PARTICIPATION AGREEMENT Among DAVIS VARIABLE ACCOUNT FUND, INC. DAVIS DISTRIBUTORS, LLC. and ANNUITY INVESTORS LIFE INSURANCE COMPANY
Exhibit 8(aa)
Among
XXXXX VARIABLE ACCOUNT FUND, INC. XXXXX DISTRIBUTORS, LLC.
and
ANNUITY INVESTORS LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 25 day of April , 2006, by and
among ANNUITY INVESTORS LIFE INSURANCE COMPANY (hereinafter the “Insurance Company”), an
Ohio corporation, on its own behalf and on behalf of each segregated asset account of the
Insurance Company set forth on Schedule A hereto as may be amended from time to time (each such
account hereinafter referred to as the “Account”), XXXXX VARIABLE ACCOUNT FUND, INC., a Maryland
Corporation (the “Company”) and Xxxxx Distributors, LLC., a Delaware Limited Liability Company
(“Xxxxx Distributors”).
WHEREAS, the Company engages in business as an open-end management investment company and is
available to act as the investment vehicle for variable annuity and life insurance contracts to be
offered by separate accounts of insurance companies which have entered into participation
agreements substantially similar to this Agreement (“Participating Insurance Companies”) and for
qualified retirement and pension plans (“Qualified Plans”); and
WHEREAS, the beneficial interest in the Company is divided into several series of shares, each
designated a “Fund” and representing the interest in a particular managed portfolio of securities
and other assets; and
WHEREAS, the Company has obtained an order from the Securities and Exchange Commission (the
“SEC”), granting Participating Insurance Companies and their separate accounts exemptions from the
provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the 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 shares of the Company to be sold to and held by Qualified Plans and by variable
annuity and variable life insurance separate accounts of Participating Insurance Companies that may
or may not be affiliated with one another (the “Mixed and Shared Funding Exemptive Order”); and
WHEREAS, the Company has registered as an open-end management investment company under the
1940 Act and the offering of its shares has been registered under the Securities Act of 1933, as
amended (hereinafter the “1933 Act”); and
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WHEREAS, Xxxxx Distributors is duly registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, (the “1934 Act”), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the “NASD”); and
WHEREAS, Xxxxx Distributors is a wholly owned subsidiary of Xxxxx Selected Advisers, L.P.
which is duly registered as an investment adviser under the Investment Advisers Act of 1940, as
amended, and any applicable state securities law; and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will register under the
1933 Act, certain variable annuity or variable life insurance contracts identified on Schedule B
to this Agreement, as amended from time to time hereafter by mutual written agreement of all the
parties hereto (the “Contracts”); and
WHEREAS, each Account is a duly organized, validly existing segregated asset account,
established by resolution of the board of directors of the Insurance Company on the date shown for
that Account on Schedule A hereto, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, the Insurance Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Insurance
Company intends to purchase shares in the Funds listed on Schedule C to this Agreement as amended
from time to time, at net asset value on behalf of each Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance Company, the Company
and Xxxxx Distributors agree as follows:
ARTICLE I. Sale of Company Shares
1.1. Xxxxx Distributors agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the net asset value
next computed after receipt by the Company or its designee of the order for the shares of the
Company. For purposes of this Section 1.1, the Insurance Company, or its designee, shall be the
designee of the Company for receipt of such orders from the Accounts and receipt by such designee
shall constitute receipt by the Company; provided that the Company receives notice of such order by
10:00 a.m., Eastern Time, on the next following Business Day. In this Agreement, “Business Day”
shall mean any day on which the New York Stock Exchange is open for trading and on which the
Company calculates its net asset value pursuant to the rules of the SEC.
1.2. The Company agrees to make its shares available for purchase at the applicable net asset
value per share by the Insurance Company and its Accounts on those days on which the Company
calculates its Funds’ net asset values pursuant to rules of the SEC and the Company shall use
reasonable efforts to calculate its Funds’ net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the directors of the Company may
refuse to sell shares of any Fund to any person, or suspend or terminate the offering of shares of
any Fund if such action is required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the directors of the Company acting in good
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faith and in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of that Fund.
1.3. The Company agrees that shares of the Company will be sold only to Accounts of
Participating Insurance Companies and to Qualified Plans. No shares of any Fund will be sold to the
general public.
1.4. The Company will not sell its shares to any insurance company or separate account unless
an agreement containing provisions substantially the same as Sections 2.4, 3.4, 3.5, and Article
VIII of this Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company’s request, any full or fractional
shares of the Company held by the Account, executing such requests on a daily basis at the net
asset value next computed after receipt by the Company or its designee of the request for
redemption. However, if one or more Funds has determined to settle redemption transactions for all
of its shareholders on a delayed basis (more than one Business Day, but in no event more than three
Business Days, after the date on which the redemption order is received, unless otherwise permitted
by an order of the SEC under Section 22(e) of the 1940 Act), the Company shall be permitted to
delay sending redemption proceeds to the Insurance Company by the same number of days that the
Company is delaying sending redemption proceeds to the other shareholders of the Fund. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the Company for
receipt of requests for redemption from each Account and receipt by that designee shall constitute
receipt by the Company; provided that the Company receives notice of the request for redemption by
9:00 a.m., Eastern Time, on the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of each Fund listed on
Schedule C to this Agreement, as amended from time to time, and offered by the then-current
prospectus of the Company in accordance with the provisions of that prospectus.
1.7. Each purchase, redemption and exchange order placed by the Insurance Company shall be
placed separately for each Fund and shall not be netted with respect to any Fund. However, with
respect to payment of the purchase price by the Insurance Company and of redemption proceeds by the
Company, the Insurance Company and the Company shall net purchase and redemption orders with
respect to each Fund and shall transmit one net payment for all of the Funds. Payment shall be in
federal funds transmitted by wire. In the event of net purchase, the Insurance Company shall pay
for the Funds’ shares by 3:00 p.m. Eastern time on the next Business Day after an order to purchase
shares is made in accordance with the provisions of Section 1.1 hereof. For the purpose of Sections
2.9 and 2.10, upon receipt by the Company of the wired federal funds, such funds shall cease to be
the responsibility of the Insurance Company and shall become the responsibility of the Company, hi
the event of net redemption, the Company shall pay the redemption proceeds by 3:30 p.m. Eastern
time on the next Business Day after an order to redeem the shares is made hi accordance with the
provisions of Section 1.5 hereof. However, payment may be postponed under unusual circumstances,
such as when normal trading is not taking place on the New York Stock Exchange, an emergency as
defined by the SEC exists, or as permitted by the SEC.
