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EXHIBIT(8)(b)(i)
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this 24th day of September, 1998
by and between XXXXXXX XXXXX VARIABLE INSURANCE TRUST, an unincorporated
business trust formed under the laws of Delaware (the "Trust"), XXXXXXX, SACHS &
CO., a New York limited partnership (the "Distributor"), and XXXXXX INVESTORS
LIFE INSURANCE COMPANY, an Illinois life insurance company (the "Company"), on
its own behalf and on behalf of each separate account of the Company identified
herein.
WHEREAS, the Trust is a series-type mutual fund offering shares of
beneficial interest (the "Trust shares") consisting of one or more separate
series ("Series") of shares, each such Series representing an interest in a
particular investment portfolio of securities and other assets (a "Fund"), and
which Series may be subdivided into 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 insurance company separate accounts supporting variable
annuity contracts and variable life insurance policies to be offered by
insurance companies and may also be utilized by qualified retirement plans; and
WHEREAS, the Distributor has the exclusive right to distribute Trust
shares to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment
vehicle for a certain separate account(s) of the Company and the Distributor
desires to sell shares of certain Series and/or Class(es) to such separate
account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
the Distributor and the Company agree as follows:
ARTICLE I
ADDITIONAL DEFINITIONS
1.1. "Account" -- the separate account of the Company described more
specifically in Schedule 1 to this Agreement. If more than one separate account
is described on Schedule 1, the term shall refer to each separate account so
described.
1.2. "Business Day" -- each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any
successor thereto.
1.4. "Contracts" -- the class or classes of variable annuity contracts
and/or variable life insurance policies issued by the Company and described more
specifically on Schedule 2 to this Agreement.
1.5. "Contract Owners" -- the owners of the Contracts, as distinguished
from all Product Owners.
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1.6. "Participating Account" -- a separate account investing all or a
portion of its assets in the Trust, including the Account.
1.7. "Participating Insurance Company" -- any insurance company
investing in the Trust on its behalf or on behalf of a Participating Account,
including the Company.
1.8. "Participating Plan" -- any qualified retirement plan investing in
the Trust.
1.9. "Participating Investor" -- any Participating Account,
Participating Insurance Company or Participating Plan, including the Account and
the Company.
1.10. "Products" -- variable annuity contracts and variable life
insurance policies supported by Participating Accounts, including the Contracts.
1.11. "Product Owners" -- owners of Products, including Contract
Owners.
1.12. "Trust Board" -- the board of trustees of the Trust.
1.13. "Registration Statement" -- with respect to the Trust shares or a
class of Contracts, the registration statement filed with the SEC to register
such securities under the 1933 Act, or the most recently filed amendment
thereto, in either case in the form in which it was declared or became
effective. The Contracts' Registration Statement for each class of Contracts is
described more specifically on Schedule 2 to this Agreement. The Trust's
Registration Statement is filed on Form N-1A (File No. 333-35883).
1.14. "1940 Act Registration Statement" -- with respect to the Trust or
the Account, 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 Account's 1940 Act Registration Statement is described
more specifically on Schedule 1 to this Agreement. The Trust's 1940 Act
Registration Statement is filed on Form N-1A (File No. 811-08361).
1.15. "Prospectus" -- with respect to shares of a Series (or Class) of
the Trust or a class of Contracts, each version of the definitive prospectus 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 Prospectus, such reference thereto shall be deemed to be to
the version for the applicable Series, Class or Contracts last so filed prior to
the taking of such action. For purposes of Article IX, the term "Prospectus"
shall include any statement of additional information incorporated therein.
1.16. "Statement of Additional Information" -- with respect to the
shares of the Trust or a class of Contracts, each version of the definitive
statement of additional information or supplement thereto filed with the SEC
pursuant to Rule 497 under the 1933 Act. With respect to any provision of this
Agreement requiring a party to take action in accordance with a Statement of
Additional Information, such reference thereto shall be deemed to be the last
version so filed prior to the taking of such action.
1.17. "SEC" -- the Securities and Exchange Commission.
1.18. "NASD" -- The National Association of Securities Dealers, Inc.
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1.19. "1933 Act" -- the Securities Act of 1933, as amended.
1.20. "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 Account, shares of the Series and Classes listed on Schedule 3
to this Agreement, such purchases to be effected at net asset value in
accordance with Section 2.3 of this Agreement. Such Series and Classes
shall be made available to the Company in accordance with the terms and
provisions of this Agreement until this Agreement is terminated
pursuant to Article X or the Distributor suspends or terminates the
offering of shares of such Series or Classes in the circumstances
described in Article X.
(b) Notwithstanding clause (a) of this Section 2.1, Series or
Classes of Trust shares in existence now or that may be established in
the future will be made available to the Company only as the
Distributor may so provide, subject to the Distributor's rights set
forth in Article X to suspend or terminate the offering of shares of
any Series or Class or to terminate this Agreement.
(c) The parties acknowledge and agree that: (i) the Trust may
revoke the Distributor's authority pursuant to the terms and conditions
of its distribution agreement with the Distributor; provided, however,
in such event the Trust shall make alternative distribution
arrangements so that shares of the Series and Classes listed on
Schedule 3, as amended from time to time, shall continue to be
available to the Company for purchase and redemption on behalf of the
Account in accordance with this Agreement; and (ii) the Trust reserves
the right in its sole discretion to refuse to accept a request for the
purchase of Trust shares in accordance with the Trust's Prospectus.
2.2. REDEMPTIONS. The Trust shall redeem, at the Company's request, any
full or fractional Trust shares held by the Company on behalf of the Account,
such redemptions to be effected at net asset value in accordance with Section
2.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not
redeem Trust shares attributable to Contract Owners except in the circumstances
permitted in Article X of this Agreement, and (ii) the Trust may delay
redemption of Trust shares of any Series or Class to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the Prospectus for
such Series or Class.
