FUND PARTICIPATION AGREEMENT
among
XXXXXXX RESPONSIBLY INVESTED BALANCED PORTFOLIO
and
XXXXXXX ASSET MANAGEMENT COMPANY, INC.
and
AETNA INSURANCE COMPANY OF AMERICA
Aetna Insurance Company of America (the "Company"), XXXXXXX RESPONSIBLY
INVESTED BALANCED PORTFOLIO (the "Fund") and XXXXXXX ASSET MANAGEMENT COMPANY,
INC. (the "Adviser") hereby agree to an arrangement whereby the Fund shall be
made available to serve as underlying investment media for Variable Annuity or
Variable Life Contracts ("Contracts") to be issued by the Company.
1. Establishment of Accounts; Availability of Fund.
(a) The Company represents that it has established Variable Annuity
Accounts I and II and may establish such other accounts as may be set
forth in Schedule A attached hereto and as may be amended from time to
time with the mutual consent of the parties hereto (the "Accounts"),
each of which is a separate account under Connecticut Insurance law,
and has registered or will register each of the Accounts (except for
such Accounts for which no such registration is required) as a unit
investment trust under the Investment Company Act of 1940 (the "1940
Act"), to serve as an investment vehicle for the Contracts. Each
Contract provides for the allocation of net amounts received by the
Company to an Account for investment in the shares of one or more
specified open-end management investment companies available through
that Account as underlying investment media. Selection of a particular
investment management company and changes therein from time to time
are made by the participant, beneficiary or Contract owner, as
applicable under a particular Contract.
(b) The Adviser represents and warrants that the investments of the series
of the Fund (each designated a "Portfolio") specified in Schedule B
attached hereto (as may be amended from time to time with the mutual
consent of the parties hereto) will at all times be adequately
diversified within the meaning of Section 817(h) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Regulations
thereunder, and that at all times while this Agreement is in effect,
all beneficial interests will be owned by one or more insurance
companies or by any other party permitted under Section 1.817-5(f)(3)
of the Regulations promulgated under the Code or by the successor
thereto, or by any other party permitted under a Revenue Ruling or
private letter ruling granted by the Internal Revenue Service.
2. Pricing Information; Orders; Settlement.
(a) The Fund will make Fund shares available to be purchased by the
Company, and will accept redemption orders from the Company, on behalf
of each Account at the net asset value applicable to each order on
those days on which the Fund calculates its net asset value (a
"Business Day"). Fund shares shall be purchased and redeemed in such
quantity and at such time determined by the Company to be necessary to
meet the requirements of those Contracts for which the Fund serve as
underlying investment media, provided, however, that the Board of
Directors of the Fund (hereinafter the "Directors") may upon
reasonable notice to the Company, refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole
discretion of the Directors, acting in good faith and in the best
interests of the shareholders of any Portfolio and is acting in
compliance with their fiduciary obligations under federal and/or any
applicable state laws.
(b) The Fund will provide to the Company closing net asset value, dividend
and capital gain information at the close of trading each day that the
New York Stock Exchange (the "Exchange") is open (each such day a
"Business Day"), and in no event later than 7:00 p.m. Eastern Standard
Time on such Business Day. The Company will send via facsimile or
electronic transmission to the Fund or its specified agent orders to
purchase and/or redeem Fund shares by 10:00 a.m. Eastern Standard Time
the following business day. Payment for net purchases will be wired by
the Company to an account designated by the Fund to coincide with the
order for shares of the Fund.
(c) The Fund hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares
relating to the Contracts from Contract owners or participants. Orders
from Contract owners, participants or beneficiaries received from any
distributor of the Contracts (including affiliates of the Company) by
the Company, acting as agent for the Fund, prior to the close of the
Exchange on any given business day will be executed by the Fund at the
net asset value determined as of the close of the Exchange on such
Business Day, provided that the Fund receives written (or facsimile)
notice of such order by 10 a.m. Eastern Standard Time on the next
following Business Day. Any orders received by the Company acting as
agent on such day but after the close of the Exchange will be executed
by the Fund at the net asset value determined as of the close of the
Exchange on the next business day following the day of receipt of such
order, provided that the Fund receives written (or facsimile) notice
of such order by 10 a.m. Eastern Standard Time within two days
following the day of receipt of such order.
