FUND/SERV AND NETWORKING SUPPLEMENT TO PARTICIPATION AGREEMENT
This Fund/SERV and NETWORKING Supplement (the "Supplement") is made and entered
into this 14 day of April, 2008, by and among XXXXXXXXXXX VARIABLE ACCOUNT FUNDS
("Funds"), OPPENHEIMERFUNDS, INC. ("Adviser") on its own behalf and on behalf of
its division OppenheimerFunds Services ("Fund Agent")and COMMONWEALTH ANNUITY
AND LIFE INSURANCE COMPANY ("Insurance Company"), on its own behalf and on
behalf of each separate account of the Insurance Company (each an "Account")
identified in the Participation Agreement (as defined below).
WHEREAS, Insurance Company, the Funds, and the Adviser have entered into an
Amended and Restated Participation Agreement dated as of May 1, 2000, as amended
from time to time ("Participation Agreement"), which provides that the Funds
will make available shares for purchase, exchange and redemption by the
Insurance Company, on behalf of the Accounts, in order to fund variable annuity
contracts and variable life insurance policies contracts ("Contracts") purchased
by its customers ("Contract Holders"); and
WHEREAS, Insurance Company and Fund Agent are members in good standing of the
National Securities Clearing Corporation ("NSCC") or otherwise have access to
the NSCC's Fund/SERV system, which permits the transmission of trade and
registration data between Insurance Company and Fund Agent;
WHEREAS, the parties wish to supplement the Participation Agreement as necessary
to permit the transmission of purchase, exchange and redemption orders of Fund
shares using the NSCC Fund/SERV system; and
WHEREAS, it is intended that the parties will participate with each other in
NSCC's Networking system ("Networking") to enable the transmission of
shareholder data between Fund Agent and Insurance Company with respect to the
Funds, pursuant to certain matrix levels as described in the Standard Networking
Agreement ("Networking Agreement") on file with the NSCC and incorporated herein
by reference;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, which
consideration is full and complete, Fund, Adviser and Insurance Company hereby
agree to supplement the Participation Agreement as follows:
1. TRANSACTIONS SUBJECT TO FUND/SERV AND NETWORKING.
(a) On each business day that the New York Stock Exchange is open for business
on which the Funds determine their per share net asset values ("Business Day"),
Fund Agent shall accept, and effect changes in its records upon receipt of
purchase, redemption, exchanges, and registration instructions from Insurance
Company electronically through Fund/SERV ("Instructions"), without supporting
documentation.
(b) Each party hereby agrees to participate in Networking with the other party
pursuant to a mutually agreeable matrix or trust level established by the NSCC,
in accordance with the terms and conditions of the Networking Agreement, as
amended by this Supplement. In the event of
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any conflict between the terms of the Networking Agreement and the terms of this
Supplement, the terms of the Networking Agreement shall govern.
(c) Fund Agent acknowledges that Insurance Company may engage one or more agents
to fulfill some or all of Insurance Company's responsibilities hereunder and
that said agent(s) shall be authorized to act on Insurance Company's behalf and
shall be entitled to collect, receive and transmit information directly to and
from Fund Agent on Insurance Company's behalf. As between the Fund Agent and
Insurance Company, Insurance Company represents and warrants that such agents
have appropriate agreements in place with Insurance Company and if required,
with the NSCC, to assume such delegated responsibilities.
2. OPERATING PROCEDURES.
The Operating Procedures governing the responsibilities of the Fund Agent and
the Company under the Participation Agreement and this Supplement with respect
to the purchase and redemption of Fund shares and share price communications as
set forth in Schedule A attached hereto are hereby incorporated into the
Participation Agreement, as Schedule A thereto. In the event that the NSCC's
Fund/SERV system is not available, the parties agree that orders will be
processed in accordance with the Manual Procedures set forth in Schedule A.
3. AS OF TRANSACTIONS.
Processing errors which result from any delay or error caused by Insurance
Company may be adjusted through Fund/SERV by Insurance Company by the necessary
corrective transactions on an as-of basis ("As Of Trade"); provided, however,
that prior authorization must be obtained from Fund Agent if the corrective
transaction is backdated more than five days or to a previous calendar year.