2.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Trust hereby appoints the Company as its designee for the
limited purpose of receiving purchase and redemption requests on behalf
of the Account (but not with respect to any Trust shares that may be
held in the general account of the Company) for shares of those Series
or Classes made available hereunder, based on allocations of amounts to
the Account or subaccounts thereof under the Contracts, other
transactions relating to the Contracts or the Account and customary
processing of the Contracts. Receipt of any such requests (or
effectuation of such transaction or processing) on any
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Business Day by the Company as such designee 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 defined as the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m. New York Time)) shall constitute
receipt by the Trust on that same Business Day, provided (i) with
respect to all Funds listed on Schedule 3 (other than the International
Equity Fund and the Global Income Fund), the Trust receives actual and
sufficient notice of such request by 10:00 a.m. New York time on the
next following Business Day, and (ii) with respect to the International
Equity Fund and the Global Income Fund, the Trust receives actual and
sufficient notice of such request by 9:30 a.m. New York time on the
next following Business Day.
(b) In the event the Company's order results in a net purchase of
Trust shares, the Company shall pay for shares of each Series or Class
on the same day that it provides actual notice to the Trust of a
purchase request for such shares. Payment for Series or Class shares
shall be made in Federal funds transmitted to the Trust by wire to be
received by the Trust by 3:30 p.m. New York Time on the day the Trust
receives actual notice of the purchase request for Series or Class
shares (unless the Trust determines and so advises the Company that
sufficient proceeds are available from redemption of shares of other
Series or Classes effected pursuant to redemption requests tendered by
the Company on behalf of the Account). In no event may proceeds from
the redemption of shares requested pursuant to an order received by the
Company after the Trust's close of business on any Business Day be
applied to the payment for shares for which a purchase order was
received prior to the Trust's close of business on such day. If the
issuance of shares is canceled because Federal funds are not timely
received, the Company shall indemnify the respective Fund and
Distributor with respect to all costs, expenses and losses relating
thereto. Upon the Trust's receipt of Federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become
the responsibility of the Trust. If Federal funds are not received on
time, such funds will be invested, and Series or Class shares purchased
thereby will be issued, as soon as practicable after actual receipt of
such funds but in any event not on the same day that the purchase order
was received.
(c) In the event that the Company's order results in a net
redemption of Trust shares, payment for Series or Class shares redeemed
by the Account or the Company shall be made in Federal funds
transmitted by wire to the Company or any other person properly
designated in writing by the Company, such funds normally to be
transmitted by 6:00 p.m. New York Time on the next Business Day after
the Trust receives actual notice of the redemption order for Series or
Class shares (unless redemption proceeds are to be applied to the
purchase of Trust shares of other Series or Classes in accordance with
Section 2.3(b) of this Agreement), except that the Trust reserves the
right to redeem Series or Class shares in assets other than cash and to
delay payment of redemption proceeds to the extent permitted by the
1940 Act, any rules or regulations or orders thereunder, or the
applicable Prospectus. The Trust shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption
proceeds received by the Company; the Company alone shall be
responsible for such action.
(d) Any purchase or redemption request for Series or Class shares
held or to be held in the Company's general account shall be effected
at the net asset value per share next determined after the Trust's
actual receipt of such request, provided that, in the case of a
purchase request, payment for Trust shares so requested is received by
the Trust in Federal funds prior to close of business for determination
of such value, as defined from time to time in the Prospectus for such
Series or Class.
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(e) Prior to the first purchase of any Trust shares hereunder, the
Company and the Trust shall provide each other with all information
necessary to effect wire transmissions of Federal funds to the other
party and all other designated persons pursuant to such protocols and
security procedures as the parties may agree upon. Should such
information change thereafter, the Trust and the Company, as
applicable, shall notify the other in writing of such changes,
observing the same protocols and security procedures, at least three
Business Days in advance of when such change is to take effect. The
Company and the Trust shall observe customary procedures to protect the
confidentiality and security of such information, but neither the Trust
nor the Company shall be liable to the other for any breach of
security.
(f) The procedures set forth herein are subject to any additional
terms set forth in the applicable Prospectus for the Series or Class or
by the requirements of applicable law.
2.4. NET ASSET VALUE. The Trust shall provide to the Company a closing
net asset value per share for each Series or Class available hereunder as of the
close of trading each Business Day. The Trust shall use its best efforts to
inform the Company of such net asset value as soon as reasonably practicable
after the net asset values are calculated and shall use its best efforts to
provide each such net asset value by 6:30 p.m. New York Time. The Trust shall
calculate net asset value 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 Account, hereby elects to receive all such dividends
and distributions as are payable on any Series or Class shares in the form of
additional shares of that Series or Class. The Company reserves the right, on
its behalf and on behalf of the Account, 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 or its designee promptly of the number of Series or Class shares so
issued as payment of such dividends and distributions. The Trust shall to the
extent practicable provide advance notice to the Company of any date on which
the Trust reasonably expects to make a dividend distribution.
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 Account.
Purchase and redemption orders for Trust shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
2.7. PRICING ERRORS. Each party to this Agreement shall be responsible
for pricing errors that are attributable to it in the event that under SEC
standards, the Company and the Account are required to make Contract Owners
whole; provided that each party shall have the right to rely on information or
confirmations provided by any other party (or by any affiliate of any other
party) which is reasonably believed to be genuine, including information
supplied by or on behalf of the Company or any other Participating Insurance
Company to the Trust or the Distributor, and shall not be liable in the event
that an error results from any incorrect information or confirmations supplied
by any other party.
