PARTICIPATION AGREEMENT
By and Among
GENWORTH LIFE AND ANNUITY INSURANCE COMPANY
And
GE INVESTMENTS FUNDS, INC.
And
GE INVESTMENT DISTRIBUTORS, INC.
And
GE ASSET MANAGEMENT INCORPORATED
THIS PARTICIPATION AGREEMENT (this "Agreement"), made and entered into this
1st day of May, 2006, by and among GENWORTH LIFE AND ANNUITY INSURANCE COMPANY,
organized under the laws of the Commonwealth of Virginia (the "Company"), on
its own behalf and on behalf of each segregated asset account of the Company
named in Schedule 1 (Registered Accounts) and Schedule 2 (Unregistered
Accounts) to this Agreement as may be amended from time to time (each account
individually referred to as an "Account" and collectively referred to as the
"Accounts"), GE INVESTMENTS FUNDS, INC., an open-end management investment
company organized under the laws of the Commonwealth of Virginia (the "Fund")
on its own behalf and on behalf of the Portfolios named in Schedule 3
(Portfolios) to this Agreement (each portfolio individually referred to as a
"Portfolio" and collectively referred to as the "Portfolios"); GE INVESTMENT
DISTRIBUTORS, INC., a corporation organized under the laws of the State of
Delaware (the "Distributor"); and GE ASSET MANAGEMENT INCORPORATED, a
corporation organized under the laws of the State of Delaware (the "Adviser").
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment
vehicle for separate accounts established for variable life insurance contracts
and variable annuity contracts to be offered by insurance companies that have
entered into participation agreements similar to this Agreement (the
"Participating Insurance Companies") and for qualified pension and retirement
plans; and
WHEREAS, the Fund has received an order from the Securities & Exchange
Commission (the "SEC") granting Participating Insurance Companies and variable
life insurance separate accounts relief from the provisions of Sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit Fund shares of a Portfolio to be sold to and held by
variable annuity separate accounts and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance Companies
and qualified pension and retirement plans outside of the separate account
context (the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and its shares of stock representing an interest in the
Portfolio(s) shown on Schedule 3 (the "Shares") are registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered each Account listed on Schedule 1 as a
unit investment trust under the 1940 Act; and
WHEREAS, each Account listed on Schedule 2 is excluded from the definition
of an investment company as provided for by Section 3(c)(11) of the 1940 Act;
and
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WHEREAS, the Company issues certain other variable life insurance and
variable annuity policies (the "Contracts") set forth in Schedule 4 (Registered
Contracts), interests under which have been or will be registered under the
1933 Act; and
WHEREAS, the Company issues certain other variable annuity contracts (also
hereinafter included within the term "Contracts") to trustees of both qualified
pension and profit-sharing plans and certain government employee benefit plans
as identified in Section 3(a)(2) of the 1933 Act, set forth in Schedule 5
(Exempt Contracts) hereto; and
WHEREAS, the Company may issue certain variable annuity insurance contracts
(also hereinafter included within the term "Contracts") set forth in Schedule 6
(Contracts with Accredited Investors), for sale to "accredited investors" as
that term is defined in Regulation D promulgated under the 1933 Act
(hereinafter "Regulation D"), or other investors permitted by Regulation D; and
WHEREAS, each Account listed on Schedule 7 is excluded from the definition
of an investment company as provided by Section 3(c)(1) or Section 3(c)(7) of
the 1940 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the Commonwealth of Virginia, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Shares of the Portfolios named in
Schedule 3, as such schedule may be amended from time to time on behalf of the
Accounts to fund the Contracts, and the Fund is authorized to sell such Shares
to the Accounts at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Portfolios, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Shares
1.1. Subject to Article X hereof, the Fund agrees to make available to the
Company for purchase on behalf of the Accounts, Shares of those Portfolios
listed on Schedule 3 to this Agreement, such purchases to be effected at net
asset value in accordance with Section 1.3 hereof. Notwithstanding the
foregoing:
(a) Portfolios (other than those listed on Schedule 3) in existence now or
that may be established in the future will be made available to the Company
only as the Fund may so provide, and
(b) The board of directors of the Fund (the "Board") may suspend or
terminate the offering of the Shares of any Portfolio or class thereof, if
such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Board acting in good faith
and in light of its fiduciary duties under federal and any applicable state
securities laws, suspension or termination is necessary and in the best
interests of the shareholders of such Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or fractional
Shares held by the Company on behalf of an Account, such redemptions to be
effected at net asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, the Fund may delay redemption of Shares to the
extent permitted by the 1940 Act, and any rules, regulations or orders
thereunder.
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1.3.Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as its agent for the limited
purpose of receiving purchase and redemption requests on behalf of the
Accounts listed on Schedules 1, 2 and 7, where permitted by applicable law,
for Shares made available hereunder, based on allocations of amounts to such
Accounts or subaccounts thereof under the Contracts listed in Schedules 4, 5
and 6 and other transactions relating to such Contracts or such Accounts;
provided, however, that if applicable law is amended in the future to
prevent the foregoing, the Company shall only act as the Fund's agent for
the limited purpose of receiving purchase and redemption requests on behalf
of the Accounts listed on Schedule 1 (but not on behalf of the Accounts
listed on Schdules 2 and 7 or with respect to any Shares that may be held in
the general account of the Company). Receipt of any such request (or
relevant transactional information therefor), by the Company as such limited
agent of the Fund, on any day the New York Stock Exchange ("NYSE") is open
for trading and on which the Fund calculates its net asset value pursuant to
the rules of the SEC (a "Business Day") prior to the time that the Fund
ordinarily calculates its net asset value as described from time to time in
the Fund's prospectus (which as of the date of execution of this Agreement
is the close of regular trading on the NYSE) shall constitute receipt by the
Fund on that same Business Day, provided that:
(i) if the Company transmits such request to the Fund via the National
Securities Clearing Corporation's (the "NSCC") Defined Contribution
Clearance & Settlement ("DCC&S") platform, such request must be received
by the Company by the close of regular trading on the NYSE (or such
reasonably earlier time designated by the Company in response to a
change by the NSCC in the deadline for receipt of requests via its DCC&S
platform) and must be transmitted by the Company to the Fund by the
deadline designated by the NSCC pursuant to Rule 22c-1 of the 1940 Act
(which as of the date of execution of this Agreement is 6:00 a.m.
Eastern Time on the next following Business Day); or
(ii) if the Company transmits such request to the Fund through means
other than the DCC&S platform (e.g., by fax), such request must be
received by the Fund by 9:00 a.m. Eastern Time on the next following
Business Day.
With regard to purchase and redemptions of Shares under this Section 1.3(a),
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.
(b) The Company shall pay for Shares on the same day that it notifies the
Fund of a purchase request for such Shares. Payment for Shares shall be made
in federal funds transmitted to the Fund by wire to be received by the Fund
by 1:00 p.m. Eastern Time on the day the Fund is notified of the purchase
request for Shares (unless the Fund determines and so advises the Company
that sufficient proceeds are available from redemption of Shares of other
Portfolios effected pursuant to redemption requests tendered by the Company
on behalf of an Account). Upon receipt of federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
(c) Payment for Shares redeemed by the Company on behalf of an Account shall
be made in federal funds transmitted by wire to the Company or any other
designated person on the next Business Day after the Fund is properly
notified of the redemption order of such Shares (unless
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redemption proceeds are to be applied to the purchase of Shares of other
Portfolios in accordance with Section 1.3(b) of this Agreement), except that
the Fund reserves the right to delay payment of redemption proceeds to the
extent permitted under Section 22(e) of the 1940 Act and any rules
thereunder, and to make payment in any manner permitted under the procedures
and policies of the Fund as described in the then current registration
statement. The Fund shall not bear any responsibility whatsoever for the
proper disbursement or crediting of redemption proceeds by the Company; the
Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Shares held or to be held in the
Company's general account shall be effected at the closing net asset value
per Share next determined after the Fund's receipt of such request, provided
that, in the case of a purchase request, payment for Shares so requested is
received by the Fund in federal funds prior to close of business for
determination of such value, as defined from time to time in the Fund
Prospectus.
1.4. The Fund shall use its best efforts to make the closing net asset value
per Share for each Portfolio available to the Company by 6:30 p.m. Eastern Time
each Business Day, and in any event, as soon as reasonably practicable after
the closing net asset value per Share for such Portfolio is calculated, and
shall calculate such closing net asset value in accordance with the Fund's
Prospectus. In the event the Fund is unable to make the 6:30 p.m. deadline
stated herein, it shall provide additional time for the Company to place orders
for the purchase and redemption of Shares. Such additional time shall be equal
to the additional time, which the Fund takes to make the closing net asset
value available to the Company. Neither the Fund, any Portfolio, the
Distributor, the Adviser, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company or any
other Participating Insurance Company to the Fund, the Distributor or the
Adviser. Neither the Company nor any of its affiliates shall be liable for any
information provided to the Fund, the Distributor or the Adviser pursuant to
this Agreement which information is based on incorrect information supplied by
the Fund, the Distributor, or the Adviser to the Company. Any material error in
the calculation or reporting of the closing net asset value per Share shall be
reported immediately upon discovery to the Company. In such event the Company
shall be entitled to an adjustment to the number of Shares purchased or
redeemed to reflect the correct closing net asset value per Share and the Fund
shall bear the cost of correcting such errors; provided, however, that if such
errors is directly caused by the Company's breach of this Agreement or its
willful misconduct or negligence in the performance of, or failure to perform,
its obligations hereunder, the Company shall be liable for such cost of
correcting such errors. Any error of a lesser amount shall be corrected in the
next Business Day's net asset value per Share.
1.5. The Company, on its behalf and on behalf of each Account, hereby elects to
receive all dividends and distributions as are payable on any Shares in the
form of additional Shares of that Portfolio. The Company reserves the right, on
its behalf and on behalf of the Accounts, to revoke this election and to
receive all such dividends and capital gain distributions in cash. The Fund
shall notify the Company promptly of the number of Shares so issued as payment
of such dividends and distributions.
1.6. Issuance and transfer of Shares shall be by book entry only. Stock
certificates will not be issued to the Company or any Account. Purchase and
redemption orders for Shares shall be recorded in an appropriate ledger for
each Account or the appropriate subaccount of an Account.
1.7.(a) The parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; except as provided in this Section 1.7,
the Shares may be sold to other insurance companies (subject to Section 1.8
hereof) and amounts allocated to the Contracts may be invested
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in other investment companies, subject to the terms of such Contracts. A
funding vehicle other than those listed on Schedule 3 to this Agreement may
be made available for the investment of amounts allocated to the Contracts.
(b) The Company shall not, without prior notice to the Distributor (unless
otherwise required by applicable law), take any action to operate any
Account that is a unit investment trust as a management investment company
under the 1940 Act.
(c) The Company shall not, without prior notice to the Distributor (unless
otherwise required by applicable law), induce Contract owners to vote to
change or modify the Fund or change the Fund's Distributor or the Adviser.
(d) The Company shall not, without prior notice to the Fund, induce Contract
owners to vote on any matter submitted for consideration by the shareholders
of the Fund in a manner other than as recommended by the Board.
1.8. The Fund shall sell Shares only to Participating Insurance Companies and
their separate accounts and to trustees of qualified pension and profit-sharing
plans, trustees of certain government employee benefit plans, or other persons
("Qualified Persons") that communicate to the Fund that they qualify to
purchase Shares under Section 817(h) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder without impairing the
ability of any Account to treat the portfolio investments of the Fund as
constituting investments of the Account for the purpose of satisfying the
diversification requirements of Section 817(h) of the Code (the
"Diversification Requirements"). To the extent required by the Mixed and Shared
Funding Exemptive Order, the Fund shall not sell Shares to any insurance
company or separate account unless it enters into an agreement having
provisions that require of the parties what is, in substance, required by
Articles VI and VII of this Agreement to govern such sales. The Company hereby
represents and warrants that it and each Account are Qualified Persons.
1.9. The Company shall comply with all applicable laws and regulations designed
to prevent money "laundering," and if required by such laws or regulations, to
share with the Fund information about individuals, entities, organizations and
countries suspected of possible terrorist or money "laundering" activities in
accordance with Section 314(b) of the USA Patriot Act. In particular, the
Company agrees that: (a) as part of processing an application for a Contract it
will verify the identity of applicants and, if an applicant is not a natural
person, will verify the identity of prospective principal and beneficial owners
submitting an application for a Contract, (b) as part of its ongoing compliance
with the USA Patriot Act it will from time to time re-verify the identity of
Contract owners, including the identity of principal and beneficial owners of
Contracts held by non-natural persons, (c) as part of processing an application
for a Contract it will verify that no applicant, including prospective
principal or beneficial Contract owners is a "specially designated national" or
a person from an embargoed or "blocked" country as indicated by the Office of
Foreign Asset Control ("OFAC") list of such persons, (d) as part of its ongoing
compliance with the USA Patriot Act it will from time to time re-verify that no
Contract owner, including a principal or beneficial Contract owner, is a
"specially designated national" or a person from an embargoed or "blocked"
country as indicated by the OFAC list of such persons, (e) it will ensure that
money tendered to the Fund as payment for Shares did not originate with a bank
from a country or territory named on the list of high-risk or non-cooperating
countries or jurisdictions published by the Financial Action Task Force, and
(f) if any of (a) through (e) become untrue, then the Fund or its agent(s) in
compliance with the USA Patriot Act or Bank Secrecy Act, may seek authority to
block one or more Contract owner accounts with the Company or
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one or more of the Company's accounts with the Fund.
1.10.(a) The Company shall comply with the terms and conditions of the Fund's
prospectus and statement of additional information and all applicable
laws, rules and regulations governing the Company's performance under this
Agreement, including without limitation compliance with the 1940 Act and
Rule 22c-1 thereunder. The Company agrees to comply with policies and
procedures adopted by the Funds, as may be modified by the Funds from time
to time, to prevent or minimize "market timing" and other types of
frequent or disruptive trading in Shares that may harm one or more Funds
(the "Fund's Disruptive Trading Policy").
