FUND PARTICIPATION AGREEMENT Schwab Annuity Portfolios
TABLE OF CONTENTS
ARTICLE I. |
Sale of Fund Shares | 3 | ||
ARTICLE II. |
Representations and Warranties | 6 | ||
ARTICLE III. |
Prospectuses and Proxy Statements; Voting | 8 | ||
ARTICLE IV. |
Sales Material and Information | 10 | ||
ARTICLE V. |
Fees and Expenses | 12 | ||
ARTICLE VI. |
Diversification and Qualification | 12 | ||
ARTICLE VII. |
Potential Conflicts and Compliance With | |||
Mixed and Shared Funding Exemptive Order | 14 | |||
ARTICLE VIII. |
Indemnification | 16 | ||
ARTICLE IX. |
Applicable Law | 20 | ||
ARTICLE X. |
Termination | 20 | ||
ARTICLE XI. |
Notices | 24 | ||
ARTICLE XII. |
Miscellaneous | 26 | ||
ARTICLE XIII. |
Anti-Money Laundering | 29 | ||
ARTICLE IX. |
Shareholder Information (Rule 22c-2) | 31 | ||
SCHEDULE A |
Contracts | 35 | ||
SCHEDULE B |
Designated Portfolios | 36 | ||
SCHEDULE C |
Expenses | 37 |
PARTICIPATION AGREEMENT
Among
PACIFIC LIFE INSURANCE COMPANY,
SCHWAB ANNUITY PORTFOLIOS,
and
XXXXXXX XXXXXX & CO., INC.
THIS AGREEMENT, made and entered into as of this 1st day of May, 2012 by and among PACIFIC
LIFE INSURANCE COMPANY (“Company”), on its own behalf and on behalf of each of its segregated asset
accounts named on Schedule A (the “Account”); SCHWAB ANNUITY PORTFOLIOS, a business trust organized
under the laws of Massachusetts (“Fund”); and XXXXXXX XXXXXX & CO., INC., a California corporation
(“Schwab” or the ”Distributor”) (each a “Party,” and collectively, the “Parties”).
WHEREAS, the Fund 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/or variable annuity contracts (collectively, the “Variable Insurance
Products”) to be offered by insurance companies, including the Company, which have entered into
participation agreements similar to this Agreement (“Participating Insurance Companies”); and
WHEREAS, the beneficial interest in the Fund is divided into several series of shares, each
designated a “Portfolio” and representing the interest in a particular managed portfolio of
securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange Commission (“SEC”),
dated September 25, 1996 (File No. 812-10052), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended (“1940
Act”), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Fund to be sold to and held by variable annuity and variable life insurance separate
accounts of life insurance companies that may or may not be affiliated with one another and
qualified pension and retirement plans (“Qualified Plans”) (“Mixed and Shared Funding Exemptive
Order”); and
WHEREAS, the Fund is registered as an open-end management investment company under the 1940
Act and shares of the Portfolio(s) are registered under the Securities Act of 1933, as amended
(“1933 Act”); and
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WHEREAS, the Distributor is duly registered as a broker-dealer under the Securities Exchange
Act of 1934, as amended, (“1934 Act”) and is a member in good standing of the Financial Industry
Regulatory Authority, Inc. (“FINRA”); and
WHEREAS, the Company has registered interests under certain variable annuity contracts that
are supported wholly or partially by the Account under the 1933 Act and that are listed in Schedule
A hereto (“Contracts”); and
WHEREAS, the Account is a duly organized, validly existing segregated asset account,
established by resolution of the Board of Directors of the Company on September 7, 1994, under the
insurance laws of the State of California, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit investment trust under the 1940 Act
and has registered (or will register prior to sale) the securities deemed to be issued by the
Account under the 1933 Act to the extent required; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company
intends to purchase shares in the Portfolio(s) listed in Schedule B hereto (the “Designated
Portfolio(s)”), on behalf of the Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net asset value; and
WHEREAS, the Company will perform certain services for the Fund in connection with the
Contracts; and
WHEREAS, the Fund, acting through the Fund’s transfer agent, has established a master account
on its mutual fund shareholder account system (the “T/A Account”) reflecting the aggregate
ownership of shares of the Portfolios and all transactions involving such shares by the Company on
behalf of the Accounts; and
WHEREAS, in the event both parties agree to use National Securities Clearing Corporation
(“NSCC”) Fund/SERV System (“Fund/SERV System”), upon notification to the Fund of such availability,
the parties may permit the Fund to receive, and the Company to transmit, purchase and redemption
orders of Portfolio shares using the NSCC Fund/SERV System; and
WHEREAS, upon such notification, in order to receive and transmit orders for Portfolio shares
via Fund/SERV, it is intended that the Fund and the Company, or their duly authorized agents, will
establish an account using Fund/SERV (the “Fund/SERV Account”) that will reflect corresponding
transactions and Portfolio share balances in the T/A Account;
NOW, THEREFORE, in consideration of their mutual promises, the Parties agree as follows:
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ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to make shares of the Designated Portfolio(s) available for purchase at
the applicable net asset value per share by the Company and the Account on those days on which the
Fund calculates its Designated Portfolio(s)’ net asset value pursuant to rules of the SEC, and the
Fund shall use its best efforts to calculate such net asset value on each day which the New York
Stock Exchange is open for regular trading. Notwithstanding the foregoing, the Board of Trustees
of the Fund (hereinafter the “Board”) may refuse to sell shares of any Designated Portfolio to any
person, or suspend or terminate the offering of shares of any Designated 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 its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of such Designated
Portfolio.
1.2. The Fund and Distributor will not sell shares of the Designated Portfolio(s) to any other
Participating Insurance Company separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 2.4 and 2.9 of Article II, and Article VII of this
Agreement is in effect to govern such sales.
1.3. The Fund agrees to (a) sell to the Company those full and fractional shares of the
Designated Portfolio(s) that the Company, on behalf of the Account, orders, and (b) redeem, on the
Company’s order, any full or fractional shares of the Fund held by the Company, in each case
executing such orders on each Business Day at the net asset value next computed after receipt by
the Fund or its designee of the order for the shares of the Designated Portfolios, except that the
Fund reserves the right to suspend the right of redemption or postpone the date of payment or
satisfaction upon redemption consistent with Section 22(e) of the 1940 Act and any sales
thereunder, and in accordance with the procedures and policies of the Fund as described in the then
current prospectus of the Fund (“Fund Prospectus”). For purposes of this Section 1.3, the Company
shall be the designee of the Fund for receipt of such orders and receipt by such designee shall
constitute receipt by the Fund, provided that:
(i) if the Company transmits such request to the Fund via the National Securities
Clearing Corporation’s (the “NSCC”) Fund/SERV System and/or Defined Contribution
Clearance & Settlement (“DCC&S”) platform, such request must be received by the
Company by the close of regular trading on the NYSE and must be received from
Fund/SERV by 9:00 a.m. Eastern Time on the next following Business Day; or
(ii) If there are technical problems with Fund/SERV, or if the Parties are not able
to transmit or receive information through Fund/SERV (e.g., by fax), such request
must be received by the Fund by 10:00 a.m. Eastern Time on the next following
Business Day.
With regard to purchase and redemptions of Shares under this Section 1.3, the Company is solely
responsible for ensuring that each such purchase or redemption is the net result of requests from
Contract owners for Contract transactions received by it or its duly designated agent each Business
Day before the time(s) that the Fund calculates its net asset value. In the event that any Party is
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prohibited from communicating, processing or settling Portfolio share transactions via Fund/SERV or
Networking, such Party shall notify the other Parties by 10:00 a.m. Eastern Time. “Business Day”
shall mean any day on which the New York Stock Exchange is open for trading and on which the
Designated Portfolio calculates its net asset value pursuant to the rules of the SEC. The Company
shall provide the Fund with net purchase and redemption requests computed in accordance with
Section 1.7 hereof. The Company agrees to purchase and redeem the shares of each Designated
Portfolio offered by the Fund Prospectus in accordance with the provisions of such Prospectus.
1.4. In the event of net purchases, the Company shall pay for Fund shares the same Business
Day after an order to purchase Fund shares is made in accordance with the provisions of Section 1.3
hereof. Payment shall be in federal funds transmitted to the Fund by wire by 5:30 p.m. Eastern
time. With respect to orders submitted via NSCC, payment shall be from the designated NSCC Settling
Bank on behalf of the Company by the time specified by the Fund’s transfer agent (the “NSCC Wire
Cut-off Time”). If payment in federal funds for any purchase is not received or is received by the
Fund after 5:30 p.m. Eastern time on such Business Day or by the NSCC Wire Cut-Off Time, the
Company shall promptly, upon the Fund’s request, reimburse the Fund for any charges, costs, fees,
interest or other expenses incurred by the Fund in connection with any advances to, or borrowings
or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. Upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund. “Settling Bank” shall mean the entity appointed by the party
to perform such settlement services which entity agrees to abide by NSCC’s then current rules and
procedures insofar as they related to funds settlement.
