SECOND
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
BY AND AMONG
AID ASSOCIATION FOR LUTHERANS
AND
AAL VARIABLE ANNUITY ACCOUNT I
AND
AAL VARIABLE ANNUITY ACCOUNT II
AND
AAL VARIABLE LIFE ACCOUNT I
AND
AAL VARIABLE PRODUCT SERIES FUND, INC.,
DATED JANUARY 1, 2002
TABLE OF CONTENTS
Page
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1. Sale of FUND Shares...............................................4
2. Representations and Warranties....................................5
3. Prospectus and Proxy Statements: Voting...........................6
4. Sales Material and Information....................................6
5. Fees and Expenses.................................................7
6. Diversification...................................................8
7. Monitoring for Material Irreconcilable Conflicts..................8
9. Term and Termination Of This Agreement...........................13
10. Notices..........................................................15
11. Miscellaneous....................................................16
This PARTICIPATION
AGREEMENT, is made and entered into as of this 1st day of January,
2002, by and among AID ASSOCIATION FOR LUTHERANS (“AAL”), on its own
behalf and on behalf of AAL VARIABLE ANNUITY ACCOUNT I, AAL VARIABLE ANNUITY
ACCOUNT II, and AAL VARIABLE LIFE ACCOUNT I (the “ACCOUNTS”), and AAL
VARIABLE PRODUCT SERIES FUND, INC. (the “FUND”), (collectively the
“Parties”).
WITNESSETH:
WHEREAS, AAL is a fraternal
benefit society organized under the laws of the State of Wisconsin engaged in
the writing of life insurance, annuity contracts, and other insurance products,
and serves as sponsor and depositor of the ACCOUNTS ;
WHEREAS, the ACCOUNTS are
legally segregated asset accounts of AAL, established pursuant to the laws of
the State of Wisconsin, with several subaccounts (the “Subaccounts”),
for the purpose of funding certain variable universal life insurance contracts
and variable annuity contracts (collectively the “Certificates”);
WHEREAS, the FUND, is
registered with the Securities and Exchange Commission (the “SEC”), as
a diversified, open-end management investment company under the Investment
Company Act of 1940 (the “1940 Act”), and its shares are registered
with the SEC under the Securities Act of 1933 (the “1933 Act”);
WHEREAS, the FUND is a
series company, meaning its Board of Directors may designate various series
(“Portfolios”) into which the FUND’s authorized shares are to be
divided from time to time, with each such Portfolio consisting of a specific
number of the FUND’s authorized shares, representing an interest in a
separate portfolio of securities and other assets, and having its own investment
objectives, policies and restrictions;
WHEREAS, to the extent
permitted by applicable insurance, tax and other laws and regulations, AAL
intends to purchase shares in the FUND on behalf of the ACCOUNTS to fund the
Certificates or on its own behalf for related purposes, and the FUND is
authorized to sell such shares to the ACCOUNTS and to AAL at net asset value;
WHEREAS, the FUND has
entered into an Investment Advisory Agreement with AAL , dated the 1st day of
January, 2002, as amended, wherein AAL has agreed to serve as investment adviser
to the FUND, and to accept certain obligations of the FUND as set forth herein,
i.e., to compute the daily net asset value and the net asset value per share for
each Portfolio and to comply with Subchapter M and Section 817(h) of the
Internal Revenue Code of 1986 (the “Code”), as amended;
NOW, THEREFORE, in
consideration of the covenants and mutual promises contained herein, and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the Parties agree
as follows:
1. Sale of
FUND Shares
| 1.1 |
The Certificates funded through the ACCOUNTS will provide for the allocation of
net amounts among certain Subaccounts for investment in such shares of the
Portfolios as may be offered from time to time in the prospectus of the ACCOUNTS
for the Certificates. The selection of the particular Subaccount is to be made
by the Certificate owner, and such selection may be changed in accordance with
the terms of the Certificates. |
| 1.2 |
The FUND will sell to AAL those shares of each available Portfolio that AAL
orders based on transactions under Certificates, effecting such orders on a
daily basis at the Portfolio’s net asset value per share next computed as
provided in the FUND prospectus. |
| 1.3 |
The Board of Directors of the FUND (the “Board”) may refuse to sell
shares of any Portfolio to AAL, 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 Board, acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of the FUND. |
| 1.4 |
The FUND agrees that its shares will be sold only to: (a) AAL, on its own behalf
and on behalf of separate accounts that it establishes from time to time and
maintains to fund variable annuity contracts and variable life insurance
contracts of AAL, including the ACCOUNTS; (b) other life insurance companies,
whether affiliated or unaffiliated with AAL, on behalf of separate accounts
funding variable annuity contracts and variable life insurance contracts of such
other insurance companies; and (c) qualified pension or retirement plans,
