PARTICIPATION/DISTRIBUTION AGREEMENT
THIS AGREEMENT, is hereby entered into on this __ day of April,
1998, between American Foundation Life Insurance Company ("American
Foundation"), a life insurance company organized under the laws of the State
of Alabama, for itself and on behalf of Variable Annuity Account A of
American Foundation (the "Account"), a separate account established by
American Foundation in accordance with the laws of the State of Alabama;
Protective Investment Company (the "Company"), an open-end management
investment company organized under the laws of the State of Maryland and
Investment Distributors, Inc. ("IDI"), a broker-dealer.
WITNESSETH:
WHEREAS, the Account has been established by American Foundation
pursuant to the laws of the State of Alabama in connection with certain
variable annuity contracts ("Contracts") proposed to be issued to the public
by American Foundation; and
WHEREAS, the Account has been registered as a unit investment trust
under the investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the income, if any, and gains and losses, realized and
unrealized, from assets allocated to the Account are, in accordance with the
applicable contracts, to be credited to or charged against Account without
regard to other income, gains or losses of American Foundation; and
WHEREAS, the Account is subdivided into various subaccounts
("sub-accounts") as to which income, if any, and gains and losses, realized
and unrealized, from assets allocated to each such sub-account are to be
credited to or charged against such sub-accounts without regard to other
income, gains or losses of other sub-accounts; and
WHEREAS, the Company is registered as an open-end management
investment company organized under the laws of the State of Maryland and will
operate in accordance with the 1940 Act; and
WHEREAS, the Company is divided into various investment portfolio's
(each, a "Fund"), each being subject to certain fundamental investment
policies and restrictions that may not be changed without a majority vote of
the shareholders of such Fund; and
WHEREAS, the shares of each Fund will be offered to a corresponding
sub-account; and
WHEREAS, IDI is the principal underwriter for the contracts and is
a broker-dealer registered as such under the Securities Exchange Act of 1934
and is a member of the National Association of Securities Dealers ("NASD");
NOW THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein American Foundation, the Account,
IDI and the Company hereby agree as follows:
1. The Contracts funded through the account will provide for the
allocation of purchase payments among certain sub-accounts for investment in
such shares of the Funds as may be offered from time to time in the
prospectus for the Contracts. The selection of the particular sub-account is
to be made by the contract owner and such selection may be changed or the
cash value may be transferred among or between sub-accounts in accordance
with the terms of the Contracts.
2. No representation is made as to the number or amount of such
Contracts to be sold; however, American Foundation through IDI, will make
reasonable efforts to market such Contracts.
3. The Company hereby appoints IDI as its principal underwriter
and exclusive distributor to sell its shares to the Account. The Company
reserves the right to sell its shares to other persons and to appoint
additional underwriters and distributors.
4. IDI accepts such appointment. IDI shall offer shares of the
Company only on the terms set forth in the Company's currently effective
registration statement.
5. The Company agrees to sell to American Foundation those shares
of the Company which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Company or
its designated agent of the order for the shares of the Company. For
purposes of this Section, American Foundation (or its designated agents)
shall be the designated agent of the Company for receipt of such orders from
contract owners and receipt by such designated agent shall constitute receipt
by the Company; provided that the Company's transfer agent receives notice of
such order by 9:30 a.m. New York time on the next following business day.
"Business day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Company calculates the net asset value of
the Funds as described in its registration statement.
The Company agrees to make shares of each Fund available
indefinitely for purchase at the applicable net asset value per share by the
Account on those days on which the Company calculates its net asset value as
described in its registration statement and the Company shall use reasonable
efforts to calculate such net asset value on each business day as defined
above. Notwithstanding the foregoing, the Board of Directors of the Company
(hereinafter the "Board") may refuse to sell shares of any Fund to American
Foundation, or suspend or terminate the offering of shares of any Fund if
such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the Shareholders of such Fund or
contract owners indirectly invested in such Fund.
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American Foundation shall pay for the such shares by 9:30 a.m. New
York time on the next business day after an order to purchase shares is made
in accordance with the provisions of this Section 5. Payment shall be in
federal funds transmitted by wire to the Company's transfer agent or by a
credit for any shares redeemed.
6. The Company agrees to redeem for cash, on American
Foundation's request, any full or fractional shares of the Company held by
American Foundation, executing such requests on a daily basis at the net
asset value next computed after receipt by the Company or its designated
agents of the request for redemption by Contract owners. For purposes of
this Section, (or its designated agents) shall be the designated agent of the
Company for receipt of requests for redemption from Contract owners and
receipt by such designated agent shall constitute receipt by the Company;
provided that the Company receives notice of such request for redemption by
9:30 a.m. New York time on the next following business day.
The Company ordinarily shall make payment to American Foundation
for shares redeemed on the day the Company receives notices from American
Foundation, but the Company may delay payment for up to seven calendar days
after the request is received. Payment shall be in federal funds transmitted
by wire or by a credit for any shares purchased.
7. Transfer of shares will be by book entry. No stock
certificates will be issued to the account. Shares of each Fund will be
recorded in an appropriate title for the corresponding sub-account on the
books of American Foundation. If, however, state law requires transfer other
than by book entry, then the Company agrees to provide the required form of
transfer.