(b) The Company has adopted policies and procedures reasonably designed
to protect the Fund from disruption or harm caused by "market timing"
and other types of frequent trading in Shares (the "Company's Disruptive
Trading Policy"), a copy of which is attached hereto as Exhibit A. The
Company shall take all reasonable measures to consistently and
effectively enforce the Company's Disruptive Trading Policy for the
duration of this Agreement. The Company shall also provide the
Distributor written notice of any proposed amendments to the Company's
Disruptive Trading Policy and the complete text of such proposed
amendments concurrently with the filing of such amendments with the SEC,
provided, however, that if such filing shall become effective on the
date upon which it is filed with the SEC (i.e., a Rule 485(b) filing),
the Company shall provide the Distributor such amendments for review no
later than 10 days prior to such filing. Should the Distributor
determine, in its sole discretion, that the Company's Disruptive Trading
Policy would be unreasonable or unacceptable as a result of the proposed
amendments, the Distributor may terminate this Agreement in accordance
with Article X hereof.
(c) The Company shall provide, promptly upon request by the Distributor,
certain Contract owner or Contract owners information ("Information"),
including, but not limited to:
(i) a unique identifier (and commencing no later than the effective
date of Rule 22c-2 under the 1940 Act, the Taxpayer Identification
Number) of each Contract owner or Contract owners that purchased,
redeemed, transferred, or exchanged Account units supported by the
Shares,
(ii) the amount and dates of such Contract owner or Contract owners
purchases, redemptions, transfers and exchanges,
(iii) the name or other identifier of any investment professional(s)
associated with each Contract owner or Contract owners or account (if
known), and
(iv) 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.
The Company also agrees to use its best efforts to determine, promptly upon
request by Distributor, whether any Contract owner or Contract owners that
hold Shares through the Company is itself a financial intermediary as
defined in Rule 22c-2(c)(1) and, upon request by Distributor, provide (or
arrange to have provided) Information with respect to beneficial owners of
interests held through the Contract who hold Shares through that other
financial intermediary. If the Company cannot provide the Information with
respect to that other financial intermediary, the
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Company agrees upon request from Distributor and as soon as reasonably
practicable, to restrict or prohibit that other financial intermediary from
further purchases or exchanges.
Information requests shall set forth a specific period for which Information
is sought. The Company agrees to transmit such Information to the
Distributor promptly, but in no event later than five (5) business days
after receipt of a request. The Distributor agrees not to use the
Information for marketing or any other similar purpose without the Company's
prior written consent.
(d) The Company understands and agrees that the Distributor may review
omnibus transactions for potentially harmful or disruptive trading activity
and notify the Company in writing if it believes that any such activity may
have occurred. Upon such written notification from the Distributor, the
Company shall investigate such activity and work with the Distributor to
determine if disruptive trading has occurred under the Fund's Disruptive
Trading Policy or the Company's Disruptive Trading Policy, as applicable. If
it is determined that disruptive trading has occurred, the Company shall
restrict any offending Contract owner or Contract owners and otherwise
cooperate with the Distributor to prevent future violations of the
applicable policy.
(e) The Company understands and agrees that, notwithstanding anything in
this Agreement to the contrary, the Distributor reserves the right to
(i) refuse any purchase order at any time for any reason without prior
notice to the Company, and (ii) delay settlement of any redemption order if
the Distributor determines, in its sole discretion, that such delay is
necessary to protect the Fund from potential disruption or harm. In no way
will any delay in settlement be beyond that allowed under Section 22(e) of
the 1940 Act.
(f) In compliance with this Section 1.10, the Company shall not undertake
any activity that will cause it to violate any federal or state law, rule or
regulation concerning the privacy of owners of the Contracts. This includes,
but is not limited to, the provision of Contract owner names or other
identifying information.
1.11. The Company understands and agrees that: (a) the Distributor offers
shares of other mutual funds or other classes of mutual funds with the same
investment objective, strategy and portfolio management team as the Portfolios,
(b) the mutual fund and share class most appropriate for each Account depends,
among other things, on the eligibility for investment and servicing
requirements of each such Account, and (c) to the extent the appropriate
eligibility requirements are satisfied, the parties hereto shall cooperate to
effect a transfer of Account assets to the mutual fund best suited for such
assets.
ARTICLE II. Representations and Warranties
2.1.The Company represents and warrants that:
(a) the Contracts listed on Schedule 4 are or will be registered under the
1933 Act and that the Contracts listed on Schedules 5 and 6 are exempt from
registration under the 1933 Act;
(b) the Accounts listed on Schedules 2 and 7 are and will remain excluded
from the definition of an investment company under the 1940 Act, and that it
will immediately notify the Fund and the Distributor upon having a
reasonable basis for believing that such Accounts have ceased to be so
excluded or that they might become investment companies in the future;
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(c) each Account listed on Schedule 1 is and will remain registered as unit
investment trust in accordance with the provisions of the 1940 Act for so
long as required by the 1940 Act;
(d) the Contracts are and will be issued and sold in compliance in all
material respects with all applicable federal and state laws;
(e) each Account meets the definition of a "separate account" under the 1940
Act;
(f) it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established each Account
as a separate account under applicable law and that it has legally and
validly established each Account, prior to any issuance or sale of any
Contract funded by that Account, as a segregated asset account under the
Insurance Laws of the Commonwealth of Virginia;
(g) it will amend the registration statement under the 1933 Act for the
Contracts listed on Schedule 4 and the registration statement under the 1940
Act for the Accounts listed on Schedule 1 from time to time as required in
order to effect the continuous offering of the Contracts or as may otherwise
be required by applicable law;
(h) it will register and qualify the Contracts for sale in accordance with
the securities laws of the various states only if and to the extent deemed
necessary by the Company;
(i) each Account is a segregated asset account and that interests in each
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 requirement and will notify the Fund
immediately upon having a reasonable basis for believing such requirements
have ceased to be met or that they might not be met in the future;
(j) the Contracts are currently and at the time of issuance will be treated
as life insurance or annuity contracts under applicable provisions of the
Code, and that it will make every effort to maintain such treatment, and
that it will notify 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;
(k) it will not purchase Shares with assets derived from tax-qualified
retirement plans except, indirectly, through Contracts purchased in
connection with such plans; and
(l) it has or will adopt and implement policies and procedures reasonably
designed to ensure that each purchase or redemption order for Shares that it
submits pursuant to Section 1.3(a) herein is the net result of requests from
Contract owners for Contract transactions received by it or its agents each
Business Day before the time(s) that the Fund calculates its net asset
value; which procedures shall include the establishment and maintenance of
records sufficient to demonstrate such compliance.
2.2.The Fund represents and warrants that:
(a) it will not knowingly sell Shares to any purchaser whose purchase of
such Shares would result in a violation of the conditions imposed by the
Mixed and Shared Fund Exemptive Order;
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(b) Shares of each Portfolio sold pursuant to this Agreement and listed on
Schedule 3 will be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and will
remain registered under the 1940 Act for as long as such Shares are
outstanding. The Fund will amend the registration statement for its Shares
of the Portfolios under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of Shares. The Fund will
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;
(c) each Portfolio listed on Schedule 3 is currently qualified as a
"regulated investment company" under Subchapter M of the Code, and that it
will make every effort to maintain such qualification (under Subchapter M or
any successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that a Portfolio
has ceased to so qualify or that it might not so qualify in the future;
(d) in performing the services described in this Agreement, the Fund will
comply in all material respects with all applicable federal securities laws,
rules and regulations. The Fund further represents and warrants that its
investment objectives, policies and restrictions comply with all applicable
state investment laws, rules and regulations. The Fund makes no
representation as to whether any aspect of its operations (including, but
not limited to, fees and expenses and investment policies, objectives and
restrictions) complies with the insurance laws and regulations of any state.
The Fund agrees that upon request it will use its best efforts to furnish
the information required by state insurance laws so that the Company can
obtain the authority needed to issue the Contracts in the various states;
(e) it currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it
reserves the right to make such payments in the future;
(f) it is lawfully organized and validly existing under the laws of the
Commonwealth of Virginia and that it does and will comply in all material
respects with applicable provisions of the 1940 Act; and
(g) all of its directors, trustees, officers, employees, investment
advisers, and other individuals/entities having access to the funds and/or
securities of the Portfolios are and continue to be at all times covered by
a blanket fidelity bond or similar coverage for the benefit of the
Portfolios in an amount not less than the minimal coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding company.
2.3. The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and shall perform its obligations for the Portfolios in
compliance with applicable securities laws.
2.4. The Distributor represents and warrants that it is a member in good
standing of the National Association of Securities Dealers, Inc. and is
registered, and shall remain registered, as a broker-dealer with the SEC. The
Distributor further represents that it will sell and distribute Shares in
accordance in all material respects with all applicable federal and state
securities laws, including without limitation the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act.
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2.5. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. The Fund shall bear the costs of preparing, filing with the SEC, and
setting for printing the Fund's prospectus, Statement of Additional Information
("SAI"), including any amendments or supplements thereto, periodic reports to
shareholders, Fund proxy material and other shareholder communications
(collectively, the "Fund Materials"), and the Fund will provide to the Company
a camera-ready or other formatted copy of all Fund Materials.
It is understood and agreed that the Company is not responsible for the content
of the Fund Materials, except to the extent that statements in the Fund
Materials reflect information given to the Fund by the Company. It is also
understood and agreed that, except with respect to information provided to the
Company by the Fund, the Distributor or the Adviser, the Portfolios, the Fund,
the Distributor and the Adviser shall not be responsible for the content of the
prospectus, SAI or disclosure statement for the Contracts or non-affiliated
funds.
3.2. The Company shall print in quantity and deliver to existing Contract
owners the Fund Materials. The Fund shall bear the costs of printing the Fund
Materials for existing Contract owners. The Company shall bear the costs of
delivering the Fund Materials to existing Contract owners.
3.3. The Company shall print in quantity and deliver to prospective Contract
owners the Fund prospectus and, if requested, the SAI for the Fund. The Company
shall bear the costs of printing the Fund Materials for prospective Contract
owners. The Company shall bear the costs of delivering the Fund Materials to
prospective contract owners.
3.4. The Company, at its expense, will distribute proxy material, reports and
other communications to existing Contract owners and tabulate the votes. If and
to the extent required by law, the Company will:
(a) solicit voting instructions from Contract owners;
(b) vote the Shares of each Portfolio held in the Accounts in accordance
with instructions received from Contract owners; and
(c) vote Shares of each Portfolio held in the Accounts for which no timely
instructions have been received, as well as Shares it owns, in the same
proportion as Shares of each such Portfolio for which instructions have been
received from the Contract owners; in each case, for so long as and to the
extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for owners of Contracts listed on Schedule 4.
Except as set forth above, the Company reserves the right to vote Shares
held in any account in its own right, to the extent permitted by law. The
Company will be responsible for assuring that each Account calculates voting
privileges in a manner consistent with all legal requirements, including the
Mixed and Shared Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section
10
16(a) of the 1940 Act with respect to periodic elections of trustees and with
whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Distributor will provide the Company on a timely basis with investment
performance information for the Portfolios, including total return for the
preceding calendar month and calendar quarter, the calendar year to date, and
the prior one-year, five-year, and ten year (or life of the Portfolio) periods.
The Company may, based on the SEC-mandated information supplied by the
Distributor, prepare communications for Contract owners ("Contract Owner
Materials"). The Company will provide the Distributor with copies of all
Contract Owner Materials concurrently with their first use for the
Distributor's internal recordkeeping purposes. It is understood that neither
the Distributor, the Adviser, the Fund nor the Portfolios will be responsible
for errors or omissions in, or the content of, Contract Owner Materials except
to the extent that the error or omission resulted from information provided by
or on behalf of the Distributor, the Adviser, the Fund or the Portfolio. Any
printed information that is furnished to the Company pursuant to this Agreement
other than the Portfolio's prospectus or SAI (or information supplemental
thereto), periodic reports and proxy solicitation materials is the
Distributor's sole responsibility and not the responsibility of the Portfolio
or the Fund. The Company agrees that the Portfolio, the shareholders of the
Portfolio and the officers and members of the Board will have no liability or
responsibility to the Company in these respects.
4.2. The Company will not give any information or make any representations or
statements on behalf of the Fund or concerning the Portfolios in connection
with the sale of the Contracts other than the information or representations
contained in the registration statement, prospectus or SAI for Shares, as such
registration statement, prospectus and SAI may be amended or supplemented from
time to time, or in reports or proxy statements for the Portfolio, or in
published reports for the Portfolio which are in the public domain or approved
by the Fund, the Distributor or the Adviser for distribution, or in sales
literature or other material provided by the Fund, the Distributor or the
Adviser, except with permission of the Fund, the Distributor or the Adviser.
The Fund, the Distributor and/or the Adviser, as applicable, agrees to respond
to any request for approval on a prompt and timely basis. Nothing in this
Section 4.2 will be construed as preventing the Company or its employees or
agents from giving advice on investment in the Portfolios.
4.3. The Company will furnish, or will cause to be furnished, to the Fund or
the Distributor or its designee, each piece of sales literature or other
promotional material in which the Fund, the Portfolios or the Distributor is
named, at least fifteen (15) business days prior to its use. No such material
will be used if the Fund or the Distributor reasonably objects to such use
within fifteen (15) business days after receipt of such material. Likewise, the
Fund or the Distributor will furnish, or will cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company is named, at least fifteen (15) business days
prior to its use. No such material will be used if the Company reasonably
objects to such use within fifteen (15) business days after receipt of such
material.
4.4. The Fund, the Distributor and the Adviser will not give any information or
make any representations or statements on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or SAI for
the Contracts, as such registration statement, prospectus and SAI may be
amended or supplemented from time to time, or in published reports for each
Account or the Contracts which are in the public domain or approved by the
Company for distribution to Contract owners, or in sales literature or
11
other material provided by the Company, except with permission of the Company.
