PARTICIPATION AGREEMENT
AMONG
ACACIA CAPITAL CORPORATION
PROTECTIVE LIFE INSURANCE COMPANY
AND
XXXXXXX ASSET MANAGEMENT COMPANY, INC.
THIS AGREEMENT, made and entered into this 29th day of April 1997, by and
among ACACIA CAPITAL CORPORATION, a management investment company organized
under the laws of the State of Maryland ("ACC"), Protective Life Insurance
Company, a Tennessee corporation (the "Company") on its own behalf and on behalf
of each of the segregated asset accounts of the Company set forth in Schedule A
hereto, as may be amended from time to time (the "Accounts", and XXXXXXX ASSET
MANAGEMENT COMPANY, INC. ("CAMCO"), a Delaware corporation.
WHEREAS, ACC is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and its
shares are registered or will be registered under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, shares of beneficial interest of ACC are divided into several
series of shares, each representing the interests in a particular managed pool
of securities and other assets;
WHEREAS, the series of shares of ACC offered by ACC to the Company and the
Accounts are set forth on Schedule A attached hereto (each, a "Portfolio," and.
collectively, the "Portfolios");
WHEREAS, CAMCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the ACC's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies') which, if required by applicable law will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, XXXXXXX DISTRIBUTORS, (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers.
Inc. (the"NASD");
WHEREAS, INVESTMENT DISTRIBUTORS, INC., the underwriter for the individual
variable annuity and the variable life policies, is registered as a broker-
dealer with the SEC under the 1934 Act and is a member in good standing of the
NASD; and
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WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and ACC intends to sell such Shares to the
Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, ACC, CAMCO, and
the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1 ACC agrees to sell to the Company those Shares that the Accounts
order (based on orders placed by Policy holders on that Business Day, as
defined below) and that are available for purchase by such Accounts,
executing such orders on a daily basis at the net asset value next computed
after receipt by ACC or its designee of the order for the Shares. For
purposes of this Section 1.1, the Company shall be the designee of ACC for
receipt of such orders from Policy owners and receipt by such designee
shall constitute receipt by ACC; PROVIDED that ACC receives written or
facsimile notice of such orders by 10:30 a.m. Eastern time on the next
following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange, Inc. (the "NYSE") is open for trading and on which ACC
calculates its net asset value pursuant to the rules of the SEC. ACC shall
furnish to the Company same day written or facsimile confirmation of each
order under this paragraph 1.1. Written or facsimile notices under Article
I of this agreement shall be delivered to the address or facsimile number
designated from time to time by ACC, CAMCO and the Company.
1.2. ACC agrees to make the Shares available indefinitely for purchase at
the applicable net asset value per share by the Company and the Accounts on
those days on which ACC calculates its net asset value pursuant to rules of
the SEC and ACC shall calculate such net asset value on each day which the
NYSE is open for trading. Notwithstanding the foregoing, the Board of
Directors of ACC (the "Board") may refuse to sell any Shares to the Company
and the Accounts, or suspend or terminate the offering of the Shares 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 its fiduciary duties under federal and any applicable
state laws, necessary in the best interest of the Shareholders of such
Portfolio.
1.3. ACC and CAMCO agree that (1) the Shares will be sold only to
insurance companies that have entered into participation agreements with
ACC and CAMCO (the "Participating Insurance Companies") and their separate
accounts, qualified pension and retirement plans and CAMCO or its
affiliates; and (2) all such sales will comply with applicable federal and
state securities laws and with ACC's Exemptive Order regarding Shared
Funding. The Company will not resell the Shares except to ACC or its
agents.
1.4. ACC agrees to redeem for cash, on the Company's request, any full or
fractional Shares held by the Accounts (based on orders placed by Policy
owners on that Business Day), executing such requests on a daily basis at
the net asset value next computed after receipt by ACC or its designee of
the request for redemption. For purposes of this Section 1.4. the Company
shall be the designee of ACC for receipt of requests for redemption from
Policy owners and receipt by such designee shall constitute receipt by ACC;
provided that ACC receives written or facsimile notice of such request for
redemption by 10:30 a.m. Eastern time on the next following Business Day.