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2.8. LIMITS ON PURCHASERS. The Distributor and the Trust shall sell Trust shares
only to insurance companies and their separate accounts and to persons or plans
("Qualified Persons") that qualify to purchase shares of the Trust under Section
817(h) of the Code and the regulations thereunder without impairing the ability
of the Account to consider the portfolio investments of the Trust as
constituting investments of the Account for the purpose of satisfying the
diversification requirements of Section 817(h) Trust shares will not be sold
directly to the general public. The Distributor and the Trust shall not sell
Trust shares to any insurance company and its separate account unless an
agreement defining the responsibilities of the parties is in effect to govern
such sales. The Company hereby represents and warrants that it and the Account
are Qualified Persons.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. COMPANY. The Company represents and warrants that: (i) the Company
is an insurance company duly organized and in good standing under Illinois
insurance law; (ii) the Account is a validly existing separate account, duly
established and maintained in accordance with applicable law; (iii) the
Account's 1940 Act Registration Statement has been filed with the SEC in
accordance with the provisions of the 1940 Act and the Account is duly
registered as a unit investment trust thereunder; (iv) the Contracts'
Registration Statement has been, or will be prior to the sale of any Contracts,
declared effective by the SEC; (v) the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws; (vi) 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; (vii) the Account will maintain its registration under the 1940
Act and will comply in all material respects with the 1940 Act; (viii) the
Contracts currently are, and at the time of issuance and for so long as they are
outstanding will be, treated as annuity contracts or life insurance policies,
whichever is appropriate, under applicable provisions of the Code; (ix) the
Company's entering into and performing its obligations under this Agreement does
not and will not violate its charter documents or by-laws, rules or regulations,
or any agreement to which it is a party; (x) the principal underwriter for each
Account and any subaccount thereof is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended; and (xi) the Trust shares are and
will continue to be the only investment securities held by the corresponding
Account subaccount(s). The Company will notify 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: (i) the Trust is an
unincorporated business trust duly formed and validly existing under Delaware
law; (ii) the Trust's 1940 Act Registration Statement has been filed with the
SEC in accordance with the provisions of the 1940 Act and the Trust is duly
registered as an open-end management investment company thereunder; (iii) the
Trust's Registration Statement has been declared effective by the SEC; (iv) the
Trust shares will be issued in compliance in all material respects with all
applicable federal and state laws; (v) the Trust will remain registered under
and will comply in all material respects with the 1940 Act during the term of
this Agreement; (vi) each Fund of the Trust intends to qualify as a "regulated
investment company" under Subchapter M of the Code and shall comply with the
diversification standards prescribed in Section 817(h) of the Code and the
regulations thereunder as set forth in Section 6.1 of this Agreement; and (vii)
the investment policies of each Fund are in material compliance with any
investment restrictions set forth on Schedule 4 to this Agreement. The Trust,
however, makes no representation as to whether any
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aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state.
3.3. DISTRIBUTOR. The Distributor represents and warrants that: (i) the
Distributor is a limited partnership duly organized and in good standing under
New York law; (ii) the Distributor is registered as a broker-dealer under
federal and applicable state securities laws and is a member of the NASD; and
(iii) the Distributor is registered as an investment adviser under federal
securities laws.
3.4. LEGAL AUTHORITY. Each party represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate, partnership or trust action, as applicable, by such party, and, when
so executed and delivered, this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
3.5. BONDING REQUIREMENT. Each party represents and warrants that all
of its directors, officers, partners and employees dealing with the money and/or
securities of the Trust are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Trust in an
amount not less than the amount required by the applicable rules of the NASD and
the federal securities laws. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company. All
parties shall make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, shall provide evidence thereof
promptly to any other party upon written request therefor, and shall notify the
other parties promptly in the event that such coverage no longer applies.
ARTICLE IV
REGULATORY REQUIREMENTS
4.1. TRUST FILINGS. The Trust shall amend the Trust's Registration
Statement and the Trust's 1940 Act Registration Statement from time to time as
required in order to effect the continuous offering of Trust shares in
compliance with applicable law and to maintain the Trust's registration under
the 1940 Act for so long as Trust shares are sold.
4.2. CONTRACTS FILINGS. The Company shall amend the Contracts'
Registration Statement and the Account's 1940 Act Registration Statement from
time to time as required in order to effect the continuous offering of the
Contracts in compliance with applicable law or as may otherwise be required by
applicable law, but in any event shall maintain a current effective Contracts'
Registration Statement and the Account's registration under the 1940 Act for so
long as the Contracts are outstanding unless 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. The Company shall be responsible for filing all
such Contract forms, applications, marketing materials and other documents
relating to the Contracts and/or the Account with state insurance commissions,
as required or customary, and shall use its best efforts: (i) 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 (ii)
to keep such approvals in effect for so long as the Contracts are outstanding.
4.3. VOTING OF TRUST SHARES. With respect to any matter put to vote by
the holders of Trust shares ("Voting Shares"), the Company will provide
"pass-through" voting privileges to owners of Contracts registered with the SEC
as long as the 1940 Act requires such privileges in
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such cases. In cases in which "pass-through" privileges apply, the Company will
(i) solicit voting instructions from Contract Owners of SEC-registered
Contracts; (ii) vote Voting Shares attributable to Contract Owners in accordance
with instructions or proxies timely received from such Contract Owners; and
(iii) vote Voting Shares held by it that are not attributable to reserves for
SEC-registered Contracts or for which it has not received timely voting
instructions in the same proportion as instructions received in a timely fashion
from Owners of SEC-registered Contracts. The Company shall be responsible for
ensuring that it calculates "pass-through" votes for the Account in a manner
consistent with the provisions set forth above and with other Participating
Insurance Companies. Neither the Company nor any of its affiliates will in any
way recommend action in connection with, or oppose or interfere with, the
solicitation of proxies for the Trust shares held for such Contract Owners,
except with respect to matters as to which the Company has the right under Rule
6e-2 or 6e-3(T) under the 1940 Act, to vote Voting Shares without regard to
voting instructions from Contract Owners.