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1.8. Issuance and transfer of the Company’s shares will be by book entry only. Stock
certificates will not be issued to the Insurance Company or any Account. Shares ordered from the
Company will be recorded in an appropriate title for each Account or the appropriate subaccount of
each Account.
1.9. The Company shall furnish same day notice (by wire or telephone, followed by written
confirmation) to the Insurance Company of any income, dividends or capital gain distributions
payable on the Funds’ shares. The Insurance Company hereby elects to receive all income
dividends and capital gain distributions payable on a Fund’s shares in additional shares of that
Fund. The Insurance Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Company shall notify the Insurance
Company of the number of shares issued as payment of dividends and distributions.
1.10. The Company shall make the net asset value per share for each Fund available to the
Insurance Company on a daily basis as soon as reasonably practical after the net asset value per
share is calculated and shall use its best efforts to make those per-share net asset values
available by 7:00 p.m., Eastern Time, hi the event that the Company is unable to meet the 7:00
p.m. Eastern time stated herein, it shall provide additional time for the Insurance Company to
place orders for the purchase and redemption of shares. Such additional time shall be equal to
the additional time which the Company takes to make the net asset value available to the Insurance
Company. In accordance with Section 9.3(a)(iii) hereof, if the Company provides materially
incorrect share net asset value information, the Company may make an adjustment to the number of
shares purchased or redeemed for the Account to reflect the correct net asset value per share. Any
material error in the calculation or reporting of net asset value per share, dividend or capital
gains information shall be reported to the Insurance Company promptly upon discovery.
ARTICLE II. Representations, Warranties and Agreements
2.1. The Insurance Company represents, warrants and agrees that the offerings of the
Contracts are, or will be, registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and state laws and that
the sale of the Contracts shall comply in all material respects with applicable state insurance
suitability requirements. The Insurance Company further represents that it is an insurance company
duly organized and in good standing under applicable law and that it has legally and validly
established the Account prior to any issuance or sale thereof as a segregated asset account under
Ohio insurance law and has registered, or warrants and agrees that prior to any issuance
or sale of the Contracts it will register, the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Company warrants and agrees that Company shares sold pursuant to this Agreement shall
be registered under the 1933 Act, duly authorized for issuance and sale in compliance with the laws
of the State of Maryland and all applicable federal securities laws and that the Company is and
shall remain registered under the 1940 Act. The Company warrants and agrees that it shall amend the
registration statement for its shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its shares. The Company shall register and
qualify the shares for sale in accordance with the laws of the various states only if and to the
extent deemed advisable by the Company or Xxxxx Distributors.
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2.3. The Company represents that each Fund is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and
warrants and agrees that it will make all reasonable efforts to maintain each Fund’s qualification
(under Subchapter M or any successor or similar provision) and that it will notify the Insurance
Company immediately upon having a reasonable basis for believing that any Fund has ceased to so
qualify or might not so qualify in the future.
2.4. The Insurance Company represents that the Contracts are currently treated as annuity or
life insurance contracts under applicable provisions of the Code and warrants and agrees that it
will make all reasonable efforts to maintain such treatment and that it will notify the Company and
Xxxxx Distributors immediately upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the future.
2.5. The Company may elect to make payments to finance distribution expenses pursuant to Rule
12b-l under the 1940 Act. To the extent that it decides to finance distribution expenses pursuant
to Rule 12b-l, the Company undertakes to have a board of directors, a majority of whom are not
interested persons of the Company, formulate and approve any plan under Rule 12b-l to finance
distribution expenses.
2.6. The Company makes no representation or warranty as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment policies) complies or
will comply with the insurance laws or regulations of the various states.
2.7. The Company represents that it is lawfully organized and validly existing under the laws
of the State of Maryland and represents, warrants and agrees that it does and will comply in all
material respects with the 1940 Act and the laws of the State of Maryland.
2.8. Xxxxx Distributors represents that it is and warrants that it shall remain duly
registered as a broker-dealer under all applicable federal and state securities laws and a member
in good standing of the NASD, and agrees that it shall perform its obligations for the Company in
compliance in all material respects with any applicable state and federal securities laws and NASD
rules and regulations.
2.9. The Company and Xxxxx Distributors represent and warrant that all of their officers,
employees, investment advisers, investment sub-advisers, and other individuals or entities
described in Rule 17g-l under the 1940 Act dealing with the money and/or securities of the Company
are, and shall continue to be at all times, covered by a blanket fidelity bond or similar coverage
for the benefit of the Company in an amount not less than the minimum coverage required currently
by Rule 17g-l under the 1940 Act or related provisions as may be promulgated from time to time.
That fidelity bond shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.10. The Insurance Company represents and warrants that all of its officers, employees and
other individuals or entities dealing with the money and/or securities of the Company are and shall
continue to be at all times, covered by a blanket fidelity bond or similar coverage for the benefit
of the Company, in an amount not less than the minimum amount of the bond that the Accounts would
be required to maintain if they were subject to Rule 17g-l under the 1940 Act. The aforesaid
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bond shall include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
ARTICLE III. Disclosure Documents and Voting
3.1. Xxxxx Distributors shall provide the Insurance Company (at the Insurance Company’s
expense) with as many copies of the current prospectus for each Fund listed on Schedule C herein as
the Insurance Company may reasonably request for distribution to prospective purchasers of
contracts. Xxxxx Distributors shall also provide the Insurance Company (free of charge) with as
many copies of the current prospectus for each Fund listed on Schedule C herein as the Insurance
Company may reasonably request for distribution to existing Contract owners whose Contracts are
funded by shares of such Fund(s). If requested by the Insurance Company in lieu thereof, the
Company shall provide such documentation (including a final copy of the new prospectus as set in
type at the Company’s expense) and other assistance as is reasonably necessary in order for the
Insurance Company once each year (or more frequently if the prospectus for the Company is amended)
to have the prospectus for the Contracts and the Company’s prospectus printed together in one
document (at the Insurance Company’s expense).
3.2. The Company’s prospectus shall state that the Statement of Additional Information for the
Company (the “SAI”) is available from the Company, and Xxxxx Distributors (or the Company), at its
expense, shall print and provide the SAI free of charge to the Insurance Company and to any owner
of a Contract or prospective owner who requests the SAI.