ACC shall furnish to the Company same day written or facsimile confirmation
of each request for redemption under this paragraph 1.4. Written or
facsimile notice under Article I of this agreement shall be delivered to
the address or facsimile number designated from time to time by ACC, CAMCO
and the Company.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by ACC, the Company and ACC
shall net purchase and redemption orders with respect to each Portfolio and
shall transmit one net payment for all of the Portfolios in accordance with
Section 1.6 hereof.
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1.6. In the event of net purchases, the Company shall pay for the Shares
on the next Business Day after an order to purchase the Shares is made in
accordance with the provisions of Section 1.1. hereof. In the event of net
redemptions, ACC shall pay the redemption proceeds on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts. The
Shares ordered from ACC will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. ACC shall furnish same day notice (by wire or telephone followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions as are payable on a Portfolio's Shares
in additional Shares of that Portfolio. ACC shall notify the Company of
the number of Shares so issued as payment of such dividends and
distributions.
1.9. ACC or its custodian shall make the net asset value per share for
each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. Eastern time. If ACC provides materially incorrect share net
asset value information, ACC shall make an adjustment to the number of
shares purchased or redeemed for the Accounts to reflect the correct net
asset value per share. Any material error in the calculation or reporting
of net asset value per share, dividend or capital gains information shall
be reported promptly upon discovery to the Company.
ARTICLE II, CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Accounts as segregated asset
accounts under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies, and
that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the
1933 Act for the Policies and the registration statements under the 1940
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. Subject to Article VI hereof, the Company represents and warrants
that the Policies are currently and at the time of issuance will be treated
as life insurance, endowment or annuity contracts under applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
that it will maintain such treatment and that it will notify ACC or CAMCO
immediately upon having a reasonable basis for believing that the Policies
have ceased to be so treated or that they might not be so treated in the
future.
2.3. The Company represents and warrants that Investment Distributors,
Inc., the underwriter for the individual variable annuity and the variable
life policies, is a member in good standing of the NASD and is a registered
broker-dealer with the SEC. The Company represents and warrants that the
Company and Investment Distributors, Inc. will sell and distribute such
policies in accordance in all material respects with all applicable state
and federal securities laws including without limitation the 1933 Act, the
1934 Act and the 1940 Act.
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2.4. ACC and CAMCO represent and warrant that the Shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland and
all applicable federal and state securities laws and that ACC is and shall
remain registered under the 1940 Act. ACC shall amend the registration
statement for its Shares under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of its Shares.
ACC shall register and qualify the Shares for sale in accordance with the
laws of the various states only if and to the extent deemed necessary by
ACC.
2.5. CAMCO represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. ACC and CAMCO represent that ACC and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. ACC represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in
all material respects with the 1940 Act and any applicable regulations
thereunder and Subchapter M of the Code.
2.7. CAMCO represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for ACC in compliance in all material respects with
any applicable federal and state securities laws.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so
that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the SEC
has granted exemptive relief to permit mixed and shared funding (the "Mixed
and Shared Funding Exemptive Order").
