PARTICIPATION AGREEMENT
THIS AGREEMENT, dated as of the 1st day of February, 2007 by
and among Valley Forge Life Insurance Company (the "Company"), an Indiana life
insurance company, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each separate account hereinafter referred to as the "Account"),
DWS VARIABLE SERIES I (the "Fund"), a Massachusetts business trust created under
a Declaration of Trust, as amended, DWS XXXXXXX DISTRIBUTORS, INC. (the
"Underwriter"), a Delaware corporation, and DEUTSCHE INVESTMENT MANAGEMENT
AMERICAS INC., a Delaware corporation (the "Adviser").
WHEREAS, the Fund engages in business as an open-end
management investment company and is or will be available to act as the
investment vehicle for separate accounts established for variable life insurance
and variable annuity contracts (the "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements with the
Fund and Underwriter ("Participating Insurance Companies");
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares of beneficial interest without par value, and, with
respect to certain series, classes thereof ("Shares"), and additional series of
Shares, and classes thereof, may be established, each such series of Shares
designated a "Portfolio" and representing the interest in a particular managed
portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (the "SEC") granting Participating Insurance Companies
and variable annuity and variable life insurance separate accounts exemptions
from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended (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 Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies (the
"Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and Shares of the Portfolios are
registered under the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the Adviser, which serves as investment adviser to
the Fund, is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and any applicable state securities laws;
WHEREAS, the Company has issued or will issue certain variable
life insurance and/or variable annuity contracts supported wholly or partially
by the Account (the "Contracts"), and said Contracts are listed in Schedule A
hereto, as it may be amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the
Fund, is registered as a broker dealer with the SEC 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, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios, and
classes thereof, listed in Schedule B hereto, as it may be amended from time to
time by mutual written agreement (the "Designated Portfolios") on behalf of the
Account to fund the aforesaid Contracts, and the Underwriter is authorized to
sell such Shares to the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, the Adviser and the Underwriter agree as follows:
ARTICLE I Sale of Fund Shares
1.1. The Fund has granted to the Underwriter exclusive authority to distribute
the Fund's Shares, and has agreed to instruct, and has so instructed, the
Underwriter to make available to the Company for purchase, on behalf of the
Account, Fund Shares of those Designated Portfolios selected by the Underwriter.
Pursuant to such authority and instructions, and subject to Article X hereof,
the Underwriter agrees to make available to the Company for purchase on behalf
of the Account, Shares of those Designated Portfolios listed on Schedule B to
this Agreement, such purchases to be effected at net asset value in accordance
with Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) Fund
series (other than those listed on Schedule B) in existence now or that may be
established in the future will be made available to the Company only as the
Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may refuse to sell shares of any Designated Portfolio to any person, or
suspend or terminate the offering of Fund Shares of any Designated Portfolio or
class thereof, if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Board acting in good
faith and in light of its fiduciary duties under federal and any applicable
state laws, suspension or termination is in the best interests of the
shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or fractional
Designated Portfolio Shares held by the Company on behalf of the Account, such
redemptions to be effected at net asset value in accordance with Section 1.3 of
this Agreement. Notwithstanding the foregoing, (i) the Company shall not redeem
Fund Shares attributable to Contract owners except in the circumstances
permitted in Section 10.3 of this Agreement, and (ii) the Fund may suspend the
right of redemption or postpone the date of payment or satisfaction upon
redemption of Fund Shares of any Designated Portfolio to the extent permitted by
the 1940 Act, any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent of the Fund for the limited
purpose of receiving purchase and redemption requests on behalf of the Account
(but not with respect to any Fund Shares that may be held in the general account
of the Company) for Shares of those Designated Portfolios made available
hereunder, based on allocations of amounts to the Account or subaccounts thereof
under the Contracts and other transactions relating to the Contracts or the
Account. Receipt of any such request (or relevant transactional information
therefore) on any day the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the rules of the SEC
(a "Business Day") by the Company as such limited agent of the Fund prior to the
time that the Fund calculates its net asset value as described from time to time
in the Fund Prospectus (which as of the date of execution of this Agreement is
4:00 p.m. Eastern Time) shall constitute receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such request by 9:30
a.m. Eastern Time on the next following Business Day.
(b) The Company shall pay for Shares of each Designated Portfolio on the same
day that it notifies the Fund of a purchase request for such Shares. Payment for
Designated Portfolio Shares shall be made in federal funds transmitted to the
Fund by wire to be received by the Fund by 12:00 p.m. Eastern Time on the same
Business Day the Fund is notified of the purchase request for Designated
Portfolio Shares pursuant to Section 1.3(a) (unless the Fund determines and so
advises the Company that sufficient proceeds are available from redemption of
Shares of other Designated Portfolios effected pursuant to redemption requests
tendered by the Company on behalf of the Account). If federal funds are not
received on time, such funds will be invested, and Designated Portfolio Shares
purchased thereby will be issued, as soon as practicable and the Company shall
promptly, upon the Fund's request, reimburse the Fund for any charges, costs,
fees, interest or other expenses incurred by the Fund in connection with any
advances to, or borrowing or overdrafts by, the Fund, or any similar expenses
incurred by the Fund, as a result of portfolio transactions effected by the Fund
based upon such purchase request. Upon receipt of federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
(c) The Fund will redeem Designated Portfolio Shares requested on behalf of the
Account, and make payment therefore, in accordance with the provisions of the
then current registration statement of the Fund. Payment for Designated
Portfolio Shares redeemed by the Account or the Company normally shall be made
in federal funds transmitted by wire to the Company or any other designated
person on the same Business Day that the Fund is properly notified of the
redemption order for such Shares pursuant to Section 1.3(a) (unless redemption
proceeds are to be applied to the purchase of Shares of other Designated
Portfolios in accordance with Section 1.3(b) of this Agreement). The Fund shall
not bear any responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds by the Company, the Company alone shall be responsible
for such action.