4.4. STATE INSURANCE RESTRICTIONS. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness of
such determination. Schedule 4 sets forth the investment restrictions and any
other restrictions, limitations or requirements that the Company and/or other
Participating Insurance Companies have determined are applicable to any Fund and
with which the Trust has agreed to comply as of the date of this Agreement. The
Company shall inform the Trust of any investment restrictions and any other
restrictions, limitations or requirements imposed by state insurance law that
the Company determines may become applicable to the Trust or a Fund from time to
time as a result of the Account's investment therein, other than those set forth
on Schedule 4 to this Agreement. Upon receipt of any such information from the
Company or any other Participating Insurance Company, the Trust shall determine
whether it is in the best interests of shareholders to comply with any such
restrictions. If the Trust determines that it is not in the best interests of
shareholders (it being understood that "shareholders" for this purpose shall
mean Product Owners) to comply with a restriction determined to be applicable by
the Company, the Trust shall so inform the Company, and the Trust and the
Company shall discuss alternative accommodations in the circumstances. If the
Trust determines that it is in the best interests of shareholders to comply with
such restrictions, the parties hereto shall amend Schedule 4 to this Agreement
to reflect such restrictions, subject to obtaining any required shareholder
approval thereof.
4.5. DRAFTS OF FILINGS. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, prepared by or on behalf of either of them
and that mentions the other party by name. Such drafts shall be provided to the
other party sufficiently in advance of filing such materials with regulatory
authorities in order to allow such other party a reasonable opportunity to
review the materials.
4.6. COPIES OF FILINGS. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations of voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to the Trust, the Contracts or
the Account, as the case may be, promptly after the filing by or on behalf of
each such party of
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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 Account).
4.7. 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 4.6 of this Agreement.
4.8. COMPLAINTS AND PROCEEDINGS
(a) The Trust and/or the Distributor shall immediately notify the
Company of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Trust's
Registration Statement or the Prospectus of any Series or Class; (ii)
any request by the SEC for any amendment to the Trust's Registration
Statement or the Prospectus of any Series or Class; (iii) the
initiation of any proceedings for that purpose or for any other
purposes relating to the registration or offering of the Trust shares;
or (iv) any other action or circumstances that may prevent the lawful
offer or sale of Trust shares or any Class or Series in any state or
jurisdiction, including, without limitation, any circumstance in which
(A) such shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or
(B) such law precludes the use of such shares as an underlying
investment medium for the Contracts. The Trust will make every
reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) The Company shall immediately notify the Trust and the
Distributor of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Contracts'
Registration Statement or the Contracts' Prospectus; (ii) any request
by the SEC for any amendment to the Contracts' Registration Statement
or Prospectus; (iii) the initiation of any proceedings for that purpose
or for any other purposes relating to the registration or offering of
the Contracts; or (iv) any other action or circumstances that may
prevent the lawful offer or sale of the Contracts or any class of
Contracts in any state or jurisdiction, including, without limitation,
any circumstance in which such Contracts are not registered, qualified
and approved, and, in all material respects, issued and sold in
accordance with applicable state and federal laws. The Company will
make every reasonable effort to prevent the issuance of any such stop
order, cease and desist order or similar order and, if any such order
is issued, to obtain the lifting thereof at the earliest possible time.
(c) Each party shall immediately notify the other parties when it
receives notice, or otherwise becomes aware of, the commencement of any
litigation or proceeding against such party or a person affiliated
therewith in connection with the issuance or sale of Trust shares or
the Contracts.
(d) The Company shall provide to the Trust and the Distributor any
complaints it has received from Contract Owners pertaining to the Trust
or a Fund, and
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the Trust and Distributor shall each provide to the Company any
complaints it has received from Contract Owners relating to the
Contracts.
4.9. COOPERATION. Each party hereto shall cooperate with the other
parties and all appropriate government authorities (including without limitation
the SEC, the NASD and state securities and insurance regulators) and shall
permit such authorities reasonable access to its books and records in connection
with any investigation or inquiry by any such authority relating to this
Agreement or the transactions contemplated hereby. However, such access shall
not extend to attorney-client privileged information.
ARTICLE V
SALE, ADMINISTRATION AND SERVICING OF THE CONTRACTS
5.1. SALE OF THE CONTRACTS. The Company shall be fully responsible for
the sale and marketing of the Contracts. The Company shall provide Contracts,
the Contracts' and Trust's Prospectuses, Contracts' and Trust's Statements of
Additional Information, and all amendments or supplements to any of the
foregoing to Contract Owners and prospective Contract Owners, all in accordance
with federal and state laws. The Company shall ensure that all persons offering
the Contracts are duly licensed and registered under applicable insurance and
securities laws. The Company shall ensure that each sale of a Contract satisfies
applicable suitability requirements under insurance and securities laws and
regulations, including without limitation the rules of the NASD. The Company
shall adopt and implement procedures reasonably designed to ensure that
information concerning the Trust and the Distributor that is intended for use
only by brokers or agents selling the Contracts (i.e., information that is not
intended for distribution to Contract Owners or offerees) is so used.
5.2. ADMINISTRATION AND SERVICING OF THE CONTRACTS. The Company shall
be fully responsible for the underwriting, issuance, service and administration
of the Contracts and for the administration of the Account, including, without
limitation, the calculation of performance information for the Contracts, the
timely payment of Contract Owner redemption requests and processing of Contract
transactions, and the maintenance of a service center, such functions to be
performed in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. The Company shall provide to
Contract Owners all Trust reports, solicitations for voting instructions
including any related Trust proxy solicitation materials, and updated Trust
Prospectuses as required under the federal securities laws.
5.3. CUSTOMER COMPLAINTS. The Company shall promptly address all
customer complaints and resolve such complaints consistent with high ethical
standards and principles of ethical conduct.
