FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the ___ day of ___________, 1999,
by and among __Valley Forge Life Insurance Co.__ ("Insurer"), a life insurance
company organized under the laws of the State of __Pennsylvania__, __CNA
Investor Services, Inc. an __Illinois__ corporation ("Contract Distributor"),
LAZARD ASSET MANAGEMENT ("XXX"), a division of Lazard Freres & Co. LLC, a New
York limited liability company ("LF & Co."), and LAZARD RETIREMENT SERIES, INC.
("Fund"), a Maryland corporation (collectively, the "Parties").
ARTICLE I.
DEFINITIONS
The following terms used in this Agreement shall have the meanings set out
below:
1.1. "Act" shall mean the Investment Company Act of 1940, as amended.
1.2. "Board" shall mean the Fund's Board of Directors having the responsibility
for management and control of Fund.
1.3. "Business Day" shall mean any day for which Fund calculates net asset value
per share as described in a Portfolio Prospectus.
1.4. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5. "Commission" shall mean the Securities and Exchange Commission.
1.6. "Contract" shall mean a variable annuity or variable life insurance
contract that uses a Portfolio or Fund as an underlying investment medium
and that is named on Schedule 1 hereto, as the Parties may amend in writing
from time to time by mutual agreement ("Schedule 1").
1.7. "Contract Prospectus" shall mean the prospectus and, if applicable,
statement of additional information, as currently in effect with the
Commission, with respect to the Contracts, including any supplements or
amendments thereto. All references to "Contract Prospectuses" shall be
deemed to also include all offering documents and other materials relating
to any Contract that is not registered under the Securities Act of 1933, as
amended ("1933 Act").
1.8. "Contractholder" shall mean any person that is a party to a Contract with a
Participating Company. Individuals who participate under a group Contract
are "Participants."
1.9. "Disinterested Board Members" shall mean those members of the Board that
are not deemed to be "interested persons" of Fund, as defined by the Act.
1.10. "General Account" shall mean the general account of Insurer.
1.11."Participating Company" shall mean any insurance company, including
Insurer, that offers variable annuity and/or variable life insurance
contracts to the public and that has entered into an agreement with Fund
for the purpose of making Fund shares available to serve as the underlying
investment medium for Contracts.
1.12. "Portfolio" shall mean each series of Fund named on Schedule 1.
1.13."Portfolio Prospectus" shall mean the prospectus and statement of
additional information, as currently in effect with the Commission, with
respect to the Portfolios, including any supplements or amendments thereto.
1.14."Separate Account" shall mean a separate account duly established by
Insurer in accordance with the laws of the State of __Illinois__ and named
on Schedule 1.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1. Insurer represents and warrants that:
(a) it is an insurance company duly organized and in good standing under
__Pennsylvania__ law;
(b) it has legally and validly established and shall maintain each
Separate Account pursuant to the insurance laws and regulations of the
State of __Illinois__;
(c) it has registered and shall maintain the registration of each Separate
Account as a unit investment trust under the Act, to the extent
required by the Act, to serve as a segregated investment account for
the Contracts;
(d) each Separate Account is and at all times shall be eligible to invest
in shares of Fund without such investment disqualifying Fund as an
investment medium for insurance company separate accounts supporting
variable annuity contracts and/or variable life insurance contracts;
(e) each Separate Account is and at all times shall be a "segregated asset
account," and interests in each Separate Account that are offered to
the public shall be issued exclusively through the purchase of a
Contract that is and at all times shall be a "variable contract"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. Insurer agrees to notify Fund and XXX
immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in
the future;
(f) the Contracts are and at all times shall be treated as life insurance,
endowment or annuity contracts under applicable provisions of the
Code, and it shall notify Fund 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.
2.2 Insurer and Distributor represent and warrant that (a) units of interest in
each Separate Account available through the purchase of Contracts are
registered under the 1933 Act, to the extent required thereby; (b) the
Contracts shall be issued in compliance in all material respects with all
applicable federal and state laws; and (c) the sale of the Contracts shall
comply in all material respects with state insurance law requirements.
Insurer agrees to inform Fund promptly of any investment restrictions
imposed by state insurance law and applicable to Fund.
2.3 Distributor represents and warrants that it is and at all times shall be:
(a) registered with the Commission as a broker-dealer, (b) a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD");
and (c) an __Illinois__ corporation duly organized, validly existing, and
in good standing under the laws of the State of, __Illinois__ with full
power, authority, and legal right to execute, deliver, and perform its
duties and comply with its obligations under this Agreement. Distributor is
a limited purpose Broker-Dealer and does not oversee the licensing of sales
practices of registered representatives.
