PARTICIPATION AGREEMENT
AMONG
X. XXXX PRICE EQUITY SERIES, INC.,
X. XXXX PRICE INVESTMENT SERVICES, INC.,
AND
AIG SUNAMERICA LIFE ASSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 30th day of April, 2008 by
and among AIG SunAmerica Life Assurance Company (hereinafter, the "Company"), an
Arizona insurance company, on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A hereto as may be amended
from time to time (each account hereinafter referred to as the "Account"), and
the undersigned funds, each, a corporation organized under the laws of Maryland
(each hereinafter referred to as the "Fund") and X. Xxxx Price Investment
Services, Inc. (hereinafter the "Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
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WHEREAS, X. Xxxx Price Associates, Inc. and X. Xxxx Price International,
Inc. (each hereinafter referred to as the "Adviser") are each duly registered as
an investment adviser under the Investment Advisers Act of 1940, as amended, and
any applicable state securities laws; and
WHEREAS, the Company has issued or will issue certain variable annuity
contracts (including any certificates thereunder) supported wholly or partially
by the Account (the "Contracts"), and said Contracts are listed in Schedule A
hereto, as it may be amended from time to time by mutual written agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act or will not register the Account in proper
reliance upon an exclusion from registration under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the Financial Industry Regulatory
Authority (hereinafter "FINRA"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the SEC, and the Fund shall use its best efforts to calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Directors of the Fund
(hereinafter the "Board") may refuse to sell shares of any Designated Portfolio
to any person, or suspend or terminate the offering of shares of any Designated
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction, or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Designated
Portfolio, and Fund will use its best efforts to give prior written notice to
the Company at the earliest practicable time.
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1.3 The Fund and the Underwriter agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Designated Portfolios will be sold to the general public. The Fund and
the Underwriter will not sell Fund shares to any insurance company or separate
account unless an agreement containing provisions substantially the same as
Articles I, III and VII of this Agreement is in effect to govern such sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, State Street Bank and Trust
Company is authorized as agent for the Company for receipt of purchase and
redemption orders from the Account, and receipt by such agent or the Company
shall constitute receipt by the Fund; provided that the agent or Company
receives the order by 4:00 p.m. Baltimore time and the Fund receives notice of
such order by 9:30 a.m. Baltimore time on the next following Business Day.
Company acknowledges that it is financially responsible for such orders placed
by State Street Bank and Trust Company with the Fund and such orders will be
treated as if they were placed by Company under this Agreement. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which the Fund calculates its net asset value pursuant to the rules of the
SEC.
1.6 Consistent with Rule 22c-2, the Company agrees to purchase and redeem
the shares of each Designated Portfolio offered by the then current prospectus
of the Fund and in accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares one Business Day after receipt of
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
3:00 p.m. Baltimore time. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 3:00 p.m. Baltimore time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any reasonable charges, costs, fees, or interest 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. For purposes of Section
2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated Portfolio shares in additional shares of
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that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Baltimore time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Baltimore time. If the net asset value is
materially incorrect through no fault of the Company, the Company on behalf of
each Account, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct net asset value in accordance with
Fund procedures and SEC guidelines. Any material error in the calculation of the
net asset value, income dividend or capital gain information shall be reported
by the Fund or its designee to the Company promptly upon discovery.
Additionally, the Company shall be entitled to reimbursement from the Fund or
the Underwriter for any expenses incurred by the Company in correcting an
Account or Contract records or in adjusting proceeds paid to Contract owners who
have redeemed or reallocated interests under their Contracts pursuant to
Schedule B attached.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or that the Contracts are not registered because
they are properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws and that the sale of the Contracts pursuant to selling
agreements with broker-dealers comply in all material respects with state
insurance suitability requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established the Account prior
to any issuance or sale thereof as a segregated asset account under the Arizona
insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts or that it has not registered the Account in proper reliance
upon an exclusion from registration under the 0000 Xxx.
