PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this 30th day of April, 2014 by and
between XXXXXXX XXXXX VARIABLE INSURANCE TRUST, a statutory trust formed under
the laws of Delaware (the "Trust"), XXXXXXX, SACHS & CO., a New York limited
partnership (the "Distributor"), and Forethought Life Insurance Company, an
Indiana life insurance company (the "Company"), on its own behalf and on behalf
of each separate account of the Company identified herein.
WHEREAS, the Trust engages in business as an open-end management
investment company of the series-type offering shares of beneficial interest
(the "Trust Shares") in one or more separate series ("Series"), and each such
Series represents an interest in a particular investment portfolio of securities
and other assets (a "Fund") and may be issued in various classes ("Classes")
with each such Class supporting a distinct charge and expense arrangement; and
WHEREAS, the Trust was established for the purpose of serving as an
investment vehicle for life insurance company separate accounts supporting
variable annuity contracts and variable life insurance policies to be offered by
insurance companies and may also be utilized by certain retirement plans and
other persons as described herein; and
WHEREAS, an order of the Securities and Exchange Commission dated February
2, 1998, (File No. 812-10794) grants certain separate accounts supporting
variable life insurance policies, their life insurance company depositors, and
their principal underwriters, exemptions from Sections 9(a), 13(a), 15(a) and
15(b) of the Investment Company Act of 1940, and from Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary for such separate accounts to
purchase and hold Trust Shares at the same time that such shares are sold to or
held by separate accounts of affiliated and unaffiliated insurance companies
supporting either variable annuity contracts or variable life insurance
policies, or both, or by qualified pension and retirement plans (the "SEC
Order"); and
WHEREAS, the Distributor has the exclusive right to distribute Trust
Shares to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment vehicle
for a certain separate account(s) of the Company and the Distributor desires to
sell Trust Shares of certain Series and/or Class(es) to such separate
account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust, the
Distributor and the Company agree as follows:
ARTICLE I
ADDITIONAL DEFINITIONS
1.1. "Accounts" -- the separate accounts of the Company identified in
Schedule 1A, to this Agreement.
1.2 "Applicable Law" -- the federal securities laws as defined in Rule
38a-1 under the 1940 Act, any rules promulgated under the federal securities
laws, FINRA regulations, any Applicable SEC Guidance, and any state or municipal
laws or regulations that may apply to the Trust, the Distributor, the Company,
the Accounts, or the Contracts.
1.3. "Applicable SEC Guidance" -- any applicable: (a) SEC release,
opinion, or order, as well as any published "no-action" position or written
interpretive guidance by the SEC staff; and (b) FINRA interpretive memoranda or
notices to members, as well as any written interpretive guidance from the FINRA
staff. Applicable SEC Guidance does not include oral statements, speeches, or
informal guidance by the SEC or its staff.
1.4. "Business Day"--each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.5. "Code"--the Internal Revenue Code of 1986, as amended, and any
successor thereto.
1.6. "Contracts"--the class or classes of variable annuity contracts
and/or variable life insurance policies issued by the Company and described more
specifically on Schedule 1B to this Agreement.
1.7. "Contract Owners"--the owners of the Contracts, as distinguished
from all Product Owners.
1.8. "FINRA"--The Financial Industry Regulatory Authority, Inc.
1.9. "Fund Documents" -- documents prepared by the Trust that, pursuant
to Rule 498(e)(1), must be publicly accessible free of charge at the Web site
address shown on the cover page or at the beginning of the Summary Prospectus.
1.10. "Fund Documents Web Site"--the web site maintained by the Trust
(or its agent) where Contract Owners, prospective Contract Owners, participants
in Participating Plans, or individual investors who are Qualified Persons or
invest through a Qualified Person may access Fund Documents.
1.11. "Participating Account"--a separate account investing all or a
portion of its assets in the Trust, including the Accounts.
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1.12. "Participating Insurance Company"--any life insurance company
with a Participating Account, including the Company.
1.13. "Participating Plan"--any pension or profit-sharing plan
qualified under Section 401 of the Code investing in the Trust and certain other
retirement plans that are Qualified Persons investing in the Trust.
1.14. "Participating Investor"--any Participating Account,
Participating Insurance Company, Participating Plan, or other Qualified Person,
including the Accounts and the Company.
1.15. "Products"--variable annuity contracts and variable life
insurance policies supported by Participating Accounts, including the Contracts.
1.16. "Product Owners"--owners of Products, including Contract Owners.
1.17. "Prospectus"--with respect to a Series (or Class) of Trust
Shares or a class of Schedule 1 Contracts, each version of the definitive
Prospectus or Summary Prospectus (where used or required to be used) and
supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act.
With respect to any provision of this Agreement requiring a party to take action
in accordance with a Prospectus, PROSPECTUS shall mean the version of the
Prospectus for the applicable Series, Class or Contracts filed most recently
prior to the taking of such action. For purposes of Article IX, the term
"Prospectus" shall include any statement of additional information incorporated
therein.
1.18. "Qualified Person" - a person permitted to hold Trust Shares
under Treasury Regulation Section 1.817-5(f) in order for any Fund of the Trust
to qualify for "look-through" treatment, including, subject to the requirements
of Treasury Regulation Section 1.817-5(f), insurance companies and their
separate accounts supporting variable annuity contracts and variable life
insurance policies, pension and profit-sharing plans qualified under Section 401
of the Code, certain government retirement plans, custody accounts established
for individual retirement accounts under Section 408 of the Code, custody
accounts established in connection with arrangements under Section 403(b)(7) of
the Code, and such other persons or plans permitted under Treasury Regulation
Section 1.817-5(f) to hold Trust Shares without impairing the ability of the
Accounts to treat the portfolio investments of a Fund as constituting
investments of the Accounts for the purpose of satisfying the diversification
requirements of Section 817(h) of the Code.
1.19. "Registration Statement"--with respect to the Trust Shares or
Schedule 1 Contracts, the registration statement filed with the SEC to register
such securities under the 1933 Act, or the most recently filed amendment
thereto, in either case in the form in which it was declared or became
effective. The Contracts' Registration Statement for each class of Schedule 1
Contracts is identified on Schedule 1B to this Agreement. The Trust's
Registration Statement is filed on Form N-1A (File No. 333-35883).
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1.20. "1940 Act Registration Statement"--with respect to the Trust or
Schedule 1 Accounts, the registration statement filed with the SEC to register
such person as an investment company under the 1940 Act, or the most recently
filed amendment thereto. The Trust's 1940 Act Registration Statement is filed on
Form N-1A (File No. 811-08361).
1.21. "Schedule 1 Accounts"--Accounts registered under the 1940 Act as
unit investment trusts and listed on Schedule 1A.
1.22. "Schedule 1 Contracts"--Contracts through which interests in
Schedule 1 Accounts are offered and issued, which interests are registered as
securities under the 0000 Xxx.
1.23. "SEC"--the Securities and Exchange Commission.
1.24. "Statement of Additional Information"--with respect to the shares
of the Trust or Schedule 1 Contracts, each version of the definitive statement
of additional information or supplement thereto filed with the SEC pursuant to
Rule 497 under the 1933 Act. With respect to any provision of this Agreement
requiring a party to take action in accordance with a Statement of Additional
Information, STATEMENT OF ADDITIONAL INFORMATION shall mean the last version so
filed prior to the taking of such action.
1.25. "Statutory Prospectus" - a prospectus that satisfies the
requirements of Section 10(a) of the 0000 Xxx.
1.26. "Summary Prospectus" -a prospectus described in paragraph (b) of
Rule 498 under the 0000 Xxx.
1.27. "Trust Board"--the board of trustees of the Trust.
1.28. "1933 Act"--the Securities Exchange Act of 1933, as amended.
1.29. "1940 Act"--the Investment Company Act of 1940, as amended.
ARTICLE II
SALE OF TRUST SHARES
2.1. AVAILABILITY OF SHARES
(a) The Trust has granted to the Distributor exclusive authority to
distribute the Trust Shares and to select which Series or Classes of Trust
Shares shall be made available to Participating Investors. Pursuant to
such authority, and subject to Article X hereof, the Distributor shall
make available to the Company for purchase on behalf of the Accounts,
shares of the Series and Classes listed on Schedule 1B to this Agreement,
such
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purchases to be effected at net asset value in accordance with Section 2.3
of this Agreement. The Distributor shall make such Series and Classes
available to the Company in accordance with the terms and provisions of
this Agreement until: (i) this Agreement is terminated pursuant to Article
X, or (ii) the Distributor suspends or terminates the offering of shares
of such Series or Classes in the circumstances described in Article X.
(b) The parties acknowledge and agree that: (i) the Trust may revoke
the Distributor's authority to distribute Trust Shares pursuant to the
terms and conditions of its distribution agreement with the Distributor,
and (ii) the Trust reserves the right in its sole discretion to refuse to
accept a request for the purchase of Trust Shares.
2.2. REDEMPTIONS. At the Company's request, the Trust shall redeem any
full or fractional Trust Shares held by the Company on behalf of an Account at
net asset value in accordance with Section 2.3 of this Agreement. However, the
Trust may delay redemption or suspend the right of redemption of Trust Shares of
any Series or Class to the extent permitted by the Applicable Law or as
disclosed in the Prospectus for such Series or Class. The Company shall not
redeem Trust Shares attributable to Contract Owner investments except in the
circumstances permitted in Article X of this Agreement.