The Company agrees to respond to any request for approval on a prompt and
timely basis.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Portfolios or their Shares, contemporaneously with the filing of
such document with the SEC, the NASD or other regulatory authority.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications
for exemptions, requests for no action letters, and all amendments to any of
the above, that reference the Funds or the Portfolios and relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC, the NASD or other regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, (e.g., on-line
networks such as the Internet or other electronic messages), 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
advertisements sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees), registration statements, prospectuses, SAIs,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 0000
Xxx.
4.8. The Fund and each Portfolio hereby consents to the Company's use of the
name "GE Investments Funds, Inc." and the name of each Portfolio listed on
Schedule 3 in connection with the marketing of the Contracts, subject to the
terms of Sections 4.1, 4.2 and 4.3 of this Agreement. Such consent will
terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. Except as otherwise provided herein, all expenses incident to performance
by the Fund under this Agreement shall be paid by the Fund. The Fund shall see
to it that all its Shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Fund or the Distributor, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Portfolios' Shares; the preparation of
all statements and notices required by any federal or state law; all taxes on
the issuance or transfer of the Portfolios' Shares; and any expenses permitted
to be paid or assumed by a Portfolio pursuant to a plan, if any, under Rule
12b-1 under the 1940 Act.
ARTICLE VI. Diversification
6.1. The Fund will ensure that each Portfolio will at all times invest money
from the Contracts in such a manner as to ensure that the Contracts will comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, as amended
from time to time, relating to the Diversification Requirements for variable
12
annuity or life insurance contracts and any amendments or other modifications
to such Section or Regulation. In the event of a breach of this Article VI by
the Portfolio, it will take all reasonable steps: (a) to notify the Company of
such breach; and (b) to adequately diversify the Portfolio so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Portfolios for the existence of any material
irreconcilable conflict among the interests of the Contract owners of all
Accounts investing in the Portfolios and determine what action, if any, should
be taken in response to such conflicts. 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
the Portfolios are being managed; (e) a difference in voting instructions given
by Participating Insurance Companies or by variable annuity and variable life
insurance Contract owners; or (f) a decision by an insurer to disregard the
voting instructions of Contract owners. The Board will 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 agrees to assist the Board in carrying out its
responsibilities, as delineated in 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 it has determined to
disregard Contract owner voting instructions. The Company's responsibilities
hereunder will be carried out with a view only to the interest of Contract
owners.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company will, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict,
including: (a) withdrawing the assets allocable to some or all of the Accounts
from the Portfolios and reinvesting such assets in a different investment
medium, subject to the requirements of Section 26(c) of the 1940 Act, 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., variable annuity Contract owners or
variable life insurance 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; and (b) 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 the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Portfolios and terminate this Agreement with
respect to such Account; provided, however, that such withdrawal and
termination will be limited to the extent required to remedy the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested directors of the Board. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal and termination shall take place
within six (6) months after written notice is given that this provision is
being implemented. Unless doing so would exacerbate the conflict until such
withdrawal and termination is
13
implemented, the Fund shall continue to accept and implement orders by the
Company for the purchase and redemption of Shares.
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 insurance regulators, then the Company will withdraw
the affected Account's investment in the Portfolios and terminate this
Agreement with respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested directors of the Board. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal and termination shall take place
within six (6) months after written notice is given that this provision is
being implemented. Until such withdrawal and termination is implemented, the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of Shares.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Board will determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in no
event will the Fund, the Distributor or the Adviser be required to establish a
new funding medium for the Contracts. The Company will 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 materially
affected by the material irreconcilable conflict.
7.7. The Company will at least annually submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out the duties imposed upon it as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Board.
7.8. The Fund, the Distributor and the Adviser will at least annually submit to
the Company such reports, materials or data as the Company may reasonably
request so that the Company may fully carry out the duties imposed upon it by
state and federal regulators, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Company.
7.9. If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the 1940 Act
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 Companies, as appropriate, will 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,
7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement will 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
Portfolios, the Distributor, the Adviser, and each person, if any, who
controls or is associated with the Fund, the Portfolios, the Distributor or
the Adviser within the meaning of such terms under the federal securities
laws and any director, trustee, officer, partner, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all
14
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
Shares or the Contracts and:
(1) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or SAI for the Contracts or contained in the
Contracts or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated or necessary to make
such statements not misleading in light of the circumstances in which
they were made; provided that this agreement to indemnify will not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by the
Fund, the Portfolio, the Distributor or the Adviser for use in the
registration statement, prospectus or SAI for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Shares; or
(2) arise out of or as a result of statements or representations by or
on behalf of the Company (other than statements or representations
contained in the Fund's registration statement, prospectus, SAI or sales
literature or other promotional material of the Fund 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 Shares; or
(3) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus, SAI or sales literature or other promotional material of the
Fund (or amendment or supplement) or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make such statements not misleading in light of the circumstances in
which they were made, if such a statement or omission was made in
reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company or persons under its control; or
(4) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(5) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result
from any other material breach by the Company of this Agreement;
except to the extent provided in Sections 8.l(b) and 8.4 hereof. This
indemnification will be in addition to any liability that the Company
otherwise may have.
(b) No party will be entitled to indemnification under Section 8.l(a) to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of
such party's duties under this Agreement, or by reason of such party's
15
reckless disregard of its obligations or duties under this Agreement by the
party seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with the issuance or sale
of the Shares or the Contracts or the operation of the Fund.
8.2.Indemnification By the Distributor and the Adviser
(a) The Distributor and the Adviser, in each case solely to the extent
relating to such party's responsibilities hereunder, agree to indemnify and
hold harmless the Company and each person, if any, who controls or is
associated with the Company within the meaning of such terms under the
federal securities laws and any director, trustee, officer, partner,
employee or agent of the foregoing (collectively, the "Indemnified Parties"
for purposes of this Section 8.2) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor or the Adviser, as applicable) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of Shares or the Contracts and:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus or SAI for the Fund or sales literature or other
promotional material of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
or necessary to make such statements not misleading in light of the
circumstances in which they were made; provided that this agreement to
indemnify will not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Distributor or
the Adviser by or on behalf of the Company for use in the registration
statement, prospectus or SAI for the Fund or in sales literature of the
Fund (or any amendment or supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Shares; or
(2) arise out of or as a result of statements or representations (other
than statements or representations contained in the Contracts, or
Contract registration statements, prospectuses, SAIs or sales literature
or other promotional materials for the Contracts not supplied by the
Distributor, the Adviser, the Fund or persons under their control) or
wrongful conduct of the Distributor or the Adviser or persons under the
control of the Distributor or the Adviser, respectively, with respect to
the sale of the Shares; or
(3) arise out of any untrue statement or alleged untrue statement of a
material fact contained in Contract registration statements,
prospectuses, SAIs or sales literature or other promotional material of
the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be
stated or necessary to make such statement or statements not misleading
in light of the circumstances in which they were made, if such statement
or omission was made in reliance upon and in conformity with written
information furnished to the Company by the Distributor or the Adviser
or persons under the control of the Distributor or the Adviser; or
16
(4) arise as a result of any failure by the Distributor or the Adviser
to provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the Diversification Requirements and
procedures related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the Adviser in
this Agreement, or arise out of or result from any other material breach
of this Agreement by the Distributor or the Adviser, including the
failure of any Portfolio to comply with the diversification requirements
set forth in Section 817(h) of the Code or to qualify as a "regulated
investment company" under Subchapter M of the Code;
except to the extent provided in Sections 8.2(b) and 8.4 hereof. This
indemnification will be in addition to any liability that the Distributor or
the Adviser otherwise may have.
(b) No party will be entitled to indemnification under Section 8.2(a) to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of
such party's duties under this Agreement, or by reason of such party's
reckless disregard of its obligations or duties under this Agreement by the
party seeking indemnification.
(c) The Indemnified Parties will promptly notify the Distributor or the
Adviser of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with the
issuance or sale of the Contracts or the operation of the account.
8.3.Indemnification By the the Fund and each Portfolio
(a) The Fund and each Portfolio, in each case solely to the extent relating
to such party's responsibilities hereunder, agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated
with the Company within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for purposes
of this Section 8.3) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written consent
of the Fund or a Portfolio, as applicable) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
Shares or the Contracts and:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus or SAI for the Fund or sales literature or other
promotional material of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
or necessary to make such statements not misleading in light of the
circumstances in which they were made; provided that this agreement to
indemnify will not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Fund or a
Portfolio by or on
17
behalf of the Company for use in the registration statement, prospectus
or SAI for the Fund or in sales literature of the Fund (or any amendment
or supplement thereto) or otherwise for use in connection with the sale
of the Contracts or Shares; or
(2) arise out of or as a result of statements or representations (other
than statements or representations contained in the Contracts, or
Contract registration statements, prospectuses, SAIs or sales literature
or other promotional materials for the Contracts not supplied by the
Distributor, the Adviser, the Fund or persons under their control) or
wrongful conduct of the Fund or a Portfolio or persons under the control
of the Fund or a Portfolio respectively, with respect to the sale of the
Shares; or
(3) arise out of any untrue statement or alleged untrue statement of a
material fact contained in Contract registration statements,
prospectuses, SAIs or sales literature or other promotional material of
the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be
stated or necessary to make such statement or statements not misleading
in light of the circumstances in which they were made, if such statement
or omission was made in reliance upon and in conformity with written
information furnished to the Company by the Fund or a Portfolio or
persons under the control of the Fund or a Portfolio; or
(4) arise as a result of any failure by the Fund or a Portfolio to
provide the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the Diversification Requirements and
procedures related thereto specified in Article VI of this Agreement);
except to the extent provided in Sections 8.3(b) and 8.4 hereof. This
indemnification will be in addition to any liability that the Fund or the
Portfolio otherwise may have.
(b) No party will be entitled to indemnification under Section 8.3(a) to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of
such party's duties under this Agreement, or by reason of such party's
reckless disregard of its obligations or duties under this Agreement by the
party seeking indemnification.
(c) The Indemnified Parties will promptly notify the Fund or a Portfolio of
the commencement of any litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with the issuance or sale
of the Contracts or the operation of the account.
8.4.Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.4) will not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("Indemnified Party" for the purpose of this Section 8.4) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim will have been served upon such
Indemnified Party (or after such party will have received notice of such
service on any designated agent), but failure to notify the Indemnifying Party
of any such claim will not relieve the Indemnifying Party from any liability,
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of the
18
indemnification provision of this Article VIII. In case any such action is
brought against the Indemnified Party, the Indemnifying Party will be entitled
to participate, at its own expense, in the defense thereof. The Indemnifying
Party also will be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from
the Indemnifying Party to the Indemnified Party of the Indemnifying Party's
election to assume the defense thereof, the Indemnified Party will bear the
fees and expenses of any additional counsel retained by it, and the
Indemnifying Party 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, unless: (a) the Indemnifying Party and the Indemnified Party
will have mutually agreed to the retention of such counsel; or (b) the named
parties to any such proceeding (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The Indemnifying Party will not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there is a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment. A
successor by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Virginia.
9.2. This Agreement will be subject to the provisions of the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding
Exemptive Order) and the terms hereof will be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1.This Agreement will terminate:
(a) at the option of any party, with or without cause, upon
one-hundred-eighty (180) days' advance written notice to the other parties;
or
(b) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to a Portfolio if Shares are not
reasonably available to meet the requirements of the Contracts as determined
in good faith by the Company; or
(c) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to a Portfolio in the event any of
the Shares are not registered, issued or sold in accordance with applicable
state and/or Federal law or such law precludes the use of such Shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(d) at the option of the Fund, upon receipt of the Fund's written notice by
the other parties, upon institution of formal proceedings against the
Company by the NASD, the SEC, the insurance commission of any state or any
other regulatory body regarding the Company's duties under this
19
Agreement or related to the sale of the Contracts, the administration of
the Contracts, the operation of the Account, or the purchase of Shares,
provided that the Fund determines in its sole judgment, exercised in
good faith, that any such proceeding would have a material adverse
effect on the Company's ability to perform its obligations under this
Agreement; or
(e) at the option of the Company, upon receipt of the Company's written
notice by the other parties, upon institution of formal proceedings
against the Fund, the Distributor, the Adviser or a Portfolio by the
NASD, the SEC, or any state securities or insurance department or any
other regulatory body, provided that the Company determines in its sole
judgment, exercised in good faith, that any such proceeding would have a
material adverse effect on the Fund's, the Distributor's, the Adviser's
or a Portfolio's ability to perform its obligations under this
Agreement; or
(f) as to any Portfolio, at the option of the Company, upon receipt of
the Company's written notice by the other parties, if the Portfolio
ceases to qualify as a "regulated investment company" under Subchapter M
of the Code, or under any successor or similar provision, or if the
Company reasonably and in good faith believes that a Portfolio may fail
to so qualify; or
(g) as to any Portfolio, at the option of the Company, upon receipt of
the Company's written notice by the other parties, if the Portfolio
fails to meet the Diversification Requirements specified in Article VI
hereof or if the Company reasonably and in good faith believes the
Portfolio may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon written notice to
the other parties, upon another party's material breach of any provision
of this Agreement, which material breach is not cured within thirty
(30) days of said notice; or
(i) at the option of the Company, if the Company determines in its sole
judgment exercised in good faith, that either the Fund, the Distributor,
the Adviser or a Portfolio has suffered a material adverse change in its
business, operations or financial condition since the date of this
Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Company; provided, however that no such termination
shall be effective under this subsection (i) until the Fund, the
Distributor, the Adviser or the Portfolio (as appropriate) has been
afforded a reasonable opportunity to respond to a statement by the
Company concerning the reason for notice of termination hereunder; or
(j) at the option of the Fund, the Distributor or the Adviser, upon
receipt of the Fund's, the Distributor's or the Adviser's written notice
by the Company, if the Fund, the Distributor or the Adviser,
respectively determines in its sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is
the subject of material adverse publicity which is likely to have a
material adverse impact upon the business and operations of the Fund,
the Distributor or the Adviser; provided, however that no such
termination shall be effective under this subsection (j) until the
Company has been afforded a reasonable opportunity to respond to a
statement by the Fund, the Distributor, the Adviser or the Portfolio (as
appropriate) concerning the reason for notice of termination hereunder;
or
(k) at the option of the Company or the Fund upon a determination by a
majority of the Board, or a majority of the disinterested Board members,
that a material irreconcilable conflict exists
20
between or among the interests of: (1) owners of Contracts issued by
different insurance companies, (2) owners of different types of Contracts,
or (3) the Participating Insurance Companies investing in the Portfolio as
set forth in Article VII of this Agreement; or
(l) at the option of the Fund in the event any of the Contracts are not
issued or sold in accordance with applicable federal and/or state law, it
being understood that such issuance or sale must qualify as a material
breach of such laws for the Fund to exercise its termination option under
this subsection. Termination will be effective immediately upon such
occurrence without notice.