1.5. In the event of net redemptions, the Fund shall pay and transmit the proceeds of
redemptions of Fund shares the same Business Day after a redemption order is received in accordance
with Section 1.3 hereof (with respect to orders submitted via NSCC), from the designated NSCC
Settling Bank on behalf of the Fund. Payment shall be in federal funds transmitted to the Company
or its designee by wire.
1.6. The Fund shall make the net asset value per share for each Designated 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 6:00 p.m. Eastern time. In the event that the Fund is unable to meet the 6:00 p.m. time stated
herein, the Fund shall provide additional time for the Company to place orders received in good
order for the purchase and redemption of shares equal to the additional time it takes the Fund to
make the net asset value available to the Company. However, if net asset values are not available
for inclusion in the next business cycle and purchase orders/redemptions are not able to be
calculated and available for the Company to execute within the time frame identified in Section 1.3
hereof, the Company on behalf of the Account, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct share net asset value.
1.7. At the end of each Business Day, the Company shall use the information described herein
to calculate Account unit values for the day. Using these unit values, the Company shall process
each such Business Day’s separate account transactions based on requests and premiums received by
it by the close of regular trading on the floor of the New York Stock Exchange
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(currently 4:00 p.m., Eastern time) to determine the net dollar amount of Fund shares which shall be purchased or
redeemed at that day’s closing net asset value per share.
1.8. In the event of an error in the computation of a Designated Portfolio’s net asset value
per share (“NAV”) or any dividend or capital gain distribution (each, a “pricing error”), the
Fund’s adviser or the Fund shall immediately notify the Company as soon as possible after
discovery of the error. Such notification may be verbal, but shall be confirmed promptly in
writing in accordance with Article XI of this Agreement. A pricing error shall be corrected as
follows: (a) if the pricing error results in a difference between the erroneous NAV and the
correct NAV of less than $0.01 per share, then no corrective action need be taken; (b) if the
pricing error results in a difference between the erroneous NAV and the correct NAV equal to or
greater than $0.01 per share, but less than 1/2 of 1% of the Designated Portfolio’s NAV at the time
of the error, then the Fund’s adviser shall reimburse the Designated Portfolio for any loss, after
taking into consideration any positive effect of such error; however, no adjustments to Contract
owner accounts need be made; and (c) if the pricing error results in a difference between the
erroneous NAV and the correct NAV equal to or greater than 1/2 of 1% of the Designated Portfolio’s
NAV at the time of the error, then the Fund’s adviser shall reimburse the Designated Portfolio for
any loss (without taking into consideration any positive effect of such error) and shall reimburse
the Company for the costs of adjustments made to correct Contract owner accounts in accordance with
the provisions of Schedule C hereto. If an adjustment is necessary to correct a material error
which has caused Contract owners to receive less than the amount to which they are entitled, the
number of shares of the appropriate Designated Portfolio(s) attributable to the accounts of the
Contract owners will be adjusted and the amount of any underpayments shall be credited by the
Fund’s adviser to the Company for crediting of such amounts to the applicable Contract owners’
accounts. Upon notification by the Fund’s adviser of any overpayment due to a material error, the
Company shall promptly remit to Fund’s adviser any overpayment that has not been paid to Contract
owners; however, Fund’s adviser acknowledges that the Company does not intend to seek additional
payments from any Contract owner who, because of a pricing error, may have underpaid for units of
interest credited to his/her account. In no event shall the Company be liable to Contract owners
for any such adjustments or underpayment amounts. A pricing error within categories (b) or (c)
above shall be deemed to be “materially incorrect” or constitute a “material error” for purposes of
this Agreement.
The standards set forth in this Section 1.8 are based on the Parties’ understanding of the
views expressed by the staff of the SEC as of the date of this Agreement. In the event the views
of the SEC staff are later modified or superseded by SEC or judicial interpretation, the Parties
shall amend the foregoing provisions of this Agreement to comport with the appropriate applicable
standards, on terms mutually satisfactory to all Parties.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed by written
confirmation) to the Company of any income, dividends or capital gain distributions payable on the
Designated Portfolio(s)’ shares. The Company hereby elects to receive all such income dividends
and capital gain distributions as are payable on the Designated Portfolio shares in additional
shares of that Designated Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and distributions.
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1.10. Issuance and transfer of the Fund’s shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Shares ordered from the Fund will
be recorded in an appropriate title for the Account or the appropriate sub-account of the Account.
1.11. The Parties acknowledge that the arrangement contemplated by this Agreement is not
exclusive; the Fund’s shares may be sold to other Participating Insurance Companies (subject to
Section 1.2 and Article VI hereof) and the cash value of the Contracts may be invested in other
investment companies.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the securities deemed to be issued by the
Account under the Contracts are or will be registered under the 1933 Act or exempt from
registration thereunder, and that the Contracts will be issued and sold in compliance in all
material respects with all applicable laws, rules, and regulations (collectively, “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
the Account prior to any issuance or sale of units thereof as a segregated asset account under the
applicable state insurance laws and has registered the 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 and that it will maintain such registration for so long as any Contracts are outstanding
as required by applicable law.
2.2. The Fund and Distributor each represents and warrants that Designated Portfolio(s) shares
sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with all applicable federal and state securities laws including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act, and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund 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 Fund 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
Fund or the Distributor.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule 12b-1 under the 1940 Act and
to impose an asset-based or other charge to finance distribution expenses as permitted by
applicable law. To the extent that the Fund decides to finance distribution expenses pursuant to
Rule 12b-1, the Fund undertakes to have its Board, a majority of whom are not interested persons of
the Fund, formulate and approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4. The Fund makes no representations as to whether any aspect of its operations, including
but not limited to, investment policies, fees and expenses, complies with the insurance and other
applicable laws of the various states, except that the Fund represents that the Fund’s investment
policies, fees and expenses are and shall at all times remain in compliance with the laws of the
state of Massachusetts to the extent required to perform this Agreement.
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2.5. The Fund represents and warrants that it is lawfully organized and validly existing under
the laws of the State of Massachusetts and that it does and will comply in all material respects
with the 1940 Act.
2.6. The Distributor represents and warrants that it is and shall remain duly qualified and
registered under all applicable laws and that it shall perform its obligations for the Fund in
compliance in all material respects with all applicable federal and state securities laws.
2.7. The Fund represents and warrants that all of its directors, officers, employees,
investment advisers, and other individuals or entities dealing with the money and/or securities of
the Fund are, and shall continue to be at all times, covered by one or more blanket fidelity bonds
or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage
required by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from time to
time. The aforesaid bonds shall include coverage for larceny and embezzlement and shall be issued
by a reputable bonding company.
2.8. The Fund will provide the Company with as much advance notice as is reasonably
practicable of any material change affecting the Designated Portfolio(s) (including, but not
limited to, any material change in the registration statement or prospectus affecting the
Designated Portfolio(s)) and any proxy solicitation affecting the Designated Portfolio(s) and will
consult with the Company in order to implement any such change in an orderly manner, recognizing
the expenses of changes and attempting to minimize such expenses by implementing them in
conjunction with regular annual updates of the prospectus for the Contracts.
2.9. The Fund represents and warrants that it has adopted a compliance program in accordance
with Rule 38a-1 under the 1940 Act, which includes appointing a Chief Compliance Officer (“CCO”)
for the Fund. The CCO is responsible for monitoring the operation of the Fund’s compliance program,
and for reviewing the compliance programs of service providers to the Fund covered under Rule 38a-1
(“Covered Service Providers”). The CCO has completed or is in the process of completing an annual
review to assess the adequacy of the Fund’s and Covered Service Providers’ policies and procedures
and the effectiveness of their implementation.
2.10. The Company represents and warrants, for purposes other than diversification under
Section 817 of the Internal Revenue Code of 1986 as amended (“the Code”), that the Contracts are
currently and at the time of issuance will be treated as annuity contracts under applicable
provisions of the Code, and that it will make every effort to maintain such treatment and that it
will notify Schwab, the Fund, and the Distributor 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. In addition, the Company represents and warrants that the Account is a “segregated
asset account” and that interests in the Account are offered exclusively through the purchase of or
transfer into a “variable contract” within the meaning of such terms under Section 817 of the Code
and the regulations thereunder. The Company will use every effort to continue to meet such
definitional requirements, and it will notify Schwab, the Fund or the Distributor immediately upon
having a reasonable basis for believing that such requirements have ceased to be met or that they
might not be met in the future. The Company represents and warrants that it will not purchase
Fund shares with
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assets derived from tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.11 Each of the Parties represents and warrants to the other that it has, or shall, to the
extent required by applicable law, adopt, implement and maintain effective “disclosure controls and
procedures” and “internal controls” (as such phrases are defined pursuant to the Xxxxxxxx-Xxxxx Act
of 2002 and the rules and regulations promulgated thereunder (hereinafter collectively the “S-Ox
Act”)) and will cooperate with one another in exchanging copies of such policies and procedures and
facilitating the filing by the relevant Parties and/or their respective officers and auditors of
any and all certifications or attestations as required by the S-Ox Act, including, without
limitation, furnishing such sub-certifications from relevant officers of each Party as such Party
shall reasonably request from time to time.
