FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is entered into as of this ____day of ____________, 2005
among Western Reserve Life Assurance Co. of Ohio, (the "Company") a life
insurance company organized under the laws of the State of Ohio (on behalf of
itself and certain of its separate accounts); AMERICAN FUNDS INSURANCE SERIES
("Series"), an open-end management investment company organized under the laws
of the Commonwealth of Massachusetts, and CAPITAL RESEARCH AND MANAGEMENT
COMPANY ("CRMC"), a corporation organized under the laws of the State of
Delaware.
WITNESSETH:
WHEREAS, the Company proposes to issue, now and in the future, certain
multi-manager variable contracts that provide certain funds (the "Funds" and
each, a "Fund") of the Series as investment options (the "Contracts");
WHEREAS, the Company has established pursuant to Ohio insurance law one or
more separate accounts (each, an "Account") for purposes of issuing the
Contracts;
WHEREAS, the Company has registered or will register certain variable life
insurance contracts under the 1933 Act or will not register the contracts in
proper reliance on an exemption from registration under the 1933 Act; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act or alternatively, has properly relied
on an exclusion of the 1940 Act; and
WHEREAS, the Contracts, which are or will be registered (unless exempt
from such registration) by the Company with the Commission for offer and sale,
will be in material compliance with all applicable laws prior to being offered
for sale;
WHEREAS, the Series has received a "Mixed and Shared Funding Order" from
the Commission granting relief from certain provisions of the 1940 Act and the
rules thereunder to the extent necessary to permit shares of the Series to be
sold to variable annuity and life insurance separate accounts of unaffiliated
insurance companies;
WHEREAS, the Series is divided into various Funds, each Fund being subject
to certain fundamental investment policies which may not be changed without a
majority vote of the shareholders of such Fund;
WHEREAS, certain Funds listed in Attachment A to this Agreement will serve
as certain of the underlying investment mediums for the Contracts; and
WHEREAS, CRMC is the investment adviser for the Series.
NOW, THEREFORE, in consideration of the foregoing and of mutual covenants
and conditions set forth herein and for other good and valuable consideration,
the Company, the Series and CRMC hereby agree as follows:
1. The Series and CRMC each represents and warrants to the Company
that: (a) a registration statement under the 1933 Act and under the 1940 Act
with respect to the Series has been filed with the Commission in the form
previously delivered to the Company, and copies of any and all amendments
thereto will be forwarded to the Company at the time that they are filed with
the Commission; (b) the Series is, and shall be at all times while this
Agreement is in force, lawfully organized, validly existing, and properly
qualified as an open-end management investment company in accordance with the
laws of the Commonwealth of Massachusetts; and (c) the Series' registration
statement and any further amendments thereto will, when they become effective,
and all definitive prospectuses and statements of additional information and any
further supplements thereto (the "Prospectus") shall, conform in all material
respects to the requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder, and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statement therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Series by the Company expressly for use therein.
2. The Series will furnish to the Company such information with respect
to the Series in such form and signed by such of its officers as the Company may
reasonably request, and will warrant that the statements therein contained when
so signed will be true and correct. The Series will advise the Company
immediately of: (a) the issuance by the Commission of any stop order suspending
the effectiveness of the registration statement of the Series or the initiation
of any proceeding for that purpose; (b) the institution of any proceeding,
investigation or hearing involving the offer or sale of the Contracts or the
Series of which it becomes aware; or (c) the happening of any material event, if
known, which makes untrue any statement made in the registration statement of
the Series or which requires the making of a change therein in order to make any
statement made therein not misleading.
3. The Series will use best efforts to register for sale under the 1933
Act and, if required, under state securities laws, such additional shares of the
Series as may reasonably be necessary for use as the funding vehicle for the
Contracts.