2.4 Fund represents and warrants that:
(a) it is and shall remain registered with the Commission as an open-end,
management investment company under the Act to the extent required
thereby;
(b) its shares are registered under the 1933 Act to the extent required
thereby;
(c) it possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for it to operate and
offer its shares as an underlying investment medium for the Contracts;
(d) each Portfolio is qualified as a regulated investment company under
Subchapter M of the Code, it shall make every effort to maintain such
qualification, and it shall notify Insurer immediately upon having a
reasonable basis for believing that any Portfolio invested in by the
Separate Account has ceased to so qualify or that it might not so
qualify in the future;
(e) each Portfolio's assets shall be managed and invested in a manner that
complies with the requirements of Section 817(h) of the Code and the
regulations thereunder, to the extent applicable; and in the event of
breach of this provision by the Fund it will take all reasonable steps
to: (a) notify the Company of such breach and (b) adequately diversify
the Fund so as to achieve compliance within the grace period afforded
by Regulation 817-5. The Fund shall provide the Company information
reasonably requested in relation Section 817(h) diversification
requirements, including quarterly reports and annual certifications.
And
(f) all of its directors, officers, employees, investment advisers, and
other individuals/entities who deal with the money and/or securities
of Fund are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of Fund in an amount
not less than that required by Rule 17g-1 under the Act. The aforesaid
bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.5 XXX represents and warrants that LF & Co., the principal underwriter of
each Portfolio's shares, that it is and at all times shall be: (a)
registered with the Commission as a broker-dealer, (b) a member in good
standing of the NASD; and (c) a New York limited liability company duly
organized, validly existing, and in good standing under the laws of the
State of New York, with full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement. XXX further represents and warrants that it shall sell the
shares of the Portfolios to Insurer in compliance in all material respects
with all applicable federal and state securities laws.
ARTICLE III.
FUND SHARES
3.2. Fund agrees to make the shares of each Portfolio available for purchase by
Insurer and each Separate Account at net asset value and without sales
charge, subject to the terms and conditions of this Agreement. Fund may
refuse to sell the shares of any Portfolio to any person, or suspend or
terminate the offering of the shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Board, acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary and
in the best interests of the shareholders of such Portfolio.
3.3. Fund agrees that it shall sell shares of the Portfolios only to persons
eligible to invest in the Portfolios in accordance with Section 817(h) of
the Code and the regulations thereunder, to the extent such Section and
regulations are applicable.
3.4. Except as noted in this Article III, Fund and Insurer agree that orders and
related payments to purchase and redeem Portfolio shares shall be processed
in the manner set out in Schedule 2 hereto, as the Parties may amend in
writing from time to time by mutual agreement.
0.00.Xxxx shall confirm each purchase or redemption order made by Insurer.
Transfer of Portfolio shares shall be by book entry only. No share
certificates shall be issued to Insurer. Shares ordered from Fund shall be
recorded in an appropriate title for Insurer, on behalf of each Separate or
General Account.
0.00.Xxxx shall promptly notify Insurer of the amount of dividend and capital
gain, if any, per share of each Portfolio to which Insurer is entitled.
Insurer hereby elects to reinvest all dividends and capital gains of any
Portfolio in additional shares of that Portfolio at the applicable net
asset value, until Insurer otherwise notifies Fund in writing. Insurer
reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash.
ARTICLE IV.
STATEMENTS AND REPORTS
4.1. Fund shall provide Insurer with monthly statements of account by the
fifteenth (15th) Business Day of the following month.