Insurance Company shall promptly pay Fund Agent for any loss incurred by a Fund
as a result of the As of Trade that results from a delay or error caused by the
Insurance Company. Fund Agent shall have complete and sole discretion as to
whether or not to accept an As Of Trade. If an As Of Trade is allowed by Fund
Agent to be processed as of a particular Trade Date, Insurance Company warrants
that the trade relates only to Instructions received by Insurance Company by the
Close of Trading on Trade Date. Fund Agent reserves the right to process any As
of Trade outside of Fund/SERV.
4. TRADE CONFIRMATION.
Any confirmation provided by Fund Agent to Insurance Company electronically
through Fund/SERV and pursuant to this Supplement, shall satisfy the
confirmation delivery obligations as outlined by SEC Rule 10b-10. Insurance
Company hereby provides its informed consent to suppress the delivery of this
information using paper-media. Insurance Company will promptly verify accuracy
of confirmations of transactions and records received by Fund Agent through
Fund/SERV.
5. OVERPAYMENTS
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(a). OVERPAYMENTS TO INSURANCE COMPANY. In the event of overpayment to Insurance
Company upon a redemption, where such overpayment is caused by Fund Agent's
error, Insurance Company agrees to use best efforts to collect such overpayment
from the Contract Holder. If, after such efforts, Insurance Company is not able
to recover all of such overpayment, Insurance Company will cooperate with the
attempts of Fund Agent or the relevant Fund to recover any portion of the
overpayment, including providing Fund Agent with information reasonably
available to Insurance Company as to the identity of the Contract Holder(s) from
whom such remainder has not been recovered. If the overpayment proceeds are
still in the custody of Insurance Company or the Contract Holder's account with
Insurance Company, or if the overpayment is caused by Insurance Company's error,
Insurance Company shall promptly repay such overpayment to Fund Agent after
Insurance Company receives notice of such overpayment.
(b) OVERPAYMENTS TO FUND AGENT. In the event any overpayment is made to Fund
Agent by Insurance Company, Fund Agent shall promptly repay such overpayment to
Insurance Company after Fund Agent receives notice of such overpayment.
6. NETWORKING
This section 6 shall apply only between parties using Networking with each other
from time to time:
(a) Each party represents to the other that it or its affiliate has executed and
filed with the NSCC, and has not terminated, the Networking Agreement, and that
it or its affiliate is eligible to use the NSCC's Networking service. Each party
agrees to participate in Networking with the other under the terms of the
Networking Agreement and in accordance with the rules, standards and procedures
of the NSCC as in effect from time-to-time.
(b) The terms of the Networking Agreement, as supplement by this Section 6,
shall be incorporated by reference herein. The provisions of Article III of the
NETWORKING Agreement as incorporated by reference herein shall survive
termination of this Agreement with respect to acts or omissions occurring prior
to such termination and actions, claims, suits, complaints, proceedings or
investigations resulting from or arising out such acts or omissions.
(c) Insurance Company shall be responsible for obtaining and maintaining all
documentation and information (together, "Information"), and any changes to such
Information, necessary to ensure that all Networking accounts are established
and maintained in compliance with applicable laws and regulations, including,
without limitation, tax laws and regulations. Insurance Company represents and
warrants that (i) all such Information is, and shall remain, true and correct;
(ii) each taxpayer identification number or certificate of foreign status
provided by Insurance Company to the Fund Agent has been certified, under
penalties of perjury, by the Shareholder on the appropriate Internal Revenue
Service form or a legally acceptable substitute; and (iii) Insurance Company
shall hold available for provision to, or inspection by, regulatory authority,
all Information required by law or regulation to be so held.