10.2.Notice Requirement
Except as provided in 10.1 above, no termination of this Agreement will 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
will set forth the basis for the termination.
10.3.Effect of Termination
Notwithstanding any termination of this Agreement, the Fund will, at the
option of the Company, continue to make available additional Shares pursuant to
the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement that have Contract value
invested in Shares of a Portfolio (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in a Portfolio (as in
effect on such date), redeem investments in a Portfolio and/or invest in
Portfolio upon the making of additional purchase payments under the Existing
Contracts.
10.4.Surviving Provisions
Notwithstanding any termination of this Agreement, each party's obligations
under Article VIII to indemnify other parties will survive and not be affected
by any termination of this Agreement. In addition, each party's obligations
under Section 12.6 will survive and not be affected by any termination of this
Agreement. Finally, with respect to Existing Contracts, all provisions of this
Agreement also will survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
11.1. Any notice will be deemed duly given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other parties.
If to the Company:
Genworth Life and Annuity Insurance Company
0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxx 0
Xxxxxxxx, Xxxxxxxx 00000
Attn: Associate General Counsel - Securities
If to the Fund, the Distributor, the Adviser and/or the Portfolio:
c/o GE Investment Distributors, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
21
Attn: General Counsel
ARTICLE XII. Miscellaneous
12.1 The Fund, the Distributor and the Adviser acknowledge that the identities
of the customers of the Company or any of its affiliates (collectively the
"Company Protected Parties" for purposes of this Section 12.1), information
maintained regarding those customers, and all computer programs and procedures
or other information developed or used by the Company Protected Parties or any
of their employees or agents in connection with the Company's performance of
its duties under this Agreement are the valuable property of the Company
Protected Parties. The Fund, the Distributor and the Adviser agree that if they
come into possession of any list or compilation of the identities of or other
information about the Company Protected Parties' customers, or any other
information or property of the Company Protected Parties, other than such
information as is publicly available or as may be independently developed or
compiled by the Fund, the Distributor and the Adviser from information supplied
to them by the Company Protected Parties' customers who also maintain accounts
directly with the Fund or the Distributor, the Fund, the Distributor and the
Adviser will hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b)as required by law
or judicial process. The Company acknowledges that the identities of the
customers of the Fund, the Distributor or any of their affiliates (collectively
the "Distributor Protected Parties" for purposes of this Section 12.1),
information maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Distributor Protected
Parties or any of their employees or agents in connection with the Fund's, the
Distributor's or the Adviser's performance of their respective duties under
this Agreement are the valuable property of the Distributor Protected Parties.
The Company agrees that if it comes into possession of any list or compilation
of the identities of or other information about the Distributor Protected
Parties' customers, or any other information or property of the Distributor
Protected Parties, other than such information as is publicly available or as
may be independently developed or compiled by the Company from information
supplied to them by the Distributor Protected Parties' customers who also
maintain accounts directly with the Company, the Company will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with the
Fund's, the Distributor's or the Adviser's prior written consent; or (b) as
required by law or judicial process. Each party acknowledges that any breach of
the agreements in this Section 12.1 would result in immediate and irreparable
harm to the other parties for which there would be no adequate remedy at law
and agree that in the event of such a breach, the other parties will be
entitled to equitable relief by way of temporary and permanent injunctions, as
well as such other relief as any court of competent jurisdiction deems
appropriate.
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 will constitute one and the same
instrument.
12.4. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement will
not be affected thereby.
12.5. This Agreement will not be assigned by any party hereto without the prior
written consent of all the parties.
22
12.6. Each party to this Agreement will maintain all records required by law,
including records detailing the services it provides. Such records will be
preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and 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. Upon
request by the Fund and at the Fund's expense, the Company agrees to promptly
make copies or, if required, originals of all records pertaining to the
performance of services under this Agreement available to the Fund. The Fund
agrees that the Company will have the right to inspect, audit and copy all
records pertaining to the performance of services under this Agreement pursuant
to the requirements of any state insurance department. Each party also agrees
to promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This provision will
survive termination of this Agreement.
12.7. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts, the
Accounts or the Portfolios or other applicable terms of this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights.
12.9. Notwithstanding anything else in this Agreement to the contrary, absent a
negligent act of commission or omission, each party hereunder shall have no
liability to the other parties for any losses, damages, injuries, claims, cost
or expenses arising as a result of war, insurrection, terrorist activities,
strikes or labor difficulties or any other similar or dissimilar acts of God
beyond the reasonable control of such party.
12.10 The parties acknowledge that the consideration received by the Company in
exchange for the performance of its obligations hereunder is the right to
purchase and redeem Fund Shares as provided herein, and the Fund shall not pay
any remuneration to the Company hereunder.
Signatures on Following Page
23
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
GENWORTH LIFE AND ANNUITY
INSURANCE COMPANY
By:
------------------------------
Name:
Title:
GE INVESTMENTS FUNDS, INC.
By:
------------------------------
Name:
Title:
GE INVESTMENT DISTRIBUTORS, INC.
By:
------------------------------
Name:
Title:
GE ASSET MANAGEMENT INCORPORATED
By:
------------------------------
Name:
Title:
24
Schedule 1
Registered Accounts
Date of Resolution of Company's Board
Name of Account: that Established the Account:
---------------- -------------------------------------
Genworth Life & Annuity VL Separate Account 1 August 21, 1986
Genworth Life & Annuity VA Separate Account 1 August 19, 1987
Schedule 2
Unregistered Accounts
Date of Resolution of Company's Board
Name of Account: that Established the Account:
---------------- -------------------------------------
Genworth Life & Annuity Group VA Separate Account 1 May 20, 1996
Schedule 3
Name(s) of Portfolio
GE Investments Funds, Inc.:
Income Fund
International Equity Fund
Mid-Cap Equity Fund
Money Market Fund
Premier Growth Equity Fund
Real Estate Securities Fund
S&P 500(R) Index Fund
Small-Cap Equity Fund
U.S. Equity Fund
Value Equity Fund
Schedule 4
Registered Contracts
Commonwealth II 333-111440
Commonwealth 3 033-09651
Commonwealth Variable Universal Life 333-32071
RetireReady(SM) Protection Plus 333-40820
Commonwealth 4 333-41031
RetireReady(SM) Accumulator 333-72572
Estate Optimizer 333-82311
Commonwealth VL Flex 333-111208
RetireReady(SM) Legacy 333-111213
Commonwealth Variable Annuity 033-17428
Commonwealth Variable Annuity - Xxxxxxxx 033-76336
Commonwealth Variable Annuity Plus 033-76334
Commonwealth Extra 333-62695
RetireReady(SM) Extra 333-62695
Commonwealth Freedom 333-63531
RetireReady(SM) Freedom 333-63531
Savvy Investor 333-96513
RetireReady(SM) Choice 333-31172
Foundation 333-31172
RetireReady(SM) Selections 333-47732
Schedule 5
Exempt Contracts
Commonwealth 401(k)
Schedule 6
Contracts with Accredited Investors
None
Schedule 7
Accounts Excluded from the Definition of Investment Company
Date of Resolution of Company's Board
Name of Account: that Established the Account:
---------------- -------------------------------------
None
Exhibit A
Company's Disruptive Trading Policy
"The Separate Account does not accommodate frequent transfers of Contract Value
among Subaccounts. When owners or someone on their behalf submit requests to
transfer all or a portion of their assets between Subaccounts, the requests
result in the purchase and redemption of shares of the Portfolios in which the
Subaccounts invest. Frequent Subaccount transfers, therefore, cause
corresponding frequent purchases and redemptions of shares of the Portfolios.
Frequent purchases and redemptions of shares of the Portfolios can dilute the
value of a Portfolio's shares, disrupt the management of the Portfolio's
investment portfolio, and increase brokerage and administrative costs.
Accordingly, when an owner or someone on their behalf engages in frequent
Subaccount transfers, other owners and persons with rights under the contracts
(such as the beneficiaries) may be harmed.
The Separate Account discourages frequent transfers, purchases and redemptions.
To discourage frequent Subaccount transfers, we adopted the policy described in
the "Transfers Among the Subaccount" section. This policy requires owners who
request more than 12 Subaccount transfers in a calendar year to submit such
requests in writing by U.S. Mail or by overnight delivery service (the "U.S.
Mail requirement"). The U.S. Mail requirement creates a delay of at least one
day between the time transfer decisions are made and the time such transfers
are processed. This delay is intended to discourage frequent Subaccount
transfers by limiting the effectiveness of abusive "market timing" strategies
(in particular, "time-zone" arbitrage) that rely on "same-day" processing of
transfer requests.
In addition, we will not honor transfer requests if any Subaccount that would
be affected by the transfer is unable to purchase or redeem shares of the
Portfolio in which the Subaccount invests or if the transfer would adversely
affect Accumulation Unit Values. Whether these restrictions apply is determined
by the affected Portfolio(s), and although we apply the restrictions uniformly
when we receive information from the Portfolio(s), we cannot guarantee that the
Portfolio(s) will apply their policies and procedures in a uniform basis.
There can be no assurance that the U.S. Mail requirement will be effective in
limiting frequent Subaccount transfers or that we can prevent all frequent
Subaccount transfer activity that may adversely affect owners, other persons
with material rights under the Policies, or Portfolio shareholders generally.
For instance, imposing the U.S. Mail requirement after 12 Subaccount transfers
may not be restrictive enough to deter an owner seeking to engage in abusing
market timing strategies.
We may revise our frequent Subaccount transfer policy and related procedures,
at our sole discretion, at any time and without prior notice, as we deem
necessary or appropriate to better detect and deter frequent transfer activity
that may adversely affect owners, other persons with material rights under the
contracts, or Portfolio shareholders generally, to comply with state or federal
regulatory requirements, or to impose additional or alternative restrictions on
owners engaging in frequent Subaccount transfers. For example, we may invoke
our right to refuse transfers if the transfer involves the same Subaccount
within a 30 day period and/or we may change our procedures to monitor for a
different number of transfers within a specified time period or to impose a
minimum time period between each transfer.
There are inherent risks that changing our policies and procedures in the
future may not be effective in limiting frequent Subaccount transfers. We will
not implement any policy and procedure at the contract level that discriminates
among owners, however, we may be compelled to adopt policies and procedures
adopted by the Portfolios on behalf of the Portfolios and we will do so unless
we cannot service such policies and procedures or we believe such policies and
procedures contradict state or federal regulations or such policies and
procedures contradict with the terms of your Policy.
As stated in the previous paragraph, each of the Portfolios in which the
Subaccounts invest may have its own policies and procedures with respect to
frequent purchases and redemption of Portfolio shares. The prospectuses for the
Portfolios describe any such policies and procedures. The frequent trading
policies and procedures of a Portfolio may be different, and more or less
restrictive, than the frequent trading policies and procedures of other
Portfolios and the policies and procedures we have adopted to discourage
frequent Subaccount transfers. Owners should be aware that we may not, have the
contractual obligation nor the operational capability to monitor owners'
Subaccount transfer requests and apply the frequent trading policies and
procedures of the respective Portfolios that would be affected by the
transfers. Accordingly, owners and other persons who have material rights under
the contracts should assume that the sole protection they may have against
potential harm from frequent Subaccount transfers is the protection, if any,
provided by the policies and procedures we have adopted to discourage frequent
Subaccount transfers.
Owners and other persons with material rights under the contracts also should
be aware that the purchase and redemption orders received by the Portfolios
generally are "omnibus" orders from intermediaries such as retirement plans or
separate accounts funding variable insurance contracts. These omnibus orders
reflect the aggregation and netting of multiple orders from individual
retirement plan participants and/or individual owners of variable insurance
contracts. The omnibus nature of these orders may limit the Portfolios' ability
to apply their respective frequent trading policies and procedures. We cannot
guarantee that the Portfolios will not be harmed by transfer activity relating
to the retirement plans and/or other insurance companies that may invest in the
Portfolios. In addition, if a Portfolio believes an omnibus order we submit may
reflect one or more Subaccount transfer requests from owners engaged in
frequent transfer activity, the Portfolio may reject a portion of or the entire
omnibus order. If a Portfolio rejects part of an omnibus order it believes is
attributable to transfers that exceed its market timing policies and
procedures, it will return the amount to us and we will credit the amount to
the owner as of the Valuation Day of our receipt of the amount. You may realize
a loss if the unit value on the Valuation Day we credit the amount back to your
account has increased since the original date of your transfer.
We apply our policies and procedures without exception, waiver, or special
arrangement."
PARTICIPATION AGREEMENT
By and Among
GENWORTH LIFE AND ANNUITY INSURANCE COMPANY
And
GE INVESTMENTS FUNDS, INC.
And
GE INVESTMENT DISTRIBUTORS, INC.
And
GE ASSET MANAGEMENT INCORPORATED
THIS PARTICIPATION AGREEMENT (this "Agreement"), made and entered into this
1/st/ day of May, 2006, by and among GENWORTH LIFE AND ANNUITY INSURANCE
COMPANY, organized under the laws of the Commonwealth of Virginia (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company named in Schedule 1 (Registered Accounts) and Schedule 2
(Unregistered Accounts) to this Agreement as may be amended from time to time
(each account individually referred to as an "Account" and collectively
referred to as the "Accounts"), GE INVESTMENTS FUNDS, INC., an open-end
management investment company organized under the laws of the Commonwealth of
Virginia (the "Fund") on its own behalf and on behalf of the Portfolios named
in Schedule 3 (Portfolios) to this Agreement (each portfolio individually
referred to as a "Portfolio" and collectively referred to as the "Portfolios");
GE INVESTMENT DISTRIBUTORS, INC., a corporation organized under the laws of the
State of Delaware (the "Distributor"); and GE ASSET MANAGEMENT INCORPORATED, a
corporation organized under the laws of the State of Delaware (the "Adviser").
