EXHIBIT (h)(10)(a)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the ___ day of ___________ 2003, between
American International Life Assurance Company of New York ("Insurance Company"),
a life insurance company organized under the laws of the State of New York, and
X.X. Xxxxxx Series Trust II ("Fund"), a business trust organized under the laws
of Delaware, with respect to the Fund's portfolio or portfolios set forth on
Schedule 1 hereto, as such Schedule may be revised from time to time (the
"Series"; if there are more than one Series to which this Agreement applies, the
provisions herein shall apply severally to each such Series).
ARTICLE I 1.
DEFINITIONS
1.1. "Act" shall mean the Investment Company Act of 1940, as amended.
1.2. "Board" shall mean the Board of Trustees of the Fund having the
responsibility for management and control of the Fund.
1.3. "Business Day" shall mean any day for which the Fund calculates net
asset value per share as described in the Fund's Prospectus.
1.4. "Commission" shall mean the Securities and Exchange Commission.
1.5. "Contract" shall mean a variable annuity or variable life insurance
contract that uses the Fund as an underlying investment medium.
Individuals who participate under a group Contract are "Participants".
1.6. "Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company.
1.7. "Disinterested Board Members" shall mean those members of the Board that
are not deemed to be "interested persons" of the Fund, as defined by the
Act.
1.8. "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an
agreement with the Fund for the purpose of making Fund shares available
to serve as the underlying investment medium for the aforesaid
Contracts.
1.9. "Plans" shall mean qualified pension and retirement benefit plans.
1.10. "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission, with
respect to the Series.
1.11. "Separate Account" shall mean the separate accounts listed on Schedule
II hereto, separate accounts established by Insurance Company in
accordance with the laws of the State of __________.
1.12. "Software Program" shall mean the software program used by the Fund for
providing Fund and account balance information including net asset value
per share.
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1.13. "Insurance Company's General Account(s)" shall mean the general
account(s) of Insurance Company and its affiliates which invest in the
Fund.
ARTICLE II 2.
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it
has legally and validly established the Separate Account pursuant to the
__________ Insurance Code for the purpose of offering to the public
certain individual variable annuity and variable life contracts; (c) it
has registered the Separate Account as a unit investment trust under the
Act to serve as the segregated investment account for the Contracts; (d)
each Separate Account is eligible to invest in shares of the Fund
without such investment disqualifying the Fund as an investment medium
for insurance company separate accounts supporting variable annuity
contracts or variable life insurance contracts; and (e) each Separate
Account shall comply with all applicable legal requirements.
2.2 Insurance Company represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act of
1933, as amended ("1933 Act"); (b) the Contracts will be issued and sold
in compliance in all material respects with all applicable federal and
state laws; and (c) the sale of the Contracts shall comply in all
material respects with state insurance law requirements. Insurance
Company agrees to inform the Fund promptly of any investment
restrictions imposed by state insurance law and applicable to the Fund.
2.3 Insurance Company represents and warrants that the income, gains and
losses, whether or not realized, from assets allocated to the Separate
Account are, in accordance with the applicable Contracts, to be credited
to or charged against such Separate Account without regard to other
income, gains or losses from assets allocated to any other accounts of
Insurance Company. Insurance Company represents and warrants that the
assets of the Separate Account are and will be kept separate from
Insurance Company's General Account and any other separate accounts
Insurance Company may have, and will not be charged with liabilities
from any business that Insurance Company may conduct or the liabilities
of any companies affiliated with Insurance Company.
2.4 Fund represents that the Fund is registered with the Commission under
the Act as an open-end management investment company and possesses, and
shall maintain, all legal and regulatory licenses, approvals, consents
and/or exemptions required for the Fund to operate and offer its shares
as an underlying investment medium for Participating Companies. The Fund
has established five portfolios and may in the future establish other
portfolios.
2.5 Fund represents that it is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar
provision) and that it will notify Insurance Company immediately upon
having a reasonable basis for believing that it has ceased to so qualify
or that it might not so qualify in the future.
2.6 Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life
insurance policies, annuity contracts, or endowment contracts, whichever
is appropriate, under applicable provisions of the Code, and that it
will make every effort to maintain such treatment and that it will
notify the Fund and its investment adviser immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future. Insurance
Company agrees that any prospectus offering a Contract that is a
"modified endowment contract," as that term is defined in Section 7702A
of the Code, will identify such Contract as a modified endowment
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contract (or policy), except in situations, where, because of excess
premium payments, the Code may treat a specific variable life insurance
policy as a modified endowment contract.