7. REPRESENTATIONS AND WARRANTIES
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(a) Fund Agent and Insurance Company each represents, warrants, and covenants to
the other that:
(i) it shall perform any and all duties, functions, procedures and
responsibilities assigned to it under this Supplement and as otherwise
established by the NSCC in a competent manner and in compliance with (a)
all applicable laws, rules and regulations, including NSCC rules and
procedures relating to Fund/SERV and Networking; and (b) the then current
prospectuses and statements of additional information of the Fund;
(ii) it shall maintain facilities, equipment and skilled personnel
sufficient to perform the foregoing activities and to otherwise comply with
the terms of this Supplement;
(iii) all trades, confirmations and other information provided by one party
to the other party through the NSCC and pursuant to this Supplement shall
be accurate, complete and, in the format prescribed by the NSCC. Each party
shall adopt, implement and maintain procedures reasonably designed to
ensure the accuracy of all transmissions through Fund/SERV and Networking
and to limit the access to, and the inputting of data into, Fund/SERV and
Networking to persons specifically authorized by such party; and
(b) To the extent Insurance Company has engaged one or more third parties
(including affiliates of Insurance Company) to act as subcontractor(s) or
agent(s) ("Agents") to perform services that Insurance Company is responsible
for performing under this Supplement, Insurance Company has determined that each
such Agent is capable of performing such services and shall take measures as may
be necessary to ensure that such Agents perform such services in accordance with
the terms of this Supplement and applicable law. Insurance Company shall be
responsible for, and assume all liability for (including any obligation for
indemnification) the actions and inactions of such Agents as if such services
had been provided by Insurance Company.
8. TERMINATION; AMENDMENT.
This Supplement shall continue in effect until terminated, but shall terminate
automatically if the Participation Agreement is terminated. Any party may
terminate this Supplement at any time by written notice to the other 30 days
prior to the termination date, but such termination shall not affect the payment
or repayment of fees on transactions, if any, prior to the termination date.
This Supplement may be amended at any time by mutual written agreement of both
parties.
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9. CONFLICTING AGREEMENTS.
Except for the Participation Agreement and the Networking Agreement, this
Supplement sets forth the entire agreement and understanding of the parties
relating to the subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, among the parties. In the
event there is any conflict between this Supplement and the Networking
Agreement, the terms and conditions of the Networking Agreement shall control.
In the event there is any conflict between this Supplement and the applicable
Participation Agreement, the terms and conditions of the Participation Agreement
shall control.
10. ASSIGNMENT.
No party may assign this Supplement without the prior written consent of the
other Party, and any attempted assignment without such consent shall be null and
void; provided, however, a change in control of either Party shall not
constitute an assignment of this Supplement. Fund Agent acknowledges that
Insurance Company may engage one or more agents to fulfill some or all of
Insurance Company's responsibilities hereunder, which shall not constitute an
assignment for the purposes of this Supplement.
11. GOVERNING LAW.
This Supplement shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York, without giving effect to conflicts of
law principles thereof which might refer such interpretations to the laws of a
different state or jurisdiction.
12. SEVERABILITY.
If any provision of this Supplement is held to be invalid, the remaining
provisions of the Supplement shall continue to be valid and enforceable.
13. NOTICE.
Any notice or amendment required or permitted hereunder shall be in writing and
shall be given by personal service, mail, or facsimile to the other parties at
the address set forth below (or such other address as the parties may specify by
written notice). Notice shall be effective upon receipt if by mail, on the date
of personal delivery (by private messenger, courier service or otherwise), or
upon receipt of facsimile, whichever occurs first at:
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Funds:
OppenheimerFunds Distributor, Inc.
2 World Financial Center
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: President
Adviser:
OppenheimerFunds Services
0000 Xxxxx Xxxxxx Xxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: President
Insurance Company:
Xxxxxxx X. Xxxxxxx
President and CEO
Commonwealth Annuity and Life Insurance Company
000 Xxxxxxxx Xxxx. Xxxxx 000
Xxxxxxxxxxxx, XX 00000
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14. WAIVER.
The failure of a party to insist upon strict adherence to any provision of this
Supplement on any occasion shall not be considered a waiver nor shall it deprive
such Party of the right thereafter to insist upon strict adherence to that
provision or any other provision of this Supplement.
IN WITNESS WHEREOF, the undersigned have caused this Supplement to be executed
as of the date first above written.
