EXHIBIT (8)(b)
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PARTICIPATION AGREEMENT
BY AND AMONG
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.,
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION,
AND
PFL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS.
PARTICIPATION AGREEMENT
BY AND AMONG
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.,
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION,
AND
PFL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS.
TABLE OF CONTENTS
DESCRIPTION PAGE
Section 1. Available Funds 2
1.1 Availability 2
1.2 Addition, Deletion or Modification of Funds 2
1.3 No Sales to the General Public 2
Section 2. Processing Transactions 2
2.1 Timely Pricing and Orders 2
2.2 Timely Payments 3
2.3 Applicable Price 3
2.4 Dividends and Distributions 4
2.5 Book Entry 4
Section 3. Costs and Expenses 4
3.1 General 4
3.2 Registration 4
3.3 Other (Non-Sales-Related) 5
3.4 Parties To Cooperate 6
Section 4. Legal Compliance 6
4.1 Tax Laws 6
4.2 Insurance and Certain Other Laws 7
4.3 Securities Laws 7
4.4 Notice of Certain Proceedings and Other Circumstances 9
4.5 Company To Provide Documents; Information About FAIP 9
4.6 FAIP To Provide Documents; Information About Company 11
Section 5. Mixed and Shared Funding 12
5.1 General 12
5.2 Disinterested Directors 12
5.3 Monitoring for Material Irreconcilable Conflicts 13
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5.4 Conflict Remedies 13
5.5 Notice to Company 15
5.6 Information Requested by Board of Directors 15
5.7 Compliance with SEC Rules 15
5.8 Other Requirements 15
Section 6. Termination 15
6.1 Events of Termination 15
6.2 Notice Requirement for Termination 17
6.3 Funds To Remain Available 17
6.4 Survival of Warranties and Indemnifications 17
6.5 Continuance of Agreement for Certain Purposes 18
Section 7. Parties To Cooperate Respecting Termination 18
Section 8. Assignment 18
Section 9. Notices 18
Section 10. Voting Procedures 19
Section 11. Foreign Tax Credits 19
Section 12. Indemnification 20
12.1 Of FAIP and the Advisor by Company 20
12.2 Of Company by FAIP and Advisor 22
12.3 Effect of Notice 25
12.4 Successors 25
Section 13. Applicable Law 25
Section 14. Execution in Counterparts 25
Section 15. Severability 25
Section 16. Rights Cumulative 25
Section 17. Headings 25
Section 18. Confidentiality 26
Section 19. Parties to Cooperate 26
Section 20. Amendments 26
Section 21. Assignment 27
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of August, 2000
("Agreement"), by and among First American Insurance Portfolios, Inc., a
Minnesota corporation ("FAIP"); First American Asset Management, a division of
U.S. Bank National Association, a national banking association organized and
existing under the laws of the United States of America (the "Advisor"); and PFL
Life Insurance Company, an Iowa corporation ("Company"), on behalf of itself and
each of its segregated asset accounts of the Company listed in Schedule A
hereto, as the parties hereto may amend said Schedule A from time to time (each,
an "Account," and collectively, the "Accounts") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, FAIP is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, FAIP currently consists of five separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and may be sold to one or more separate accounts of
life insurance companies to fund benefits under variable annuity contracts and
variable life insurance contracts; and
WHEREAS, FAIP will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend said Schedule A from time to time (each a
"Fund"; reference herein to "Fund" includes reference to each Fund, to the
extent the context requires) available for purchase by the Accounts; and
WHEREAS, Company will be the issuer of certain variable annuity contracts
and variable life insurance contracts ("Contracts") as set forth on Schedule A
hereto, as the Parties hereto may amend said Schedule A from time to time, which
Contracts, if required by applicable law, will be registered under the 1933 Act;
and
WHEREAS, Company will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, Company will serve as the depositor of the Accounts, each of which
is registered as a unit investment trust investment company under the 1940 Act
(or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Company intends to purchase Shares in one or more of the Funds on
behalf of the Accounts to fund the Contracts.
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NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
FAIP will make Shares of each Fund available to Company for purchase and
redemption on behalf of the Accounts at net asset value and with no sales
charges, subject to the terms and conditions of this Agreement. The Board of
Directors of FAIP may refuse to sell Shares of any Fund to any person, 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 if, in the
sole discretion of the Board of Directors acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, such action
is deemed in the best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
FAIP represents and warrants that Shares of the Funds have been and will be
sold only to variable annuity separate accounts and variable life insurance
separate accounts of participating insurance companies for the purpose of
funding variable annuity contracts or variable life insurance policies and no
Shares of the Funds have been or will be sold to the general public.
Notwithstanding this, under Treas. Reg. 1.817-5(f)(3)(ii), shares may be held by
the Advisor in connection with the creation of FAIP (or by a person related to
the Advisor in a manner specified in Section 267(d) of the Code).
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) FAIP or its designated agent will use its best efforts to provide
Company with the net asset value per Share for each Fund by 5:00 p.m.
