DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this 29/th/ day of April, 2016 by and
between XXXXXXX XXXXX VARIABLE INSURANCE TRUST, a statutory trust formed under
the laws of Delaware (the "Trust"), XXXXXXX, SACHS & CO., a New York limited
partnership (the "Distributor"), and THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY, a Texas life insurance company (the "Company"), on its own behalf and
on behalf of each separate account of the Company identified herein.
WHEREAS, the Trust engages in business as an open-end management investment
company of the series-type offering shares of beneficial interest (the "Trust
Shares") in one or more separate series ("Series"), and each such Series
represents an interest in a particular investment portfolio of securities and
other assets (a "Fund") and may be issued in various classes ("Classes") with
each such Class supporting a distinct charge and expense arrangement; and
WHEREAS, the Trust was established for the purpose of serving as an
investment vehicle for life insurance company separate accounts supporting
variable annuity contracts and variable life insurance policies to be offered
by insurance companies and may also be utilized by certain retirement plans and
other persons as described herein; and
WHEREAS, an order of the Securities and Exchange Commission dated February 2,
1998, (File No. 812-10794) grants certain separate accounts supporting variable
life insurance policies, their life insurance company depositors, and their
principal underwriters, exemptions from Sections 9(a), 13(a), 15(a) and 15(b)
of the Investment Company Act of 1940, and from Rules 6e-2(b)( 15) and
6e-3(T)(b)( 15) thereunder, to the extent necessary for such separate accounts
to purchase and hold Trust Shares at the same time that such shares are sold to
or held by separate accounts of affiliated and unaffiliated insurance companies
supporting either variable annuity contracts or variable life insurance
policies, or both, or by qualified pension and retirement plans (the "SEC
Order"); and
WHEREAS, the Distributor has the exclusive right to distribute Trust Shares
to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment vehicle
for a certain separate account(s) of the Company and the Distributor desires to
sell Trust Shares of certain Series and/or Class(es) to such separate
account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust, the
Distributor and the Company agree as follows:
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
ARTICLE I
ADDITIONAL DEFINITIONS
1.1. "Accounts" -- the separate accounts of the Company identified in
Schedules 1A, 2A and 3A to this Agreement.
1.2 "Applicable Law" -- the federal securities laws as defined in Rule 38a-1
under the 1940 Act, any rules promulgated under the federal securities laws,
FINRA regulations, any Applicable SEC Guidance, and any state or municipal laws
or regulations that may apply to the Trust, the Distributor, the Company, the
Accounts, or the Contracts.
1.3. "Applicable SEC Guidance" -- any applicable: (a) SEC release, opinion,
or order, as well as any published "no-action" position or written interpretive
guidance by the SEC staff; and (b) FINRA interpretive memoranda or notices to
members, as well as any written interpretive guidance from the FINRA staff.
Applicable SEC Guidance does not include oral statements, speeches, or informal
guidance by the SEC or its staff.
1.4. "Business Day"--each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.5. "Code"--the Internal Revenue Code of 1986, as amended, and any successor
thereto.
1.6. "Contracts"--the class or classes of variable annuity contracts and/or
variable life insurance policies issued by the Company and described more
specifically on Schedules 1B, 2B, or 3B to this Agreement.
1.7. "Contract Owners"--the owners of the Contracts, as distinguished from
all Product Owners.
1.8. "FINRA"--The Financial Industry Regulatory Authority, Inc.
1.9. "Fund Documents" -- documents prepared by the Trust that, pursuant to
Rule 498(e)(1), must be publicly accessible free of charge at the Web site
address shown on the cover page or at the beginning of the Summary Prospectus.
1.10. "Fund Documents Web Site"--the web site maintained by the Trust (or
its agent) where Contract Owners, prospective Contract Owners, participants in
Participating Plans, or individual investors who are Qualified Persons or
invest through a Qualified Person may access Fund Documents.
1.11. "Participating Account"--a separate account investing all or a portion
of its assets in the Trust, including the Accounts.
2
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
1.12. "Participating Insurance Company"--any life insurance company with a
Participating Account, including the Company.
1.13. "Participating Plan"--any pension or profit-sharing plan qualified
under Section 401 of the Code investing in the Trust and certain other
retirement plans that are Qualified Persons investing in the Trust.
1.14. "Participating Investor"--any Participating Account, Participating
Insurance Company, Participating Plan, or other Qualified Person, including the
Accounts and the Company.
1.15. "Products"--variable annuity contracts and variable life insurance
policies supported by Participating Accounts, including the Contracts.
1.16. "Product Owners"--owners of Products, including Contract Owners.
1.17. "Prospectus"--with respect to a Series (or Class) of Trust Shares or a
class of Schedule 1 Contracts, each version of the definitive Prospectus or
Summary Prospectus (where used or required to be used) and supplement thereto
filed with the SEC pursuant to Rule 497 under the 1933 Act. With respect to any
provision of this Agreement requiring a party to take action in accordance with
a Prospectus, PROSPECTUS shall mean the version of the Prospectus for the
applicable Series, Class or Contracts filed most recently (or most current for
Schedule 2 Contracts and Schedule 3 Contracts) prior to the taking of such
action. For purposes of Article IX, the term "Prospectus" shall include any
statement of additional information incorporated therein. With respect to a
class of Schedule 2 Contracts or Schedule 3 Contracts, Prospectus includes any
offering circular or memorandum for such Contracts.
1.18. "Qualified Person"--a person permitted to hold Trust Shares under
Treasury Regulation Section 1.817-5(f), as supplemented by published rulings
and procedures issued thereunder by the Internal Revenue Service, in order for
any Fund of the Trust to qualify for "look-through" treatment by Participating
Accounts in applying the diversification requirements of Section 817(h) of the
Code by taking into account the portfolio investments of a Fund.
1.19. "Registration Statement"--with respect to the Trust Shares or Schedule
1 Contracts, the registration statement filed with the SEC to register such
securities under the 1933 Act, or the most recently filed amendment thereto, in
either case in the form in which it was declared or became effective. The
Contracts' Registration Statement for each class of Schedule 1 Contracts is
identified on Schedule 1B to this Agreement. The Trust's Registration Statement
is filed on Form N-1A (File No. 333-35883).
1.20. "1940 Act Registration Statement"--with respect to the Trust or
Schedule 1 Accounts, the registration statement filed with the SEC to register
such person as an investment company under the 1940 Act, or the most recently
filed amendment thereto. The Trust's 1940 Act Registration Statement is filed
on Form N-1A (File No. 811-08361).
3
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
1.21. "Schedule 1 Accounts"--Accounts registered under the 1940 Act as unit
investment trusts and listed on Schedule 1A.
1.22. "Schedule 2 Accounts"--Accounts excluded from the definition of an
investment company as provided for by Section 3(c)(11) of the 1940 Act and
listed on Schedule 2A.
1.23. "Schedule 3 Accounts"--Accounts excluded from the definition of an
investment company as provided for by Section 3(c)(1) or Section 3(c)(7) of the
1940 Act and listed on Schedule 3A.
1.24. "Schedule 1 Contracts"--Contracts through which interests in Schedule
1 Accounts are offered and issued, which interests are registered as securities
under the 0000 Xxx.
1.25. "Schedule 2 Contracts"--Contracts through which interests in Schedule
2 Accounts are offered and issued to trustees of qualified pension and
profit-sharing plans and certain government plans identified in Section 3(a)(2)
of the 1933 Act (which Contracts and interests are not registered as securities
in reliance upon Section 3(a)(2) of the 1933 Act).
1.26. "Schedule 3 Contracts"--Contracts through which interests in Schedule
3 Accounts are offered and issued to "accredited investors", as that term is
defined in Regulation D under the 1933 Act, or other investors permitted by
Regulation D (which Contracts and interests are not registered as securities in
reliance upon Regulation D).
1.27. "SEC"--the Securities and Exchange Commission.
1.28. "Statement of Additional Information"--with respect to the shares of
the Trust or Schedule 1 Contracts, each version of the definitive statement of
additional information or supplement thereto filed with the SEC pursuant to
Rule 497 under the 1933 Act. With respect to any provision of this Agreement
requiring a party to take action in accordance with a Statement of Additional
Information, STATEMENT OF ADDITIONAL INFORMATION shall mean the last version so
filed prior to the taking of such action.
1.29. "Statutory Prospectus"--a prospectus that satisfies the requirements
of Section 10(a) of the 0000 Xxx.
1.30. "Summary Prospectus" --a prospectus described in paragraph (b) of Rule
498 under the 0000 Xxx.
1.31. "Trust Board"--the board of trustees of the Trust.
1.32. "1933 Act"--the Securities Exchange Act of 1933, as amended.
1.33. "1940 Act"--the Investment Company Act of 1940, as amended.
4
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
ARTICLE II
SALE OF TRUST SHARES
2.1. AVAILABILITY OF SHARES
(a) The Trust has granted to the Distributor exclusive authority to
distribute the Trust Shares and to select which Series or Classes of Trust
Shares shall be made available to Participating Investors. Pursuant to such
authority, and subject to Article X hereof, the Distributor shall make
available to the Company for purchase on behalf of the Accounts, shares of
the Series and Classes listed on Schedules 1B, 2B, and 3B to this Agreement,
such purchases to be effected at net asset value in accordance with Section
2.3 of this Agreement. The Distributor shall make such Series and Classes
available to the Company in accordance with the terms and provisions of this
Agreement until: (i) this Agreement is terminated pursuant to Article X, or
(ii) the Distributor suspends or terminates the offering of shares of such
Series or Classes in the circumstances described in Article X.
(b) The parties acknowledge and agree that: (i) the Trust may revoke the
Distributor's authority to distribute Trust Shares pursuant to the terms and
conditions of its distribution agreement with the Distributor, and (ii) the
Trust reserves the right in its sole discretion to refuse to accept a
request for the purchase of Trust Shares.
2.2. REDEMPTIONS. At the Company's request, the Trust shall redeem any full
or fractional Trust Shares held by the Company on behalf of an Account at net
asset value in accordance with Section 2.3 of this Agreement. However, the
Trust may delay redemption or suspend the right of redemption of Trust Shares
of any Series or Class to the extent permitted by the Applicable Law or as
disclosed in the Prospectus for such Series or Class. The Company shall not
redeem Trust Shares attributable to Contract Owner investments except in the
circumstances permitted in Article X of this Agreement.