2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the Code
and that it will make every effort to maintain such compliance and that
it will notify Insurance Company immediately upon having a reasonable
basis for believing that it has ceased to so comply or that it might not
so comply in the future.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to
the other terms of this Agreement) to make Series' shares available to
other Participating Companies and contractholders and to Plans.
2.9 Fund represents and warrants that any of its trustees, officers,
employees, investment advisers, and other individuals/entities who deal
with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage
for the benefit of the Fund in an amount not less than that required by
Rule 17g-1 under the Act. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond or
similar coverage in an amount not less than the coverage required to be
maintained by the Fund. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.11 Insurance Company agrees that the Fund's investment adviser shall be
deemed a third party beneficiary under this Agreement and may enforce
any and all rights conferred by virtue of this Agreement.
ARTICLE III 3.
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the Series' shares
3.2 Fund agrees to make the shares of its Series available for purchase at
the then applicable net asset value per share by Insurance Company and
the Separate Account on each Business Day pursuant to rules of the
Commission. Notwithstanding the foregoing, the Fund may refuse to sell
the shares of any Series to any person, or suspend or terminate the
offering of the shares of any Series 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 its
fiduciary duties under federal and any applicable state laws, necessary
and in the best interests of the shareholders of such Series.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of
those Participating Companies and their affiliates and to Plans. No
shares of any Series will be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information for each Series available on a
per-share and Series basis to Insurance Company by 7:00 p.m. Eastern
Time on each Business Day. Any material errors in the calculation of net
asset value, dividend and capital gain information shall be reported
immediately upon discovery to Insurance Company. Non-material errors
will be corrected in the next Business Day's net asset value per share
for the Series in question.
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3.5 At the end of each Business Day, Insurance Company will use the
information described in Sections 3.2 and 3.4 to calculate the Separate
Account unit values for the day. Using this unit value, Insurance
Company will process the day's Separate Account transactions received by
it by the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m. Eastern time) to determine the net dollar amount of
Series shares which will be purchased or redeemed at that day's closing
net asset value per share for such Series. The net purchase or
redemption orders will be transmitted to the Fund by Insurance Company
by 10:00 a.m. Eastern Time on the Business Day next following Insurance
Company's receipt of that information. Subject to Sections 3.6 and 3.8,
all purchase and redemption orders for Insurance Company's General
Accounts shall be effected at the net asset value per share of the
relevant Series next calculated after receipt of the order by the Fund
or its Transfer Agent.
3.6 Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of shares of each
Series for the Separate Account. Fund will execute orders for any Series
at the applicable net asset value per share determined as of the close
of trading on the day of receipt of such orders by Insurance Company
acting as agent ("effective trade date"), provided that the Fund
receives notice of such orders by 10:00 a.m. Eastern Time on the next
following Business Day and, if such orders request the purchase of
Series shares, the conditions specified in Section 3.8, as applicable,
are satisfied. A redemption or purchase request for any Series that does
not satisfy the conditions specified above and in Section 3.8, as
applicable, will be effected at the net asset value computed for such
Series on the Business Day immediately preceding the next following
Business Day upon which such conditions have been satisfied.
3.7 Insurance Company will make its best efforts to notify Fund in advance
of any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Series shares,
Insurance Company will pay for such purchases by wiring Federal Funds to
Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall transmit to the Fund payment in
Federal Funds by the close of the Federal Reserve wire system on the
Business Day the Fund receives the notice of the order pursuant to
Section 3.5. Fund will execute such orders at the applicable net asset
value per share determined as of the close of trading on the effective
trade date if Fund receives payment in Federal Funds by the close of the
Federal Reserve wire system on the Business Day the Fund receives the
notice of the order pursuant to Section 3.5. If payment in Federal Funds
for any purchase is not received on such Business Day, Insurance Company
shall promptly upon the Fund's request, reimburse the Fund for any
charges, costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of
portfolio transactions effected by the Fund based upon such purchase
request. If Insurance Company's order requests the redemption of Series
shares valued at or greater than $1 million dollars, the Fund may wire
such amount to Insurance Company within seven days of the order. Upon
receipt by the Fund of the Federal Funds so wired, such amounts shall
cease to be the responsibility of Insurance Company and shall become the
responsibility of the Fund.
3.9 Fund has the obligation to ensure that Series shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm in writing, each purchase or redemption order made by
Insurance Company. Transfer of Series shares will be by book entry only.
No share certificates will be issued to Insurance Company. Insurance
Company will record shares ordered from Fund in an appropriate title for
the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of
shares.