whether for the benefit of employees of AAL and/or its affiliates or for the
benefit of unaffiliated entities (“Qualified Plans”). AAL separate
accounts (including the ACCOUNTS) and separate accounts of other life insurance
companies eligible to purchase shares of the FUND are referred to in this
Agreement as “Separate Accounts.” No shares of any Portfolio will be
sold to the general public or to any life insurance company (on its own behalf,
as opposed to a Separate Account maintained by such other insurance company)
other than AAL. |
| 1.5 |
The FUND will redeem for cash from AAL those full or fractional shares of each
Portfolio that AAL requests based on transactions under Certificates, effecting
such requests on a daily basis at the Portfolio’s net asset value per share
next computed as provided in the FUND prospectus. |
| 1.6 |
Issuance and transfer of the FUND’s shares will be by book entry only.
Stock certificates will not be issued to AAL. Shares ordered from the FUND will
be recorded in an appropriate title for AAL. |
| 1.7 |
The FUND shall furnish notice promptly to AAL of any income, dividends or
capital gain distributions payable on the shares of any Portfolio. AAL hereby
elects to receive all such income, dividends and capital gain distributions as
are payable on FUND shares in additional shares of that Portfolio. AAL reserves
the right to revoke this election and to receive all such income, dividends and
capital gain distributions in cash. The FUND shall notify AAL of the number of
shares so issued as payment of such income, dividends and distributions. |
| 1.8 |
The FUND shall make the net asset value per share for each Portfolio available
to AAL on a daily basis, as soon as reasonably practical after the net asset
value per share is calculated. |
| 1.9 |
The FUND may establish additional Portfolios to provide additional funding media
for the Certificates, or delete, combine, or modify existing Portfolios. The
shares of any additional Portfolio may be made available to the ACCOUNTS by the
FUND, pursuant to the terms of this Agreement, and any applicable reference to
any Portfolio, the FUND or its shares herein shall include a reference to any
such Portfolio. |
2.
Representations and Warranties
| 2.1 |
AAL represents and warrants that interests in the ACCOUNTS under the
Certificates are or will be registered under the 1933 Act to the extent required
by the 1933 Act, that the Certificates will be issued and sold in compliance in
all material respects with all applicable federal and state laws and that the
sale of the Certificates will comply in all material respects with state
insurance and federal securities law suitability requirements. AAL further
represents and warrants that it is a fraternal benefit society organized under
the laws of the State of Wisconsin and engaged in the writing of life insurance,
annuity contracts, and other insurance products; that it has legally and validly
established its ACCOUNTS as segregated asset accounts under Wisconsin insurance
law; and that it has registered or will register the ACCOUNTS as unit investment
trusts in accordance with the provisions of the 1940 Act to serve as segregated
investment accounts for the Certificates, to the extent required by the 0000
Xxx. |
| 2.2 |
AAL represents and warrants that any interests in the ACCOUNTS being offered for
sale under the Certificates are or will be registered under the 1933 Act to the
extent required by the 1933 Act, that the Certificates will be issued and sold
in compliance in all material respects with all applicable federal and state
laws, and that the sale of the Certificates will comply in all material respects
with state insurance law, and federal securities laws, including the rules of
the National Association of Securities Dealers, Inc. (“NASD”). |
| 2.3 |
The FUND represents and warrants that its shares sold pursuant to this Agreement
are or will be registered under the 1933 Act to the extent required by the 1933
Act, duly authorized for issuance and sold in compliance with the laws of the
state of Maryland and all applicable federal securities laws and that the FUND
is or will be registered under the 1940 Act to the extent required by the 1940
Act. The FUND will amend the registration statement for its shares under the
1933 Act, as well as its registration statement under the 1940 Act, as required
in order to effect the continuous offering of its shares. The FUND will register
or qualify the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the FUND. |
| 2.4 |
AAL represents and warrants that its Certificates are currently treated as
annuity contracts and universal life insurance contracts under applicable
provisions of the Code and that it will make every effort to maintain such
treatment. |
| 2.5 |
The FUND makes no representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses) complies with the insurance
laws or regulations of the various states. On the request of any state insurance
department, the FUND agrees to provide and furnish to the department any
information or reports in connection with the FUND’s operations or services
that will allow the insurance department to determine if the variable product
operations of AAL are being conducted in a manner consistent with state laws.