2.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws of the state of Arizona and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 0000 Xxx. The Fund shall amend the Registration Statement
for its shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
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2.3 The X. Xxxx Price Equity Series, Inc. and X. Xxxx Price Fixed Income
Series, Inc. currently are authorized to issue a class of shares with respect to
which each has adopted a plan for purposes of paying for distribution services
under Rule 12b-1 of the 1940 Act. To the extent that another Fund decides to
finance distribution expenses pursuant to Rule 12b-1, the Fund will undertake to
have the Board, a majority of whom are not interested persons of the Fund,
formulate and approve any plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Arizona to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of FINRA and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Arizona and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with the laws of the State of Arizona and any applicable
state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing 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 and is in an amount not less than $5
million or the minimum coverage required by Rule 17g-1 of the 1940 Act or
related provisions as may be promulgated from time to time, which ever is
greater. The aforesaid bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company. The Fund and Underwriter
agree to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect.
2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Separate Accounts
are covered by a blanket fidelity bond or similar coverage in an amount not less
than $5 million. The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Company agrees to
make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect.
2.10 The Fund and the Underwriter represent that they are each covered by
an errors and omissions insurance policy, covering losses due to certain errors
and omissions, misstatements and other actions of the insureds, which at the
effective date of this Agreement is in the aggregate amount of $100,000,000. The
Fund and Underwriter further represent that they are covered by a Fidelity Bond,
which at the effective date of this Agreement provides coverage up to
$95,000,000,
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for certain employee and third-party dishonest or fraudulent acts. The
aforementioned insurance coverage or substantially equivalent coverage shall
remain in effect with respect to the Fund and Underwriter for the term of this
Agreement.
2.11 The Underwriter represents that it complies with the FINRA minimum net
capital and aggregate indebtedness to net capital ratio requirements. The
Underwriter has entered into an agreement with the Adviser which provides that
the Adviser will contribute additional capital to the Underwriter if necessary
to ensure that the Underwriter complies with such requirements.
ARTICLE III. Prospectuses, Statements of Additional Information, and Proxy
Statements; Voting
3.1 The Underwriter shall provide the Company with as many copies of the
Fund's current prospectus, including any amendments or supplements thereto
(describing only the Designated Portfolios listed on Schedule A) as the Company
may reasonably request to deliver to Contract owners. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the new prospectus as set in type or by camera ready pdf file or
other electronic medium agree to by the parties) and other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is amended or if required by law) to deliver such
documents to Contract owners. The Company may have the prospectus (which shall
include an offering memorandum, if any) for the Contracts, and the Fund's
prospectus printed together in one document ("Combined Document"). Additionally,
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information.
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company, and
the Underwriter (or the Fund), at its expense, shall print, or otherwise
reproduce, and provide sufficient copies of such SAI free of charge to the
Company for itself, and for any owner of a Contract who requests such SAI. The
Company shall promptly send an SAI to any such Contract owner upon request of
the Contract owner, which generally means within three (3) business days of the
receipt of a request.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders (including annual reports and
semi-annual reports), and other legally required communications to shareholders
("Trust Communications") in such quantity as the Company shall reasonably
require for distributing to Contract owners in the Fund. The Underwriter (at the
Company's expense) shall provide the Company with copies of the Fund's Trust
Communication Documents in such quantity as the Company shall reasonably request
for use in connection with offering the Variable Contracts issued by the Company
to prospective contract owners. If requested by the Company in lieu thereof, the
Underwriter shall provide Trust Communications (which may include a final copy
of the Trust Communications as set in type or by camera ready pdf file or other
electronic medium agree to by the parties) and other assistance as is reasonably
necessary in order for the Company to print such shareholder communications for
distribution to Contract owners.
3.4 In connection with paragraph 3.1, 3.2 and 3.3, Underwriter or Fund will
pay for the printing and delivery of Trust Communications and Fund's
prospectuses, including amendments/supplements thereto (or proportional printing
and mailing costs if printed as part of a
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Combined Document provided such costs do not exceed the cost it would otherwise
cost the Fund to produce and mail such documents for its own X. Xxxx Price
variable annuity Contract owners) to existing Contract owners with account
balances in the Portfolios on each occasion that such document is required by
law or regulation to be delivered to existing Contract owners. Company will pay
for the costs of printing and delivery of Fund's prospectuses to potential or
new Contract owners.
3.5 The Underwriter or Fund will use its best efforts to deliver Trust
Communications and Fund prospectuses, including amendments/supplements thereto,
to the Company no later than fifteen (15) days prior to the date that the
Company is legally obligated to file or provide copies to any regulatory body or
to Contract owners.
3.6 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such Designated Portfolio
for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.7 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt and notify
the Company of in writing.