Central Time on each Business Day. As used herein, "Business Day"
shall mean any day on which (i) the New York Stock Exchange is open
for regular trading, and (ii) on which FAIP calculates the Fund's net
asset value pursuant to the rules of the SEC.
(b) Company will use the data provided by FAIP each Business Day pursuant
to paragraph (a) immediately above to calculate Account unit values
and to process
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transactions that receive that same Business Day's Account unit
values. Company will perform such Account processing the same Business
Day, and will place corresponding orders to purchase or redeem Shares
with FAIP by 9:00 a.m. Central Time the following Business Day;
provided, however, that FAIP shall provide additional time to Company
in the event that FAIP is unable to meet the 5:00 p.m. time stated in
paragraph (a) immediately above. Such additional time shall be no more
than the additional time that FAIP took to make the net asset values
available to Company.
(c) With respect to payment of the purchase price by Company and of
redemption proceeds by FAIP, Company and FAIP shall net purchase and
redemption orders with respect to each Fund and shall transmit one
total net payment for all Funds in accordance with Section 2.2, below.
(d) If FAIP provides materially incorrect Share net asset value
information (as determined under SEC guidelines and the net asset
value error policy as approved by the Board of Directors of FAIP),
Company shall be entitled to an adjustment to the number of Shares
purchased or redeemed to reflect the correct net asset value per
Share. Any material error in the calculation or reporting of net asset
value per Share, dividend or capital gain information shall be
reported promptly upon discovery to Company. If an Account, due to
such error has received amounts in excess of the amounts to which it
is entitled, the Company, when requested by FAIP or the Advisor, shall
make adjustments to the Account to reflect the change in the values of
the Shares as reflected in the unit values of the affected contract
owners who still have values in the Funds.
2.2 TIMELY PAYMENTS.
Company will wire payment in federal funds for net purchases to a custodial
account designated by Fund by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. FAIP will wire payment
for net redemptions in federal funds to an account designated by Company by 1:00
p.m. Central Time on the same day as the order is placed. Notwithstanding the
foregoing, if the payment of redemption proceeds would require the Fund to
dispose of portfolio securities or otherwise incur substantial additional costs,
and if the Fund has determined to settle redemption transactions for all
shareholders on a delayed basis, proceeds in federal funds shall be wired after
the date the order is placed, but in any event within three (3) calendar days
after the date the order is placed in order to enable Company to pay redemption
proceeds within the time specified in Section 22(e) of the 1940 Act or such
shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and all other
Participant transactions under Contracts (collectively, "Contract
transactions") that Company receives prior to the close of regular
trading on the New York Stock Exchange on a
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Business Day will be executed at the net asset values of the
appropriate Funds next computed after receipt by Fund or its
designated agent of the orders. For purposes of this Section 2.3(a),
Company shall be the designated agent of FAIP for receipt of orders
relating to Contract transactions on each Business Day and receipt by
such designated agent shall constitute receipt by FAIP, provided that
FAIP receives notice of such orders by 9:00 a.m. Central Time on the
next following Business Day, or such later time as computed in
accordance with Section 2.1(b) hereof.
(b) Share purchases and redemptions by Company not received by FAIP in
accordance with Section 2.3(a) hereof, will be effected at the net
asset values of the appropriate Funds next computed after receipt by
FAIP of the order therefor, and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
FAIP will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to Company of any income dividends
or capital gain distributions payable on the Shares of any Fund. Company hereby
elects to reinvest all dividends and capital gains distributions in additional
Shares of the corresponding Fund at the ex-dividend date net asset values until
Company otherwise notifies FAIP in writing, it being agreed by the Parties that
the ex-dividend date and the payment date with respect to any dividend or
distribution will be the same business day. Company reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of FAIP Shares will be by book entry only. Stock
certificates will not be issued to Company. Shares ordered from FAIP will be
recorded in an appropriate title for Company, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) FAIP will bear the cost of its registering as a management investment
company under the 1940 Act and registering its Shares under the 1933
Act, and keeping such registrations current and effective; including,
without limitation, the preparation of and filing with the SEC of
Forms N-SAR and Rule 24f-2 Notices with respect to FAIP and its Shares
and, to the extent required, payment of all applicable registration or
filing fees with respect to any of the foregoing.
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(b) Company will bear the cost of registering, to the extent required,
each Account as a unit investment trust under the 1940 Act and
registering units of interest under the Contracts under the 1933 Act
and keeping such registrations current and effective; including,
without limitation, the preparation and filing with the SEC of Forms
N-SAR and Rule 24f-2 Notices with respect to each Account and its
units of interest and payment of all applicable registration or filing
fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) FAIP will provide a PDF file, camera-ready film or computer diskettes,
in such format as requested by the Company, containing the Funds'
prospectus, statement of additional information, reports to
shareholders and, as required, other communications to shareholders,
for Company to print and distribute to prospective and existing
Contract owners.