The FUND intends to comply with the insurance laws of any relevant state
regarding any Portfolio’s investment objectives, policies and restrictions
to the extent that AAL advises the FUND, in writing, of such laws or any change
in such laws, provided the FUND’s Board of Directors and/or shareholders
approve such changes as required by the 0000 Xxx. |
| 2.6 |
The FUND represents and warrants that each of its Portfolios will qualify as a
regulated investment company under Subchapter M of the Code and that the
investments of each of its Portfolios will comply with the diversification
requirements of Section 817(h) of the Code and the regulations thereunder, and
that it will notify AAL immediately upon having a reasonable basis for believing
that it has ceased to so qualify or that it might not so qualify in the future. |
3. Prospectus
and Proxy Statements: Voting
| 3.1 |
The FUND will provide such documentation (including a final copy of any new
prospectus, statement of additional information (“SAI”), or
supplement) and other assistance as is reasonably necessary in order for AAL or
its designee to timely distribute the current FUND prospectus, SAI and any
supplement thereto, or, in the alternative, to have the prospectus of the
ACCOUNTS for the Certificates and the FUND’s prospectus printed together in
one document once each year (or more frequently if the prospectus for the FUND
is amended) (such FUND prospectus printing to be at the FUND’s expense, as
provided in Section 5.1). |
| 3.2 |
The FUND will provide such documentation (including a final copy of any proxy
material, report to shareholders, and other communication to shareholders) and
other assistance as is reasonably necessary for AAL or its designee to timely
distribute the proxy material, report to shareholders, and other communication
(such printing and distribution to be the FUND’s expense, as provided in
Section 5.1). |
| 3.3 |
If, and to the extent required by law, AAL shall, at AAL’s expense, as
provided in Section 5.2: |
| |
(a) solicit voting instructions from Certificate owners; |
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(b) vote Portfolio shares in accordance with instructions received from
Certificate owners; |
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(c)
vote Portfolio shares for which no instructions have been received, as well as
Portfolio shares attributable to AAL other than under Certificates, in the same
proportion as shares of such Portfolio for which instructions have been
received, so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges. AAL reserves the right to
vote Portfolio shares held in any segregated asset accounts or in general
accounts in its own right, to the extent permitted by law. |
| 3.4 |
The FUND reserves the right to take all actions, including but not limited to
the dissolution, merger, and sale of all assets of the FUND solely upon the
authorization of its Board and/or shareholders as required by the 1940 Act. |
4. Sales
Material and Information
| 4.1 |
AAL or its designee will furnish, or will cause to be furnished, to the FUND or
its designee, each piece of sales literature or other promotional material in
which the FUND or AAL is named, at least fifteen (15) days prior to its intended
use. No such material will be used if the FUND or its designee objects to such
intended use within fifteen (15) days after receipt of such material. |
| 4.2 |
AAL will not give any information or make any representation or statement, or
cause such information to be given or representation to be made, on behalf of
the FUND or concerning any Portfolio in connection with the sale of the
Certificates other than the information or representations contained in the
registration statement, prospectus, and SAI for FUND shares, as such
registration statement, prospectus, and SAI may be amended or supplemented from
time to time, or in reports or proxy materials for the FUND, or in sales
literature or other promotional material approved by the FUND or its designee,
except with the permission of the FUND or its designee. |
| 4.3 |