2.12 The Fund and the Company (if the Company uses NSCC) each represents and warrants to the
other that it: (a) has entered into an agreement with NSCC, (b) has met and will continue to meet
all of the requirements to participate in Fund/SERV and Networking, and (c) intends to remain at
all times in compliance with the then current rules and procedures of NSCC, all to the extent
necessary or appropriate to facilitate such communications, processing, and settlement of Portfolio
share transactions.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Distributor shall provide the Company and Schwab with as many
printed copies of the Fund Prospectus or the Fund’s then current summary prospectus (as such term
is defined in Rule 498 under the 1933 Act or any successor provision) (“Fund Summary Prospectus”),
and any supplements thereto, for each Designated Portfolio as the Company may reasonably request
for distribution to Contract owners. If requested by the Company or Schwab, the Fund or
Distributor shall provide such documentation (including a camera-ready copy of the Fund Prospectus
or Fund Summary Prospectus for each Designated Portfolio as set in type, a diskette containing such
documents in the form sent to the financial printer, or an electronic copy (in print ready PDF
format) of the documents, all as the Company and Schwab may reasonably request) and such other
assistance as is reasonably necessary in order for the Company and Schwab once each year (or more
frequently if the such prospectuses are amended) to have the Fund’s Prospectus or Fund Summary
Prospectus printed, as the case may be, to the extent permitted by applicable law or other
applicable guidance received from the SEC, including Rule 498, or posted on a website maintained by
or for the Company or Schwab. Expenses associated with providing such documentation shall be
allocated in accordance with Schedule C hereto. Notwithstanding anything herein to the contrary,
the delivery or use of Fund Summary Prospectuses shall be in the Fund’s sole discretion. The Fund
shall use its best efforts to provide the Fund’s summary prospectuses and statutory prospectuses
(which only includes the Designated Portfolios offered by the Company) and full SAI by specified
date as mutually agreed upon by the Fund and the Company.
(i) | The Fund shall host and manage all of the electronic documents for purposes of compliance with Rule 498 requirements. |
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(ii) | The Company shall be permitted, but not required, to post a copy of the Fund’s statutory prospectuses on the Company’s website. The Fund documents posted on the Company website are for informational purposes only and are not intended to comply with Rule 498. Notwithstanding the above, the Fund shall be and remain solely responsible for ensuring that the Fund electronic documents are hosted and managed by the Fund’s website and fully comply with the requirements of Rule 498. |
3.2. If applicable laws require that the Statement of Additional Information (“SAI”) for the
Fund be distributed to all Contract owners, then the Fund or Distributor, as appropriate, shall
provide the Company with copies of the Fund’s SAI, and any supplements thereto, for the Designated
Portfolio(s) in such quantities, with expenses to be borne in accordance with Schedule C hereto, as
the Company may reasonably require to permit timely distribution thereof to Contract owners. If
requested by the Company, the Fund or Distributor shall provide an electronic copy of the Fund SAI
in a format suitable for posting on an Internet website maintained by or on behalf of the Company
and/or Schwab. The Company shall send an SAI to any Contract owner within 3 Business Days of the
receipt of a request or such shorter time as may be required by applicable law. The Fund, and/or
Distributor, as appropriate, shall also provide SAIs to any Contract owner or prospective owner who
requests such SAI from the Fund (although it is anticipated that such requests will be made to the
Company).
3.3. The Fund and/or Distributor shall use their best efforts to provide the Company, within
10 (ten) business days of scheduled mailing date, with printed copies of the Fund’s proxy material,
reports to stockholders, and other communications to stockholders for the Designated Portfolio(s)
in such quantity, with expenses to be borne in accordance with Schedule C hereto, as the Company
may reasonably require to permit timely distribution thereof to Contract owners. If requested by
the Company or Schwab, the Fund or Distributor shall provide an electronic copy of such
documentation in a format suitable for posting on an Internet website maintained by or on behalf of
the Company and/or Schwab. In lieu of all or part of the foregoing, the Fund may elect to retain,
at its own expense, a proxy solicitation firm to perform some or all of the tasks necessary for the
Company to obtain voting instructions from Contract owners.
(i) | The Fund shall provide the Company with printed copies of Fund annual and semiannual reports in such quantity as the Company shall reasonably require for distributing to Contract owners, with expenses to be borne in accordance with Schedule C hereto. | ||
3.4. | If and to the extent required by law the Company shall: |
(i) | solicit voting instructions from Contract owners; | ||
(ii) | vote the Designated Portfolio(s) shares held in the Account in accordance with instructions received from Contract owners; and | ||
(iii) | vote Designated Portfolio shares held in the Account for which no instructions have been received in the same proportion as Designated Portfolio(s) shares for which instructions have been received from Contract 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 |
9
owners. The Company reserves the right to vote Fund shares held in its general account and in any segregated asset account in its own right, to the extent permitted by law. |
3.5. Participating Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in a Designated Portfolio calculates voting privileges in a manner
consistent with the standards set forth in the Mixed and Shared Funding Exemptive Order and
consistent with any reasonable standards that the Fund may adopt, provided however, the Company
shall be free to vote Designated Portfolio shares attributable to the Account in any manner
permitted by applicable law, to the extent the Mixed and Shared Funding Order is superseded by SEC
or administrative practice (including no-action relief).
3.6. The Fund will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular the Fund will either provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to require such meetings) or, as the Fund
currently intends, comply with Section 16(c) of the 1940 Act (although the Fund 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 Fund will act in accordance with the SEC’s interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors or trustees and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company and Schwab shall furnish, or shall cause to be furnished, to the Fund or its
designee, a copy of each piece of sales literature or other promotional material that the Company
or Schwab develops or proposes to use and in which the Fund (or a Designated Portfolio thereof),
its adviser, any of its sub-advisers, or the Distributor is named in connection with the Contracts,
at least ten (10) Business Days prior to its use. No such material shall be used if the Fund or
Distributor objects to such use within five (5) Business Days after receipt of such material. The
Fund and Distributor reserve the right to reasonably object to the continued use of any such sales
literature or other promotional material in which the Fund (or a Designated Portfolio thereof), its
adviser, any of its sub-advisers, or the Distributor is named and no such material shall be used if
the Fund or Distributor, or any designee thereof, so objects.
4.2. The Company and Schwab shall not give any information or make any representations or
statements on behalf of the Fund in connection with the sale of the Contracts other than the
information or representations contained in the registration statement, prospectus or SAI for the
Fund shares, as the same may be amended or supplemented from time to time, or in sales literature
or other promotional material approved by the Fund Distributor, except with the permission of the
Fund or Distributor.
4.3. The Fund or Distributor shall furnish, or shall cause to be furnished, to the Company and
Schwab, a copy of each piece of sales literature or other promotional material in which the
Company, its separate account(s), any Contract or Schwab is named ten (10) Business Days prior to
its intended date of first use. No such material shall be used if the Company or Schwab reasonably
objects to such use within five (5) Business Days after receipt of such material. The Company or
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Schwab reserves the right to reasonably object to the continued use of any such sales literature or
other promotional material in which the Company or Schwab, its separate account(s), or any Contract
is named, and no such material shall be used if the Company or Schwab so objects.
4.4. The Fund and the Distributor shall not give any information or make any representations
on behalf of the Company or concerning the Company, the Account, or the Contracts other than the
information or representations contained in a registration statement, prospectus (which shall
include an offering memorandum, if any, if the Contracts issued by the Company or interests
therein are not registered under the 0000 Xxx) or SAI for the Contracts, as the same may be amended
or supplemented from time to time, or in sales literature or other promotional material approved by
the Company or its designee, except with the permission of the Company.
4.5. The Company shall not give any information or make any representations on behalf of or
concerning Schwab, or use Xxxxxx’x name except with the permission of Schwab.
4.6. The Fund or its designee will provide to the Company upon request, at least one complete
copy of all registration statements, prospectuses, SAIs, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all amendments or
supplements to any of the above, that relate to the Fund or its shares (collectively, “Fund
materials”).
4.7. The Company or its designee will provide to the Fund upon request, at least one complete
copy of all registration statements, prospectuses, SAIs, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all amendments or
supplements to any of the above, that relate to the Contracts, (collectively, “Contract
materials”).
4.8. For purposes of Articles IV and VIII, the phrase “sales literature and 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;
e.g., on-line networks such as the Internet or other electronic 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, shareholder reports, proxy materials (including solicitations
for voting instructions), and any other material constituting sales literature or advertising under
FINRA rules, the 1933 Act or the 0000 Xxx.
4.9. At the request of any Party to this Agreement, each other Party will make available to
the other Party’s independent auditors and/or representative of the appropriate regulatory
agencies, all records, data and access to operating procedures that may be reasonably requested in
connection with compliance and regulatory requirements related to this Agreement or any Party’s
obligations under this Agreement.
