Exhibit (h.16)
PARTICIPATION AGREEMENT
Among
XXXXXX ADVISORS TRUST,
COLUMBIA FUNDS DISTRIBUTOR, INC.
and
TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 1/st/ day of May, 2004, by
and among TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY, (hereinafter the
"Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the XXXXXX ADVISORS TRUST, a business trust organized under the
laws of Massachusetts (hereinafter the "Trust") and COLUMBIA FUNDS DISTRIBUTOR,
INC. (hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be issued by Transamerica
Financial Life Insurance Company; and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as set forth on Schedule A hereto and as may be
amended from time to time by mutual agreement of the parties hereto (each such
series hereinafter referred to as a "Portfolio"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and its shares
are registered under the Securities Act of 1933, as amended (the "1933 Act");
and
WHEREAS, the Company has registered or will register certain variable life
insurance and variable annuity contracts ("Contracts") under the 1933 Act or
will not register the Contracts in proper reliance on an exemption from
registration under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker/dealer with the
Securities and Exchange Commission ("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. (hereinafter "NASD");
and
WHEREAS, the Trust has obtained an order from the SEC granting
participating insurance companies and their separate accounts exemptions from
the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(l5) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Trust to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and nonaffiliated
life insurance companies and certain qualified pension and retirement plans (the
"Shared Exemptive Order"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as each Account
at net asset value;
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NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Trust and the Underwriter agree as follows:
ARTICLE I. Sale of Trust Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Trust which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Trust or its designee of the
order for the shares of the Trust. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Trust; provided
that the Trust or its designated transfer agent receives notice of such order by
9:00 a.m. central time on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Trust calculates its net asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall use reasonable efforts to
calculate such net asset value on each day the New York Stock Exchange is open
for trading. Notwithstanding the foregoing, the Board of Trustees of the Trust
(hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the 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 such Portfolio.
1.3. The Trust and the Underwriter agree that shares of the Trust will be
sold only to the Company and its separate accounts or (subject to the other
terms of this Agreement and the Shared Exemptive Order) to other life insurance
companies that offer variable annuity and/or variable life insurance contracts
to the public and which have entered into an agreement with the Trust, or to
other qualified pension and retirement plans. No shares of any Portfolio will be
sold to the general public.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust or its designated
transfer agent receives notice of such request for redemption on the next
following Business Day.
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Trust shall be made in accordance
with the provisions of such prospectus.
1.6. The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
the purpose of Sections 2.10 and 2.11, upon receipt by the Trust of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Trust.
1.7. The Company agrees to provide purchase, redemption and exchange
activity with respect to each Portfolio to State Street Bank & Trust Company, as
agent for the Trust, no later than 10:00 a.m. the next Business Day after such
transactions have occurred.
1.8. Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Trust shall cause to be furnished on record date electronic
notice to the Company of any income, dividends or capital gain distributions
payable on the Trust's shares. The Company hereby elects to receive all such
income dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that
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Portfolio. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. The Trust
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 5:30 p.m. central
time), and shall use its best efforts to make net asset value per share
available by 5:00 p.m. central time.
1.11. The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Trust's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts maybe invested in other investment companies.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; or that the Contracts are not registered in
proper reliance on an exemption from registration under the 1933 Act; that the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws and that the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
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 each Account prior to any issuance or sale thereof as a
segregated asset account under New York and has registered or, prior to any
issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, or that the Company will not
register the Account in proper reliance upon an exclusion from registration
under the 0000 Xxx.
2.2. The Trust represents and warrants that Trust 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 New York and all
applicable federal and state securities laws and that the Trust is and shall
remain registered under the 1940 Act. The Trust 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. The Trust
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Trust or
the Underwriter.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company 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.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Trust and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Trust represents and warrants that should it ever desire to make
any payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act, the Directors, including a majority who are not "interested persons"
of the Trust under the 1940 Act ("disinterested Directors"), will formulate and
approve any plan under Rule 12b-1 to finance distribution expenses. To the
extent that any portfolio of the Trust may finance its distribution expenses
pursuant to a Plan adopted under Rule 12b-1, the portfolio undertakes to comply
with any then current SEC and SEC staff interpretations concerning Rule 12b-l or
any successor provisions.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Trust represents that the Trust's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
state of Massachusetts and the Trust and the Underwriter represent that
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their respective operations are and shall at all times remain in material
compliance with the laws of the state of New York to the extent required to
perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker/dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Trust shares
in accordance with the laws of the state of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 0000 Xxx.