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment
vehicle for separate accounts established for variable life insurance contracts
and variable annuity contracts to be offered by insurance companies that have
entered into participation agreements similar to this Agreement (the
"Participating Insurance Companies") and for qualified pension and retirement
plans; and
WHEREAS, the Fund has received an order from the Securities & Exchange
Commission (the "SEC") granting Participating Insurance Companies and variable
life insurance separate accounts relief from the provisions of Sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit Fund shares of a Portfolio to be sold to and held by
variable annuity separate accounts and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance Companies
and qualified pension and retirement plans outside of the separate account
context (the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and its shares of stock representing an interest in the
Portfolio shown on Schedule 3 (the "Shares") are registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered each Account listed on Schedule 1 as a
unit investment trust under the 1940 Act; and
WHEREAS, each Account listed on Schedule 2 is excluded from the definition
of an investment company as provided for by Section 3(c)(11) of the 1940 Act;
and
1
WHEREAS, the Company issues certain other variable life insurance and
variable annuity policies (the "Contracts") set forth in Schedule 4 (Registered
Contracts), interests under which have been or will be registered under the
1933 Act; and
WHEREAS, the Company issues certain other variable annuity contracts (also
hereinafter included within the term "Contracts") to trustees of both qualified
pension and profit-sharing plans and certain government employee benefit plans
as identified in Section 3(a)(2) of the 1933 Act, set forth in Schedule 5
(Exempt Contracts) hereto; and
WHEREAS, the Company may issue certain variable annuity insurance contracts
(also hereinafter included within the term "Contracts") set forth in Schedule 6
(Contracts with Accredited Investors), for sale to "accredited investors" as
that term is defined in Regulation D promulgated under the 1933 Act
(hereinafter "Regulation D"), or other investors permitted by Regulation D; and
WHEREAS, each Account listed on Schedule 7 is excluded from the definition
of an investment company as provided by Section 3(c)(1) or Section 3(c)(7) of
the 1940 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the Commonwealth of Virginia, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Shares of the Portfolios named in
Schedule 3, as such schedule may be amended from time to time on behalf of the
Accounts to fund the Contracts, and the Fund is authorized to sell such Shares
to the Accounts at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Portfolios, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Shares
1.1. Subject to Article X hereof, the Fund agrees to make available to the
Company for purchase on behalf of the Accounts, Shares of those Portfolios
listed on Schedule 3 to this Agreement, such purchases to be effected at net
asset value in accordance with Section 1.3 hereof. Notwithstanding the
foregoing:
(a) Portfolios (other than those listed on Schedule 3) in existence now or
that may be established in the future will be made available to the Company
only as the Fund may so provide,
(b) Class 1 Shares of a Portfolio are only available to Existing Contracts
as defined in Section 10.3 hereof,
(c) The Fund will make Class 2 Shares, Class 3 Shares, and Class 4 Shares
available to the Company on terms and conditions negotiated from time to
time between the Distributor and the Company or the principal underwriter of
applicable classes of Contracts, and
(d) The board of directors of the Fund (the "Board") may suspend or
terminate the offering of the Shares of any Portfolio or class thereof, if
such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Board acting in good faith
and in
2
light of its fiduciary duties under federal and any applicable state
securities laws, suspension or termination is necessary and in the best
interests of the shareholders of such Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or fractional
Shares held by the Company on behalf of an Account, such redemptions to be
effected at net asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, the Fund may delay redemption of Shares to the
extent permitted by the 1940 Act, and any rules, regulations or orders
thereunder.
1.3.Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as its agent for the limited
purpose of receiving purchase and redemption requests on behalf of the
Accounts listed on Schedules 1, 2 and 7, where permitted by applicable law,
for Shares made available hereunder, based on allocations of amounts to such
Accounts or subaccounts thereof under the Contracts listed in Schedules 4, 5
and 6 and other transactions relating to such Contracts or such Accounts;
provided, however, that if applicable law is amended in the future to
prevent the foregoing, the Company shall only act as the Fund's agent for
the limited purpose of receiving purchase and redemption requests on behalf
of the Accounts listed on Schedule 1 (but not on behalf of the Accounts
listed on Schdules 2 and 7 or with respect to any Shares that may be held in
the general account of the Company). Receipt of any such request (or
relevant transactional information therefor), by the Company as such limited
agent of the Fund, on any day the New York Stock Exchange ("NYSE") is open
for trading and on which the Fund calculates its net asset value pursuant to
the rules of the SEC (a "Business Day") prior to the time that the Fund
ordinarily calculates its net asset value as described from time to time in
the Fund's prospectus (which as of the date of execution of this Agreement
is the close of regular trading on the NYSE) shall constitute receipt by the
Fund on that same Business Day, provided that:
(i) if the Company transmits such request to the Fund via the National
Securities Clearing Corporation's (the "NSCC") Defined Contribution
Clearance & Settlement ("DCC&S") platform, such request must be received
by the Company by the close of regular trading on the NYSE (or such
reasonably earlier time designated by the Company in response to a
change by the NSCC in the deadline for receipt of requests via its DCC&S
platform) and must be transmitted by the Company to the Fund by the
deadline designated by the NSCC pursuant to Rule 22c-1 of the 1940 Act
(which as of the date of execution of this Agreement is 6:00 a.m.
Eastern Time on the next following Business Day); or
(ii) if the Company transmits such request to the Fund through means
other than the DCC&S platform (e.g., by fax), such request must be
received by the Fund by 9:00 a.m. Eastern Time on the next following
Business Day.
With regard to purchase and redemptions of Shares under this Section 1.3(a),
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.
(b) The Company shall pay for Shares on the same day that it notifies the
Fund of a purchase request for such Shares. Payment for Shares shall be made
in federal funds transmitted to the Fund by wire to be received by the Fund
by 1:00 p.m. Eastern Time on the day the Fund is notified of the purchase
request for Shares (unless the Fund determines and so advises the Company
that
3
sufficient proceeds are available from redemption of Shares of other
Portfolios effected pursuant to redemption requests tendered by the Company
on behalf of an Account). Upon receipt of federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
(c) Payment for Shares redeemed by the Company on behalf of an Account shall
be made in federal funds transmitted by wire to the Company or any other
designated person on the next Business Day after the Fund is properly
notified of the redemption order of such Shares (unless redemption proceeds
are to be applied to the purchase of Shares of other Portfolios in
accordance with Section 1.3(b) of this Agreement), except that the Fund
reserves the right to delay payment of redemption proceeds to the extent
permitted under Section 22(e) of the 1940 Act and any rules thereunder, and
to make payment in any manner permitted under the procedures and policies of
the Fund as described in the then current registration statement. The Fund
shall not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds by the Company; the Company alone shall be
responsible for such action.
(d) Any purchase or redemption request for Shares held or to be held in the
Company's general account shall be effected at the closing net asset value
per Share next determined after the Fund's receipt of such request, provided
that, in the case of a purchase request, payment for Shares so requested is
received by the Fund in federal funds prior to close of business for
determination of such value, as defined from time to time in the Fund
Prospectus.
1.4. The Fund shall use its best efforts to make the closing net asset value
per Share for each Portfolio available to the Company by 6:30 p.m. Eastern Time
each Business Day, and in any event, as soon as reasonably practicable after
the closing net asset value per Share for such Portfolio is calculated, and
shall calculate such closing net asset value in accordance with the Fund's
Prospectus. In the event the Fund is unable to make the 6:30 p.m. deadline
stated herein, it shall provide additional time for the Company to place orders
for the purchase and redemption of Shares. Such additional time shall be equal
to the additional time, which the Fund takes to make the closing net asset
value available to the Company. Neither the Fund, any Portfolio, the
Distributor, the Adviser, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company or any
other Participating Insurance Company to the Fund, the Distributor or the
Adviser. Neither the Company nor any of its affiliates shall be liable for any
information provided to the Fund, the Distributor or the Adviser pursuant to
this Agreement which information is based on incorrect information supplied by
the Fund, the Distributor, or the Adviser to the Company. Any material error in
the calculation or reporting of the closing net asset value per Share shall be
reported immediately upon discovery to the Company. In such event the Company
shall be entitled to an adjustment to the number of Shares purchased or
redeemed to reflect the correct closing net asset value per Share and the Fund
shall bear the cost of correcting such errors; provided, however, that if such
errors is directly caused by the Company's breach of this Agreement or its
willful misconduct or negligence in the performance of, or failure to perform,
its obligations hereunder, the Company shall be liable for such cost of
correcting such errors. Any error of a lesser amount shall be corrected in the
next Business Day's net asset value per Share.
1.5. The Company, on its behalf and on behalf of each Account, hereby elects to
receive all dividends and distributions as are payable on any Shares in the
form of additional Shares of that Portfolio. The Company reserves the right, on
its behalf and on behalf of the Accounts, to revoke this election and to
receive all such dividends and capital gain distributions in cash. The Fund
shall notify the Company promptly of the number of Shares so issued as payment
of such dividends and distributions.
4
1.6. Issuance and transfer of Shares shall be by book entry only. Stock
certificates will not be issued to the Company or any Account. Purchase and
redemption orders for Shares shall be recorded in an appropriate ledger for
each Account or the appropriate subaccount of an Account.
1.7.(a) The parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; except as provided in this Section 1.7,
the Shares may be sold to other insurance companies (subject to Section 1.8
hereof) and amounts allocated to the Contracts may be invested in other
investment companies, subject to the terms of such Contracts. A funding
vehicle other than those listed on Schedule 3 to this Agreement may be made
available for the investment of amounts allocated to the Contracts.
(b) The Company shall not, without prior notice to the Distributor (unless
otherwise required by applicable law), take any action to operate any
Account that is a unit investment trust as a management investment company
under the 1940 Act.
(c) The Company shall not, without prior notice to the Distributor (unless
otherwise required by applicable law), induce Contract owners to vote to
change or modify the Fund or change the Fund's Distributor or the Adviser.
(d) The Company shall not, without prior notice to the Fund, induce Contract
owners to vote on any matter submitted for consideration by the shareholders
of the Fund in a manner other than as recommended by the Board.
1.8. The Fund shall sell Shares only to Participating Insurance Companies and
their separate accounts and to trustees of qualified pension and profit-sharing
plans, trustees of certain government employee benefit plans, or other persons
("Qualified Persons") that communicate to the Fund that they qualify to
purchase Shares under Section 817(h) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder without impairing the
ability of any Account to treat the portfolio investments of the Fund as
constituting investments of the Account for the purpose of satisfying the
diversification requirements of Section 817(h) of the Code (the
"Diversification Requirements"). To the extent required by the Mixed and Shared
Funding Exemptive Order, the Fund shall not sell Shares to any insurance
company or separate account unless it enters into an agreement having
provisions that require of the parties what is, in substance, required by
Articles VI and VII of this Agreement to govern such sales. The Company hereby
represents and warrants that it and each Account are Qualified Persons.
1.9. The Company shall comply with all applicable laws and regulations designed
to prevent money "laundering," and if required by such laws or regulations, to
share with the Fund information about individuals, entities, organizations and
countries suspected of possible terrorist or money "laundering" activities in
accordance with Section 314(b) of the USA Patriot Act. In particular, the
Company agrees that: (a) as part of processing an application for a Contract it
will verify the identity of applicants and, if an applicant is not a natural
person, will verify the identity of prospective principal and beneficial owners
submitting an application for a Contract, (b) as part of its ongoing compliance
with the USA Patriot Act it will from time to time re-verify the identity of
Contract owners, including the identity of principal and beneficial owners of
Contracts held by non-natural persons, (c) as part of processing an application
for a Contract it will verify that no applicant, including prospective
principal or beneficial Contract owners is a "specially designated national" or
a person from an embargoed or "blocked" country as indicated by the Office of
Foreign Asset Control ("OFAC") list of such persons, (d) as part of its ongoing
compliance with
5
the USA Patriot Act it will from time to time re-verify that no Contract owner,
including a principal or beneficial Contract owner, is a "specially designated
national" or a person from an embargoed or "blocked" country as indicated by
the OFAC list of such persons, (e) it will ensure that money tendered to the
Fund as payment for Shares did not originate with a bank from a country or
territory named on the list of high-risk or non-cooperating countries or
jurisdictions published by the Financial Action Task Force, and (f) if any of
(a) through (e) become untrue, then the Fund or its agent(s) in compliance with
the USA Patriot Act or Bank Secrecy Act, may seek authority to block one or
more Contract owner accounts with the Company or one or more of the Company's
accounts with the Fund.
1.10.(a) The Company shall comply with the terms and conditions of the Fund's
prospectus and statement of additional information and all applicable
laws, rules and regulations governing the Company's performance under this
Agreement, including without limitation compliance with the 1940 Act and
Rule 22c-1 thereunder. The Company agrees to comply with policies and
procedures adopted by the Funds, as may be modified by the Funds from time
to time, to prevent or minimize "market timing" and other types of
frequent or disruptive trading in Shares that may harm one or more Funds
(the "Fund's Disruptive Trading Policy").
(b) The Company has adopted policies and procedures reasonably designed
to protect the Fund from disruption or harm caused by "market timing" and
other types of frequent trading in Shares (the "Company's Disruptive
Trading Policy"), a copy of which is attached hereto as Exhibit A. The
Company shall take all reasonable measures to consistently and effectively
enforce the Company's Disruptive Trading Policy for the duration of this
Agreement. The Company shall also provide the Distributor written notice
of any proposed amendments to the Company's Disruptive Trading Policy and
the complete text of such proposed amendments concurrently with the filing
of such amendments with the SEC, provided, however, that if such filing
shall become effective on the date upon which it is filed with the SEC
(i.e., a Rule 485(b) filing), the Company shall provide the Distributor
such amendments for review no later than 10 days prior to such filing.