2.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Trust hereby appoints the Company as its designee for the
limited purpose of receiving purchase and redemption requests for Trust
Shares under Schedule 1 Contracts resulting from purchase and redemption
requests by Owners of Schedule 1 Contracts for units of the Schedule 1
Accounts. Receipt by the Company, as designee of the Trust for this
purpose, of requests for the purchase and redemption of units of the
Schedule 1 Accounts on any Business Day prior to the Trust's close of
business, as disclosed from time to time in the applicable Prospectus for
such Series or Class (which as of the date of execution of this Agreement
is the close of regular trading on the New York Stock Exchange), shall
constitute receipt by the Trust on that Business Day of requests from such
Schedule 1 Accounts for the purchase and redemption of Trust Shares
necessary to facilitate such purchase and redemption of units of such
Schedule 1 Accounts. This limited agency only extends to requests by the
Schedule 1 Accounts for the purchase and redemption of Trust Shares that
the Trust (or its transfer agent) receives by 9:00 a.m. New York Time on
the next following Business Day. Such requests for the purchase and
redemption of Trust Shares may be communicated by facsimile, electronic
mail, or telephone to the office or person designated by the Trust and
shall be confirmed by facsimile or electronic mail.
(b) The Company shall pay for Trust Shares on the same day that it
provides a purchase request for such Shares. Payment for Trust Shares
shall be made in federal funds transmitted to the Trust by wire by 12:00
p.m. New York Time on that day (unless the Trust determines and so advises
the Company that sufficient proceeds are available
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from redemption of Trust Shares of other Series or Classes on that day by
the Company). Proceeds from the redemption of Trust Shares requested
pursuant to an order received by the Company after the Trust's close of
business on any Business Day shall not be applied to the payment for
shares for which a purchase order was received prior to the Trust's close
of business on the same day. If federal funds are not received on time,
issuance of the requested Trust Shares will be cancelled and such funds
will be applied to the purchase of Trust Shares as soon as practicable
after receipt of such funds at the Share price next computed after
receipt. If the issuance of Trust Shares is canceled because federal funds
are not timely received, the Company shall indemnify the respective Fund
and the Distributor with respect to all costs, expenses and losses
relating thereto and the Company shall be responsible for any impact on
Contract Owners.
(c) Payment for Trust Shares redeemed shall be made in federal funds
transmitted by wire to the Company, such funds normally to be transmitted
by 6:00 p.m. New York Time on the next Business Day after the Trust
receives the redemption request (unless redemption proceeds are to be
applied to the purchase of Trust Shares of other Series or Classes in
accordance with Section 2.3(b) of this Agreement). Notwithstanding the
foregoing, the Trust reserves the right to redeem Trust Shares in assets
other than cash to the extent disclosed in the applicable Prospectus and
permitted by Applicable Law. The Trust shall not be responsible for the
proper disbursement or crediting of redemption proceeds by the Company or
the Accounts.
(d) The Company and the Trust shall provide each other with all
information necessary to effect wire transmissions of federal funds to the
other party or the other party's agents pursuant to such protocols and
security procedures as the parties may agree upon from time to time. The
Trust and the Company, as applicable, shall notify the other in writing of
any changes in such information at least three Business Days in advance of
when such change is to take effect. The Company and the Trust shall
observe customary procedures to protect the confidentiality and security
of such information, but the Trust shall not be liable to the Company for
any breach of security.
(e) The procedures set forth in this Section 2.3 are subject to any
additional terms set forth in the applicable Prospectus for the Series or
Class and by the requirements of Applicable Law.
2.4. NET ASSET VALUE. The Trust shall use its best efforts to inform the
Company of the net asset value per share for each Series and Class available to
the Company as soon as reasonably practicable after the computation of the same.
The Trust shall calculate such net asset values in accordance with the
Prospectus for such Series or Class.
2.5. DIVIDENDS AND DISTRIBUTIONS. The Trust shall furnish notice to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Accounts, hereby elects to receive all such
dividends and distributions in the form of additional shares of that
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Series or Class. The Company reserves the right, on its behalf and on behalf of
the Accounts, to revoke this election and to receive all such dividends and
capital gain distributions in cash; to be effective, such revocation must be
made in writing and received by the Trust at least ten Business Days prior to a
dividend or distribution date. The Trust shall notify the Company promptly of
the number of Series or Class shares so issued as payment of such dividends and
distributions.
2.6. BOOK ENTRY. Issuance and transfer of Trust Shares shall be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Purchase and redemption orders for Trust Shares shall be recorded in
an appropriate ledger for each Account.
2.7. PRICING ERRORS. Any material errors in the calculation of the net
asset value of a Fund, the net asset value per share of any Series or Class of
Trust Shares, dividends or capital gain information shall be reported to the
Company immediately upon discovery. An error shall be deemed "material" based on
the Trust's interpretation of Applicable Law. To the extent necessary for the
Company to reimburse Contract Owners for actual loses, the Distributor shall
reimburse the Company for losses arising as a direct result of any material
error in the calculation of the net asset value of any Fund or the net asset
value per share of any Series or Class of Trust Shares. Neither the Trust, any
Fund, the Distributor, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement, which
information is based on incorrect information supplied by or on behalf of the
Company or any other Participating Company to the Trust or the Distributor.
2.8. LIMITS ON PURCHASERS. The Distributor and the Trust shall sell Trust
Shares only to insurance companies and their separate accounts and to other
Qualified Persons. The Distributor and the Trust shall not sell Trust Shares to
any insurance company or separate account unless an agreement complying with
Article VIII of this Agreement is in effect to govern such sales. The
Distributor and the Trust shall not sell more than 10% of any Series of Trust
Shares to any Participating Plan unless an agreement is in effect between the
Distributor, the Trust and the trustee (or other fiduciary) of the Plan
containing provisions substantially the same as those in Article VIII of this
Agreement. The Distributor and the Trust shall not sell Trust Shares to any
Participating Plan unless a written acknowledgment of the foregoing condition is
received from the trustee (or other fiduciary) of the Plan.
2.9. DISRUPTIVE TRADING.
(a) The Trust has adopted policies designed to prevent frequent
purchases and redemptions of any Series of Trust Shares in quantities
great enough to: (i) disrupt orderly management of the corresponding
Fund's investment portfolio, or (ii) dilute the value of the outstanding
Trust Shares of that Series ("Disruptive Trading Policies"). From time to
time, the Trust and the Distributor implement procedures reasonably
designed to enforce the Trust's Disruptive Trading Policies and shall
provide a written description of such procedures (and revisions thereto)
to the Company. As a procedure in furtherance of its Disruptive Trading
Policies, the Trust may assess fees, to be paid by
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one or more Accounts or by the Company, upon redemption of one or more
Series or Classes of Trust Shares within certain stated time periods after
such shares have been purchased.
(b) The Company agrees to develop, adopt and maintain policies
regarding transactions in Account units reasonably designed to complement
the Trust's Disruptive Trading Policies and, from time to time, to
implement procedures regarding transactions in Account units reasonably
designed to effectuate the Trust's procedures for preventing disruptive
trading in Trust Shares. In particular, in the event that the Trust or the
Distributor identifies a particular Contract Owner as having engaged in
transactions in Account units that directly or indirectly violate the
Trust's Disruptive Trading Policies, the Company agrees, at the written
request of the Trust or the Distributor, to restrict or prohibit further
transactions in Account units by that Contract Owner which could result in
additional purchases and redemptions of a specified Series and/or Class of
Trust Shares in violation of the Trust's Disruptive Trading Policies.
(c) In furtherance of Section 2.9(b), the Trust and the Distributor
may, from time to time, investigate purchases and redemptions of any
Series or Class of Trust Shares by the Company on behalf of the Accounts
that appears to violate, or has the potential to violate, the Trust's
Disruptive Trading Policies. When requested by the Trust or the
Distributor in writing, the Company agrees to provide the following with
respect to purchases and redemptions of a specific Series and/or Class of
Trust Shares over a designated period:
- the identity of the Contract Owner or Contract Owners
whose transactions in Account units underlies the Trust
share purchases and redemptions being investigated,
- the amounts and dates of transactions in Account units
during the designated period representing an indirect
investment in the Series and/or Class of Trust Shares
being investigated, and
- the identity of any investment professional known by
the Company to be associated with the Contract Owner or
Contract Owners.