4.2 At least annually, Fund or its designee shall provide Insurer, free of
charge, with as many Portfolio Prospectuses as Insurer may reasonably
request for distribution by Insurer to existing Contractholders and
Participants that have invested in that Portfolio. Fund or its designee
shall provide Insurer, at Insurer's expense, with as many Portfolio
Prospectuses as Insurer may reasonably request for distribution by Insurer
to prospective purchasers of Contracts. The Fund shall bear the cost of
printing the Portfolio Prospectuses. If the Portfolio Prospectuses are
printed by the Insurer in one document with the prospectus for the
Contracts and the prospectuses for other funds, then the expenses of such
printing will be apportioned between the Insurer and the Fund in proportion
to the number of pages of the Contract's prospectus, other fund
prospectuses and the Portfolio prospectuses. This expense will be subject
to an annual maximum. That maximum will be calculated by means of a similar
proportion based upon the total dollars invested in the Portfolios as
compared to the total dollars invested in all portfolios offered in the
Contract. The form of the Fund's prospectus and/or statement of additional
information provided to the Company shall be the final form of prospectus
and statement of additional information as filed with the Securities and
Exchange Commission which form shall include only those Portfolios of the
Fund identified in Schedule 1. If requested by the Insurer in lieu of a
printed copy of the prospectuses, fund or its designee shall provide such
documentation in "camera ready" copy, or , at the request of insurer as a
diskette in the form sent to the financial printer and other assistance as
is reasonably necessary in order for the Parties once a year (or more
frequently if the Portfolio Prospectuses are supplemented or updated) to
have the Contract Prospectuses and the Portfolio Prospectuses printed
together in one document.
4.3 Fund shall provide Insurer with copies of each Portfolio's proxy materials,
notices, periodic reports and other printed materials (which the Portfolio
customarily provides to its shareholders) in quantities as Insurer may
reasonably request for distribution by Insurer to each Contractholder and
Participant that has invested in that Portfolio.
4.4 Fund shall provide to Insurer at least one complete copy of all
registration statements, Portfolio Prospectuses, 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 Fund or its shares, contemporaneously with the
filing of such document with the Commission or other regulatory
authorities.
4.5 Insurer shall provide to Fund at least one copy of all registration
statements, Contract Prospectuses, reports, proxy statements, sales
literature which utilizes XXX'x name, company or fund information or
statistics, applications for exemptions, requests for no-action letters,
and all amendments to any of the above, that relate to the Contracts or a
Separate Account, contemporaneously with the filing of such document with
the Commission or the NASD.
ARTICLE V.
EXPENSES
5.1. Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
ARTICLE VI.
EXEMPTIVE RELIEF
6.1. Insurer acknowledges that it has reviewed a copy of Fund's mixed and shared
funding exemptive order ("Order") and, in particular, has reviewed the
conditions to the relief set forth in the related notice ("Notice"). As
required by the conditions set forth in the Notice, Insurer shall report
any potential or existing conflicts promptly to the Board. In addition,
Insurer shall be responsible for assisting the Board in carrying out its
responsibilities under the Order by providing the Board with all
information necessary for the Board to consider any issues raised,
including, without limitation, information whenever Contract voting
instructions are disregarded. Insurer, at least annually, shall submit to
the Board such reports, materials, or data as the Board may reasonably
request so that the Board may carry out fully the obligations imposed upon
it by the Order. Insurer agrees to carry out such responsibilities with a
view to the interests of existing Contractholders.
6.2. If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that Insurer is a
Participating Insurance Company for whom the conflict is relevant, Insurer
shall at its sole cost and expense, and to the extent reasonably
practicable (as determined by a majority of the Disinterested Board
Members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include, but
shall not be limited to:
(a) Withdrawing the assets allocable to some or all Separate Accounts from
Fund or any Portfolio and reinvesting such assets in a different
investment medium, or submitting the question of whether such
segregation should be implemented to a vote of all affected
Contractholders and, as appropriate, segregating the assets of any
appropriate group (i.e. variable annuity or variable life insurance
contract owners) that votes in favor of such segregation; and/or
(b) Establishing a new registered management investment company.
6.3. If a material irreconcilable conflict arises as a result of a decision by
Insurer to disregard Contractholder voting instructions and that decision
represents a minority position or would preclude a majority vote by all
Contractholders having an interest in Fund, Insurer may be required, at the
Board's election, to withdraw the investments of its Separate Accounts in
Fund.
6.4. For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether any proposed action adequately remedies any
material irreconcilable conflict. In no event shall Fund or XXX or any
other investment adviser of Fund be required to bear the expense of
establishing a new funding medium for any Contract. Insurer shall not be
required by this Article to establish a new funding medium for any Contract
if an offer to do so has been declined by vote of a majority of the
Contractholders materially and adversely affected by the material
irreconcilable conflict.
6.5. No action by Insurer taken or omitted, and no action by the Separate
Account or Fund taken or omitted as a result of any act or failure to act
by Insurer pursuant to this Article VI shall relieve Insurer of its
obligations under or otherwise affect the operation of Article V.
ARTICLE VII.