2.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Trust hereby appoints the Company as its designee for the limited
purpose of receiving purchase and redemption requests for Trust Shares under
Schedule 1 Contracts resulting from purchase and redemption requests by
Owners of Schedule 1 Contracts for units of the Schedule 1 Accounts (but not
for units of the Schedule 2 Accounts or Schedule 3 Accounts). Receipt by the
Company, as designee of the Trust for this purpose, of requests for the
purchase and redemption of units of the Schedule 1 Accounts on any Business
Day prior to the Trust's close of business, as disclosed from time to time
in the applicable Prospectus for such Series or Class (which as of the date
of execution of this Agreement is the close of regular trading on the New
York Stock Exchange), shall constitute receipt by the Trust on that Business
Day of requests from
5
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
such Schedule 1 Accounts for the purchase and redemption of Trust Shares
necessary to facilitate such purchase and redemption of units of such
Schedule 1 Accounts. This limited agency only extends to requests by the
Schedule 1 Accounts for the purchase and redemption of Trust Shares that the
Trust (or its transfer agent) receives by 9:00 a.m. New York Time on the
next following Business Day. Such requests for the purchase and redemption
of Trust Shares may be communicated by facsimile, electronic mail, or
telephone to the office or person designated by the Trust and shall be
confirmed by facsimile or electronic mail.
(b) The Company shall pay for Trust Shares on the same day that it
provides a purchase request for such Shares. Payment for Trust Shares shall
be made in federal funds transmitted to the Trust by wire by 5:00 p.m. New
York Time on that day (unless the Trust determines and so advises the
Company that sufficient proceeds are available from redemption of Trust
Shares of other Series or Classes on that day by the Company). Proceeds from
the redemption of Trust Shares requested pursuant to an order received by
the Company after the Trust's close of business on any Business Day shall
not be applied to the payment for shares for which a purchase order was
received prior to the Trust's close of business on the same day. If federal
funds are not received on time, issuance of the requested Trust Shares will
be cancelled and such funds will be applied to the purchase of Trust Shares
as soon as practicable after receipt of such funds at the Share price next
computed after receipt. If the issuance of Trust Shares is canceled because
federal funds are not timely received, the Company shall indemnify the
respective Fund and the Distributor with respect to all costs, expenses and
losses relating thereto and the Company shall be responsible for any impact
on Contract Owners.
(c) Payment for Trust Shares redeemed shall be made in federal funds
transmitted by wire to the Company, such funds normally to be transmitted by
6:00 p.m. New York Time on the next Business Day after the Trust receives
the redemption request (unless redemption proceeds are to be applied to the
purchase of Trust Shares of other Series or Classes in accordance with
Section 2.3(b) of this Agreement). Notwithstanding the foregoing, the Trust
reserves the right to redeem Trust Shares in assets other than cash to the
extent disclosed in the applicable Prospectus and permitted by Applicable
Law. The Trust shall not be responsible for the proper disbursement or
crediting of redemption proceeds by the Company or the Accounts.
(d) Any purchase or redemption request for Trust Shares held or to be
held by Schedule 2 Accounts, Schedule 3 Accounts, or in the Company's
general account, shall be effected at the net asset value per share next
determined after the Trust's actual receipt of such request, provided that
payment for Trust Shares purchased is received by the Trust in federal funds
prior to the Trust's close of business, as disclosed from time to time in
the Prospectus for such Series or Class.
(e) The Company and the Trust shall provide each other with all
information necessary to effect wire transmissions of federal funds to the
other party or the other
6
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
party's agents pursuant to such protocols and security procedures as the
parties may agree upon from time to time. The Trust and the Company, as
applicable, shall notify the other in writing of any changes in such
information at least three Business Days in advance of when such change is
to take effect. The Company and the Trust shall observe customary procedures
to protect the confidentiality and security of such information, but the
Trust shall not be liable to the Company for any breach of security.
(f) The procedures set forth in this Section 2.3 are subject to any
additional terms set forth in the applicable Prospectus for the Series or
Class and by the requirements of Applicable Law.
2.4. NET ASSET VALUE. The Trust shall use its best efforts to inform the
Company of the net asset value per share for each Series and Class available to
the Company as soon as reasonably practicable after the computation of the
same. The Trust shall calculate such net asset values in accordance with the
Prospectus for such Series or Class.
2.5. DIVIDENDS AND DISTRIBUTIONS. The Trust shall furnish notice to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Accounts, hereby elects to receive all such
dividends and distributions in the form of additional shares of that Series or
Class. The Company reserves the right, on its behalf and on behalf of the
Accounts, to revoke this election and to receive all such dividends and capital
gain distributions in cash; to be effective, such revocation must be made in
writing and received by the Trust at least ten Business Days prior to a
dividend or distribution date. The Trust shall notify the Company promptly of
the number of Series or Class shares so issued as payment of such dividends and
distributions.
2.6. BOOK ENTRY. Issuance and transfer of Trust Shares shall be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Purchase and redemption orders for Trust Shares shall be recorded in
an appropriate ledger for each Account.
2.7. PRICING ERRORS. Any material errors in the calculation of the net asset
value of a Fund, the net asset value per share of any Series or Class of Trust
Shares, dividends or capital gain information shall be reported to the Company
immediately upon discovery. An error shall be deemed "material" based on the
Trust's interpretation of Applicable Law. To the extent necessary for the
Company to reimburse Contract Owners for actual losses, the Distributor shall
reimburse the Company for losses arising as a direct result of any material
error in the calculation of the net asset value of any Fund or the net asset
value per share of any Series or Class of Trust Shares. Neither the Trust, any
Fund, the Distributor, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement, which
information is based on incorrect information supplied by or on behalf of the
Company or any other Participating Company to the Trust or the Distributor.
7
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
2.8. LIMITS ON PURCHASERS. The Distributor and the Trust shall sell Trust
Shares only to insurance companies and their separate accounts and to other
Qualified Persons. The Distributor and the Trust shall not sell Trust Shares to
any insurance company or separate account unless an agreement complying with
Article VIII of this Agreement is in effect to govern such sales. The
Distributor and the Trust shall not sell more than 10% of any Series of Trust
Shares to any Participating Plan unless an agreement is in effect between the
Distributor, the Trust and the trustee (or other fiduciary) of the Plan
containing provisions substantially the same as those in Article VIII of this
Agreement. The Distributor and the Trust shall not sell Trust Shares to any
Participating Plan unless a written acknowledgment of the foregoing condition
is received from the trustee (or other fiduciary) of the Plan.
2.9. DISRUPTIVE TRADING.
(a) The Trust has adopted policies designed to prevent frequent purchases
and redemptions of any Series of Trust Shares in quantities great enough to:
(i) disrupt orderly management of the corresponding Fund's investment
portfolio, or (ii) dilute the value of the outstanding Trust Shares of that
Series ("Disruptive Trading Policies"). From time to time, the Trust and the
Distributor implement procedures reasonably designed to enforce the Trust's
Disruptive Trading Policies and shall provide a written description of such
procedures (and revisions thereto) to the Company. As a procedure in
furtherance of its Disruptive Trading Policies, the Trust may assess fees,
to be paid by one or more Accounts or by the Company, upon redemption of one
or more Series or Classes of Trust Shares within certain stated time periods
after such shares have been purchased.
(b) The Company agrees to develop, adopt and maintain policies regarding
transactions in Account units reasonably designed to complement the Trust's
Disruptive Trading Policies and, from time to time, to implement procedures
regarding transactions in Account units (including transactions by
intermediaries) reasonably designed to effectuate the Trust's procedures for
preventing disruptive trading in Trust Shares. In particular, in the event
that the Trust or the Distributor identifies a particular Contract Owner (or
intermediary) as having engaged in transactions in Account units that
directly or indirectly violate the Trust's Disruptive Trading Policies, the
Company agrees, at the written request of the Trust or the Distributor, to
restrict or prohibit further transactions in Account units by that Contract
Owner (or intermediary) which could result in additional purchases and
redemptions of a specified Series and/or Class of Trust Shares in violation
of the Trust's Disruptive Trading Policies.
(c) In furtherance of Section 2.9(b), the Trust and the Distributor may,
from time to time, investigate purchases and redemptions of any Series or
Class of Trust Shares by the Company on behalf of the Accounts that appears
to violate, or has the potential to violate, the Trust's Disruptive Trading
Policies. When requested by the Trust or the Distributor in writing, the
Company agrees to provide the following with respect to
8
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
purchases and redemptions of a specific Series and/or Class of Trust Shares
over a designated period:
. the identity of the Contract Owner or Contract Owners whose
transactions in Account units underlies the Trust share purchases
and redemptions being investigated,
. the amounts and dates of transactions in Account units during the
designated period representing an indirect investment in the
Series and/or Class of Trust Shares being investigated, and
. the identity of any investment professional known by the Company
to be associated with the Contract Owner or Contract Owners.
The Company agrees to provide the foregoing information that is on its books
and records promptly. If the requested information is not on its books and
records, it agrees to make reasonable efforts to:
. promptly obtain the requested information, or
. if requested by the Trust or the Distributor restrict or prohibit
further transactions in Account units by that Contract Owner
which could result in additional purchases and redemptions of a
specified Series and/or Class of Trust Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. COMPANY. The Company represents and warrants that: (a) it is an
insurance company duly organized and in good standing under the laws of the
jurisdiction of its organization, (b) it has legally and validly established
each Account as a segregated asset account under applicable state law to serve
as segregated investment accounts for the Contracts, (c) each Schedule 1
Account is registered as a unit investment trust under the 1940 Act and each
such Account's 1940 Act Registration Statement has been filed with the SEC in
accordance with the 1940 Act, (d) the Schedule 2 Accounts and Schedule 3
Accounts each qualify for the exclusions on which they rely for not registering
as investment companies under the 1940 Act, (e) it has registered, or will
register, all Schedule 1 Contracts offered and sold pursuant to this Agreement
under the 1933 Act and, except as provided in Article 4.2 of this Agreement,
has effective Registration Statements for that purpose, (f) it will offer and
sell the Contracts in compliance in all material respects with all applicable
federal and state laws and regulations, including, but not limited to, state
insurance law and federal securities law suitability requirements, (g) the
Contracts have been filed, qualified and or approved for sale, as applicable,
under the insurance laws and regulations of the states in which the Contracts
will be offered, (h) sales of the Schedule 2 Contracts and Schedule 3 Contracts
properly qualify for exemptions
9
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
on which the Company relies in not registering such Contracts, or interests in
the Account through which each is issued, under the 1933 Act, (i) its
activities and those of its employees in promoting the sale and distribution of
the Contracts and effecting Contract Owner transactions in Account units have
not caused, and will not cause, the Company to be deemed a broker-dealer,
(j) orders it places for the purchase and redemption of Trust Shares pursuant
to Article 2.3 of this Agreement are the net result of transactions in units
issued by an Account, instructions for which are received by the Company prior
to the Trust's close of business as defined from time to time in the applicable
Prospectus for such Series or Class (which as of the date of execution of this
Agreement is the close of regular trading on the New York Stock Exchange), (k)
as long as this Agreement remains in effect, it shall remain in continuous
compliance with Article 6.3, Article 6.4 and Article 6.5 of this Agreement,
(l) it complies with the requirements of Rule 498 under the 1933 Act and
Applicable SEC Guidance regarding the Rule in connection with delivery of
Summary Prospectuses for the Series and Classes of Trust Shares available under
this Agreement, (m) it maintains policies and procedures reasonably designed to
ensure that it can meet obligations in connection with Summary Prospectuses,
(n) it will notify the Distributor and the Trust promptly if for any reason it
is unable to perform its obligations under this Agreement, (o) with respect to
any Schedule 3 Accounts: (1) the principal underwriter for each Schedule 3
Account and any subaccounts thereof is a broker or dealer registered with the
SEC under the Securities Exchange Act of 1934 or a person controlled (as
defined in the 0000 Xxx) by such a broker or dealer; (2) shares of a Fund are
and will continue to be the only securities held by the relevant subaccount;
(3) it will either (i) seek instructions from Contract Owners with account
value in the Schedule 3 Accounts allocated to shares of a Fund with regard to
the voting of all proxies solicited in connection with the Fund and will vote
those proxies only in accordance with those instructions, or (ii) vote such
Fund shares held in the Schedule 3 Accounts in the same proportion as the vote
of all the Fund's other shareholders; and (4) it will not substitute another
security for shares of the Fund held in a Schedule 3 Account unless the SEC has
approved the substitution in the manner provided in Section 26 of the 1940 Act.