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3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Insurance
Company the amount of dividend and capital gain, if any, per share of
each Series. All dividends and capital gains of any Series shall be
automatically reinvested in additional shares of the relevant Series at
the applicable net asset value per share of such Series on the payable
date. The Insurance Company reserves the right to revoke this election
and to receive all such income dividends and capital gains distributions
in cash. Fund shall, on the day after the payable date or, if not a
Business Day, on the first Business Day thereafter, notify Insurance
Company of the number of shares so issued. Notwithstanding this Section
3.12, the Fund shall utilize its best efforts to provide the Insurance
Company with at least ten (10) Business Days advance notice of a
forthcoming dividend or capital gains distribution.
ARTICLE IV 4.
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Insurance Company's accounts by the fifteenth (15th)
Business Day of the following month.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other
printed materials (which the Fund customarily provides to its
shareholders) in quantities as Insurance Company may reasonably request
for distribution to each Contractholder and Participant. If requested by
Insurance Company in lieu thereof, the Fund shall provide a camera-ready
copy of the Fund's Prospectus, and such other assistance as is
reasonably necessary in order for Insurance Company once each year (or
more frequently if the Prospectus for the Fund is amended during the
year) to have the Prospectus for the Contracts and the Fund's prospectus
printed together in one document. Alternatively, Insurance Company may
print the Fund's Prospectus in combination with other fund companies'
prospectuses and statements of additional information. Insurance Company
may also utilize the Fund's Prospectus and annual and semi-annual
reports on Insurance Company's internet sites and other electronic
and/or public media.
4.3 Fund will provide to Insurance Company at least one complete copy of all
registration statements, Prospectuses, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Fund or its shares, contemporaneously with the filing
of such document with the Commission or other regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Contracts or the Separate Account, contemporaneously
with the filing of such document with the Commission.
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ARTICLE V 5.
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Series,
including but not limited to management fees, administrative expenses
and legal and regulatory costs, will be made in the determination of the
relevant Series' daily net asset value per share so as to accumulate to
an annual charge at the rate set forth in the Fund's Prospectus.
Excluded from the expense limitation described herein shall be brokerage
commissions and transaction fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of the Fund or expenses relating to the distribution of its
shares. Insurance Company shall pay the following expenses or costs:
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus or
marketing materials for prospective Insurance Company
Contractholders and Participants as the Fund's investment
adviser and Insurance Company shall agree from time to time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders and
Participants.
c. Distribution expenses of Fund materials or marketing materials
for Insurance Company Contractholders and Participants.
Except as provided herein, all other Fund expenses, including, but not
limited to, the cost of printing Fund prospectuses, which are required
by law to be distributed to current Contractholders or Participants,
shall not be borne by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated December 1996
of the Securities and Exchange Commission under Section 6(c) of the Act
and, in particular, has reviewed the conditions to the relief set forth
in the related Notice. As set forth therein, Insurance Company agrees to
report any potential or existing conflicts promptly to the Board, and in
particular whenever contract voting instructions are disregarded, and
recognizes that it will be responsible for assisting the Board in
carrying out its responsibilities under such application. Insurance
Company agrees to carry out such responsibilities with a view to the
interests of existing Contractholders.
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6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists with
regard to Contractholder investments in the Fund, the Board shall give
prompt notice to all Participating Companies. If the Board determines
that Insurance Company is responsible for causing or creating said
conflict, Insurance Company shall at its sole cost and expense, and to
the extent reasonably practicable (as determined by a majority of the
Disinterested Board Members), take such action as is necessary to remedy
or eliminate the irreconcilable material conflict. Such necessary action
may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from
the Series and reinvesting such assets in a different investment
medium, or submitting the question of whether such segregation
should be implemented to a vote of all affected Contractholders;
and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision
by Insurance Company to disregard Contractholder voting instructions and
said decision represents a minority position or would preclude a
majority vote by all Contractholders having an interest in the Fund,
Insurance Company may be required, at the Board's election, to withdraw
the Separate Account's investment in the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to bear the expense of establishing a new funding
medium for any Contract. Insurance Company shall not be required by this
Article to establish a new funding medium for any Contract if an offer
to do so has been declined by vote of a majority of the Contractholders
materially adversely affected by the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or the Fund taken or omitted as a result of any act or
failure to act by Insurance Company pursuant to this Article VI shall
relieve Insurance Company of its obligations under, or otherwise affect
the operation of, Article V.