VOTING OF FUND SHARES
7.1. Insurer shall provide pass-through voting privileges to all Contractholders
or Participants as long as the Commission continues to interpret the Act as
requiring pass-through voting privileges for Contractholders or
Participants. Accordingly, Insurer, where applicable, shall vote shares of
a Portfolio held in each Separate Account in a manner consistent with
voting instructions timely received from its Contractholders or
Participants. Insurer shall be responsible for assuring that the Separate
Account calculates voting privileges in a manner consistent with other
Participating Companies. Insurer shall vote shares for which it has not
received timely voting instructions, as well as shares it owns, in the same
proportion as it votes those shares for which it has received voting
instructions.
7.2. If and to the extent Rule 6e-2 and Rule 6e-3(T) under the Act are amended,
or if Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules thereunder with respect to mixed and shared funding
on terms and conditions materially different from any exemptions granted in
the Order, then Fund, and/or the Participating Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and Rule
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules
are applicable.
ARTICLE VIII.
MARKETING
8.1. Fund or LF & Co. shall periodically or upon request furnish Insurer with
Portfolio Prospectuses and sales literature or other promotional materials
for each Portfolio, in quantities as Insurer may reasonably request for
distribution to prospective purchasers of Contract. Expenses for the
printing and distribution of such documents shall be borne by Insurer.
8.2. Insurer shall designate certain persons or entities that shall have the
requisite licenses to solicit applications for the sale of Contracts.
Insurer shall make reasonable efforts to market the Contracts and shall
comply with all applicable federal and state laws in connection therewith.
8.3. Insurer shall furnish, or shall cause to be furnished, to Fund, each piece
of sales literature or other promotional material in which Fund, XXX, XX &
Co., Fund's administrator is named, at least five (5) Business Days prior
to its use. No such material shall be used if the Fund or its designee
reasonably objects to such use within fifteen business days of the receipt
of such material.
8.4. Insurer shall not give any information or make any representations or
statements on behalf of Fund, XXX, XX & Co., or concerning Fund or any
Portfolio in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or a
Portfolio Prospectus, as the same may be amended or supplemented from time
to time, or in reports or proxy statements for each Portfolio, or in sales
literature or other promotional material approved by Fund.
8.5. Fund shall furnish, or shall cause to be furnished, to Insurer, each piece
of the Fund's sales literature or other promotional material in which
Insurer or a Separate Account is named, at least five (5) Business Days
prior to its use. No such material shall be used if the Insurer reasonably
objects to such use within fifteen business days after receipt of such
material.
8.6. Fund shall not, in connection with the sale of Portfolio shares, give any
information or make any representations on behalf of Insurer or concerning
Insurer, a Separate Account, or the Contracts other than the information or
representations contained in a registration statement for the Contracts or
the Contract Prospectus, as the same may be amended or supplemented from
time to time, or in published reports for each Separate Account that are in
the public domain or approved by Insurer for distribution to
Contractholders or Participants, or in sales literature or other
promotional material approved by Insurer.
8.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for
use, in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards, motion
pictures or other public media), sales literature (such as any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, or 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, prospectuses, statements of
additional information, shareholder reports and proxy materials, and any
other material constituting sales literature or advertising under the rules
of the National Association of Securities Dealers, Inc. ("NASD"), the Act
or the 1933 Act.
ARTICLE IX.
INDEMNIFICATION
9.1. Insurer and Distributor each agree to indemnify and hold harmless Fund,
XXX, any sub-investment adviser of a Portfolio, and their affiliates, and
each of their respective directors, trustees, general members, officers,
employees, agents and each person, if any, who controls or is associated
with any of the foregoing entities or persons within the meaning of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section), against any and all losses, claims, damages or liabilities joint
or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted) (collectively,
"Losses") for which the Indemnified Parties may become subject, under the
1933 Act or otherwise, insofar as such Losses (or actions in respect to
thereof):
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact (collectively "materially untrue
statement") contained in any registration statement, Contract
Prospectus, Contract, or sales literature or other promotional
material relating to a Separate Account or the Contracts
(collectively, "Account documents"), 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 (collectively "material omission");
(b) arise out of or are based upon any materially untrue statement or
material omission made in any registration statement, Portfolio
Prospectus, or sales literature or other promotional material relating
to Fund or a Portfolio (collectively, "Portfolio documents"), provided
such statement or omission was made in reliance upon and in conformity
with information provided in writing to Fund by or on behalf of
Insurer specifically for use therein;
(c) arise out of or as a result of statements or representations (other
than statements or representations contained in any Portfolio document
on which Insurer or Distributor have reasonably relied) or wrongful
conduct of Insurer, Distributor, their respective agents, and persons
under their respective control, with respect to the sale and
distribution of Contracts or Portfolio shares;
(d) arise out of any material breach of any representation and/or warranty
made by Insurer or Distributor in this Agreement, or arise out of or
result from any other material breach of this Agreement by Insurer or
Distributor; or
(e) arise out of Insurer's incorrect calculation and/or untimely reporting
of net purchase or redemption orders.