Should the Distributor determine, in its sole discretion, that the
Company's Disruptive Trading Policy would be unreasonable or unacceptable
as a result of the proposed amendments, the Distributor may terminate this
Agreement in accordance with Article X hereof.
(c) The Company shall provide, promptly upon request by the Distributor,
certain Contract owner or Contract owners information ("Information"),
including, but not limited to:
(i) a unique identifier (and commencing no later than the effective
date of Rule 22c-2 under the 1940 Act, the Taxpayer Identification Number)
of each Contract owner or Contract owners that purchased, redeemed,
transferred, or exchanged Account units supported by the Shares,
(ii) the amount and dates of such Contract owner or Contract owners
purchases, redemptions, transfers and exchanges,
(iii) the name or other identifier of any investment professional(s)
associated with each Contract owner or Contract owners or account (if
known), and
(iv) 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.
6
For purposes of this Section 1.10(c), the term Contract owner shall
include a participant under group Contracts issued to an employee benefit
plan or a trustee of an employee benefit plan.
The Company also agrees to use its best efforts to determine, promptly
upon request by Distributor, whether any Contract owner or Contract owners
hold Shares through the Company is itself a financial intermediary as
defined in Rule 22c-2(c)(1) and, upon request by Distributor, provide (or
arrange to have provided) Information with respect to beneficial owners of
interests held through the Contract who hold Shares through that other
financial intermediary. If the Company cannot provide the Information with
respect to that other financial intermediary, the Company agrees upon
request from Distributor and as soon as reasonably practicable, to
restrict or prohibit that other financial intermediary from further
purchases or exchanges.
Information requests shall set forth a specific period for which the
Information is sought. The Company agrees to transmit such Information to
the Distributor promptly, but in no event later than five (5) business
days after receipt of a request. The Distributor agrees not to use the
Information for marketing or any other similar purpose without the
Company's prior written consent.
(d) The Company understands and agrees that the Distributor may review
omnibus transactions for potentially harmful or disruptive trading
activity and notify the Company in writing if it believes that any such
activity may have occurred. Upon such written notification from the
Distributor, the Company shall investigate such activity and work with the
Distributor to determine if disruptive trading has occurred under the
Fund's Disruptive Trading Policy or the Company's Disruptive Trading
Policy, as applicable. If it is determined that disruptive trading has
occurred, the Company shall restrict any offending Contract owner or
Contract owners and otherwise cooperate with the Distributor to prevent
future violations of the applicable policy.
(e) The Company understands and agrees that, notwithstanding anything in
this Agreement to the contrary, the Distributor reserves the right to
(i) refuse any purchase order at any time for any reason without prior
notice to the Company, and (ii) delay settlement of any redemption order
if the Distributor determines, in its sole discretion, that such delay is
necessary to protect the Fund from potential disruption or harm. In no way
will any delay in settlement be beyond that allowed under Section 22(e) of
the 1940 Act.
(f) In compliance with this Section 1.10, the Company shall not undertake
any activity that will cause it to violate any federal or state law, rule
or regulation concerning the privacy of owners of the Contracts. This
includes, but is not limited to, the provision of names or other
identifying information.
1.11. The Company understands and agrees that: (a) the Distributor offers
shares of other mutual funds or other classes of mutual funds with the same
investment objective, strategy and portfolio management team as the Portfolios,
(b) the mutual fund and share class most appropriate for each Account depends,
among other things, on the eligibility for investment and servicing
requirements of each such Account, and (c) to the extent the appropriate
eligibility requirements are satisfied, the parties hereto shall cooperate to
effect a transfer of Account assets to the mutual fund best suited for such
assets.
7
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that:
(a) the Contracts listed on Schedule 4 are or will be registered under the
1933 Act and that the Contracts listed on Schedules 5 and 6 are exempt
from registration under the 1933 Act;
(b) the Accounts listed on Schedules 2 and 7 are and will remain excluded
from the definition of an investment company under the 1940 Act, and that
it will immediately notify the Fund and the Distributor upon having a
reasonable basis for believing that such Accounts have ceased to be so
excluded or that they might become investment companies in the future;
(c) each Account listed on Schedule 1 is and will remain registered as
unit investment trust in accordance with the provisions of the 1940 Act
for so long as required by the 1940 Act;
(d) the Contracts are and will be issued and sold in compliance in all
material respects with all applicable federal and state laws;
(e) each Account meets the definition of a "separate account" under the
1940 Act;
(f) it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established each
Account as a separate account under applicable law and that it has legally
and validly established each Account, prior to any issuance or sale of any
Contract funded by that Account, as a segregated asset account under the
Insurance Laws of the Commonwealth of Virginia;
(g) it will amend the registration statement under the 1933 Act for the
Contracts listed on Schedule 4 and the registration statement under the
1940 Act for the Accounts listed on Schedule 1 from time to time as
required in order to effect the continuous offering of the Contracts or as
may otherwise be required by applicable law;
(h) it will register and qualify the Contracts for sale in accordance with
the securities laws of the various states only if and to the extent deemed
necessary by the Company;
(i) each Account is a segregated asset account and that interests in each
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 requirement and will notify the Fund
immediately upon having a reasonable basis for believing such requirements
have ceased to be met or that they might not be met in the future;
(j) the Contracts are currently and at the time of issuance will be
treated as life insurance or annuity contracts under applicable provisions
of the Code, and that it will make every effort to maintain such
treatment, and that it will notify 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;
(k) it will not purchase Shares with assets derived from tax-qualified
retirement plans except, indirectly, through Contracts purchased in
connection with such plans; and
8
(l) it has or will adopt and implement policies and procedures reasonably
designed to ensure that each purchase or redemption order for Shares that
it submits pursuant to Section 1.3(a) herein is the net result of requests
from Contract owners for Contract transactions received by it or its
agents each Business Day before the time(s) that the Fund calculates its
net asset value; which procedures shall include the establishment and
maintenance of records sufficient to demonstrate such compliance.
2.2. The Fund represents and warrants that:
(a) it will not knowingly sell Shares to any purchaser whose purchase of
such Shares would result in a violation of the conditions imposed by the
Mixed and Shared Fund Exemptive Order;
(b) Shares of each Portfolio sold pursuant to this Agreement and listed on
Schedule 3 will be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and will
remain registered under the 1940 Act for as long as such Shares are
outstanding. The Fund will amend the registration statement for its Shares
of the Portfolios under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of Shares. The Fund
will 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;
(c) each Portfolio listed on Schedule 3 is currently qualified as a
"regulated investment company" under Subchapter M of the Code, and that it
will make every effort to maintain such qualification (under Subchapter M
or any successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that a Portfolio
has ceased to so qualify or that it might not so qualify in the future;
(d) in performing the services described in this Agreement, the Fund will
comply in all material respects with all applicable federal securities
laws, rules and regulations. The Fund further represents and warrants that
its investment objectives, policies and restrictions comply with all
applicable state investment laws, rules and regulations. The Fund makes no
representation as to whether any aspect of its operations (including, but
not limited to, fees and expenses and investment policies, objectives and
restrictions) complies with the insurance laws and regulations of any
state. The Fund agrees that upon request it will use its best efforts to
furnish the information required by state insurance laws so that the
Company can obtain the authority needed to issue the Contracts in the
various states;
(e) except in connection with Class 2 Shares, Class 3 Shares, and Class 4
Shares, it currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although
it reserves the right to make such payments in the future;
(f) it is lawfully organized and validly existing under the laws of the
Commonwealth of Virginia and that it does and will comply in all material
respects with applicable provisions of the 1940 Act; and
(g) all of its directors, trustees, officers, employees, investment
advisers, and other individuals/entities having access to the funds and/or
securities of the Portfolios are and continue to be at all times covered
by a blanket fidelity bond or similar coverage for the benefit of the
Portfolios in an amount not less than the minimal coverage as required
currently by Rule 17g-1 of the
9
1940 Act or related provisions as may be promulgated from time to time.
The aforesaid bond includes coverage for larceny and embezzlement and is
issued by a reputable bonding company.
2.3. The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and shall perform its obligations for the Portfolios in
compliance with applicable securities laws.
2.4. The Distributor represents and warrants that it is a member in good
standing of the National Association of Securities Dealers, Inc. and is
registered, and shall remain registered, as a broker-dealer with the SEC. The
Distributor further represents that it will sell and distribute Shares in
accordance in all material respects with all applicable federal and state
securities laws, including without limitation the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 0000 Xxx.
2.5. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. Except as otherwise stated herein, the Fund shall bear the costs of
preparing, filing with the SEC, and setting for printing the Fund's prospectus,
Statement of Additional Information ("SAI"), including any amendments or
supplements thereto, periodic reports to shareholders, Fund proxy material and
other shareholder communications (collectively, the "Fund Materials"), and the
Fund will provide to the Company a camera-ready or other formatted copy of all
Fund Materials.
It is understood and agreed that the Company is not responsible for the content
of the Fund Materials, except to the extent that statements in the Fund
Materials reflect information given to the Fund by the Company. It is also
understood and agreed that, except with respect to information provided to the
Company by the Fund, the Distributor or the Adviser, the Portfolios, the Fund,
the Distributor and the Adviser shall not be responsible for the content of the
prospectus, SAI or disclosure statement for the Contracts or non-affiliated
funds.
3.2 The Company shall print in quantity and deliver to owners of Existing
Contracts, the Fund Materials. The Company shall bear the cost of printing the
Fund Materials for owners of Existing Contracts investing in Class 1 Shares and
the cost of delivering Fund Materials to owners of Existing Contracts investing
in Class 1 Shares. [Note: In connection with Class 1 Shares, the Company
anticipates that some or all of its costs (and/or those of its affiliates) in
printing and delivering Fund Materials, as identified in this section 3.2, will
be reimbursed by revenues from the investor service plan adopted for Class 1
Shares and paid by the Fund to the Company pursuant to an investor services
agreement.] The Fund shall bear the cost of printing the Fund Materials for
owners of Existing Contracts investing in Class 2 Shares, Class 3 Shares, and
Class 4 Shares and the cost of delivering Fund Materials to owners of Existing
Contracts investing in Class 2 Shares Class 3 Shares, and Class 4 Shares.
3.3 The Company shall print in quantity and deliver to prospective owners of
Contracts (and prospective participants in group Contracts), the Fund Materials
and, if requested, the SAI for the Fund. The Company shall bear the cost of
delivering the Fund Materials to prospective owners of Contracts (and
prospective participants in group Contracts). [Note: In connection with Class 2
Shares, Class 3 Shares and Class 4 Shares, the Company anticipates that some or
all of its costs (and/or those of its affiliates)
10
in printing and delivering Fund Materials, as identified in this section 3.3,
will be reimbursed by revenues from distribution plans adopted for such Classes
of Shares and paid by the Distributor to the principal underwriter of the
Contracts.]
3.4. The Company, at its expense, will distribute proxy material, reports and
other communications to existing Contract owners and tabulate the votes. If and
to the extent required by law, the Company will:
(a) solicit voting instructions from Contract owners;
(b) vote the Shares of each Portfolio held in the Accounts in accordance
with instructions received from Contract owners; and
(c) vote Shares of each Portfolio held in the Accounts for which no timely
instructions have been received, as well as Shares it owns, in the same
proportion as Shares of each such Portfolio for which instructions have
been received from the Contract owners; in each case, for so long as and
to the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for owners of Contracts listed on Schedule
4. Except as set forth above, the Company reserves the right to vote
Shares held in any account in its own right, to the extent permitted by
law. The Company will be responsible for assuring that each Account
calculates voting privileges in a manner consistent with all legal
requirements, including the Mixed and Shared Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) of the 1940 Act with
respect to periodic elections of trustees and with whatever rules the SEC may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Distributor will provide the Company on a timely basis with investment
performance information for the Portfolios, including total return for the
preceding calendar month and calendar quarter, the calendar year to date, and
the prior one-year, five-year, and ten year (or life of the Portfolio) periods.
The Company may, based on the SEC-mandated information supplied by the
Distributor, prepare communications for Contract owners ("Contract Owner
Materials"). The Company will provide the Distributor with copies of all
Contract Owner Materials concurrently with their first use for the
Distributor's internal recordkeeping purposes. It is understood that neither
the Distributor, the Adviser, the Fund nor the Portfolios will be responsible
for errors or omissions in, or the content of, Contract Owner Materials except
to the extent that the error or omission resulted from information provided by
or on behalf of the Distributor, the Adviser, the Fund or the Portfolio. Any
printed information that is furnished to the Company pursuant to this Agreement
other than the Portfolio's prospectus or SAI (or information supplemental
thereto), periodic reports and proxy solicitation materials is the
Distributor's sole responsibility and not the responsibility of the Portfolio
or the Fund. The Company agrees that the Portfolio, the shareholders of the
Portfolio and the officers and members of the Board will have no liability or
responsibility to the Company in these respects.
4.2. The Company will not give any information or make any representations or
statements on behalf of the Fund or concerning the Portfolios in connection
with the sale of the Contracts other than the information or representations
contained in the registration statement, prospectus or SAI for Shares, as such
registration statement, prospectus and SAI may be amended or supplemented from
time to time, or in
11
reports or proxy statements for the Portfolio, or in published reports for the
Portfolio which are in the public domain or approved by the Fund, the
Distributor or the Adviser for distribution, or in sales literature or other
material provided by the Fund, the Distributor or the Adviser, except with
permission of the Fund, the Distributor or the Adviser. The Fund, the
Distributor and/or the Adviser, as applicable, agrees to respond to any request
for approval on a prompt and timely basis. Nothing in this Section 4.2 will be
construed as preventing the Company or its employees or agents from giving
advice on investment in the Portfolios.
4.3. The Company will furnish, or will cause to be furnished, to the Fund or
the Distributor or its designee, each piece of sales literature or other
promotional material in which the Fund, the Portfolios or the Distributor is
named, at least fifteen (15) business days prior to its use. No such material
will be used if the Fund or the Distributor reasonably objects to such use
within fifteen (15) business days after receipt of such material. Likewise, the
Fund or the Distributor will furnish, or will cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company is named, at least fifteen (15) business days
prior to its use. No such material will be used if the Company reasonably
objects to such use within fifteen (15) business days after receipt of such
material.