3.2. TRUST. The Trust represents and warrants that: (a) it is a statutory
trust duly organized and validly existing under Delaware law, (b) it is
registered under the 1940 Act as an open-end management investment company and
has filed a 1940 Act Registration Statement with the SEC in accordance with the
provisions of the 1940 Act, (c) Trust Shares issued pursuant to this Agreement
have been, or will be, duly authorized and validly issued in accordance with
Applicable Law, (d) it will offer and sell Trust Shares pursuant to this
Agreement in compliance in all material respects with all applicable federal
and state laws and regulations, (e) it has registered, or will register, all
Trust Shares offered and sold pursuant to this Agreement under the 1933 Act and
has an effective Registration Statement for that purpose, (f) as long as this
Agreement remains in effect, it shall remain in continuous compliance with
Article 6.1 and Article 6.2 of this Agreement, (g) the Trust's Board, a
majority of whom are not interested persons of the Trust, have formulated and
approved any plans to finance distribution expenses pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plans"), (h) the Trust or its service provider
complies with the requirements of Rule 498 under the 1933 Act and Applicable
SEC Guidance regarding the Rule in connection with the offer and sale of Trust
Shares, (i) the Trust or its service provider maintains policies and procedures
reasonably designed to ensure that Fund
10
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
Documents are available on the Fund Documents Web Site in the manner required
by Rule 498(e)(1), (e)(2), and (e)(3) and Applicable SEC Guidance related
thereto, and (j) as provided by Rule 498(e)(4)(ii), the Trust or its service
provider shall take prompt action to ensure that Fund Documents become
available in the manner required by Rule 498(e)(1), (e)(2), and (e)(3) and
Applicable SEC Guidance as soon as practicable following the earlier of the
time it knows or should reasonably have known that the Fund Documents are not
available in the required manner.
3.3. DISTRIBUTOR. The Distributor represents and warrants that: (a) it is a
limited partnership duly organized and in good standing under New York law, and
(b) it is registered as a broker-dealer under federal and applicable state
securities laws and is a member in good standing of FINRA.
3.4. LEGAL AUTHORITY. Each party represents and warrants that the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary corporate,
partnership or trust action, as applicable, by such party, and, when so
executed and delivered, this Agreement will be the valid and binding obligation
of such party enforceable in accordance with its terms.
ARTICLE IV
REGULATORY REQUIREMENTS
4.1. TRUST FILINGS. The Trust shall amend its Registration Statement from
time to time and maintain its effectiveness as required in order to effect the
continuous offering of Trust Shares in compliance with Applicable Law.
Notwithstanding the foregoing, the Trust shall register and qualify Trust
Shares for sale in accordance with the laws of various states if, and to the
extent, deemed advisable by the Trust or the Distributor. The Trust shall amend
its 1940 Act Registration Statement as required by the 1940 Act to maintain its
registration under the 1940 Act for as long as Trust Shares are outstanding.
The Trust shall file Form 24F-2 and pay 1933 Act registration fees for all
Series and Classes of Trust Shares as required by Rule 24f-2 under the 1940
Act. The Trust shall comply in all material respects with the 1940 Act.
4.2. ACCOUNT FILINGS. The Company shall amend the Registration Statement for
each Schedule 1 Contract from time to time and maintain its effectiveness as
required in order to effect the continuous offering of such Contracts in
compliance with Applicable Law for as long as purchase payments may be made
under such Contracts. Notwithstanding the foregoing, the Company: (a) may
permit the effectiveness of a Schedule 1 Contract's Registration Statement
expire if the Company has supplied the Trust with an SEC "no-action" letter or
opinion of counsel satisfactory to the Trust's counsel to the effect that
maintaining such Registration Statement on a current basis is no longer
required, and (b) shall register and qualify the Contracts for sale in
accordance with the securities laws of the various states only if, and to the
extent, it considers such registration and qualification necessary. The Company
shall amend each Schedule 1 Account's 1940 Act Registration Statement as
required by the 1940 Act to maintain
11
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
the Account's registration under the 1940 Act for as long as the Schedule 1
Contracts issued through that Account are in force. With regard to each
Schedule 1 Account and, as applicable, Schedule 3 Account, the Company shall
comply in all material respects with the 1940 Act. The Company shall make such
filings and take such other actions as are required by the exemptions and
exclusions on which it relies.
The Company shall be responsible for filing all Contract forms,
applications, marketing materials and other documents relating to the Contracts
and/or the Accounts with state insurance commissions, as required or as is
customary, and shall use its best efforts: (a) to obtain any and all approvals
thereof, under applicable state insurance law, of each state or other
jurisdiction in which Contracts are or may be offered for sale, and (b) to keep
such approvals in effect for so long as the Contracts are outstanding.
4.3 DELIVERY OF PROSPECTUSES BY THE Company. The Company shall deliver (or
arrange for delivery of) an appropriate Prospectus to each prospective Contract
Owner describing in all material respects the terms and features of the
Contract being offered. Except as provided below, the Company also shall
deliver (or arrange for delivery OF) a Summary Prospectus for each Fund that a
prospective Contract Owner identifies on his or her application as an intended
investment option under a Contract or to which a Contract Owner allocates
premium payments to or transfers Contract value. In addition, the Company
reserves the right to deliver (or arrange for delivery of) the Statutory
Prospectus in place of the Summary Prospectus. The Company shall deliver (or
arrange for delivery of) such Summary or Statutory Prospectuses at the times
and in the manner required by applicable provisions of the 1933 Act and rules
or regulations thereunder and Applicable SEC Guidance.
4.4. SPECIFIC REQUESTS FOR SUMMARY PROSPECTUSES. The Company shall not bind
together the Summary Prospectuses or Statutory Prospectuses for the Series and
Classes available under this Agreement with Summary Prospectuses and Statutory
Prospectuses for shares of other investment companies, or any other document
except as expressly permitted by and in Rule 498(c)(2) and any Applicable SEC
Guidance. The Company shall deliver or provide all Summary Prospectuses and all
Statutory Prospectuses in compliance with the Greater Prominence requirements
of Rule 498(f)(2) and any Applicable SEC Guidance.
4.5. WEB SITE POSTING. The Trust or its service provider shall maintain the
Fund Documents Web Site. At the Company's request, the Trust or its service
provider may provide the Company with URLs to the current Fund Documents for
use with the Company's electronic delivery of Fund Documents or on the
Company's Web site. The Company will be responsible for the maintenance of any
web links to such URLs on the Company's Web site. The Trust agrees to use
commercially reasonable efforts to employ procedures consistent with industry
practices designed to reduce exposure to viruses. However, the Trust and the
Distributor make no warranty, express or implied, that the Fund Documents Web
Site, the Fund Documents, or any URLs provided will be free from any defects,
bugs, errors or malfunctions.
12
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
4.6. RESPONSE TO REQUESTS FOR ADDITIONAL FUND DOCUMENTS. Within three
(3) Business Days of receiving a request for a paper copy of a Fund Document,
the Trust shall promptly send the same to the person requesting it free of
charge. Within three (3) Business Days of receiving a request for an electronic
copy of a Fund Document, the Trust shall send, by e-mail to the requestor,
either a PDF copy of, or an electronic link to, the same free of charge. The
Company shall respond in accordance with Rule 498(f)(1) to requests for
additional Fund Documents made by a person directly to the Company or one of
its affiliates.
4.7. CESSATION OF USE OF SUMMARY PROSPECTUSES. The Trust shall provide the
Company with at least thirty (30) days advance written notice of its intent to
cease using the Summary Prospectus delivery option so that the Company can
arrange to deliver a Statutory Prospectus in place of a Summary Prospectus in
compliance with Section 4.3 of this Agreement. In order to comply with Rule
498(e)(1), the Trust shall continue to maintain the Fund Documents Web Site in
compliance with the requirements of this Agreement and Rule 498 for a minimum
of 90 days after the termination of any such notice period.
4.8. VOTING OF TRUST SHARES. To the extent required by the 1940 Act or Rule
6e-2 OR Rule 6e-3(T) thereunder, or other Applicable Law, whenever the Trust
shall have a meeting of holders of any Series or Class of Trust Shares, the
Company shall:
. solicit voting instructions from Contract Owners;
. vote Trust Shares held in each Account at such shareholder meetings
in accordance with instructions received from Contract Owners;
. vote Trust Shares held in each Account for which it has not received
timely instructions in the same proportion as it votes the applicable
Series or Class of Trust Shares for which it has received timely
instructions; and
. vote Trust Shares held in its general account in the same proportion
as it votes the applicable Series or Class of Trust Shares held by
the Accounts for which it has received timely instructions.
Except with respect to matters as to which the Company has the right in
connection with Schedule 1 Contracts under Rule 6e-2 or Rule 6e-3(T) under the
1940 Act, to vote Trust Shares without regard to voting instructions from
Contract Owners, neither the Company nor any of its affiliates will recommend
action in connection with, or oppose or interfere with, the actions of the
Trust Board to hold shareholder meetings for the purpose of obtaining approval
or disapproval from shareholders (and, indirectly, from Contract Owners) of
matters put before the shareholders.
