EXHIBIT (h)(18)
FUND PARTICIPATION AGREEMENT
Aetna Life Insurance and Annuity Company (the "Company"), Aetna Series
Fund, Inc. ("Fund"), on behalf of each series of the Fund specified on Schedule
A attached hereto (as may be amended from time to time with the mutual consent
of the parties hereto) ("Series"), and Aeltus Investment Management, Inc.
("Adviser") hereby agree to an arrangement whereby the Series shall be made
available to serve as underlying investment media for Variable Annuity Contracts
("Contracts") to be issued by the Company.
1. Establishment of Account.
The Company represents that it has established Separate Account F
and may establish such other accounts as may be set forth in
Schedule B attached hereto (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 that is
not required to be registered as an investment company under the
Investment Company Act of 1940, 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 of 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 or
Contract owner, as applicable under a particular Contract.
2. Pricing Information; Orders; Settlement.
(a) The Fund will make shares of each Series 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 Series calculates its net asset
value (a "Business Day"). Series shares shall be purchased and
redeemed in such quantity and at such times as determined by the
Company to be necessary to meet the requirements of those Contracts
for which the Series 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 Series to any person, or suspend or terminate the
offering of shares of any Series 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 light of
their fiduciary duties under federal and/or any applicable state
laws, necessary in the best interests of the shareholders of such
Series.
(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 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 9:30
a.m. eastern 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 a Series.
(c) The Fund hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Series
shares relating to the Contracts from Contract owners or
participants. Orders from Contract owners or participants 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 9:30 a.m. eastern
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 9:30 a.m.
eastern time within two days following the day of receipt of such
order.
(d) Payments for net redemptions of shares of a Series 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 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. ALIAC
shall assume responsibility as herein described for any loss to a
Series caused by a cancellation or correction made to an Instruction
by a Plan Representative or Participant subsequent to the date as of
which such Instruction has been received by ALIAC and originally
relayed to Aeltus, and ALIAC will immediately pay such loss to such
Series upon ALIAC's receipt of written notification, with supporting
data. Aeltus shall indemnify and hold ALIAC harmless, from the
effective date of this Agreement, against any amount ALIAC is
required to pay to Plans, Plan Representatives, or Participants due
to: (i) an incorrect calculation of a Series' daily net asset value,
dividend rate, or capital gains distribution rate or (ii) incorrect
or unreasonably late reporting of the daily net asset value deemed
material in accordance with the Fund's error correction policy,
dividend rate, or capital gain distribution rate of a Series, upon
written notification by ALIAC, with supporting data, to Aeltus.
(f) The Company agrees to purchase and redeem the shares of the Series
named in this Agreement or in Schedule A hereof offered by the
then-current prospectus and
2
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 or Participant to give instructions to the Company
which would require the Company to redeem or exchange shares of a
Series. 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, including the cost of registration of its
shares with the Securities and Exchange Commission (the "SEC") and
in states where required. 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 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 materials, and periodic fund reports to
shareholders, 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 or participants.
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.
3
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 shares
of a Series the shares of another investment company in accordance
with the terms of the applicable Contracts. The Company will give
sixty days written notice to the Fund and the Adviser of any
decision to replace the shares of a Series;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if shares of a Series are not registered, issued or sold in
conformance with Federal law or such law precludes the use of such
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.
6. Continuation of Agreement.
Termination as the result of any cause listed in Section 5 shall not
affect the Fund's obligation to furnish shares of its Series to Contracts then
in force for which such 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.
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
objects
4
to such use in writing, transmitted by facsimile within two business
days after receipt of such material.
(b) 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
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.
8. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on shares
of a Series held by the separate accounts to all Contract owners.
(b) The Company will distribute to Contract owners all proxy material
furnished by the Fund and will vote shares of a Series in accordance
with instructions received from such Contract owners. The Company
and its agents shall not oppose or interfere with the solicitation
of proxies for shares of a Series held for such Contract owners and
participants.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Fund and 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
5
Company or its agents, with respect to the sale and distribution of
Contracts for which shares of a Series 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 the Company may otherwise have.
(b) The Fund and 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, 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 Fund 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 Fund 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 Fund 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
6
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. 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, facsimile 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: To the Adviser:
Aetna Life Insurance and Annuity Aeltus Investment Management,
Company Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Hartford, Connecticut 06103-1205
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To the Fund:
Aetna Series Fund, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇ ▇▇▇
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.
7
(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.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 30th day of January, 1998.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President and Treasurer,
Corporate Controller
AETNA SERIES FUND, INC.
BY /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
8
AELTUS INVESTMENT MANAGEMENT, INC.
By: /s/ J. ▇▇▇▇▇ ▇▇▇
----------------------------------------------
Name: J. ▇▇▇▇▇ ▇▇▇
Title: Managing Director, Chief Operating Officer
9
SCHEDULE A
SERIES OF AETNA SERIES FUND. INC.
Aetna Bond Fund
Aetna Balanced Fund
Aetna Growth and Income Fund
Aetna International Fund
Aetna Government Fund
Aetna Growth Fund
Aetna Small Company Fund
Aetna Index Plus Large Cap Fund
Aetna Ascent Fund
Aetna Crossroads Fund
Aetna Legacy Fund
Aetna High Yield Fund
Aetna Index Plus Bond Fund
Aetna Index Plus Mid Cap Fund
Aetna Index Plus Small Cap Fund
Aetna Mid Cap Fund
Aetna Real Estate Securities Fund
Aetna Value Opportunity Fund
SCHEDULE B
(For any future separate accounts - See Section 1)