(i) The Company, at its expense, will print and deliver prospectuses,
statements of additional information, reports to shareholders,
and other shareholder communications to prospective and existing
Contract owners; and
(ii) The Company may elect upon 10 (ten) days notice that, in lieu of
a PDF file, camera-ready film or computer diskettes containing
the Funds' prospectus, statement of additional information,
reports to shareholders or other communications to shareholders,
that FAIP will provide, at Company's expense, as many printed
copies of such shareholder information as Company may reasonably
request to deliver, at Company's expense, to prospective and
existing Contract owners.
(b) The Company may elect to print prospectuses, statements of additional
information and reports to shareholders in combination with other fund
companies' prospectuses, statements of additional information, and
reports.
(c) FAIP, at its expense, will provide the Company with as many printed
copies of its proxy solicitations as may be required to deliver to
existing Contract owners. The Company, at FAIP's expense, will
distribute proxy materials in accordance with the procedures set forth
in Section 10 hereof.
(d) Unregistered separate accounts subject to the Employee Retirement
Income Security Act of 1974 ("ERISA") will refrain from voting shares
for which no instructions are received if such shares are held subject
to the provisions of ERISA.
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3.4 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of FAIP and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) FAIP and the Advisor represent and warrant (i) that each Fund is
currently qualified as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) that they will maintain qualification of each Fund
as a RIC. FAIP and the Advisor will notify 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.
(b) FAIP and the Advisor represent and warrant that, at all times, each
Fund will comply with the diversification requirements set forth in
Section 817(h) of the Code and Section 1.817-5(b) of the regulations
under the Code. FAIP and the Advisor will notify Company immediately
upon having a reasonable basis for believing that a Fund has ceased to
so comply or that a Fund might not so comply in the future. In the
event a Fund ceases to comply, FAIP and the Advisor will take all
reasonable steps to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) The Parties hereto agree that if the Internal Revenue Service ("IRS")
asserts, in connection with any governmental audit or review of
Company, FAIP or the Advisor, that any Fund has failed to comply with
the diversification requirements of Section 817(h) of the Code and
Section 1.817-5(b) of the regulations under the Code, or if a Party
otherwise becomes aware of any facts that could give rise to any claim
against Company, FAIP or the Advisor as a result of such failure or
alleged failure to comply with these requirements:
(i) Such Party shall promptly notify the other Parties of such
potential claims;
(ii) The Parties shall consult with each other as to how to minimize
any liability that may arise as a result of such failure or
alleged failure; and
(iii) The Parties shall provide each other with reasonable access to
books and records related to any such failure or alleged
failure, and shall provide any written materials provided to the
IRS associated with any proceedings arising out of any such
failure or alleged failure.
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(d) Company represents and warrants that the Contracts, upon issuance,
will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will maintain such
treatment. Company will notify FAIP immediately upon having a
reasonable basis for believing that any of the Contracts have ceased
to be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code or that they might not be so treated
in the future.
(e) Company represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable
contract," within the meaning of such terms under Section 817 of the
Code and the regulations thereunder. Company will notify FAIP
immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in
the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) FAIP will comply with any applicable state insurance laws or
regulations, to the extent specifically requested in writing by
Company, including, the furnishing of information not otherwise
available to Company which is required by state insurance law to
enable Company to obtain the authority needed to issue the Contracts
in any applicable state.
(b) Company represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws
of the State of Iowa and has full corporate power, authority and legal
right to execute, deliver and perform its duties and comply with its
obligations under this Agreement, (ii) it has legally and validly
established and maintains each Account as a segregated asset account
under Iowa Insurance Law and the regulations thereunder, and (iii) the
Contracts comply in all material respects with all other applicable
federal and state laws and regulations.
(c) FAIP and the Advisor represent and warrant that FAIP is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Minnesota and has full power, authority, and legal
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) Company represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly
authorized for issuance and sold in compliance with all applicable
federal and state laws, including, without limitation, the 1933 Act,
the 1934 Act, the 1940 Act and Iowa law, (iii) each Account is and
will remain registered under the 1940 Act, to the extent required
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by the 1940 Act, (iv) each Account does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any
amendments thereto, will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder, (vi)
Company will amend the registration statement for its Contracts under
the 1933 Act and for its Accounts under the 1940 Act from time to time
as required in order to effect the continuous offering of its
Contracts or as may otherwise be required by applicable law, and (vii)
each Account Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules
thereunder.
(b) Company will at its expense register and qualify the Contracts for
sale in accordance with the laws of any state or other jurisdiction if
and to the extent reasonably deemed advisable by Company.
(c) FAIP represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required
by the 1933 Act and duly authorized for issuance and sold in
compliance with Minnesota law, (ii) FAIP is and will remain registered
under the 1940 Act to the extent required by the 1940 Act, (iii) FAIP
will amend the registration statement for its Shares under the 1933
Act and itself under the 1940 Act from time to time as required in
order to effect the continuous offering of its Shares, (iv) FAIP does
and will comply in all material respects with the requirements of the
1940 Act and the rules thereunder, (v) FAIP's 1933 Act registration
statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act
and rules thereunder, and (vi) FAIP's Prospectus will at all times
comply in all material respects with the requirements of the 1933 Act
and the rules thereunder.