5.4. TRUST PROSPECTUSES AND REPORTS. In order to enable the Company to
fulfill its obligations under this Agreement and the federal securities laws,
the Trust shall provide the Company with a copy, in camera-ready form or form
otherwise suitable for printing or duplication or, at the Company's request, as
a diskette in the form sent to the financial printer, of: (i) the Trust's
Prospectus for the Series and Classes listed on Schedule 3 and any supplement
thereto; (ii) each Statement of Additional Information and any supplement
thereto; (iii) any Trust proxy soliciting material for such Series or Classes;
and (iv) any Trust periodic shareholder reports. The Trust and the Company may
agree upon alternate arrangements, but in all cases, the Trust reserves the
right to approve the printing of any such material. The Trust shall 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
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provided by the Trust or the Distributor (including without limitation
presenting or delivering such material in a different medium, e.g., electronic
or Internet) without the prior written consent of the Distributor.
5.5. TRUST ADVERTISING MATERIAL. No piece of advertising or sales
literature or other promotional material in which the Trust or the Distributor
is named (including, without limitation, material for prospects, existing
Contract Owners, brokers, rating or ranking agencies, or the press, whether in
print, radio, television, video, Internet, or other electronic medium) shall be
used by the Company or any person directly or indirectly authorized by the
Company, including without limitation, underwriters, distributors, and sellers
of the Contracts, except with the prior written consent of the Trust or the
Distributor, as applicable, as to the form, content and medium of such material.
Any such piece shall be furnished to the Trust for such consent prior to its
use. The Trust or the Distributor shall respond to any request for written
consent on a prompt and timely basis, but failure to respond shall not relieve
the Company of the obligation to obtain the prior written consent of the Trust
or the Distributor. After receiving the Trust's or Distributor's consent to the
use of any such material, no further changes may be made without obtaining the
Trust's or Distributor's consent to such changes. The Trust or Distributor may
at any time in its sole discretion revoke such written consent, and upon
notification of such revocation, the Company shall no longer use the material
subject to such revocation. Until further notice to the Company, the Trust has
delegated its rights and responsibilities under this provision to the
Distributor.
5.6. CONTRACTS ADVERTISING MATERIAL. No piece of advertising or sales
literature or other promotional material in which the Company is named shall be
used by the Trust or the Distributor, except with the prior written consent of
the Company. Any such piece shall be furnished to the Company for such consent
prior to its use. The Company shall respond to any request for written consent
on a prompt and timely basis, but failure to respond shall not relieve the Trust
or the Distributor of the obligation to obtain the prior written consent of the
Company. 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 Company, upon
prior written notice to the Trust, may delegate its rights and responsibilities
under this provision to the principal underwriter for the Contracts.
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. No party shall use in advertising, publicity or otherwise the name
of any other party or any affiliate thereof nor its or their trade name,
trademark, trade device, service xxxx, symbol or any abbreviation, contraction
or simulation thereof without the prior written consent of such other party in
each instance.
5.8. REPRESENTATIONS BY COMPANY. Except with the prior written consent
of the Trust, the Company shall not give any information or make any
representations or statements about the Trust or the Funds, nor shall it
authorize or allow any other person to do so, except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in reports or proxy statements for the Trust, or in 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.
5.9. REPRESENTATIONS BY TRUST. Except with the prior written consent of
the Company, the Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Account or the Contracts nor shall it authorize or allow any other
person to do so other than information or representations contained in the
Contracts' Registration Statement or Contracts' Prospectus or in published
reports of the
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Account which are in the public domain or in sales literature or other
promotional material approved in writing by the Company in accordance with this
Article V.
5.10. ADVERTISING. For purposes of this Article V, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
material constituting sales literature or advertising under the NASD rules, the
1940 Act or the 1933 Act.
ARTICLE VI
COMPLIANCE WITH CODE
6.1. SECTION 817(H). Each Fund of the Trust shall comply with Section
817(h) of the Code and the regulations issued thereunder ("817(h) Requirements")
to the extent applicable to the Fund as an investment company underlying the
Account, and the Trust shall notify the Company immediately upon having a
reasonable basis for believing that a Fund has ceased to so qualify or that it
might not so qualify in the future and will immediately take all steps necessary
to adequately diversify the Fund to achieve compliance.
6.2. SUBCHAPTER M. Each Fund of the Trust shall maintain the
qualification of the Fund as a regulated investment company ("RIC") (under
Subchapter M or any successor or similar provision), and the Trust shall notify
the Company immediately upon having a reasonable basis for believing that a Fund
has ceased to so qualify or that it might not so qualify in the future. The
Trust acknowledges that failure to qualify as a RIC may result in failure to
comply with the 817(h) Requirements.
6.3. CONTRACTS. The Company shall ensure the continued treatment of the
Contracts as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code and shall notify the Trust
and the Distributor immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
ARTICLE VII
EXPENSES
7.1. EXPENSES. All expenses incident to each party's performance under
this Agreement (including expenses expressly assumed by such party pursuant to
this Agreement) shall be paid by such party to the extent permitted by law.
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;
(b) preparation and filing with the SEC of the Trust's Prospectuses,
Trust's Statement of Additional Information, Trust's Registration
Statement, Trust proxy materials and shareholder reports, and
preparation of a camera-ready or other copy of the foregoing as
provided in Section 5.4;
(c) preparation of all statements and notices required by any federal
or state securities law;
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(d) printing and mailing of all materials and reports required to be
provided by the Trust to its existing shareholders;
(e) all taxes on the issuance or transfer of Trust shares;
(f) payment of all applicable fees relating to the Trust, including,
without limitation, all fees due under Rule 24f-2 under the 1940
Act in connection with sales of Trust shares to qualified
retirement plans, custodial, auditing, transfer agent and advisory
fees, fees for insurance coverage and Trustees' fees; and
(g) any expenses permitted to be paid or assumed by the Trust pursuant
to a plan, if any, under Rule 12b-1 under the 1940 Act.