The Company shall remain responsible for ensuring that it calculates voting
instructions and votes Trust Shares at shareholder meetings in a manner
consistent with other Participating Investors. The Trust will notify the
Company of any changes to the SEC Order or the conditions attaching thereto
relating to voting of Trust Shares of which it becomes aware.
13
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
4.9. STATE INSURANCE LAW RESTRICTIONS. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness
of such determination. Schedule 4 sets forth any investment restrictions that
the Company and or other Participating Insurance Companies have determined are
applicable to any Fund and with which the Trust has agreed to comply as of the
date of this Agreement. The Company shall inform the Trust of any investment
restrictions imposed by state insurance law that the Company determines may
become applicable to the Trust or a Fund from time to time as a result of the
Accounts' investment therein, other than those set forth on Schedule 4 to this
Agreement. Upon receipt of any such information from the Company or any other
Participating Insurance Company, the Trust shall determine whether it is in the
best interests of shareholders to comply with any such restrictions. If the
Trust determines that it is not in the best interests of shareholders (which,
for this purpose, shall mean Product Owners) to comply with a restriction
determined to be applicable by the Company, the Trust shall so inform the
Company, and the Trust and the Company shall discuss alternative
accommodations. If the Trust determines that it is in the best interests of
shareholders to comply with such restrictions, the Trust and the Company shall
amend Schedule 4 to this Agreement to reflect such restrictions, subject to
obtaining any required shareholder approval thereof.
4.10. INTERPRETATION OF LAW. The Trust, the Distributor and their affiliates
are not responsible or liable for acts or omissions by the Company or the
Company's affiliates taken (or not taken) in reliance upon any statements or
representations made by the Trust, the Distributor or any of their affiliates
or their legal advisers, to the Company or the Company's affiliates concerning
the applicability of any Applicable Law or Applicable SEC Guidance to the
activities contemplated by this Agreement.
The Company and its affiliates are not responsible or liable for acts or
omissions by the Trust, the Distributor and their affiliates taken (or not
taken) in reliance upon any statements or representations made by the Company
or its affiliates or their legal advisers, to the Trust, the Distributor and
their affiliates concerning the applicability of any Applicable Law or
Applicable SEC Guidance to the activities contemplated by this Agreement.
4.11. DISCLOSURE. The Trust's prospectus shall state that the statement of
additional information for the Trust is available from either the Distributor
or the Trust. The Trust hereby notifies the Company that it is appropriate to
include in Contract Prospectuses, disclosure of the potential risks of mixed
and shared funding.
4.12. DRAFTS OF FILINGS. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or
Contract Owner reports, proxy statements, information statements, solicitations
for voting instructions, applications for exemptions
14
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
(including applications by the Company to the SEC seeking approval of
substitutions of any Fund under Section 26(c) of the 1940 Act), requests for
no-action letters, and all amendments or supplements to any of the above,
prepared by or on behalf of either of them and that mentions the other party by
name. Such drafts shall be provided to the other party sufficiently in advance
of filing such materials with regulatory authorities in order to allow such
other party a reasonable opportunity to review the documents.
4.13. COPIES of FILINGS. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or
Contract Owner reports, proxy statements, information statements, solicitations
of voting instructions, applications for exemptions (including applications by
the Company to the SEC seeking approval of substitutions of any Fund under
Section 26(c) of the 1940 Act), requests for "no-action" letters, and all
amendments or supplements to any of the above, that relate to the Trust, the
Contracts or the Accounts, as the case may be, promptly after the filing by or
on behalf of each such party of such document with the SEC or other regulatory
authorities (it being understood that this provision is not intended to require
the Trust to provide to the Company copies of any such documents prepared,
filed or used by Participating Investors other than the Company and the
Accounts). If the Trust, Distributor or any of their affiliates are named in
the filing(s), the Company shall send the filings to the contacts listed in
Article XII.
4.14. REGULATORY RESPONSES. Each party shall promptly provide to all other
parties copies of responses to no-action requests, notices, orders and other
rulings received by such party with respect to any filing covered by
Section 4.13 of this Agreement. If the Trust, Distributor or any of their
affiliates are named in the regulatory response(s), the Company shall send the
regulatory response(s) to the contacts listed in Article XII.
4.15. COMPLAINTS AND PROCEEDINGS
(a) The Trust and or the Distributor shall immediately notify the Company
of: (i) the issuance by any court or regulatory body of any stop order,
cease and desist order, or other similar order (but not including an order
of a regulatory body exempting or approving a proposed transaction or
arrangement) with respect to the Trust's Registration Statement or the
Prospectus of any Series or Class, (ii) any request by the SEC for any
amendment to the Trust's Registration Statement or the Prospectus of any
Series or Class, (iii) the initiation of any proceedings for that purpose or
for any other purposes relating to the registration or offering of the Trust
Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Trust Shares or any Class or Series in any state or
jurisdiction, including, without limitation, any circumstance in which
(A) such shares are not registered and, in all material respects, issued and
sold in accordance with applicable state and federal law or (B) such law
precludes the use of such shares as an underlying investment medium for the
Contracts. The Trust will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar
15
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
order and, if any such order is issued, to obtain the lifting thereof at the
earliest possible time.
(b) The Company shall immediately notify the Trust and the Distributor of:
(i) the issuance by any court or regulatory body of any stop order, cease
and desist order, or other similar order (but not including an order of a
regulatory body exempting or approving a proposed transaction or
arrangement) with respect to the Contracts' Registration Statement or the
Contracts' Prospectus, (ii) any request by the SEC for any amendment to the
Contracts' Registration Statement or Prospectus, (iii) the initiation of any
proceedings for that purpose or for any other purposes relating to the
registration or offering of the Contracts, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of the Contracts or
any class of Contracts in any state or jurisdiction, including, without
limitation, any circumstance in which such Contracts are not registered,
qualified and approved, and, in all material respects, issued and sold in
accordance with applicable state and federal laws. The Company will make
every reasonable effort to prevent the issuance of any such stop order,
cease and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(c) Each party shall immediately notify the other parties when it
receives notice, or otherwise becomes aware of, the commencement of any
litigation or proceeding against such party or a person affiliated with such
party arising in connection with the Trust or the Accounts or the issuance
or sale of Trust Shares or the Contracts.
(d) The Company shall provide to the Trust and the Distributor any
complaints it has received from Contract Owners pertaining to the Trust or a
Fund, and the Trust and Distributor shall each provide to the Company any
complaints it has received from Contract Owners relating to the Contracts.
4.16. COOPERATION. Each party hereto shall cooperate with the other parties
and all appropriate government authorities (including without limitation the
SEC, FINRA and state securities and insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry by any such authority relating to this Agreement or
the transactions contemplated hereby. However, such access shall not extend to
attorney-client privileged information.
4.17. MONEY MARKET FUND. The Company acknowledges and agrees that Contract
Owners will suffer NO financial loss or other harm in the event that the Trust
BOARD determines to temporarily or permanently use market values rather than
the amortized cost value to value the assets OF the Trust's Money Market Fund,
thereby preventing the Trust from maintaining a constant net asset value per
share for the Money Market Fund Class of Trust Shares.
16
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
ARTICLE V
SALE, ADMINISTRATION AND SERVICING OF THE CONTRACTS
5.1. SALE OF THE CONTRACTS. The Company shall be fully responsible as to the
Trust and the Distributor for the sale and marketing of the Contracts. The
Company shall provide Contracts, the Contracts' and Trust's Prospectuses (or
Summary Prospectuses), Contracts' and Trust's Statements of Additional
Information, and all amendments or supplements to any of the foregoing to
Contract Owners and prospective Contract Owners, all in accordance with
Applicable Law. Without limiting the generality of the foregoing, the Company
shall: (1) enter into and enforce agreements with affiliated and unaffiliated
parties to, and (2) adopt and implement written compliance policies and
procedures reasonably designed to, ensure that:
. all persons offering or selling the Contracts are duly licensed
and registered under Applicable Law,
. all individuals offering or selling the Contracts are duly
appointed agents of the Company and are registered
representatives of a FINRA member broker-dealer,
. each sale of a Contract satisfies all suitability requirements
under Applicable Law,
. the Contracts are offered and sold in compliance with Applicable
Law (including applicable disclosure requirements), and
. Prospectuses are delivered as required by Article IV of this
Agreement and Applicable Law.
5.2. ANTI-MONEY LAUNDERING. The Company shall comply with all Applicable Law
designed to prevent money "laundering", and if required by such laws or
regulations, to share with the Trust information about individuals, entities,
organizations and countries suspected of possible terrorist or money
"laundering" activities in accordance with Section 314(b) of the USA Patriot
Act. In particular, the Company agrees that:
. as part of processing an application for a Contract, it will
verify the identity of applicants and, if an applicant is not a
natural person, will verify the identity of prospective principal
and beneficial owners submitting an application for a Contract,
. as part of its ongoing compliance with the USA Patriot Act, it
will, from time to time, reverify the identity of Contract
Owners, including the identity of principal and beneficial owners
of Contracts held by non- natural persons,
. as part of processing an application for a Contract, it will
verify that no applicant, including prospective principal or
beneficial Contract Owners, is a "specially designated national"
or a person from an embargoed or
17
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
"blocked" country as indicated by the Office of Foreign Asset
Control ("OFAC") list of such persons,
. as part of its ongoing compliance with the USA Patriot Act, it
will, from time to time, reverify that no Contract Owner,
including a principal or beneficial Contract Owners, is a
"specially designated national" or a person from an embargoed or
"blocked" country as indicated by the OFAC list of such persons,
. it will ensure that money tendered to the Trust as payment for
Trust Shares did not originate with a bank lacking a physical
place of business (I.E., a "shell" bank) or from a country or
territory named on the list of high-risk or non-cooperating
countries or jurisdictions published by the Financial Action Task
Force, and
. if any of the foregoing cease to be true, the Trust or its
agents, in compliance with the USA Patriot Act or Bank Secrecy
Act, may seek authority to block transactions in Account units
arising from accounts of one or more such Contract Owners with
the Company or of one or more of the Company's accounts with the
Trust.
The Trust and the Distributor shall comply with all Applicable Laws designed
to prevent money "laundering", and if required by such laws or regulations, to
share with the Company information about individuals, entities, organizations
and countries suspected of possible terrorist or money "laundering" activities
in accordance with Section 314(b) of the USA Patriot Act.