(d) Any purchase or redemption request for Designated Portfolio Shares held or
to be held in the Company's general account shall be effected at the net asset
value per share next determined after the Fund's receipt of such request,
provided that, in the case of a purchase request, payment for Fund Shares so
requested is received by the Fund in federal funds prior to close of business
for determination of such value, as defined from time to time in the Fund
Prospectus.
1.4. The Fund shall use its best efforts to make the net asset value per share
for each Designated Portfolio available to the Company by 6:30 p.m. Eastern Time
each Business Day, and in any event, as soon as reasonably practicable after the
net asset value per share for such Designated Portfolio is calculated, and shall
calculate such net asset value in accordance with the Fund's Prospectus. Any
material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported to the Company promptly
upon discovery by the Fund. A material error in the calculation of net asset
value per share shall be corrected in accordance with the procedures for
correcting net asset value errors adopted by the Fund's Board of Trustees and in
effect at the time of the error. The Fund represents and warrants that its
procedures for correcting net asset value errors, including determinations of
materiality, currently comply, and will continue to comply, with the 1940 Act
and generally industry-wide accepted SEC staff interpretations concerning
pricing errors in effect at the time of an error.
1.5. The Fund shall furnish notice (by wire or telephone followed by written
confirmation) to the Company as soon as reasonably practicable of any income
dividends or capital gain distributions payable on any Designated Portfolio
Shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any Designated
Portfolio Shares in the form of additional Shares of that Designated Portfolio.
The Company reserves the right, on its behalf and on behalf of the Account, to
revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
Designated Portfolio Shares so issued as payment of such dividends and
distributions.
1.6. Issuance and transfer of Fund Shares shall be by book entry only. Stock
certificates will not be issued to the Company or the Account. Purchase and
redemption orders for Fund Shares shall be recorded in an appropriate ledger for
the Account or the appropriate subaccount of the Account.
1.7. The parties hereto acknowledge that the arrangement contemplated by this
Agreement is not exclusive; the Fund's Shares may be sold to other insurance
companies (subject to Section 1.8 hereof) and to certain qualified retirement
plans, and the cash value of the Contracts may be invested in other investment
companies.
1.8. The Underwriter and the Fund shall sell Fund Shares only to Participating
Insurance Companies and their separate accounts and to persons or plans
("Qualified Persons") that qualify to purchase Shares of the Fund under Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder without impairing the ability of the Account to consider
the portfolio investments of the Fund as constituting investments of the Account
for the purpose of satisfying the diversification requirements of Section
817(h). The Underwriter and the Fund shall not sell Fund Shares to any insurance
company or separate account unless an agreement complying with Article VI of
this Agreement is in effect to govern such sales. The Company hereby represents
and warrants that it and the Account are Qualified Persons. The Fund reserves
the right to cease offering Shares of any Designated Portfolio in the discretion
of the Fund.
ARTICLE II. Representations, Warranties and Covenants
2.1. The Company represents and warrants that the Contracts (a) are or, prior to
issuance, will be registered under the 1933 Act or, alternatively (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under applicable insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, 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, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company shall register and qualify the Contracts or
interests therein as securities in accordance with the laws of the various
states only if and to the extent deemed advisable by the Company.
2.2. The Fund represents and warrants that Fund Shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance in all material respects with all applicable federal
securities laws and that the Fund is and shall remain registered under the 0000
Xxx. The Fund shall amend the registration statement for its Shares under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of the shares of the Designated Portfolios. The Fund shall
register and qualify such Shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund or the
Underwriter after taking into consideration any state insurance law requirements
that the Company advises the Fund may be applicable.
2.3. The Fund makes no representations as to whether any aspect of its
operations, including, but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the investment policies, fees and
expenses of the Designated Portfolios, are and shall at all times remain in
compliance with the insurance laws of the state of organization of the Company
set forth on the first page (the "State") to the extent required to perform this
Agreement. The Company will advise the Fund in writing as to any requirements of
State insurance law that affect the Designated Portfolios, and the Fund will be
deemed to be in compliance with this Section 2.3 so long as the Fund complies
with such advice of the Company.
2.4. The Fund represents that it is a Massachusetts business trust duly
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that the Designated Portfolios do and will comply in all
material respects with all applicable provisions of the 1940 Act.
2.5. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the shares of
the Designated Portfolios in accordance with any applicable state and federal
securities laws.