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 Contracts under the federal
securities laws;
(b) preparation and filing with the SEC of the Contracts' Prospectus
and Contracts' Registration Statement;
(c) the sale, marketing and distribution of the Contracts, including
printing and dissemination of Contracts' and the Trust's
Prospectuses and compensation for Contract sales;
(d) administration of the Contracts;
(e) solicitation of voting instructions with respect to Trust proxy
materials;
(f) payment of all applicable fees relating to the Contracts,
including, without limitation, all fees due under Rule 24f-2;
(g) preparation, printing and dissemination of all statements and
notices to Contract Owners required by any federal or state
insurance law other than those paid for by the Trust; and
(h) preparation, printing and dissemination of all marketing materials
for the Contracts and Trust (to the extent it relates to the
Contracts) except where other arrangements are made in advance.
7.4. 12B-1 PAYMENTS. The Trust shall pay no fee or other compensation
to the Company under this Agreement, except that if the Trust or any Series or
Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then payments may be made to the Company in
accordance with such plan. The Trust currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or in contravention of such rule, although it may make payments pursuant to
Rule 12b-1 in the future. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1 and such formulation is required by the 1940 Act
or any rules or order thereunder, the Trust undertakes to have a Board of
Trustees, a majority of whom are not interested persons of the Trust, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
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ARTICLE VIII
POTENTIAL CONFLICTS
8.1. EXEMPTIVE ORDER. The parties to this Agreement acknowledge that
the Trust has obtained an order (the "Exemptive Order") granting relief from
various provisions of the 1940 Act and the rules thereunder to the extent
necessary to permit Trust shares to be 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 2.8 hereof). The Exemptive Order requires the Trust and each
Participating Insurance Company to comply 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.
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 subject to the conflict and reinvesting such assets in a different
investment medium (including another Fund of the Trust) 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.
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8.6. 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 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.
8.7. 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 Exemptive Order, then (i) 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 (ii) Sections 8.2 through 8.5 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 Participating
Insurance Companies or Qualified Persons) and any officer, trustee, partner,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Contracts' Registration Statement,
Contracts' 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 the Contracts'
Registration Statement, Contracts' Prospectus or in the Contracts
or sales literature or promotional material for the Contracts (or
any amendment or supplement to any of the foregoing) or otherwise
for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of any untrue statement 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
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made in reliance upon and in conformity with information furnished
to the Trust or Distributor in writing by or on behalf of the
Company; or
(c) arise out of or are based upon any wrongful conduct of, or
violation of federal or state law by, the Company, its directors
or officers or persons under its or their control or subject to
its authorization, including without limitation, any
broker-dealers or agents authorized to sell the Contracts, with
respect to the sale, marketing or distribution of the Contracts or
Trust shares, including, without limitation, any impermissible use
of broker-only material, unsuitable or improper sales of the
Contracts or unauthorized representations about the Contracts or
the Trust; or
(d) arise as a result of any failure by the Company or persons under
its control (or subject to its authorization) to provide services,
furnish materials or make payments as required under the terms of
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,
including any breach of any warranties contained in Article III
hereof or any unauthorized use of the names or trade names of the
Trust or Distributor; or
(f) arise out of any failure by the Company to transmit payment for
purchase of Trust shares on a timely basis in accordance with the
procedures set forth in Article II, including costs which result
from the Trust being required to break an order to purchase
portfolio securities originally made in reliance on such
forthcoming payment or borrow funds to make payment on any such
order.
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 or liability is caused by the
willful 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 or liabilities:
(a) arise out of or are based upon any untrue statement of any
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
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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 contained in
the Contracts' Registration Statement, Contracts' Prospectus or
sales literature or other promotional material for the Contracts
(or any amendment or supplement to any of the foregoing), or the
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made, if such
statement or omission was made in reliance upon information
furnished in writing by or on behalf of the Trust to the Company;
or
(c) arise out of or are based upon wrongful conduct of the Trust, its
Trustees or officers, or persons under its or their control, with
respect to the sale of Trust shares; or
(d) arise as a result of any failure by the Trust or persons under its
control (or subject to its authorization, it being understood that
any Participating Insurance Company will not be deemed to be a
person subject to the Trust's authorization) 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 or persons under its
control (or subject to its authorization, it being understood that
any Participating Insurance Company will not be deemed to be a
person subject to the Trust's authorization) of this Agreement
(including any breach of Section 6.1 of this Agreement and any
warranties contained in Article III hereof); or
(f) arise out of any unauthorized use of the names or trade names of
the Company.
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 4.4 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
willful 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 or liabilities:
(a) arise out of or are based upon any untrue statement of any
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
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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 contained in
the Contracts' Registration Statement, Contracts' Prospectus or
sales literature or other promotional material for the Contracts
(or any amendment or supplement to any of the foregoing), or the
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made, if such
statement or omission was made in reliance upon and in conformity
with information furnished in writing by or on behalf of the
Distributor to the Company; or
(c) arise out of or are based upon wrongful conduct of the
Distributor, its partners or persons under its or their control
with respect to the sale of Trust shares; or
(d) arise as a result of any failure by the Distributor or persons
under its control (or subject to its authorization, it being
understood that any Participating Insurance Company will not be
deemed to be a person subject to the Distributor's authorization)
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 (or subject to its authorization, it being
understood that any Participating Insurance Company will not be
deemed to be a person subject to the Distributor's authorization)
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 (i) 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
4.4 hereof, or (ii) any failure by the Company to transmit a request for
redemption or purchase of Trust shares or payment therefor on a timely basis in
accordance with the procedures set forth in Article II. This indemnification is
in addition to any liability that the Distributor may otherwise have; provided,
however, that no party shall be entitled to indemnification if such loss, claim,
damage or liability is caused by the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the party seeking indemnification.
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
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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 (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article 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, and
the Trust and the Distributor are to be independent contractors vis-a-vis the
Company, for all purposes hereunder and neither will have authority to act for
or represent the other (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 will be deemed to be an employee
or agent of the Trust, Distributor or any of their affiliates and vice versa.
The Company will not act as an "underwriter," "distributor" or "transfer agent"
of the Trust and the Trust and the Distributor will not act as "underwriter,"
"distributor" or "transfer agent" of the Contracts, as those terms variously are
used in the 1940 Act, the 1933 Act, and rules and regulations promulgated
thereunder.