(d) FAIP will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to
the extent reasonably deemed advisable by FAIP.
(e) FAIP currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it reserves the right to make such payments in the
future. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, FAIP undertakes to have its Board of
Directors, a majority of whom are not "interested" persons of FAIP,
formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
(f) FAIP represents and warrants that all of its directors, officers,
employees, investment advisers, and other individuals/entities having
access to the Funds and/or securities of the Funds are and continue to
be at all times covered by a blanket fidelity bond or similar coverage
for the benefit of the Funds in an amount
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not less than the minimal coverage as required currently by Rule
17g-(1) of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid bond includes coverage for larceny
and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) FAIP will immediately notify Company of (i) the issuance by any court
or regulatory body of any stop order, cease and desist order, or other
similar order with respect to FAIP's registration statement under the
1933 Act or FAIP Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Fund Prospectus that may
affect the offering of Shares of FAIP, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of FAIP's Shares, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of Shares of
any Fund in any state or jurisdiction, including, without limitation,
any circumstances 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 of the Contracts issued or
to be issued by Company. FAIP will make every reasonable effort to
prevent the issuance, with respect to any Fund, 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) Company will immediately notify FAIP of (i) the issuance by any court
or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement
under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or Account Prospectus that may affect the
offering of Shares of FAIP, (iii) the initiation of any proceedings
for that purpose or for any other purpose relating to the registration
or offering of each Account's interests pursuant to the Contracts, or
(iv) any other action or circumstances that may prevent the lawful
offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and
sold in accordance with applicable state and federal law. 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.
4.5 COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT FAIP.
(a) Company will provide to FAIP or its designated agent at least one (1)
complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction
solicitation material, applications for exemptions, requests for
no-action letters, and all amendments to any of the
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above, that relate to each Account or the Contracts, contemporaneously
with the filing of such document with the SEC or other regulatory
authorities.
(b) Company will provide to FAIP or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional
material in which FAIP or any of its affiliates is named, at least ten
(10) Business Days prior to its use or such shorter period as the
Parties hereto may, from time to time, agree upon. No such material
shall be used if FAIP or its designated agent objects to such use
within ten (10) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree
upon.
(c) Neither Company nor any of its affiliates, will give any information
or make any representations or statements on behalf of or concerning
FAIP or its affiliates in connection with the sale of the Contracts
other than (i) the information or representations contained in the
registration statement, including the FAIP Prospectus contained
therein, relating to Shares, as such registration statement and FAIP
Prospectus may be amended from time to time; or (ii) in reports or
proxy materials for FAIP; or (iii) in published reports for FAIP that
are in the public domain and approved by FAIP for distribution; or
(iv) in sales literature or other promotional material approved by
FAIP, except with the express written permission of FAIP.
(d) Company shall adopt and implement procedures reasonably designed to
ensure that information concerning FAIP and its affiliates that is
intended for use only by brokers or agents selling the Contracts
(i.e., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither FAIP
nor any of its affiliates shall be liable for any losses, damages or
expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone
or tape recording, videotape display, signs or billboards, motion
pictures, or other public media, (e.g., on-line networks such as the
Internet or other electronic messages), sales literature (i.e., any
written communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials and
any other material constituting sales literature or advertising under
the NASD rules, the 1933 Act or the 1940 Act.
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4.6 FAIP TO PROVIDE DOCUMENTS; INFORMATION ABOUT COMPANY.
(a) FAIP will provide to Company at least one (1) complete copy of all SEC
registration statements, FAIP Prospectuses, reports, any preliminary
and final proxy material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate
to FAIP or the Shares of a Fund, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.
(b) FAIP will provide to Company a PDF file, camera ready or computer
diskette copies, in such format as requested by the Company, of all
FAIP shareholder communication information (including prospectuses,
statements of additional information and reports to shareholders)
pursuant to Section 3.3. FAIP will provide such information to Company
in a timely manner so as to enable Company, as the case may be, to
file, print and distribute such materials within the time required by
law to be furnished to Participants, but no later than 5 business days
prior to the date the documents are required under then-current
regulations to be sent to owners of the Contracts.
(c) FAIP will provide to Company or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional
material in which Company, or any of its respective affiliates is
named, or that refers to the Contracts, at least ten (10) Business
Days prior to its use or such shorter period as the Parties hereto
may, from time to time, agree upon. No such material shall be used if
Company or its designated agent objects to such use within ten (10)
Business Days after receipt of such material or such shorter period as
the Parties hereto may, from time to time, agree upon. Company shall
receive all such sales literature until such time as it appoints a
designated agent by giving notice to FAIP in the manner required by
Section 9 hereof.
(d) Neither FAIP nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning
Company, each Account, or the Contracts other than (i) the information
or representations contained in the registration statement, including
each Account Prospectus contained therein, relating to the Contracts,
as such registration statement and Account Prospectus may be amended
from time to time; or (ii) in published reports for the Account or the
Contracts that are in the public domain and approved by Company for
distribution; or (iii) in sales literature or other promotional
material approved by Company or its affiliates, except with the
express written permission of Company.