2.9. ACC and CAMCO represent that ACC's investment policies, fees and
expenses are and shall at all times remain in compliance with applicable
state securities laws, if any, and with the insurance laws of the State of
Tennessee and any other states as may be identified by the Company from
time to time. ACC and CAMCO represent that their respective operations are
and shall at all times remain in material compliance with applicable state
securities laws and with the insurance laws of the State of Tennessee and
any other state as may be identified by the Company from time to time to
the extent required to perform this Agreement.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, ACC or its designee shall provide the Company,
free of charge, with as many copies of the current prospectus (describing
only the Portfolios listed in Schedule A hereto) for the Shares as the
Company may reasonably request for distribution to existing Policy owners
whose Policies are funded by such Shares. ACC or its designee shall
provide the Company, at the Company's expense, with as many copies of the
current prospectus for the Shares as the Company may reasonably request for
distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, ACC or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) ACC or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses taking account of
other relevant factors affecting the expense of printing, such as covers,
columns, graphs and charts; ACC or its designee to bear the cost of
printing the Shares' prospectus portion of such document for distribution
to owners of existing Policies funded by Shares and the Company to bear the
expenses of printing the portion of such document relating to the Accounts;
PROVIDED, however, that the Company shall bear all printing expenses of
such combined documents where used for distribution to prospective
purchasers. In the event that the Company requests that ACC or its
designee provides ACC's prospectus in a "camera ready" or diskette format,
ACC shall be responsible for providing the prospectus in the format in
which it or CAMCO is accustomed to formatting prospectuses and shall bear
the expense of providing the prospectus in such format (E.G., typesetting
expenses), and the Company shall bear the expense of adjusting or changing
the format to conform with any of its prospectuses.
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3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from ACC or its
designee. ACC or its designee, at its expense, shall print and provide
such statement of additional information to the Company (or a master of
such statement suitable for duplication by the Company) for distribution to
any owner of a Policy. ACC or its designee, at the Company's expense,
shall print and provide such statement to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to a
prospective purchaser who requests such statement.
3.3. ACC or its designee shall provide the Company free of charge copies,
if and to the extent applicable to the Shares, of ACC's proxy materials,
reports to Shareholders and other communications to Shareholders in such
quantity as the Company shall reasonably require for distribution to Policy
owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, ACC shall not pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense.
3.5. ACC hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received
from Policy owners; and
(c) vote the Shares for which no instructions have been received
in the same proportion as the Shares of such Portfolio for
which instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
Subject to applicable law, the Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies for
the Shares held for such Policy owners. The Company reserves the right to
vote shares held in any segregated asset account in its own right, to the
extent permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts holding
Shares calculates voting privileges in the manner required by the Mixed and
Shared Funding Exemptive Order. ACC and CAMCO will notify the Company of
any changes of interpretations or amendments to the Mixed and Shared
Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to ACC or
its designee, each piece of sales literature or other promotional material
in which ACC, CAMCO, any other investment adviser to ACC, or any affiliate
of CAMCO are named, at least three (3) Business Days prior to its use. No
such material shall be used if ACC, CAMCO or their respective designees
reasonably objects to such use within three (3) Business Days after receipt
of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of ACC, CAMCO, any other investment
adviser to ACC, or any affiliate of CAMCO or concerning ACC or any other
such entity in connection with the sale of the Policies other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Shares, as such
registration statement, prospectus and statement of additional information
may be amended or supplemented from time to time, or in reports or proxy
statements for ACC, or in sales literature or other promotional material
approved by ACC, CAMCO or their respective designees, except with the
permission of ACC, CAMCO or their respective designees. ACC, CAMCO or their
respective designees each agrees to respond to any request for approval on
a prompt and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning ACC, CAMCO or any
of their affiliates which is intended for use only by brokers or agents
selling the Policies (i.e., information that is not intended for
distribution to Policy owners or prospective Policy owners) is so used, and
neither ACC, CAMCO nor any of their affiliates shall be liable for any
losses, damages or expenses
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relating to the improper use of such broker-only materials. The parties
hereto agree that this Section 4.2 is not intended to designate or
otherwise imply that the Company is an underwriter of ACC's shares.
4.3. ACC or its designee shall furnish, or shall cause to be furnished,
to the Company or its designee, each piece of sales literature or other
promotional material in which the Company and/or the Accounts is named at
least three (3) Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within
three (3) Business Days after receipt of such material.