2.8. The Trust represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply in all
material respects with the 1940 Act.
2.9. The Trust and Underwriter represent and warrant that all of their
trustees, directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Trust are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than the
minimal coverage as required currently by Rule 17g-(l) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are covered by a blanket fidelity
bond or similar coverage for the benefit of the Trust, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Trust and the
Underwriter promptly in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many printed copies
of the Trust's current prospectus and Statement of Additional Information
(describing only the designated Portfolios listed on Schedule A) or, to the
extent permitted, the Trust's profiles as the Company may reasonably request. If
requested by the Company in lieu thereof, the Trust shall provide camera-ready
film containing the Trust's prospectus and Statement of Additional Information,
and such other assistance as is reasonably necessary in order for the Company
once each year (or more frequently if the prospectus and/or Statement of
Additional Information for the Trust is amended during the year) to have the
prospectus for the Contracts and the Trust's prospectus printed together in one
document, and to have the Statement of Additional Information for the Trust and
the Statement of Additional Information for the Contracts printed together in
one document. Alternatively, the Company may print the Trust's prospectus and/or
its Statement of Additional Information in combination with other fund
companies' prospectuses and statements of additional information. All such
documents shall be provided to the Company within time reasonably required to
allow for printing and delivery to Contract owners, but no later than five
business days prior to the date the documents are required under then-current
regulations to be sent to Contract owners. Except as provided in the following
three sentences, all expenses of printing and distributing Trust prospectuses
and Statements of Additional Information shall be the expense of the Company.
For prospectuses and Statements of Additional Information provided by the
Company to its existing owners of Contracts in order to update disclosure
annually as required by the 1933 Act and/or the 1940 Act, the cost of printing
shall be brone by the Trust. If the Company chooses to receive camera-ready film
in lieu of receiving printed copies of the Trust's prospectus, the Trust will
reimburse the Company in an amount equal to the product of A and B where A is
the number of such prospectuses distributed to owners of the Contracts, and B is
the Trust's per unit cost of typesetting and printing the Trust's prospectus.
The same procedures shall be followed with respect to the Trust's Statement of
Additional Information.
The Company agrees to provide the Trust or its designee with such
information as may be reasonably requested by the Trust to assure that the
Trust's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
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3.2. The Trust's prospectus shall state that the Statement of Additional
Information for the Trust is available from the Underwriter or the Company (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust).
3.3. The Trust, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and Statements of Additional Information, which are covered in
Section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions received
from Contract owners; and
(iii) vote Trust shares for which no instructions have been received
in a particular separate account in the same proportion as
Trust shares of such portfolio for which instructions have been
received in that separate account, 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.
The Company reserves the right to vote Trust shares held in any
segregated asset account in its own right, to the extent
permitted by law.
3.5. The Company shall be responsible for assuring that each of its
separate accounts participating in the Trust calculates voting privileges as
required by the Shared Exemptive Order and consistent with any reasonable
standards the Trust may adopt.
3.6. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Trust will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Trust
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Trust will act
in accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of trustees and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Trust or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Trust,
or in sales literature or other promotional material approved by the Trust or
its designee or by the Underwriter, except with the permission of the Trust or
the Underwriter or the designee of either.
4.3. The Trust, Underwriter, 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 its separate
account(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
4.4. The Trust and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement
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and prospectus may be amended or supplemented from time to time, or in published
reports for each Account which are in the public domain or approved by the
Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
permission of the Company.
4.5. Upon request, the Trust or its designee will provide to the
Company 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 Trust or its shares.