Insurer and Distributor shall reimburse any Indemnified Party in
connection with investigating or defending any Loss (or actions in
respect to thereof); provided, however, that with respect to clause
(a) above neither Insurer nor Distributor shall be liable in any such
case to the extent that any Loss arises out of or is based upon any
materially untrue statement or material omission made in any Account
documents, which statement or omission was made in reliance upon and
in conformity with written information furnished to Insurer by or on
behalf of Fund specifically for use therein. This indemnity agreement
shall be in addition to any liability that Insurer or Distributor may
otherwise have.
9.2. Fund and XXX each agree to indemnify and hold harmless Insurer and
Distributor and each of their respective directors, officers, employees,
agents and each person, if any, who controls Insurer or Distributor
(collectively, "Indemnified Parties" for purposes of this Section) within
the meaning of the 1933 Act against any Losses to which they or any
Indemnified Party may become subject, under the 1933 Act or otherwise,
insofar as such Losses (or actions in respect thereof):
(a) arise out of or are based upon any materially untrue statement or any
material omission made in any Portfolio document;
(b) arise out of or are based upon any materially untrue statement or any
material omission made in any Account document, provided such
statement or omission was made in reliance upon and in conformity with
information provided in writing to Insurer by or on behalf of Fund
specifically for use therein;
(c) arise out of or as a result of statements or representations (other
than statements or representations contained in any Account document
on which Fund or XXX have reasonably relied) or wrongful conduct of
Fund, XXX, their respective agents, and persons under their respective
control, with respect to the sale of Portfolio Shares; or
(d) arise out of any material breach of any representation and/or warranty
made by Fund or XXX in this Agreement, or arise out of or result from
any other material breach of this Agreement by Fund or XXX.
Fund and XXX shall reimburse any legal or other expenses reasonably
incurred by any Indemnified Party in connection with investigating or
defending any such Loss; provided, however, that with respect to
clause (a) above neither Fund nor XXX shall be liable in any such case
to the extent that any such Loss arises out of or is based upon an
materially untrue statement or material omission made in any Portfolio
document, which statement or omission was made in reliance upon and in
conformity with written information furnished to Fund by or on behalf
of Insurer specifically for use therein. This indemnity agreement
shall be in addition to any liability that Fund or XXX may otherwise
have.
9.3. Fund and XXX shall indemnify and hold Insurer harmless against any Loss
that Insurer may incur, suffer or be required to pay due to Fund's
incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate of a Portfolio or incorrect or untimely
reporting of the same; provided, however, that Fund shall have no
obligation to indemnify and hold harmless Insurer if the incorrect
calculation or incorrect or untimely reporting was the result of incorrect
or untimely information furnished by or on behalf of Insurer or otherwise
as a result of or relating to Insurer's breach of this Agreement. In no
event shall Fund be liable for any consequential, incidental, special or
indirect damages resulting to Insurer hereunder.
9.4 Notwithstanding anything herein to the contrary, in no event shall Fund or
XXX be liable to any individual or entity, including without limitation,
Insurer, or any Participating Insurance Company or any Contractholder, with
respect to any Losses that arise out of or result from:
(a) a breach of any representation, warranty, and/or covenant made by
Insurer hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties
and covenants;
(b) the failure by Insurer or any Participating Insurance Company to
maintain its separate account (which invests in any Portfolio) as a
legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust
under the provisions of the Act (unless exempt therefrom); or
(c) the failure by Insurer or any Participating Insurance Company to
maintain its variable annuity and/or variable life insurance contracts
(with respect to which any Portfolio serves as an underlying funding
vehicle) as life insurance, endowment or annuity contracts under
applicable provisions of the Code.