The Company agrees to provide the foregoing information that is on its
books and records promptly. If the requested information is not on its
books and records, it agrees to make reasonable efforts to:
- promptly obtain the requested information, or
- if requested by the Trust or the Distributor restrict
or prohibit further transactions in Account units by
that Contract Owner which could result in additional
purchases and redemptions of a specified Series and/or
Class of Trust Shares.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. COMPANY. The Company represents and warrants that: (a) it is an
insurance company duly organized and in good standing under the laws of the
jurisdiction of its organization, (b) it has legally and validly established
each Account as a segregated asset account under applicable state law to serve
as segregated investment accounts for the Contracts, (c) each Schedule 1 Account
is registered as a unit investment trust under the 1940 Act and each such
Account's 1940 Act Registration Statement has been filed with the SEC in
accordance with the 1940 Act, (d) it has registered, or will register, all
Schedule 1 Contracts offered and sold pursuant to this Agreement under the 1933
Act and, except as provided in Article 4.2 of this Agreement, has effective
Registration Statements for that purpose, (e) it will offer and sell the
Contracts in compliance in all material respects with all applicable federal and
state laws and regulations, including, but not limited to, state insurance law
and federal securities law suitability requirements, (f) the Contracts have been
filed, qualified and/or approved for sale, as applicable, under the insurance
laws and regulations of the states in which the Contracts will be offered, (g)
its activities and those of its employees in promoting the sale and distribution
of the Contracts and effecting Contract Owner transactions in Account units have
not caused, and will not cause, the Company to be deemed a broker-dealer, (h)
orders it places for the purchase and redemption of Trust Shares pursuant to
Article 2.3 of this Agreement are the net result of transactions in units issued
by an Account, instructions for which are received by the Company prior to the
Trust's close of business as defined from time to time in the applicable
Prospectus for such Series or Class (which as of the date of execution of this
Agreement is the close of regular trading on the New York Stock Exchange), (i)
as long as this Agreement remains in effect, it shall remain in continuous
compliance with Article 6.3, Article 6.4 and Article 6.5 of this Agreement, (j)
it complies with the requirements of Rule 498 under the 1933 Act and Applicable
SEC Guidance regarding the Rule in connection with delivery of Summary
Prospectuses for the Series and Classes of Trust Shares available under this
Agreement, (k) it maintains policies and procedures reasonably designed to
ensure that it can meet obligations in connection with Summary Prospectuses, (l)
it will notify the Distributor and the Trust promptly if for any reason it is
unable to perform its obligations under this Agreement,
3.2. TRUST. The Trust represents and warrants that: (a) it is a statutory
trust duly organized and validly existing under Delaware law, (b) it is
registered under the 1940 Act as an open-end management investment company and
has filed a 1940 Act Registration Statement with the SEC in accordance with the
provisions of the 1940 Act, (c) Trust Shares issued pursuant to this Agreement
have been, or will be, duly authorized and validly issued in accordance with
Applicable Law, (d) it will offer and sell Trust Shares pursuant to this
Agreement in compliance in all material respects with all applicable federal and
state laws and regulations, (e) it has registered, or will register, all Trust
Shares offered and sold pursuant to this Agreement under the 1933 Act and has an
effective Registration Statement for that purpose, (f) as long as this Agreement
remains in effect, it shall remain in continuous compliance with Article 6.1 and
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Article 6.2 of this Agreement, (g) the Trust's Board, a majority of whom are not
interested persons of the Trust, have formulated and approved any plans to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act ("Rule
12b-1 Plans"), (h) the Trust or its service provider complies with the
requirements of Rule 498 under the 1933 Act and Applicable SEC Guidance
regarding the Rule in connection with the offer and sale of Trust Shares, (i)
the Trust or its service provider maintains policies and procedures reasonably
designed to ensure that Fund Documents are available on the Fund Documents Web
Site in the manner required by Rule 498(e)(1), (e)(2), and (e)(3) and Applicable
SEC Guidance related thereto, and (j) as provided by Rule 498(e)(4)(ii), the
Trust or its service provider shall take prompt action to ensure that Fund
Documents become available in the manner required by Rule 498(e)(1), (e)(2), and
(e)(3) and Applicable SEC Guidance as soon as practicable following the earlier
of the time it knows or should reasonably have known that the Fund Documents are
not available in the required manner.
3.3. DISTRIBUTOR. The Distributor represents and warrants that: (a) it is
a limited partnership duly organized and in good standing under New York law,
and (b) it is registered as a broker-dealer under federal and applicable state
securities laws and is a member in good standing of FINRA.
3.4. LEGAL AUTHORITY. Each party represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate, partnership or trust action, as applicable, by such party, and, when
so executed and delivered, this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
ARTICLE IV
REGULATORY REQUIREMENTS
4.1. TRUST FILINGS. The Trust shall amend its Registration Statement from
time to time and maintain its effectiveness as required in order to effect the
continuous offering of Trust Shares in compliance with Applicable Law.
Notwithstanding the foregoing, the Trust shall register and qualify Trust Shares
for sale in accordance with the laws of various states if, and to the extent,
deemed advisable by the Trust or the Distributor. The Trust shall amend its 1940
Act Registration Statement as required by the 1940 Act to maintain its
registration under the 1940 Act for as long as Trust Shares are outstanding. The
Trust shall file Form 24F-2 and pay 1933 Act registration fees for all Series
and Classes of Trust Shares as required by Rule 24f-2 under the 1940 Act. The
Trust shall comply in all material respects with the 1940 Act.
4.2. ACCOUNT FILINGS. The Company shall amend the Registration Statement
for each Schedule 1 Contract from time to time and maintain its effectiveness as
required in order to effect the continuous offering of such Contracts in
compliance with Applicable Law for as long as purchase payments may be made
under such Contracts. Notwithstanding the foregoing, the Company: (a) may permit
the effectiveness of a Schedule 1 Contract's Registration Statement
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expire if the Company has supplied the Trust with an SEC "no-action" letter or
opinion of counsel satisfactory to the Trust's counsel to the effect that
maintaining such Registration Statement on a current basis is no longer
required, and (b) shall register and qualify the Contracts for sale in
accordance with the securities laws of the various states only if, and to the
extent, it considers such registration and qualification necessary. The Company
shall amend each Schedule 1 Account's 1940 Act Registration Statement as
required by the 1940 Act to maintain the Account's registration under the 1940
Act for as long as the Schedule 1 Contracts issued through that Account are in
force. With regard to each Schedule 1 Account, the Company shall comply in all
material respects with the 1940 Act. The Company shall make such filings and
take such other actions as are required by the exemptions and exclusions on
which it relies.
The Company shall be responsible for filing all Contract forms,
applications, marketing materials and other documents relating to the Contracts
and/or the Accounts with state insurance commissions, as required or as is
customary, and shall use its best efforts: (a) to obtain any and all approvals
thereof, under applicable state insurance law, of each state or other
jurisdiction in which Contracts are or may be offered for sale, and (b) to keep
such approvals in effect for so long as the Contracts are outstanding.
4.3 DELIVERY OF PROSPECTUSES BY THE COMPANY. The Company shall deliver (or
arrange for delivery of) an appropriate Prospectus to each prospective Contract
Owner describing in all material respects the terms and features of the Contract
being offered. Except as provided below, the Company also shall deliver (or
arrange for delivery of) a Summary Prospectus for each Fund that a prospective
Contract Owner identifies on his or her application as an intended investment
option under a Contract or to which a Contract Owner allocates premium payments
to or transfers Contract value. In addition, the Company reserves the right to
deliver (or arrange for delivery of) the Statutory Prospectus in place of the
Summary Prospectus. The Company shall deliver (or arrange for delivery of) such
Summary or Statutory Prospectuses at the times and in the manner required by
applicable provisions of the 1933 Act and rules or regulations thereunder and
Applicable SEC Guidance.
4.4. SPECIFIC REQUESTS FOR SUMMARY PROSPECTUSES. The Company shall not
bind together the Summary Prospectuses or Statutory Prospectuses for the Series
and Classes available under this Agreement with Summary Prospectuses and
Statutory Prospectuses for shares of other investment companies, or any other
document except as expressly permitted by and in Rule 498(c)(2) and any
Applicable SEC Guidance. The Company shall deliver or provide all Summary
Prospectuses and all Statutory Prospectuses in compliance with the Greater
Prominence requirements of Rule 498(f)(2) and any Applicable SEC Guidance.
4.5. WEB SITE POSTING. The Trust or its service provider shall maintain
the Fund Documents Web Site. At the Company's request, the Trust or its service
provider may provide the Company with URLs to the current Fund Documents for use
with the Company's electronic delivery of Fund Documents or on the Company's Web
site. The Company will be responsible for the maintenance of any web links to
such URLs on the Company's Web site. The Trust agrees to use commercially
reasonable efforts to employ procedures consistent with industry
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practices designed to reduce exposure to viruses. However, the Trust and the
Distributor make no warranty, express or implied, that the Fund Documents Web
Site, the Fund Documents, or any URLs provided will be free from any defects,
bugs, errors or malfunctions.
4.6. RESPONSE TO REQUESTS FOR ADDITIONAL FUND DOCUMENTS. Within three (3)
Business Days of receiving a request for a paper copy of a Fund Document, the
Trust shall promptly send the same to the person requesting it free of charge.
Within three (3) Business Days of receiving a request for an electronic copy of
a Fund Document, the Trust shall send, by e-mail to the requestor, either a PDF
copy of, or an electronic link to, the same free of charge. The Company shall
respond in accordance with Rule 498(f)(1) to requests for additional Fund
Documents made by a person directly to the Company or one of its affiliates.
4.7. CESSATION OF USE OF SUMMARY PROSPECTUSES. The Trust shall provide the
Company with at least thirty (30) days advance written notice of its intent to
cease using the Summary Prospectus delivery option so that the Company can
arrange to deliver a Statutory Prospectus in place of a Summary Prospectus in
compliance with Section 4.3 of this Agreement. In order to comply with Rule
498(e)(1), the Trust shall continue to maintain the Fund Documents Web Site in
compliance with the requirements of this Agreement and Rule 498 for a minimum of
90 days after the termination of any such notice period.
4.8. VOTING OF TRUST SHARES. To the extent required by the 1940 Act or
Rule 6e-2 or Rule 6e-3(T) thereunder, or other Applicable Law, whenever the
Trust shall have a meeting of holders of any Series or Class of Trust Shares,
the Company shall:
- solicit voting instructions from Contract Owners;
- vote Trust Shares held in each Account at such
shareholder meetings in accordance with instructions
received from Contract Owners;
- vote Trust Shares held in each Account for which it has
not received timely instructions in the same proportion
as it votes the applicable Series or Class of Trust
Shares for which it has received timely instructions;
and
- vote Trust Shares held in its general account in the
same proportion as it votes the applicable Series or
Class of Trust Shares held by the Accounts for which it
has received timely instructions.
Except with respect to matters as to which the Company has the right in
connection with Schedule 1 Contracts under Rule 6e-2 or Rule 6e-3(T) under the
1940 Act, to vote Trust Shares without regard to voting instructions from
Contract Owners, neither the Company nor any of its affiliates will recommend
action in connection with, or oppose or interfere with, the actions of the Trust
Board to hold shareholder meetings for the purpose of obtaining approval or
disapproval from shareholders (and, indirectly, from Contract Owners) of matters
put before the shareholders.
12
The Company shall remain responsible for ensuring that it calculates
voting instructions and votes Trust Shares at shareholder meetings in a manner
consistent with other Participating Investors. The Trust will notify the Company
of any changes to the SEC Order or the conditions attaching thereto relating to
voting of Trust Shares of which it becomes aware.