3.3. The Company, at its expense, shall provide the Insurance Company with copies of its proxy
material, reports to shareholders and other communications to shareholders in such quantity as the
Insurance Company shall reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) | solicit voting instructions from Contract owners; | ||
(ii) | vote the Company shares of each Fund in accordance with instructions received from Contract owners; and | ||
(iii) | vote Company shares for which no instructions have been received in the same proportion as Company shares of that Fund for which instructions have been received; |
so long as and to the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners. The Insurance Company reserves the
right to vote Company shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting privileges in a manner
consistent with the standards set forth on Schedule D attached hereto and incorporated herein by
this reference, which standards will also be provided to the other Participating Insurance
Companies. The Insurance Company shall fulfill its obligation under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular the Company will either provide for annual meetings (except insofar
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as the SEC may interpret Section 16 of the 1940 Act not to require such meetings) or, as the
Company currently intends, comply with Section 16(c) of the 1940 Act as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, the Company will act in accordance with the SEC’s
interpretation of the requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. Shareholder Information
4.1. Insurance Company agrees to provide the Fund, upon written request, the taxpayer
identification number (“TIN”), if known, of any or all Shareholder(s) of the account and the
amount, date, name or other identifier of any investment professional(s) associated with the
Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or
exchange) of every purchase, redemption, transfer, or exchange of Shares held through an account
maintained by the Insurance Company during the period covered by the request.
(i) | Period Covered by Request. Requests must set forth a specific period, not to exceed 90 days from the date of the request, for which transaction information is sought. | ||
The Fund may request transaction information older than 90 days from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund. | |||
(ii) | Form and Timing of Response. Insurance Company agrees to transmit the requested information that is on its books and records to the Fund or its designee promptly, but in any event not later than 10 Business Days or such other time as agreed to by the Fund, after receipt of a request. If the requested information is not on the Insurance Company’s books and records, Insurance Company agrees to: (i) provide or arrange to provide to the Fund the requested information from shareholders who hold an account with an indirect intermediary; or (ii) if directed by the Fund, block further purchases of Fund Shares from such indirect intermediary. In such instance, Insurance Company agrees to inform the Fund whether it plans to perform (i) or (ii). Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, an “indirect intermediary” has the same meaning as in SEC Rule 22c-2 under the 1940 Act. | ||
(iii) | Limitation on Use of Information. The Fund agrees not to use the information received for marketing or any other similar purpose without the prior written consent of the Insurance Company. |
4.2. Agreement to Restrict Trading. Insurance Company agrees to execute written instructions
from the Fund to restrict or prohibit further purchases or exchanges of Shares by a Shareholder
that has been identified by the Fund as having engaged in transactions of the Fund’s Shares
(directly or indirectly through the Insurance Company’s account) that violate policies
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established by the Fund for the purpose of eliminating or reducing any dilution of the value
of the outstanding Shares issued by the Fund.
(i) | Form of Instructions. Instructions must include the TIN, if known, and the specific instruction(s) to be executed. If the TIN is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates. | ||
(ii) | Timing of Response. Insurance Company agrees to execute instructions as soon as reasonably practicable, but not later than five Business Days after receipt of the instructions by the Insurance Company. | ||
(iii) | Confirmation by Insurance Company. Insurance Company must provide written confirmation to the Fund that instructions have been executed. Insurance Company agrees to provide confirmation as soon as reasonably practicable, but not later than ten Business Days after the instructions have been executed. |
4.3. Definitions. For purposes of Article IV:
(i) | The term “Fund” includes the fund’s principal underwriter and transfer agent. The term does not include any “excepted funds” as defined in SEC Rule 22c-2(b) under the Investment Company Act of 1940. | ||
(ii) | The term “Shares” means the interests of Shareholders corresponding to the redeemable securities of record issued by the Fund that are held by the Insurance Company. | ||
(iii) | The term “Shareholder” means the holder of interests in a variable annuity or variable life insurance contract issued by the Insurance Company. | ||
(iv) | The term “written” includes electronic writings and facsimile transmissions. |
ARTICLE V. Sales Material and Information
5.1. The Insurance Company shall furnish, or shall cause to be furnished, to the Company or
its designee, each piece of sales literature or other promotional material in which the Company,
Xxxxx Selected Advisers, L.P., or Xxxxx Distributors is named, at least five Business Days prior to
its use. No such material shall be used if the Company or its designee reasonably objects to such
use within five Business Days after receipt of such material.
5.2. The Insurance Company shall not give any information or make any representations or
statements on behalf of the Company or concerning the Company in connection with the sale of the
Contracts other than the information or representations contained in the Company’s registration
statement, prospectus or SAI, as that registration statement, prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Company, or in sales
literature or other promotional material approved by the Company or its designee or by Xxxxx
Distributors, except with the permission of the Company or Xxxxx Distributors.
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5.3. The Company or its designee or Xxxxx Distributors shall furnish, or shall cause to be
furnished, to the Insurance Company or its designee, each piece of sales literature or other
promotional material in which the Insurance Company or the Account is named at least five Business
Days prior to its use. No such material shall be used if the Insurance Company or its designee
reasonably objects to such use within five Business Days after receipt of that material.
5.4. The Company and Xxxxx Distributors shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance Company, any
Account, or the Contracts other than the information or representations contained in a registration
statement, prospectus or statement of additional information for the Contracts, as that
registration statement, prospectus or statement of additional information may be amended or
supplemented from time to time, or in published reports for any Account which are in the public
domain or approved by the Insurance Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Insurance Company or its designee, except
with the permission of the Insurance Company.
5.5. The Company will provide to the Insurance Company at least one complete copy of each
registration statement, prospectus, statement of additional information, report, proxy
statement, piece of sales literature or other promotional material, application for exemption,
request for no-action letter, and any amendment to any of the above, that relate to the Company or
its shares, contemporaneously with the filing of the document with the SEC, the NASD, or other
regulatory authorities.
5.6. The Insurance Company will provide to the Company at least one complete copy of each
registration statement, prospectus, statement of additional information, report, solicitation for
voting instructions, piece of sales literature and other promotional material, application for
exemption, request for no-action letter, and any amendment to any of the above, that relates to the
Contracts or the Account, contemporaneously with the filing of the document with the SEC, the NASD,
or other regulatory authorities.