(d) Payments for net redemptions of shares of the Fund will be wired by
the Fund to an account designated by the Company. Payments for net
purchases of the Fund will be wired by the Company to an account
designated by the Fund on
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the same Business Day the Company places an order to purchase Fund
shares. Payments shall be in federal funds transmitted by wire.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other party),
and shall not be liable in the event that an error is a result of any
misinformation supplied by the other party.
(f) The Company agrees to purchase and redeem the shares of the Portfolios
named in Schedule B offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information.
The Company shall not permit any person other than a Contract owner,
participant or beneficiary to give instructions to the Company which
would require the Company to redeem or exchange shares of the Fund.
This provision shall not be construed to prohibit the Company from
substituting shares of another fund, as permitted by law.
3. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by the Fund under this Agreement shall be paid by
the Fund or the Adviser, including the cost of registration of Fund
shares with the Securities and Exchange Commission (the "SEC") and in
states where required. The Fund and Adviser shall pay no fee or other
compensation to the Company under this Agreement, and the Company
shall pay no fee or other compensation to the Fund or Adviser, except
as provided herein and in Schedule C attached hereto and made a part
of this Agreement as may be amended from time to time with the mutual
consent of the parties hereto. All expenses incident to performance by
each party of its respective duties under this Agreement shall be paid
by that party, unless otherwise specified in this Agreement.
(b) The Fund or the Adviser shall provide to the Company Post Script files
of periodic fund reports to shareholders and other materials that are
required by law to be sent to Contract owners. In addition, the Fund
or the Adviser shall provide the Company with a sufficient quantity of
its prospectuses, statements of additional information and any
supplements to any of these materials, to be used in connection with
the offerings and transactions contemplated by this Agreement. In
addition, the Fund shall provide the Company with a sufficient
quantity of its proxy material that is required to be sent to Contract
owners. The Adviser shall be permitted to review and approve the
typeset form of such material prior to such printing provided such
material has been provided by the Adviser to the Company within a
reasonable period of time prior to typesetting.
(c) In lieu of the Fund's or Adviser's providing printed copies of
prospectuses, statements of additional information and any supplements
to any of these
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materials, the Company shall have the right to request that the Fund
transmit a copy of such materials in an electronic format (Post Script
files), which the Company may use to have such materials printed
together with similar materials of other Account funding media that
the Company or any distributor will distribute to existing or
prospective Contract owners, participants or beneficiaries.
4. Representations.
The Company agrees that it and its agents shall not, without the written
consent of the Fund or the Adviser, make representations concerning the Fund, or
its shares except those contained in the then current prospectuses and in
current printed sales literature approved by or deemed approved by the Fund or
the Adviser.
5. Termination.
This Agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company, the Adviser or the Fund, upon
sixty days advance written notice to the other parties;
(b) at the option of the Company, upon one week advance written notice to
the Adviser and the Fund, if Fund shares are not available for any
reason to meet the requirement of Contracts as determined by the
Company. Reasonable advance notice of election to terminate shall be
furnished by Company;
(c) at the option of either the Company, the Adviser or the Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the Account,
the Company, the Fund or the Adviser by the National Association of
Securities Dealers, Inc. (the "NASD"), the SEC or any other regulatory
body;
(d) upon the determination of the Accounts to substitute for the Fund's
shares the shares of another investment company in accordance with the
terms of the applicable Contracts. The Company will give 60 days
written notice to the Fund and the Adviser of any decision to replace
the Fund's' shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if Fund shares are not registered, issued or sold in conformance with
Federal law or such law precludes the use of Fund shares as an
underlying investment medium for Contracts issued or to be issued by
the Company. Prompt notice shall be given by the appropriate party
should such situation occur.
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6. Continuation of Agreement.
Termination as the result of any cause listed in Section 5 shall not
affect the Fund's obligation to furnish its shares to Contracts then in force
for which its shares serve or may serve as the underlying medium unless such
further sale of Fund shares is prohibited by law or the SEC or other regulatory
body, or is determined by the Directors to be necessary to remedy or eliminate
an irreconcilable conflict pursuant to Section 10 hereof.
7. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the Fund prepared by
the Company or its agents for use in marketing its Contracts will be
submitted to the Fund or its designee for review before such material
is submitted to any regulatory body for review. No such material shall
be used if the Fund or its designee reasonably object to such use in
writing, transmitted by facsimile within two business days after
receipt of such material.
(b) At the Company's request, the Fund will provide additional copies of
its financials as soon as available to the Company and at least one
complete copy of all registration statements, prospectuses, statements
of additional information, annual and semi-annual reports, proxy
statements and/or all amendments or supplements to any of the above
that relate to the Fund promptly after the filing of such document
with the SEC or other regulatory authorities. At the Adviser's
request, the Company will provide to the Adviser at least one complete
copy of all registration statements, prospectuses, statements of
additional information, annual and semi-annual reports, proxy
statements, and all amendments or supplements to any of the above that
relate to the Account promptly after the filing of such document with
the SEC or other regulatory authority.
(c) The Fund or the Adviser will provide via Excel spreadsheet diskette
format or in electronic transmission to the Company at least quarterly
portfolio information necessary to update Fund profiles within seven
business days following the end of each quarter.
(d) The Adviser will reimburse the Company for any incorrect information
provided to the Company under this Section as provided for in Schedule
C.
8. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on Fund
shares held by registered separate accounts to all Contract owners and
participants to the extent the SEC continues to interpret the 1940 Act
as requiring such privileges. The Company shall provide pass-through
voting privileges on Fund shares held by unregistered separate
accounts to all Contract owners.
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(b) The Company will distribute to Contract owners, participants and
beneficiaries, as appropriate, all proxy material furnished by the
Fund and will vote Fund shares in accordance with instructions
received from such Contract owners, participants and beneficiaries. If
and to the extent required by law, the Company, with respect to each
group Contract and in each Account, shall vote Fund shares for which
no instructions have been received in the same proportion as shares
for which such instructions have been received. The Company and its
agents shall not oppose or interfere with the solicitation of proxies
for Fund shares held for such Contract owners, participants and
beneficiaries.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Adviser, and its
directors, officers, employees, agents and each person, if any, who
controls the Fund or its Adviser within the meaning of the Securities
Act of 1933 (the "1933 Act") against any losses, claims, damages or
liabilities to which the Fund or any such director, officer, employee,
agent, or controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained
in the Registration Statement, prospectus or sales literature of the
Company or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arise out of or as a result of conduct, statements or representations
(other than statements or representations contained in the
prospectuses or sales literature of the Fund) of the Company or its
agents, with respect to the sale and distribution of Contracts for
which Fund shares are the underlying investment. The Company will
reimburse any legal or other expenses reasonably incurred by the Fund
or any such director, officer, employee, agent, investment adviser, or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written
materials furnished to the Company by the Fund specifically for use
therein or (ii) the willful misfeasance, bad faith, or gross
negligence by the Fund or Adviser in the performance of its duties or
the Fund's or Adviser's reckless disregard of obligations or duties
under this Agreement or to the Company, whichever is applicable. This
indemnity agreement will be in addition to any liability which Company
may otherwise have.
(b) The Adviser agree to indemnify and hold harmless the Company and its
directors, officers, employees, agents and each person, if any, who
controls the Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which the Company or any
such director, officer,
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employee, agent or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, prospectuses or sales
literature of the Fund or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to
be stated therein or material fact required to be stated therein or
necessary to make the statements therein not misleading. The Adviser
will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, employee, agent, or controlling
person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
Adviser will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
an untrue statement or omission or alleged omission made in such
Registration Statement or prospectuses which are in conformity with
written materials furnished to the Adviser by the Company specifically
for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
otherwise than under this Section 9. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish to, assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
10. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by the Fund on and with the SEC and the
order issued by the SEC dated 11/21/88 (File No. 812-7095) in response
thereto (the "Shared Funding Exemptive Order"). The Company has
reviewed the conditions to the requested relief set forth in such
application for exemptive relief. As set forth in such application,
the Directors will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contractholders
of all separate accounts ("Participating Companies") investing in the
Fund. An irreconcilable material conflict may arise for a variety of
reasons, including: (i) an action by any state insurance regulatory
authority; (ii) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative
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letter, or any similar actions by insurance, tax or securities
regulatory authorities; (iii) an administrative or judicial decision
in any relevant proceeding; (iv) the manner in which the investments
of any portfolio are being managed; (v) a difference in voting
instructions given by variable annuity contractholders and variable
life insurance contractholders; or (vi) a decision by an insurer to
disregard the voting instructions of contractholders. The Board shall
promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Directors. The Company will assist the Directors in
carrying out its responsibilities under the Shared Funding Exemptive
Order by providing the Directors with all information reasonably
necessary for the Directors to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to
inform the Directors whenever contractholder voting instructions are
disregarded.