2.6. The Adviser represents and warrants that it is and shall remain duly
registered as an investment adviser under all applicable federal and state
securities laws and that it shall perform its obligations for the Fund in
compliance in all material respects with any applicable state and federal
securities laws.
2.7. The Fund, the Adviser and the Underwriter represent and warrant that all of
their trustees, directors, officers, employees, investment advisers, and other
individuals or entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Rule 17g-1 of the 1940 Act or such
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.8. The Company represents and warrants that all of its directors, officers,
employees, investment advisers, and other individuals or entities employed or
controlled by the Company dealing with the money and/or securities of the
Account are covered by a blanket fidelity bond or similar coverage for the
benefit of the Account, in an amount not less than $20 million. The aforesaid
bond includes coverage for larceny and embezzlement and is issued by a reputable
bonding company. The Company agrees to hold for the benefit of the Fund and to
pay to the Fund any amounts lost from larceny, embezzlement or other events
covered by the aforesaid bond to the extent such amounts properly belong to the
Fund pursuant to the terms of this Agreement. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
2.9. The Company represents and warrants that all shares of the Designated
Portfolios purchased by the Company will be purchased on behalf of one or more
unmanaged separate accounts that offer interests therein that are registered
under the 1933 Act and upon which a registration fee has been or will be paid or
that are unregistered because the interests are exempt from registration under
the 1933 Act, and the Company acknowledges that the Fund intends to rely upon
this representation and warranty for purposes of calculating SEC registration
fees payable with respect to such Shares of the Designated Portfolios pursuant
to Form 24F-2 or any similar form or SEC registration fee calculation procedure
that allows the Fund to exclude Shares so sold for purposes of calculating its
SEC registration fee. The Company will certify the amount of any Shares of the
Designated Portfolios purchased by the Company on behalf of any separate account
offering interests not subject to registration under the 1933 Act. The Company
agrees to cooperate with the Fund on no less than an annual basis to certify as
to its continuing compliance with this representation and warranty.
2.10. The Company represents and warrants as follows:
1. The Company has in place an anti-money laundering program
("AML program") that does now and will continue to comply with applicable laws
and regulations, including the relevant provisions of the USA PATRIOT Act (Pub.
L. No. 107-56 (2001)) and the regulations issued thereunder by the U.S. Treasury
Department and the rules of the National Association of Securities Dealers,
Inc., as applicable.
2. The Company has in place - and has conducted due diligence
pursuant to - policies, procedures and internal controls reasonably designed (a)
to verify the identity of the Contract owners that invest in the Account, and
(b) to identify those Contract owners' sources of funds, and have no reason to
believe that any of the invested funds were derived from illegal activities.
3. The Company has, after undertaking reasonable inquiry, no
information or knowledge that (a) any Contract owner that invests in the
Account, or (b) any person or entity controlling, controlled by or under common
control with such Contract owner is an individual or entity or in a country or
territory that is on an Office of Foreign Assets Control ("OFAC") list or
similar list of sanctioned or prohibited persons maintained by a U.S.
governmental or regulatory body.
The Company further agrees promptly to notify the Fund and the Underwriter
should it become aware of any change in the above representations and
warranties.
The Company agrees to require any broker-dealer/insurance agency that
distributes the Contracts to have an AML Program in substantial compliance with
the foregoing.
In addition, the Underwriter and the Fund hereby provide notice to the Company
that the Underwriter and/or the Fund reserve the right to make inquiries of and
request additional information from the Company regarding its AML program.
2.11. The Company will develop, implement and maintain policies and
procedures reasonably designed to prevent the use of the Accounts by persons
engaged in short-term trading or excessive trading, which policies and
procedures shall be reasonably acceptable to the Fund, the Adviser and the
Underwriter. If the Company proposes to modify such policies and procedures
following their implementation, the Company will first discuss its proposal
with the Fund, the Adviser and the Underwriter and will not materially modify
such policies and procedures without the written consent of the Fund, the
Adviser and the Underwriter.
In addition to the foregoing, the Company will develop, implement and
maintain procedures as necessary or appropriate to further any specific
policies and procedures of the Fund, the Adviser or the Underwriter for one or
more Designated Portfolios in regard to short-term trading or excessive
trading.
The Company represents and warrants that it has reserved sufficient
flexibility in the Contracts to impose such limitations and restrictions on
transfers and purchases of the underlying investments for the Contracts,
including specifically the Designated Portfolios, as may be necessary to
implement the policies and procedures referred in this Section 2.11.
If, notwithstanding the foregoing, the Fund, the Adviser or the
Underwriter notifies the Company that a pattern or patterns of transactions
involving short-term trading or excessive trading in one or more Accounts is
having or may have, in their sole discretion, an adverse effect on a
Designated Portfolio, the Company will promptly take such actions and
implement such procedures as are appropriate to prevent such trading. The
parties hereto acknowledge that, if necessary, such actions and procedures may
include the identification of Account participants engaged in such trading and
the imposition of complete or partial restrictions on their requests to
purchase shares of the Designated Portfolio.