The FUND or its designee will furnish, or will cause to be furnished, to AAL or
its designee, each piece of sales literature or other promotional material of
the FUND in which AAL and/or its ACCOUNTS is named, at least fifteen (15) days
prior to its intended use. No such material will be used if AAL or its designee
objects to such intended use within fifteen (15) days after receipt of such
material. |
| 4.4 |
The FUND will not give any information or make any representations or
statements, or cause such information to be given or representations to be made,
on behalf of AAL or concerning AAL, its ACCOUNTS or its Certificates other than
the information or representations contained in a registration statement or
prospectus for such ACCOUNTS, as such registration statement and prospectus may
be amended or supplemented from time to time, or in published reports for the
ACCOUNTS that are in the public domain or approved by AAL for distribution to
owners, or in sales literature or other promotional material approved by AAL or
its designee, except with the permission of AAL or its designee . |
| 4.5 |
The FUND will provide to AAL one complete copy of all registration statements,
prospectuses, SAI’s, reports, proxy material, sales literature and other
promotional material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the FUND or its
shares, contemporaneously with the filing of such document with the SEC or other
regulatory authorities. |
| 4.6 |
AAL will provide to the FUND one complete copy of all registration statements,
prospectuses, SAI’s, reports, solicitations for voting instructions, sales
literature and other promotional material, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate to
the ACCOUNTS or its Certificates, contemporaneously with the filing of such
document with the SEC or other regulatory authorities. |
5. Fees and
Expenses
| 5.1 |
The FUND will pay all expenses incident to the FUND’s performance under
this Agreement. In addition to the investment advisory fee, subject to the
expense reimbursement arrangement discussed below, each Portfolio will bear all
of its operating expenses that are not specifically assumed by AAL, including
the following: (i) interest and taxes (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses for those Directors who are
not “interested” persons under Section 2(a)(19) of the Act; (v)
independent legal and audit expenses; (vi) fees and expenses of the FUND’s
custodian, shareholder servicing or transfer agent and accounting services
agent; (vii) expenses incident to the issuance of its shares, including stock
certificates and issuance of shares on the payment of, or reinvestment of
dividends; (viii) fees and expenses incident to the registration under Federal
or state securities laws of the FUND or its shares; (ix) FUND or portfolio
organizational expenses; (x) FUND expenses of preparing, printing and mailing
reports and notices, proxy material and prospectuses to shareholders of the
FUND; (xi) all other expenses incidental to holding meetings of the FUND’s
shareholders; (xii) dues or assessments of or contributions to the Investment
Company Institute or any successor or other industry association; (xiii) such
non-recurring expenses as may arise, including litigation affecting the FUND and
the legal obligations which the FUND may have to indemnify its officers and
Directors with respect thereto; and (xiv) cost of daily valuation of each of the
Portfolio’s securities and net asset value per share. |
| 5.2 |
AAL will pay all expenses incident to AAL’s performance under this
Agreement. In addition, AAL will bear the expenses of printing and distributing
to its Certificate owners the FUND proxy materials, proxy cards and voting
instruction forms (collectively “proxy information”), tabulating the
results of proxy solicitations to its Certificate owners, printing and
distributing to its Certificate owners the FUND prospectus, SAI, supplement,
proxy material, report to shareholders, and other communication to shareholders,
and any expenses associated with administration of its Certificates. |
6.