4. The Series agrees to make Class 2 shares of the Funds listed on
Attachment A hereto available to the Contracts. The Company will be entitled to
a Rule 12b-1 service fee paid by the Series and to be accrued daily and paid
monthly at an annual rate of 0.25% of the average daily net assets of the Class
2 shares of each Fund attributable to the Contracts for personal services and
account maintenance services for Contract owners with investments in subaccounts
corresponding to the Class 2 shares of each Fund (each, a "Subaccount") for as
long as the Series' Plan of Distribution pursuant to Rule 12b-1 under the 1940
Act (the "12b-1 plan") remains in effect. Fund shares to be made available to
Accounts for the Contracts shall be sold
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by the Series and purchased by the Company for a given Account at the net asset
value of the respective class of the respective Fund (without the imposition of
a sales load) next computed after receipt of each order by the Series or its
designee, as established in accordance with the provisions of the then current
Prospectus of the Series. For purposes of this Paragraph 4, the Company shall be
a designee of the Series for receipt of such orders from each Account, and
receipt by such designee by 4:00 p.m. Eastern time (or other such time the Board
of Trustees of the Series shall so designate) shall constitute receipt by the
Series; provided that the Series receives notice of such order by 8:30 a.m.
Eastern time on the following Business Day ("Next Business Day"). "Business Day"
shall mean any day on which the New York Stock Exchange ("NYSE") is open for
trading and on which the Series calculates the net asset values of each class of
shares of each Fund pursuant to the rules of the Commission. The Series will
make the shares of each class of each Fund available indefinitely for purchase
at the applicable net asset value per share by the Company and its Accounts on
those days on which the Series calculates the net asset values of each such
class pursuant to the rules of the Commission, and the Series shall use its best
efforts to calculate such net asset values on each day on which the NYSE is open
for trading. The Series shall make the net asset value per share for each class
of each Fund available to the Company on a daily basis as soon as reasonably
practical after the Series calculates such net asset values per share, and the
Series shall use its best efforts to make such net asset values per share
available by 6:30 p.m. Eastern time. CRMC and the Series shall report to the
Company any material error in the calculation of the net asset values, dividends
or capital gain information as soon as practicable upon discovery. The Series
and CRMC are responsible for maintaining net asset values for each class of each
Fund in accordance with the requirements of the 1940 Act and the Series' then
current Prospectus. Payments for shares purchased will be made in federal funds
transmitted by wire on the Next Business Day, and the Company and the Fund shall
each use commercially reasonable efforts to wire (or cause to be wired) funds to
the other, for the purpose of settling net purchase orders or orders of
redemption, by 3:00 p.m. Eastern time on the Next Business Day.
The Series reserves the right to temporarily suspend sales if the
Board of Trustees of the Series deems it appropriate and in the best interests
of the Series or in response to the order of an appropriate regulatory
authority. The Company reserves the right to refuse, to impose limitations on,
or to limit any transaction request if the request would tend to disrupt
Contract administration or is not in the best interest of the Contract holders
or an Account or Subaccount.
5. The Contracts funded through each Account will provide for the
allocation of net amounts among certain Subaccounts for investment in shares of
a class of the Funds as may be offered from time to time in the Contracts. The
selection of the particular Subaccount is to be made by the Contract owner and
such selection may be changed in accordance with the terms of the Contracts.
6. Transfer of the Series' shares will be by book entry only. No stock
certificates will be issued to the Account. Shares ordered from a particular
Fund will be recorded by the Series as instructed by the Company in an
appropriate title for the corresponding Account or Subaccount.
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7. The Series shall furnish notice promptly to the Company of any
dividend or distribution payable on any shares underlying Subaccounts. The
Company hereby elects to receive all such dividends and distributions as are
payable on shares of a Fund recorded in the title for the corresponding
Subaccount in additional shares of that Fund. The Series shall notify the
Company of the number of shares so issued. The Company reserves the right to
revoke this election and to receive all such income dividends and capital gain
distributions in cash.
8. The Series shall redeem for cash its shares in accordance with the
terms of its then current Prospectus. For purposes of this Paragraph 8, the
Company shall be a designee of the Series for receipt of requests for redemption
from each Account, and receipt by such designee by 4:00 p.m. Eastern time (or
other such time the Board of Trustees of the Series shall so designate) shall
constitute receipt by the Series; provided that the Series receives notice of
such request for redemption by 8:30 a.m. Eastern time on the Next Business Day.