5.3. ADMINISTRATION AND SERVICING OF the CONTRACTS. The Company shall be
fully responsible for the underwriting, issuance, service and administration of
the Contracts and for the administration of the Accounts, including, without
limitation, the calculation of performance information for the Contracts, the
timely payment of Contract Owner redemption requests and processing of Contract
transactions, and the maintenance of a service center, such functions to be
performed in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. The Company shall provide to
Contract Owners all Trust reports, information statements, proxy statements and
other voting instruction solicitation materials, and updated Trust Prospectuses
(or Summary Prospectuses) as required by Applicable Law.
5.4. TRUST PROSPECTUSES AND REPORTS. In order to enable the Company to
fulfill its obligations under this Agreement and Applicable Law, the Trust
shall provide the Company with a copy, in camera-ready form or form otherwise
suitable for printing or duplication of: (a) the Trust's Prospectus for the
Series and Classes listed on Schedules 1B, 2B, and 3B and any supplement
thereto; (b) any Trust proxy soliciting material for such Series or Classes;
and (c) any Trust periodic shareholder reports. The Trust and the Company may
amend this section 5.4, but the Trust reserves the right to require its prior
approval of the printing of the foregoing documents. The Trust shall make
available to the Company on the Trust's website each Statement of Additional
Information and supplement thereto. The Trust shall provide the Company at
least 10 days advance written notice when any such material shall become
available,
18
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
provided, however, that in the case of a supplement, the Trust shall provide
the Company notice reasonable in the circumstances, it being understood that
circumstances surrounding such supplement may not allow for advance notice. The
Company may not alter any material so provided by the Trust or the Distributor
(including, without limitation, presenting or delivering such material in a
different medium such as electronic mail or attachments thereto) without the
prior written consent of the Distributor.
5.5. TRUST ADVERTISING MATERIAL. Neither the Company or any person directly
or indirectly authorized by the Company (including, without limitation,
underwriters, distributors, and sellers of the Contracts) shall use any piece
of advertising, sales literature or other promotional material in which the
Trust, the Distributor, or an affiliate of either is named, except with the
prior written consent of the Trust or the Distributor. The Company shall
furnish to the Trust or the Distributor each such piece of advertising, sales
literature or other promotional material at least ten (10) days prior to its
use. The Trust or the Distributor shall respond to any request for written
consent on a prompt and timely basis, but failure to respond shall not relieve
the Company of the obligation to obtain the prior written consent of the Trust
or the Distributor. After receiving the Trust's or Distributor's consent to the
use of any such material, no further changes may be made without obtaining the
Trust's or Distributor's written consent to such changes. The Trust or
Distributor may at any time in its sole discretion revoke such written consent,
and upon notification of such revocation, the Company shall no longer use the
material subject to such revocation. The Company shall not be responsible for
filing any materials with FINRA.
5.6. CONTRACTS ADVERTISING MATERIAL. The Trust and the Distributor shall not
use any piece of advertising, sales literature or other promotional material in
which the Company, an Account or a Contract is named, except with the prior
written consent of the Company. The Trust or the Distributor shall furnish to
the Company each such piece of advertising, sales literature or other
promotional material at least ten (10) days prior to its use. The Company shall
respond to any request for written consent on a prompt and timely basis, but
failure to respond shall not relieve the Trust or the Distributor of the
obligation to obtain the prior written consent of the Company. After receiving
the Company's consent to the use of any such material, no further changes may
be made by the Trust or Distributor without obtaining the Company's consent to
such changes. The Company may at any time in its sole discretion revoke any
written consent, and upon notification of such revocation, neither the Trust
nor the Distributor shall use the material subject to such revocation. The
Trust and the Distributor shall not be responsible for filing any such
materials with FINRA.
5.7. TRADE NAMES. No party shall use any other party's names, logos,
trademarks or service marks, whether registered or unregistered, without the
prior written consent of such other party, or after written consent therefor
has been revoked. The Company shall not use in advertising, publicity or
otherwise the name of the Trust, Distributor, or any of their affiliates nor
any trade name, trademark, trade device, service xxxx, symbol or any
abbreviation, contraction or simulation thereof of the Trust, Distributor, or
their affiliates without the prior written consent of the Trust or the
Distributor in each instance.
19
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
5.8. ADDITIONAL COVENANTS AND REPRESENTATIONS BY COMPANY. Except with the
prior written consent of the Trust, the Company shall not give any information
or make any representations or statements about the Trust or the Funds nor
shall it authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in proxy statements for the Trust, or in advertisements, sales
literature or other promotional material approved in writing by the Trust or
its designee in accordance with this Article V, or in published reports or
statements of the Trust in the public domain.
The Company represents that advertisements, sales literature or other
promotional material for the Contracts prepared by the Company or its
affiliates are and will be consistent with Applicable Law, including, but not
limited to, FINRA Conduct Rules 2210, 2212, 2213, and 2214.
The Company has adopted and implemented, or shall adopt and implement,
written compliance procedures reasonably designed to ensure that information
concerning the Trust, the Distributor, or any of their affiliates which is
intended for use by brokers or agents selling the Contracts (I.E., information
that is not intended for distribution to Contract Owners or prospective
Contract Owners) is used solely in the manner so intended. Neither the Trust,
the Distributor, nor any of their affiliates shall be liable for any losses,
damages, or expenses relating to the improper use of such "broker only"
materials by agents of the Company or its affiliates who are unaffiliated with
the Trust or the Distributor.
The parties agree that this Section 5.8 is not intended to imply that the
Company is an underwriter or distributor of the Trust's shares or a dealer in
the Trust's shares.
5.9. ADDITIONAL COVENANTS AND REPRESENTATIONS BY TRUST. Except with the
prior written consent of the Company, the Trust shall not give any information
or make any representations on behalf of the Company or concerning the Company,
the Accounts or the Contracts other than the information or representations
contained in the appropriate Contract Registration Statement or Contract
Prospectus or in published reports of or statements by the Company or the
Accounts which are in the public domain or in advertisements, sales literature
or other promotional material approved in writing by the Company in accordance
with this Article V.
The Trust represents that advertisements, sales literature or other
promotional material for the Trust prepared by the Distributor or its
affiliates in connection with the sale of the Contracts are and will be
consistent with Applicable Law, including, but not limited to, FINRA Conduct
Rules 2210, 2212, 2213, and 2214.
The Trust or the Distributor shall xxxx information produced by or on behalf
of the Trust which is intended for use by brokers or agents selling the
Contracts (I.E., information that is not intended for distribution to Contract
Owners or prospective Contract Owners) "FOR BROKER
20
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
USE ONLY," and neither the Company nor any of its affiliates shall be liable
for any losses, damages, or expenses arising on account of the use by brokers
of such information with third parties in the event that it is not so marked.
5.11. ADVERTISING. For purposes of this Article V, the phrase "advertising,
sales literature or other promotional material" includes, but is not limited
to, any material constituting sales literature, advertising, or communications
with the public under FINRA Conduct rules, the 1940 Act or the 1933 Act. Such
material includes, without limitation, the following materials for prospective
Contract Owners, existing Contract Owners, wholesalers and other
broker-dealers, rating or ranking agencies, or the press:
. 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, websites, or other public media),
. sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, electronic mail, 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, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE VI
COMPLIANCE WITH CODE
6.1. SECTION 817(H). The Trust, on behalf of each Fund, will comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 thereunder, relating
to the diversification requirements for variable annuity, endowment, or life
insurance contracts, and any amendments or other modifications to such Section
and Regulation or successors thereto, to the extent applicable to the Fund as
an investment company underlying the Account. The Trust shall notify the
Company immediately upon having a reasonable basis for believing that a Fund
has ceased to so comply and will not be able to comply within the grace period
afforded by Treasury Regulation 1.817-5.
6.2. SUBCHAPTER M. The Trust shall maintain the qualification of each Fund
as a regulated investment company (under Subchapter M of the Code or any
successor or similar provision), and the Trust shall notify the Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to so qualify and will not be able to qualify within the grace period afforded
by Section 851 of the Code.
21
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
6.3. COMPANY AND CONTRACTS. The Company represents and warrants that it is a
life insurance company within the meaning of Section 816(a) of the Code. The
Company shall ensure that at the time each Contract is issued it is a variable
contract (as defined in Section 817(D) of the Code) which is treated as a life
insurance, endowment, OR annuity contract under applicable provisions of the
Code, and that as long as the Accounts hold shares of the Trust the Company
shall maintain such treatment for each outstanding Contract. The Company shall
notify the Trust and the Distributor immediately upon having any basis for
believing that the Contracts will not be treated as life insurance, endowment,
or annuity contracts under applicable provisions of the Code.
6.4 REGULATION 1.817-5(F). The Company shall ensure that no Fund fails to
remain eligible for "look-through" treatment under Treasury Regulation
1.817-5(f) by reason of a current or future failure of the Company, the
Accounts or the Contracts to comply with any applicable requirements of the
Code or Treasury Regulations. The Company shall notify the Trust and the
Distributor immediately upon having any basis for believing that the failure of
the Company, the Accounts or the Contracts to comply with any applicable
requirements of the Code or Treasury Regulations could render a Fund
ineligible, or jeopardize a Fund's eligibility, for "look-through" treatment
under Treasury Regulation 1.817-5(f). In the event of such a failure, the
Company shall take all necessary steps to cure any such failure, including, if
necessary, obtaining a waiver or closing agreement with respect to such failure
from the U.S. Internal Revenue Service at the Company's expense.
6.5 MODIFIED ENDOWMENT CONTRACTS. The Company shall ensure that any
Prospectus offering a variable life insurance Contract in circumstances where
it is reasonably probable that such Contract would be a "modified endowment
contract," as that term is defined in Section 7702A of the Code, will identify
such Contract as a modified endowment contract.
ARTICLE VII
EXPENSES
7.1. EXPENSES. All expenses incident to each party's performance under this
Agreement (including expenses expressly assumed by such party pursuant to this
Agreement) shall be borne by such party to the extent permitted by law, except
as otherwise provided below or in a separate agreement.