4.4. ACC and CAMCO shall not give, and agree that the Underwriter shall
not give, any information or make any representations on behalf of the
Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. ACC and CAMCO shall adopt and implement
procedures reasonably designed to ensure that information concerning the
Company or any of its affiliates and the Accounts that is intended for use
only by brokers or agents (I.E. information that is not intended for
distribution to owners of the Shares or prospective owners of the Share) is
so used, and neither the Company, its affiliates nor the Accounts shall be
liable for any losses, damages or expenses relating to the improper use of
such broker only materials. The parties hereto agree that this Section
4.4. is neither intended to designate nor otherwise imply that CAMCO is an
underwriter or distributor of the Policies.
4.5. The Company and ACC (or its designee in lieu of the Company or ACC,
as appropriate) will each provide to the other at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the
Policies, or to ACC or its Shares, prior to or contemporaneously with the
filing of such document with the SEC or other regulatory authorities. The
Company and ACC shall also each promptly inform the other of the results of
any examination by the SEC (or other regulatory authorities) that relates
to the Policies, ACC or its Shares, and the party that was the subject of
the examination shall provide the other party with a copy of relevant
portions of any "deficiency letter" or other correspondence or written
report regarding any such examination.
4.6. ACC and CAMCO will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in ACC's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. ACC and CAMCO will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement in an orderly manner. ACC
and CAMCO will make reasonable efforts to attempt to have changes affecting
Policy prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. ACC shall pay no fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to ACC,
except that if ACC or any Portfolio adopts and implements a plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution and Shareholder
servicing expenses, then, subject to obtaining any required exemptive
orders or regulatory approvals, ACC may make payments to the
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Company or to the underwriter for the Policies if and in amounts agreed to
by ACC in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof, reimburse
other parties for expenses initially paid by one party but allocated to
another party. In addition, nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to ACC and/or to the Accounts.
5.2. ACC or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of ACC's registration
statement, and payment of filing fees and registration fees; preparation
and filing of ACC's proxy materials and reports to Shareholders; setting in
type and printing its prospectus and statement of additional information
(to the extent provided by and as determined in accordance with Article III
above); setting in type and printing the proxy materials and reports to
Shareholders (to the extent provided by and as determined in accordance
with Article III above); the preparation of all statements and notices
required of ACC by any federal or state law with respect to its Shares; all
taxes on the issuance or transfer of the Shares; and the costs of
distributing ACC's prospectuses and proxy materials to owners of Policies
funded by the Shares and any expenses permitted to be paid or assumed by
ACC pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. ACC
shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares
prospectus or prospectuses in connection with new sales of the Policies and
of distributing ACC's Shareholder reports to Policy owners. The Company
shall bear all expenses associated with the registration, qualification,
and filing of the Policies under applicable federal securities and state
insurance laws; the cost of preparing, printing and distributing the Policy
prospectus and statement of additional information; and the cost of
preparing, printing and distributing annual individual account statements
for Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. ACC and CAMCO represent and warrant that each Portfolio of ACC will
meet the diversification requirements of Section 817 (h) (1) of the Code
and Treas. Reg. 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts, as they may be
amended from time to time (and any revenue rulings, revenue procedures,
notices, and other published announcements of the Internal Revenue Service
interpreting these sections), as if those requirements applied directly to
each such Portfolio. In the event that any Portfolio is not so diversified
at the end of any applicable quarter, ACC and CAMCO will make every effort
to: (a) adequately diversify the Portfolio so as to achieve compliance
within the grace period afforded by Treas. Reg. 1.817.5, and (b) notify the
Company.