ARTICLE VII 7.
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to Insurance
Company, of the Fund's proxy material, reports to shareholders and other
communications to shareholders in such quantity as Insurance Company
shall reasonably require for distributing to Contractholders or
Participants.
Insurance Company shall:
(a) solicit voting instructions from Contractholders or Participants
on a timely basis and in accordance with applicable law;
(b) vote the Series shares in accordance with instructions received
from Contractholders or Participants; and
(c) vote Series shares for which no instructions have been received
in the same proportion as Series shares for which instructions
have been received.
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Insurance Company agrees at all times to votes its General Account
shares in the same proportion as Series shares for which instructions
have been received from Contractholders or Participants. Insurance
Company further agrees to be responsible for assuring that voting Series
shares for the Separate Account is conducted in a manner consistent with
other Participating Companies. The Fund shall utilize its best efforts
to provide the Insurance Company with advance written notice of any
forthcoming Fund shareholders meeting and proxy.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and its investment adviser, solicit, induce or
encourage Contractholders to (a) change or supplement the Fund's current
investment adviser.
ARTICLE VIII 8.
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance Company
with the following documents, in quantities as Insurance Company may
reasonably request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which
shall have the requisite licenses to solicit applications for the sale
of Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Insurance Company. Insurance Company
shall make reasonable efforts to market the Contracts and shall comply
with all applicable federal and state laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to the
Fund, each piece of sales literature or other promotional material in
which the Fund, its investment adviser or the administrator is named, at
least fifteen Business Days prior to its use. No such material shall be
used unless the Fund approves such material. Such approval (if given)
must be in writing and shall be presumed not given if not received
within ten Business Days after receipt of such material. The Fund shall
use all reasonable efforts to respond within ten days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the
Fund or any Series in connection with the sale of the Contracts other
than the information or representations contained in the registration
statement or Prospectus, as may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance
Company, each piece of the Fund's sales literature or other promotional
material in which Insurance Company or the Separate Account is named, at
least fifteen Business Days prior to its use. No such material shall be
used unless Insurance Company approves such material. Such approval (if
given) must be in writing and shall be presumed not given if not
received within ten Business Days after receipt of such material.
Insurance Company shall use all reasonable efforts to respond within ten
days of receipt.
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8.6 Fund shall not, in connection with the sale of Series shares, give any
information or make any representations on behalf of Insurance Company
or concerning Insurance Company, the Separate Account, or the Contracts
other than the information or representations contained in a
registration statement or prospectus for the Contracts, as may be
amended or supplemented from time to time, or in published reports for
the Separate Account which are in the public domain or approved by
Insurance Company for distribution to Contractholders or Participants,
or in sales literature or other promotional material approved by
Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for
use, on the internet, in a newspaper, magazine or other periodical,
radio, television, telephone or tape recording, videotape display, signs
or billboards, motion pictures or other public media), sales literature
(such as any written communication distributed or made generally
available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or
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
National Association of Securities Dealers, Inc. rules, the Act or the
1933 Act.
ARTICLE IX 9.
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, its
investment adviser, any sub-investment adviser of a Series, and their
affiliates, and each of their directors, trustees, officers, employees,
agents and each person, if any, who controls or is associated with any
of the foregoing entities or persons within the meaning of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of Section 9.1),
against any and all losses, claims, damages or liabilities joint or
several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted) for
which the Indemnified Parties may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect to thereof) (i) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in information furnished by Insurance Company for use in the
registration statement or Prospectus or sales literature or
advertisements of the Fund or with respect to the Separate Account or
Contracts, 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; (ii) arise
out of or as a result of conduct, statements or representations (other
than statements or representations contained in the Prospectus and sales
literature or advertisements of the Fund) of Insurance Company or its
agents, with respect to the sale and distribution of Contracts for which
Series shares are an underlying investment; (iii) arise out of the
wrongful conduct of Insurance Company or persons under its control with
respect to the sale or distribution of the Contracts or Series shares;
(iv) arise out of Insurance Company's incorrect calculation and/or
untimely reporting of net purchase or redemption orders through no fault
of the Fund; or (v) arise out of any breach by Insurance Company of a
material term of this Agreement or as a result of any failure by
Insurance Company to provide the services and furnish the materials or
to make any payments provided for in this Agreement. Insurance Company
will reimburse any Indemnified Party in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that with respect to clauses (i) and (ii) above Insurance
Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission or alleged omission made in such
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registration statement, prospectus, sales literature, or advertisement
in conformity with written information furnished to Insurance Company by
the Fund specifically for use therein.