XXXXXXXXXXX VARIABLE ACCOUNT FUNDS
By:/s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
OPPENHEIMERFUNDS, INC. on its own behalf
and on behalf of its division
OPPENHEIMERFUNDS SERVICES
By:/s/ Xxxxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxxxx Xxxxx
Title: VP
COMMONWEALTH ANNUITY AND LIFE
INSURANCE COMPANY
By:/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
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SCHEDULE A
OPERATING PROCEDURES
Unless otherwise defined below, all capitalized terms have the meanings
specified in the Amendment and the Participation Agreement, each of which this
Exhibit is a part.
I. FUND/SERV AND NETWORKING PROCEDURES
A. TRANSMITTAL OF PORTFOLIO INFORMATION. With respect to each Portfolio,
the Fund Agent will provide the Insurance Company or its agent, via the NSCC's
Mutual Fund Profile System, with (i) the net asset value per share of the
Portfolio (the "Share Price") on each Business Day, determined as of the time
specified in the Portfolio's prospectus ("Close of Trading"); (ii) dividend and
capital gains distribution information on ex-date; and (iii) in the case of
fixed income and money market Portfolios which declare dividends daily, the
daily accrual interest rate factor. The Fund Agent will use its best efforts to
communicate such information to the Insurance Company or its designee via the
NSCC's Mutual Fund Profile System by 7:00 p.m. Eastern Time each Business Day;
provided, however, that the Fund Agent reserves the right to communicate the
Share Price at a time later than 7:00 p.m. Eastern Time due to extraordinary or
unforeseen circumstances. Fund Agent shall notify Insurance Company in the event
that the Share Price information will be delayed and shall make available to
Insurance Company, a contact person that is able to answer questions and provide
information about the reason for the delay and when the information is expected
to be provided.
B. TRANSMITTAL OF ORDERS. The Insurance Company agrees that, unless
otherwise agreed to in writing with the Fund Agent, orders for the purchase,
exchange or redemption of Fund shares ("Instructions") received by the Insurance
Company prior to the Close of Trading on any Business Day ("Day 1) will be
transmitted to the Fund Agent via Fund/SERV and accepted by Fund/SERV prior to
6:00 a.m. Eastern Time on the following Business Day ("Day 2") (such orders are
referred to as "Day 1 Trades"). Each transmission by the Insurance Company or
its designee of a purchase, exchange or redemption order relating to a Business
Day ("Order") will constitute a representation by the Insurance Company that
such Order was based on Instructions that the Insurance Company received and
accepted as being in good order prior to the Close of Trading on that Business
Day, and that the Order included all purchase, exchange and redemption
Instructions so received by the Insurance Company.
In the event that Orders for any Business Day are not transmitted to the
Fund Agent via Fund/SERV and accepted by Fund/SERV prior to 6:00 a.m. Eastern
Time on Day 2, the Insurance Company or its designee shall transmit such Orders
to the Fund Agent in accordance with the Manual Procedures below. If such Orders
are not transmitted to the Fund Agent in accordance with the Manual Procedures,
the Fund Agent reserves the right, in its sole discretion, to reject, reverse or
re-price the Orders (notwithstanding that the Insurance Company may have
received Fund/Serv confirmation of the Orders) and the Insurance Company will be
responsible for reimbursement of any loss sustained by the Fund that may arise
out of the improper transmittal of such Orders.
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All Orders transmitted to the Fund Agent via Fund/SERV will be communicated
in accordance with Fund/SERV rules, guidelines and procedures. The Insurance
Company acknowledges that certain cash flows may be known on or before a trade
date, and the Insurance Company agrees to use its reasonable efforts to notify
the Fund Agent of such cash flows before such trade date.
C. FUND/SERV CONFIRMATION. The Fund Agent, has established one or more
master accounts on its mutual fund shareholder account recordkeeping system
(each, a "T/A Account") reflecting the aggregate ownership of shares of each
Portfolio of the Fund and all transactions involving such shares by the
Insurance Company on behalf of the Accounts. The Fund Agent will transmit a
confirmation via Fund/SERV that will set forth the number of Portfolio shares
purchased, exchanged and redeemed, the beginning and ending share balances, and
the net asset value per share.