5.7. For purposes of this Article V, the phrase “sales literature or other promotional
material” includes, but is not limited to, advertisements, newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media, sales literature (i.e., any written communication
distributed or made generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, shareholder newsletters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
5.8. At the request of any party to this Agreement, each other party will make available to
the other party’s independent auditors and/or representative of the appropriate regulatory
agencies, all records, data and access to operating procedures that may be reasonably requested.
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ARTICLE VI. Fees and Expenses
6.1. The Company and Xxxxx Distributors shall pay no fee or other compensation to the
Insurance Company under this agreement, except as set forth in Section 6.4.
6.2. All expenses incident to performance by the Company under this Agreement shall be paid by
the Company. The Company shall see to it that any offering of its shares is registered and that all
of its shares are authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Company or Xxxxx Distributors, in accordance with applicable
state laws prior to their sale. The Company shall bear the cost of registration and qualification
of the Company’s shares, preparation and filing of the Company’s prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting in type and
printing the proxy materials and reports to shareholders, the preparation of all statements and
notices required by any federal or state law, and all taxes on the issuance or transfer of the
Company’s shares.
6.3. The Insurance Company shall bear the expenses of printing and distributing to Contract
owners the Contract prospectuses and of distributing to Contract owners the Company’s prospectus,
proxy materials and reports.
6.4. The Insurance Company bears the responsibility and correlative expense for administrative
and support services for Contract owners. Xxxxx Distributors recognizes the Insurance Company,
on behalf of each Account, as the sole shareholder of shares of the Company issued under this
Agreement. From time to time, Xxxxx Distributors may pay amounts from its past profits to the
Insurance Company for providing certain administrative services for the Company or for providing
other services that relate to the Company, hi consideration of the savings resulting from such
arrangement, and to compensate the Insurance Company for its costs, Xxxxx Distributors agrees to
pay to the Insurance Company an amount equal to 25 basis points (0.25%) per annum of the average
aggregate amount invested by the Insurance Company in the Company under this Agreement. Such
payments will be made quarterly. ‘ The parties agree that such payments are for administrative
services and investor support services, and do not constitute payment for investment advisory,
distribution or other services. Payment of such amounts by Xxxxx Distributors shall not increase
the fees paid by the Company or its shareholders.
ARTICLE VII. Diversification
7.1. The Company will comply with Section 817(h) of the Code and Treasury Regulation 1.817-5
relating to the diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that Section or
Regulation at all times necessary to satisfy those requirements. Upon having a reasonable basis
for believing a Fund has ceased to comply and will not be able to comply within the grace period
afforded by Regulation 1.817-5, the Company will notify the Insurance Company immediately and will
take all reasonable steps to adequately diversify the Fund to achieve compliance.
ARTICLE VIII. Potential Conflicts
8.1. The directors of the Company will monitor each Fund for the existence of any material
irreconcilable conflict between the interests of the variable Contract owners of all separate
accounts
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investing in the Company and the participants of all Qualified Plans investing in the Company.
An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by
any state insurance regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of variable contract owners.
The directors of the Company shall promptly inform the Insurance Company if they determine that an
irreconcilable material conflict exists and the implications thereof. The directors of the
Company shall have sole authority to determine whether an irreconcilable material conflict exists
and their determination shall be binding upon the Insurance Company.
8.2. The Insurance Company and Xxxxx Distributors each will report promptly any potential or
existing conflicts of which it is aware to the directors of the Company. The Insurance Company and
Xxxxx Distributors each will assist the directors of the Company in carrying out their
responsibilities under the Mixed and Shared Funding Exemptive Order, by providing the directors of
the Company with all information reasonably necessary for them to consider any issues raised. This
includes, but is not limited to, an obligation by the Insurance Company to inform the directors of
the Company whenever Contract owner voting instructions are to be disregarded. These
responsibilities shall be carried out by the Insurance Company with a view only to the interests of
the Contract owners and by Xxxxx Distributors with a view only to the interests of Contract owners
and Qualified Plan participants.
8.3. If it is determined by a majority of the directors of the Company, or a majority of the
directors who are not interested persons of the Company, any of its Funds, or Xxxxx Distributors
(the “Independent Directors”), that a material irreconcilable conflict exists, the Insurance
Company and/or other Participating Insurance Companies or Qualified Plans that have executed
participation agreements shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the Independent Directors), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (1) withdrawing the assets
attributable to some or all of the separate accounts from the Company or any Fund and reinvesting
those assets in a different investment medium, including (but not limited to) another Fund of the
Company, or submitting the question whether such segregation should be implemented to a vote of all
affected variable contract owners and, as appropriate, segregating the assets of any appropriate
group (e.g., annuity contract owners, life insurance contract owners, or variable contract owners
of one or more Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected variable contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate account and
obtaining any necessary approvals or orders of the SEC in connection therewith.
8.4. If a material irreconcilable conflict arises because of a decision by the Insurance
Company to disregard Contract owner voting instructions and that decision represents a minority
position or would preclude a majority vote, the Insurance Company may be required, at the Company’s
election, to withdraw the affected Account’s investment in the Company and terminate this Agreement
with respect to that Account; provided,
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however, that such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the Independent
Directors. Any such withdrawal and termination must take place within six (6) months after the
Company gives written notice that this provision is being implemented, and, until the end of that
six month period, the Company shall continue to accept and implement orders by the Insurance
Company for the purchase (and redemption) of shares of the Company.
8.5. If a material irreconcilable conflict arises because a particular state insurance
regulator’s decision applicable to the Insurance Company conflicts with the majority of other state
regulators, then the Insurance Company will withdraw the affected Account’s investment in the
Company and terminate this Agreement with respect to that Account within six months after the
directors of the Company inform the Insurance Company in writing that they have determined that the
state insurance regulator’s decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the Independent
Directors. Until the end of the foregoing six month period, the Company shall continue to accept
and implement orders by the Insurance Company for the purchase (and redemption) of shares of the
Company.
8.6. For purposes of Sections 8.3 through 8.6 of this Agreement, a majority of the Independent
Directors shall determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Company be required to establish a new funding medium
for the Contracts. The Insurance Company shall not be required by Section 8.3 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 adversely affected by the irreconcilable material conflict. In the event
that the directors of the Company determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Insurance Company will withdraw the Account’s investment
in the Company and terminate this Agreement within six (6) months after the directors of the
Company inform the Insurance Company in writing of the foregoing determination, provided, however,
that the withdrawal and termination shall be limited to the extent required by the material
irreconcilable conflict, as determined by a majority of the Independent Directors.