(e) FAIP and Advisor shall adopt and implement procedures reasonably
designed to ensure that information concerning Company, and its
respective affiliates that is intended for use only by brokers or
agents selling the Contracts (i.e., information that is not intended
for distribution to Participants) ("broker only materials") is so
used, and neither Company, nor any of its respective affiliates shall
be liable for
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any losses, damages or expenses relating to the improper use of such
broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone
or tape recording, videotape display, signs or billboards, motion
pictures, or other public media, (e.g., on-line networks such as the
Internet or other electronic messages), sales literature (i.e., any
written communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials and
any other material constituting sales literature or advertising under
the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
FAIP has applied to the SEC for an order exempting it from certain
provisions of the 1940 Act and rules thereunder so that FAIP may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with Company,
and trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC may impose terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. FAIP hereby notifies Company that it intends to
include in the Fund Prospectus disclosure regarding the potential risks of Mixed
and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
FAIP agrees that a majority of the Board of Directors of FAIP ("Board")
will consist of persons who are not "interested persons" of the Company, as
defined by Section 2(a)(19) of the 1940 Act and the rules thereunder and as
modified by any applicable orders of the SEC ("Disinterested Directors"), except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
12
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
FAIP agrees that its Board of Directors will monitor the Funds for the
existence of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing FAIP
("Participating Insurance Companies"), including each Account, and of
participants in qualified retirement and pension plans investing in the Funds
("Participating Plans") and determine what action, if any, should be taken in
response to such conflicts. A material irreconcilable conflict may arise for a
variety of reasons, including:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by
insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants
in Participating Plans;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participant; or
(g) a decision by a Participating Plan to disregard the voting
instructions of its Participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, FAIP and Company will report any
potential or existing conflicts to the Board and will be responsible for
assisting the Board in carrying out its responsibilities under these conditions
by providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This responsibility includes, but is not limited
to, an obligation of Company to inform the Board whenever it has determined to
disregard Participant voting instructions. Company agrees that such
responsibilities will be carried out with a view only to the interests of
Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of its Disinterested Directors
that a material irreconcilable conflict exists, Company will, if it is
a Participating Insurance Company for which a material irreconcilable
conflict is relevant, at its own expense and to the extent reasonably
practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or eliminate
the material irreconcilable conflict, which steps may include, but are
not limited to:
13
(i) withdrawing the assets allocable to some or all of the Accounts
from FAIP or any Fund and reinvesting such assets in a different
investment medium, including another Fund of FAIP, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate,
segregating the assets of any particular group (e.g., variable
annuity contract owners or variable life insurance contract
owners) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change;
and
(ii) establishing a new registered management investment company or a
new separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of Company's
decision to disregard Participants' voting instructions and that
decision represents a minority position or would preclude a majority
vote, Company may be required, at FAIP's election, to withdraw each
Account's investment in FAIP or any Fund. No charge or penalty will be
imposed as a result of such withdrawal. Any such withdrawal must take
place within six (6) months after FAIP gives notice to Company that
this provision is being implemented, and until such withdrawal FAIP
shall continue to accept and implement orders by Company for the
purchase and redemption of Shares of FAIP.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Company conflicts
with the majority of other state regulators, then Company will
withdraw each Account's investment in FAIP within six (6) months after
FAIP's Board of Directors informs Company that it has determined that
such decision has created a material irreconcilable conflict, and
until such withdrawal FAIP shall continue to accept and implement
orders by Company for the purchase and redemption of Shares of FAIP.
No charge or penalty will be imposed as a result of such withdrawal.
(d) Company agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense
and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event, however, will FAIP or
any of its affiliates be required to establish a new funding medium
for any Contracts. Company will not be required by the terms hereof to
establish a new funding medium for any Contracts if an offer to do so
has been declined by vote of a majority of Participants materially
adversely affected by the material irreconcilable conflict.
14
(f) The Board's determination of the existence of a material
irreconcilable conflict and its implications will be made known
promptly and in writing to all Participants.
5.5 NOTICE TO COMPANY.
FAIP will promptly make known in writing to Company the Board of Directors'
determination of the existence of a material irreconcilable conflict, a
description of the facts that give rise to such conflict and the implications of
such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Company and FAIP (or the Advisor) will, upon request, submit to the Board
of Directors of FAIP such reports, materials or data as the Board of Directors
may reasonably request so that the Board of Directors may fully carry out the
obligations imposed upon it by the provisions hereof or any exemptive order
granted by the SEC to permit Mixed and Shared Funding, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying Participating Insurance
Companies and Participating Plans of a conflict, and determining whether any
proposed action adequately remedies a conflict, will be properly recorded in the
minutes of the Board of Directors or other appropriate records, and such minutes
or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If and to the extent that Rules 6e-2 and 6e-3(T) under the 1940 Act are
amended (or if Rule 6e-3 under the 1940 Act is adopted) to provide exemptive
relief from any provision of the 1940 Act, or the rules thereunder, with respect
to mixed or shared funding on terms and conditions materially different from any
exemptions granted in the order obtained by FAIP, then FAIP and/or 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, to the extent applicable.