Diversification
| 6.1 |
The Portfolios will be invested in such a manner as to ensure that the
Certificates will be treated as variable life insurance contracts and variable
annuity contracts under the Code and the regulations thereunder insofar as such
investment is required for such treatment. Without limiting the scope of the
foregoing, the Portfolios will at all times comply with Section 817(h) of the
Code and Treasury Regulations Section 1.817-5 relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. |
| 6.2 |
The FUND shall furnish to AAL on a regular basis reports of all of the
investments of each Portfolio in a form sufficient to permit AAL to determine
whether each Portfolio is in compliance with the diversification requirements of
Section 817(h) of the Code and the Regulations thereunder and shall take
immediate action, on learning through its own monitoring, or on advice from AAL,
that any Portfolio is not in compliance with such requirements, to return to
compliance with such requirements. |
| 6.3 |
If any Portfolio is found not to comply with the diversification requirements at
the end of a calendar quarter and the 30-day grace period allowed under the
Regulations, the FUND shall take all appropriate efforts immediately to restore
any such Portfolio to compliance and shall fully cooperate with AAL in any
effort to correct such diversification failure under procedures established by
the Internal Revenue Service, including those set forth in Revenue Procedure
92-25. |
7. Monitoring
for Material Irreconcilable Conflicts
| 7.1 |
The FUND’s Board of Directors will monitor the FUND for the existence of
any material irreconcilable conflict between and among the interests of the
certificateholders of the Separate Accounts (including the ACCOUNTS) investing
in the FUND and the participants of any of the Qualified Plans investing in the
FUND. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) action by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax or securities laws or regulations,
or a public ruling , private letter ruling, no-action or interpretive letter, or
any similar action by insurance, tax or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investment of the FUND are being managed; (e) a difference
in voting instructions given by the Separate Accounts vis-à-vis voting
instructions provided by the trustees of the Qualified Plans; (f) a decision by
AAL or another life insurance company to disregard the voting instructions of
Certificate owners in one or more Separate Accounts; or (g) if applicable, a
decision by the trustee of a Qualified Plan to disregard the voting instructions
of the participants of such Qualified Plan. A determination by the FUND’s
Board that a material irreconcilable conflict exists will be a final
determination. |
| 7.2 |
If it is determined by a majority of the FUND’s Board, or by a majority of
its disinterested directors, that a material irreconcilable conflict exists, AAL
(on behalf of the ACCOUNTS) shall, at its expense and to the extent reasonably
practicable (as determined by a majority of the disinterested directors of the
FUND), take whatever steps are necessary to remedy or eliminate the material
irreconcilable conflict. Such steps could include: (a) withdrawing the assets
allocable to some or all of the ACCOUNTS from the FUND or any Portfolio of the
FUND and reinvesting such assets in a different investment medium, including
another portfolio of the FUND; (b) submitting the question as to whether such
segregation should be implemented to a vote of all affected Certificate owners
and, as appropriate, segregating the assets of any appropriate (i.e., variable
annuity Certificate owners or variable life insurance Certificate owners of one
or more of AAL and any other insurance companies with Separate Accounts
investing in the FUND) that votes in favor of such segregation, or offering to
the affected Certificate owners the option of making such change; or (c)
establishing a new registered management investment company or managed separate
account. If a material irreconcilable conflict arises because of a decision by
AAL to disregard voting instructions of owners of Certificates in one or more of
the ACCOUNTS, and that decision represents a minority position or would preclude
a majority vote with respect to the vote being taken by shareholders of the
FUND, then AAL shall, at the election and direction of the FUND’s Board,
withdraw each affected ACCOUNT’s investment in the FUND (but no charge or
penalty shall be imposed as a result of such withdrawal). |
| 7.3 |
AAL is responsible, to the extent permitted by applicable law, for taking
remedial action on behalf of the affected ACCOUNT(s) in the event that the
FUND’s Board determines a material irreconcilable conflict exists. AAL will
take remedial action only as it pertains to assets of the affected ACCOUNT(s)
and in accordance with its fiduciary responsibility to Certificate owners in
such affected ACCOUNT(s). AAL, as the sponsor of the affected ACCOUNT(s), will
be responsible for the cost of any such remedial action. For the purpose of this
Section, a majority of the disinterested members of the FUND’s Board will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event shall the FUND, or AAL in its capacity as
advisor to the FUND, be required to establish a Portfolio or new funding medium
for any Certificate or any ACCOUNT. Nor, in its capacity as sponsor of any
ACCOUNT, shall AAL be required to establish a new funding medium for any
Certificate or any ACCOUNT if any offer to do so has been declined by a vote of
a majority of the Certificate owners materially and adversely affected by the
material irreconcilable conflict. |
| 7.4 |
The FUND promptly shall notify AAL in writing of any determination by the
FUND’s Board as to the existence of a material irreconcilable conflict and
its implications |
| 7.5 |
All reports of potential or existing conflicts received by the FUND’s Board
and all Board actions with regard to or determining the existence of a conflict
of interest, notifying AAL of a conflict, and determining whether any proposed
action adequately remedies a conflict, will be properly recorded in the minutes
of the FUND’s Board or other appropriate records, and such minutes or other
records will be made available to the SEC upon request. |
| 7.6 |
The FUND will disclose in its prospectus that (a) shares of the FUND may be
offered to Separate Accounts and Qualified Plans; (b) material irreconcilable
conflicts may arise between the interest of various certificateholders investing
in the Separate Accounts and the interests of participants in the Qualified
Plans investing in the FUND; and (c) the FUND’s Board will monitor events
in order to identify the existence of any material conflict and determine what
action, if any, should be taken in response to such material irreconcilable
conflict. |
| 7.7 |
No less than annually, AAL will submit to the FUND’s Board such reports,
materials and data as the Board may reasonably request so that the Board may
carry out fully its obligations under this Section. Such reports, materials and
data will be submitted more frequently if deemed appropriate by the FUND’s
Board. In any event, AAL will promptly notify the FUND’s Board in writing
if it becomes aware of any facts or circumstances that could give rise to a
material irreconcilable conflict between the interests of various Certificate
owners in the ACCOUNTS and the interests of Qualified Plan participants
investing in the FUND. All reports submitted to the FUND’s Board under this
Section 7.7 shall include all information reasonably necessary for the Board to
consider the conflict issues raised. In this regard, AAL promptly shall notify
the FUND’s Board whenever AAL has determined to disregard voting
instructions of the Certificate owners of any ACCOUNT(s) on any matter submitted
to a vote of shareholders of the FUND. |
8.