11
ARTICLE V. Fees and Expenses
5.1. The Fund, Distributor, and the Fund’s adviser shall pay no fee or other compensation to
the Company under this Agreement, and the Company shall pay no fee or other compensation to the
Fund, Distributor, or Fund’s adviser under this Agreement, although the Parties hereto will bear
certain expenses in accordance with Schedule C hereto, Articles III, V, and other provisions of
this Agreement.
5.2. Except as otherwise provided in this Agreement, including without limitation Schedule C
hereto, each Party shall bear all expenses incident to the performance of its obligations
hereunder. Nothing herein shall prevent the Parties hereto from otherwise agreeing to perform, and
arranging for appropriate compensation for, other services relating to the Fund and /or to the
Account pursuant to this Agreement. The Fund shall see to it that all its shares are registered
and authorized for issuance in accordance with applicable federal and state securities laws to the
extent required or deemed advisable by the Fund. Except as otherwise set forth in Schedule C of
this Agreement, the Fund shall bear the expenses for the cost of registration and qualification of
the Fund’s shares, preparation and filing of the Fund Prospectus and registration statement, proxy
materials and reports, setting the Fund Prospectus in type, setting in type and printing the proxy
materials and reports to shareholders, the preparation of all statements and notices required by
any federal or state law, and all taxes on the issuance or transfer of the Fund’s shares.
ARTICLE VI. Diversification and Qualification.
6.1. The Fund and the Distributor each represents and warrants that the Fund will at all times
sell its shares and invest its assets in such a manner as to ensure that the Contracts will be
treated as annuity contracts under the Code, and the regulations issued thereunder. Without
limiting the scope of the foregoing, each Designated Portfolio thereof will at all times comply
with Section 817(h) of the Code and Treasury Regulation §1.817-5, as amended from time to time, and
any Treasury interpretations thereof, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or other modifications or
successor provisions to such Section or Regulations. In the event of a breach of this Article VI by
the Fund, the Fund and Distributor will take all reasonable steps to: (a) notify the Company of
such breach, and (b) adequately diversify the Fund so as to achieve compliance within the 30-day
grace period afforded by Regulation 1.817-5.
6.2. The Fund and the Distributor each represents and warrants that shares of the Designated
Portfolio(s) will be sold only to Participating Insurance Companies and their separate accounts and
to Qualified Plans, and that no person has or will purchase shares in any Portfolio for any purpose
or under any circumstances that would preclude the Company from “looking through” to the
investments of each Designated Portfolio in which it invests, pursuant to the “look through” rules
found in Treasury Regulation 1.817-5. No shares of any Designated Portfolio of the Fund will be
sold to the general public.
12
6.3. The Fund and the Distributor each represents and warrants that the Fund and each
Designated Portfolio is currently qualified as a “regulated investment company” under Subchapter M
of the Code, and that each Designated Portfolio will maintain such qualification (under Subchapter
M or any successor or similar provisions) as long as this Agreement is in effect.
6.4. The Fund and Distributor each will notify the Company immediately upon having a
reasonable basis for believing that the Fund or any Designated Portfolio has ceased to comply with
the aforesaid Section 817(h) diversification or Subchapter M qualification requirements or might
not so comply in the future.
6.5. The Company agrees that if the Internal Revenue Service (“IRS”) asserts in writing in
connection with any governmental audit or review of the Company or, to the Company’s knowledge,
or any Contract owner that any Designated Portfolio has failed to comply with the diversification
requirements of Section 817(h) of the Code or the Company otherwise becomes aware of any facts
that could give rise to any claim against the Fund and Distributor as a result of such a failure or
alleged failure:
(a) the Company shall promptly notify the Fund and the Distributor of such assertion or
potential claim;
(b) the Company shall consult with the Fund and the Distributor as to how to minimize any
liability that may arise as a result of such failure or alleged failure;
(c) the Company shall use its best efforts to minimize any liability of the Fund and the
Distributor resulting from such failure, including, without limitation, demonstrating,
pursuant to Treasury Regulations, Section 1.817-5(a)(2), to the commissioner of the IRS that
such failure was inadvertent;
(d) any written materials to be submitted by the Company to the IRS, any Contract owner or
any other claimant in connection with any of the foregoing proceedings or contests
(including, without limitation, any such materials to be submitted to the IRS pursuant to
Treasury Regulations, Section 1.817-5(a)(2)) shall be provided by the Company to the Fund
and the Distributor (together with any supporting information or analysis) within at least
two (2) Business Days prior to submission;
(e) the Company shall provide the Fund and the Distributor with such cooperation as the
Fund and the Distributor shall reasonably request (including, without limitation, by
permitting the Fund and the Distributor to review the relevant books and records of the
Company) in order to facilitate review by the Fund and the Distributor of any written
submissions provided to it or its assessment of the validity or amount of any claim against
it arising from such failure or alleged failure;
(f) the Company shall not with respect to any claim of the IRS or any Contract owner that
would give rise to a claim against the Fund and the Distributor(i) compromise or settle any
claim, (ii) accept any adjustment on audit, or (iii) forego any allowable administrative or
judicial appeals, without the express written consent of the Fund and the Distributor, which
13
shall not be unreasonably withheld; provided that, the Company shall not be required to
appeal any adverse judicial decision unless the Fund shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists for taking such appeal;
and further provided that the Fund and the Distributor shall bear the costs and expenses,
including reasonable attorney’s fees, incurred by the Company in complying with this clause
(f).
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order
Mixed and Shared Funding Exemptive Order
7.1. The Fund represents that the Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of all separate
accounts investing in the Fund. A material irreconcilable 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 Designated Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity contract and variable life
insurance contract owners or by contract owners of different Participating Insurance Companies; or
(f) a decision by a Participating Insurance to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that a material
irreconcilable conflict exists and the implications thereof.
7.2. 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 Mixed and
Shared Funding 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 to be
disregarded. Such responsibilities shall be carried out by the Company with a view only to the
interests of its Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its members who are not
interested persons of the Fund, the Distributor, the adviser or any sub-adviser to any of the
Designated Portfolios (the “Disinterested Members “), that a material irreconcilable conflict
exists, and it is a Participating Insurance Company for which a material irreconcilable conflict is
relevant, the Company and other Participating Insurance Companies shall, at their expense and to
the extent reasonably practicable (as determined by a majority of the Disinterested Members), take
whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the separate accounts from the
Fund or any Designated Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another portfolio of the Fund, 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 one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the affected contract
owners the option of making such a change;
14
and (2) establishing a new registered management investment company or managed separate account.
7.4. 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 Fund’s election, to withdraw
the Account’s investment in the Fund and terminate this Agreement; 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 Members. Any such
withdrawal and termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six month period the
Fund and the Distributor shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund subject to the terms and conditions of this
Agreement. No charge or penalty will be imposed as a result of such withdrawal. The
responsibility to take such remedial action shall be carried out with a view only to the interest
of the Contract owners.
7.5. 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 Account’s investment in the Fund and terminate this
Agreement within six (6) 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 Members. Until
the end of the foregoing six month period, the Fund and the Distributor shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares of the Fund subject
to the terms and conditions of this Agreement. The responsibility to take such action shall be
carried out with a view only to the interest of the Contract owners.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of the
Disinterested Members shall determine whether any proposed action adequately remedies any material
irreconcilable conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 7.3 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 affected by the material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any material irreconcilable
conflict, then the Company will withdraw the Account’s investment in the Fund 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.
7.7. 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) the Fund and/or the Participating Insurance
15
Companies, 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: and (b) Sections 3.4,
3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 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
(a). The Company agrees to indemnify and hold harmless the Fund, the Distributor and the
Fund’s adviser and each of their respective officers and directors or trustees, employees and
agents and each person, if any, who controls the Fund, Distributor or Fund’s adviser 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, expenses, damages and liabilities (including
amounts paid in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses) (collectively, a “Loss”) to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise, insofar as such Loss is
related to the sale or acquisition of the Fund’s shares or the Contracts and:
(i) | arises out of or is based upon any untrue statements or alleged untrue statements of any material fact contained in any Contract materials, 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 in writing to the Company by or on behalf of the Fund, Distributor, or Fund’s adviser for use in the Contract materials or otherwise for use in connection with the sale of the Contracts or Fund shares; or | ||
(ii) | arises out of or as a result of statements or representations (other than statements or representations contained in Fund materials 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 Fund shares; or | ||
(iii) | arises out of any untrue statement or alleged untrue statement of a material fact contained in any Fund materials, 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 and conformity with information furnished in writing to the Fund by or on behalf of the Company; or | ||
(iv) | arises as a result of any failure by the Company to perform the obligations, provide the services, and furnish the materials required of it under the terms of this Agreement; or |
16
(v) | arises out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arises out of or result from any other material breach of this Agreement by the Company, including without limitation Section 2.10 and Section 6.7 hereof, |
as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof.
(b). The Company shall not be liable under this indemnification provision with respect to
any Loss to which an Indemnified Party would otherwise be subject by reason of such Indemnified
Party’s willful misfeasance, bad faith, or 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 any of the Indemnified Parties.