D. PRICING OF ORDERS. Day 1 Trades communicated to the Fund Agent as
provided under Section C of these Fund/SERV Procedures will be effected at the
Share Price for the applicable Portfolio on Day 1.
E. SETTLEMENT. Day 1 Trades confirmed by the Fund Agent via Fund/SERV will
settle in U.S. dollars in accordance with the Fund's profile within Fund/SERV
applicable to the Insurance Company.
F. DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund Agent will furnish the
Company or its designee notice of any dividends or other distributions payable
on the shares of each Portfolio via Networking. Dividends and distributions with
respect to a Portfolio will be automatically reinvested in additional shares of
the Portfolio held by the T/A Account(s) and the Fund Agent will notify the
Company or its agent, via Networking, as to the number of shares so issued.
G. ACTIVITY REPORTING AND VERIFICATION. The Fund Agent will transmit or
make available to the Insurance Company, via Networking (including DST Vision,
Advisor Central, websites, or other electronic means), a report containing any
transactions or other activity occurring in a T/A Account on a Business Day,
including any Fund/SERV transactions, and the share balance for each T/A Account
in accordance with Fund/SERV's Networking guidelines. The Insurance Company will
promptly review and verify this information and immediately advise the Fund
Agent in writing of any discrepancies between the Company's records and the
balance in the T/A Account(s).
If the Insurance Company chooses not to utilize Networking, the Fund Agent will
deliver to the Insurance Company a physical statement for the preceding calendar
month reflecting the shares of each Portfolio held by the T/A Account(s) as of
the end of such preceding month and all purchases, exchanges and redemptions by
the Insurance Company of shares of a Portfolio during such preceding month. The
Insurance Company will, immediately on receipt of any physical statement
concerning an Account, verify the information contained therein against the
information contained on the Insurance Company's record-keeping system and
immediately advise the Fund Agent in writing of any discrepancies between such
information.
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The Fund Agent and the Insurance Company will cooperate to resolve any such
discrepancies as soon as reasonably practicable.
H. PROCESSING ADJUSTMENTS. In the event of any error or delay with respect
to these Fund/SERV and Networking Procedures that is caused by the Fund Agent,
the Fund Agent will make any adjustments on its accounting system necessary to
correct such error or delay. The Insurance Company will make the corresponding
adjustments on its record-keeping system. The Insurance Company and the Fund
Agent will each provide the other with prompt notice of any errors or delays of
the type referred to in these Fund/SERV and Networking Procedures.
I. FUND/SERV UNAVAILABILITY. If the Fund/SERV and Networking systems are
unavailable for any reason, or if it is otherwise impracticable to operate in
accordance with these Fund/SERV and Networking Procedures, transactions shall be
processed in accordance with the Manual Procedures outlined below.
II. MANUAL PROCEDURES
A. TRANSMITTAL OF PORTFOLIO INFORMATION. With respect to each Portfolio,
the Fund Agent will provide the Company with (i) the Share Price determined as
of the Close of Trading on each Business Day; (ii) dividend and capital gains
distribution information on ex-date,; and (iii) in the case of fixed income and
money market Portfolios which declare dividends daily, the daily accrual
interest rate factor. The Fund Agent will use its best efforts to communicate,
such information to the Company or its designee via facsimile or other method
agreed upon by the parties by 7:00 p.m. Eastern Time each Business Day; however,
the Fund Agent reserves the right to communicate the Share Price at a time later
than 7:00 p.m. Eastern Time due to extraordinary or unforeseen circumstances.
Fund Agent shall notify Insurance Company in the event that the Share Price
information will be delayed and shall make available to Insurance Company, a
contact person that is able to answer questions and provide information about
the reason for the delay and when the information is expected to be provided.
B. TRANSMITTAL OF ORDERS. The Insurance Company agrees that, unless
otherwise agreed to in writing with the Fund Agent, Instructions received by the
Insurance Company prior to the Close of Trading on any Business Day ("Day 1")
will be transmitted to the Fund Agent by facsimile no later than 9:00 a.m.