The Company acknowledges that all orders accepted by the Company for
the Accounts are subject to the obligations of the Company in this Section
2.11, including the obligation to prevent the use of the Accounts for
short-term trading or excessive trading, and that the Fund, the Adviser or the
Underwriter may take such actions as it deems to be in the best interests of
shareholders of the Designated Portfolios to enforce such obligations and to
otherwise prevent such trading in shares of the Designated Portfolios,
including, among other things, the right to revoke, reject or cancel purchase
orders for shares of the Designated Portfolios made by the Company. Any such
revocation, rejection or cancellation may be made in whole or in part, it
being understood that the Fund, the Adviser and the Underwriter are not
required to isolate objectionable trades.
The Fund, the Adviser and the Underwriter shall not be responsible for
any losses or costs incurred by the Company, the Account or Account
participants as a result of the revocation, rejection or cancellation orders
made by the Company in furtherance of the enforcement of their policy to
prevent short-term trading and excessive trading in shares of the Designated
Portfolios.
2.12. The Company shall comply with any applicable privacy and notice
provisions of 15 U.S.C. xx.xx. 6801-6827 and any applicable regulations
promulgated thereunder (including but not limited to 17 C.F.R. Part 248) as
they may be amended.
2.13. Neither the Fund, any Designated Portfolio, the Underwriter, nor
any of their affiliates shall be liable for any information provided to the
Company pursuant to this Agreement which information is based on incorrect
information supplied by the Company or any other Participating Insurance
Company to the Fund or the Underwriter. The Company agrees that the Fund, the
Underwriter and the Adviser shall bear no responsibility for any act of any
unaffiliated fund or the investment adviser or underwriter thereof.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many copies of the Fund's
current prospectus (describing only the Designated Portfolios listed on Schedule
B) as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide such documentation (including a final copy of
the new prospectus on computer diskette or other electronic means at the Fund's
expense) and other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus for a Designated
Portfolio is amended) to have the prospectus for the Contracts and the
prospectus for the Designated Portfolios printed together in one document.
Expenses with respect to the foregoing shall be borne as provided under Article
V.
3.2. The Fund's prospectus shall state that the current Statement of Additional
Information ("SAI") for the Fund is available from the Company (or in the Fund's
discretion, from the Fund), and the Fund shall provide a copy of such SAI to any
owner of a Contract who requests such SAI and to the Company in such quantities
as the Company may reasonably request. Expenses with respect to the foregoing
shall be borne as provided under Article V.
3.3. The Fund shall provide the Company with copies of its proxy material,
reports to shareholders, and other communications to shareholders of the
Designated Portfolios in such quantity as the Company shall reasonably require
for distributing to Contract owners. Expenses with respect to the foregoing
shall be borne as provided under Article V.
3.4. The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the shares of each Designated Portfolio in accordance with
instructions received from Contract owners; and
(iii) vote shares of each Designated Portfolio for which no instructions have
been received in the same proportion as fund shares of such Designated Portfolio
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 or to the extent otherwise required by
law. The Company reserves the right to vote shares of each Designated Portfolio
held in any segregated asset account in its own right, to the extent permitted
by law.
3.5. The Fund reserves the right, upon prior written notice to the Company
(given at the earliest practicable time), to take all actions, including but not
limited to, the dissolution, termination, merger and sale of all assets of the
Fund or any Designated Portfolio upon the sole authorization of the Board, to
the extent permitted by the laws of the Commonwealth of Massachusetts and the
1940 Act.
3.6. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Mixed and Shared Funding
Exemptive Order and consistent with any reasonable standards that the Fund may
adopt and provide in writing.
3.7. It is understood and agreed that, except with respect to information
regarding the Fund, the Underwriter, the Adviser or Designated Portfolios
provided in writing by the Fund, the Underwriter or the Adviser, none of the
Fund, the Underwriter or the Adviser is responsible for the content of the
prospectus or statement of additional information for the Contracts.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material that
the Company develops or uses and in which the Fund (or a Designated Portfolio
thereof) or the Adviser or the Underwriter is named. No such material shall be
used until approved by the Fund or its designee, and the Fund will use its best
efforts for it or its designee to review such sales literature or promotional
material within ten Business Days after receipt of such material. The Fund or
its designee reserves the right to reasonably object to the continued use of any
such sales literature or other promotional material in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter is named, and no
such material shall be used if the Fund or its designee so objects.
4.2. The Company shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained in
the registration statement or prospectus or SAI for the Fund Shares, as such
registration statement and prospectus or SAI may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee or
by the Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3. The Fund and the Underwriter, or their designee, shall furnish, or shall
cause to be, furnished, to the Company, each piece of sales literature or other
promotional material that it develops or uses and in which the Company, and/or
its Account, is named. No such material shall be used until approved by the
Company, and the Company will use its best efforts to review such sales
literature or promotional material within ten Business Days after receipt of
such material. The Company reserves the right to reasonably object to the
continued use of any such sales literature or other promotional material in
which the Company and/or its Account is named, and no such material shall be
used if the Company so objects.