9.5 Further, neither Fund nor XXX shall have any liability for any failure or
alleged failure to comply with the diversification requirements of Section
817(h) of the Code or the regulations thereunder if Insurer fails to comply
with any of the following clauses, and such failure could be shown to have
materially contributed to the liability:
(a) In the event the Internal Revenue Service ("IRS") asserts in writing
in connection with any governmental audit or review of Insurer or, to
Insurer's knowledge, of any Contractholder, that any Portfolio has
failed or allegedly failed to comply with the diversification
requirements of Section 817(h) of the Code or the regulations
thereunder or Insurer otherwise becomes aware of any facts that could
give rise to any claim against Fund or its affiliates as a result of
such a failure or alleged failure,
(i) Insurer shall promptly notify Fund of such assertion or potential
claim;
(ii) Insurer shall consult with Fund as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii)Insurer shall use its best efforts to minimize any liability of
Fund or its affiliates resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent;
(iv) Insurer shall permit Fund, its affiliates and their legal and
accounting advisors to participate in any conferences, settlement
discussions or other administrative or judicial proceeding or
contests (including judicial appeals thereof) with the IRS, any
Contractholder or any other claimant regarding any claims that
could give rise to liability to Fund or its affiliates as a
result of such a failure or alleged failure;
(v) Insurer shall not with respect to any claim of the IRS or any
Contractholder that would give rise to a claim against Fund or
its affiliates compromise or settle any claim, accept any
adjustment on audit, or forego any allowable judicial appeals,
without the express written consent of Fund or its affiliates,
which shall not be unreasonably withheld, provided that Insurer
shall not be required to appeal any adverse judicial decision
unless Fund or its affiliates shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists
for taking such appeal.
9.6 Promptly after receipt by an indemnified party under this Article of notice
of the commencement of any action, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under this
Article, notify the indemnifying party of the commencement thereof. The
failure to so notify the indemnifying party shall not relieve the
indemnifying party from any liability under this Article IX, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a
result of the failure to give such notice. In case any such action is
brought against any indemnified party, and it notified the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such indemnified party, and
to the extent that the indemnifying party has given notice to such effect
to the indemnified party and is performing its obligations under this
Article, the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (a) the indemnifying party and the indemnified party shall 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 shall
not be liable for any settlement of any proceeding effected without its
written consent.
A successor by law of any Party to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article IX, which shall
survive any termination of this Agreement.
ARTICLE X.
COMMENCEMENT AND TERMINATION
10.1.This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2.This Agreement shall terminate without penalty as to one or more
Portfolios:
(a) At the option of Insurer, Distributor, Fund, or XXX at any time from
the date hereof upon 120 days' notice, unless a shorter time is agreed
to by the Parties;
(b) At the option of Insurer if it determines that shares of any Portfolio
are not reasonably available to meet the requirements of the
Contracts. Insurer shall furnish prompt notice of election to
terminate and termination shall be effective ten days after receipt of
notice unless Fund makes available a sufficient number of shares to
meet the requirements of the Contracts within such ten day period;
(c) At the option of Insurer or Fund, upon the institution of formal
proceedings against the other or their respective affiliates by the
Commission, the NASD or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in the
Insurer's or Fund's reasonable judgment, materially impair the other's
ability to meet and perform its obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by Insurer
or Fund, as the case may be, with termination to be effective upon
receipt of notice;
(d) At the option of Insurer or Fund, if either shall determine, in its
sole judgment reasonably exercised in good faith, that the other has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity is likely to
have a material adverse impact upon the business and operation of the
Insurer, Fund or XXX, as the case may be. Insurer or Fund shall notify
the other in writing of any such determination and its intent to
terminate this Agreement, which termination shall be effective on the
sixtieth (60th) day following the giving of such notice, provided the
determination of Insurer or Fund, as the case may be, continues to
apply on that date.
(e) Upon termination of the Investment Management Agreement between Fund,
on behalf of its Portfolios, and XXX or its successors unless Insurer
specifically approves the selection of a new investment adviser for
the Portfolios. Fund shall promptly furnish notice of such termination
to Insurer;
(f) In the event Portfolio shares are not registered, issued or sold in
accordance with applicable federal law, or such law precludes the use
of such shares as the underlying investment medium of Contracts issued
or to be issued by Insurer. Termination shall be effective immediately
upon such occurrence without notice;
(g) At the option of Fund upon a determination by the Board in good faith
that it is no longer advisable and in the best interests of
shareholders for Fund to continue to operate pursuant to this
Agreement. Termination shall be effective upon notice by Fund to
Insurer of such termination;
(h) At the option of Fund if the Contracts cease to qualify as annuity
contracts or life insurance policies, as applicable, under the Code,
or if Fund reasonably believes that the Contracts may fail to so
qualify. Termination shall be effective immediately upon such
occurrence or reasonable belief without notice;
(i) At the option of any Party, upon another's breach of any material
provision this Agreement, which breach has not been cured to the
satisfaction of the non-breaching Parties within ten days after
written notice of such breach is delivered to the breaching Party;
(j) At the option of Fund, if the Contracts are not registered, issued or
sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence
without notice;
(k) Upon assignment of this Agreement, unless made with the written
consent of the non-assigning Parties.