4.6. Upon request, the Company will provide to the Trust at least one
complete copy of all registration statements, prospectuses, Statements of
Additional Information, reports, solicitations for voting instructions, 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 Contracts or each Account.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Trust or any affiliate of the Trust: 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), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-l to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Trust.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares, preparation and filing of the Trust's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
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ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Trust will at all times comply with Section 817(h) of the
Code and Treasury Regulation 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. In the
event of a breach of this Article VI by the Trust, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
the Trust so as to achieve compliance within the grace period afforded by
Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Trust, if it determines to offer its shares to any other
insurance company, separate account or to a qualified plan shall furnish the
Company with a copy of its application for an order of the SEC under Section
6(c) of the 1940 Act for mixed and shared funding relief, and the notice of such
application and order when issued by the SEC. The Company agrees to comply with
the conditions on which such order is issued, including reporting any potential
or existing conflicts promptly to the Board of Trustees of the Trust ("Board"),
and in particular whenever contract owner voting instructions are disregarded,
to the extent such conditions are not materially different from the conditions
of the mixed and shared funding relief that the Company has agreed to be bound
by in similar participation agreements with other fund providers, and recognizes
that it shall be responsible for assisting the Board in carrying out its
responsibilities in connection with such order. The Company agrees to carry out
such responsibilities with a view to the interests of existing contract owners.
7.2. The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an 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 interpretative 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
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.3. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Exemptive Order by providing the Board with
all information reasonably necessary for the Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are disregarded.
7.4. If it is determined by a majority of the Board, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of the Company) that
votes in favor of such segregation, or offering to the affected contract owners
the option of making such a change; and (2), establishing a new registered
management investment company or managed separate account.
7.5. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination
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shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Trust shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Trust.
7.6. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees of the Board.
Until the end of the foregoing six-month period, the Underwriter and Trust shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Trust.
7.7. For purposes of Sections 7.4 through 7.7 of this Agreement, a
majority of the disinterested Trustees of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.4 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Trust
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 by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.8. 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 Shared Exemptive Order) on terms and conditions materially
different from those contained in the Shared Exemptive Order, then the Trust
and/or the Company, as appropriate, shall take such steps as may be necessary to
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to
the extent such rules are applicable.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Underwriter
and the Trust and each trustee of the Board and officers and each person, if
any, who controls the Trust 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 the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties 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 Trust's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts or sales
literature for the Contracts (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 reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Trust for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
9
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Trust not supplied
by the Company, or persons under its control) or wrongful conduct of the Company
or persons under its control, with respect to the sale or distribution of the
Contracts or Trust Shares; or
(iii) 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 Trust 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 to
the Trust by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) 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, as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from 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 Trust, whichever is applicable.
8.1(c). The Company shall 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 Company 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 Company of any
such claim shall not relieve the Company from any liability which 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 Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company 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.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust Shares or the Contracts or the operation of
the Trust.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter 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 (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 the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties 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 Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or prospectus or sales literature of the Trust (or any amendment
10
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 reliance upon and in conformity with information furnished to the
Underwriter or Trust by or on behalf of the Company for use in the Registration
Statement or prospectus for the Trust or in sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale of the Contracts
or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful conduct of
the Trust or its designated transfer agent, or Underwriter or persons under
their control, with respect to the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, 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 the
Underwriter; or
(iv) arise as a result of any material failure by the
Underwriter to provide the services and furnish the materials under the terms of
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
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise 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 and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter from any liability which 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 Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter 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.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Trust
8.3(a). The Trust 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 (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages,
11
liabilities (including amounts paid in settlement with the written consent of
the Trust) or litigation (including legal and other expenses) to which the
Indemnified Parties 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 result from the gross negligence, bad
faith or willful misconduct of the Board or any member thereof, are related to
the operations of the Trust and:
(i) arise as a result of any material failure by the Trust to
provide the services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements specified
in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by the Trust, as
limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c)
hereof.
8.3(b). The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from 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 and duties under this Agreement or to the
Company, the Trust, the Underwriter or each Account, whichever is applicable.
8.3(c). The Trust shall 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 Trust 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 Trust of any such claim shall not
relieve the Trust from any liability which 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 Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust 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.
8.3(d). The Company and the Underwriter agree promptly to notify the Trust
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Trust.
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 New York.