4.9. STATE INSURANCE LAW RESTRICTIONS. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness of
such determination. The Company represents that there are no investment
restrictions or any other restrictions, limitations or requirements under state
insurance law, applicable to any Fund or the Trust or the Distributor as a
result of Accounts' investments in a Fund.
4.10. INTERPRETATION OF LAW. The Trust, the Distributor and their
affiliates are not responsible or liable for acts or omissions by the Company or
the Company's affiliates taken (or not taken) in reliance upon any statements or
representations made by the Trust, the Distributor or any of their affiliates or
their legal advisers, to the Company or the Company's affiliates concerning the
applicability of any Applicable Law or Applicable SEC Guidance to the activities
contemplated by this Agreement.
The Company and its affiliates are not responsible or liable for acts or
omissions by the Trust, the Distributor and their affiliates taken (or not
taken) in reliance upon any statements or representations made by the Company or
its affiliates or their legal advisers, to the Trust, the Distributor and their
affiliates concerning the applicability of any Applicable Law or Applicable SEC
Guidance to the activities contemplated by this Agreement.
4.11. DISCLOSURE. The Trust's prospectus shall state that the statement of
additional information for the Trust is available from either the Distributor or
the Trust. The Trust hereby notifies the Company that it is appropriate to
include in Contract Prospectuses, disclosure of the potential risks of mixed and
shared funding.
4.12. DRAFTS OF FILINGS. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, information statements, solicitations for
voting instructions, applications for exemptions (including applications by the
Company to the SEC seeking approval of substitutions of any Fund under Section
26(c) of the 1940 Act), requests for no-action letters, and all amendments or
supplements to any of the above, prepared by or on behalf of either of them and
that mentions the other party by name other than a listing or listings of the
investment options generally available within the Products. Such drafts shall be
provided to the other party sufficiently in advance of filing such materials
with regulatory authorities in order to allow such other party a reasonable
opportunity to review the documents.
13
4.13. COPIES OF FILINGS. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, information statements, solicitations of voting
instructions, applications for exemptions (including applications by the Company
to the SEC seeking approval of substitutions of any Fund under Section 26(c) of
the 1940 Act), requests for "no-action" letters, and all amendments or
supplements to any of the above, that relate to the Trust, the Contracts or the
Accounts, as the case may be, promptly after the filing by or on behalf of each
such party of such document with the SEC or other regulatory authorities (it
being understood that this provision is not intended to require the Trust to
provide to the Company copies of any such documents prepared, filed or used by
Participating Investors other than the Company and the Accounts). If the Trust,
Distributor or any of their affiliates are named in the filing(s) other than a
listing or listings of the investment options generally available within the
Product, the Company shall send the filings to the contacts listed in Article
XII.
4.14. REGULATORY RESPONSES. Each party shall promptly provide to all other
parties copies of responses to no-action requests, notices, orders and other
rulings received by such party with respect to any filing covered by Section
4.13 of this Agreement. If the Trust, Distributor or any of their affiliates are
named in the regulatory response(s), the Company shall send the regulatory
response(s) to the contacts listed in Article XII.
4.15. COMPLAINTS AND PROCEEDINGS
(a) The Trust and/or the Distributor shall immediately notify the
Company of: (i) the issuance by any court or regulatory body of any stop
order, cease and desist order, or other similar order (but not including
an order of a regulatory body exempting or approving a proposed
transaction or arrangement) with respect to the Trust's Registration
Statement or the Prospectus of any Series or Class, (ii) any request by
the SEC for any amendment to the Trust's Registration Statement or the
Prospectus of any Series or Class, (iii) the initiation of any proceedings
for that purpose or for any other purposes relating to the registration or
offering of the Trust Shares, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of Trust Shares or any Class or
Series in any state or jurisdiction, including, without limitation, any
circumstance in which (A) such shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law or (B) such law precludes the use of such shares as an
underlying investment medium for the Contracts. The Trust will make every
reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) The Company shall immediately notify the Trust and the
Distributor of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or
14
approving a proposed transaction or arrangement) with respect to the
Contracts' Registration Statement or the Contracts' Prospectus, (ii) any
request by the SEC for any amendment to the Contracts' Registration
Statement or Prospectus that is related to the Trust, (iii) the initiation
of any proceedings for that purpose or for any other purposes relating to
the registration or offering of the Contracts, or (iv) any other action or
circumstances that are likely to prevent the lawful offer or sale of the
Contracts or any class of Contracts in any state or jurisdiction,
including, without limitation, any circumstance in which such Contracts
are not registered, qualified and approved, and, in all material respects,
issued and sold in accordance with applicable state and federal laws. The
Company will make every reasonable effort to prevent the issuance of any
such stop order, cease and desist order or similar order and, if any such
order is issued, to obtain the lifting thereof at the earliest possible
time.
(c) Each party shall immediately notify the other parties when it
receives notice, or otherwise becomes aware of, the commencement of any
litigation or proceeding against such party or a person affiliated with
such party arising in connection with the Trust or the Accounts or the
issuance or sale of Trust Shares or the Contracts.
(d) The Company shall provide to the Trust and the Distributor any
complaints it has received from Contract Owners pertaining to the Trust or
a Fund, and the Trust and Distributor shall each provide to the Company
any complaints it has received from Contract Owners relating to the
Contracts.
4.16. COOPERATION. Each party hereto shall cooperate with the other
parties and all appropriate government authorities (including without limitation
the SEC, FINRA and state securities and insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry by any such authority relating to this Agreement or
the transactions contemplated hereby. However, such access shall not extend to
attorney-client privileged information.
ARTICLE V
SALE, ADMINISTRATION AND SERVICING OF THE CONTRACTS
5.1. SALE OF THE CONTRACTS. The Company shall be fully responsible as to
the Trust and the Distributor for the sale and marketing of the Contracts. The
Company shall provide Contracts, the Contracts' and Trust's Prospectuses (or
Summary Prospectuses), Contracts' and Trust's Statements of Additional
Information, and all amendments or supplements to any of the foregoing to
Contract Owners and prospective Contract Owners, all in accordance with
Applicable Law. Without limiting the generality of the foregoing, the Company
shall: (1) enter into and enforce agreements with affiliated and unaffiliated
parties to, and (2) adopt and implement written compliance policies and
procedures reasonably designed to, ensure that:
15
- all persons offering or selling the Contracts are duly
licensed and registered under Applicable Law,
- all individuals offering or selling the Contracts are
duly appointed agents of the Company and are registered
representatives of a FINRA member broker-dealer,
- each sale of a Contract satisfies all suitability
requirements under Applicable Law,
- all persons offering or selling the Contracts disclose
to prospective Contract Owners remuneration each
expects to receive in connection with sales of the
Contracts and any conflicts of interest arising
therefrom as required by Applicable Law, and
- no persons offering or selling the Contracts intend to
engage in Account unit transactions that would violate
the Company's or the Trust's Disruptive Trading
Policies.
- Prospectuses are delivered as required by Article IV of
this Agreement and Applicable Law.
5.2. ANTI-MONEY LAUNDERING. The Company shall comply with all Applicable
Law designed to prevent money "laundering", and if required by such laws or
regulations, to share with the Trust information about individuals, entities,
organizations and countries suspected of possible terrorist or money
"laundering" activities in accordance with Section 314(b) of the USA Patriot
Act. In particular, the Company agrees that:
- as part of processing an application for a Contract, it
will verify the identity of applicants and, if an
applicant is not a natural person, will verify the
identity of prospective principal and beneficial owners
submitting an application for a Contract,
- as part of its ongoing compliance with the USA Patriot
Act, it will, from time to time, reverify the identity
of Contract Owners, including the identity of principal
and beneficial owners of Contracts held by non-natural
persons,
- as part of processing an application for a Contract, it
will verify that no applicant, including prospective
principal or beneficial Contract Owners, is a
"specially designated national" or a person from an
embargoed or "blocked" country as indicated by the
Office of Foreign Asset Control ("OFAC") list of such
persons,
- as part of its ongoing compliance with the USA Patriot
Act, it will, from time to time, reverify that no
Contract Owner, including a principal or beneficial
Contract Owners, is a "specially designated national"
or a
16
person from an embargoed or "blocked" country as
indicated by the OFAC list of such persons,
- it will ensure that money tendered to the Trust as
payment for Trust Shares did not originate with a bank
lacking a physical place of business (I.E., a "shell"
bank) or from a country or territory named on the list
of high-risk or non-cooperating countries or
jurisdictions published by the Financial Action Task
Force, and
- if any of the foregoing cease to be true, the Trust or
its agents, in compliance with the USA Patriot Act or
Bank Secrecy Act, may seek authority to block
transactions in Account units arising from accounts of
one or more such Contract Owners with the Company or of
one or more of the Company's accounts with the Trust.
The Trust and the Distributor shall comply with all Applicable Laws
designed to prevent money "laundering", and if required by such laws or
regulations, to share with the Company information about individuals, entities,
organizations and countries suspected of possible terrorist or money
"laundering" activities in accordance with Section 314(b) of the USA Patriot
Act.
5.3. ADMINISTRATION AND SERVICING OF THE CONTRACTS. The Company shall be
fully responsible for the underwriting, issuance, service and administration of
the Contracts and for the administration of the Accounts, including, without
limitation, the calculation of performance information for the Contracts, the
timely payment of Contract Owner redemption requests and processing of Contract
transactions, and the maintenance of a service center, such functions to be
performed in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. The Company shall provide to
Contract Owners all Trust reports, information statements, proxy statements and
other voting instruction solicitation materials, and updated Trust Prospectuses
(or Summary Prospectuses) as required by Applicable Law.