8.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from those contained in the Mixed and
Shared Funding Exemptive Order, then (a) the Company and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent those rules are applicable; and (b) Sections 3.4,
3.5, 8.1, 8.2, 8.3, 8.4, 8.5, and 8.6 of this Agreement shall continue in effect only to the extent
that terms and conditions substantially identical to those Sections are contained in the Rule(s) as
so amended or adopted.
12
ARTICLE IX. Indemnification
9.1. Indemnification By The Insurance Company
9.1 (a). The Insurance Company agrees to indemnify and hold harmless the Company and each
director, officer, employee or agent of the Company, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (each, an “Indemnified Party” and
collectively, the “Indemnified Parties” for purposes of this Section 9.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with the written
consent of the Insurance Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the acquisition or redemption of the Company’s shares by the
Insurance Company or to the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or statement of additional information for the
Contracts or contained in the Contracts or sales literature
generated or approved by the Insurance Company for the Contracts (or
any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished in writing to the Insurance Company by or on behalf of the
Company for use in the registration statement, prospectus or
statement of additional information for the Contracts or in the
Contracts or sales literature (or any amendment or supplement to any
of the foregoing) or otherwise for use in connection with the sale
of the Contracts or shares of the Company;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in or accurately
derived
from the registration statement, prospectus, statement of
additional information or sales literature of the Company not
supplied by the Insurance Company, or persons under its control) or
wrongful conduct of the Insurance Company or persons under its
control, with respect to the sale or distribution of the Contracts
or the sale of shares of the Company to the Insurance Company;
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, statement of additional information or sales literature
of the
13
Company or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon and accurately derived from information furnished in
writing to the Company by or on behalf of the Insurance Company;
(iv) arise as a result of any failure by the Insurance Company to
provide the services and furnish the materials required under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance Company
in this Agreement or arise out of or result from any other material
breach of this Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 9. l(b) and 9. l(c) hereof.
9.1(b). The Insurance Company shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an
Indemnified Party that may arise from that Indemnified Party’s willful misfeasance, bad faith, or
gross negligence in the performance of that Indemnified Parry’s duties or by reason of that
Indemnified Party’s reckless disregard of obligations or duties under this Agreement or to the
Company, whichever is applicable.
9.1(c). The Insurance Company shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless that Indemnified Party shall have
notified the Insurance Company in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Insurance Company of its obligations hereunder
except to the extent that the Insurance Company has been prejudiced by such failure to give notice,
hi addition, any failure by the Indemnified Party to notify the Insurance Company of any such claim
shall not relieve the Insurance Company from any liability which it may have to the Indemnified
Party against whom the action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties, the Insurance
Company shall be entitled to participate, at its own expense, in the defense of the action. The
Insurance Company also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; provided, however, that if the Indemnified Party shall
have reasonably concluded that there may be defenses available to it which are different from or
additional to those available to the Insurance Company, the Insurance Company shall not have the
right to assume said defense, but shall pay the costs and expenses thereof (except that in no event
shall the Insurance Company be liable for the fees and expenses of more than one counsel for
Indemnified Parties in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or circumstances). After notice
from the Insurance Company to the Indemnified Party of the Insurance Company’s election to
14
assume the defense thereof, and in the absence of such a reasonable conclusion that there may
be different or additional defenses available to the Indemnified Party, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the Insurance Company will
not be liable to that party under this Agreement for any legal or other expenses subsequently
incurred by the party independently in connection with the defense thereof other than reasonable
costs of investigation.
9.1(d). An Indemnified Party will promptly notify the Insurance Company of the commencement
of any litigation or proceedings against such Indemnified Party in connection with this Agreement,
the issuance or sale of the Company’s shares or the Contracts or the operation of the Company.
9.2. Indemnification by Xxxxx Distributors
9.2(a). Xxxxx Distributors agrees to indemnify and hold harmless the Insurance Company, and
each director, officer, employee and agent of the Insurance Company, and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act (individually, an
“Indemnified Party” and collectively, the “Indemnified Parties” for purposes of this Section 9.2)
against any and all losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of Xxxxx Distributors, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are related to the sale,
acquisition or redemption of the Company’s shares or to the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement, prospectus, statement of additional information or sales
literature or other promotional material of the Company (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party
if the statement or omission or alleged statement or omission was
made in reliance upon and in conformity with information furnished
in writing to Xxxxx Distributors or the Company by or on behalf of
the Insurance Company for use in the registration statement,
prospectus, or statement of additional information for the Company
or in sales literature or other promotional material (or any
amendment or supplement to any of the foregoing) or otherwise for
use in connection with the sale of the Contracts or Company shares;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales
15
literature for the Contracts not supplied by Xxxxx Distributors or
persons under its control) or wrongful conduct of the Company, Xxxxx
Distributors or persons under their control, with respect to the
sale or distribution of the Contracts or shares of the Company;
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, statement of additional information or sales literature
or other promotional material covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished in writing to the Insurance Company by or on
behalf of the Company;
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials required under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification requirements
specified in Article VII of this Agreement or the representation set
forth in Paragraph 2.3 of this Agreement); or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by Xxxxx Distributors in
this Agreement or arise out of or result from any other material
breach of this Agreement by Xxxxx Distributors;
as limited by and in accordance with the provisions of Sections 9.2(b) and 9.2(c) hereof.
9.2(b) Xxxxx Distributors shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an
Indemnified Party that may arise from the Indemnified Party’s willful misfeasance, bad faith, or
gross negligence in the performance of the Indemnified Party’s duties or by reason of the
Indemnified Party’s reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
9.2(c) Xxxxx Distributors shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless the Indemnified Party shall have
notified Xxxxx Distributors in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been served upon the
Indemnified Party (or after the Indemnified Party shall have received notice of such service on
any designated agent). Notwithstanding the foregoing, the failure of any Indemnified Party to give
notice as provided herein shall not relieve Xxxxx Distributors of its obligations hereunder except
to the extent that Xxxxx Distributors has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party to notify Xxxxx Distributors of any such claim
shall not relieve Xxxxx Distributors from any liability which it may have to
16
the Indemnified Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the Indemnified Parties,
Xxxxx Distributors will be entitled to participate, at its own expense, in the defense thereof.