4.4. The Fund and the Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement, prospectus (which shall include an offering memorandum,
if any, if the Contracts issued by the Company or interests therein are not
registered under the 1933 Act), or SAI for the Contracts, as such registration
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of any
prospectuses and SAIs, and all amendments to any of the above, that relate to
the Designated Portfolio(s) reasonably promptly after the filing of such
document(s) with the SEC or NASD or other regulatory authorities. Upon request,
the Fund will provide to the Company copies of SEC exemptive orders and
no-action letters and sales literature and other promotional material that
relate to the Designated Portfolios and to the performance of this Agreement by
the parties.
4.6. The Company will provide to the Fund at least one complete copy of any
prospectuses (which shall include an offering memorandum, if any, if the
Contracts issued by the Company or interests therein are not registered under
the 0000 Xxx) and SAIs, and all amendments to any of the above, that relate to
the Contracts or the Account reasonably promptly after the filing of such
document(s) with the SEC or NASD or other regulatory authorities. Upon request,
the Company will provide to the Fund copies of SEC exemptive orders and
no-action letters, solicitations of voting instructions and sales literature and
other promotional material that relate to the Contracts or the Account and the
performance of this Agreement by the parties. The Company shall provide to the
Fund and the Underwriter any complaints received from the Contract owners
pertaining to the Fund or the Designated Portfolios.
4.7. The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for any Designated Portfolio, and of any
material change in the Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.8. For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following
that refer to the Fund or any affiliate of the Fund: advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, internet website (or other electronic media),
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, reports, market letters, form letters,
seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, SAIs, shareholder reports,
proxy materials, and any other communications distributed or made generally
available with regard to the Fund.
ARTICLE V. Fees and Expenses
5.1. The Adviser and the Underwriter shall pay no fee or other compensation to
the Company under this Agreement, although the parties hereto will bear certain
expenses in accordance with Schedule C and other provisions of this Agreement.
5.2. All expenses incident to performance by the Fund under this Agreement shall
be paid by the Fund, except and as further provided in Schedule C. The cost of
setting the Fund's prospectus in type, setting in type and printing the Fund's
proxy materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices relating to the Fund required by any federal or state law, and all
taxes on the issuance or transfer of the Fund's Shares shall be borne by the
parties hereto as set forth in Schedule C.
5.3. The expenses of distributing the Fund's prospectus to new and existing
owners of Contracts issued by the Company and of distributing the Fund's proxy
materials and reports to Contract owners shall be borne by the parties hereto as
set forth in Schedule C.
ARTICLE VI. Diversification and Qualification
6.1. The Fund will invest the assets of each Designated Portfolio in such a
manner as to ensure that the Contracts will be treated as annuity or life
insurance contracts, whichever is appropriate, under the Code and the
regulations issued thereunder (or any successor provisions). Without limiting
the scope of the foregoing, the Fund will, with respect to each Designated
Portfolio, comply with Section 817(h) of the Code and Treasury Regulation
ss.1.817-5, and any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts, and any amendments or other modifications or successor provisions to
such Section or Regulations. In the event of a breach of this Article VI by the
Fund, it will take all reasonable steps (a) to notify the Company of such breach
and (b) to adequately diversify the affected Designated Portfolio so as to
achieve compliance within the grace period afforded by Treasury Regulation
ss.1.817-5.
6.2. The Fund represents that each Designated Portfolio is or will be qualified
as a Regulated Investment Company under Subchapter M of the Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that it will notify the Company immediately
upon having a reasonable basis for believing that a Designated Portfolio has
ceased to so qualify or that it might not so qualify in the future.
6.3. The Company represents that the Contracts are currently, and at the time of
issuance shall be, treated as life insurance or annuity insurance contracts,
under applicable provisions of the Code, and that it will make every effort to
maintain such treatment, and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing the Contracts have
ceased to be so treated or that they might not be so treated in the future. The
Company agrees that any prospectus offering a contract that is a "modified
endowment contract" as that term is defined in Section 7702A of the Code (or any
successor or similar provision), shall identify such contract as a modified
endowment contract.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict among the interests of the Contract owners of all
separate accounts investing in the Fund. 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 insurance laws or regulations;
(c) a tax ruling or provision of the Internal Revenue Code or the regulations
thereunder; (d) any other development relating to the tax treatment of insurers,
Contract or policy owners or beneficiaries of variable annuity contracts or
variable life insurance policies; (e) the manner in which the investments of any
Designated Portfolio are being managed; (f) a difference in voting instructions
given by variable annuity contract holders, on the one hand, and variable life
insurance policy owners, on the other hand, or by the contract holders or policy
owners of different Participating Insurance Companies; or (g) a decision by a
Participating Insurance Company to disregard the voting instructions of its
Contract owners. The Board shall promptly inform the Company by written notice
if it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company and the Adviser will report any potential or existing conflicts
of which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever Contract owner voting instructions
are disregarded. At least annually, and more frequently if deemed appropriate by
the Board, the Company shall submit to the Adviser, and the Adviser shall at
least annually submit to the Board, such reports, materials and data as the
Board may reasonably request so that the Board may fully carry out the
obligations imposed upon it by the conditions contained in the Mixed and Shared
Funding Exemptive Order; and said reports, materials and data shall be submitted
more frequently if deemed appropriate by the Board. The responsibility to report
such information and conflicts to the Board will be carried out with a view only
to the interests of the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Designated Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Designated Portfolio
of the Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contract owners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account.