Eastern Time on the following Business Day ("Day 2") (such Orders are referred
to as "Day 1 Trades"). Each transmission by the Insurance Company or its
designee of a purchase, exchange or redemption order relating to a Business Day
("Order") will constitute a representation by the Insurance Company that such
Order was based on Instructions that the Insurance Company received and accepted
as being in good order prior to the Close of Trading on that Business Day, and
that the Order included all purchase, exchange and redemption Instructions so
received by the Insurance Company.
All Orders transmitted to the Fund Agent will be communicated in U.S.
dollars and will indicate the date of the transaction. On Business Days where
there are no Orders, or where the net dollar amount for purchases and
redemptions for an Account equals zero, the communication will so indicate. The
Insurance Company acknowledges that certain cash flows may be known on
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or before a trade date, and the Insurance Company agrees to use its reasonable
efforts to notify the Fund Agent of such cash flows before such trade date.
C. CONFIRMATION. All Orders transmitted in accordance with Section B of
these Manual Procedures are subject to acceptance by the Fund Agent and shall
become effective only upon confirmation by the Fund Agent, which confirmation
shall be sent to the Company or its designee via mail.
D. PRICING OF ORDERS. Day 1 Trades communicated to the Fund Agent by
9:00 a.m. Eastern Time on Day 2 will be effected at the Share Price for the
applicable Portfolio on Day 1.
E. SETTLEMENT.
1. PURCHASE ORDERS. In the case of Day 1 Trades that constitute a net
purchase (including exchanges) Order, the Insurance Company or its designee will
arrange for a federal funds wire transfer of the net purchase amount to a
custodial account designated by the Fund Agent by 3:00 p.m. Eastern Time on Day
2.
2. REDEMPTION ORDERS. In the case of Day 1 Trades that constitute a net
redemption (including exchanges) Order, the Fund Agent will arrange for a
federal funds wire transfer of the net redemption amount to a bank account
designated by the Insurance Company on Day 2, in no instance later than the time
provided for in the applicable Portfolio's Prospectus.
3. GENERALLY. Settlements will be in U.S. dollars. On any Business Day
when the Federal Reserve Wire Transfer System is closed, all communication and
processing rules will be suspended for the settlement of Orders. Orders will be
settled on the next Business Day on which the Federal Reserve Wire Transfer
System is open. Transactions that are the subject of such Orders will be
processed at the Share Price for the applicable Portfolio on the Business Day to
which the Orders originally relate.
F. DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund Agent will furnish the
Insurance Company or its designee written notice of any dividends or other
distributions payable on the shares of each Portfolio, via facsimile or other
method agreed upon by the parties. Dividends and distributions with respect to a
Portfolio will be automatically reinvested in additional shares of the Portfolio
held by the T/A Account(s) and the Fund Agent will notify the Insurance Company
or its designee as to the number of shares so issued.
G. ACTIVITY REPORTING AND VERIFICATION. The Fund Agent will deliver to the
Insurance Company or its designee in writing, via facsimile or other method
agreed upon by the parties (e.g., DST Vision, Advisor Central, websites, or
other electronic means) a statement for the preceding calendar month reflecting
the shares of each Portfolio held by the T/A Account(s) as of the end of such
preceding month and all purchases, exchanges and redemptions by the Insurance
Company of shares of a Portfolio during such preceding month. The Insurance
Company will, immediately upon receipt of any statement concerning a T/A
Account, verify the information contained therein against the information
contained on the Insurance Company's record-keeping system and immediately
advise the Fund Agent, in writing, of any discrepancies between such
information. The Fund Agent and the Insurance Company will cooperate to resolve
any such discrepancies as soon as reasonably practicable.
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H. PROCESSING ADJUSTMENTS. In the event of any error or delay with respect
to these Manual Procedures that is caused by the Fund Agent, the Fund Agent will
make any adjustments on its (or its transfer agent's) recordkeeping system
necessary to correct such error or delay. The Insurance Company will make the
corresponding adjustments on its record-keeping system. The Insurance Company
and the Fund Agent will each provide the other with prompt notice of any errors
or delays of the type referred to in these Manual Procedures.
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