The Company shall purchase and redeem the shares of Funds offered by the then
current Prospectus of the Series in accordance with the provisions of such
Prospectus.
9. The Series shall pay all expenses incidental to its performance
under this Agreement. The Series shall see to it that all of its shares are
registered and authorized for issue in accordance with applicable federal and
state laws prior to their purchase for the Account. The Series shall bear the
expenses for the cost of registration of its shares, preparation of prospectuses
and statements of additional information to be sent to existing Contract owners
(upon request in the case of the statement of additional information), proxy
statements and related materials and annual and semi-annual shareholder reports,
the printing and distribution of such items to each Contract owner who has
allocated net amounts to any Subaccount, the preparation of all statements and
notices required from it by any federal or state law, and taxes on the issue or
transfer of the Series' shares subject to this Agreement. The Series will
provide the Company, at least once a year, with enough copies of its Statement
of Additional Information to be able to distribute one to each Contract owner or
prospective Contract owner who requests such Statement of Additional
Information.
With respect to any prospectus and annual and semi-annual reports (the
"Reports") of the Series that are printed in combination with any one or more
such Reports of other investment options for the Contracts (the "Booklet"), the
Series shall bear the costs of printing and mailing the Booklet to existing
Contract owners based on the ratio of the number of pages of the Series' Reports
included in the Booklet to the number of pages in the Booklet as a whole.
10. The Company shall bear the expenses for the cost of preparation and
delivery of Series prospectuses (and supplements thereto) to be sent to
prospective Contract owners. The Series shall provide, at its expense, such
documentation (in camera-ready or other mutually agreeable form) and other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus for the Series is amended), and twice each
year in the case of the annual and semi-annual shareholder reports, to have the
prospectus or prospectuses, and the annual and semi-annual shareholder reports
for the Contracts and the Series, printed together in one or more documents
(such printing to be done at the Company's
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expense with respect to prospective investors).
11. The Company represents and warrants to the Series that any
information furnished in writing by the Company to the Series for use in the
registration statement of the Series will not result in the registration
statement's failing to conform in all respects to the requirements of the 1933
Act and the 1940 Act and the rules and regulations thereunder or containing any
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
12. CRMC and AFD represent and warrant to the Company and AFSG
Securities Corporation (the "Distributor") that any information furnished in
writing by CRMC or AFD to the Company and the Distributor for use in the
registration statements for the Contracts will not result in the registration
statement's failing to conform in all respects to the requirements of the 1933
Act and the 1940 Act and the rules and regulations thereunder or containing any
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
13. The Company and its affiliates shall make no representations
concerning the Series' shares except those contained in the then current
Prospectus of the Series, in such printed information subsequently issued on
behalf of the Series or other funds managed by CRMC as supplemental to the
Series' Prospectus, in information published on the Series' or CRMC's internet
site, or in materials approved by AFD, as provided in the Business Agreement in
effect among the Company, the Distributor, AFD and CRMC dated as of January 28,
2005 (the "Business Agreement").
14. CRMC and its affiliates shall make no representations concerning the
Contracts except those contained in the then current Prospectus of the
Contracts, in such printed information subsequently issued on behalf of the
Contracts, in information published on the Company's internet site, or in
materials approved by the Company or the Distributor, as provided in the
Business Agreement.
15. Shares of the Series may be offered to separate accounts of various
insurance companies in addition to the Company. The Series represents, warrants
and covenants that no shares of the Series shall be sold to the general public
in contravention of Section 817 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "Code"). The Series represents,
warrants and covenants that each Fund will comply with the diversification
requirements of Section 817. The Series also represents, warrants and covenants
to maintain each Fund's qualification as a "regulated investment company"
("RIC") under the Code. The Series will provide the Company with securities
holdings reports for each Fund within ten days after each calendar quarter.
16. The parties to this Agreement recognize that due to differences in
tax treatment or other considerations, the interests of various Contract owners
participating in one or more Funds might, at some time, be in conflict. Each
party shall report to the other party any potential or existing conflict of
which it becomes aware. The Board of Trustees of the Series shall promptly
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notify the Company of the existence of irreconcilable material conflict and its
implications. If such a conflict exists, the Company will, at its own expense,
take whatever action it deems necessary to remedy such conflict; in any case,
Contract owners will not be required to bear such expenses.