7.4. If a material irreconcilable conflict arises because of a decision by the
Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in any Designated Portfolio and terminate this Agreement with respect
to such Account; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
The Company will bear the cost of any remedial action, including such withdrawal
and termination. Any such withdrawal and termination must take place within six
(6) months after the Fund gives written notice that this provision is being
implemented, and until the end of that six month period the Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of such Designated Portfolio.
7.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
such Designated Portfolios.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw an Account's investment in any Designated Portfolio and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent the Mixed and Shared Funding Exemption Order or any
amendment thereto contains terms and conditions different from Sections 3.4,
3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with the Mixed and Shared Funding Exemptive Order, and
Sections 3.4, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue
in effect only to the extent that terms and conditions substantially identical
to such Sections are contained in the Mixed and Shared Funding Exemptive Order
or any amendment thereto. If and to the extent that Rule 6e-2 and Rule 6e-3(T)
are amended, or Rule 6e-3 or any similar rule is adopted, to provide exemptive
relief from any provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Exemptive Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3 or any similar rule, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the Fund, the Adviser and
the Underwriter and each of its trustees, directors and officers, and each
person, if any, who controls the Fund, the Adviser or Underwriter within the
meaning of Section 15 of the 1933 Act or who is under common control with the
Underwriter (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares of the Designated Portfolios or the Contracts; and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statements of any material fact contained in the registration statement,
prospectus (which shall include an offering memorandum, if any), or SAI for the
Contracts or contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of the Fund for use in the
registration statement, prospectus or SAI for the Contracts or in the Contracts
or sales literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund Shares; or
(ii) arise out of or are based upon any untrue statement or alleged untrue
statements of any material fact contained in the registration statement,
prospectus (which shall include an offering memorandum, if any), or SAI covering
insurance products sold by the Company or any insurance company which is an
affiliate thereof, or any amendments or supplements thereto, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of the Fund for use in the
registration statement, prospectus or SAI covering insurance products sold by
the Company or any insurance company which is an affiliate thereof, or any
amendments or supplements thereto; or
(iii) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus, SAI, or sales literature of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or its agents or
persons under the Company's authorization or control, or any affiliate thereof,
with respect to the sale or distribution of the Contracts or Fund Shares; or
(iv) arise out of any untrue statement or alleged untrue statement of a material
fact contained in a registration statement, prospectus, SAI, or sales literature
of the Fund or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such a statement
or omission was made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(v) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in any registration statement,
prospectus, statement of additional information or sales literature for any fund
not affiliated with the Fund ("Unaffiliated Fund"), or arise out of or are based
upon 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,
or otherwise pertain to or arise in connection with the availability of any
Unaffiliated Fund as an underlying funding vehicle in respect of the Contracts,
or arise out of or are based upon any act or omission on the part of the
investment adviser or underwriter of an Unaffiliated Fund; or
(vi) arise out of or result from any material breach of any representation,
warranty or agreement made by the Company in this Agreement (including a
failure, whether unintentional or in good faith or otherwise, to comply with the
qualification requirements specified in Article VI of this Agreement);
as limited by and in accordance with the provisions of Sections 8.1(b), 8.1(c)
and 8.1(d) hereof.
(b) The Company shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties, or by reason of such Indemnified Party's
reckless disregard of its obligations or duties either under this Agreement or
to the Company, the Fund, the Adviser, the Underwriter or the Account, whichever
is applicable.
(c) The Company shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Company in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim shall not relieve
the Company from any liability that it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision, except to the extent that the Company has been materially prejudiced
by such failure to give notice. In case any such action is brought against an
Indemnified Party, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Company to such party of the Company's election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Company will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation, but, in case the Company does not
elect to assume the defense of any such suit, the Company will reimburse the
Indemnified Parties in such suit, for the reasonable fees and expenses of any
counsel retained by them.
(d) The Indemnified Parties will promptly notify the Company of the commencement
of any litigation or proceedings against them in connection with the issuance or
sale of the Fund Shares or the Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of Shares of the Designated Portfolios or the
Contracts; and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or SAI or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for use in the registration
statement, prospectus or SAI for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Contracts or Fund Shares; or
(ii) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus, SAI or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the Fund or
Underwriter or persons under their control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, SAI or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund or the
Underwriter; or
(iv) arise out of or result from any material breach of any representation,
warranty or agreement made by the Underwriter, the Adviser or the Fund in this
Agreement (including a failure of the Fund, whether unintentional or in good
faith or otherwise, to comply with the diversification and other qualification
requirements specified in Article VI of this Agreement);
as limited by and in accordance with the provisions of Sections 8.2(b), 8.2(c)
and 8.2(d) hereof.
(b) The Underwriter shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties, or by reason of such Indemnified Party's
reckless disregard of obligations and duties either under this Agreement or to
the Company, the Fund, the Adviser, the Underwriter or the Account, whichever is
applicable.