3.8 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the 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, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
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ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
("Marketing Materials") that the Company develops or uses and in which the Fund
(or a Portfolio thereof) or the Adviser or the Underwriter is named, at least
ten calendar days prior to its use. Notwithstanding the foregoing, the Company
is not required to furnish Marketing Materials to the Fund in which disclosure
regarding the Fund or an Adviser has been previously approved by the Fund or its
designee as provided above and varies only in non-material ways from such
disclosure previously approved. No such material shall be used if the Fund or
its designee reasonably object to such use within ten calendar days after
receipt of such material. The Fund or its designee reserves the right to
reasonably object to the continued use of such material, and no such material
shall be used if the Fund or its designee so object, provided that Fund will be
presumed to approve such Marketing Material if it does not object to its use by
the Company within ten (10) calendar days after receipt.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI 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 or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause to
be furnished, to the Company, each piece of Marketing Materials in which the
Company, and/or its Account, is named at least ten calendar days prior to its
use. Notwithstanding the foregoing, the Fund is not required to furnish
Marketing Materials to the Company in which disclosure regarding the Company has
been previously approved by the Company or its designee as provided above and
varies only in non-material ways from such disclosure previously approved. No
such material shall be used if the Company reasonably objects to such use within
ten calendar days after receipt of such material. The Company reserves the right
to reasonably object to the continued use of such material and no such material
shall be used if the Company so objects, provided that Company will be presumed
to approve such Marketing Material if it does not object to its use by the Fund
within ten (10) calendar days after receipt.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 Upon request, the Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, SAIs, 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, within a reasonable time after the
filing of such document(s) with the SEC or other regulatory authorities.
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4.6 Upon request, the Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses, SAIs, reports,
solicitations for voting instructions, 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 Account,
within a reasonable time after the filing of such document(s) with the SEC or
other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following
that refer to the Fund or any affiliate of the Fund: 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), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, 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, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
5.1 The Underwriter shall pay a fee to the Company or to the underwriter
for the Contracts pursuant to Rule 12b-1 to finance distribution expenses as set
forth in the Letter Agreement entered into between Company and X. Xxxx Price
Investment Services, Inc. effective April 30, 2008, as amended.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, except as otherwise provided herein. The Fund shall
see to it that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Fund, in accordance with applicable state laws prior to their
sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports; setting the
prospectus, proxy materials and reports to shareholders in type; the preparation
of all statements and notices required by any federal or state law; and all
taxes on the issuance or transfer of the Fund's shares. In accordance with
Section 3, the Fund or Underwriter shall also bear the expense for printing and
delivering the Fund's prospectuses (including any amendments/supplements
thereto), proxy materials, and shareholder reports (including annual reports and
semi-annual reports), and other legally required shareholder communications to
existing Contract owners with account balances in the Portfolios on each
occasion that such document is required by law or regulation to be delivered.
5.3 In accordance with Section 3, the Company shall bear the expenses of
printing the Fund's prospectus and of distributing the Fund's prospectus to
prospective Contract owners.
ARTICLE VI. Diversification and Qualification
6.1 The Fund will invest the assets of each Designated Portfolio in such a
manner as to ensure that the Contracts will be treated as annuity, endowment, or
life insurance contracts, whichever is appropriate, under the Internal Revenue
Code of 1986, as amended (the "Code") and
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the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, each Designated Portfolio of the Fund will
comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, and any
Treasury interpretations thereof, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts, and any amendments
or other modifications or successor provisions to such Section or Regulations.
In the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 1.817-5. The Fund shall provide Company a certification of its
compliance with Section 817(h) of the Code and Treasury Regulation 1.817-5
within twenty (20) days of the end of each calendar quarter. The Fund represents
that shares of each Designated Portfolio will only be sold to Participating
Insurance Companies and that shares will not be sold to the general public.
6.2 The Fund represents that each Designated Portfolio is or will be
qualified as a Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the 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.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance, endowment contracts, or
annuity insurance contracts, 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 the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be so treated or that they might not be
so treated in the future. The 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 (or any successor or similar provision), shall
identify such contract as a modified endowment contract.
ARTICLE VII. Potential Conflicts.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
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 Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. Upon request, the Company will report any potential or existing
conflicts of which it is aware to the Board. The Company will assist the Board
in carrying out its responsibilities under the Shared Funding Exemptive Order,
by providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever Contract owner voting
instructions are disregarded.