5.8 OTHER REQUIREMENTS.
FAIP will require that each Participating Insurance Company and
Participating Plan enter into an agreement with FAIP that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
15
(a) at the option of any Party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other Parties,
unless otherwise agreed to in writing by the Parties; or
(b) at the option of FAIP upon institution of formal proceedings against
Company or any of its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding Company's
obligations under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of Shares,
if, in each case, FAIP reasonably determines that such proceedings, or
the facts on which such proceedings would be based, have a material
likelihood of imposing material adverse consequences on the Fund with
respect to which the Agreement is to be terminated; or
(c) at the option of Company upon institution of formal proceedings
against FAIP, its principal underwriter, or its investment adviser by
the NASD, the SEC, or any state insurance regulator or any other
regulatory body regarding FAIP's obligations under this Agreement or
related to the operation or management of FAIP or the purchase of Fund
Shares, if, in each case, Company reasonably determines that such
proceedings, or the facts on which such proceedings would be based,
have a material likelihood of imposing material adverse consequences
on Company, or the Subaccount corresponding to the Fund with respect
to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (ii) such law
precludes the use of such Shares as an underlying investment medium of
the Contracts issued or to be issued by Company; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of Company if the Fund ceases to qualify as a RIC under
Subchapter M of the Code or under successor or similar provisions, or
if the Company reasonably believes that the Fund may fail to so
qualify or comply; or
(g) at the option of Company if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if the
Company reasonably believes that the Fund may fail to so qualify or
comply; or
(h) at the option of FAIP if the Contracts issued by Company cease to
qualify as annuity contracts or life insurance contracts under the
Code (other than by reason of the Fund's noncompliance with Section
817(h) or Subchapter M of the Code), or if FAIP reasonably believes
that the Contracts issued by Company may fail to so qualify or comply;
or
16
(i) at the option of FAIP if interests in an Account under the Contracts
are not registered, where required, and, in all material respects, are
not issued or sold in accordance with any applicable federal or state
law, or if FAIP reasonably believes that the interests in an Account
under the Contracts are not registered, issued, or sold in accordance
with any applicable federal and state law.
(j) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Parties
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be
given at least six (6) months in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be
given at least sixty (60) days in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto;
and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h), 6.1(i) or 6.1(j) hereof, such
prior written notice may be given at any time after the terminating
Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, FAIP will, at the option
of Company, continue to make available additional shares of the Fund pursuant to
the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"), unless such further sale of shares of the Fund is
proscribed by law, regulation of applicable regulating body. Specifically,
without limitation, the owners of the Existing Contracts will be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The Parties agree that this Section 6.3 will not apply to any
terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
17
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(a), 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h), 6.1(i) or
6.1(j) hereof, this Agreement shall nevertheless continue in effect as to any
Shares of that Fund that are outstanding as of the date of such termination (the
"Initial Termination Date"). This continuation shall extend to the date as of
which an Account owns no Shares of the affected Fund (the "Final Termination
Date").
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto. Such steps may include combining the affected Account
with another Account, substituting other mutual fund's shares for those of the
affected Fund, or otherwise terminating participation by the Contracts in such
Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
000 Xxxxxx Xxxxxx South, MPFP 1816
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxx, Senior Vice President
FIRST AMERICAN ASSET MANAGEMENT
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
000 Xxxxxx Xxxxxx South, MPFP 1816
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxx, Vice President
18
cc: FIRST AMERICAN ASSET MANAGEMENT
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
000 Xxxxxx Xxxxxx South, MPFP 2016
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxxxxx X. Xxxxx, General Counsel
PFL Life Insurance Company
0000 Xxxxxxxx Xxxx XX
Xxxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Financial Markets Division, General Counsel
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Company will distribute all proxy material furnished by FAIP to Participants to
whom pass-through voting privileges are required to be extended and will solicit
voting instructions from Participants. Company will vote Shares in accordance
with timely instructions received from Participants. Company will vote Shares
that are (a) not attributable to Participants to whom pass-through voting
privileges are extended, or (b) attributable to Participants, but for which no
timely instructions have been received, in the same proportion as Shares for
which said instructions have been received from Participants, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require pass
through voting privileges for Participants. Neither 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 Shares held for such
Participants. Company reserves the right to vote shares held in any Account in
its own right, to the extent permitted by law. Company shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by FAIP. FAIP will notify Company of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. FAIP
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, FAIP either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although Fund is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, FAIP
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
FAIP agrees to consult in advance with Company concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
19
SECTION 12. INDEMNIFICATION
12.1 OF FAIP AND THE ADVISOR BY COMPANY
(a) Except to the extent provided in Sections 12.1(b), 12.1(c), and
12.1(d), hereof, Company agrees to indemnify and hold harmless FAIP
and the Advisor, and each person, if any, who controls FAIP within the
meaning of Section 15 of the 1933 Act and each of its directors and
officers, (collectively, the "Indemnified Parties" for purposes of
this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of Company) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common
law or otherwise; provided, the Account owns or at the relevant time
owned shares of the Funds and insofar as such losses, claims, damages,
liabilities or actions and are related to the sale or acquisition of
Fund shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to
Company by or on behalf of FAIP specifically for use in any
Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising or
otherwise for use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the foregoing)
or was consented to by FAIP pursuant to Section 4.5(c); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in FAIP's 1933 Act registration statement, FAIP
Prospectus, sales literature or advertising of FAIP, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of Company or its affiliates and on
which such persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of Company or its affiliates or
persons under their control (including, without limitation, their
employees and "Associated Persons," as that term is defined in
paragraph (m) of Article I of the NASD's By-Laws), in connection
with the sale or distribution of the Contracts or Shares; or
20
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in FAIP's 1933
Act registration statement, FAIP Prospectus, sales literature or
advertising of FAIP, or any amendment or supplement to any of
the foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
a statement or omission was made in reliance upon and in
conformity with information furnished in writing to FAIP or its
affiliates by or on behalf of Company or its affiliates
specifically for use in FAIP's 1933 Act registration statement,
FAIP Prospectus, sales literature or advertising of FAIP, or any
amendment or supplement to any of the foregoing or was consented
to by Company pursuant to Section 4.6 (d); or
(iv) arise as a result of any failure by Company to perform the
obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
Company in this Agreement or arise out of or result from any
other material breach of this Agreement by Company; or
(v) arise as a result of failure by the Contracts issued by Company
to qualify as annuity contracts or life insurance contracts
under the Code, otherwise than by reason of any Fund's failure
to comply with Subchapter M or Section 817(h) of the Code.
(b) Company shall not be liable under this Section 12.1 with respect to
any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified
Party's reckless disregard of obligations or duties under this
Agreement;
(c) Company shall not be liable under this Section 12.1 with respect to
any action against an Indemnified Party unless the Indemnified Party
shall have notified Company in writing within a reasonable time after
the summons or other first legal process giving information of the
nature of the action shall have been served upon such Indemnified
Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Company
of any such action shall not relieve Company from any liability which
they may have to the Indemnified Party against whom such action is
brought unless the ability of Company to defend such action is
materially impaired thereby, except as otherwise provided herein, in
case any such action is brought against an Indemnified Party, Company
shall be entitled to participate, at their own expense, in the defense
of such action and also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in the
action, which approval shall not be unreasonably withheld. After
notice from Company to such Indemnified Party of Company's election to
assume the defense thereof
21
(which shall include, without limitation, the conduct of any ruling
request or closing agreement or offer settlement proceeding with the
IRS), the Indemnified Party will cooperate fully with Company and
shall bear the fees and expenses of any additional counsel retained by
it, and Company will not be liable to such Indemnified Party under
this Agreement for any legal or other expenses subsequently incurred
by such Indemnified Party independently in connection with the defense
thereof, other than reasonable costs of investigation.
(d) In no event shall the Company be liable under the indemnification
provisions contained in this Agreement to any Indemnified Party with
respect to any losses, claims, damages, liabilities or expenses that
arise out of or result from (i) a breach of any representation,
warranty, and/or covenant made by FAIP or Advisor hereunder; (ii) the
failure by FAIP to qualify as a legally and validly established
corporation under applicable state law and as duly registered under
the 1940 Act; or (iii) the failure by FAIP or Advisor to maintain the
qualification of any Fund under Subchapter M of the Code or Section
817 of the Code.
12.2 OF COMPANY BY FAIP AND ADVISOR
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), hereof, FAIP and the Advisor agree to indemnify and hold
harmless Company, its affiliates, and each person, if any, who
controls Company or its affiliates within the meaning of Section 15 of
the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section
12.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
FAIP) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common
law, or otherwise; provided, insofar as such losses, claims, damages,
liabilities or actions are related to the sale or acquisition of
FAIP's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in FAIP's 1933
Act registration statement, FAIP Prospectus or sales literature
or advertising of FAIP (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to FAIP
or its affiliates by or on behalf of Company or its affiliates
specifically for use in FAIP's 1933 Act registration statement,
FAIP Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the foregoing)
or was consented to by Company pursuant to Section 4.6(d); or
22
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of FAIP
or its affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of FAIP
or its affiliates or persons under their control (including,
without limitation, their employees and "Associated Persons" as
that Term is defined in Section (ee) of Article 1 of the NASD
By-Laws), in connection with the sale or distribution of FAIP
Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished in
writing to Company or its affiliates by or on behalf of FAIP or
its affiliates specifically for use in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any amendment or
supplement to any of the foregoing or was consented to by FAIP
pursuant to Section 4.5(c); or
(iv) arise as a result of any failure by FAIP or the Advisor to
perform the obligations, provide the services and furnish the
materials required of it under the terms of this Agreement, or
any material breach of any representation and/or warranty made
by FAIP or the Advisor in this Agreement or arise out of or
result from any other material breach of this Agreement by FAIP
or the Advisor.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, FAIP and the Advisor agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims,
damages, liabilities (including amounts paid in settlement thereof
with, the written consent of FAIP) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses) to
which the Indemnified Parties may become subject directly or
indirectly under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions directly or
indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder, or (ii) Section
817(h) of the Code and regulations thereunder, including, without
limitation, any income taxes and related penalties, rescission
charges, liability under state law to Participants
23
asserting liability against Company pursuant to the Contracts, the
costs of any ruling and closing agreement or other settlement with the
IRS, and the cost of any substitution by Company of Shares of another
investment company or portfolio for those of any adversely affected
Fund as a funding medium for each account that Company reasonably
deems necessary or appropriate as a result of the noncompliance.