Xxxxx Distributors also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; provided, however, that if the Indemnified Party shall
have reasonably concluded that there may be defenses available to it which are different from or
additional to those available to Xxxxx Distributors, Xxxxx Distributors shall not have the right
to assume said defense, but shall pay the costs and expenses thereof (except that in no event
shall Xxxxx Distributors be liable for the fees and expenses of more than one counsel for
Indemnified Parties in connection with any one action or separate but similar or related actions
in the same jurisdiction arising out of the same general allegations or circumstances). After
notice from Xxxxx Distributors to the Indemnified Party of Xxxxx Distributors’ election to assume
the defense thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and Xxxxx Distributors will
not be liable to that party under this Agreement for any legal or other expenses subsequently
incurred by that party independently in connection with the defense thereof other than reasonable
costs of investigation.
9.2(d) An Indemnified Party will promptly notify Xxxxx Distributors of the commencement of
any litigation or proceedings against such Indemnified Party in connection with this Agreement,
the issuance or sale of the Contracts or the operation of any Account.
9.3 Indemnification By the Company
9.3(a). The Company agrees to indemnify and hold harmless the Insurance Company, and each
director, officer, employee and agent of the Insurance Company, and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act (individually, an
“Indemnified Party” and collectively, the “Indemnified Parties” for purposes of this Section 9.3)
against any and all losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company, which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses) to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as those losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of any director(s) of the Company, are related to the
operations of the Company or:
(i) arise as a result of any failure by the Company to provide the
services and furnish’ the materials required under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VII of this Agreement or the
representation set forth in Paragraph 2.3 of the Agreement);
(ii) arise out of or result from any material breach of any
representation, warranty or agreement made by the Company in
17
this Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(iii) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate for any Fund.
With respect to net asset value information, the Company will make a
determination, in accordance with SEC guidelines, as to whether an
error has occurred. Any correction of pricing errors shall be
accomplished using the least costly corrective action permitted
under SEC guidelines, as agreed to by the Company in writing. In no
event shall the Company be required to reimburse for pricing errors
caused by conditions beyond the control of the Company or its agent,
including, but not limited to, Acts of God, fires, and electrical or
phone outages.
as limited by, and in accordance with the provisions of, Sections 9.3(b) and 9.3(c) hereof.
9.3(b). The Company shall not be liable under this indemnification provision with respect to
any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified
Party that may arise from the Indemnified Party’s willful misfeasance, bad faith, or gross
negligence in the performance of the Indemnified Party’s duties or by reason of the Indemnified
Party’s reckless disregard of obligations and duties under this Agreement or to the Insurance
Company or the Account, whichever is applicable.
9.3(c). The Company shall not be liable under this indemnification provision with respect to
any claim made against an Indemnified Party unless the Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any designated agent).
Notwithstanding the foregoing, the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Company of its obligations hereunder except to the extent that the
Company has been prejudiced by such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company will be entitled to participate, at its own expense, in the
defense thereof. The Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action; provided, however, that if the Indemnified
Party shall have reasonably concluded that there may be defenses available to it which are
different from or additional to those available to the Company, the Company shall not have the
right to assume said defense, but shall pay the costs and expenses thereof (except that in no event
shall the Company be liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances). After notice from the
Company to the Indemnified Party of the Company’s election to assume the defense thereof, and in
the absence of such a reasonable conclusion that there may be different or additional defenses
available to the
18
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Company will not be liable to that party under this Agreement for
any legal or other expenses subsequently incurred by that party independently in connection with
the defense thereof other than reasonable costs of investigation.
9.3(d). Each Indemnified Party will promptly notify the Company of the commencement of any
litigation or proceedings against such Indemnified Party in connection with this Agreement, the
issuance or sale of the Contracts, the operation of any Account, or the acquisition of shares of
the Company by the Insurance Company.
9.4. Notwithstanding anything in this Agreement to the contrary, in no event will a party to
this Agreement be liable to any other party for lost profits, or exemplary, punitive, special,
incidental, indirect, or consequential damages, each of which is hereby excluded by the parties.
ARTICLE X. Applicable Law
10.1. This Agreement shall be construed and provisions hereof interpreted under and in
accordance with the laws of the State of Maryland.
10.2. This Agreement shall be subject to the provisions of the 1933, 1934, and 1940 Acts, and
the rules and regulations and rulings thereunder, including any exemptions from those statutes,
rules and regulations the SEC may grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE XL Termination
11.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice to the other parties;
provided, however, such notice shall not be given earlier than one year following the date
of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares of Funds are not
reasonably available to meet the requirements of the Contracts as determined by the
Insurance Company, provided, however, that such a termination shall apply only to the
Fund(s) not reasonably available. Prompt written notice of the election to terminate for
such cause shall be furnished by the Insurance Company to the Company and Xxxxx
Distributors; or
(c) at the option of the Company or Xxxxx Distributors, in the event that formal
administrative proceedings are instituted against the Insurance Company by the NASD, the
SEC, an insurance commissioner or any other regulatory body regarding the Insurance
Company’s duties under this Agreement or related to the sale of the Contracts, the operation
of any Account, or the purchase of the Company’s shares, provided, however, that the Company
determines, in its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the Insurance Company to
perform its obligations under this Agreement; or
19
(d) at the option of the Insurance Company in the event that formal administrative
proceedings are instituted against the Company or Xxxxx Distributors by the NASD, the SEC,
or any state securities or insurance department or any other regulatory body, provided,
however, that the Insurance Company determines, in its sole judgement exercised in good
faith, that any such administrative proceedings will have a material adverse effect upon the
ability of the Company or Xxxxx Distributors to perform its obligations under this
Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract owners having an
interest in that Account (or any subaccount) to substitute the shares of another investment
company for the corresponding Fund shares in accordance with the terms of the Contracts for
which those Fund shares had been selected to serve as the underlying investment media or as
permitted by an order of the SEC pursuant to Section 26(c) of the 1940 Act. The Insurance
Company will give at least 30 days’ prior written notice to the Company of the date of any
proposed vote to replace the Company’s shares; or
(f) at the option of the Insurance Company, in the event any of the Company’s shares are not
registered, issued or sold in accordance with applicable state and/or federal law or
exemptions therefrom, or such law precludes the use of those shares as the underlying
investment media of the Contracts issued or to be issued by the Insurance Company; or
(g) at the option of the Insurance Company, if the Company ceases to qualify as a regulated
investment company under Subchapter M of the Code or under any successor or similar
provision, or if the Insurance Company reasonably believes that the Company may fail to so
qualify; or
(h) at the option of the Insurance Company, if the Company fails to meet the
diversification requirements specified in Article VII hereof; or
(i) at the option of either the Company or Xxxxx Distributors, if (1) the Company or Xxxxx
Distributors, respectively, shall determine, in their sole judgment reasonably exercised in
good faith, that the Insurance Company has suffered a material adverse change in its
business or financial condition or is the subject of material adverse publicity and that
material adverse change or material adverse publicity will have a material adverse impact
upon the business and operations of either the Company or Xxxxx Distributors, (2) the
Company or Xxxxx Distributors shall notify the Insurance Company in writing of that
determination and its intent to terminate this Agreement, and (3) after considering the
actions taken by the Insurance Company and any other changes in circumstances since the
giving of such a notice, the determination of the Company or Xxxxx Distributors shall
continue to apply on the sixtieth (60th) day following the giving of that notice, which
sixtieth day shall be the effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance Company shall determine, in
its sole judgment reasonably exercised in good faith, that either the Company or Xxxxx
Distributors has suffered a material adverse change in its business or financial condition
or is the subject of material adverse publicity and that material adverse change or material
adverse publicity will have a material adverse impact upon the business and operations of
20
the Insurance Company, (2) the Insurance Company shall notify the Company and Xxxxx
Distributors in writing of the determination and its intent to terminate the Agreement, and
(3) after considering the actions taken by the Company and/or Xxxxx Distributors and any
other changes in circumstances since the giving of such a notice, the determination shall
continue to apply on the sixtieth (60th) day following the giving of the notice, which
sixtieth day shall be the effective date of termination; or
(k) at the option of any party upon another party’s failure to cure a material breach of any
provision of this Agreement within 30 days after written notice thereof.