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7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund provided that no charge or penalty will be imposed upon
the Company or Contract owners as a result of such withdrawal, and terminate
this Agreement with respect to such Account provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of that six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by the company for the purchase (and redemption) of shares of
the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilabile conflict as determined by a majority of the disinterested
members of the Board.
12
7.7 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
the Underwriter and each of their officers and directors and each person, if
any, who controls the Fund or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
Registration Statement, prospectus (which shall include an
offering memorandum, if any), or statement of additional
information ("SAI") for the Contracts or contained in the
Contracts or sales literature or other promotional material 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 to the Company by or
on behalf of the Fund for use in the Registration Statement,
prospectus or SAI for the Contracts or in the Contracts or sales
literature or other promotional material (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature or other
promotional material of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
persons under its authorization or control, with respect to the
sale or distribution of the Contracts or Fund Shares; or
13
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, SAI, or sales literature or other promotional
material of the Fund or any amendment thereof or supplement
thereto 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 information furnished to the
Fund by or on behalf of the Company for use in the Registration
Statement or prospectus for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Trust
shares; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the qualification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of 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 its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim 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 the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
14
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2 Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the Indemnified Parties
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund'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
the Registration Statement or prospectus or SAI or sales
literature or other promotional material of the Fund (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 to the Underwriter or Fund by or on behalf of the
Company for use in the Registration Statement or prospectus
for the Fund or in sales literature or other promotional
material (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature or
other promotional material for the Contracts not supplied by
the Underwriter, Adviser, Fund, or persons under their
control) or wrongful conduct of the Adviser, Fund or
Underwriter or persons under their control, with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, SAI, or sales literature or other
promotional material of the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Fund; or
15
(iv) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter
(including failures to comply with diversification
requirements described in Section 6.1 and 6.2);
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim 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 the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3)
16
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including reasonable legal and other expenses) to which the Indemnified Parties
may be required to pay or may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, expenses, damages,
liabilities or expenses (or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(i) 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 of the Fund (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 to the Underwriter or Fund by or on behalf of the
Company for use in the registration statement or prospectus
for the Fund (or any amendment or supplement); or
(ii) arise as a result of any material failure by the Fund,
whether unintentional or in good faith or otherwise, to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements
specified in Article VI of this Agreement); or
(iii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of 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 or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim 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 the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account
17
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
expense thereof, with counsel satisfactory to the party named in the action and
to settle the claim at its own expense; provided, however, that no such
settlement shall, without the Indemnified Parties' written consent, include any
factual stipulation referring to the Indemnified Parties or their conduct. After
notice from the Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect until the first
to occur of:
(a) termination by any party, for any reason with respect to some or
all Designated Portfolios, by six (6) months' advance written
notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio based upon
the Company's determination that shares of the Fund are not
reasonably available to meet the requirements of the Contracts;
provided that such termination shall apply only to the Designated
Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Fund and the
Underwriter in the event any of the Designated Portfolio's shares
are not registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued
or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that formal
administrative proceedings are instituted against the Company by
the FINRA, the SEC, the Insurance Commissioner or like official
of any state or
18
any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Fund shares;
provided, however, that the Fund or Underwriter determines in its
sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect
upon the ability of the Company to perform its obligations under
this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the FINRA, the SEC, or any state securities or
insurance department or any other regulatory body; provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund
or Underwriter to perform its obligations under this Agreement;
or
(f) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio in the event
that such Designated Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified in Article
VI hereof; or
(g) termination by the Fund or Underwriter by written notice to the
Company in the event that the Contracts fail to meet the
qualifications specified in Section 6.3 hereof; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations, financial condition,
or prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(i) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that the Fund or the Underwriter has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity.
(j) termination by the Company in response to the Fund's pattern or
practice of providing inaccurate or incomplete net asset values
for each Designated Portfolio where (i) such pattern or practice
is the result of the Fund's failure to meet the standards set
forth in Article I and (ii) such pattern or practice has a
material negative impact on the Company as determined by the
Company in its sole judgment exercised in good faith.
(k) termination by the Company upon any substitution of the shares of
another investment company or series thereof for shares of a
Designated Portfolio
19
of the Fund in accordance with all terms of the contracts.