Any such termination pursuant to this Article X shall not affect the
operation of Articles V or IX of this Agreement. The Parties agree that any
termination pursuant to Article VI shall be governed by that Article.
10.3.Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, Fund and XXX may, at the option of Fund, continue to make available
additional Portfolio shares for so long as Fund desires pursuant to the
terms and conditions of this Agreement as provided below, for all Contracts
in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if Fund so elects to make additional Portfolio shares
available, the owners of the Existing Contracts or Insurer, whichever shall
have legal authority to do so, shall be permitted to reallocate investments
among the Portfolios, redeem investments in the Portfolios and/or invest in
the Portfolios upon the making of additional purchase payments under the
Existing Contracts. In the event of a termination of this Agreement
pursuant to Section 10.2 hereof, Fund, as promptly as is practicable under
the circumstances, shall notify Insurer whether Fund shall continue to make
Portfolio shares available after such termination. If Portfolio shares
continue to be made available after such termination, the provisions of
this Agreement shall remain in effect and thereafter either Fund or Insurer
may terminate the Agreement, as so continued pursuant to this Section 10.3,
upon prior written notice to the other Parties, such notice to be for a
period that is reasonable under the circumstances but, if given by Fund,
need not be for more than six months.
00.0.Xx the event of any termination of this Agreement pursuant to Section 10.2
hereof, the Parties agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose
of ensuring that a Separate Account owns no shares of a Portfolio beyond
six months from the date of termination. Such steps may include, without
limitation, substituting other mutual fund shares for those of the affected
Portfolio.
ARTICLE XI.
AMENDMENTS
11.1.Any changes in the terms of this Agreement shall be made by agreement in
writing by the Parties hereto.
ARTICLE XII.
NOTICE
12.1.Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate Parties at the following
addresses:
Insurer: Valley Forge Life Insurance Company
CNA Plaza
333 Wabash, 00 Xxxxx
Xxxxxxx, XX 00000
Attn: G. Xxxxxxx Xxxxxx, Esq.
Distributor: CNA Investor Services
CNA Plaza
333 Wabash, 00 Xxxxx
Xxxxxxx, XX 00000
Attn: Xxx Xxxxxx
Fund: Lazard Retirement Series, Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
XXX: Lazard Asset Management
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
with copies to: Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Notice shall be deemed to be given on the date of receipt by the addresses as
evidenced by the return receipt.
ARTICLE XIII.
MISCELLANEOUS
13.1.This Agreement has been executed on behalf of the Parties by the
undersigned duly authorized officers in their capacities as officers of
Insurer, Distributor, XXX, and Fund.
13.1.If any provision of this Agreement is held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement will
not be affected thereby.
13.1.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, that the Parties are entitled to under
federal and state laws.
13.1.This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
ARTICLE XIV.
LAW
14.1.This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of
laws.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
Valley Forge Life Insurance Company
By:___________________________________
Attest:_____________________
CNA Investor Services
By:____________________________________
Attest:_____________________
LAZARD RETIREMENT SERIES, INC.
By:____________________________________
Attest:_____________________
LAZARD ASSET MANAGEMENT,
a division of Lazard Freres & Co., LLC
By:____________________________________
Attest:______________________
SCHEDULE 1
Portfolios
Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
Separate Accounts and Contracts
1. Valley Forge Life Insurance Company Variable Annuity Separate Acct.
Established October 15, 1995.
a) Contracts: CNA Capital Select Variable Annuity
CNA Capital Select Plus Variable Annuity
2. Valley Forge Life Insurance Company Variable Life Separate Acct.
Established October 15, 1995
a) Contracts: CNA Capital Select Variable Universal Life
SCHEDULE 2
PORTFOLIO SHARE ORDER PROCESSING
TIMELY PRICING AND ORDERS
1. Each Business Day, Fund shall use its best efforts to make each Portfolio's
closing net asset value per share ("NAV") on that Day available to Insurer
by 6:30 p.m. New York time.