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 the Account as a management investment company under the
1940 Act;
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(c) the Company shall not, without the prior written consent of the
Distributor, which consent shall not be unreasonably withheld,
solicit, induce or encourage Contract Owners to change or modify
the Trust, or to change the Trust's distributor or investment
adviser (unless otherwise required by applicable law);
(d) the Company shall not solicit, induce or encourage Contract Owners
to transfer or withdraw Contract Values allocated to a Fund or to
exchange their Contract for contracts not allowing for investment
in the Trust, except with 60 days prior written notice to the
Distributor under circumstances where the Company has determined
such solicitation, inducement or encouragement to be in the best
interests of Contract Owners (unless otherwise required by
applicable law);
(e) the Company shall not substitute another investment company for
one or more Funds without providing written notice to the
Distributor at least 60 days in advance of effecting any such
substitution; and
(f) the Company shall not withdraw the Account's investment in the
Trust or a Fund of the Trust except as necessary to facilitate
Contract Owner requests and routine Contract processing and except
as provided in Article VIII of this Agreement.
10.3. TERMINATION OF AGREEMENT. This Agreement shall not terminate
until (i) the Trust is dissolved, liquidated, or merged into another entity, or
(ii) 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. Article III, Article
IX and Sections 5.7, 10.8 and 10.9 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 the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, the operation of the Account, the
administration of the Contracts or the purchase of Trust shares,
or an expected or anticipated ruling, judgment or outcome which
would, in the Distributor's reasonable judgment exercised in good
faith, materially impair the Company's or Trust's ability to meet
and perform the Company's or Trust's obligations and duties
hereunder, such termination effective upon 15 days prior written
notice;
(b) in the event any of the Contracts are not registered, issued or
sold in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written notice;
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(c) if the Distributor shall determine, in its reasonable judgment
exercised in good faith, that either (1) the Company shall have
suffered a material adverse change in its business or financial
condition or (2) the Company shall have been the subject of
material adverse publicity which is likely to have a material
adverse impact upon the business and operations of either the
Trust or the Distributor, such termination effective upon 30 days
prior written notice; provided that the Company has been afforded
a reasonable opportunity to respond to a statement by the
Distributor concerning the reason for notice of termination
hereunder during such notice period;
(d) if the Distributor suspends or terminates the offering of Trust
shares of any Series or Class to all Participating Investors or
only designated Participating Investors, if such action is
required by law or by regulatory authorities having jurisdiction
or if, in the sole discretion of the Distributor acting in good
faith, suspension or termination is necessary in the best
interests of the shareholders of any Series or Class (it being
understood that "shareholders" for this purpose shall mean Product
Owners), such notice effective immediately upon receipt of written
notice, it being understood that a lack of Participating Investor
interest in a Series or Class may be grounds for a suspension or
termination as to such Series or Class and that a suspension or
termination shall apply only to the specified Series or Class;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the Account
to another insurance company pursuant to an assumption reinsurance
agreement) unless the Trust consents thereto, such termination
effective upon 30 days prior written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction of
the Trust within 30 days after written notice of such breach has
been delivered to the Company, such termination effective upon
expiration of such 30-day period;
(g) upon the determination of the Trust s Board to dissolve, liquidate
or merge the Trust as contemplated by Section 10.3(i), upon
termination of the Agreement pursuant to Section 10.3(ii), or upon
notice from the Company pursuant to Section 10.5 or 10.6, such
termination pursuant hereto to be effective upon 30 days prior
written notice; or
(h) at any time more than 18 months after the date of this Agreement,
upon six months written notice.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to new Contracts and the Distributor shall
continue to make Trust shares available to the extent necessary to permit owners
of Contracts in effect on the effective date of such termination (hereinafter
referred to as "Existing Contracts") to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts.
10.5. TERMINATION OF INVESTMENT IN A FUND. The Company may elect to
cease investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment or the Account's investment in a Fund,
subject to compliance with applicable law, upon written notice to the Trust
within 15 days of the occurrence of any of the following events (unless provided
otherwise below):
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(a) if the Trust informs the Company pursuant to Section 4.4 that it
will not cause such Fund to comply with investment restrictions or
other restrictions, limitations or requirements as requested by
the Company and the Trust and the Company are unable to agree upon
any reasonable alternative accommodations;
(b) if shares in such Fund are not reasonably available to meet the
requirements of the Contracts as determined by the Company
(including any non-availability as a result of notice given by the
Distributor pursuant to Section 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
to meet the requirements of the Contracts; or
(c) if such Fund fails to comply with the diversification requirements
specified in Section 817(h) of the Code and any regulations
thereunder.
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 BY THE COMPANY. The Company may elect
to cease investing in all Series or Classes of the Trust made available
hereunder, promoting the Trust as an investment option under the Contracts, or
withdraw its investment or the Account's 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 NASD, the
SEC or any state securities or insurance commission or any other
regulatory body; or upon the Company's reasonable determination
that institution of such proceedings is being considered by the
NASD, the SEC, the insurance commission of any state or any other
regulatory body regarding the Trust's or the Distributor's duties
under this Agreement, the sale of Trust shares, or an expected or
anticipated ruling, judgment or outcome which would, in the
Company's reasonable judgment exercised in good faith, materially
impair the Trust's or the Distributor's ability to meet and
perform the Trust's or the Distributor's obligations and duties
hereunder, such termination effective upon 15 days prior written
notice;
(b) if, with respect to the Trust or a Fund, the Trust or the Fund
ceases to qualify as a regulated investment company under
Subchapter M of the Code, as defined therein, or any successor or
similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify, and the Trust, upon written request,
fails to provide reasonable assurance that it will take action to
cure or correct such failure within 30 days;
(c) if the Trust or Distributor is in material breach of a provision
of this Agreement, which breach has not been cured to the
satisfaction of the Company within 30 days after written notice of
such breach has been delivered to the Trust or the
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Distributor, as the case may be, such termination effective upon
expiration of such 30-day period; or
(d) at any time more than 18 months after the date of this Agreement,
upon six months written notice.