10.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the 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"). Specifically, the owners of the Existing Contracts may 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 10.2 shall not apply to
any termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement. The parties further agree
that this Section 10.2 shall not apply to any termination under Section 10.1(g)
of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) pursuant
to the terms of a substitution order issued by the SEC pursuant to Section 26(b)
of the 1940 Act.
10.4 If the Fund terminates the agreement at its option under Sections 10.1
(a) or 10.1 (h) or the Company terminates under Sections 10.1 (b), 10.1 (c),
10.1 (e), or 10.1 (f), the Trust will cooperate reasonably in effecting a
transfer of assets to another underlying fund pursuant to either an exchange
offer, SEC substitution order, SEC no-action letter, or other legal and
appropriate means. The Underwriter agrees to bear the Company's expenses of a
substitution of the Equity Income (EIF) or Blue Chip Growth (BCG) Portfolios
pursuant to Section 26(c) of the 1940 Act where such substitution was caused by:
(i) a merger or liquidation of the EIF or BCG Portfolio or a termination of the
Agreement by the Fund or Underwriter due to a merger or liquidation of the EIF
or BCG Portfolio, or (ii) a termination of the Agreement by the Company in the
event that the sale of shares of a Portfolio violated applicable state and
federal law and such violation was caused by the Fund or Underwriter. For the
purposes of this section, the Company's expenses shall include the cost incurred
with the preparation and filing of any necessary application with the SEC under
Section 26(c) of the 1940 Act, the costs of any notices to Contract owners, and
the cost of any brokerage expenses of a portfolio and a replacing fund that the
Company is required to bear under the terms of an order of the SEC under Section
26(c) of the 1940 Act; provided however, that Underwriter's obligation to
reimburse such expenses shall be subject to an aggregate cap of $25,000. If this
Agreement is terminated as required by the Shared Funding Exemptive Order, its
provisions shall govern.
10.5 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered, certified
mail or overnight delivery to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
20
If to the Fund:
X. Xxxx Price Associates, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxxx, Esq.
If to the Company:
AIG SunAmerica Life Assurance Company
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
with a copy to: AIG SunAmerica Life Assurance Company
0 XxxXxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel
If to Underwriter:
X. Xxxx Price Investment Services, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxxx, Esq.
ARTICLE XII. Miscellaneous
12.1 All references herein to the Fund are to each of the undersigned Funds
as if this agreement were between such individual Fund and the Underwriter and
the Company. All references herein to the Adviser relate solely to the Adviser
of such individual Fund, as appropriate. All persons dealing with a Fund must
look solely to the property of such Fund, and in the case of a series company,
the respective Designated Portfolio listed on Schedule A hereto as though such
Designated Portfolio had separately contracted with the Company and the
Underwriter for the enforcement of any claims against the Fund. The parties
agree that neither the Board, officers, agents or shareholders assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party, unless the information (a) is independently developed by
a party without violating the disclosing party's proprietary rights, (b) is or
becomes publicly known (other than through unauthorized disclosure), (c) is
intentionally disclosed by the owner of such information to a
21
third party free of any obligation of confidentiality, (d) is already known by a
party, as evidenced by the written records of that party, free of an obligation
of confidentiality other than pursuant to this Agreement, or (e) is rightfully
received by a party free of any obligation of confidentiality.Each party further
agrees to use and disclose Personal Information, as defined herein, only to
carry out the purposes for which it was disclosed to them and will not use or
disclose Personal Information if prohibited by applicable law, including,
without limitation, statutes and regulations enacted pursuant to the
Xxxxx-Xxxxx-Xxxxxx Act (Public Law 106-102), applicable state law and other
applicable federal law. For purposes of this Agreement, "PERSONAL INFORMATION"
means financial, medical and other information that identifies an individual
personally and is not available to the public, including, but not limited to,
credit history, income, financial benefits, policy or claim information and
medical records. The parties will take reasonable steps to protect the
confidential information (including Personal Information), applying at least the
same security measures and level of care as they employ to protect their own
confidential information, including reasonable steps to protect information
received by third parties providing services to a party. The parties acknowledge
that the unauthorized disclosure of confidential information is likely to cause
irreparable injury to the other party and that, in the event of a violation or
threatened violation of a party's obligations hereunder, the disclosing party
shall have no adequate remedy at law, and shall therefore be entitled to enforce
each such obligation by temporary or permanent injunctive relief obtained in any
court of competent jurisdiction without the necessity of proving damages, and
without prejudice to any other rights and remedies which may be available at law
or equity.