(c) FAIP and the Advisor shall not be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance
by that Indemnified Party of its duties or by reason of such
Indemnified Party's reckless disregard of its obligations and duties
under this Agreement.
(d) FAIP and the Advisor shall not be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the
Indemnified Party shall have notified FAIP in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure
to notify FAIP of any such action shall not relieve FAIP from any
liability which it may have to the Indemnified Party against whom such
action is brought unless the ability of Company to defend such action
is materially impaired thereby, except as otherwise provided herein,
in case any such action is brought against an Indemnified Party and/or
FAIP will be entitled to participate, at its own expense, in the
defense of such action and also shall be entitled to assume the
defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified
Party named in the action, which approval shall not be unreasonably
withheld. After notice from FAIP to such Indemnified Party of FAIP's
election to assume the defense thereof, the Indemnified Party will
cooperate fully with FAIP and shall bear the fees and expenses of any
additional counsel retained by it, and FAIP will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
(e) In no event shall FAIP and the Advisor be liable under the
indemnification provisions contained in this Agreement to any
Indemnified Party, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by Company; (ii)
the failure by Company to maintain its segregated asset account (which
invests in any Fund) as a legally and validly established segregated
asset account under applicable state law and as a duly registered unit
investment trust under the provisions of the 1940 Act (unless exempt
therefrom); or (iii) the failure by Company to maintain its variable
annuity or life insurance contracts (with respect
24
to which any Fund serves as an underlying funding vehicle) as annuity
contracts or life insurance contracts under applicable provisions of
the Code other than where such failure arises from the Funds'
non-compliance with Subchapter M of the Code or Section 817 of the
Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Iowa law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
25
SECTION 18. CONFIDENTIALITY
FAIP and the Advisor acknowledge that the identities of the customers of
Company or any of its affiliates (collectively, the "Company Protected Parties"
for purposes of this Section 18), information maintained regarding those
customers, and all computer programs and procedures or other information
developed by the Company Protected Parties or any of their employees or agents
in connection with Company's performance of its duties under this Agreement are
the valuable property of the Company Protected Parties. FAIP agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the Company Protected Parties' customers, or any other
information or property of the Company Protected Parties, other than such
information as may be independently developed or compiled by FAIP from
information supplied to it by the Company Protected Parties' customers who also
maintain accounts directly with FAIP, FAIP will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with Company's prior written
consent; or (b) as required by law or judicial process. Company acknowledges
that the identities of the customers of FAIP or any of its affiliates
(collectively the "FAIP Protected Parties" for purposes of this Section 18),
information maintained regarding those customers, and all computer programs and
procedures or other information developed by the FAIP Protected Parties or any
of their employees or agents in connection with FAIP's performance of its duties
under this Agreement are the valuable property of the FAIP Protected Parties.
Company agrees that if it comes into possession of any list or compilation of
the identities of or other information about the FAIP Protected Parties'
customers or any other information or property of the FAIP Protected Parties,
other than such information as may be independently developed or compiled by
Company from information supplied to it by the FAIP Protected Parties' customers
who also maintain accounts directly with Company, Company will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with FAIP's
prior written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 18 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
SECTION 19. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 20. AMENDMENTS
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
26
SECTION 21. ASSIGNMENT
This Agreement may not be assigned without the prior written consent of all
parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
By Xxxx X. Xxxxxx
------------------------------------------
Its Vice President
-------------------------------------
FIRST AMERICAN ASSET MANAGEMENT,
a division of U.S. Bank National Association
By Xxxx X. Xxxxxx
------------------------------------------
Its Senior Vice President
-------------------------------------
PFL LIFE INSURANCE COMPANY
By Xxxxx X. Xxxxxx
------------------------------------------
Its President
-------------------------------------
27
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
. First American Insurance Portfolios, Inc.:
Large Cap Growth Portfolio
Mid Cap Growth Portfolio
Small Cap Growth Portfolio
Technology Portfolio
International Portfolio
SEPARATE ACCOUNTS UTILIZING THE FUNDS
. Separate Account VA I
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS/SUBACCOUNTS
. Policy - AV288 101 95 796
. Policy Endorsement - AE 1162 0800.
A-1