6.2. ACC and CAMCO represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. ACC agrees that the Board, constituted with a majority of
disinterested directors, will monitor each Portfolio of ACC for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in ACC. The Board shall have the sole authority to determine if a
material irreconcilable conflict exists, and such determination shall be
binding on the Company only if approved in the form of a resolution by a
majority of the Board, or a majority of the disinterested directors of the
Board. The Board will give prompt notice of any such determination to the
Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in ACC's exemptive application pursuant to which the SEC has granted the
Mixed and Shared Funding Exemptive Order by providing the Board, as it may
reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting
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any potential or existing conflicts of which it is aware to the Board
including, but not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregarded. The
Company also agrees that, if a material irreconcilable conflict arises, it
will at its own cost remedy such conflict up to and including (a)
withdrawing the assets allocable to some or all of the Accounts from ACC or
any Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of ACC, or submitting to a
vote of all affected contract owners whether to withdraw assets from ACC or
any Portfolio and reinvesting such assets in a different investment medium
and, as appropriate, segregating the assets attributable to any appropriate
group of contract owners that votes in favor of such segregation, or
offering to any of the affected contract owners the option of segregating
the assets attributable to their contracts or policies, and (b)
establishing a new registered management investment company and segregating
the assets underlying the Policies, unless a majority of Policy owners
materially adversely affected by the conflict have voted to decline the
offer to establish a new registered management investment company.
7.3. A majority of the disinterested directors of the Board shall
determine whether any proposed action by the Company adequately remedies
any material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any material
irreconcilable conflict, the Company will withdraw from investment in ACC
each of the Accounts designated by the disinterested directors and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; PROVIDED, HOWEVER, that
such withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested directors of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed and Shared Funding Exemptive Order, then (a) ACC and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless ACC, CAMCO, any
affiliates of CAMCO, and each of their respective directors/trustees,
officers and each person, if any, who controls ACC or CAMCO within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or 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 the Company) or expenses (including reasonable counsel
fees) to which any Indemnified Party may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) 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 statement of
additional information for the Policies or contained in or
sales literature or other promotional material for the
Policies (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 shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reasonable reliance upon
and in conformity with information furnished to the Company
or its designee by or on behalf of ACC or CAMCO or the
Underwriter for use in the registration statement,
prospectus or statement of additional information for the
Policies or in the Policies or sales literature or other
promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Policies or Shares; or
8
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional
material of ACC not supplied by the Company or its designee,
or persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information
or sales literature or other promotional literature of ACC,
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
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to ACC by or on behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. INDEMNIFICATION BY CAMCO
CAMCO agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including, but not limited to,
amounts paid in settlement with the written consent of CAMCO) or expenses
(including, but not limited to, reasonable counsel fees) to which any
Indemnified Party may become 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 are related to the
sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of ACC (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 statement therein not misleading, PROVIDED that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished
to ACC, CAMCO, the Underwriter or their respective designees
by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information
for ACC or in sales literature or other promotional material
for ACC (or any amendment or supplement) or otherwise for
use in connection with the sale of the Policies or Shares;
or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by ACC, CAMCO, the
Underwriter or any of their respective designees or persons
under their respective control and on which any such entity
has reasonably relied) or wrongful conduct of ACC or persons
under its control, with respect to the sale or distribution
of the Policies or Shares; or
9
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information,
or sales literature or other promotional literature of the
Accounts or relating to the Policies, 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 statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of ACC, CAMCO or the
Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by ACC in this Agreement
(including a failure, whether unintentional or in good faith
or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of
this Agreement by ACC; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset
value per share or dividend or capital gain distribution
rate; or
(f) arise as a result of any failure by ACC to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall CAMCO be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Portfolio) as a legally
and validly established segregated asset account under applicable state law
and as a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) subject to ACC's compliance
with the diversification requirements specified in Article VI, the failure
by the Company or any Participating Insurance Company to maintain its
variable annuity and/or variable life insurance contracts (with respect to
which any Portfolio serves as an underlying funding vehicle) as life
insurance, endowment or annuity contracts under applicable provisions of
the Code.