Indemnification
| 8.1 |
Indemnification By AAL |
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(a)
AAL will indemnify and hold harmless the FUND and each of its Directors,
officers, and employees and each person, if any, who controls the FUND within
the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified
Parties” for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of AAL) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, and which: |
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(i)
arise out of or are based upon any failure by AAL to perform the duties or
assume the general business responsibilities of AAL with respect to the design,
drafting, state approvals, issuance, servicing and administration of the
Certificates, or the establishment and maintenance of the ACCOUNTS; or |
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(ii)
arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement,
prospectus, or SAI for the Certificates, or the ACCOUNTS, or contained in the
Certificates or sales literature for the Certificates (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this Agreement to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished in writing to
AAL by or on behalf of the FUND for use in the registration statement,
prospectus, or SAI for the Certificates or the ACCOUNTS or in the Certificates
or sales literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Certificates or FUND shares; or |
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(iii)
arise out of or are based upon statements or representations (other than
statements or representations contained in the registration statement,
prospectus, SAI, or sales literature of the FUND not supplied by AAL, or persons
under its control) or wrongful conduct of AAL or persons under its control, or
failure to supervise persons under AAL’s control or entities or individuals
with which AAL contracts, with respect to the sale or distribution of the
Certificates or FUND shares; or |
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(iv)
arise out of any untrue statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or sales literature of the
FUND or any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in writing to the FUND
by or on behalf of AAL; or |
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(v) arise out of or result from any failure by AAL to provide the services and
furnish the materials contemplated by this Agreement; or |
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(vi)
arise out of or result from any material breach of any representation and/or
warranty made by AAL in this Agreement or arise out of or result from any other
material breach of this Agreement by AAL, as limited by and in accordance with
the provisions of Sections 8.1(b). and 8.1(c) hereof. |
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(b)
AAL will not be liable under this indemnification provision with respect to any
losses, claims, damages, liabilities or litigation to which an Indemnified Party
would be subject by reason of such Indemnified Party’s willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified
Party’s duties or by reason of such Indemnified Party’s reckless
disregard of obligations or duties under this Agreement or to the FUND,
whichever is applicable. |
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(c)
AAL will not be liable under this indemnification provision with respect to any
claim made against an Indemnified Party unless such Indemnified Party shall have
notified AAL in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify AAL of any such claim will not relieve AAL from any liability that it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, AAL shall be entitled to participate, at its
own expense, in the defense thereof. AAL also will be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from AAL to such party of AAL’s election to assume the defense
thereof, the Indemnified Party will bear the fees and expenses of any additional
counsel retained by it, and AAL will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation. |
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(d)
The Indemnified Party will promptly notify AAL of the commencement of any
litigation or proceeding against it or any of its respective officers or
directors in connection with transactions that are the subject of this Agreement
whether or not indemnification is being sought hereunder. |
| 8.2 |
Indemnification By the FUND |
| |
(a)
The FUND will indemnify and hold harmless AAL and each of its directors,
officers and employees and each person, if any, who controls AAL within the
meaning of Section 15 of the 1933 Act (collectively, the “Indemnified
Parties” for purposes of this Section 8.2) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of FUND) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, which: |
| |
(i)