4.4. The Fund, the Distributor and the Adviser will not give any information or
make any representations or statements on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or SAI for
the Contracts, as such registration statement, prospectus and SAI may be
amended or supplemented from time to time, or in published reports for each
Account or the Contracts which are in the public domain or approved by the
Company for distribution to Contract owners, or in sales literature or other
material provided by the Company, except with permission of the Company. The
Company agrees to respond to any request for approval on a prompt and timely
basis.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Portfolios or their Shares, contemporaneously with the filing of
such document with the SEC, the NASD or other regulatory authority.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications
for exemptions, requests for no action letters, and all amendments to any of
the above, that reference the Funds or the Portfolios and relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC, the NASD or other regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, (e.g., on-line
networks such as the Internet or other electronic messages), 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
advertisements sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees), registration statements, prospectuses, SAIs,
shareholder reports, and proxy
12
materials and any other material constituting sales literature or advertising
under the NASD rules, the 1933 Act or the 0000 Xxx.
4.8. The Fund and each Portfolio hereby consents to the Company's use of the
name "GE Investments Funds, Inc." and the name of each Portfolio listed on
Schedule 3 in connection with the marketing of the Contracts, subject to the
terms of Sections 4.1, 4.2 and 4.3 of this Agreement. Such consent will
terminate with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1. Except as otherwise provided herein, all expenses incident to performance
by the Fund under this Agreement shall be paid by the Fund. The Fund shall see
to it that all its Shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Fund or the Distributor, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Portfolios' Shares; the preparation of
all statements and notices required by any federal or state law; all taxes on
the issuance or transfer of the Portfolios' Shares; and any expenses permitted
to be paid or assumed by a Portfolio pursuant to a plan, if any, under Rule
12b-1 under the 1940 Act.
ARTICLE VI. Diversification
6.1. The Fund will ensure that each Portfolio will at all times invest money
from the Contracts in such a manner as to ensure that the Contracts will comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, as amended
from time to time, relating to the Diversification Requirements for variable
annuity or life insurance contracts and any amendments or other modifications
to such Section or Regulation. In the event of a breach of this Article VI by
the Portfolio, it will take all reasonable steps: (a) to notify the Company of
such breach; and (b) to adequately diversify the Portfolio so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Portfolios for the existence of any material
irreconcilable conflict among the interests of the Contract owners of all
Accounts investing in the Portfolios and determine what action, if any, should
be taken in response to such conflicts. 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
the Portfolios are being managed; (e) a difference in voting instructions given
by Participating Insurance Companies or by variable annuity and variable life
insurance Contract owners; or (f) a decision by an insurer to disregard the
voting instructions of Contract owners. The Board will 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 agrees to assist the Board in carrying out its
responsibilities, as delineated in 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 it has determined to
disregard Contract owner voting instructions. The
13
Company's responsibilities hereunder will be carried out with a view only to
the interest of Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company will, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict,
including: (a) withdrawing the assets allocable to some or all of the Accounts
from the Portfolios and reinvesting such assets in a different investment
medium, subject to the requirements of Section 26(c) of the 1940 Act, 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., variable annuity Contract owners or
variable life insurance 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; and (b) 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 the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Portfolios and terminate this Agreement with
respect to such Account; provided, however, that such withdrawal and
termination will be limited to the extent required to remedy the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested directors of the Board. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal and termination shall take place
within six (6) months after written notice is given that this provision is
being implemented. Unless doing so would exacerbate the conflict, until such
withdrawal and termination is implemented, the Fund shall continue to accept
and implement orders by the Company for the purchase and redemption of Shares.
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 insurance regulators, then the Company will withdraw
the affected Account's investment in the Portfolios and terminate this
Agreement with respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested directors of the Board. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal and termination shall take place
within six (6) months after written notice is given that this provision is
being implemented. Until such withdrawal and termination is implemented, the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of Shares.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Board will determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in no
event will the Fund, the Distributor or the Adviser be required to establish a
new funding medium for the Contracts. The Company will 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 materially
affected by the material irreconcilable conflict.
7.7. The Company will at least annually submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out the duties imposed upon it as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Board.
14
7.8. The Fund, the Distributor and the Adviser will at least annually submit to
the Company such reports, materials or data as the Company may reasonably
request so that the Company may fully carry out the duties imposed upon it by
state and federal regulators, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Company.
7.9. If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the 1940 Act
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 Companies, as appropriate, will 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,
7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement will 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
Portfolios, the Distributor, the Adviser, and each person, if any, who
controls or is associated with the Fund, the Portfolios, the Distributor or
the Adviser within the meaning of such terms under the federal securities
laws and any director, trustee, officer, partner, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written consent
of the Company) or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of Shares or the
Contracts and:
(1) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or SAI for the Contracts or contained in the
Contracts or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated or necessary to make
such statements not misleading in light of the circumstances in which
they were made; provided that this agreement to indemnify will not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by the
Fund, the Portfolio, the Distributor or the Adviser for use in the
registration statement, prospectus or SAI for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Shares; or
(2) arise out of or as a result of statements or representations by or
on behalf of the Company (other than statements or representations
contained in the Fund's registration statement, prospectus, SAI or sales
literature or other promotional material of the Fund not supplied by the
Company or persons under its control) or wrongful conduct of the
15
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Shares; or
(3) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus, SAI or sales literature or other promotional material of the
Fund (or amendment or supplement) or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make such statements not misleading in light of the circumstances in
which they were made, if such a statement or omission was made in
reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company or persons under its control; or
(4) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(5) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result
from any other material breach by the Company of this Agreement;
except to the extent provided in Sections 8.l(b) and 8.4 hereof. This
indemnification will be in addition to any liability that the Company
otherwise may have.
(b) No party will be entitled to indemnification under Section 8.l(a) to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of
such party's duties under this Agreement, or by reason of such party's
reckless disregard of its obligations or duties under this Agreement by the
party seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with the issuance or sale
of the Shares or the Contracts or the operation of the Fund.
8.2.Indemnification By the Distributor and the Adviser
(a) The Distributor and the Adviser, in each case solely to the extent
relating to such party's responsibilities hereunder, agree to indemnify and
hold harmless the Company and each person, if any, who controls or is
associated with the Company within the meaning of such terms under the
federal securities laws and any director, trustee, officer, partner,
employee or agent of the foregoing (collectively, the "Indemnified Parties"
for purposes of this Section 8.2) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor or the Adviser, as applicable) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of Shares or the Contracts and:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus or SAI for the Fund or sales literature or other
promotional material of the Fund (or any amendment or
16
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated or necessary to make such statements not
misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Distributor or the Adviser by or on behalf
of the Company for use in the registration statement, prospectus or SAI
for the Fund or in sales literature of the Fund (or any amendment or
supplement thereto) or otherwise for use in connection with the sale of
the Contracts or Shares; or
(2) arise out of or as a result of statements or representations (other
than statements or representations contained in the Contracts, or
Contract registration statements, prospectuses, SAIs or sales literature
or other promotional materials for the Contracts not supplied by the
Distributor, the Adviser, the Fund or persons under their control) or
wrongful conduct of the Distributor or the Adviser or persons under the
control of the Distributor or the Adviser, respectively, with respect to
the sale of the Shares; or
(3) arise out of any untrue statement or alleged untrue statement of a
material fact contained in Contract registration statements,
prospectuses, SAIs or sales literature or other promotional material of
the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be
stated or necessary to make such statement or statements not misleading
in light of the circumstances in which they were made, if such statement
or omission was made in reliance upon and in conformity with written
information furnished to the Company by the Distributor or the Adviser
or persons under the control of the Distributor or the Adviser; or
(4) arise as a result of any failure by the Distributor or the Adviser
to provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the Diversification Requirements and
procedures related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the Adviser in
this Agreement, or arise out of or result from any other material breach
of this Agreement by the Distributor or the Adviser, including the
failure of any Portfolio to comply with the diversification requirements
set forth in Section 817(h) of the Code or to qualify as a "regulated
investment company" under Subchapter M of the Code;
except to the extent provided in Sections 8.2(b) and 8.4 hereof. This
indemnification will be in addition to any liability that the Distributor or
the Adviser otherwise may have.
(b) No party will be entitled to indemnification under Section 8.2(a) to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of
such party's duties under this Agreement, or by reason of such party's
reckless disregard of its obligations or duties under this Agreement by the
party seeking indemnification.
(c) The Indemnified Parties will promptly notify the Distributor or the
Adviser of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities
17
against them in connection with the issuance or sale of the Contracts or the
operation of the account.
8.3.Indemnification By the the Fund and each Portfolio
(a) The Fund and each Portfolio, in each case solely to the extent relating
to such party's responsibilities hereunder, agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated
with the Company within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner, employee or
agent of the foregoing (collectively, the "Indemnified Parties" for purposes
of this Section 8.3) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written consent
of the Fund or a Portfolio, as applicable) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
Shares or the Contracts and:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus or SAI for the Fund or sales literature or other
promotional material of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
or necessary to make such statements not misleading in light of the
circumstances in which they were made; provided that this agreement to
indemnify will not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Fund or a
Portfolio by or on behalf of the Company for use in the registration
statement, prospectus or SAI for the Fund or in sales literature of the
Fund (or any amendment or supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Shares; or
(2) arise out of or as a result of statements or representations (other
than statements or representations contained in the Contracts, or
Contract registration statements, prospectuses, SAIs or sales literature
or other promotional materials for the Contracts not supplied by the
Distributor, the Adviser, the Fund or persons under their control) or
wrongful conduct of the Fund or a Portfolio or persons under the control
of the Fund or a Portfolio respectively, with respect to the sale of the
Shares; or
(3) arise out of any untrue statement or alleged untrue statement of a
material fact contained in Contract registration statements,
prospectuses, SAIs or sales literature or other promotional material of
the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be
stated or necessary to make such statement or statements not misleading
in light of the circumstances in which they were made, if such statement
or omission was made in reliance upon and in conformity with written
information furnished to the Company by the Fund or a Portfolio or
persons under the control of the Fund or a Portfolio; or
(4) arise as a result of any failure by the Fund or a Portfolio to
provide the services and furnish the materials under the terms of this
Agreement (including a failure, whether
18
unintentional or in good faith or otherwise, to comply with the
Diversification Requirements and procedures related thereto specified in
Article VI of this Agreement);
except to the extent provided in Sections 8.3(b) and 8.4 hereof. This
indemnification will be in addition to any liability that the Fund or the
Portfolio otherwise may have.
(b) No party will be entitled to indemnification under Section 8.3(a) to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of
such party's duties under this Agreement, or by reason of such party's
reckless disregard of its obligations or duties under this Agreement by the
party seeking indemnification.
(c) The Indemnified Parties will promptly notify the Fund or a Portfolio of
the commencement of any litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with the issuance or sale
of the Contracts or the operation of the account.
8.4.Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.4) will not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("Indemnified Party" for the purpose of this Section 8.4) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim will have been served upon such
Indemnified Party (or after such party will have received notice of such
service on any designated agent), but failure to notify the Indemnifying Party
of any such claim will not relieve the Indemnifying Party from any liability,
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of the indemnification provision of this Article
VIII. In case any such action is brought against the Indemnified Party, the
Indemnifying Party will be entitled to participate, at its own expense, in the
defense thereof. The Indemnifying Party also will be entitled to assume the
defense thereof, with counsel satisfactory to the Indemnified Party named in
the action. After notice from the Indemnifying Party to the Indemnified Party
of the Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any additional counsel
retained by it, and the Indemnifying Party 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, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of such counsel;
or (b) the named parties to any such proceeding (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The Indemnifying Party
will not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there is a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. A successor by law of the parties to this Agreement
will be entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article VIII
will survive any termination of this Agreement.
19
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Virginia.
9.2. This Agreement will be subject to the provisions of the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding
Exemptive Order) and the terms hereof will be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1.This Agreement will terminate:
(a) at the option of any party, with or without cause, upon
one-hundred-eighty (180) days' advance written notice to the other parties;
or
(b) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to a Portfolio if Shares are not
reasonably available to meet the requirements of the Contracts as determined
in good faith by the Company; or
(c) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to a Portfolio in the event any of
the Shares are not registered, issued or sold in accordance with applicable
state and/or Federal law or such law precludes the use of such Shares as the
underlying investment media of the Contracts issued or to be issued by the
Company; or
(d) at the option of the Fund, upon receipt of the Fund's written notice by
the other parties, upon institution of formal proceedings against the
Company by the NASD, the SEC, the insurance commission 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 administration of the Contracts,
the operation of the Account, or the purchase of Shares, provided that the
Fund determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the Company's written
notice by the other parties, upon institution of formal proceedings against
the Fund, the Distributor, the Adviser or a Portfolio by the NASD, the SEC,
or any state securities or insurance department or any other regulatory
body, provided that the Company determines in its sole judgment, exercised
in good faith, that any such proceeding would have a material adverse effect
on the Fund's, the Distributor's, the Adviser's or a Portfolio's ability to
perform its obligations under this Agreement; or
(f) as to any Portfolio, at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the Portfolio ceases to
qualify as a "regulated investment company" under Subchapter M of the Code,
or under any successor or similar provision, or if the Company reasonably
and in good faith believes that a Portfolio may fail to so qualify; or
(g) as to any Portfolio, at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the Portfolio fails to
meet the Diversification Requirements specified
20
in Article VI hereof or if the Company reasonably and in good faith believes
the Portfolio may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon written notice to the
other parties, upon another party's material breach of any provision of this
Agreement, which material breach is not cured within thirty (30) days of
said notice; or
(i) at the option of the Company, if the Company determines in its sole
judgment exercised in good faith, that either the Fund, the Distributor, the
Adviser or a Portfolio has suffered a material adverse change in its
business, operations or financial condition since the date of this Agreement
or is the subject of material adverse publicity which is likely to have a
material adverse impact upon the business and operations of the Company;
provided, however that no such termination shall be effective under this
subsection (i) until the Fund, the Distributor, the Adviser or the Portfolio
(as appropriate) has been afforded a reasonable opportunity to respond to a
statement by the Company concerning the reason for notice of termination
hereunder; or
(j) at the option of the Fund, the Distributor or the Adviser, upon receipt
of the Fund's, the Distributor's or the Adviser's written notice by the
Company, if the Fund, the Distributor or the Adviser, respectively
determines in its sole judgment exercised in good faith, that the Company
has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Fund, the Distributor or the
Adviser; provided, however that no such termination shall be effective under
this subsection (j) until the Company has been afforded a reasonable
opportunity to respond to a statement by the Fund, the Distributor, the
Adviser or the Portfolio (as appropriate) concerning the reason for notice
of termination hereunder; or
(k) at the option of the Company or the Fund upon a determination by a
majority of the Board, or a majority of the disinterested Board members,
that a material irreconcilable conflict exists between or among the
interests of: (1) owners of Contracts issued by different insurance
companies, (2) owners of different types of Contracts, or (3) the
Participating Insurance Companies investing in the Portfolio as set forth in
Article VII of this Agreement; or
(l) at the option of the Fund in the event any of the Contracts are not
issued or sold in accordance with applicable federal and/or state law, it
being understood that such issuance or sale must qualify as a material
breach of such laws for the Fund to exercise its termination option under
this subsection. Termination will be effective immediately upon such
occurrence without notice.