5.4. TRUST PROSPECTUSES AND REPORTS. In order to enable the Company to
fulfill its obligations under this Agreement and Applicable Law, the Trust shall
provide the Company with a copy, in camera-ready form or form otherwise suitable
for printing or duplication of: (a) the Trust's Prospectus for the Series and
Classes listed on Schedule 1B and any supplement thereto; (b) any Trust proxy
soliciting material for such Series or Classes; and (c) any Trust periodic
shareholder reports. The Trust and the Company may amend this section 5.4, but
the Trust reserves the right to require its prior approval of the printing of
the foregoing documents. The Trust shall make available to the Company on the
Trust's website each Statement of Additional Information and supplement thereto.
The Trust shall provide the Company at least 10 days advance written notice when
any such material shall become available, provided, however, that in the case of
a supplement, the Trust shall provide the Company notice reasonable in the
circumstances, it being understood that circumstances surrounding such
supplement may not allow for advance notice. The Company may not alter any
material so provided by the Trust or the Distributor (including, without
limitation, presenting or delivering such material in a different
17
medium such as electronic mail or attachments thereto) without the prior written
consent of the Distributor.
5.5. TRUST ADVERTISING MATERIAL. Neither the Company or any person
directly or indirectly authorized by the Company (including, without limitation,
underwriters, distributors, and sellers of the Contracts) shall use any piece of
advertising, sales literature or other promotional material in which the Trust,
the Distributor, or an affiliate of either is described or discussed, except
with the prior written consent of the Trust or the Distributor. Notwithstanding
the foregoing sentence, Company may name the Trust in advertising, sales
literature or other promotional material where Company lists all Trusts or
investment options available within its Products without consent. The Company
shall furnish to the Trust or the Distributor each such piece of advertising,
sales literature or other promotional material at least ten (10) days prior to
its use. The Trust or the Distributor shall respond to any request for written
consent on a prompt and timely basis, and failure to respond within ten (10)
days from receipt shall relieve the Company of the obligation to obtain the
prior written consent of the Trust or the Distributor. After receiving the
Trust's or Distributor's consent to the use of any such material, no further
changes may be made without obtaining the Trust's or Distributor's written
consent to such changes. The Trust or Distributor may at any time in its sole
discretion revoke such written consent, and upon notification of such
revocation, the Company shall no longer use the material subject to such
revocation. The Company shall not be responsible for filing any materials with
FINRA.
5.6. CONTRACTS ADVERTISING MATERIAL. The Trust and the Distributor shall
not use any piece of advertising, sales literature or other promotional material
in which the Company, an Account or a Contract is named, except with the prior
written consent of the Company. The Trust or the Distributor shall furnish to
the Company each such piece of advertising, sales literature or other
promotional material at least ten (10) days prior to its use. The Company shall
respond to any request for written consent on a prompt and timely basis, and
failure to respond within ten (10) days from receipt shall relieve the Trust or
the Distributor of the obligation to obtain the prior written consent of the
Company. After receiving the Company's consent to the use of any such material,
no further changes may be made by the Trust or Distributor without obtaining the
Company's consent to such changes. The Company may at any time in its sole
discretion revoke any written consent, and upon notification of such revocation,
neither the Trust nor the Distributor shall use the material subject to such
revocation. The Trust and the Distributor shall not be responsible for filing
any such materials with FINRA.
5.7. TRADE NAMES. No party shall use any other party's names, logos,
trademarks or service marks, whether registered or unregistered, without the
prior written consent of such other party, or after written consent therefor has
been revoked. The Company shall not use in advertising, publicity or otherwise
the name of the Trust, Distributor, or any of their affiliates nor any trade
name, trademark, trade device, service xxxx, symbol or any abbreviation,
contraction or simulation thereof of the Trust, Distributor, or their affiliates
without the prior written consent of the Trust or the Distributor in each
instance. Notwithstanding the foregoing, Company may name the Trust and use its
logo in advertising, sales literature or other promotional material
18
where Company lists all Trusts or investment options available within its
Products, without prior consent.
5.8. ADDITIONAL COVENANTS AND REPRESENTATIONS BY COMPANY. Except with the
prior written consent of the Trust, the Company shall not give any information
or make any representations or statements about the Trust or the Funds nor shall
it authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in proxy statements for the Trust, or in advertisements, sales
literature or other promotional material approved in writing by the Trust or its
designee in accordance with this Article V, or in published reports or
statements of the Trust in the public domain.
The Company represents that advertisements, sales literature or other
promotional material for the Contracts prepared by the Company or its affiliates
is and will be consistent with Applicable Law, including, but not limited to,
FINRA Conduct Rule 2210 and XX-0000-0, XX-0000-0 and IM-2210-3 thereunder.
The Company has adopted and implemented, or shall adopt and implement,
written compliance procedures reasonably designed to ensure that information
concerning the Trust, the Distributor, or any of their affiliates which is
intended for use by brokers or agents selling the Contracts (I.E., information
that is not intended for distribution to Contract Owners or prospective Contract
Owners) is so used. Neither the Trust, the Distributor, nor any of their
affiliates shall be liable for any losses, damages, or expenses relating to the
improper use of such "broker only" materials by agents of the Company or its
affiliates who are unaffiliated with the Trust or the Distributor.
The parties agree that this Section 5.8 is not intended to imply that the
Company is an underwriter or distributor of the Trust's shares or a dealer in
the Trust's shares.
5.9. ADDITIONAL COVENANTS AND REPRESENTATIONS BY TRUST. Except with the
prior written consent of the Company, the Trust shall not give any information
or make any representations on behalf of the Company or concerning the Company,
the Accounts or the Contracts other than the information or representations
contained in the appropriate Contract Registration Statement or Contract
Prospectus or in published reports of or statements by the Company or the
Accounts which are in the public domain or in advertisements, sales literature
or other promotional material approved in writing by the Company in accordance
with this Article V.
The Trust represents that advertisements, sales literature or other
promotional material for the Trust prepared by the Distributor or its affiliates
in connection with the sale of the Contracts is and will be consistent with
Applicable Law, including, but not limited to, FINRA Conduct Rule 2210 and
XX-0000-0, XX-0000-0 and IM-2210-3 thereunder.
19
The Trust or the Distributor shall xxxx information produced by or on
behalf of the Trust which is intended for use by brokers or agents selling the
Contracts (I.E., information that is not intended for distribution to Contract
Owners or prospective Contract Owners) "FOR BROKER USE ONLY," and neither the
Company nor any of its affiliates shall be liable for any losses, damages, or
expenses arising on account of the use by brokers of such information with third
parties in the event that it is not so marked.
5.10. ADVERTISING. For purposes of this Article V, the phrase
"advertising, sales literature or other promotional material" includes, but is
not limited to, any material constituting sales literature or advertising under
FINRA Conduct rules, the 1940 Act or the 1933 Act. Such material includes,
without limitation, the following materials for prospective Contract Owners,
existing Contract Owners, wholesalers and other broker-dealers, rating or
ranking agencies, or the press:
- advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording,
videotape display, signs or billboards, motion
pictures, websites, or other public media),
- sales literature (I.E., any written communication
distributed or made generally available to customers or
the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales
literature, electronic mail, or published article),
- educational or training materials or other
communications distributed or made generally available
to some or all agents or employees, and
- registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials.
ARTICLE VI
COMPLIANCE WITH CODE
6.1. SECTION 817(h). The Trust, on behalf of each Fund, will comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 thereunder, relating
to the diversification requirements for variable annuity, endowment, or life
insurance contracts, and any amendments or other modifications to such Section
and Regulation or successors thereto. The Trust shall notify the Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to so comply and will not be able to comply within the grace period afforded by
Treasury Regulation 1.817-5.
6.2. SUBCHAPTER M. The Trust shall maintain the qualification of each Fund
as a regulated investment company (under Subchapter M of the Code or any
successor or similar provision), and the Trust shall notify the Company
immediately upon having a reasonable basis
20
for believing that a Fund has ceased to so qualify and will not be able to
qualify within the grace period afforded by Section 851 of the Code.
6.3. CONTRACTS. The Company shall ensure that at the time each Contract is
issued it is treated as a life insurance, endowment, or annuity contract under
applicable provisions of the Code, and that as long as the Accounts hold shares
of the Trust the Company shall maintain such treatment for each outstanding
Contract. The Company shall notify the Trust and the Distributor immediately
upon having any basis for believing that the Contracts will not be treated as
life insurance, endowment, or annuity contracts under applicable provisions of
the Code.
6.4 REGULATION 1.817-5(f). The Company shall ensure that no Fund fails to
remain eligible for "look-through" treatment under Treasury Regulation
1.817-5(f) by reason of a current or future failure of the Company, the Accounts
or the Contracts to comply with any applicable requirements of the Code or
Treasury Regulations. The Company shall notify the Trust and the Distributor
immediately upon having any basis for believing that the failure of the Company,
the Accounts or the Contracts to comply with any applicable requirements of the
Code or Treasury Regulations could render a Fund ineligible, or jeopardize a
Fund's eligibility, for "look-through" treatment under Treasury Regulation
1.817-5(f). In the event of such a failure, the Company shall take all necessary
steps to cure any such failure, including, if necessary, obtaining a waiver or
closing agreement with respect to such failure from the U.S. Internal Revenue
Service at the Company's expense.
6.5 MODIFIED ENDOWMENT CONTRACTS. The Company shall ensure that any
Prospectus offering a variable life insurance Contract in circumstances where it
is reasonably probable that such Contract would be a "modified endowment
contract," as that term is defined in Section 7702A of the Internal Revenue
Code, will identify such Contract as a modified endowment contract.
ARTICLE VII
EXPENSES
7.1. EXPENSES. All expenses incident to each party's performance under
this Agreement (including expenses expressly assumed by such party pursuant to
this Agreement) shall be borne by such party to the extent permitted by law,
except as otherwise provided below or in a separate agreement.