11.2. It is understood and agreed that the right of any party hereto to terminate this
Agreement pursuant to Section 11. l(a) may be exercised for any reason or for no reason.
11.3. No termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties to this Agreement of its
intent to terminate, which notice shall set forth the basis for the termination. Furthermore,
(a) in the event that any termination is based upon the provisions of Article VIII, or the
provision of Section 11.1 (a), 11.1(i) or 11.10) of this Agreement, the prior written notice
shall be given in advance of the effective date of termination as required by those
provisions; and
(b) in the event that any termination is based upon the provisions of Section 11.1(c) or
11.1(d) of this Agreement, the prior written notice shall be given at least ninety (90) days
before the effective date of termination; provided that any party may terminate this
Agreement immediately with respect to any Fund if such party reasonably determines that
continuing to perform under this Agreement would violate any state or federal law.
11.4. Notwithstanding any termination of this Agreement, subject to Section 1.2 of this
Agreement and for so long as the Company continues to exist, the Company and Xxxxx Distributors
shall, at the option of the Insurance Company, continue to make available additional shares of the
Company pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (“Existing Contracts”). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to reallocate investments from
any other investment option to any Fund, redeem investments in the Company and/or invest in the
Company upon the making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 11.4 shall not apply to any terminations under Article VIII and the effect
of Article VIII terminations shall be governed by Article VIII of this Agreement.
11.5. The Insurance Company shall not redeem Company shares attributable to the Contracts (as
opposed to Company shares attributable to the Insurance Company’s assets held in the Account)
except (i) as necessary to implement Contract-owner-initiated transactions, or (ii) as required by
state and/or federal laws or regulations or judicial or other legal precedent of general
application (a “Legally Required Redemption”), or as permitted by an order of the SEC pursuant to
Section 26(c) of the 1940 Act. Upon request, the Insurance Company will promptly furnish to the
Company and Xxxxx Distributors the opinion of counsel for the Insurance Company (which counsel
21
shall be reasonably satisfactory to the Company and Xxxxx Distributors) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by registered or certified mail to the other
party at the address of that other party set forth below or at such other address as the other
party may from time to time specify in writing.
If to the Company:
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
If to the Insurance Company:
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx, General Counsel
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx, General Counsel
If to Xxxxx Distributors:
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
ARTICLE XIII. Miscellaneous
13.1. Subject to the requirements of legal process and regulatory authority, each party hereto
shall treat as confidential the names and addresses of the owners of the Contracts and all
information reasonably identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses
and other confidential information without the express written consent of the affected party unless
and until that information may come into the public domain other than through a breach of this
Agreement.
13.2. The captions in this Agreement are included for convenience of reference only and in no
way define or delineate any of the provisions hereof or otherwise affect their construction or
effect.
13.3. This Agreement may be executed simultaneously in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.
13.5. Each party hereto shall cooperate, to the extent reasonable, with each other party and
all appropriate governmental authorities (including without limitation the SEC, the NASD and state
insurance regulators) and shall permit those authorities reasonable access to its books and records
in
22
connection with any lawful investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
13.6. The rights, remedies and obligations contained in this Agreement are cumulative and are
in addition to any and all rights, remedies and obligations, at law or in equity, which the parties
hereto are entitled to under state and federal laws.
13.7. This Agreement shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, that no party may assign this Agreement without the
prior written consent of the others.
13.8. Except as otherwise expressly provided in this Agreement, neither the Company nor Xxxxx
Distributors, nor any affiliate thereof shall use any trademark, trade name, service xxxx or logo
of the Insurance Company or any of its affiliates, or any variation of any such trademark, trade
name, service xxxx or logo, without the Insurance Company’s prior written consent, the granting of
which shall be at the Insurance Company’s sole option.
13.9. Except as otherwise expressly provided in this Agreement, neither the Insurance Company
nor any affiliate thereof shall use any trademark, trade name, service xxxx or logo of the Company
or Xxxxx Distributors, or any affiliates thereof, or any variation of any such trademark, trade
name, service xxxx or logo, without the Company’s or Xxxxx Distributor’s prior written consent, the
granting of which shall be at the Company’s and Xxxxx Distributor’s sole option.
13.10. Agreement to Arbitrate. Each of the parties agrees that any controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Code of Arbitration Procedure of the National Association of
Securities Dealers (or, in the event that the National Association of Securities Dealers refuses to
accept jurisdiction, the Commercial Arbitration Rules of the American Arbitration Association), and
judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its
name and on its behalf by its duly authorized representative as of the date specified below.