(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, except to the extent that the Company has been
prejudiced by such failure to give notice. In case any such action is brought against an
Indemnified Party, the Company shall be entitled to participate, at its own expense, in the defense
of such action, and unless the Indemnified Parties release the Company from any further obligation
under this Section 8.1 with respect to such claim(s), 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.
(d). Each Indemnified Party will promptly notify the Company of the commencement of any
litigation or proceedings against them in connection with the Agreement, the issuance or sale of
the Fund shares or the Contracts or the operation of the Fund.
8.2. Indemnification By the Fund.
(a). The Fund agrees to indemnify and hold harmless the Company and each of their respective
directors and officers, employees 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 Loss to which the Indemnified Parties may be required to pay or become
subject under any statute or regulation, at common law or otherwise, insofar as such Loss, is
related to the operations of the Fund and:
17
(i) | arises as a result of any material failure by the Fund to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification and other qualification requirements specified in Article VI of this Agreement); or | ||
(ii) | arises out of or results from any material breach of any representation and/or warranty made by the Fund in this Agreement or arises out of or result from any other material breach of this Agreement by the Fund; |
as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof.
(b). The Fund shall not be liable under this indemnification provision with respect to any
Loss to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s
willful misfeasance, bad faith, or 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 any of the Indemnified Parties.
(c). The Fund 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 Fund
in writing within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve it 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, except to the extent that the Fund has been prejudiced by such failure
to give notice. In case any such action is brought against an Indemnified Party, the Fund will be
entitled to participate, at its own expense, in the defense thereof and unless the Indemnified
Parties release the Fund from any further obligation under this Section 8.2 with respect to such
claim(s), the Fund shall also be entitled to assume the defense thereof, with counsel satisfactory
to the Party named in the action. After notice from the Fund to such Party of the Fund’s election
to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such Party under this
Agreement for any legal or other expenses subsequently incurred by such Party independently in
connection with the defense thereof other than reasonable costs of investigation.
(d). The Company agree to notify the Fund promptly of the commencement of any litigation or
proceeding against itself or any of its respective officers or directors in connection with the
Agreement, the issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
8.3. Indemnification by the Distributor.
(a). The Distributor agrees to indemnify and hold harmless the Company and each of their
respective directors and officers, employees and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties”
18
for purposes of this Section 8.3) against any Loss to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as such Loss is related to the
sale or acquisition of the Fund’s shares or the Contracts and:
(i) | arises out of or is based upon any untrue statement or alleged untrue statement of any material fact contained in Fund materials, 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 in writing to the Fund or Distributor by or on behalf of the Company for use in the Fund materials or otherwise for use in connection with the sale of the Contracts or Fund shares; or | ||
(ii) | arises out of or as a result of statements or representations (other than statements or representations contained in Fund materials not supplied by the Distributor or persons under its control) or wrongful conduct of the Distributor or persons under its control, with respect to the sale or distribution of the Contracts or Fund shares; or | ||
(iii) | arises out of any untrue statement or alleged untrue statement of a material fact contained in any Contract materials, 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 and in conformity with information furnished in writing to the Company by or on behalf of the Distributor; or | ||
(iv) | arises as a result of any failure by the Distributor to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement; or | ||
(v) | arises out of or result from any material breach of any representation and/or warranty made by the Distributor in this Agreement or arises out of or results from any other material breach of this Agreement by the Distributor; |
as limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) hereof. This
indemnification is in addition to and apart from the responsibilities and obligations of the
Distributor specified in Article VI hereof.
(b). The Distributor shall not be liable under this indemnification provision with respect to
any Loss to which an Indemnified Party would otherwise be subject by reason of such Indemnified
Party’s willful misfeasance, bad faith, or negligence in the performance or such Indemnified
Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties
under this Agreement or to any of the Indemnified Parties.
(c) The Distributor 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
19
the Distributor 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 Distributor of any such claim shall not relieve the Distributor
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, except to the extent that the
Distributor has been prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, the Distributor will be entitled to participate, at its own expense,
in the defense thereof and unless the Indemnified Parties release the Distributor from any further
obligation under this Section 8.3 with respect to such claim(s), the Distributor also shall be
entitled to assume the defense thereof, with counsel satisfactory to the Party named in the action.
After notice from the Distributor to such Party of the Distributor’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 Distributor will not be liable to such Party under this Agreement for any
legal or other expenses subsequently incurred by such Party independently in connection with the
defense thereof other than reasonable costs of investigation.
(d) The Company agrees to promptly notify the Distributor 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 the Account.
ARTICLE IX. Applicable Law
This Agreement shall be construed and the provisions hereof interpreted under and in
accordance with the laws of the State of California.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any Party, with or without cause, with respect to some or all
Designated Portfolios, upon three (3) months advance written notice delivered to the
other Parties; provided, however, that such notice shall not be given earlier than
six (6) months following the date of this Agreement; or
(b) at the option of the Company or Schwab by written notice to the other Parties
with respect to any Designated Portfolio based upon the Company’s or Xxxxxx’x
determination that shares of such Designated Portfolio are not reasonably available
to meet the requirements of the Contracts; or
(c) at the option of the Company or Schwab by written notice to the other Parties
with respect to any Designated Portfolio in the event any of the Designated
Portfolio’s shares are not registered, issued or sold in accordance with applicable
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
20
(d) at the option of the Fund or Distributor upon written notice to the other
Parties in the event that formal administrative proceedings are instituted against
the Company by FINRA, the SEC, the Insurance Commissioner or like official of any
state or any other regulatory body regarding the Company’s duties under this
Agreement or related to the sale of the Contracts, the operation of any Account, or
the purchase of the Fund shares, if, in each case, the Fund or Distributor, as the
case may be, reasonably determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material adverse effect upon
the ability of the Company to perform its obligations under this Agreement; or
(e) at the option of the Company upon written notice to the other Parties in the
event that formal administrative proceedings are instituted against the Fund or the
Distributor by FINRA, the SEC, or any state securities or insurance department or
any other regulatory body, if the Company reasonably determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Fund or the Distributor to perform
their respective obligations under this Agreement; or
(f) at the option of the Company or Schwab by written notice to the other Parties
with respect to any Designated Portfolio in the event that such Portfolio fails to
meet the requirements and comply with the representations and warranties specified
in Article VI hereof; or
(g) at the option of the Company or Schwab by written notice to the other Parties
with respect to any Designated 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
(h) at the option of the Fund or the Distributor, if (i) the Fund or Distributor,
respectively, shall determine, in its sole judgment reasonably exercised in good
faith, that either the Company has suffered a material adverse change in its
business or financial condition or is the subject of material adverse publicity,
(ii) the Fund or Distributor notifies the Company of that determination and its
intent to terminate this Agreement, and (iii) after considering the actions
taken by the Company and any other changes in circumstances since the giving of such
a notice, the determination of the Fund or Distributor shall continue to apply on
the sixtieth (60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(i) at the option of the Company, if (i) the Company, shall determine, in its sole
judgment reasonably exercised in good faith, that the Fund or Distributor has
suffered a material adverse change in its business or financial condition or is the
subject of material adverse publicity, (ii) the Company notifies the Fund or
Distributor, as appropriate, of that determination and its intent to terminate this
Agreement, and (iii) after considering the actions taken by the Fund or
Distributor and any other changes in circumstances since the giving of such a
notice, the
21
determination of the Company shall continue to apply on the sixtieth
(60th) day following the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Company in the event that formal administrative
proceedings are instituted against Schwab by FINRA, the SEC, or any state securities
or insurance department or any other regulatory body regarding Xxxxxx’x duties under
this Agreement or related to the sale of the Fund’s shares or the Contracts, the
operation of any Account, or the purchase of the Fund shares, provided, however,
that the Company determines in its sole judgment exercised in good faith, that any
such administrative proceedings will have a material adverse effect upon the ability
of Schwab to perform its obligations related to the Contracts; or
(k) at the option of Schwab in the event that formal administrative proceedings are
instituted against the Company by FINRA, the SEC, or any state securities or
insurance department or any other regulatory body regarding the Company’s duties
under this Agreement or related to the sale of the Fund’s shares or the Contracts,
the operation of any Account, or the purchase of the Fund shares, provided, however,
that Schwab determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability of
the Company to perform its obligations related to the Contracts; or
(l) termination by the Fund or Distributor by written notice to the Company in
the event that the Contracts fail to meet the qualifications specified in
Section 2.9 hereof; or
(m) at the option of any non-defaulting Party hereto in the event of a material
breach of this Agreement by any Party hereto (the “defaulting Party”) other than as
described in 10.1(a)-(l); provided, that the non-defaulting Party gives written
notice thereof to the defaulting Party, with copies of such notice to all other
non-defaulting Parties, and if such breach shall not have been remedied within
thirty (30) days after such written notice is given, then the non-defaulting Party
giving such written notice may terminate this Agreement by giving thirty (30) days
written notice of termination to the defaulting Party.