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. Each party will keep confidential any
information acquired as a result of this Agreement regarding the business and
affairs of the other parties and their affiliates.
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 separate accounts therefor investing in the Trust.
Such amendments may be made effective by executing the form of amendment
included on each schedule attached hereto. The provisions of this Agreement
shall be equally applicable to each such class of Contracts, Series, Class or
separate account, as applicable, effective as of the date of amendment of such
Schedule, unless the context otherwise requires. The parties to this Agreement
may amend this Agreement from time to time by written agreement signed by all of
the parties.
ARTICLE 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:
Xxxxxxx X. Grip
President
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Xxxxxxx Sachs Variable Insurance Trust
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
If to the Distributor:
Xxxxxxx X. Grip
Vice President
Xxxxxxx Sachs & Co.
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
If to the Company:
General Counsel
Xxxxxx Investors Life Insurance Company
Xxx Xxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier, and shall be
effective upon receipt. Notices pursuant to the provisions of Article II may be
sent by facsimile to the person designated in writing for such notices.
ARTICLE 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 the provisions of the 1933 Act,
1940 Act and Securities Exchange Act of 1934, as amended, and the
rules, regulations and rulings thereunder, including such
exemptions from those statutes, rules, and regulations as the SEC
may grant, and the terms hereof shall be limited, interpreted and
construed in accordance therewith.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or
effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
(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.
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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.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
XXXXXXX XXXXX VARIABLE INSURANCE TRUST
(Trust)
Date: By: /s/ Xxxxxxx X. Xxxxxxx
----------------- --------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
XXXXXXX, SACHS & CO.
(Distributor)
Date: By: /s/ Xxxxxxx X. Xxxxxxxx
----------------- --------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
XXXXXX INVESTORS LIFE INSURANCE COMPANY
(Company)
Date: 9/24/98 By: /s/ Xxxx X. Xxxxxxx, Xx.
----------------- --------------------------------------
Name: Xxxx X. Xxxxxxx, Xx.
Title: Marketing Officer
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SCHEDULE 1
Accounts of the Company
Investing in the Trust
Effective as of the date the Agreement was executed, the following separate
accounts of the Company are subject to the Agreement:
===================================================================================================================
Date Established by
Name of Account and Board of Directors of the SEC 1940 Act Registration Type of Product Supported
Subaccounts Company Number by Account
===================================================================================================================
KILICO Variable Separate June 17, 1997 Flexible Premium
Account -2 Variable Life Insurance
Policy (Individual Life
and Survivorship)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
===================================================================================================================
===================================================================================================================
[Form of Amendment to Schedule 1]
Effective as of, the following separate accounts of the Company are hereby
added to this Schedule 1 and made subject to the Agreement:
======================================================================================================================
Date Established by
Name of Account and Board of Directors of the SEC 1940 Act Registration Type of Product Supported
Subaccounts Company Number by Account
======================================================================================================================
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
======================================================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 1 in accordance with Article XI of the Agreement.
-------------------------------------- ------------------------------
Xxxxxxx Xxxxx Variable Insurance Trust Xxxxxx Investors
Life Insurance Company
--------------------------------------
Xxxxxxx, Xxxxx & Co.
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SCHEDULE 2
Classes of Contracts
Supported by Separate Accounts
Listed on Schedule 1
Effective as of the date the Agreement was executed, the following classes of
Contracts are subject to the Agreement:
======================================================================================================================
SEC 1933 Act
Policy Marketing Name Registration Number Contract Form Number Annuity or Life
======================================================================================================================
First Foundation VUL 333-35159 L-8161, L-8161CV, Life
X-0000, X-0000XX
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
======================================================================================================================
======================================================================================================================
[Form of Amendment to Schedule 2]
Effective as of , the following classes of Contracts are hereby added to
this Schedule 2 and made subject to the Agreement:
======================================================================================================================
SEC 1933 Act Name of Supporting
Policy Marketing Name Registration Number Account Annuity or Life
======================================================================================================================
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
======================================================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 2 in accordance with Article XI of the Agreement.
-------------------------------------- ---------------------------------
Xxxxxxx Sachs Variable Insurance Trust Xxxxxx Investors
Life Insurance Company
--------------------------------------
Xxxxxxx, Sachs & Co.
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SCHEDULE 3
Trust Classes and Series
Available Under
Each Class of Contracts
Effective as of the date the Agreement was executed, the following Trust Classes
and Series are available under the Contracts:
===========================================================================================================
Contracts Marketing Name Trust Classes and Series
===========================================================================================================
First Foundation VUL Xxxxxxx Xxxxx International Equity Fund,
Xxxxxxx Sachs Global Income Fund
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
===========================================================================================================
======================================================================================================================
[Form of Amendment to Schedule 3]
Effective as of , this Schedule 3 is hereby amended to reflect
the following changes in Trust Classes and Series:
===========================================================================================================
Contracts Marketing Name Trust Classes and Series
===========================================================================================================
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
===========================================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 3 in accordance with Article XI of the Agreement.
-------------------------------------- ------------------------------
Xxxxxxx Xxxxx Variable Insurance Trust Xxxxxx Investors
Life Insurance Company
--------------------------------------
Xxxxxxx, Xxxxx & Co.
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SCHEDULE 4
Investment Restrictions
Applicable to the Trust
Effective as of the date the Agreement was executed, the following investment
restrictions are applicable to the Trust:
================================================================================
[Form of Amendment to Schedule 4]
Effective as of , this Schedule 4 is hereby amended to
reflect the following changes:
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 4 in accordance with Article XI of the Agreement.
-------------------------------------- ------------------------------
Xxxxxxx Sachs Variable Insurance Trust Xxxxxx Investors
Life Insurance Company
--------------------------------------
Xxxxxxx, Sachs & Co.
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