7.2. TRUST EXPENSES. Expenses incident to the Trust's performance of its
duties and obligations under this Agreement include, but are not limited to,
the costs of:
(a) registration and qualification of the Trust Shares under the federal
securities laws;
(b) preparation and filing with the SEC of the Trust's Prospectuses,
Summary Prospectuses, Statement of Additional Information, Registration
Statement, information
22
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
statements, proxy statements and other proxy materials, and shareholder
reports, and preparation of a "camera-ready" copy of the foregoing;
(c) preparation of all statements and notices required by Applicable Law;
(d) provision and maintenance of the Fund Documents Web Site;
(e) printing of all information statements, proxy statements and other
proxy materials, shareholder reports, Prospectuses, Summary Prospectuses and
other documents required to be provided by the Trust to its existing
shareholders, and providing sufficient copies of the same to the Company for
distribution to Contract Owners then invested in Accounts that hold Trust
Shares; provided, however, that if the Company prints copies of a Trust
Prospectus (or portions thereof) or Summary Prospectus as part of a larger
document containing Prospectuses of other investment companies, any expense
obligation of the Trust shall be limited only to its share of the cost of
printing the document. For this purpose, the Trust's share shall be the
percentage of the total cost of the document represented by the ratio that
the number of pages of the Trust's Prospectus or Summary Prospectus bears to
the total number of pages in the document;
(f) all taxes on the issuance or transfer of Trust Shares;
(g) payment of all expenses of operating the Trust, including, without
limitation, expenses relating to fees for custody, auditing, transfer agency
services, legal services, investment management services, and insurance
coverage, as well as Trustee compensation and 1940 Act Rule 24f-2 fees in
connection with sales of Trust Shares to Schedule 2 Accounts, Schedule 3
Accounts, and Qualified Persons;
(h) payment of any expenses permitted to be paid or assumed by the Trust
pursuant to a Rule 12b-1 Plan and/or shareholder service plan; and
(i) provision or printing of Trust proxy statements and other proxy
materials required in connection with the Company's obligation to solicit
voting instructions from Contract Owners.
7.3. COMPANY EXPENSES. Expenses incident to the Company's performance of its
duties and obligations under this Agreement include, but are not limited to,
the costs of:
(a) registration and qualification of the Schedule 1 Contracts under
Applicable Law;
(b) preparation of Contract Prospectuses, preparation of Registration
Statements with the SEC for Schedule 1 Contracts, payment of registration
fees for Schedule 1 Contracts pursuant to Rule 24f-2 under the 1940 Act;
23
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
(c) the sale, marketing and distribution of the Contracts, including
compensation for Contract sales, printing and delivery of Contract
Prospectuses to current and prospective Contract owners, and printing and
delivery of the Trust's Prospectuses or Summary Prospectuses to prospective
Contract Owners;
(d) provision and maintenance of internet websites other than the Fund
Documents Web Site;
(e) administration of the Contracts;
(f) payment of all expenses of operating the Accounts; and
(g) preparation, printing and delivery of all statements and notices to
Contract Owners required by Applicable Law other than those paid for by the
Trust.
7.4. OTHER EXPENSES AND PAYMENTS. The Trust and the Distributor shall pay no
fee or other compensation to the Company under this Agreement. Each party,
however, shall, in accordance with the allocation of expenses specified in this
Agreement, reimburse other parties for expenses paid by such other parties, but
allocated to it. In addition, nothing herein shall prevent the parties from
otherwise agreeing to perform, and arranging for appropriate compensation for,
services relating to the Trust, the Distributor, the Company or the Accounts.
Notwithstanding anything else in this Agreement, pursuant to any Rule 12b-1
Plan adopted by the Trust, and as contemplated by Article 3.2(g) of this
Agreement, the Trust or any Series or Class thereof may pay the Distributor,
and the Distributor may pay the principal underwriter or distributor of one or
more classes of Contracts, for activities primarily intended to result in the
sale of Trust Shares to the Accounts through which such Contracts are issued.
Likewise, pursuant to any shareholder service plan adopted and implemented by
the Trust or any Series or Class thereof under Rule 12b-1 of the 1940 Act or
otherwise, the Trust or the appropriate Series or Class may pay the Distributor
and the Distributor may pay the principal underwriter or distributor of one or
more classes of Contracts, or the Company, for activities related to personal
service and/or maintenance of Contract Owner accounts and/or administration
services, as permitted by such plan.
ARTICLE VIII
POTENTIAL CONFLICTS
8.1. SEC ORDER. The parties to this Agreement acknowledge that the Trust has
obtained the SEC Order granting exemptions from various provisions of the 1940
Act and the rules thereunder to Participating Accounts supporting variable life
insurance policies to the extent necessary to permit them to hold Trust Shares
when Trust Shares also are sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and other Qualified Persons (as defined in
24
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
Section 1.18 hereof). The relief provided by the SEC Order is conditioned upon
the Trust and each Participating Insurance Company complying with conditions
and undertakings substantially as provided in this Article VIII. The Trust and
the Distributor reserve the right to determine that one or more provisions of
this Article VIII are no longer applicable, and in that event will notify the
Company to that effect. Upon receipt of such notice by the Company, this
Agreement shall be deemed amended to eliminate the provisions of Article VIII
specified in the notice.
8.2. COMPANY MONITORING REQUIREMENTS. The Company will monitor its
operations and those of the Trust for the purpose of identifying any material
irreconcilable conflicts or potential material irreconcilable conflicts between
or among the interests of Participating Plans, Product Owners of variable life
insurance policies and Product Owners of variable annuity contracts.
8.3. COMPANY REPORTING REQUIREMENTS. The Company shall report any conflicts
or potential conflicts to the Trust Board and will provide the Trust Board, at
least annually, with all information reasonably necessary for the Trust Board
to consider any issues raised by such existing or potential conflicts or by the
conditions and undertakings required by the Exemptive Order. The Company also
shall assist the Trust Board in carrying out its obligations including, but not
limited to: (a) informing the Trust Board whenever it disregards Contract Owner
voting instructions with respect to variable life insurance policies, and
(b) providing such other information and reports as the Trust Board may
reasonably request. The Company will carry out these obligations with a view
only to the interests of Contract Owners.
8.4. TRUST BOARD MONITORING AND DETERMINATION. The Trust Board shall monitor
the Trust for the existence of any material irreconcilable conflicts between or
among the interests of Participating Plans, Product Owners of variable life
insurance policies and Product Owners of variable annuity contracts and
determine what action, if any, should be taken in response to those conflicts.
A majority vote of Trustees who are not interested persons of the Trust as
defined in the 1940 Act (the "disinterested trustees") shall represent a
conclusive determination as to the existence of a material irreconcilable
conflict between or among the interests of Product Owners and Participating
Plans and as to whether any proposed action adequately remedies any material
irreconcilable conflict. The Trust Board shall give prompt written notice to
the Company and Participating Plan of any such determination. Minutes of the
meetings of the Trust Board, or other appropriate records of the Trust, shall
record all reports received by the Board regarding such conflicts and all
actions taken by the Board in response.
8.5. UNDERTAKING TO RESOLVE CONFLICT. In the event that a material
irreconcilable conflict of interest arises between Product Owners of variable
life insurance policies or Product Owners of variable annuity contracts and
Participating Plans, the Company will, at its own expense, take whatever action
is necessary to remedy such conflict as it adversely affects Contract Owners up
to and including: (1) establishing a new registered management investment
company, and (2) withdrawing assets from the Trust attributable to reserves for
the Contracts subject to the conflict and reinvesting such assets in a
different investment medium (including another Fund) or submitting the question
of whether such withdrawal should be implemented to
25
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
a vote of all affected Contract Owners, and, as appropriate, segregating the
assets supporting the Contracts of any group of such owners that votes in favor
of such withdrawal, or offering to such owners the option of making such a
change. The Company will carry out the responsibility to take the foregoing
action with a view only to the interests of Contract Owners.
8.6. WITHDRAWAL. If a material irreconcilable conflict arises because of the
Company's decision to disregard the voting instructions of Contract Owners of
variable life insurance policies and that decision represents a minority
position or would preclude a majority vote at any Fund shareholder meeting,
then, if Trust Board so requests, the Company will redeem the shares of the
Trust to which the disregarded voting instructions relate and terminate this
Agreement with respect to the Account through which such Contracts were issued.
No charge or penalty, however, will be imposed in connection with such a
redemption.
8.7. EXPENSES ASSOCIATED WITH REMEDIAL ACTION. In no event shall the Trust
be required to bear the expense of establishing a new funding medium FOR any
Contract. The Company shall not be required by this Article VIII to establish a
new funding medium for any Contract if an offer to do so has been declined by
vote of a majority of the Contract Owners materially adversely affected by the
irreconcilable material conflict.
8.8. SUCCESSOR RULES. IF and to the extent that Rule 6e-2 and Rule 6e-3(T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provisions of the 1940 Act or the rules promulgated thereunder with respect to
mixed and shared funding on terms and conditions materially different from
those contained in the SEC Order, then: (a) the Trust and/or the Company, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the
extent such rules are applicable, and (b) Sections 8.2 through 8.7 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.
8.9. MONEY MARKET FUND. The Company acknowledges and agrees that the Trust's
failure to maintain a constant net asset value per share for the Money Market
Fund Class of Trust Shares, as contemplated by Section 4.17 of this Agreement,
will not give rise to a material irreconcilable material conflict between the
interests of Contract Owners or any class of Contract Owners and the interests
of any other class of Product Owners, or Product Owners generally.
ARTICLE IX
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to, and
shall, indemnify and hold harmless the Trust, the Distributor and each person
who controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any other
Participating Insurance Companies or Qualified Persons) and any officer,
trustee, partner, director, employee or agent of the foregoing, against any and
all losses,
26
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they or any of them may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any material
fact or alleged untrue statement of material fact contained in a Contract
Registration Statement, Contract Prospectus, sales literature or other
promotional material for the Contracts or the Contracts themselves (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission was
made in reliance upon and in conformity with information furnished in
writing to the Company by the Trust or the Distributor for use in a Contract
Registration Statement, Contract Prospectus or in the Contracts or sales
literature or promotional material for the Contracts (or any amendment or
supplement to any of the foregoing) or otherwise for use in connection with
the sale of the Contracts or Trust Shares; or
(b) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Trust Registration Statement, any Prospectus
for Series or Classes or sales literature or other promotional material of
the Trust (or any amendment or supplement to any of the foregoing), or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made, if such statement or omission was
made in reliance upon and in conformity with information furnished to the
Trust or Distributor in writing by or on behalf of the Company; or
(c) arise out of or are based upon any wrongful conduct of, or violation
of Applicable Law by, the Company or persons under its control or subject to
its authorization, including without limitation, any broker-dealers or
agents authorized to sell the Contracts, with respect to the sale, marketing
or distribution of the Contracts or Trust Shares, including, without
limitation, any impermissible use of broker-only material, unsuitable or
improper sales of the Contracts or unauthorized representations about the
Contracts or the Trust; or
(d) arise as a result of any material failure by the Company or persons
under its control (or subject to its authorization) to provide services,
furnish materials or make payments as required under this Agreement; or
(e) arise out of any material breach by the Company or persons under its
control (or subject to its authorization) of this Agreement; or
27
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
(f) any breach of any warranties contained in Article III hereof, any
failure to transmit a request for redemption or purchase of Trust Shares or
payment therefor on a timely basis in accordance with the procedures set
forth in Article II, or any unauthorized use of the names or trade names of
the Trust or the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage, expense or liability is caused
by the wilful misfeasance, bad faith, gross negligence or reckless disregard
of duty by the party seeking indemnification.