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
(including any Shared Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by ninety (90) days
advance written notice delivered to the other parties; or
12
(b) termination by the Company by written notice to the Trust and
the Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably available to meet
the requirements of the Contracts; or
(c) termination by the Company by written notice to the Trust and
the Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use of such shares
as the underlying investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Trust and
the Underwriter with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if the Company reasonably
believes that the Trust may fail to so qualify; or
(e) termination by the Company by written notice to the Trust and
the Underwriter with respect to any Portfolio in the event that such Portfolio
fails to meet the diversification requirements specified in Article VI hereof;
or
(f) termination by either the Trust or the Underwriter by written
notice to the Company, if (1) either one or both of the Trust or the Underwriter
respectively, shall determine, in their sole judgment reasonably exercised in
good faith, that the Company has suffered a material adverse change in its
business or financial condition or is the subject of material adverse publicity
and such material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of either the Trust or
the Underwriter, (2) the Trust or the Underwriter shall notify the Company in
writing of such determination and its intent to terminate this Agreement, and
(3) after considering the actions taken by the Company and any other changes in
circumstances since the giving of such notice, such determination of the Trust
or the Underwriter shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth day shall be the effective date of
termination; or
(g) termination by the Company by written notice to the Trust and
the Underwriter, if (1) the Company shall determine, in its sole judgment
reasonably exercised in good faith, that either the Trust or the Underwriter has
suffered a material adverse change in its business or financial condition or is
the subject of material adverse publicity and such material adverse change or
material adverse publicity will have a material adverse impact upon the business
and operations of the Company, (2) the Company shall notify the Trust and the
Underwriter in writing of such determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the Tmst and/or the
Underwriter and any other changes in circumstances since the giving of such
notice, such determination of the Company shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination.
10.2. Notwithstanding any termination of this Agreement, the Trust and
the Underwriter shall at the option of the Company, continue to make available
additional shares of the Trust pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.2 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be
13
reasonably satisfactory to the Trust and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption,
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Trust or the Underwriter 90 days notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall 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 the Trust:
Xxxxxx Advisors Trust
Liberty Xxxxxx Asset Management, L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Chief Legal Counsel
If to the Company:
Transamerica Financial Life Insurance Company
000 Xxxxxxxx Xxxxxxx
Xx. Xxxxxxxxxx, XX 00000
If to the Underwriter:
Columbia Funds Distributor, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Chief Legal Counsel
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Trust must look solely to the property
of the Trust for the enforcement of any claims against the Trust as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. 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.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. 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.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
14
agrees to furnish the New York Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may reasonably request in order to ascertain whether the insurance
operations of the Company are being conducted in a manner consistent with the
New York Insurance Regulations and any other applicable law or regulations.
12.7. 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.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement. The Company
shall promptly notify the Trust and the Underwriter of any change in control of
the Company.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon as practical and in any event
within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days after the end of each
quarterly period;
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon as practical
after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state insurance regulator, as
soon as practical after the filing thereof; and
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special audit made by them
of the books of the Company, as soon as practical after the receipt thereof.
15
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 date specified below.
Company:
TRANSAMERICA FINANCIAL LIFE INSURANCE
COMPANY
By its authorized officer,
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: Vice President
Trust:
XXXXXX ADVISORS TRUST
By its authorized officer,
By: /s/ Xxxxxxx Xxxxxxxxxxx
Name: Xxxxxxx Xxxxxxxxxxx
Title: Assistant Secretary
Underwriter:
COLUMBIA FUNDS DISTRIBUTOR, INC.
By its authorized officer,
By: /s/ Xxxxx X. Xxxxxx, Xx.
Name: Xxxxx X. Xxxxxx, Xx.
Title: Vice President
SCHEDULE A
Separate Accounts, Associated Contracts, and Portfolios
--------------------------------------------------------------------------------
Name of Separate Account Portfolio(s)
and Date Established Policies Funded by the Available Under the
by the Board of Trustees Separate Accounts Policies
--------------------------------------------------------------------------------
Separate Account VA QNY Flexible Premium Xxxxxx U.S. Smaller
August 13, 1996 Variable Annuity - E Companies
AV1024 101 179 1003
--------------------------------------------------------------------------------