(c) If a majority of the Directors, or a majority of its disinterested
Directors, determines that a material irreconcilable conflict exists
with regard to contractholder investments in a Fund, the Directors
shall give prompt notice to all Participating Companies. If the
Directors determines that the Company is responsible for causing or
creating said conflict, the Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take such action as is
necessary to remedy or eliminate the irreconcilable material conflict.
Such necessary action may include but shall not be limited to:
(i) withdrawing the assets allocable to the Account from the Fund and
reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contractholders and as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners, life insurance contract owners,
or variable contract owners of one or more Participating
Companies) that votes in favor of such segregation, or offering
to the affected contractholders the option of making such a
change; and/or
(ii) establishing a new registered management investment company or
managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contractholder voting instructions and
said decision represents a minority position or would preclude a
majority vote by all of its contractholders having an interest in the
Fund, the Company at its sole cost, may be required, at the Directors'
election, to withdraw an Account's investment in the Fund and
terminate this Agreement; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Directors.
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(e) For the purpose of this Section 10, a majority of the disinterested
Directors shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for
any Contract. The Company shall not be required by this Section 10 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,
participants or beneficiaries materially adversely affected by the
irreconcilable material conflict.
11. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
(b) Notices. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by
telex, telecopier or registered or certified mail, postage prepaid,
return receipt requested or recognized overnight courier service to
the party or parties to whom they are directed at the following
addresses, or at such other addresses as may be designated by notice
from such party to all other parties.
To the Company:
Aetna Insurance Company of America
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Counsel
To the Fund:
Xxxxxxx Group, Ltd.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000X
Xxxxxxxx, Xxxxxxxx 00000
Attn: Legal Department
Any notice, demand or other communication given in a manner prescribed in
this subsection (b) shall be deemed to have been delivered on receipt.
(c) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted
successors and assigns.
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(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by signing
any such counterpart.
(e) Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Connecticut.
(h) It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.
(i) The terms of this Agreement and the Schedules thereto will be held
confidential by each party except to the extent that either party or
its counsel may deem it necessary to disclose such terms.
12. Limitation on Liability of Trustees, etc.
This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his or her capacity as an officer of the Fund and on
behalf of the Advisor by an undersigned officer of the Advisor in his or her
capacity as an officer of the Advisor. Any obligations imposed on the Fund by
this Agreement shall be binding upon the assets and property of the Fund only
and shall not be binding on any Director, officer or shareholder of the Fund
individually.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 1st day of December, 1997.
AETNA INSURANCE COMPANY OF AMERICA
By: /s/ Xxxxx X. Xxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
Date: 12/11/97
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-------------------------------------- ----------------------------------
XXXXXXX RESPONSIBILITY INVESTED XXXXXXX ASSET MANAGEMENT
BALANCED PORTFOLIO COMPANY, INC.
By: /s/ Xxxxx Xxxxxx Xxxxxx By: /s/ Xxxxx Xxxxxx Xxxxxx
------------------------- --------------------------
Name: Xxxxx Xxxxxx Xxxxxx Name: Xxxxx Xxxxxx Xxxxxx
Title: Assistant Secretary Title: Assistant General Counsel
Date: December 11, 1997 Date: December 11, 1997
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Schedule A
(For any future separate accounts - See Section 1(a)
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Schedule B
Xxxxxxx Responsibly Invested Balanced Portfolio
13