Insurance Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party which arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement. In addition, Insurance Company shall not be
liable for special, consequential or incidental damages to any
Indemnified Party. This indemnity agreement will be in addition to any
liability which Insurance Company
9.2 The Fund agrees to indemnify and hold harmless Insurance Company and
each of its directors, officers, employees, agents and each person, if
any, who controls Insurance Company within the meaning of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of Section 9.2)
against any and all losses, claims, damages or liabilities joint or
several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted) to
which the Indemnified Parties may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof): (1) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the registration statement or Prospectus or sales
literature or advertisements of the Fund; (2) arise out of or are based
upon the omission or alleged omission to state in the registration
statement or Prospectus or sales literature or advertisements of the
Fund any material fact required to be stated therein or necessary to
make the statements therein not misleading; (3) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement, Prospectus, sales
literature or advertisements with respect to the Separate Account or the
Contracts and such statements were based on information provided to
Insurance Company by the Fund; (4) arise as a result of any failure by
the Fund to provide the services and furnish the materials provided for
in this Agreement, including a failure to comply with the
diversification requirements of Section 817(h) of the Code or to qualify
as a regulated investment company under Subchapter M of the Code;
provided, however, that with respect to clauses (1), (2) and (3) above,
the Fund will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or omission or alleged omission made in such
Registration Statement, Prospectus, sales literature or advertisements
in conformity with written information furnished to the Fund by
Insurance Company specifically for use therein.
The Fund shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party which arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and duties
under this Agreement. In addition, the Fund shall not be liable for
special, consequential or incidental damages to any Indemnified Party.
This indemnity agreement will be in addition to any liability which the
Fund may otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless against any
and all liability, loss, damages, costs or expenses which Insurance
Company may incur, suffer or be required to pay due to the Fund's (1)
incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate of a Series; (2) incorrect reporting of
the daily net asset value, dividend rate or capital gain distribution
rate; and (3) untimely reporting of the net asset value, dividend rate
or capital gain distribution rate; provided that the Fund shall have no
obligation to indemnify and hold harmless Insurance Company if the
incorrect calculation or incorrect or untimely reporting was the result
of incorrect information furnished by Insurance Company or information
furnished untimely by Insurance Company or otherwise as a result
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of or relating to a breach of this Agreement by Insurance Company; and
provided, further, that the Fund shall not be liable for special,
consequential or incidental damages.
9.4 Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Article, notify the indemnifying party of the
commencement thereof. The omission to so notify the indemnifying party
will not relieve the indemnifying party from any liability under this
Article IX, except to the extent that the omission results in a failure
of actual notice to the indemnifying party and such indemnifying party
is damaged solely as a result of the failure to give such notice. In
case any such action is brought against any indemnified party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and to the extent
that the indemnifying party has given notice to such effect to the
indemnified party and is performing its obligations under this Article,
the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof, other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX.
9.5 Insurance Company shall indemnify and hold the Fund, its investment
adviser and any sub-investment adviser of a Series harmless against any
tax liability incurred by the Fund under Section 851 of the Code arising
from purchases or redemptions by Insurance Company's General Accounts or
the account of its affiliates, but only if the Fund provides prior
notice to the Insurance Company that any such purchase or redemption
might cause the Fund to incur tax liability under Section 851.
ARTICLE X 10.
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.
10.2 This Agreement shall terminate without penalty as to one or more Series
at the option of the terminating party:
a. At the option of Insurance Company or the Fund at any time from
the date hereof upon 180 days' notice, unless a shorter time is
agreed to by the parties;
b. At the option of Insurance Company, if shares of any Series are
not reasonably available to meet the requirements of the
Contracts as determined by Insurance Company. Prompt notice of
election to terminate shall be furnished by Insurance Company,
said termination to be effective ten days after receipt of
notice unless the Fund makes available a sufficient number of
shares to meet the requirements of the Contracts within said
ten-day period;
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c. At the option of Insurance Company, upon the institution of
formal proceedings against the Fund by the Commission, National
Association of Securities Dealers or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which
would, in Insurance Company's reasonable judgment, materially
impair the Fund's ability to meet and perform the Fund's
obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by Insurance Company with said
termination to be effective upon receipt of notice;
d. At the option of the Fund, upon the institution of formal
proceedings against Insurance Company by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in the Fund's reasonable judgment,
materially impair Insurance Company's ability to meet and
perform Insurance Company's obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by the
Fund with said termination to be effective upon receipt of
notice;
e. At the option of the Fund, if the Fund shall determine, in its
sole judgment reasonably exercised in good faith, that Insurance
Company has suffered a material adverse change in its business
or financial condition or is the subject of material adverse
publicity and such material adverse change or material adverse
publicity is likely to have a material adverse impact upon the
business and operation of the Fund or its investment adviser,
the Fund shall notify Insurance Company in writing of such
determination and its intent to terminate this Agreement, and
after considering the actions taken by Insurance Company and any
other changes in circumstances since the giving of such notice,
such determination of the Fund shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which
sixtieth day shall be the effective date of termination;
f. Upon termination of the Investment Advisory Agreement between
the Fund and its investment adviser or its successors unless
Insurance Company specifically approves the selection of a new
Fund investment adviser. The Fund shall promptly furnish notice
of such termination to Insurance Company;
g. In the event the Fund's shares are not registered, issued or
sold in accordance with applicable federal law, or such law
precludes the use of such shares as the underlying investment
medium of Contracts issued or to be issued by Insurance Company.