ANNUITY INVESTORS LIFE INSURANCE COMPANY (“Insurance Company”) By its authorized officer, |
By: /s/ ILLEGIBLE |
||||
Title: Senior Vice President | ||||
Date: 4/27/07 |
XXXXX VARIABLE ACCOUNT FUND (“Company”) |
||||
By its authorized officer, | ||||
By: /s/ ILLEGIBLE |
||||
Title Vice President | ||||
Date: 4/25/07 | ||||
XXXXX DISTRIBUTORS, LLC (“Xxxxx Distributors”) By its authorized officer, |
||||
By: /s/ ILLEGIBLE |
||||
Title: Vice President | ||||
Date: 4/25/07 |
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Schedule A
Accounts
Accounts
Date of Resolution of Insurance Company’s | ||
Name of Account | Board which Established the Account | |
December 19,1996 | ||
Annuity Investors Variable Account C
|
November 7,2001 |
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Schedule B
Contracts
Contracts
The Commodore Spirit Individual Flexible Premium Deferred Variable Annuity The Commodore
Spirit Group Flexible Premium Deferred Variable Annuity The Commodore Independence
Individual Flexible Premium Deferred Variable Annuity The Commodore Independence Group
Flexible Premium Deferred Variable Annuity The Commodore Advantage Individual Flexible
Premium Deferred Variable Annuity
Annuity Investors Variable Account C
The Commodore Helmsman Individual Flexible Premium Deferred Variable Annuity The Commodore
Majesty Individual Flexible Premium Deferred Variable Annuity
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Schedule D
Proxy Voting Procedure
Proxy Voting Procedure
The following is a list of procedures and corresponding responsibilities for the handling
of proxies relating to the Company by Xxxxx Distributors, the Company and the Insurance Company.
The defined terms herein shall have the meanings assigned in the Participation Agreement except
that the term “Insurance Company” shall also include the department or third party assigned by the
Insurance Company to perform the steps delineated below.
1. | The number of proxy proposals is given to the Insurance Company by Xxxxx Distributors as early as possible before the date set by the Company for the shareholder meeting to facilitate the establishment of tabulation procedures. At this time Xxxxx Distributors will inform the Insurance Company of the Record, Mailing and Meeting dates. This will be done verbally, with confirmation following promptly in writing, approximately two months before meeting. | |
2. | Promptly after the Record Date, the Insurance Company will perform a “tape run”, or other activity, which will generate the names, addresses and number of units which are attributed to each contract-owner/policyholder (the “Customer”) as of the Record Date. Allowance should be made for account adjustments made after this date that could affect the status of the Customers’ accounts of the Record Date. |
Note: The number of proxy statements is determined by the activities described in Step #2.
The Insurance Company will use its best efforts to call in the number of Customers to Xxxxx
Distributors, as soon as possible, but no later than one week after the Record Date.
3. | The text and format for the Voting Instruction Cards (“Cards” or “Card”) is provided to the Insurance Company by the Company. The Insurance Company, at its expense, shall produce and personalize the Voting Instruction cards. Xxxxx Distributors must approve the Card before it is printed. Allow approximately 2-4 business days for printing information on the Cards. Information commonly found on the Cards includes: |
a. | name (legal name as found on account registration) | ||
b. | address | ||
c. | Fund or account number | ||
d. | coding to state number of units | ||
e. | individual Card number for use in tracking and verification of votes (already on Cards as printed by the Company). |
(This and related steps may occur later in the chronological process due to possible
uncertainties relating to the proposals.)
4. During this time, Xxxxx Distributors will develop, produce, and the Company will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed and
folded notices and statements will be sent to Insurance Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the Insurance
Company). Contents of envelope sent to customers by Insurance Company will include:
a. | Voting Instruction Card(s) |
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b. | One proxy notice and statement (one document) | ||
c. | Return envelope (postage pre-paid by Insurance Company) addressed to the Insurance Company or its tabulation agent | ||
d. | “Urge buckslip” — optional, but recommended. (This is a small, single sheet of paper that requests Contract owners to vote as quickly as possible and that their vote is important. One copy will be supplied by the Company.) | ||
e. | Cover letter — optional, supplied by Insurance Company and reviewed and approved in advance by Xxxxx Distributors. |
5. | The above contents should be received by the Insurance Company approximately 3-5 business days before mail date, and in no event later than 3 business days before mail date. Individual in charge at Insurance Company reviews and approves the contents of the mailing package to ensure correctness and completeness. Copy of this approval sent to Xxxxx Distributors. | |
6. | Package mailed by the Insurance Company. |
* | The Company must allow at least a 15-day solicitation time to the Insurance Company as the shareowner. (A 5-week period is recommended.) Solicitation time is calculated as calendar days from (but not including) the meeting, counting backwards. |
7. | Collection and tabulation of Cards begins. Tabulation usually takes place in another department or another vendor depending on process used. An often-used procedure is to sort cards on arrival by proposal into vote categories of all yes, no, or mixed replies, and to begin data entry. | |
Note: Postmarks are not generally needed. A need for postmark information would be due to an insurance company’s internal procedure. | ||
8. | If Cards are mutilated, or for any reason are illegible or are not signed properly, they are sent back to the Customer with an explanatory letter, a new Card and return envelope. The mutilated or illegible Card is disregarded and considered to be not received for purposes of vote tabulation. Such mutilated or illegible Cards are “hand verified,” i.e., examined as to why they did not complete the system. Any questions on those Cards are usually remedied individually. | |
9. | There are various control procedures used to ensure proper tabulation of votes and accuracy of that tabulation. The most prevalent is to sort the Cards as they first arrive into categories depending upon their vote; an estimate of how the vote is progressing may then be calculated. If the initial estimates and the actual vote do not coincide, then an internal audit of that vote should occur. This may entail a recount. | |
10. | The actual tabulation of votes is done in units and then converted to shares. (It is very important that the Company receives the tabulations stated in terms of a percentage and the number of shares.) Xxxxx Distributors must review and approve tabulation format. |
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11. | Final tabulation in shares is verbally given by the Insurance Company to Xxxxx Distributors on the day of the meeting not later than 1:00 p.m. Eastern time. Xxxxx Distributors may request an earlier deadline if required to calculate the vote in time for the meeting. |
12. | A Certificate of Mailing and Authorization to Vote Shares will be required from the Insurance Company as well as an original copy of the final vote. Xxxxx Distributors will provide a standard form for each Certification. |
13. | The Insurance Company will be required to box and archive the Cards received from the Customers, hi the event that any vote is challenged or if otherwise necessary for legal, regulatory, or accounting purposes, Xxxxx Distributors will be permitted reasonable access to such Cards. |
14. | All approvals and “signing-ofF” may be done orally, but must always be followed up in writing. For this purpose, signatures transmitted by facsimile will be acceptable. | |
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