amendment or supplement to any of the
foregoing; or
-26-
(iv) arise as a result of any failure by AGL or AGSI to perform the
obligations, provide the services and furnish the materials required
of them under the terms of this Agreement.
(b) AGL shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of its reckless disregard of obligations or duties under
this Agreement or to the Distributor or to the Trust.
(c) AGL shall not be liable under this indemnification provision with
respect to any action against an Indemnified Party unless the Trust or the
Distributor shall have notified AGL in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AGL of any such action shall not relieve AGL from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against an Indemnified Party, AGL shall be
entitled to participate, at its own expense, in the defense of such action. AGL
also shall be entitled to assume the defense thereof, with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AGL to such Indemnified Party of AGL's
election to assume the defense thereof, the Indemnified Party
-27-
will cooperate fully with AGL and shall bear the fees and expenses of any
additional counsel retained by it, and AGL will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12. Indemnification of AGL and AGSI by Distributor.
----------------------------------------------
(a) Except to the extent provided in Sections 12.2(b) and 12.2(c) hereof,
the Distributor agrees to indemnify and hold harmless AGL, AGSI, and the Trust,
each of their trustees, directors and officers, and each person, if any, who
controls AGL, AGSI or the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions are
related to the sale or acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's 1933
Act registration statement, Trust Prospectus, sales literature or
advertising of the Trust or, to the extent not prepared by AGL or
AGSI, sales literature or advertising for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material
-28-
fact required to be stated therein or necessary to make the statements
therein not misleading; provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Distributor
or Trust by or on behalf of AGL or AGSI for use in the Trust's 1933
Act registration statement, Trust Prospectus, or in sales literature
or advertising (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in
the Separate Account's 1933 Act registration statement, Separate
Account Prospectus, sales literature or advertising for the Contracts,
or any amendment or supplement to any of the foregoing, not supplied
for use therein by or on behalf of the Distributor, Trust or Adviser)
or wrongful conduct of the Trust or Distributor or persons under their
control (including, without limitation, their employees and Associated
Persons), in connection with the sale or distribution of the Contracts
or Trust shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Separate
Account's 1933 Act registration statement, Separate Account
Prospectus, sales literature or advertising covering the Contracts, or
any amendment or supplement to any of the foregoing, or the omission
or alleged omission to state therein a material fact required to be
-29-
stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished to AGL or AGSI by or on
behalf of the Trust, the Adviser or the Distributor for use in the
Separate Account's 1933 Act registration statement, Separate Account
Prospectus, sales literature or advertising covering the Contracts, or
any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Trust or the Distributor
to perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement;
(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of its reckless disregard of
obligations and duties under this Agreement or to AGL, AGSI or the Separate
Account.
(c) The Distributor shall not be liable under this indemnification
provision with respect to any action against an Indemnified Party unless AGL or
AGSI shall have notified the Distributor in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent),
-30-
but failure to notify the Distributor of any such action shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, the Distributor will be entitled to participate, at its own
expense, in the defense of such action. The Distributor also shall be entitled
to assume the defense thereof, with counsel approved by the Indemnified Party
named in the action, which approval shall not be unreasonably withheld. After
notice from the Distributor to such Indemnified Party of the Distributor's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with the Distributor and shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
2. Effect of Notice.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Section 12.1 or 12.2 above of participation in or control of any action by
the indemnifying Party will in no event be deemed to be an admission by the
indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
Section 13. Applicable Law
----------------------------
-31-
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Massachusetts law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
--------------------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
-32-
Section 15. Severability
-------------------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
------------------------------
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, that the Parties are entitled to under federal and state
laws.
Section 17. Restrictions on Sales of Trust Shares
--------------------------------------------------
AGL agrees that the Trust is permitted (subject to the other terms of this
Agreement) to make its shares available to separate accounts of other life
insurance companies. Without AGL's express written consent, neither the Trust
nor the Distributor, nor any of their related persons and entities, will enter
into any arrangement for utilization of the Trust by any other life insurance
company under which the terms granted to that insurance company or its related
persons and entities are more favorable than those granted to AGL and its
related persons and entities hereunder. Other than as set forth above in this
Section 17, neither the Trust nor the Distributor will offer or issue Trust
shares to any person or entity, other than the Separate Account, without AGL's
specific written consent, which shall not be unreasonably withheld.
-33-
Section 18. Scope of Liability
-------------------------------
It is understood and expressly agreed that the obligations and liabilities
of the Trust hereunder will not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Trust, as provided
in the Declaration of Trust. The execution and delivery of this Agreement have
been authorized by the Board of Trustees and this Agreement has been signed by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Board of Trustees nor such execution and delivery by such
officer will be deemed to have been made by any of the Trustees individually or
to impose any liability on any of them personally, but will bind only the assets
and property of the Trust, as provided in its Declaration of Trust.
Section 19. Headings
---------------------
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
-34-
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:/s/ XXX XXXX
---------------------------------------------
Title: SVP
AMERICAN GENERAL SECURITIES INCORPORATED
By: /s/ F. XXXX XXXXXX
---------------------------------------------
Title: President
WM VARIABLE TRUST
By: /s/ XXXXXXX X. XXXXXX
--------------------------------------------
Title: President
WM FUNDS DISTRIBUTOR, INC.
By: /s/ XXXXXXX X. XXXXXX
--------------------------------------------
Title: President
EXHIBIT A
---------
INVESTMENT FUNDS OF THE TRUST
AS OF July 12, 1999
. Money Market Fund
. Short-Term High Quality Bond Fund
. U.S. Government Securities Fund
. Income Fund
. Bond & Stock Fund
. Growth & Income Fund
. Growth Fund
. Northwest Fund
. Emerging Growth Fund
. International Growth Fund
. Strategic Growth Portfolio
. Conservative Growth Portfolio
. Balanced Portfolio
. Flexible Income Portfolio
. Income Portfolio