The Series hereby notifies the Company that it may be appropriate to
include in the Prospectus pursuant to which a Contract is offered disclosure
regarding the risks of mixed and shared funding.
17. The Company agrees to indemnify and hold the Series harmless
against, any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which the Series may be subject under
any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
arising as a result of the Company's: (a) making untrue statements of material
facts or omitting material facts in a Contract's registration statement,
prospectus, statement of additional information, semi-annual or annual reports
to Contract owners and sales literature for the Contracts; (b) making untrue
statements of material facts that the Series includes in the same materials of
the Series, provided that Series relies on information supplied by the Company;
(c) unlawful conduct, bad faith, willful malfeasance, or gross negligence by the
Company with respect to the sale of the Contracts or Fund shares; and (d)
breaching this Agreement or a representation or warranty.
18. The Series and CRMC each agrees to indemnify and hold the Company
harmless against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which the Company may be subject under
any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
arising as a result of the Series', or CRMC's: (a) making untrue statements of
material facts or omitting material facts in the Series' registration statement,
prospectuses or statements of additional information, semi-annual and annual
reports to shareholders, and sales literature; (b) making untrue statements of
material facts that the Series includes in its materials, provided the Company
relies on information supplied by the Series; (c) unlawful conduct, bad faith,
willful malfeasance, or gross negligence by the Series with respect to the sale
of the Contracts or Fund shares or the operation of the Series or a Fund; (d)
failure of the Series to comply with any Fund's investment objectives, policies
and restrictions; and (e) breaching this Agreement or a representation or
warranty, including, but not limited to, the representations, warranties and
covenants in Section 13.
19. The Company shall be responsible for assuring that the Account
calculates pass-through voting privileges of Contract owners in a manner
consistent with the method of calculating pass-through voting privileges set
forth in the current Contract.
20. The Series and CRMC will comply in all material respects with all
provisions of the 1940 Act requiring voting by shareholders.
21. The parties understand that there is no intention to create a joint
venture in the subject matter of this Agreement. Accordingly, the right to
terminate this Agreement and to
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engage in any activity not inconsistent with this Agreement is absolute. This
Agreement will terminate:
(a) by mutual agreement at any time; or
(b) any party at any time upon sixty days' written notice to the other
parties; or
(c) at the option of the Company, CRMC or the Series upon ten calendar
days' prior written notice to the other party if a final
non-appealable administrative or judicial decision is entered
against the other party which has a material impact on the
Contracts;
(d) at the option of the Company, upon ten calendar days' prior written
notice, if shares of the Series are not reasonably available;
(e) at the option of the Company, immediately upon written notice, if
the Series or CRMC fails to meet the requirements for either
diversification under Section 817 or RIC status under the Code, or
if the Board of the Series terminates the 12b-1 plan; or
(f) in the event the Series' shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such law
precludes the use of such shares as an underlying investment for the
Contracts issued or to be issued by the Company; in such event
prompt notice shall be given by the Company or the Series to the
other party.
(g) at the Company's option by written notice to AFD and/or CRMC if the
Company shall determine in its sole judgment exercised in good
faith, that either AFD or CRMC has suffered a material adverse
change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity.
(h) at the option of AFD or CRMC by written notice to the Company if AFD
or CRMC shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in
its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity.
The effective date for termination pursuant to any notice given under this
Paragraph shall be calculated beginning with the date of receipt of such notice.