Termination shall be effective immediately upon such occurrence
without notice;
h. At the option of the Fund upon a determination by the Board in
good faith that it is no longer advisable and in the best
interests of shareholders for the Fund to continue to operate
pursuant to this Agreement. Termination pursuant to this
Subsection (h) shall be effective upon notice by the Fund to
Insurance Company of such termination;
i. At the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies or modified
endowment contracts, as applicable, under the Code, or if the
Fund reasonably believes that the Contracts may fail to so
qualify;
j. At the option of either party to this Agreement, upon another
party's breach of any material provision of this Agreement;
k. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal and/or
state law;
l. Upon assignment of this Agreement, unless made with the written
consent of the non-assigning party;
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m. At the option of the Insurance Company by written notice to the
Fund and the Underwriter in the event that the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of
the Code or under any successor or similar provision, or if
Insurance Company reasonably believes that the Fund may fail to
so qualify;
n. At the option of the Insurance Company by written notice to the
Fund and the Underwriter in the event that the Fund fails to
meet the diversification requirements of Section 817(h) of the
Code; or
o. At the option of the Insurance Company arising from the
substitution of Fund shares with the shares of another
investment company for the Contracts for which the Fund shares
have been selected to serve as the underlying investment medium,
subject to compliance with applicable regulations of the SEC,
Insurance Company will give 60 days written notice to the Fund
and the Underwriter of any proposed action to replace Fund
shares.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section
10.2 hereof, the Fund and its investment adviser may, at the option of
the Fund, continue to make available additional Series shares for so
long as the Fund desires pursuant to the terms and conditions of this
Agreement as provided below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, if the Fund
so elects to make additional Series shares available, the owners of the
Existing Contracts or Insurance Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in the
Series, redeem investments in the Fund and/or invest in the Fund upon
the making of additional purchase payments under the Existing Contracts.
In the event of a termination of this Agreement pursuant to Section 10.2
hereof, the Fund, as promptly as is practicable under the circumstances,
shall notify Insurance Company whether the Fund will continue to make
Series shares available after such termination. If Series shares
continue to be made available after such termination, the provisions of
this Agreement shall remain in effect and thereafter either the Fund or
Insurance Company may terminate the Agreement, as so continued pursuant
to this Section 10.3, upon prior written notice to the other party, such
notice to be for a period that is reasonable under the circumstances
but, if given by the Fund, need not be for more than six months.
ARTICLE XI 11.
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and Fund.
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ARTICLE XII 12.
NOTICE
12.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following
addresses:
Insurance Company:
Fund:
X.X. Xxxxxx Series Trust II
c/x Xxxxxx Guaranty Trust Company
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxx
Notice shall be deemed to be given on the date of receipt by the addresses as
evidenced by the return receipt.
ARTICLE XIII 13.
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the
Fund. The obligations of this Agreement shall only be binding upon the
assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
ARTICLE XIV 14.
LAW
14.1 This Agreement shall be construed in accordance with the internal laws
of the State of New York, without giving effect to principles of
conflict of laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
INSURANCE COMPANY
By:
-------------------------------
Its:
----------------
X.X.XXXXXX SERIES TRUST II
By:
-------------------------------
Its:
----------------
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SCHEDULE I
Name of Series
X.X. Xxxxxx Small Company Portfolio
X.X. Xxxxxx Mid Cap Value Portfolio
16
SCHEDULE II
Name of Separate Accounts
Variable Account B of American International Life Assurance Company of New York
17