10.2. Notice Requirement. No termination of this Agreement shall be effective unless
and until the Party terminating this Agreement gives prior written notice to all other Parties of
its intent to terminate, which notice shall set forth the basis for the termination. Furthermore,
(a) in the event any termination is based upon the provisions of Article VII, or the
provisions of Section 10.1(a), 10.1(h) or 10.1(i) of this Agreement, the prior written
notice shall be given in advance of the effective date of termination as required by those
provisions unless such notice period is shortened by mutual written agreement of the
Parties;
22
(b) in the event any termination is based upon the provisions of Section 10.1(d), 10.1(e),
10.1(j) or 10.1(k) of this Agreement, the prior written notice shall be given at least sixty
(60) days before the effective date of termination; and
(c) in the event any termination is based upon the provisions of Section 10.1(b), 10.1(c) or
10.1(f), 10.1(g) or 10.1(l), the prior written notice shall be given in advance of the
effective date of termination, which date shall be determined by the Party sending the
notice.
10.3. Effect of Termination.
(a) Notwithstanding any termination of this Agreement, other than as a result of a failure
by either the Fund or the Company to meet Section 817(h) of the Code diversification
requirements, the Fund and the Distributor shall, at the option of the Company, continue,
until the one year anniversary from the date of termination, and from year to year
thereafter if deemed appropriate by the Fund and Distributor, to make available additional shares of the Designated Portfolio(s) 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”) unless such further sale of
Designated Portfolio shares is proscribed by law, regulation, or applicable regulatory
authority, or unless the Board determines that the sale of Designated Portfolio shares to
the Existing Contract owners is not in the best interests of the Designated Portfolio or
that liquidation of the Designated Portfolio following termination of this Agreement is in
the best interests of the Designated Portfolio. Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate investments among the
Designated Portfolio(s), redeem investments in the Designated Portfolio(s) and/or invest in
the Designated Portfolio(s) upon the making of additional purchase payments under the
Existing Contracts.
The Company agrees, promptly after any termination of this Agreement, to take all steps
necessary to redeem the investment of the Accounts in the Designated Portfolios within one
year from the date of termination of the Agreement as provided in Article X. Such steps
shall include, but not be limited to, obtaining an order pursuant to Section 26(c) of the
1940 Act to permit the substitution of other securities for the shares of the Designated
Portfolios. The Fund may, in its discretion, permit the Accounts to continue to invest in
the Designated Portfolios beyond such one year anniversary for an additional year beginning
on the first annual anniversary of the date of termination, and from year to year
thereafter; provided that the Fund agrees in writing to permit the Accounts to continue to
invest in the Designated Portfolios at the beginning of any such year.
(b) Notwithstanding anything herein to the contrary, in the event (i) the Agreement is
terminated pursuant to Sections 10.1(l), at the option of the Fund or Distributor; or
(ii) the one year anniversary of the termination of the Agreement is reached or, after
waiver as provided in Section 10.3(a), such subsequent anniversary is reached (each of
(i) and (ii) referred to as a “triggering event” and the date of termination as provided in
(i) or the date of such anniversary as provided in (ii) referred to as the “request date”),
the Parties agree that such triggering event shall be considered a request for immediate
redemption of shares of the Designated Portfolios held by the Accounts, received by the
23
Fund and its agents as of the request date, and the Fund agrees to process such redemption
request in accordance with the 1940 Act and the regulations thereunder and the Fund’s
registration statement.
(c) The Parties agree that this Section 10.3 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.
10.4. Surviving Provisions. Notwithstanding any termination of this Agreement, the
following provisions shall survive: Article V, Article VIII and Section 12.1 of Article XII. In
addition, with respect to Existing Contracts assets under which continue to be invested in the
Designated Portfolios, all provisions of this Agreement shall also survive and not be affected by
any termination of this Agreement to the extent such assets remain invested in the Designated
Portfolios.
10.5. Redemptions The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund 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(c) of the 1940 Act. Upon request, the
Company will promptly furnish to the Fund and the Distributor an opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Fund and the Distributor) 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 Designated Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Distributor 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 by the
notifying Party to each other Party entitled to notice at the addresses set forth below or at such
other address as a Party may from time to time specify in writing to the other Parties.
If to the Fund:
Schwab Annuity Portfolios
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Schwab Funds Chief Legal Officer
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Schwab Funds Chief Legal Officer
24
If to the Company:
Pacific Life Insurance Company
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
If to Schwab:
Xxxxxxx Xxxxxx & Co., Inc.
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Vice President, Insurance Services
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Vice President, Insurance Services
25
ARTICLE XII. Miscellaneous
12.1.
(a) Each Party agrees that all information supplied by one Party and its affiliates and
agents (collectively, the “Disclosing Party”) to another (“Receiving Party”) including,
without limitation, any unpublished information concerning research activities and plans,
customers, marketing or sales plans, sales forecasts or results of marketing efforts,
pricing or pricing strategies, costs, operational techniques, strategic plans, portfolio
holdings, and unpublished financial information, including information concerning revenues,
profits and profit margins will be deemed confidential and proprietary to the Disclosing
Party, regardless of whether such information was disclosed intentionally or unintentionally
or marked as “confidential” or “proprietary” (“Confidential Information”). In addition,
the Company will not use any Confidential Information concerning each Fund’s portfolio
holdings, including, without limitation, the names of the portfolio holdings and the values
thereof or other Schwab Confidential Information, for purposes of making any decision about
whether to purchase or redeem shares of each Fund or to execute any other securities
transaction. The foregoing definition shall also include any Confidential Information
provided by any Party’s vendors.
(b) Confidential Information will not include any information or material, or any element
thereof, whether or not such information or material is Confidential Information for the
purposes of this Agreement, to the extent any such information or material, or any element
thereof:
(i) has previously become or is generally known, unless it has become generally
known through a breach of this Agreement or a similar confidentiality or
non-disclosure agreement;
(ii) was already rightfully known to the Receiving Party prior to being disclosed by
or obtained from the Disclosing Party as evidenced by written records kept in the
ordinary course of business of or by proof of actual use by the Receiving Party;
(iii) has been or is hereafter rightfully received by the Receiving Party from a
third person (other than the Disclosing Party) without restriction or disclosure and
without breach of a duty of confidentiality to the Disclosing Party;
(iv) has been independently developed by the Receiving Party without access to
Confidential Information of the Disclosing Party; or
(v) must be disclosed to third party vendors, to the extent reasonably necessary for
the Disclosing Party to perform its duties and obligations assigned under the
Agreement. In the event such information is disclosed to a third party vendor, the
Disclosing Party will require such third party vendor to protect Confidential
Information to the same extent the Disclosing Party is required to protect such
Confidential Information under this Agreement.
26
It will be presumed that any Confidential Information in a Receiving Party’s possession is
not within exceptions (ii), (iii) or (iv) above, and the burden will be upon the Receiving
Party to prove otherwise by records and documentation.
(c) Each Party recognizes the importance of each other Party’s Confidential Information.
In particular, each Party recognizes and agrees that the Confidential Information of another
Party is critical to its business and that no Party would enter into this Agreement without
assurance that such information and the value thereof will be protected as provided in this
Section 12.1 and elsewhere in this Agreement. Accordingly, each Party agrees as follows:
(i) The Receiving Party will hold any and all Confidential Information it obtains in
strictest confidence and will use and permit use of Confidential Information solely
for the purposes of this Agreement. Without limiting the foregoing, the Receiving
Party shall use at least the same degree of care, but no less than reasonable care,
to avoid disclosure or use of this Confidential Information as the Receiving Party
employs with respect to its own Confidential Information of a like importance;
(ii) The Receiving Party may disclose or provide access to its responsible employees
who have a need to know and may make copies of Confidential Information only to the
extent reasonably necessary to carry out its obligations hereunder;
(iii) The Receiving Party currently has, and in the future will maintain in effect
and enforce, rules and policies to protect against access to or use or disclosure of
Confidential Information other than in accordance with this Agreement, including
without limitation written instruction to and agreements with employees and agents
who are bound by an obligation of confidentiality no less stringent than set forth
in this Agreement to ensure that such employees and agents protect the
confidentiality of Confidential Information. The Receiving Party expressly will
instruct its employees and agents not to disclose Confidential Information to third
parties, including without limitation customers, subcontractors or consultants,
without the Disclosing Party’s prior written consent; and
(iv) The Receiving Party will notify the Disclosing Party immediately of any
unauthorized disclosure or use, and will cooperate with the Disclosing Party to
protect all proprietary rights in and ownership of its Confidential Information.
12.2. 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.
12.3. This Agreement may be executed simultaneously in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
12.4. 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.
27
12.5. Each Party hereto shall cooperate with each other Party and all appropriate governmental
authorities (including without limitation the SEC, FINRA 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.