arise out of or are based upon any failure by the FUND to perform the duties or
assume the general business responsibilities required by this Agreement with
respect to the sale of shares of the FUND to AAL; or |
| |
(ii)
arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the sales literature for the FUND
and/or the Certificates, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify will not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to the FUND by or
on behalf of AAL for use in the registration statement, prospectus, or SAI for
use in the sales literature or otherwise for use in connection with the sale of
Portfolio shares; or |
| |
(iii)
arise out of or are based upon statements or representations (other than
statements or representations contained in the registration statement,
prospectus, SAI, or sales literature of the FUND not supplied by the FUND, or
persons under its control) or wrongful conduct of the FUND or persons under its
control, or failure to supervise persons under the FUND’s control or
entities or individuals with which the FUND contracts, with respect to the sale
or distribution of the Certificates or FUND shares; or |
| |
(iv)
arise out of any untrue statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or sales literature of the
FUND or any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in writing to AAL by or
on behalf of AAL; or |
| |
(v) arise out of or result from any failure by the FUND to provide the services
and furnish the materials contemplated by this Agreement; or |
| |
(vi)
arise out of or result from any material breach of any representation and/or
warranty made by the FUND in this Agreement or arise out of or result from any
other material breach of this Agreement by the FUND, except to the extent
provided in Section 8.2(b) and 8.2(c) hereof. |
| |
(b)
The FUND will not be liable under this indemnification provision with respect to
any losses, claims, damages, liabilities or litigation to which an Indemnified
Party would be subject by reason of such Indemnified Party’s willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party’s duties or by reason of such Indemnified Party’s
reckless disregard of obligations or duties under this Agreement or to the FUND,
whichever is applicable. |
| |
(c)
The FUND will not be liable under this indemnification provision with respect to
any claim made against an Indemnified Party unless such Indemnified Party shall
have notified the FUND in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify the FUND of any such claim will not relieve the FUND from any
liability that it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the FUND shall be
entitled to participate, at its own expense, in the defense thereof. The FUND
also will be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the FUND to such party of
the FUND’s election to assume the defense thereof, the Indemnified Party
will bear the fees and expenses of any additional counsel retained by it, and
the FUND will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation. |
| |
(d)
The Indemnified Party will promptly notify the FUND of the commencement of any
litigation or proceeding against it or any of its respective officers or
directors in connection with transactions that are the subject of this Agreement
whether or not indemnification is being sought hereunder. |
9. Term and
Termination of this Agreement
| 9.1 |
This Agreement will terminate: |
| |
(a)
as to any party hereto, at the option of that party, upon prior written notice
to the other party as provided in Section 9.3 herein; or |
| |
(b)
at the option of the FUND in the event that formal administrative proceedings
are instituted against AAL by the NASD, the SEC, any state securities or
insurance commissioner or any other regulatory body regarding AAL’s duties
under this Agreement or related to the sale of the Certificates, the operation
of the ACCOUNTS, or the purchase of FUND shares, provided, however, that the
FUND determines, in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of AAL to perform its obligations under this Agreement; or |
| |
(c)
at the option of AAL in the event that formal administrative proceedings are
instituted against the FUND by the NASD, the SEC, or any state securities or
insurance commission or any other regulatory body, regarding the FUND’s
duties under this Agreement or related to the sale of FUND shares or the
operation of the FUND, provided, however, that AAL determines, in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the FUND to perform its
obligations under this Agreement; or |
| |
(d)
at the option of AAL with respect to the ACCOUNTS, upon requisite authority to
substitute the shares of another investment company for shares of the FUND in
accordance with the terms of the Certificates or in accordance with the ACCOUNTS
investment policy or standards of conduct; or |
| |
(e)
at the option of AAL, in the event any of the FUND’s shares are not