9.2. INDEMNIFICATION BY THE TRUST. The Trust hereby agrees to, and shall,
indemnify and hold harmless the Company and each person who controls or is
affiliated with the Company within the meaning of such terms under the 1933 Act
or 1940 Act and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any material
fact or alleged untrue statement of material fact contained in the Trust
Registration Statement, any Prospectus for Series or Classes or sales
literature or other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission was made in reliance
upon and in conformity with information furnished in writing by the Company
to the Trust or the Distributor for use in the Trust Registration Statement,
Trust Prospectus or sales literature or promotional material for the Trust
(or any amendment or supplement to any of the foregoing) or otherwise for
use in connection with the sale of the Contracts or Trust Shares; or
(b) arise out of any untrue statement of a material fact or alleged
untrue statement of material fact contained in a Contract Registration
Statement, Contract Prospectus or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made, if such statement or
omission was made in strict conformity with and in reasonable reliance upon
information furnished in writing by the Trust to the Company; or
(c) arise out of or are based upon wrongful conduct of the Trust or its
Trustees or officers with respect to the sale of Trust Shares; or
28
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
(d) arise as a result of any material failure by the Trust to provide
services, furnish materials or make payments as required under the terms of
this Agreement; or
(e) arise out of any material breach by the Trust of this Agreement
(including any breach of Section 6.1 of this Agreement and any warranties
contained in Article III hereof);
it being understood that in no way shall the Trust be liable to the Company
with respect to any violation of insurance law, compliance with which is a
responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Trust in accordance with Section 4.9 hereof.
This indemnification is in addition to any liability that the Trust may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the
wilful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification.
9.3. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor hereby agrees to,
and shall, indemnify and hold harmless the Company and each person who controls
or is affiliated with the Company within the meaning of such terms under the
1933 Act or 1940 Act and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, expenses or liabilities:
(a) arise out of or are based upon any untrue statement of any material
fact or alleged untrue statement of material fact contained in the Trust
Registration Statement, any Prospectus for Series or Classes or sales
literature or other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission was made in reliance
upon and in conformity with information furnished in writing by the Company
to the Trust or Distributor for use in the Trust Registration Statement,
Trust Prospectus or sales literature or promotional material for the Trust
(or any amendment or supplement to any of the foregoing) or otherwise for
use in connection with the sale of the Contracts or Trust Shares; or
(b) arise out of any untrue statement of a material fact or alleged
untrue statement of material fact contained in a Contract Registration
Statement, Contract Prospectus or sales literature or other promotional
material for the Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
29
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
misleading in light of the circumstances in which they were made, if such
statement or omission was made in strict conformity with and in reasonable
reliance upon information furnished in writing by the Distributor to the
Company; or
(c) arise out of or are based upon wrongful conduct of the Distributor or
persons under its control with respect to the sale of Trust Shares; or
(d) arise as a result of any material failure by the Distributor or
persons under its control to provide services, furnish materials or make
payments as required under the terms of this Agreement; or
(e) arise out of any material breach by the Distributor or persons under
its control of this Agreement (including any breach of Section 6.1 of this
Agreement and any warranties contained in Article III hereof);
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law, compliance with which
is a responsibility of the Company under this Agreement or otherwise or as to
which the Company failed to inform the Distributor in accordance with
Section 4.9 hereof. This indemnification is in addition to any liability that
the Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is caused
by the wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
9.4. RULE OF CONSTRUCTION. It is the parties' intention that, in the event
of an occurrence for which the Trust has agreed to indemnify the Company, the
Company shall seek indemnification from the Trust only in circumstances in
which the Trust is entitled to seek indemnification from a third party with
respect to the same event or cause thereof.
9.5. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article IX OF notice OF the
commencement OF any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article IX ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing OF the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under this Article
IX, except to the extent that the omission results in a failure of actual
notice to the indemnifying party and such indemnifying party is damaged solely
as a result of the failure to give such notice. The indemnifying party, upon
the request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and
any others the indemnifying party may designate in such proceeding and shall
pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (a) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (b) the named parties to any such proceeding (including any impleaded
30
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article IX. The
indemnification provisions contained in this Article IX shall survive any
termination of this Agreement.
ARTICLE X
RELATIONSHIP OF THE PARTIES; TERMINATION
10.1. RELATIONSHIP OF PARTIES. The Company is to be an independent
contractor vis-a-vis the Trust, the Distributor, or any of their affiliates for
all purposes hereunder and has no authority to act for or represent any of them
(except to the limited extent the Company acts as designee of the Trust
pursuant to Section 2.3(a) of this Agreement). In addition, no officer or
employee of the Company shall be deemed to be an employee or agent of the
Trust, Distributor, or any of their affiliates. The Company does not act as an
"underwriter" or "distributor" of Trust Shares, as those terms variously are
used in the 1940 Act, the 1933 Act, and rules and regulations thereunder.
Likewise, the Company is not a "transfer agent" of the Trust as that term is
used in the 1934 Act and rules thereunder. Consistent with the foregoing, the
Company is not a "transfer agent" or "administrator" to the Trust as those
terms are referenced in Rule 38a-1 under the 1940 Act.
10.2. NON-EXCLUSIVITY AND NON-INTERFERENCE. The parties hereto acknowledge
that the arrangement contemplated by this Agreement is not exclusive; the Trust
Shares may be sold to other insurance companies and investors (subject to
Section 2.8 hereof) and the cash value of the Contracts may be invested in
other investment companies, provided, however, that until this Agreement is
terminated pursuant to this Article X:
(a) the Company shall promote the Trust and the Funds made available
hereunder on the same basis as other funding vehicles available under the
Contracts;
(b) the Company shall not, without prior notice to the Distributor
(unless otherwise required by Applicable Law), take any action to operate
Schedule 1 Account as a management investment company under the 1940 Act;
(c) the Company shall not, without the prior written consent of the
Distributor (unless otherwise required by Applicable Law), solicit, induce
or encourage Contract Owners to change or modify the Trust to change the
Trust's distributor or investment
31
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
adviser, to transfer or withdraw Contract Values allocated to a Fund, or to
exchange their Contracts for contracts not allowing for investment in the
Trust;
(d) the Company shall not substitute another investment company for one
or more Funds without providing: (i) written notice to the Distributor at
least 120 days in advance of such substitution; and (ii) copies of any
application by the Company to the SEC seeking approval of such substitution
as required by Section 4.13 of this Agreement; and
(e) the Company shall not redeem Trust Shares attributable to Contract
Owner investments except as necessary to facilitate Contract Owner
transactions, payment of expenses by Accounts, and routine Contract
processing, or as permitted by any SEC order issued pursuant to Section
26(c) of the 1940 Act.
10.3. TERMINATION OF AGREEMENT. This Agreement shall not terminate until:
(a) the Trust is dissolved, liquidated, or merged into another entity, or
(b) as to any Fund that has been made available hereunder, the Account no
longer invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends to
invest in such Fund. However, certain obligations of, or restrictions on, the
parties to this Agreement may terminate as provided in Sections 10.4 through
10.6 and the Company may be required to redeem Trust Shares pursuant to
Section 10.7 or in the circumstances contemplated by Article VIII. Articles III
and IX and Section 10.8 shall survive any termination of this Agreement.
10.4. TERMINATION OF OFFERING OF TRUST SHARES. The obligation of the Trust
and the Distributor to make Trust Shares available to the Company for purchase
pursuant to Article II of this Agreement shall terminate at the option of the
Distributor upon written notice to the Company as provided below:
(a) upon institution of formal proceedings against the Company, or the
Distributor's reasonable determination that institution of such proceedings
is being considered by FINRA, the SEC, the insurance commission of any state
or any other regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the operation of the
Account, the administration of the Contracts or the purchase of Trust
Shares, or an expected or anticipated ruling, judgment or outcome which
would, in the Distributor's reasonable judgment exercised in good faith,
materially impair the Company's or Trust's ability to meet and perform the
Company's or Trust's obligations and duties hereunder, such termination
effective upon 15 days prior written notice;
(b) in the event any of the Contracts are not registered, issued or sold
in accordance with applicable federal and/or state law, such termination
effective immediately upon receipt of written notice;
32
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
(c) if the Distributor shall determine, in its sole judgment exercised in
good faith, that either (I) the Company shall have suffered a material
adverse change in its business or financial condition or (2) the Company
shall have been the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and operations of either
the Trust or the Distributor, such termination effective upon 30 days prior
written notice;
(d) if the Distributor suspends or terminates the offering of Trust
Shares of any Series or Class to all Participating Investors or only
designated Participating Investors, if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of
the Distributor acting in good faith, suspension or termination is necessary
in the best interests of the shareholders of any Series or Class (I.E.,
Product Owners indirectly invested in any Series or Class), such notice
effective immediately upon receipt of written notice, it being understood
that a lack of Participating Investor interest in a Series or Class may be
grounds for a suspension or termination as to such Series or Class and that
a suspension or termination shall apply only to the specified Series or
Class;
(e) upon the Company's assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Account to another
insurance company pursuant to an assumption reinsurance agreement) unless
the Trust consents thereto, such termination effective upon 30 days prior
written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction of the Trust
within 10 days after written notice of such breach has been delivered to the
Company, such termination effective upon expiration of such 10-day period; or
(g) upon the determination of the Trust's Board to dissolve, liquidate or
merge the Trust as contemplated by Section 10.3(a), upon termination of the
Agreement pursuant to Section 10.3(b), or upon notice from the Company
pursuant to Section 10.5 or 10.6, such termination pursuant hereto to be
effective upon 15 days prior written notice.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to Contracts issued after the exercise of
the option and the Distributor shall continue to make Trust Shares available to
the extent necessary to permit owners of Contracts in effect on the effective
date of such termination (hereinafter referred to as "Existing Contracts") to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts.