(c) The Underwriter shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision, except to the extent that the
Underwriter has been prejudiced by such failure to give notice. In case any such
action is brought against the Indemnified Party, the Underwriter will be
entitled to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action and to settle the claim at its own
expense; provided, however, that no such settlement shall, without the
Indemnified Parties' written consent, include any factual stipulation to the
Indemnified Parties or their conduct. After notice from the Underwriter to such
party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation, but, in case the Underwriter does not elect to assume the
defense of any such suit, the Underwriter will reimburse the Indemnified Parties
in such suit, for the reasonable fees and expenses of any counsel retained by
them.
(d) The Indemnified Parties agree promptly to notify the Underwriter of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Contracts or the operation of the Account.
8.3. Indemnification By the Fund
(a) The Fund agrees to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of the Fund) or litigation (including legal and other expenses)
to which the Indemnified Parties may be required to pay or may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, expenses, damages, liabilities or expenses (or actions in
respect thereof) or settlements, are related to the operations of the Fund and
arise out of or result from any material breach of any representation, warranty
or agreement made by the Fund in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI of this Agreement);
as limited by and in accordance with the provisions of Sections 8.3(b), 8.3(c)
and 8.3(d) hereof.
(b) The Fund shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties, or by reason of such Indemnified Party's
reckless disregard of obligations and duties either under this Agreement or to
the Company, the Fund, the Adviser, the Underwriter or the Account, whichever is
applicable.
(c) The Fund shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Fund in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve the
Fund from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision, except to the extent the Fund has been prejudiced by such failure to
give notice. In case any such action is brought against the Indemnified Parties,
the Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action and to settle the claim at
its own expense; provided, however, that no such settlement shall, without the
Indemnified Parties' written consent include any factual stipulation referring
to the Indemnified Parties or their conduct. After notice from the Fund to such
party of the Fund's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Fund will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation, but, in case the Fund does not elect to assume the defense of any
such suit, the Fund will reimburse the Indemnified Parties in such suit, for the
reasonable fees and expenses of any counsel retained by them.
(d) The Indemnified Parties agree promptly to notify the Fund of the
commencement of any litigation or proceeding against it or any of its respective
officers or trustees in connection with the Agreement, the issuance or sale of
the Contracts, the operation of any Account, or the sale or acquisition of
Shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
9.2. This Agreement shall be subject to the applicable provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, any Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith. If, in the future, the Mixed and Shared Funding Exemptive Order
should no longer be necessary under applicable law, then Article VII shall no
longer apply.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the first to
occur of:
(a) termination by any party, for any reason with respect to some or all
Designated Portfolios, by three (3) months advance written notice delivered to
the other parties; or
(b) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter based upon the Company's reasonable and good faith determination
that Shares of any Designated Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter in the event any of the Designated Portfolio's Shares are not
registered, issued or sold in accordance with applicable state and/or federal
securities laws or such law precludes the use of such Shares as the underlying
investment media of the Contracts issued or to be issued by the Company; or
(d) termination by the Fund, the Adviser or Underwriter in the event that formal
administrative proceedings are instituted against the Company or any affiliate
by the NASD, the SEC, the Insurance Commissioner or like official of any state
or any other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the operation of any Account, or the
purchase of the Fund's Shares; provided, however, that the Fund, the Adviser or
Underwriter determines in its sole judgment exercised in good faith, that any
such administrative proceedings will have a material adverse effect upon the
ability of the Company to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal administrative
proceedings are instituted against the Fund, the Adviser or Underwriter by the
NASD, the SEC, or any state securities or insurance department or any other
regulatory body; 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 Fund or Underwriter to
perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter with respect to any Designated Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under Subchapter M
or fails to comply with the Section 817(h) diversification requirements
specified in Article VI hereof, or if the Company reasonably believes that such
Designated Portfolio may fail to so qualify or comply; or
(g) termination by the Fund, the Adviser or Underwriter by written notice to the
Company in the event that the Contracts fail to meet the qualifications
specified in Section 6.3, hereof; or
(h) termination by any of the Fund, the Adviser or the Underwriter by written
notice to the Company, if any of the Fund, the Adviser or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations, financial condition, insurance company rating or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
(i) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter, if the Company shall determine, in its sole judgment exercised
in good faith, that the Fund, the Adviser or the Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of material adverse
publicity, and that material adverse change or publicity will have a material
effect on the Fund's or the Underwriter's ability to perform its obligation
under this Agreement; or
(j) termination by the Company upon any substitution of the Shares of another
investment company or series thereof for Shares of a Designated Portfolio of the
Fund in accordance with the terms of the Contracts, provided that the Company
has given at least 45 days prior written notice to the Fund and Underwriter of
the date of substitution; or
(k) termination by any party in the event that the Fund's Board of Trustees
determines that a material irreconcilable conflict exists as provided in Article
VII; or
(l) at the option of the Company, as one party, or the Fund, the Adviser and the
Underwriter, as one party, upon the other party's material breach of any
provision of this Agreement upon 30 days' written notice and the opportunity to
cure within such notice period; or
10.2. Notwithstanding any termination of this Agreement, the Fund and the
Underwriter shall, at the option of the Company, continue, for a one year period
from the date of termination and from year to year thereafter if deemed
appropriate by the Fund and the Adviser, to make available additional Shares of
a Designated Portfolio pursuant to the terms and conditions of this Agreement,
for all Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts"), unless the
Underwriter elects to compel a substitution of other securities for the Shares
of the Designated Portfolios. Specifically, the owners of the Existing Contracts
may be permitted to reallocate investments in the Designated Portfolios, redeem
investments in the Designated Portfolios and/or invest in the Designated
Portfolios upon the making of additional purchase payments under the Existing
Contracts (subject to any such election by the Underwriter). The parties agree
that this Section 10.2 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement. The parties further agree that this Section 10.2 shall not apply
to any terminations under Section 10.1(d), or (g) of this Agreement.
