EXHIBIT 3(c)(iii)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
THE SIERRA VARIABLE TRUST
AND
COMPOSITE FUNDS DISTRIBUTOR, INC.
DATED AS OF
January 30, 1998
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.................................... 10
4.3 SECURITIES LAWS..................................................... 11
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES............... 13
4.5 AGL TO PROVIDE DOCUMENTS............................................ 13
4.6 TRUST TO PROVIDE DOCUMENTS.......................................... 14
Section 5. Mixed and Shared Funding............................................ 14
5.1 GENERAL............................................................. 14
5.2 DISINTERESTED TRUSTEES.............................................. 15
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.................... 15
5.4 CONFLICT REMEDIES................................................... 16
5.5 NOTICE TO AGL....................................................... 18
5.6 INFORMATION REQUESTED BY BOARD OF TRUSTEES.......................... 18
5.7 COMPLIANCE WITH SEC RULES........................................... 19
5.8 REQUIREMENTS FOR OTHER INSURANCE COMPANIES.......................... 19
Section 6. Termination......................................................... 20
6.1 EVENTS OF TERMINATION............................................... 20
6.2 FUNDS TO REMAIN AVAILABLE........................................... 22
6.3 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS......................... 22
6.4 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES....................... 00
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Xxxxxxx 0. Parties to Cooperate Respecting Termination......................... 23
Section 8. Assignment.......................................................... 23
Section 9. Notices............................................................. 23
Section 10. Voting Procedures................................................... 24
Section 11. Foreign Tax Credits................................................. 25
Section 12. Indemnification..................................................... 25
12.1 INDEMNIFICATION OF TRUST AND DISTRIBUTOR BY AGL..................... 25
12.2 INDEMNIFICATION OF AGL AND AGSI BY DISTRIBUTOR...................... 28
12.3 EFFECT OF NOTICE.................................................... 32
Section 13. Applicable Law...................................................... 32
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 30th day of January,
1998 ("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, The Sierra Variable Trust, a Massachusetts business trust
(the "Trust"), and Composite 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"; 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").
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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 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 and capital
gains
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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.
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 proxy material and other
shareholder communications. AGL will bear the costs of preparing, filing with
the SEC
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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.
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 and
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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. Within 10 Business Days after the end of each calendar quarter,
AGL will certify in writing that such definitional requirements were met
during the preceding calendar quarter.
(e) The Trust represents that, under the terms of its investment
advisory agreements with Composite Research & Management Co. (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
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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 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) Independent public accountants (the "Auditors") will prepare a
report ("Report") for each Fund of the Trust in which the Separate Account
invests, within 15 Business Days after the end of each calendar quarter,
regarding whether any matter (the "Matter") has come to the attention of the
Auditors that has caused the Auditors to believe that the Trust 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 such calendar quarter. A Report of no such Matter is referred to herein as
a "Non-Actionable Report," and a Report of such a Matter is referred to herein
as an "Actionable Report." Each Report will be prepared by Price Waterhouse or
other independent public accountants selected by the Trust. If such other
independent public accountants are not also the auditors approved with respect
to the Trust pursuant to Section 32(a) of the 1940 Act, such other independent
public accountants must be approved by AGL, which approval shall not be
unreasonably withheld. Each Report will be in a form and based on specified
procedures and work sheets agreed upon by the Trust and AGL, such agreement
not to be unreasonably withheld.
(g) The Trust will deliver to AGL a letter confirming any Non-Actionable
Report within 20 Business Days after the end of the quarter to which it
relates. On request, the Trust will also deliver to AGL a copy of any
Non-Actionable Report.
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(h) Any Actionable Report shall be furnished immediately to AGL. In the
event of an Actionable Report, the Trust will 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
so cures the noncompliance, it will furnish AGL with a Non-Actionable Report
by the last day of such grace period. If the Trust does not so cure the
noncompliance regarding its 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
its 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 Trust 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.
(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
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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.
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
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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 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.
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(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 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
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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.
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 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.
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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;
(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
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(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 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
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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.
(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.
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(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.
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
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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
Section 5 shall be 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.
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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
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
-20-
(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
(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.
-21-
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), or (y) prevent Participants from
allocating payments to or transferring amounts from a Fund that was otherwise
available under the Contracts, until, in either case, 90 calendar days after
AGL shall have notified the Trust or Distributor of its intention to do so.
6.3 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
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).
-22-
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.
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: Xxxxxx X. Xxxxxx
FAX: 000-000-0000
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American General Securities Incorporated
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxx
FAX: 000-000-0000
The Sierra Variable Trust
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
FAX: 000-000-0000
Composite Funds Distributor, Inc.
0000 Xxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx
FAX: 000-000-0000
SECTION 10. VOTING PROCEDURES
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. AGI, 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
-24-
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
12.1 INDEMNIFICATION OF TRUST AND DISTRIBUTOR BY AGL.
(a) Except to the extent provided in Sections 12.l(b) and 12.l(c),
below, AGL agrees to indemnify and hold harmless the Trust and the
Distributor, each of their trustees, directors and 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:
-25-
(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
(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
-26-
(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
(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.
-27-
(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
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.
12.2 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)
-28-
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 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
-29-
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 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;
-30-
(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), 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
-31-
by such Indemnified Party independently in connection with the defense
thereof, other than reasonable costs of investigation.
12.3 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
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
The Trust and the Distributor agree that, for a period of 24 months
following the initial sale of Contracts, shares of the Trust will not be made
available to any separate account of any other insurance company without AGL's
specific written consent. AGL agrees that the Trust thereafter will be
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.
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.
-34-
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:________________________________
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By:________________________________
Title:
THE SIERRA VARIABLE TRUST
By:________________________________
Title:
COMPOSITE FUNDS DISTRIBUTOR, INC.
By:________________________________
Title:
-35-
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:________________________________
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By:________________________________
Title:
THE SIERRA VARIABLE TRUST
By:________________________________
Title:
COMPOSITE FUNDS DISTRIBUTOR, INC.
By:________________________________
Title:
-36-
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:________________________________
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By:________________________________
Title:
THE SIERRA VARIABLE TRUST
By:________________________________
Title:
COMPOSITE FUNDS DISTRIBUTOR, INC.
By:________________________________
Title:
-37-
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:________________________________
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By:________________________________
Title:
THE SIERRA VARIABLE TRUST
By:________________________________
Title:
COMPOSITE FUNDS DISTRIBUTOR, INC.
By:________________________________
Title:
-38-
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:________________________________
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By:________________________________
Title:
THE SIERRA VARIABLE TRUST
By:________________________________
Title:
COMPOSITE FUNDS DISTRIBUTOR, INC.
By:________________________________
Title:
-39-
EXHIBIT A
INVESTMENT FUNDS OF THE TRUST
AS OF JANUARY 30, 1998
o Money Market Fund
o Short-Term High Quality Bond Fund
o U.S. Government Fund
o Corporate Income Fund
o Growth and Income Fund
o Growth Fund
o Emerging Growth Fund
o International Growth Fund
o Capital Growth Portfolio
o Growth Portfolio
o Balanced Portfolio
o Value Portfolio
o Income Portfolio
-40-