7.2. TRUST EXPENSES. Expenses incident to the Trust's performance of its
duties and obligations under this Agreement include, but are not limited to, the
costs of:
(a) registration and qualification of the Trust Shares under the
federal securities laws;
21
(b) preparation and filing with the SEC of the Trust's Prospectuses,
Summary Prospectuses, Statement of Additional Information, Registration
Statement, information statements, proxy statements and other proxy
materials, and shareholder reports, and preparation of a "camera-ready"
copy of the foregoing;
(c) preparation of all statements and notices required by Applicable
Law;
(d) provision and maintenance of the Fund Documents Web Site;
(e) printing and mailing to shareholders of all information
statements, proxy statements and other proxy materials, shareholder
reports, Prospectuses, Summary Prospectuses and other documents, and
supplements to such documents, required to be provided by the Trust to its
existing shareholders and to shareholders making an initial investment in
a Series of the Trust, and providing sufficient copies of the same to the
Company for distribution to Contract Owners then invested in Accounts that
hold Trust Shares; provided, however, that if the Company prints copies of
a Trust Prospectus (or portions thereof) or Summary Prospectus as part of
a larger document containing Prospectuses of other investment companies,
any expense obligation of the Trust shall be limited only to its share of
the cost of printing and mailing the document. For this purpose, the
Trust's share shall be the percentage of the total cost of the document
represented by the ratio that the number of pages of the Trust's
Prospectus or Summary Prospectus bears to the total number of pages in the
document;
(f) printing and mailing of Contract Prospectus supplements required
to be provided by the Company to Contract Owners as the direct result of a
supplement or material change to a Trust document;
(g) all taxes on the issuance or transfer of Trust Shares;
(h) payment of any expenses permitted to be paid or assumed by the
Trust pursuant to a Rule 12b-1 Plan and/or shareholder service plan; and
(i) provision or printing and mailing of Trust proxy statements and
other proxy materials, as well as tabulation of voting instructions, as
required in connection with the Company's obligation to solicit voting
instructions from Contract Owners.
7.3. COMPANY EXPENSES. Expenses incident to the Company's performance of
its duties and obligations under this Agreement include, but are not limited to,
the costs of:
(a) registration and qualification of the Schedule 1 Contracts under
Applicable Law;
22
(b) preparation of Contract Prospectuses, preparation of
Registration Statements with the SEC for Schedule 1 Contracts, payment of
registration fees for Schedule 1 Contracts pursuant to Rule 24f-2 under
the 1940 Act;
(c) the sale, marketing and distribution of the Contracts, including
compensation for Contract sales, printing and delivery of Contract
Prospectuses to current and prospective Contract owners;
(d) provision and maintenance of internet websites other than the
Fund Documents Web Site;
(e) administration of the Contracts;
(f) payment of all expenses of operating the Accounts; and
(g) preparation, printing and delivery of all statements and notices
to Contract Owners required by Applicable Law other than those paid for by
the Trust.
7.4. OTHER EXPENSES AND PAYMENTS. The Trust and the Distributor shall pay
no fee or other compensation to the Company under this Agreement. Each party,
however, shall, in accordance with the allocation of expenses specified in this
Agreement, reimburse other parties for expenses paid by such other parties, but
allocated to it. In addition, nothing herein shall prevent the parties from
otherwise agreeing to perform, and arranging for appropriate compensation for,
services relating to the Trust, the Distributor, the Company or the Accounts.
Notwithstanding anything else in this Agreement, pursuant to any Rule
12b-1 Plan adopted by the Trust, and as contemplated by Article 3.2(g) of this
Agreement, the Trust or any Series or Class thereof may pay the Distributor, and
the Distributor may pay the principal underwriter or distributor of one or more
classes of Contracts, for activities primarily intended to result in the sale of
Trust Shares to the Accounts through which such Contracts are issued. Likewise,
pursuant to any shareholder service plan adopted and implemented by the Trust or
any Series or Class thereof under Rule 12b-1 of the 1940 Act or otherwise, the
Trust or the appropriate Series or Class may pay the Distributor and the
Distributor may pay the principal underwriter or distributor of one or more
classes of Contracts, or the Company, for activities related to personal service
and/or maintenance of Contract Owner accounts and/or administration services, as
permitted by such plan.
ARTICLE VIII
POTENTIAL CONFLICTS
8.1. SEC ORDER. The parties to this Agreement acknowledge that the Trust
has obtained the SEC Order granting exemptions from various provisions of the
1940 Act and the rules thereunder to Participant Accounts supporting variable
life insurance policies to the extent
23
necessary to permit them to hold Trust Shares when Trust share also are sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated Participating Insurance Companies and other
Qualified Persons (as defined in Section 1.18 hereof). The SEC Order is
conditioned upon the Trust and each Participating Insurance Company complying
with conditions and undertakings substantially as provided in this Article VIII.
The Trust will not enter into a participation agreement with any other
Participating Insurance Company unless it imposes the same conditions and
undertakings on that company as are imposed on the Company pursuant to this
Article VIII.
8.2. COMPANY MONITORING REQUIREMENTS. The Company will monitor its
operations and those of the Trust for the purpose of identifying any material
irreconcilable conflicts or potential material irreconcilable conflicts between
or among the interests of Participating Plans, Product Owners of variable life
insurance policies and Product Owners of variable annuity contracts.
8.3. COMPANY REPORTING REQUIREMENTS. The Company shall report any
conflicts or potential conflicts to the Trust Board and will provide the Trust
Board, at least annually, with all information reasonably necessary for the
Trust Board to consider any issues raised by such existing or potential
conflicts or by the conditions and undertakings required by the Exemptive Order.
The Company also shall assist the Trust Board in carrying out its obligations
including, but not limited to: (a) informing the Trust Board whenever it
disregards Contract Owner voting instructions with respect to variable life
insurance policies, and (b) providing such other information and reports as the
Trust Board may reasonably request. The Company will carry out these obligations
with a view only to the interests of Contract Owners.
8.4. TRUST BOARD MONITORING AND DETERMINATION. The Trust Board shall
monitor the Trust for the existence of any material irreconcilable conflicts
between or among the interests of Participating Plans, Product Owners of
variable life insurance policies and Product Owners of variable annuity
contracts and determine what action, if any, should be taken in response to
those conflicts. A majority vote of Trustees who are not interested persons of
the Trust as defined in the 1940 Act (the "disinterested trustees") shall
represent a conclusive determination as to the existence of a material
irreconcilable conflict between or among the interests of Product Owners and
Participating Plans and as to whether any proposed action adequately remedies
any material irreconcilable conflict. The Trust Board shall give prompt written
notice to the Company and Participating Plan of any such determination. Minutes
of the meetings of the Trust Board, or other appropriate records of the Trust,
shall record all reports received by the Board regarding such conflicts and all
actions taken by the Board in response.
8.5. UNDERTAKING TO RESOLVE CONFLICT. In the event that a material
irreconcilable conflict of interest arises between Product Owners of variable
life insurance policies or Product Owners of variable annuity contracts and
Participating Plans, the Company will, at its own expense, take whatever action
is necessary to remedy such conflict as it adversely affects Contract Owners up
to and including: (1) establishing a new registered management investment
company, and (2) withdrawing assets from the Trust attributable to reserves for
the Contracts
24
subject to the conflict and reinvesting such assets in a different investment
medium (including another Fund) or submitting the question of whether such
withdrawal should be implemented to a vote of all affected Contract Owners, and,
as appropriate, segregating the assets supporting the Contracts of any group of
such owners that votes in favor of such withdrawal, or offering to such owners
the option of making such a change. The Company will carry out the
responsibility to take the foregoing action with a view only to the interests of
Contract Owners.
8.6. WITHDRAWAL. If a material irreconcilable conflict arises because of
the Company's decision to disregard the voting instructions of Contract Owners
of variable life insurance policies and that decision represents a minority
position or would preclude a majority vote at any Fund shareholder meeting,
then, if Trust Board so requests, the Company will redeem the shares of the
Trust to which the disregarded voting instructions relate and terminate this
Agreement with respect to the Account through which such Contracts were issued.
No charge or penalty, however, will be imposed in connection with such a
redemption.
8.7. EXPENSES ASSOCIATED WITH REMEDIAL ACTION. In no event shall the Trust
be required to bear the expense of establishing a new funding medium for any
Contract. The Company shall not be required by this Article VIII to establish a
new funding medium for any Contract if an offer to do so has been declined by
vote of a majority of the Contract Owners materially adversely affected by the
irreconcilable material conflict.