12.3 The parties represent and warrant that they each have in place an
anti-money laundering program ("AML program") that does now and will continue to
comply with applicable laws and regulations, including the relevant provisions
of the USA PATRIOT Act (Pub. L. No. 107-56 (2001)) and the regulations issued
thereunder.
12.4 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.5 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.6 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.7 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
FINRA, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the state departments of insurance with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with state
variable annuity laws and regulations and any other applicable law or
regulations.
22
12.8 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.9 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
[Signature Pages to Follow]
23
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
COMPANY: AIG SUNAMERICA LIFE ASSURANCE COMPANY
By its authorized officer
By:
------------------------------------
Title: Xxxx X. Xxxxx, President
Date:
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FUND: X. XXXX PRICE EQUITY SERIES, INC.
By its authorized officer
By:
------------------------------------
Title: Vice President
Date:
----------------------------------
UNDERWRITER: X. XXXX PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By:
------------------------------------
Title: Vice President
Date:
----------------------------------
SCHEDULE A
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
-------------------------------------- -------------------------- -----------------------------
Variable Annuity Account Five Seasons Select II Blue Chip Growth Portfolio II
Seasons Elite Equity Income Portfolio II
Seasons Preferred Solution
Seasons Advantage
Seasons Advisor III
The Company may include the Designated Portfolios listed on Schedule A in all
prospectus versions of the above listed variable annuity contracts or such other
variable annuity contracts, as the Company may launch subsequently with notice
to Underwriter.
SCHEDULE B
COMPENSATING FOR CONTRACT OWNER LOSSES CAUSED BY PRICING, INCOME, DIVIDEND AND
CAPITAL GAINS DISTRIBUTION ERRORS.
In the event the Fund provides a materially incorrect price for the Fund, or
provides incorrect income, dividend or capital gains distribution information
for the Fund, through no fault of the Company, the Underwriter will adjust the
Account with the Fund on a net basis to correct the shares in the account. The
materiality of an incorrect price will be determined with reference to
applicable SEC guidance. If the Company adjusts the underlying Contract owners'
accounts, those accounts with gains shall be used to offset those accounts with
losses, including those Contract owners who received underpaid distributions
("Contract owner Adjustments"). After the Contract owner Adjustments, the
Company will identify those Contract owners who received distributions or made
exchanges into other investment options during the time period affected by the
incorrect price or the incorrect dividend or distribution information. The
Company will then notify the Underwriter of the amount of losses suffered as a
result of (i) for an overstated price or overstated income, dividend or capital
gains distributions, Contract owners whose accounts had a loss that could not be
offset by the overpayments (gains) made to Contract owners who took
distributions; or (ii) for an understated price or understated dividends or
distributions, Contract owners who received underpaid distributions that could
not be offset by gains in other Contract owner accounts; or (iii) for exchanges
into other investment options, Contract owners whose accounts had a loss due to
the adjustment in the other investment option (caused by market fluctuation of
the other investment option) and such loss cannot be offset by the gains
received by Contract owners who exchanged into other investment options where
such fluctuation caused a gain. Upon receipt of appropriate documentation
verifying such losses, the Underwriter shall reimburse the Account with the
appropriate number of additional shares. Should the Company fail to collect
overpayments made to those Contract owners who received distributions with a
gain, the Company agrees to subrogate its claim against such Contract owner to
the Fund, the Underwriter or its affiliate. Any net gains calculated after
Contract owner Adjustments will be returned by the Company to the Underwriter.
COMPENSATING THE COMPANY FOR ITS EXPENSES INCURRED AS A RESULT OF PRICING,
INCOME, DIVIDEND OR CAPITAL GAINS DISTRIBUTION ERRORS. Set forth below is the
criteria that must be met before the Underwriter will reimburse the Company for
expenses incurred due to pricing, income, dividend or capital gains distribution
errors:
- The Company must provide a full accounting of expenses;
- A $10,000 cap will be imposed on each occurrence;
- Expenses may include payroll overtime, system fees, postage and
stationery (if separate mailing is required);
- The Company must use its best efforts to mitigate all expenses which
may be reimbursable; and
- Expenses and payroll overtime shall not include any time spent
customizing the Company's systems to correct the error.