8. The Company shall make the net asset value per share for each
Fund available to American Foundation on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated and shall use
its best efforts to make such net asset value per share available to American
Foundation by 7 p.m. New York time.
9. The Company or its transfer agent shall furnish notice on the
ex-dividend date to American Foundation of any dividend or distribution
payable on any shares. All of such dividends and distributions as are
payable on shares of a Fund shall be automatically reinvested in additional
shares of that Fund. The Company shall notify American Foundation of the
number of shares so issued.
10. The Company shall pay all its expenses incidental to its
performance under this Agreement. The Company shall see to it that all of
its shares are registered and authorized for issue in accordance with
applicable federal and state laws prior to their purchase by American
Foundation for the Account. The Company shall bear the expenses for the cost
of registration of its shares, preparation of its prospectus, proxy materials
and reports, the printing and distribution of such items to each Contract
owner who has allocated net amounts to any sub-account, the preparation of all
statements and notices required by any federal or state law, and taxes
imposed upon the Company on the issue or transfer of the Company's shares
subject to this Agreement. The parties shall cooperate in the printing of
the prospectuses of the Contracts and the Company. The Company shall provide
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American Foundation with a reasonable quantity of Company prospectuses and
reports to be sent to existing Contract owners.
11. The Company does not charge a load or redemption fee in
connection with the sale or redemption of its shares and IDI will not charge
any load or redemption fee in connection with the sale of shares to or
redemption of shares from the Account. Notwithstanding this, IDI assumes and
will pay, from its own resources, all expenses related to distribution of the
Company's shares and will bear other costs and expenses attributable to any
activity primarily intended to result in the sale of shares. Such expenses
include, but are not limited to:
a. printing and distribution of the Company's prospectus to
prospective investors;
b. preparation, printing and distribution of advertising and
sales literature for use in the offering of the Company's
shares (in connection with the offering of the Contracts or
otherwise) and printing and distribution of reports to
shareholders used as sales literature; and
c. the qualification of IDI as a distributor or broker or dealer
under any applicable federal or state securities laws;
12. In selling shares of the Company, IDI shall use its best
efforts in all respects duly to conform with the requirements of all federal
and state laws and regulations and the rules of the NASD, relating to the
sales of the Company's shares or the Contracts.
13. IDI shall act as an independent contractor and nothing
contained herein shall be construed to make it, its agents or
representatives, or any employees, employees of the Company. In addition,
IDI shall remain fully responsible for its own conduct and that of its
agents, representatives and employees under applicable law.
14. American Foundation and IDI shall make no representations
concerning the Company or its shares except those contained in the
then-current prospectus of the Company and in printed information
subsequently issued on behalf of the Company and approved in writing by the
Company as supplemental to such prospectus, or otherwise approved by the
Company in writing.
15. The Company represents that each Fund of the Company shall
comply with Section 817(h) of the Internal Revenue Code of 1986, as amended,
(the "Code") and the regulations issued thereunder (Reg. Section 1.817-5),
relating to the diversification requirements for variable annuity, endowment,
and life insurance contracts, and any amendments or other modifications to
such Section or regulations.
The Company represents that each Fund of the Company is currently
qualified or will be qualified as a Regulated Investment Company under
Subchapter M of the Code and that every effort will be made to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that the Company will notify American Foundation orally (followed by written
notice) or by wire immediately upon having a reasonable basis for believing
that any Fund might not so qualify in the future.
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16. It is understood among the parties to this Agreement that
subject to obtaining any applicable regulatory approvals which may be
conditioned on the parties complying with certain requirements, shares of the
Funds may be offered to the separate accounts of various insurance companies
in addition to American Foundation and in connection with variable life
insurance contracts or variable annuity contracts other than the Contracts.
It is also understood among the parties that shares of the Funds only may be
offered to the other persons identified in paragraph (f) of Regulation
Section 1.817-5, in order that the account can rely on the "look-through"
provisions of that paragraph.
17. The Company represents and warrants that all of its officers,
employees, investment advisers, and other individuals or entities having
access to the assets of the Company are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Company in an amount not less than the minimal coverage as required currently
by Section 17(g) of the 1940 Act and Rule 17g-I or related provisions as may
be promulgated from time to time.
18. This Agreement shall terminate:
(a) at any time on six months' written notice by the Company
to American Foundation and IDI or on six months' written notice by American
Foundation to the Company and IDI or on six months written notice by IDI to
American Foundation and the Company without the payment of any penalty
(provided, however, that if American Foundation is not able, acting in good
faith, to obtain suitable substitute investment media within six months, this
Agreement shall terminate one year from the date of the notice of
termination); or
(b) at the option of any party hereto upon institution of
formal enforcement proceedings against the Company, the Company's investment
manager, American Foundation or IDI by the Securities and Exchange
Commission, or if American Foundation or the Company is determined by the
other to have failed to perform its obligations under this Agreement in a
satisfactory manner; or
(c) upon a vote of the holders of a majority of the votes
attributed to the shares supporting the Contracts having an interest in a
particular sub-account to substitute the shares of another investment company
or Fund for the Company shares then being held by that sub-account in
accordance with the terms of the Contracts. American Foundation will give 60
days' prior written notice to the Company upon becoming aware of a proposed
Contract owner vote; or
(d) in the event the shares of the Company are not
registered, issued, or sold in accordance with applicable state and/or
federal law or such law prohibits the use of such shares as an underlying
investment for the Contracts issued or to be issued by American Foundation.