8.8. SUCCESSOR RULES. If and to the extent that Rule 6e-2 and Rule 6e-3(T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provisions of the 1940 Act or the rules promulgated thereunder with respect to
mixed and shared funding on terms and conditions materially different from those
contained in the SEC Order, then: (a) the Trust and/or the Company, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the extent
such rules are applicable, and (b) Sections 8.2 through 8.7 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE IX
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to, and
shall, indemnify and hold harmless the Trust, the Distributor and each person
who controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any other
Participating Insurance Companies or Qualified Persons) and any officer,
trustee, partner, director, employee or agent of the foregoing, against any and
all losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they or any of them may become
25
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact or alleged untrue statement of material fact contained in a
Contract Registration Statement, Contract Prospectus, sales literature or
other promotional material for the Contracts or the Contracts themselves
(or any amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made; provided
that this obligation to indemnify shall not apply if such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company by the Trust or the Distributor for
use in a Contract Registration Statement, Contract Prospectus or in the
Contracts or sales literature or promotional material for the Contracts
(or any amendment or supplement to any of the foregoing) or otherwise for
use in connection with the sale of the Contracts or Trust Shares; or
(b) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Trust Registration Statement, any
Prospectus for Series or Classes or sales literature or other promotional
material of the Trust (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if such
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust or Distributor in writing by or on
behalf of the Company; or
(c) arise out of or are based upon any wrongful conduct of, or
violation of Applicable Law by, the Company or persons under its control
or subject to its authorization, including without limitation, any
broker-dealers or agents authorized to sell the Contracts, with respect to
the sale, marketing or distribution of the Contracts or Trust Shares,
including, without limitation, any impermissible use of broker-only
material, unsuitable or improper sales of the Contracts or unauthorized
representations about the Contracts or the Trust; or
(d) arise as a result of any material failure by the Company or
persons under its control (or subject to its authorization) to provide
services, furnish materials or make payments as required under this
Agreement; or
(e) arise out of any material breach by the Company or persons under
its control (or subject to its authorization) of this Agreement; or
(f) arise out of any breach of any warranties contained in Article
III hereof, any failure to transmit a request for redemption or purchase
of Trust Shares or payment
26
therefor on a timely basis in accordance with the procedures set forth in
Article II, or any unauthorized use of the names or trade names of the
Trust or the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage, expense or liability is caused by
the wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
9.2. INDEMNIFICATION BY THE TRUST. The Trust hereby agrees to, and shall,
indemnify and hold harmless the Company and each person who controls or is
affiliated with the Company within the meaning of such terms under the 1933 Act
or 1940 Act and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact or alleged untrue statement of material fact contained in
the Trust Registration Statement, any Prospectus for Series or Classes or
sales literature or other promotional material of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Trust or the Distributor for use in the
Trust Registration Statement, Trust Prospectus or sales literature or
promotional material for the Trust (or any amendment or supplement to any
of the foregoing) or otherwise for use in connection with the sale of the
Contracts or Trust Shares; or
(b) arise out of any untrue statement of a material fact or alleged
untrue statement of material fact contained in a Contract Registration
Statement, Contract Prospectus or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if such
statement or omission was made in reliance upon information furnished in
writing by the Trust to the Company; or
(c) arise out of or are based upon wrongful conduct of the Trust or
its Trustees or officers with respect to the sale of Trust Shares; or
27
(d) arise as a result of any material failure by the Trust to
provide services, furnish materials or make payments as required under the
terms of this Agreement; or
(e) arise out of any material breach by the Trust of this Agreement
(including any breach of Section 6.1 of this Agreement and any warranties
contained in Article III hereof);
it being understood that in no way shall the Trust be liable to the Company with
respect to any violation of insurance law, compliance with which is a
responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Trust in accordance with Section 4.9 hereof.
This indemnification is in addition to any liability that the Trust may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
9.3. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor hereby agrees to,
and shall, indemnify and hold harmless the Company and each person who controls
or is affiliated with the Company within the meaning of such terms under the
1933 Act or 1940 Act and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact or alleged untrue statement of material fact contained in
the Trust Registration Statement, any Prospectus for Series or Classes or
sales literature or other promotional material of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Trust or Distributor for use in the Trust
Registration Statement, Trust Prospectus or sales literature or
promotional material for the Trust (or any amendment or supplement to any
of the foregoing) or otherwise for use in connection with the sale of the
Contracts or Trust Shares; or
(b) arise out of any untrue statement of a material fact or alleged
untrue statement of material fact contained in a Contract Registration
Statement, Contract Prospectus or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if such
statement or
28
omission was made in reliance upon information furnished in writing by the
Distributor to the Company; or
(c) arise out of or are based upon wrongful conduct of the
Distributor or persons under its control with respect to the sale of Trust
Shares; or
(d) arise as a result of any material failure by the Distributor or
persons under its control to provide services, furnish materials or make
payments as required under the terms of this Agreement; or
(e) arise out of any material breach by the Distributor or persons
under its control of this Agreement (including any breach of Section 6.1
of this Agreement and any warranties contained in Article III hereof);
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law, compliance with which is
a responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Distributor in accordance with Section 4.9
hereof. This indemnification is in addition to any liability that the
Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is caused
by the wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
9.4. RULE OF CONSTRUCTION. It is the parties' intention that, in the event
of an occurrence for which the Trust has agreed to indemnify the Company, the
Company shall seek indemnification from the Trust only in circumstances in which
the Trust is entitled to seek indemnification from a third party with respect to
the same event or cause thereof.
9.5. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article IX of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article IX ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article IX, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (a) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (b) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both
29
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX. The
indemnification provisions contained in this Article IX shall survive any
termination of this Agreement.
ARTICLE X
RELATIONSHIP OF THE PARTIES; TERMINATION
10.1. RELATIONSHIP OF PARTIES. The Company is to be an independent
contractor vis-a-vis the Trust, the Distributor, or any of their affiliates for
all purposes hereunder and has no authority to act for or represent any of them
(except to the limited extent the Company acts as designee of the Trust pursuant
to Section 2.3(a) of this Agreement). In addition, no officer or employee of the
Company shall be deemed to be an employee or agent of the Trust, Distributor, or
any of their affiliates. The Company does not act as an "underwriter" or
"distributor" of Trust Shares, as those terms variously are used in the 1940
Act, the 1933 Act, and rules and regulations thereunder. Likewise, the Company
is not a "transfer agent" of the Trust as that term is used in the 1934 Act and
rules thereunder. Consistent with the foregoing, the Company is not a "transfer
agent" or "administrator" to the Trust as those terms are referenced in Rule
38a-1 under the 1940 Act.
10.2. NON-EXCLUSIVITY AND NON-INTERFERENCE. The parties hereto acknowledge
that the arrangement contemplated by this Agreement is not exclusive; the Trust
Shares may be sold to other insurance companies and investors (subject to
Section 2.8 hereof) and the cash value of the Contracts may be invested in other
investment companies, provided, however, that until this Agreement is terminated
pursuant to this Article X:
(a) the Company shall promote the Trust and the Funds made available
hereunder on the same basis as other funding vehicles available under the
Contracts;
(b) the Company shall not, without prior notice to the Distributor
(unless otherwise required by Applicable Law), take any action to operate
Schedule 1 Account as a management investment company under the 1940 Act;
(c) the Company shall not, without the prior written consent of the
Distributor (unless otherwise required by Applicable Law), solicit, induce
or encourage Contract Owners to change or modify the Trust to change the
Trust's distributor or investment adviser, to transfer or withdraw
Contract Values allocated to a Fund, or to exchange their Contracts for
contracts not allowing for investment in the Trust;
30
(d) the Company shall not substitute another investment company for
one or more Funds without providing: (i) written notice to the Distributor
at least 120 days in advance of such substitution; and (ii) copies of any
application by the Company to the SEC seeking approval of such
substitution as required by Section 4.13 of this Agreement; and
(e) the Company shall not redeem Trust Shares attributable to
Contract Owner investments except as necessary to facilitate Contract
Owner transactions, payment of expenses by Accounts, and routine Contract
processing, or as permitted by any SEC order issued pursuant to Section
26(c) of the 1940 Act.
10.3. TERMINATION OF AGREEMENT. This Agreement shall not terminate until:
(a) the Trust is dissolved, liquidated, or merged into another entity, or (b) as
to any Fund that has been made available hereunder, the Account no longer
invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends to
invest in such Fund. However, certain obligations of, or restrictions on, the
parties to this Agreement may terminate as provided in Sections 10.4 through
10.6 and the Company may be required to redeem Trust Shares pursuant to Section
10.7 or in the circumstances contemplated by Article VIII. Articles III and IX
and Section 10.8 shall survive any termination of this Agreement.
10.4. TERMINATION OF OFFERING OF TRUST SHARES. The obligation of the Trust
and the Distributor to make Trust Shares available to the Company for purchase
pursuant to Article II of this Agreement shall terminate at the option of the
Distributor upon written notice to the Company as provided below :
(a) upon institution of formal proceedings against the Company, or
the Distributor's reasonable determination that institution of such
proceedings is being considered by FINRA, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, the administration of the
Contracts or the purchase of Trust Shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Distributor's reasonable
judgment exercised in good faith, materially impair the Company's or
Trust's ability to meet and perform the Company's or Trust's obligations
and duties hereunder, such termination effective upon 15 days prior
written notice;
(b) in the event any of the Contracts are not registered, issued or
sold in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written notice;
(c) if the Distributor shall determine, in its sole judgment
exercised in good faith, that either (1) the Company shall have suffered a
material adverse change in its
31
business or financial condition or (2) the Company shall have been the
subject of material adverse publicity which is likely to have a material
adverse impact upon the business and operations of either the Trust or the
Distributor, such termination effective upon 30 days prior written notice;
(d) if the Distributor suspends or terminates the offering of Trust
Shares of any Series or Class to all Participating Investors or only
designated Participating Investors, if such action is required by law or
by regulatory authorities having jurisdiction or if, in the sole
discretion of the Distributor acting in good faith, suspension or
termination is necessary in the best interests of the shareholders of any
Series or Class (I.E., Product Owners indirectly invested in any Series or
Class), such notice effective immediately upon receipt of written notice,
it being understood that a lack of Participating Investor interest in a
Series or Class may be grounds for a suspension or termination as to such
Series or Class and that a suspension or termination shall apply only to
the specified Series or Class;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the Account to
another insurance company pursuant to an assumption reinsurance agreement)
unless the Trust consents thereto, such termination effective upon 30 days
prior written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction of the
Trust within 10 days after written notice of such breach has been
delivered to the Company, such termination effective upon expiration of
such 10-day period; or
(g) upon the determination of the Trust's Board to dissolve,
liquidate or merge the Trust as contemplated by Section 10.3(a), upon
termination of the Agreement pursuant to Section 10.3(b), or upon notice
from the Company pursuant to Section 10.5 or 10.6, such termination
pursuant hereto to be effective upon 15 days prior written notice.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to Contracts issued after the exercise of
the option and the Distributor shall continue to make Trust Shares available to
the extent necessary to permit owners of Contracts in effect on the effective
date of such termination (hereinafter referred to as "Existing Contracts") to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts.