10.3. The Company shall not redeem Fund Shares attributable to the Contracts (as
opposed to Fund Shares attributable to the Company's assets held in the Account)
except (i) as necessary to implement Contract owner initiated or approved
transactions, (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"), (iii) as permitted by an order of the
SEC pursuant to Section 26(c) of the 1940 Act, but only if a substitution of
other securities for the Shares of the Designated Portfolios is consistent with
the terms of the Contracts, or (iv) as permitted under the terms of the
Contract. Upon request, the Company will promptly furnish to the Fund and the
Underwriter reasonable assurance that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contacts, the Company shall not prevent
Contract owners from allocating payments to a Designated Portfolio that is
otherwise available under the Contracts without first giving the Fund or the
Underwriter 45 days notice of its intention to do so.
10.4. Notwithstanding any termination of this Agreement, each party's obligation
under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Fund:
DWS Variable Series I
Two International Place
Boston, MA 02110-4103
Attn.: Secretary
If to the Company:
Valley Forge Life Insurance Company
00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: General Counsel
If to Underwriter:
DWS Xxxxxxx Distributors, Inc.
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attn.: Secretary
If to the Adviser:
Deutsche Investment Management Americas Inc.
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attn.: Secretary
ARTICLE XII. Miscellaneous
12.1. 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 until such time as such information has come into the
public domain.
12.2 Futhermore, subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential any
"non-public personal information" about any "consumer" of another party as such
terms are defined in SEC Regulation S-P, and shall not disclose or use such
information without the express written consent of such party. Such written
consent shall specify the purposes for which such information may be disclosed
or used, which disclosure or use shall be consistent with SEC Regulation S-P.
12.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
12.4. This Agreement incorporates the entire understanding and agreement among
the parties hereto, and supersedes any and all prior understandings and
agreements between the parties hereto with respect to the subject matter hereof.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the State Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
State variable annuity laws and regulations and any other applicable law or
regulations.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may not be
assigned by any party without the prior written consent of all parties hereto.
12.9. The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee upon request copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted accounting
principles) filed with any state or federal regulatory body or otherwise made
available to the public, as soon as practicable and in any event within 90 days
after the end of each fiscal year; and
(b) any registration statement (without exhibits) and financial reports of the
Company filed with the Securities and Exchange Commission or any state insurance
regulatory, as soon as practicable after the filing thereof.
12.10. All persons are expressly put on notice of the Fund's Agreement and
Declaration of Trust and all amendments thereto, all of which are on file
with the Secretary of the Commonwealth of Massachusetts, and the limitation
of shareholder and trustee liability contained therein. This Agreement has
been executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund with
respect to a Designated Portfolio hereunder are not binding upon any of the
trustees, officers or shareholders of the Fund individually, but are
binding upon only the assets and property of such Designated Portfolio. All
parties dealing with the Fund with respect to a Designated Portfolio shall
look solely to the assets of such Designated Portfolio for the enforcement
of any claims against the Fund hereunder.
12.11. The Company is expressly put on notice that prospectus disclosure
regarding the potential risks of mixed and shared funding may be appropriate.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date first above written.
COMPANY: VALLEY FORGE LIFE INSURANCE
COMPANY
By:
--------------------------------------------------
Title:
-----------------------------------------------
FUND: DWS VARIABLE SERIES I
By:
--------------------------------------------------
Title:
-----------------------------------------------
UNDERWRIT DWS XXXXXXX DISTRIBUTORS, INC.
By:
--------------------------------------------------
Title:
-----------------------------------------------
By:
--------------------------------------------------
Title:
-----------------------------------------------
ADVISER: DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
By:
--------------------------------------------------
Title:
-----------------------------------------------
By:
--------------------------------------------------
Title:
-----------------------------------------------
SCHEDULE A
Name of Separate Account and Date Established by Board of Directors
Variable Annuity Fund I of Southwestern Life - December 19, 1967
Contracts Funded by Separate Account
Group variable annuity contracts, certificates and individual contracts issued
by the Company under the following forms:
GPVA
GRVA
APDVA
FPDVA
SCHEDULE B
DESIGNATED PORTFOLIOS
AND CLASSES THEREOF
Designated Portfolio Class
DWS Capital Growth VIP A
SCHEDULE C
EXPENSES
(1)Solely as it relates to the contracts listed on Schedule A, as it is attached
to the same Agreement as this Schedule C.