10.2.Notice Requirement
Except as provided in 10.1 above, no termination of this Agreement will 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
will set forth the basis for the termination.
10.3.Effect of Termination
Notwithstanding any termination of this Agreement, the Fund will, at the
option of the Company, continue to make available additional Shares pursuant to
the terms and conditions of this Agreement, for (i) all Contracts in effect on
or before April 30, 2006 under which Class 1 Shares are available as an
21
investment option; and (ii) all Contracts in effect on the effective date of
termination of this Agreement under which Class 2, Class 3 or Class 4 Shares
are available as investment options that have Contract value invested in Shares
of a Portfolio (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts will be permitted to
reallocate investments in a Portfolio (as in effect on such date), redeem
investments in a Portfolio and/or invest in Portfolio upon the making of
additional purchase payments under the Existing Contracts.
10.4.Surviving Provisions
Notwithstanding any termination of this Agreement, each party's obligations
under Article VIII to indemnify other parties will survive and not be affected
by any termination of this Agreement. In addition, each party's obligations
under Section 12.6 will survive and not be affected by any termination of this
Agreement. Finally, with respect to Existing Contracts, all provisions of this
Agreement also will survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
11.1. Any notice will be deemed duly given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other parties.
If to the Company:
Genworth Life and Annuity Insurance Company
0000 Xxxx Xxxxx Xxxxxx, Xxxxxxxx 0
Xxxxxxxx, Xxxxxxxx 00000
Attn: Associate General Counsel - Securities
If to the Fund, the Distributor, the Adviser and/or the Portfolio:
c/o GE Investment Distributors, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: General Counsel
ARTICLE XII. Miscellaneous
12.1 The Fund, the Distributor and the Adviser acknowledge that the identities
of the customers of the Company or any of its affiliates (collectively the
"Company Protected Parties" for purposes of this Section 12.1), information
maintained regarding those customers, and all computer programs and procedures
or other information developed or used by the Company Protected Parties or any
of their employees or agents in connection with the Company's performance of
its duties under this Agreement are the valuable property of the Company
Protected Parties. The Fund, the Distributor and the Adviser agree that if they
come into possession of any list or compilation of the identities of or other
information about the Company Protected Parties' customers, or any other
information or property of the Company Protected Parties, other than such
information as is publicly available or as may be independently developed or
compiled by the Fund, the Distributor and the Adviser from information supplied
to them by the Company Protected Parties' customers who also maintain accounts
directly with the Fund or the Distributor, the Fund, the Distributor and the
Adviser will hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b)as required by law
or judicial process. The Company acknowledges that the
22
identities of the customers of the Fund, the Distributor or any of their
affiliates (collectively the "Distributor Protected Parties" for purposes of
this Section 12.1), information maintained regarding those customers, and all
computer programs and procedures or other information developed or used by the
Distributor Protected Parties or any of their employees or agents in connection
with the Fund's, the Distributor's or the Adviser's performance of their
respective duties under this Agreement are the valuable property of the
Distributor Protected Parties. The Company agrees that if it comes into
possession of any list or compilation of the identities of or other information
about the Distributor Protected Parties' customers, or any other information or
property of the Distributor Protected Parties, other than such information as
is publicly available or as may be independently developed or compiled by the
Company from information supplied to them by the Distributor Protected Parties'
customers who also maintain accounts directly with the Company, the Company
will hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property except:
(a) with the Fund's, the Distributor's or the Adviser's prior written consent;
or (b) as required by law or judicial process. Each party acknowledges that any
breach of the agreements in this Section 12.1 would result in immediate and
irreparable harm to the other parties for which there would be no adequate
remedy at law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
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 will constitute one and the same
instrument.
12.4. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement will
not be affected thereby.
12.5. This Agreement will not be assigned by any party hereto without the prior
written consent of all the parties.
12.6. Each party to this Agreement will maintain all records required by law,
including records detailing the services it provides. Such records will be
preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and 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. Upon
request by the Fund and at the Fund's expense, the Company agrees to promptly
make copies or, if required, originals of all records pertaining to the
performance of services under this Agreement available to the Fund. The Fund
agrees that the Company will have the right to inspect, audit and copy all
records pertaining to the performance of services under this Agreement pursuant
to the requirements of any state insurance department. Each party also agrees
to promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This provision will
survive termination of this Agreement.
12.7. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts, the
Accounts or the Portfolios or other applicable terms of this Agreement.
23
12.8. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights.
12.9. Notwithstanding anything else in this Agreement to the contrary, absent a
negligent act of commission or omission, each party hereunder shall have no
liability to the other parties for any losses, damages, injuries, claims, cost
or expenses arising as a result of war, insurrection, terrorist activities,
strikes or labor difficulties or any other similar or dissimilar acts of God
beyond the reasonable control of such party.
12.10. The parties acknowledge that the consideration received by the Company
in exchange for the performance of its obligations hereunder is the right to
purchase and redeem Fund Shares as provided herein, and the Fund shall not pay
any remuneration to the Company hereunder.
Signatures on Following Page
24
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
GENWORTH LIFE AND ANNUITY
INSURANCE COMPANY
By:
------------------------------
Name:
Title:
GE INVESTMENTS FUNDS, INC.
By:
------------------------------
Name:
Title:
GE INVESTMENT DISTRIBUTORS, INC.
By:
------------------------------
Name:
Title:
GE ASSET MANAGEMENT INCORPORATED
By:
------------------------------
Name:
Title:
25
Schedule 1
Registered Accounts
Date of Resolution of Company's Board
Name of Account: that Established the Account:
---------------- -------------------------------------
Genworth Life & Annuity VL Separate Account 1 August 21, 1986
Genworth Life & Annuity VA Separate Account 1 August 19, 1987
Schedule 2
Unregistered Accounts
Date of Resolution of Company's Board
Name of Account: that Established the Account:
---------------- -------------------------------------
Genworth Life & Annuity Group VA Separate Account 1 May 20, 1996
Genworth Life & Annuity Group VA Separate Account 2 July 7, 2004
Schedule 3
Name(s) of Portfolio
GE Investments Funds, Inc.:
Total Return Fund
Schedule 4
Registered Contracts
Commonwealth II 333-111440
Commonwealth 3 033-09651
Commonwealth Variable Universal Life 333-32071
RetireReady(SM) Protection Plus 333-40820
Commonwealth 4 333-41031
RetireReady(SM) Accumulator 333-72572
Estate Optimizer 333-82311
Commonwealth VL Flex 333-111208
RetireReady(SM) Legacy 333-111213
Commonwealth Variable Annuity 033-17428
Commonwealth Variable Annuity - Xxxxxxxx 033-76336
Commonwealth Variable Annuity Plus 033-76334
Commonwealth Extra 333-62695
RetireReady(SM) Extra 333-62695
Commonwealth Freedom 333-63531
RetireReady(SM) Freedom 333-63531
Savvy Investor 333-96513
RetireReady(SM) Choice 333-31172
Foundation 333-31172
RetireReady(SM) Selections 333-47732
RetireReady(SM) Retirement Answer 333-67904
Schedule 5
Exempt Contracts
Commonwealth 401(k)
ClearCourse Group Variable Annuity
Schedule 6
Contracts with Accredited Investors
None
Schedule 7
Accounts Excluded from the Definition of Investment Company
Date of Resolution of Company's Board
Name of Account: that Established the Account:
---------------- -------------------------------------
None
Exhibit A
Company's Disruptive Trading Policy
"The Separate Account does not accommodate frequent transfers of Contract Value
among Subaccounts. When owners or someone on their behalf submit requests to
transfer all or a portion of their assets between Subaccounts, the requests
result in the purchase and redemption of shares of the Portfolios in which the
Subaccounts invest. Frequent Subaccount transfers, therefore, cause
corresponding frequent purchases and redemptions of shares of the Portfolios.
Frequent purchases and redemptions of shares of the Portfolios can dilute the
value of a Portfolio's shares, disrupt the management of the Portfolio's
investment portfolio, and increase brokerage and administrative costs.
Accordingly, when an owner or someone on their behalf engages in frequent
Subaccount transfers, other owners and persons with rights under the contracts
(such as the beneficiaries) may be harmed.
The Separate Account discourages frequent transfers, purchases and redemptions.
To discourage frequent Subaccount transfers, we adopted the policy described in
the "Transfers Among the Subaccount" section. This policy requires owners who
request more than 12 Subaccount transfers in a calendar year to submit such
requests in writing by U.S. Mail or by overnight delivery service (the "U.S.
Mail requirement"). The U.S. Mail requirement creates a delay of at least one
day between the time transfer decisions are made and the time such transfers
are processed. This delay is intended to discourage frequent Subaccount
transfers by limiting the effectiveness of abusive "market timing" strategies
(in particular, "time-zone" arbitrage) that rely on "same-day" processing of
transfer requests.
In addition, we will not honor transfer requests if any Subaccount that would
be affected by the transfer is unable to purchase or redeem shares of the
Portfolio in which the Subaccount invests or if the transfer would adversely
affect Accumulation Unit Values. Whether these restrictions apply is determined
by the affected Portfolio(s), and although we apply the restrictions uniformly
when we receive information from the Portfolio(s), we cannot guarantee that the
Portfolio(s) will apply their policies and procedures in a uniform basis.
There can be no assurance that the U.S. Mail requirement will be effective in
limiting frequent Subaccount transfers or that we can prevent all frequent
Subaccount transfer activity that may adversely affect owners, other persons
with material rights under the Policies, or Portfolio shareholders generally.
For instance, imposing the U.S. Mail requirement after 12 Subaccount transfers
may not be restrictive enough to deter an owner seeking to engage in abusing
market timing strategies.
We may revise our frequent Subaccount transfer policy and related procedures,
at our sole discretion, at any time and without prior notice, as we deem
necessary or appropriate to better detect and deter frequent transfer activity
that may adversely affect owners, other persons with material rights under the
contracts, or Portfolio shareholders generally, to comply with state or federal
regulatory requirements, or to impose additional or alternative restrictions on
owners engaging in frequent Subaccount transfers. For example, we may invoke
our right to refuse transfers if the transfer involves the same Subaccount
within a 30 day period and/or we may change our procedures to monitor for a
different number of transfers within a specified time period or to impose a
minimum time period between each transfer.
There are inherent risks that changing our policies and procedures in the
future may not be effective in limiting frequent Subaccount transfers. We will
not implement any policy and procedure at the contract level that discriminates
among owners, however, we may be compelled to adopt policies and procedures
adopted by the Portfolios on behalf of the Portfolios and we will do so unless
we cannot service such policies and procedures or we believe such policies and
procedures contradict state or federal regulations or such policies and
procedures contradict with the terms of your Policy.
As stated in the previous paragraph, each of the Portfolios in which the
Subaccounts invest may have its own policies and procedures with respect to
frequent purchases and redemption of Portfolio shares. The prospectuses for the
Portfolios describe any such policies and procedures. The frequent trading
policies and procedures of a Portfolio may be different, and more or less
restrictive, than the frequent trading policies and procedures of other
Portfolios and the policies and procedures we have adopted to discourage
frequent Subaccount transfers. Owners should be aware that we may not, have the
contractual obligation nor the operational capability to monitor owners'
Subaccount transfer requests and apply the frequent trading policies and
procedures of the respective Portfolios that would be affected by the
transfers. Accordingly, owners and other persons who have material rights under
the contracts should assume that the sole protection they may have against
potential harm from frequent Subaccount transfers is the protection, if any,
provided by the policies and procedures we have adopted to discourage frequent
Subaccount transfers.
Owners and other persons with material rights under the contracts also should
be aware that the purchase and redemption orders received by the Portfolios
generally are "omnibus" orders from intermediaries such as retirement plans or
separate accounts funding variable insurance contracts. These omnibus orders
reflect the aggregation and netting of multiple orders from individual
retirement plan participants and/or individual owners of variable insurance
contracts. The omnibus nature of these orders may limit the Portfolios' ability
to apply their respective frequent trading policies and procedures. We cannot
guarantee that the Portfolios will not be harmed by transfer activity relating
to the retirement plans and/or other insurance companies that may invest in the
Portfolios. In addition, if a Portfolio believes an omnibus order we submit may
reflect one or more Subaccount transfer requests from owners engaged in
frequent transfer activity, the Portfolio may reject a portion of or the entire
omnibus order. If a Portfolio rejects part of an omnibus order it believes is
attributable to transfers that exceed its market timing policies and
procedures, it will return the amount to us and we will credit the amount to
the owner as of the Valuation Day of our receipt of the amount. You may realize
a loss if the unit value on the Valuation Day we credit the amount back to your
account has increased since the original date of your transfer.
We apply our policies and procedures without exception, waiver, or special
arrangement."