Prompt notice of such an event shall be given by each party to the other in
the event the conditions of this provision occur, or
(e) upon assignment of this Agreement, at the option of any
party not assigning this Agreement.
19. Each notice required by this Agreement shall be given in
writing to:
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Xxxxx Xxxxxxxx
American Foundation Life Insurance Company
0000 Xxxxxxx 000 Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Xxxxxxx Xxxx
Protective Investment Company
0000 Xxxxxxx 000 Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
20. Each party hereto shall cooperate with each other party and
all appropriate government authorities and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
The Company agrees that all records and other data pertaining to
the Contracts are the exclusive property of American Foundation and that any
such records and other data shall be furnished to American Foundation by the
Company upon termination of this Agreement for any reason whatsoever.
American Foundation shall have the right to inspect, audit and copy all
pertinent records pertaining to the Contracts. This shall not preclude the
Company from keeping copies of such data or records for its own files subject
to the provisions of this section.
21. American Foundation, the Account and IDI agree to look solely
to the assets of the Company for the satisfaction of any liability of the
Company with respect to this agreement, and will not seek recourse against
the members of the Board or its officers, employees, agents, or shareholders,
or any of them, or any of their personal assets for such satisfaction.
22. The Company agrees to indemnify and hold harmless American
Foundation, each member of its Board of Directors, each of its officers, and
any person that controls American Foundation within the meaning of section 15
of the Securities Act of 1933 against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses) to which
American Foundation may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements arise as a result of American
Foundation's reliance on any information contained in a then current
prospectus, statement of additional information, or report of the Company; or
any current information communicated to American Foundation in writing by the
Company.
The Company shall, at all times, have the right, but not the
obligation, to take over and conduct, in the name of American Foundation, the
Account, and/or IDI, the investigation and defense of any claim by a third
party for which indemnification may be sought. In such event, American
Foundation, the Account and/or IDI shall cooperate in every way with the
Company.
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24. The Company agrees to indemnify and hold harmless IDI, each
member of its Board of Directors, each of its officers, and any person that
controls IDI within the meaning of section 15 of the Securities Act of 1933
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses) to which IDI may become subject under
any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements arise as a result of IDI's reliance on any information contained
in a then current prospectus, statement of additional information, or report
of the Company; or any current information communicated to IDI in writing by
the Company.
The Company shall, at all times, have the right, but not the
obligation, to take over and conduct, in the name of IDI, or any controlling
person of IDI, the investigation and defense of any claim by a third party
for which indemnification may be sought. In such event, IDI shall cooperate
in every way with the Company.
25. American Foundation agrees to indemnify and hold harmless the
Company, each member of its Board, each of its officer, and each person that
controls the Company within the meaning of the Securities Act of 1933 against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of American Foundation) or litigation
(including legal and other expenses) to which the Company may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements arise as a result of the Company's reliance on any information
contained in the then current prospectus, statement of additional
information, or contract of the Account; or any information communicated to
the Company in writing by American Foundation.
American Foundation shall, at all times, have the right, but not
the obligation, to take over and conduct, in the name of the Company, the
investigation and defense of any claim by a third party for which
indemnification may be sought. In such event, the Company shall cooperate in
every way with American Foundation.
26. IDI agrees to indemnify and hold harmless the Company, each
member of its Board, each of its officers, and each person that controls the
Company within the meaning of the Securities Act of 1933 against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of IDI) or litigation (including legal and other
expenses) to which the Company may become subject under any statute, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements arise as a result
of the Company's reliance on any information communicated to the Company in
writing by IDI (for inclusion in the Company's registration statement or
otherwise), as a result of any misrepresentation or omission to state a
material fact by IDI (or any agent or employee of IDI) unless such
misrepresentation or omission was made in reliance on written information
furnished by the Company, or as a result of IDI's willful misconduct or
failure to exercise reasonable care and diligence (including supervision of
its agents, representatives and employees) in providing the services the
Company specified herein.
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IDI shall, at all times, have the right, but not the obligation, to
take over and conduct, in the name of the Company, the investigation and
defense of any claim by a third party for which indemnification may be
sought. In such event, the Company shall cooperate in every way with IDI.
27. This Agreement shall be construed in accordance with the laws
of the State of Maryland.
28. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and attested as of the date shown on the First page.
AMERICAN FOUNDATION LIFE
INSURANCE COMPANY ON BEHALF OF
ITSELF AND VARIABLE ANNUITY
ACCOUNT A OF AMERICAN
FOUNDATION
By:
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PROTECTIVE INVESTMENT COMPANY
By:
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INVESTMENT DISTRIBUTORS, INC.
By:
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