10.5. TERMINATION OF INVESTMENT IN A FUND. THE Company may elect to cease
investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment OR the Account's investment in a Fund,
subject to compliance with Applicable
33
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
Law, upon written notice to the Trust within 15 days of the occurrence of any
of the following events (unless provided otherwise below):
(a) the Trust informs the Company pursuant to Section 4.9 that it will
not cause such Fund to comply with investment restrictions as requested by
the Company and the Trust and the Company are unable to agree upon any
reasonable alternative accommodations;
(b) shares in such Fund are not reasonably available to meet the
requirements of the Contracts as determined by the Company (including any
non-availability as a result of notice given by the Distributor pursuant to
Section 10.4(d)), and the Distributor, after receiving written notice from
the Company of such non-availability, fails to make available, within 10
days after receipt of such notice, a sufficient number of shares in such
Fund or an alternate Fund to meet the requirements of the Contracts;
(c) such Fund fails to meet the diversification requirements specified in
Section 817(h) of the Code and any regulations thereunder and the Trust,
upon written request, fails to provide reasonable assurance that it will
take action to cure or correct such failure; or
(d) such Fund fails to qualify as a regulated investment company under
Sub-Section 851 of the Code, or any successor provision, or if the Company
reasonably believes that the Fund may fail to so qualify and the Trust, upon
written request, fails to provide reasonable assurance that it will correct
the failure within 30 days.
Such termination shall apply only as to the affected Fund and shall not apply
to any other Fund in which the Company or the Account invests.
10.6. TERMINATION OF INVESTMENT IN THE TRUST. The Company may elect to cease
investing in all Series or Classes of the Trust made available hereunder,
promoting the Trust as an investment option under the Contracts, or withdraw
its investment or the Accounts' investment in the Trust, subject to compliance
with applicable law, upon written notice to the Trust within 15 days of the
occurrence of any of the following events (unless provided otherwise below):
(a) upon institution of formal proceedings against the Trust or the
Distributor (but only with regard to the Trust) by the FINRA, the SEC or any
state securities or insurance commission or any other regulatory body; or
(b) if the Trust or Distributor is in material breach of a provision of
this Agreement, which breach has not been cured to the satisfaction of the
Company within 10 days after written notice of such breach has been
delivered to the Trust or the Distributor, as the case may be.
34
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
10.7. COMPANY REQUIRED TO REDEEM. The parties understand and acknowledge
that it is essential for compliance with Section 817(h) of the Code that the
Contracts qualify as annuity contracts or life insurance policies, as
applicable, under the Code. Accordingly, if any of the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Trust reasonably believes that any such Contracts may fail
to so qualify, the Trust shall have the right to require the Company to redeem
Trust Shares attributable to such Contracts upon notice to the Company and the
Company shall so redeem such Trust Shares in order to ensure that the Trust
complies with the provisions of Section 817(h) of the Code applicable to
ownership of Trust Shares. Notice to the Company shall specify the period of
time the Company has to redeem the Trust Shares or to make other arrangements
satisfactory to the Trust and its counsel, such period OF time to be determined
with reference to the requirements of Section 817(h) of the Code. In addition,
the Company may be required to redeem Trust Shares pursuant to action taken or
request made by the Trust Board in accordance with the Exemptive Order
described in Article VIII or any conditions or undertakings set forth or
referenced therein, or other SEC rule, regulation or order that may be adopted
after the date hereof. The Company agrees to redeem shares in the circumstances
described herein and to comply with applicable terms and provisions. Also, in
the event that the Distributor suspends or terminates the offering of a Series
or Class pursuant to Section 10.4(d) of this Agreement, the Company, upon
request by the Distributor, will cooperate in taking appropriate action to
withdraw the Account's investment in the respective Fund.
10.8. CONFIDENTIALITY. All "Confidential Information" (as defined in this
section) supplied by one party to the another party in connection with the
negotiation or carrying out of this Agreement shall remain the property of the
party providing such information and shall be kept confidential by the
receiving party or parties except: (a) as may be required by Applicable Law,
(b) as authorized in writing by the party providing the information, or (c) in
the event that such information is otherwise made public. Each party agrees to
take all reasonable precautions to prevent any unauthorized disclosure of
Confidential Information. Confidential Information means (individually or
collectively) proprietary information of the parties to this Agreement,
including but not limited to, their inventions, "know-how", trade secrets,
business affairs, prospect lists, product designs, product plans, business
strategies, finances, fee structures, etc. Without limiting the generality of
the foregoing, Confidential Information includes: (a) information that the
disclosing party designates in writing is confidential or proprietary (b) any
non-public personal information or personally identifiable financial
information about any Contract Owner or prospective Contract Owner, and
(c) information that a reasonable business-person would assume to be
confidential or proprietary. Notwithstanding the foregoing, Confidential
Information does not include information provided by the Company to the
Distributor pursuant to section 2.9 of this Agreement.
35
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
ARTICLE XI
APPLICABILITY TO NEW ACCOUNTS AND NEW CONTRACTS
The parties to this Agreement may amend the schedules to this Agreement from
time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company and Accounts therefor investing in the Trust. Such
amendments may be made effective by executing the form of amendment included on
each schedule attached hereto. The provisions of this Agreement shall be
equally applicable to each such class of Contracts, Series, Class or Account,
as applicable, effective as of the date of amendment of such Schedule, unless
the context otherwise requires. The parties to this Agreement may amend this
Agreement from time to time by written agreement signed by all of the parties.
ARTICLE XII
NOTICE, REQUEST OR CONSENT
Any notice, request or consent to be provided pursuant to this Agreement is
to be made in writing and shall be given:
If to the Trust:
Xxxxxxxx Xxxxx
Secretary
Xxxxxxx Sachs Variable Insurance Trust
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
If to the Distributor:
Xxxxx XxXxxxxx
Xxxxxxx Sachs & Co.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
If to the Company:
The Variable Annuity Life Insurance Company
0000 Xxxxx Xxxxxxx, X0-00
Xxxxxxx, XX 00000
Attn: General Counsel
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt
requested or by overnight delivery with a nationally recognized courier, and
shall be effective upon receipt. Notices pursuant to the provisions of Article
II may be sent by facsimile to the person designated in writing for such
notices.
36
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
ARTICLE XIII
MISCELLANEOUS
13.1. INTERPRETATION. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the state of
Delaware, without giving effect to the principles of conflicts of laws, subject
to the following rules:
(a) This Agreement shall be subject to Applicable Law and the terms
hereof shall be limited, interpreted and construed in accordance
therewith.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
(d) The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.2. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which together shall constitute one and the same
instrument.
13.3. NO ASSIGNMENT. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or the
Trust without the prior written consent of the other parties.
13.4. DECLARATION OF TRUST. A copy of the Declaration of Trust of the Trust
is on file with the Secretary of State OF the state OF Delaware, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as trustees, and is not binding upon any of the Trustees, officers or
shareholders of the Trust individually, but binding only upon the assets and
property of the Trust. NO Series of the Trust shall be liable for the
obligations of any other Series of the Trust.
13.5. CHOICE OF LAW. This Agreement and its enforcement, and each
transaction entered into hereunder and all matters arising in connection with
this Agreement and transactions hereunder shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving effect to
principles of conflicts of law. To the extent that any controversy under this
Agreement is not resolved through arbitration, the Company consents to the
exclusive
37
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
York, without giving effect to principles of conflicts of law. To the extent
that any controversy under this Agreement is not resolved through arbitration,
the Company consents to the exclusive jurisdiction of, and venue in, the state
or federal court of competent jurisdiction in New York County, State of New
York, and the Company agrees that it waives any right to a jury trial to the
extent that the applicable law allows it to waive a jury trial.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
XXXXXXX SACHS VARIABLE INSURANCE TRUST
(Trust)
Date: 4/29/16 By: /s/ Xxxx Xxxxxx
------------------------------------------------
Name: Xxxx Xxxxxx
Title: M.D.
XXXXXXX, XXXXX & CO.
(Distributor)
Date: 4/29/16 By: /s/ Xxxx Xxxxxx
------------------------------------------------
Name: Xxxx Xxxxxx
Title: M.D.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
(Company)
Date: 5/2/16 By: /s/ Xxxx X. Xxxx
------------------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
38
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
SCHEDULE 1
SCHEDULE 1A
SEPARATE ACCOUNTS OF THE COMPANY REGISTERED UNDER THE 1940 ACT AS UNIT
INVESTMENT TRUSTS
The following separate accounts of the Company are subject to the Agreement:
Date Established by
Board of Directors of SEC 1940 Act Type of Product
Name of Account the Company Registration Number Supported by Account
------------------------ --------------------- ------------------- --------------------
VALIC Separate Account A April 18, 1979 811-03240 Variable Annuity
SCHEDULE 1B
VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE CONTRACTS REGISTERED
UNDER THE SECURITIES ACT OF 1933
The following Contracts are subject to the Agreement:
Available Funds/Share 1933 Act Type of Product
Name of Contract Classes Registration Number Supported by Account
------------------------ --------------------- ------------------- --------------------
VALIC Polaris Platinum Xxxxxxx Sachs VIT 333-201800 Variable Annuity
Elite VA Government Money
Market Fund/Service
Class
VALIC Polaris Choice Xxxxxxx Xxxxx VIT 333-201803 Variable Annuity
Elite VA Government Money
Market Fund/Service
Class
39
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
[FORM OF AMENDMENT TO SCHEDULE 1A]
Effective as of ,the following separate accounts of the Company are hereby
added to this Schedule 1A and made subject to the Agreement:
Date Established by
Board of Directors of SEC 1940 Act Type of Product
Name of Account the Company Registration Number Supported by Account
------------------- --------------------- ------------------- --------------------
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend
this Schedule 1A in accordance with Article XI of the Agreement.
/s/ Xxxx X. Xxxx
----------------------------------- -----------------------------------
Xxxxxxx Xxxxx Variable Insurance Trust The Variable Annuity Life Insurance Company
Name: Name: Xxxx X. Xxxx
Title: Title:
-----------------------------------
Xxxxxxx, Xxxxx & Co.
Name:
Title:
40
DocuSign Envelope ID: 67CCC76D-83BE-44B9-82F8-888875986E40
[FORM OF AMENDMENT TO SCHEDULE 1B]
Effective as of , the following Contracts are hereby added to this Schedule
1B and made subject to the Agreement:
Available Funds/Share 1933 Act Type of Product
Name of Contract Classes Registration Number Supported by Account
------------------- --------------------- ------------------- --------------------
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend
this Schedule 1B in accordance with Article XI of the Agreement.
/s/ Xxxx X. Xxxx
----------------------------------- -----------------------------------
Xxxxxxx Xxxxx Variable Insurance Trust The Variable Annuity Life Insurance Company
Name: Name: Xxxx X. Xxxx
Title: Title:
-----------------------------------
Xxxxxxx, Xxxxx & Co.
Name:
Title:
41