10.5. TERMINATION OF INVESTMENT IN A FUND. The Company may at any time
elect in its sole discretion to cease investing in a Fund, promoting a Fund as
an investment option under the Contracts, or withdraw its investment or the
Account's investment in a Fund, subject to compliance with Applicable Law, upon
written notice to the Trust, as provided below:
32
(a) shares in such Fund are not reasonably available to meet the
requirements of the Contracts as determined by the Company (including any
non-availability as a result of notice given by the Distributor pursuant to
Section 10.4(d)), and the Distributor, after receiving written notice from the
Company of such non-availability, fails to make available, within 10 days after
receipt of such notice, a sufficient number of shares in such Fund or an
alternate Fund to meet the requirements of the Contracts;
(b) such Fund fails to meet the diversification requirements specified in
Section 817(h) of the Code and any regulations thereunder and the Trust, upon
written request, fails to provide reasonable assurance that it will take action
to cure or correct such failure;
(c) such Fund fails to qualify as a regulated investment company under
Sub-Section 851 of the Code, or any successor provision, or if the Company
reasonably believes that the Fund may fail to so qualify and the Trust, upon
written request, fails to provide reasonable assurance that it will correct the
failure within 30 days; or
(d) for any other reason by ninety (90) days advance written notice
delivered to the Trust.
The Company may also redeem Trust shares attributable to the Contracts (i)
as necessary to implement Contract Owner initiated or approved transactions, or
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption") or (iii) as permitted by an order of the SEC
pursuant to Section 26(c) of the 1940 Act. Upon request, the Company will
promptly furnish to the Trust and the Distributor the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the Trust and the
Distributor) to the effect that any redemption pursuant to clause (ii) above is
a Legally Required Redemption.
Such termination shall apply only as to the affected Fund and shall not
apply to any other Fund in which the Company or the Account invests.
10.6. TERMINATION OF INVESTMENT IN THE TRUST. The Company may elect to
cease investing in all Series or Classes of the Trust made available hereunder,
promoting the Trust as an investment option under the Contracts, or withdraw its
investment or the Accounts' investment in the Trust, subject to compliance with
applicable law, upon written notice to the Trust within 15 days of the
occurrence of any of the following events (unless provided otherwise below):
(a) upon institution of formal proceedings against the Trust or the
Distributor (but only with regard to the Trust) by the FINRA, the SEC or
any state securities or insurance commission or any other regulatory body;
or
(b) if the Trust or Distributor is in material breach of a provision
of this Agreement, which breach has not been cured to the satisfaction of
the Company within
33
10 days after written notice of such breach has been delivered to the
Trust or the Distributor, as the case may be.
10.7. COMPANY REQUIRED TO REDEEM. The parties understand and acknowledge
that it is essential for compliance with Section 817(h) of the Code that the
Contracts qualify as annuity contracts or life insurance policies, as
applicable, under the Code. Accordingly, if any of the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Trust reasonably believes that any such Contracts may fail
to so qualify, the Trust shall have the right to require the Company to redeem
Trust Shares attributable to such Contracts upon notice to the Company and the
Company shall so redeem such Trust Shares in order to ensure that the Trust
complies with the provisions of Section 817(h) of the Code applicable to
ownership of Trust Shares. Notice to the Company shall specify the period of
time the Company has to redeem the Trust Shares or to make other arrangements
satisfactory to the Trust and its counsel, such period of time to be determined
with reference to the requirements of Section 817(h) of the Code. In addition,
the Company may be required to redeem Trust Shares pursuant to action taken or
request made by the Trust Board in accordance with the Exemptive Order described
in Article VIII or any conditions or undertakings set forth or referenced
therein, or other SEC rule, regulation or order that may be adopted after the
date hereof. The Company agrees to redeem shares in the circumstances described
herein and to comply with applicable terms and provisions. Also, in the event
that the Distributor suspends or terminates the offering of a Series or Class
pursuant to Section 10.4(d) of this Agreement, the Company, upon request by the
Distributor, will cooperate in taking appropriate action to withdraw the
Account's investment in the respective Fund.
10.8. CONFIDENTIALITY. All "Confidential Information" (as defined in this
section) supplied by one party to the another party in connection with the
negotiation or carrying out of this Agreement shall remain the property of the
party providing such information and shall be kept confidential by the receiving
party or parties except: (a) as may be required by Applicable Law, (b) as
authorized in writing by the party providing the information, or (c) in the
event that such information is otherwise made public. Each party agrees to take
all reasonable precautions to prevent any unauthorized disclosure of
Confidential Information. Confidential Information means (individually or
collectively) proprietary information of the parties to this Agreement,
including but not limited to, their inventions, "know-how", trade secrets,
business affairs, prospect lists, product designs, product plans, business
strategies, finances, fee structures, etc. Without limiting the generality of
the foregoing, Confidential Information includes: (a) information that the
disclosing party designates in writing is confidential or proprietary, (b) any
non-public personal information or personally identifiable financial information
about any Contract Owner or prospective Contract Owner, and (c) information that
a reasonable business-person would assume to be confidential or proprietary.
Notwithstanding the foregoing, Confidential Information does not include
information provided by the Company to the Distributor pursuant to section 2.9
of this Agreement.
34
ARTICLE XI
APPLICABILITY TO NEW ACCOUNTS AND NEW CONTRACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company and Accounts therefor investing in the Trust. Such
amendments may be made effective by executing the form of amendment included on
each schedule attached hereto. The provisions of this Agreement shall be equally
applicable to each such class of Contracts, Series, Class or Account, as
applicable, effective as of the date of amendment of such Schedule, unless the
context otherwise requires. The parties to this Agreement may amend this
Agreement from time to time by written agreement signed by all of the parties.
ARTICLE XII
NOTICE, REQUEST OR CONSENT
Any notice, request or consent to be provided pursuant to this Agreement
is to be made in writing and shall be given:
If to the Trust:
Xxxxxxxx Xxxxx
Secretary
Xxxxxxx Sachs Variable Insurance Trust
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
If to the Distributor:
Xxxxx XxXxxxxx
Xxxxxxx Sachs & Co.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
If to the Company:
Xxxx X. Xxxx
Senior Vice President
Forethought Life Insurance Company
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
35
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier, and shall be
effective upon receipt. Notices pursuant to the provisions of Article II may be
sent by facsimile to the person designated in writing for such notices.
ARTICLE XIII
MISCELLANEOUS
13.1. INTERPRETATION. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the state of
Delaware, without giving effect to the principles of conflicts of laws, subject
to the following rules:
(a) This Agreement shall be subject to Applicable Law and the terms
hereof shall be limited, interpreted and construed in accordance
therewith.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
(d) The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.2. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which together shall constitute one and the same
instrument.
13.3. NO ASSIGNMENT. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or the
Trust without the prior written consent of the other parties.
13.4. DECLARATION OF TRUST. A copy of the Declaration of Trust of the
Trust is on file with the Secretary of State of the state of Delaware, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as trustees, and is not binding upon any of the Trustees,
officers or shareholders of the Trust individually, but binding only upon the
assets and property of the Trust. No Series of the Trust shall be liable for the
obligations of any other Series of the Trust.
36
13.5. ARBITRATION. Any controversy or claim between or among the parties
arising out of or relating to this Agreement, or breach thereof, shall be
settled by arbitration in a forum jointly selected by the relevant parties (or
in a forum required by law) in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction over the same.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized officer on the date
specified below.
XXXXXXX SACHS VARIABLE INSURANCE TRUST
(Trust)
Date: By:
----------- -----------------------------------------
Name:
Title:
XXXXXXX, XXXXX & CO.
(Distributor)
Date: By:
----------- -----------------------------------------
Name:
Title:
FORETHOUGHT LIFE INSURANCE COMPANY
(Company)
Date: By:
----------- -----------------------------------------
Name:
Title:
37
SCHEDULE 1
SCHEDULE 1A
SEPARATE ACCOUNTS OF THE COMPANY REGISTERED UNDER THE 1940 ACT AS UNIT
INVESTMENT TRUSTS
The following separate accounts of the Company are subject to the Agreement:
============================== =========================== ======================== ==============================
DATE ESTABLISHED BY
NAME OF ACCOUNT BOARD OF DIRECTORS OF THE SEC 1940 ACT TYPE OF PRODUCT SUPPORTED BY
COMPANY REGISTRATION NUMBER ACCOUNT
============================== =========================== ======================== ==============================
Separate Account A 811- Variable Annuity
------------------------------ --------------------------- ------------------------ ------------------------------
------------------------------ --------------------------- ------------------------ ------------------------------
------------------------------ --------------------------- ------------------------ ------------------------------
============================== =========================== ======================== ==============================
SCHEDULE 1B
VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE CONTRACTS REGISTERED
UNDER THE SECURITIES ACT OF 1933
The following Contracts are subject to the Agreement:
============================== ==================================================== ==============================
NAME OF CONTRACT AVAILABLE FUNDS/SHARE CLASSES TYPE OF PRODUCT SUPPORTED BY
ACCOUNT
============================== ==================================================== ==============================
ForeRetirement Variable Xxxxxxx Sachs Global Markets Navigator Fund
Annuity (Service Shares)
Xxxxxxx Xxxxx Strategic Income Fund (Advisor Variable Annuity
Shares)
Xxxxxxx Sachs Multi-Strategy Alternatives Portfolio
(Advisor Shares)
------------------------------ ---------------------------------------------------- ------------------------------
------------------------------ ---------------------------------------------------- ------------------------------
============================== ==================================================== ==============================
38