2. At the end of each Business Day, Insurer shall use the information
described above to calculate each Separate Account's unit values for that
Day. Using this unit value, Insurer shall process that Day's Contract and
Separate Account transactions to determine the net dollar amount of each
Portfolio's shares to be purchased or redeemed.
3. Insurer shall transmit net purchase or redemption orders to Fund or its
designee by 9:30 a.m. New York time on the Business Day next following
Insurer's receipt of the information relating to such orders in accordance
with paragraph 1 above; provided, however, that Fund shall provide
additional time to Insurer in the event Fund is unable to meet the 6:30
p.m. deadline stated above. Such additional time shall be equal to the
additional time that Fund takes to make the net asset values available to
Insurer. For informational purposes, Insurer shall separately describe the
amount of shares of each Portfolio that is being purchased, redeemed, or
exchanged from one Portfolio to the other. In addition, Insurer shall use
its best efforts to notify Fund in advance of any unusually large purchase
or redemption orders.
TIMELY PAYMENTS
4. Insurer shall pay for any net purchase order by wiring Federal Funds to
Fund or its designated custodial account by 4:00pm New York time on the
same Business Day it transmits the order to Fund pursuant to paragraph 3
above.
5. Fund shall pay for any net redemption order by wiring the redemption
proceeds to Insurer, except as provided below, within two (2) Business Days
or, upon notice to Insurer, such longer period as permitted by the Act or
the rules, orders or regulations thereunder. In the case of any net
redemption order valued at or greater than $1 million, Fund shall wire such
amount to Insurer within seven days of the order. In the case of any net
redemption order requesting the application of proceeds from the redemption
of one Portfolio's shares to the purchase of another Portfolio's shares,
Fund shall so apply such proceeds the same Business Day that Insurer
transmits such order to Fund.
APPLICABLE PRICE
6. Fund shall execute purchase and redemption orders for a Portfolio's shares
that relate to Contract transactions at that Portfolio's NAV next
determined after Fund or its designated agent receives the order. For this
purpose, Fund hereby appoints Insurer as its agent for the limited purpose
of receiving orders for the purchase and redemption of shares of each
Portfolio for each Separate Account; provided that Fund receives both the
notice of the order in accordance with paragraph 3 above and any related
purchase payments in accordance with paragraph 4 above.
7. Fund shall execute purchase and redemption orders for a Portfolio's shares
that relate to Insurer's General Account, or that do not relate to Contract
transactions, at that Portfolio's NAV next determined after Fund (not
Insurer) receives the order and any related purchase payments in accordance
with paragraph 4 above.
8. Fund shall execute purchase and redemption orders for a Portfolio Shares
that relate to Contracts funded by registered and unregistered Separate
Accounts in the same manner, but only to the extent that Insurer represents
and warrants that it is legally or contractually obligated to treat such
orders in the same manner. Each order for Portfolio shares placed by
Insurer that is attributable, in whole or in part, to Contracts funded by
an unregistered Separate Account, shall be deemed to constitute such
representation and warranty by Insurer unless the order specifically states
to the contrary. Otherwise, Fund shall treat orders attributable to
unregistered Separate Account Contracts in the same manner as orders for
Insurer's General Account. For these purposes, a registered Separate
Account is one that is registered under the Act; an unregistered Separate
Account is one that is not.
9. Fund shall execute purchase or redemption orders for a Portfolio's shares
that do not satisfy the conditions specified in paragraphs 3 and 4 above,
as applicable, at the Portfolio's NAV next determined after such conditions
have been satisfied and in accordance with paragraphs 6 or 7, whichever
applies.
10. If Fund does not receive payment in Federal Funds for any net purchase
order in accordance with paragraph 4 above, Insurer shall promptly, upon
Fund's request, reimburse Fund for any charges, costs, fees, interest or
other expenses incurred by Fund in connection with any advances to, or
borrowings or overdrafts by, Fund, or any similar expenses incurred by
Fund, as a result of portfolio transactions effected by Fund based upon
such purchase request.
11. If Fund provides Insurer with materially incorrect net asset value per
share information through no fault of Insurer, Insurer, on behalf of the
Separate Account, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct net asset value per
share in accordance with Fund's current policies for correcting pricing
errors. Any material error in the calculation of net asset value per share,
dividend or capital gain information shall be reported promptly upon
discovery to Insurer.