22. All notices, consents, waivers, and other communications under this
Agreement must be in writing, and will be deemed to have been duly received: (a)
when delivered by hand (with written confirmation of receipt); (b) when sent by
telecopier (with written confirmation of
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receipt), provided that a copy is mailed by registered mail, return receipt
requested; or (c) the day after it is sent by a nationally recognized overnight
delivery service, in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
IF TO THE COMPANY:
Western Reserve Life Assurance Co. of Ohio
0000 Xxxxxxxx Xxxx, XX
Xxxxx Xxxxxx, Xxxx 00000
Attn: Extraordinary Markets Counsel
Facsimile No: (000) 000-0000
WITH A COPY TO:
IF TO SERIES:
American Funds Insurance Series
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Senior Vice President
Facsimile No.: (000) 000-0000
WITH A COPY TO:
Capital Research and Management Company
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Senior Vice President
and Senior Counsel,
Fund Business Management Group
Facsimile No.: (000) 000-0000
IF TO CRMC:
Capital Research and Management Company
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Senior Vice President and Legal Counsel,
Fund Business Management Group, and Secretary
Facsimile No.: (000) 000-0000
WITH A COPY TO:
Capital Research and Management Company
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
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Attention: Xxxxxxx X. Xxxxxxxxxx, Senior Vice President
and Senior Counsel,
Fund Business Management Group
Facsimile No.: (000) 000-0000
23. If this Agreement terminates, any provision of this Agreement
necessary to the orderly windup of business under it will remain in effect as to
that business, after termination.
24. If this Agreement terminates, the Series, at the Company's option,
will continue to make additional shares of the Series available for all existing
Contracts as of the effective date of termination (under the same terms and
conditions as were in effect prior to termination of this Agreement with respect
to existing Contract owners), unless the Series liquidates or applicable laws
prohibit further sales. The Company agrees not to redeem shares unless: (i) the
Agreement is terminated pursuant to Section 18(e) or 18(f); (ii) legitimately
required to do so according to a Contract owner's request; or (iii) under an
order from the Commission or pursuant to a vote of Contract owners.
25. The obligations of the Series under this Agreement are not binding
upon any of the Trustees, officers, employees or shareholders (except CRMC if it
is a shareholder) of the Series individually, but bind only the Series' assets.
When seeking satisfaction for any liability of the Series in respect of this
Agreement, the Company and the Account agree not to seek recourse against said
Trustees, officers, employees or shareholders, or any of them, or any of their
personal assets for such satisfaction. Notwithstanding the foregoing, if the
Company seeks satisfaction for any liability of the Series in respect of this
Agreement, the Company (on behalf of itself or any Account) may seek recourse
against CRMC.
26. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
27. This Agreement and the parties' rights, duties and obligations under
this Agreement are not transferable or assignable by any of them without the
express, prior written consent of the other parties hereto. Any attempt by a
party to transfer or assign this Agreement or any of its rights, duties or
obligations under this Agreement without such consent is void; provided,
however, that a merger of, reinsurance arrangement by, or change of control of a
party shall not be deemed to be an assignment for purposes of this Agreement.
28. The following Paragraphs shall survive any termination of this
Agreement: 4, 17, 18, 22-28.
29. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the state Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to
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ascertain whether the insurance operations of the Company are being conducted in
a manner consistent with the state insurance regulations and any other
applicable law or regulations.
30. This Agreement (along with the Business Agreement) constitutes the
entire agreement among the parties pertaining to the Contracts, and supersedes
any and all prior agreements, understandings, documents, projections, financial
data, statements, representations and warranties, oral or written, express or
implied, between the parties hereto and their respective affiliates,
representatives and agents in respect of the subject matter hereof. If there
should be any conflict between the terms of this Agreement and those of the
Business Agreement, the terms of the Fund Participation Agreement shall govern.
31. No waiver of any provision nor consent to any exceptions to the
terms of this Agreement shall be effective unless that waiver or consent is
executed in writing by the parties and then only for the specific purpose,
extent and instance so provided.
32. The provisions of this Agreement are severable. Should any provision
hereof be held unlawful or invalid by any competent authority, the remainder of
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested as of the date first above written.
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
ON BEHALF OF ITSELF AND EACH ACCOUNT
Attest:
By: _______________________________
___________________________ Its:
AMERICAN FUNDS INSURANCE SERIES
Attest:
By: _______________________________
___________________________ Its: Secretary
CAPITAL RESEARCH AND MANAGEMENT COMPANY
Attest:
By: _______________________________
___________________________ Its: Vice President and Secretary
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Attachment A
American Funds Insurance Series:
GROWTH FUND
INTERNATIONAL FUND
NEW WORLD FUNDGLOBAL SMALL CAPITALIZATION FUND