registered, issued, or sold in accordance with applicable federal and any state
law or such law precludes the use of such shares as the underlying investment
media of the Certificates issued or to be issued by AAL; or |
| |
(f) at the option of AAL, if the FUND fails to meet the requirements specified
in Sections 2.3 or 2.6 hereof; or |
| |
(g) at the option of the FUND, if the investments of the ACCOUNTS fail to
satisfy the diversification requirements of the Code and the regulations
thereunder, or |
| |
(h)
at the option of AAL, if the FUND dissolves or becomes otherwise unable to sell
shares to fund the ACCOUNTS. |
| 9.2 |
It is understood and agreed that the right of any party hereto to terminate this
Agreement pursuant to Section 9.1(a) may be exercised for any reason or for no
reason. |
| 9.3 |
Notice Requirement for Termination
No termination of this Agreement will be effective unless and until the party
terminating this Agreement gives prior written notice to the other party to this
Agreement of its intent to terminate, and such notice shall set forth the basis
for such termination. Furthermore, |
| |
(a)
in the event that any termination is based upon the provisions of Section 9.1(a)
hereof, such prior written notice shall be given at least one hundred eighty
(180) days in advance of the effective date of termination as required by such
provision; |
| |
(b)
in the event that any termination is based upon the provisions of Section 9.1(b)
or Section 9.1(c) hereof, such prior written notice shall be given at least
ninety (90) days in advance of the effective date of termination; |
| |
(c)
in the event that any termination is based upon the provisions of Section 9.1(d)
hereof, AAL will give at least sixty (60) days prior written notice to the FUND
of the date of any proposed action to substitute FUND shares, including the
filing of any applicable exemptive application under the 1940 Act relating to
the ACCOUNTS; and AAL will provide the FUND with a copy of any such exemptive
application; and |
| |
(d)
in the event that any termination is based upon the provisions of Section
9.1(e), Section 9.1(f), or Section 9.1(g) hereof, such prior written notice
shall be given as soon as possible within twenty-four (24) hours after the
terminating party learns of the event causing termination to be required. |
| |
It
is also understood that this Agreement may be terminated with regard to a
specific Portfolio or Portfolios of the FUND, or the entire FUND at the
discretion of the terminating party. Notwithstanding any termination of this
Agreement, the FUND, or any Portfolio, provided its shares are then available
for sale to any persons, shall at the option of AAL, continue to make available
additional shares of the FUND pursuant to the terms and conditions of this
Agreement, for all Certificates in effect on the effective date of termination
of this Agreement (hereinafter referred to as “Existing
Certificates”). Specifically, without limitation, the owners of the
Existing Certificates shall be permitted to transfer or reallocate investments
under the Certificates, redeem investments in the FUND and/or invest in the FUND
upon the making of additional purchase payments under the Existing Certificates. |
10. Notices
Any notice will be
sufficiently given when sent by registered or certified mail to the other party
at the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to AAL: 0000 Xxxxx Xxxxxxx Xxxx
.... Xxxxxxxx, Xxxxxxxxx 00000-0000
.... Attention: Xxxxxxx X. Xxx
Secretary, Senior Vice President and General Counsel
If to the FUND: 000 Xxxx Xxxxxxx Xxxxxx
.... Xxxxxxxx, Xxxxxxxxx 00000-0000
.... Attention: Xxxxx X. Xxxxx
Secretary
11.
Miscellaneous
| 11.1 |
This Agreement will be construed and the provisions hereof interpreted under and
in accordance with the laws of the State of Maryland, where the sale of any FUND
share shall be deemed to have been made; provided, however, that if such laws or
any of the provisions of this Agreement conflict with applicable Provisions of
the 1940 Act, the latter shall control. |
| 11.2 |
If any provision of this Agreement will be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement will not be
effected thereby. |
IN WITNESS WHEREOF, each of
the parties hereto has caused this Agreement to be executed in its name and on
its behalf by its duly authorized representative and its seal to be hereunder
affixed hereto as of the 1st day of January, 2002.
AID ASSOCIATION FOR LUTHERANS,
AAL VARIABLE ANNUITY ACCOUNT I,
AAL VARIABLE ANNUITY ACCOUNT II and AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL VARIABLE LIFE ACCOUNT I
By: /s/ Xxxxx X. Xxxxxxxxx By: /s/ Xxxxxx X. Same
Xxxxx X. Xxxxxxxxx Xxxxxx X. Same
President and President
Chief Executive Officer
By: /s/ Xxxxxxx X. Xxx By: /s/ Xxxxx X. Xxxxx
Xxxxxxx X. Xxx Xxxxx X. Xxxxx
Senior Vice President, Secretary
Secretary and General Counsel