12.6. Any dispute, controversy or claim between or among the Parties arising under, out of, in
connection with or in relation to this Agreement, or the breach, termination, validity, or
enforceability of any provision hereof (a “Dispute”) hereunder will be resolved by final and
binding arbitration conducted in accordance with and subject to the Commercial Arbitration Rules of
the AAA then applicable. One arbitrator will be selected by the disputing Parties’ mutual
agreement or, failing that, by the AAA, and the arbitrator will allow such discovery as is
appropriate, consistent with the purposes of arbitration in accomplishing fair, speedy and cost
effective resolution of disputes. The arbitrator will reference the rules of evidence of the
Federal Rules of Civil Procedure then in effect in setting the scope of discovery, except that no
requests for admissions will be permitted and interrogatories will be limited to identifying (a)
persons with knowledge of relevant facts and (b) expert witnesses and their opinions and the bases
therefore. Judgment upon the award rendered in any such arbitration may be entered in any court
having jurisdiction thereof. Other than those matters involving injunctive relief or any action
necessary to enforce the award of the arbitrator, the Parties agree that the provisions of this
Section are a complete defense to any suit, action, or other proceeding instituted in any court or
before any administrative tribunal with respect to any jurisdiction or venue in any Dispute.
Nothing in this Section prevents any Party from exercising its right to terminate this Agreement in
accordance with Section 10 hereof. The agreement to arbitrate does not entitle any Party to
arbitrate claims that would be time barred by the applicable statute of limitations if such claims
were brought in a court of competent jurisdiction. Any Party may initiate arbitration by serving or
mailing a written notice to the other Party or Parties stating the nature of its dispute and the
remedy sought. Any award entered by the arbitrator(s) shall be final and judgment thereon may be
entered in any court having jurisdiction. The prevailing Party shall be entitled to recovery of
costs, fees (including attorney’s fees) and/or taxes paid or incurred in obtaining the award.
Furthermore, any costs, fees or taxes involved in enforcing the award shall be fully assessed
against and paid by the Party resisting enforcement of the award. The Parties acknowledge that
under this Section, they are waiving their rights to a jury trial. Any negotiation, mediation or
arbitration conducted pursuant to this Section will take place in San Francisco, California.
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.
12.9. The Company is hereby expressly put on notice of the limitation of liability as set
forth in the Declarations of Trust of the Fund and agrees that, except as otherwise provided
herein, the obligations assumed by the Fund pursuant to this Agreement shall be limited in any case
to the
28
Fund and its assets, and in the case of a Designated Portfolio listed on Schedule A hereto,
shall be limited to the assets of such Designated Portfolio as if it had separately contracted with
the Company and the Distributor for the enforcement of any claims against it, and the Company
shall not seek satisfaction of any such obligation from the shareholders of the Fund or a
Designated Portfolio (solely by reason of their status as such), the Trustees, officers, employees,
or agents of the Fund, or any of them.
12.10. The Fund and the Distributor agree that the obligations assumed by the Company pursuant
to this Agreement shall be limited in any case to the Company and its assets and neither the Fund
nor Distributor shall seek satisfaction of any such obligation from the shareholders of the
Company, the directors, officers, employees, or agents of the Company, or any of them, except to
the extent permitted under this Agreement.
12.11. Schedules A through C hereto, as the same may be amended from time to time by mutual
written agreement of the Parties, are attached hereto and incorporated herein by reference.
12.12 Upon request, the Company shall furnish, or shall cause to be furnished, to the Fund 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. |
ARTICLE XIII. Anti-Money Laundering
13.1. The Company represents and warrants that it is in compliance and will continue to be in
compliance with all applicable anti-money laundering laws and regulations, including the Bank
Secrecy Act, as amended by the USA PATRIOT Act, and implementing regulations of the Bank Secrecy
Act (“BSA Regulations”) and applicable guidance issued by the SEC and the guidance and rules of the
applicable Exchanges, SROs and FINRA (collectively, “Guidance”).
29
13.2. In connection with the Fund’s reliance on the Company to perform Customer Identification
Program (“CIP”) procedures on its behalf, the Company represents and warrants that (1) the Company
is subject to a rule implementing 31 U.S.C. 5318(h) and maintains an anti-money laundering program
consistent with the USA PATRIOT Act and the rules thereunder; (2) the Company is regulated by a
Federal functional regulator as that term is defined under 31.C.F.R. §103.120(a)(2); (3) the
Company has implemented a CIP compliant with Section 326 and 31 C.F.R. §103.137(b) that enables the
Company to form a reasonable belief that it knows the true identity of its customers, including
procedures to obtain information from and verify the identity of customers, maintain records of the
information used to verify identity, determine whether the customer appears on any government list
of known or suspected terrorists or terrorist organizations, and provide customers with adequate
notice that the institution is requesting information to verify their identities; and (4) the
Company, upon request, will certify annually that it has implemented its anti-money laundering
program and that it or its agent will perform all aspects of its CIP procedures with respect to
customers referred to the Fund by the Company.
13.3. The Company represents and warrants that to the extent that any owner of a Contract
which provides for the allocation of purchase payments and Contract value to subaccounts investing
in shares of a Portfolio is a current or former Senior Foreign Political Figure (“SFPF”), an
immediate family member of a SFPF, a person who is widely known (or is actually known by the
Company) to maintain a close personal relationship with any such individual, or a corporation,
business or other entity that has been formed by or for the benefit of such individual, it has
conducted appropriate due diligence of such customer consistent with Section 312 of the USA PATRIOT
Act and any applicable BSA Regulations and Guidance.
13.4. The Company represents and warrants that to the extent any owner of a Contract is a
foreign bank, it has taken reasonable measures and has obtained certifications and will obtain
re-certifications that indicate that such Contract owner is not a foreign shell bank, as defined in
the BSA Regulations.
13.5. The Company will take all reasonable and practicable steps to ensure that it does not
accept or maintain investments in any Contract from:
(i) a person or entity (A) who is or becomes subject to sanctions administered by
the U.S. Office of Foreign Assets Control (“OFAC”), is included in any executive
order or is on the list of Specially Designated Nationals and Blocked Persons
maintained by OFAC, or (B) whose name appears on such other lists of prohibited
persons and entities as may be mandated by applicable U.S. law or regulation, or
(ii) a foreign shell bank (i.e., a bank with no physical presence in any country).
13.6 The Company agrees to immediately notify in writing the Anti-Money Laundering Compliance
Officer of the Fund if it becomes aware of any suspicious activity or pattern of activity or any
activity that may require further review to determine whether it is suspicious in connection with
the Funds.
13.7 The Company agrees that if the Fund or Distributor is required to supply
30
information, documentation, or guidance to a securities regulatory organization (“SRO”) or government department
or agency about the CIP of the Fund or the Distributor or the measures taken to obtain information
and to verify the identity of any owner of a Contract who has allocated purchase payments or
Contract value to Portfolios available under the Contract, the Company shall allow such SRO or
government department or agency to examine its files pertaining to such Contract owner.
ARTICLE IX. Shareholder Information (Rule 22c-2)
14.1 Pursuant to Rule 22c-2 under the 1940 Act, the Company agrees to provide to the Fund,
upon written request, the taxpayer identification number (“TIN”), the Individual/International
Taxpayer Identification Number (“ITIN”), or other government-issued identifier (“GII”) and the
Contract Owner number or participant account number, if known, of any or all Contract Owner(s) of
the account, and the amount, date and transaction type (purchase, redemption, transfer, or
exchange) of every purchase, redemption, transfer, or exchange of shares held through an account
maintained by the Company during the period covered by the request. Unless otherwise specifically
requested by the Fund, the Company shall only be required to provide information relating to
Contract Owner Initiated Transfer Purchases or Contract Owner Initiated Transfer Redemptions.
(a) Period Covered by Request. Requests must set forth a specific period, not to exceed 90 days
from the date of the request, for which transaction information is sought. The Fund may request
transaction information older than 90 days from the date of the request as it deems necessary to
investigate compliance with policies established or utilized by the Fund for the purpose of
eliminating or reducing any dilution of the value of the outstanding shares issued by a Portfolio.
If requested by the Fund, the Company will provide the information specified in this Section 14.1
for each trading day.
(b) Form and Timing of Response. The Company agrees to provide, promptly upon request of the Fund,
the requested information specified in this Section 14.1. The Company agrees to use its best
efforts to determine promptly whether any specific person about whom it has received the
identification and transaction information specified in this section is itself a “financial
intermediary,” as that term is defined in Rule 22c-2 under the 1940 Act (an “Indirect
Intermediary”) and, upon request of the Fund, promptly either (i) provide (or arrange to have
provided) the information set forth in this section for those Contract Owners who hold an account
with an Indirect Intermediary or (ii) restrict or prohibit the Indirect Intermediary from
purchasing shares in nominee name on behalf of other persons. The Company additionally agrees to
inform the Fund whether it plans to perform (i) or (ii) above. Responses required by this
paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To
the extent practicable, the format for any Contract Owner and transaction information provided to
the Fund should be consistent with the NSCC Standardized Data Reporting Format.
(c) Limitations on Use of Information. The Fund agrees not to use the information received under
this section for marketing or any other similar purpose without the prior written consent of the
Company; provided, however, that this provision shall not limit the use of
31
publicly available information, information already in the possession of the Fund or their affiliates at the time the
information is received or information which comes into the possession of the Distributor, the Fund
or their affiliates from a third party.