8.4. Neither the Company nor CAMCO shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party will,
if a claim in respect thereof is to be made against the indemnifying party
under this section, 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. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such Indemnified Party. After
notice from the indemnifying party of its intention to assume the defense
of an action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the indemnifying party shall not be
liable to such Indemnified Party under this section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
10
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article
VIII. The indemnification provisions contained in this Article VIII shall
survive any termination of this Agreement.
ARTICLE IX:. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
ACC, CAMCO, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the sale or purchase of the Shares.
ARTICLE XI. TERMINATION
11.1 This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares
of Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing,
the Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to ACC by the Company; or
(c) at the option of ACC or CAMCO upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against ACC by the NASD, the SEC, or any state
securities or insurance department or any other regulatory
body regarding ACC's or CAMCO' duties under this Agreement
or related to the sale of the Shares; or
(e) at the option of the Company, ACC or CAMCO upon receipt of
any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment medium. The Company will give thirty (30) days
prior written notice to ACC of the Date of any proposed vote
or other action taken to replace the Shares; or
11
(f) termination by either ACC or CAMCO by written notice to the
Company, if either one or both of ACC or CAMCO respectively,
shall determine, in their 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; or
(g) termination by the Company by written notice to ACC and
CAMCO, if the Company shall determine, in its sole judgment
exercised in good faith, that ACC or CAMCO has suffered a
material adverse change in this business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement;
or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified ACC of its
intention to do so.
11.5. Notwithstanding any termination of this Agreement, so long as the
Company shall have a balance of at least $1 million invested in any
Portfolio of ACC, then ACC and CAMCO shall, at the option of the Company,
continue to make available additional shares of that Portfolio pursuant to
the terms and conditions of this Agreement, for all Policies in effect on
the effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under the
Policies, redeem investments in any Portfolio and/or invest in ACC upon the
making of additional purchase payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile 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 ACC:
Acacia Capital Corporation
c/x Xxxxxxx Group Legal Department
0000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (301)
Attn: Xxxxxxx X. Xxxxxxxxx, Vice President
12
If to the Company:
Protective Life Insurance Company
0000 Xxxxxxx 000 Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000)000-0000
Attn: Legal Dept., Xxxxx X. Xxxxxxxx, Xx. Associate Counsel
If to CAMCO:
Xxxxxxx Asset Management Company, Inc.
c/x Xxxxxxx Group Legal Department
0000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (301)
Attn: Xxxxxxx X. Xxxxxxxxx, Vice President
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement or as otherwise required by applicable law
or regulation, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written
consent of the affected party until such time as it may come into the
public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. Except as otherwise expressly provided in this Agreement, neither
ACC nor CAMCO nor any affiliate thereof shall use any trademark, trade
name, service xxxx or logo of the Company or any of its affiliates, or any
variation of any such trademark, trade name, service xxxx or logo, without
the Company's prior written consent, the granting of which shall be at the
Company's sole discretion. Except as otherwise expressly provided in this
Agreement, neither the Company nor any affiliate thereof shall use any
trademark, trade name, service xxxx or logo of ACC or of CAMCO, or any
variation of any such trademark, trade name, service xxxx or logo, without
the prior written consent of ACC or of CAMCO, as appropriate, the granting
of which shall be at the sole discretion of ACC or of CAMCO, as applicable.
13
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
as of the date specified above.
PROTECTIVE LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ XXXXXXX XXXX
-------------------------------------
Xxxxxxx Xxxx, Senior Vice President
ACACIA CAPITAL CORPORATION
By its authorized officer,
By: /s/ XXXXXXX X. XXXXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxxxx, Vice President
XXXXXXX ASSET MANAGEMENT COMPANY, INC.
By its authorized officer,
By: /s/ XXXXXXX X. XXXXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxxxx, Vice President
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SCHEDULE A
Protective Life Insurance Company segregated asset accounts:
Protective Variable Annuity Separate Account
Protective Variable Life Separate Account
Acacia Capital Corporation Portfolios:
CRI Strategic Growth Portfolio
CRI Balanced Portfolio
15