(d) Agreement to Restrict Trading. The Company agrees to execute written instructions from the
Fund to restrict or prohibit further purchases or exchanges of Portfolio shares by a Contract Owner
that has been identified by the Fund as having engaged in transactions in Portfolio shares
(directly or indirectly through the Company’s account) that violate policies established or
utilized by the Fund for the purpose of eliminating or reducing any dilution of the value of the
outstanding shares issued by a Portfolio. Unless otherwise directed by the Fund, any such
restrictions or prohibitions shall only apply to Contract Owner Initiated Transfer Purchases or
Contract Owner Initiated Transfer Redemptions that are affected directly or indirectly through the
Company.
(e) Form of Instructions. Instructions must include the TIN, ITIN or GII and the specific
individual Contract Owner number or participant account number associated with the Contract Owner,
if known, and the specific restriction(s) to be executed. If the TIN, ITIN, GII or the specific
individual Contract Owner number or participant account number associated with the Contract Owner
is not known, the instructions must include an equivalent identifying number of the Contract
Owner(s) or account(s) or other agreed upon information to which the instruction relates.
(f) Timing of Response. The Company agrees to execute instructions from the Fund as soon as
reasonably practicable, but not later than ten (10) Business Days after receipt of the instructions
by the Company.
(g) Confirmation by the Company. The Company must provide written confirmation to the Fund that
the Fund’s instructions to restrict or prohibit trading have been executed. The Company agrees to
provide confirmation as soon as reasonably practicable, but not later than ten (10) Business Days
after the instructions have been executed.
(h) Definitions. For purposes of this Section 14.1, the following terms shall have the following
meanings, unless a different meaning is clearly required by the context:
(i)The term “Contract Owner” means the holder of interests in a Contract or a participant in
an employee benefit plan with a beneficial interest in a Contract.
(ii) The term “Contract Owner Initiated Transfer Purchase” means a transaction that is
initiated or directed by a Contract owner that results in a transfer of assets within a
Contract to a Portfolio, but does not include transactions that are executed: (i)
automatically pursuant to a contractual or systematic program or enrollment such as a
transfer of assets within a Contract to a Portfolio as a result of “dollar cost averaging”
programs, insurance company approved asset allocation programs, or automatic rebalancing
programs; (ii) pursuant to a Contract death benefit; (iii) as a result of a one-time step-up
in Contract value pursuant to a Contract death benefit; (iv) as a result of an
32
allocation of assets to a Portfolio through a Contract as a result of payments such as loan repayments,
scheduled contributions, retirement plan salary reduction contributions, or planned premium
payments to the Contract; or (v) pre-arranged transfers at the conclusion of a required
“free look” period.
(iii) The term “Contract Owner Initiated Transfer Redemption” means a transaction that is
initiated or directed by a Contract Owner that results in a transfer of assets within a
Contract out of a Portfolio, but does not include transactions that are executed: (i)
automatically pursuant to a contractual or systematic program or enrollments such as
transfers of assets within a Contract out of a Portfolio as a result of annuity payouts,
loans, systematic withdrawal programs, insurance company approved asset allocation programs
and automatic rebalancing programs; (ii) as a result of any deduction of charges or fees
under a Contract; (iii) within a Contract out of a Portfolio as a result of scheduled
withdrawals or surrenders from a Contract; or (iv) as a result of payment of a death benefit
from a Contract.
(iv) The term “Portfolios” shall mean the constituent series of the Fund, but for purposes
of this Section 14.1 shall not include Portfolios excepted from the requirements of
paragraph (a) of Rule 22c-2 by paragraph (b) of Rule 22c-2.
(v) The term “promptly” shall mean as soon as practicable but in no event later than ten
(10) Business Days from the Company’s receipt of the request for information from the
Underwriter.
(vi) The term “written” includes electronic writings and facsimile transmissions.
(vii) In addition, for purposes of this Section 14.1, the term “purchase” does not include
the automatic reinvestment of dividends or distributions.
33
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 first above written.
PACIFIC LIFE INSURANCE COMPANY By its authorized officer, |
||||
By: | ||||
Name: | Xxxxxxx X. Xxxxxxx | |||
Title: | Assistant Vice President | |||
Attest: | ||||
Xxxx X. Xxxx | ||||
Corporate Secretary | ||||
SCHWAB ANNUITY PORTFOLIOS By its authorized officer, |
||||
By: | ||||
Name: | ||||
Title: | ||||
XXXXXXX XXXXXX & CO., INC. By its authorized officer, |
||||
By: | ||||
Name: | ||||
Title: | ||||
34
SCHEDULE A
The terms “Account” and “Contracts” of the Company include any existing segregated asset Accounts
and Contracts (as listed below) as well as any segregated asset Accounts and/or Contracts created
subsequent to the date hereof, that offer Designated Portfolios.
Segregated Asset Accounts:
Contracts:
Schwab Retirement Income Variable Annuity
35
SCHEDULE B
Designated Portfolios
Schwab VIT Balanced Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio
36
SCHEDULE C
EXPENSES
EXPENSES
The Fund and/or the Distributor and/or Fund’s adviser, and the Company will coordinate the
functions and pay the costs of the completing these functions based upon an allocation of costs in
the tables below.
Party | ||||||
Party Responsible | Responsible for | |||||
Item | Function | for Coordination | Expense | |||
Mutual Fund Prospectus and, if applicable, Summary Prospectus |
Printing of prospectuses | Schwab | Fund, Distributor or Fund’s adviser, as applicable |
|||
Fund, Distributor or Fund’s adviser shall supply the Company with such numbers of the Designated Portfolio(s) prospectus(es) as the Company may reasonably request or in lieu of a pre-printed supply, provide the Company with a print ready PDF of the Designated Portfolios(s) prospectus(es) for printing and expense reimbursement | Company | Fund, Distributor or Fund’s adviser, as applicable |
||||
Distribution to Inforce Contract owners | Company | Fund, Distributor or Fund’s adviser, as applicable |
||||
Distribution to Prospective Contract owners | Schwab | Schwab | ||||
Product Prospectus
|
Printing for Inforce Contract owners |
Company | Company | |||
Printing for Prospective Contract owners, the Company shall supply Schwab with such numbers of the Product Prospectus as Schwab shall reasonably request | Company | Company |
37
Party | ||||||
Party Responsible | Responsible for | |||||
Item | Function | for Coordination | Expense | |||
Distribution to Inforce Contract owners | Company | Company | ||||
Distribution to Prospective Contract owners | Schwab | Schwab | ||||
Mutual Fund Prospectus and, if applicable, Summary Prospectus Update & Distribution (Supplements) |
If Required by Fund or Distributor |
Fund, Distributor or Fund’s adviser |
Fund or Distributor | |||
Distribution to Inforce Contract owners | Company | Fund, Distributor or Fund’s adviser, as applicable |
||||
Distribution to Prospective Contract owners | Schwab | Schwab | ||||
Product Prospectus Update & Distribution |
If Required by Fund or Distributor |
Company | Fund or Distributor | |||
If Required by the Company |
Company | Company | ||||
If Required by Schwab | Schwab | Schwab | ||||
Mutual Fund SAI
|
Printing | Fund or Distributor | Fund or Distributor | |||
Distribution | Company | Fund or Distributor | ||||
Product SAI
|
Printing | Company | Company | |||
Distribution | Company | Company | ||||
Proxy Material for Mutual Fund: |
Printing if proxy required by Law |
Fund or Distributor | Fund or Distributor | |||
Distribution (including labor and postage) if proxy required by Law | Company, Schwab or a proxy solicitation firm |
Fund or Distributor | ||||
Printing & distribution if required by Schwab |
Company, Schwab or a proxy solicitation firm |
Schwab |
38
Party | ||||||
Party Responsible | Responsible for | |||||
Item | Function | for Coordination | Expense | |||
Mutual Fund Annual & Semi-Annual Report |
Distribution (including postage) |
Company | Schwab | |||
Other communication
to Prospective
clients
|
If Required by the Fund or Distributor |
Schwab | Fund or Distributor | |||
If Required by the Company |
Schwab | Company | ||||
If Required by Schwab | Schwab | Schwab | ||||
Other communication
to inforce Contract
owners
|
Distribution (including labor and printing) if required by the Fund or Distributor | Company | Fund or Distributor | |||
Distribution (including labor and printing) if required by the Company | Company | Company | ||||
Distribution (including labor and printing if required by Schwab | Company | Schwab | ||||
Errors in Share
Price calculation
pursuant to Section
1.8
|
Cost of error to participants | Company | Fund or Fund’s adviser |
|||
Cost of administrative work to correct error | Company | Fund or Fund’s adviser |
||||
Operations of the
Fund
|
All operations and related expenses, including the cost of registration and qualification of shares, taxes on the issuance or transfer of shares, cost of management of the business affairs of the Fund, and expenses paid or assumed by the Fund pursuant to any Rule 12b-1 plan | Fund or Distributor | Fund or Fund’s adviser |
|||
Operations of the
Account
|
Federal registration of units of separate account (24f-2 fees) | Company | Company |
39