Exhibit (h)(4)(E)
PARTICIPATION AGREEMENT
Among
LSA VARIABLE SERIES TRUST,
LSA ASSET MANAGEMENT LLC
And
NORTHBROOK LIFE INSURANCE COMPANY
THIS AGREEMENT (the "Agreement"), made and entered into as of the
first day of May 2002, by and among Northbrook Life Insurance Company
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement (collectively, the
"Accounts"), LSA Variable Series Trust (the "Fund") and LSA Asset Management LLC
(the "Manager").
WHEREAS, the Fund is an open-end management investment company and is
available to as the investment vehicle for separate accounts now in existence or
to be established in the future for variable life insurance policies, variable
annuity contracts and other tax-deferred products offered by insurance companies
(the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the fund is divided into several
series of shares, each designated a "Portfolio", (collectively, the
"Portfolios") and each representing the interests in a particular managed pool
of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated October 4, 1999 (File No. 812-11656)
(hereinafter, the "Order") granting relief to the Fund, the Manager and any
subsequently registered open-end investment companies that in the future are
advised by the Manager, or by any entity controlling, controlled by, or under
common control with the Manager. Specifically, the Order provides exemptions
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from Section 15(a) of the 1940 Act and Rule 18f-2 thereunder, subject to the
conditions set forth in the application, to permit investment advisers other
than the Manager, to serve and act as an investment sub-adviser to one or more
portfolios of the Fund (the "Adviser(s)") pursuant to written agreements between
the Manager and each Adviser that have been approved by the board of trustees of
the Fund (the "Trustees") but which have not been approved by a vote of a
majority of the outstanding voting securities of each portfolio. The Order also
provides exemptions from: certain registration statement disclosure requirements
of Items 3, 6(a)(1)(ii) and 15(a)(3) of Form N1-A and Item 3 of Form N-14;
certain proxy statement disclosure requirements of Items 22(a)(3)(iv),
(c)(1)(ii), (c)(1)(iii), (c)(8) and (c)(9) of Schedule 14A under the Securities
Exchange Act of 1934, as amended; certain semi-annual reporting disclosure
requirements of Item 48 of Form N-SAR; and, certain financial statement
disclosure requirements of Sections 6-07(2)(a), (b), and (c) of Regulation S-X
which may be deemed to require various disclosures regarding advisory fees paid
to the Advisers;
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended (the
"1933 Act"):
WHEREAS, the Manager is duly registered as an investment adviser under
the Investment Advisers Act of 1940:
WHEREAS, the Company has registered or will register certain variable
annuity and/or life insurance contracts under the 1933 Act (the "Contracts")
(unless an exemption from registration is available);
WHEREAS, the Accounts are or will be duly organized, validly existing
segregated asset accounts, established by resolution of the Board of Directors
of the Company, to set aside and invest assets attributable to the Contracts and
the Accounts;
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WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless an exemption from registration
is available);
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios (as named
in Schedule 2 to this Agreement and as may be amended from time to time by
mutual consent of the parties) on behalf of the Accounts to fund the Contracts
(as named in Schedule 3 to this Agreement and as may be amended from time to
time by mutual consent of the parties) and the Fund is authorized to sell such
shares to the Accounts at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the Fund,
the Manager and the Company agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of the Fund
which the Company orders on behalf of the Account, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Fund. For purposes of this
Section 1.1. the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives written (or facsimile) notice of
such order by 9:30 a.m. Eastern Standard Time on the next following Business
Day. "Business Day" shall mean any day on which 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.
1.2. The Company will pay for Fund shares on the next Business Day
after it places an order to purchase Fund shares in accordance with Section 1.1.
hereof. Payment shall be in federal funds transmitted by wire or by a credit for
any shares redeemed.
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1.3 The Fund agrees to make Fund shares available for purchase at the
applicable net asset value per share by the Company for its Accounts (as named
in Schedule 1 to this Agreement and as may be amended from time to time by
mutual consent of the parties) on those days on which the Fund calculates its
net asset value pursuant to the rules of the SEC; provided, however, that the
Trustees may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Trustees, acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, in the best interests of the
shareholders of any Portfolio.
1.4 The Fund agrees to redeem, upon the Company's request, any full or
fractional shares of the Fund held by the Company, executing such requests on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.4,
the Company shall be the designee of the Fund for receipt of requests for
redemption and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives written (or facsimile) notice of such request
for redemption by 9:30 a.m. Eastern Standard Time on the next following Business
Day. Payment shall be made within the time period specified in the Fund's
prospectus or statement of additional information, in federal funds transmitted
by wire to the Company's account as designated by the Company in writing from
time to time.
1.5 The Company shall pay for the Fund shares on the next Business Day
after an order to purchase shares is made in accordance with the provisions of
Section 1.4 hereof. Payment shall be in federal funds transmitted by wire
pursuant to the instructions of the Fund's treasurer or by a credit for any
shares redeemed.
1.6 The Company agrees to purchase and redeem the shares of the
Portfolios named In Schedule 2 offered by the Fund's then current prospectus and
statement of
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additional information in accordance with the provisions of such prospectus
and statement of additional information.
1.7 Net Asset Value. The Fund shall use its best efforts to inform the
Company of the net asset value per share for each Portfolio available to the
Company by 6:30 p.m. New York time or as soon as reasonably practicable after
the net asset value per share for such Portfolio is calculated. The Fund shall
calculate such net asset value in accordance with the prospectus for such
Portfolio. In the event that net asset values are not made available to the
Company by such time, the Company agrees to use its best efforts to include the
net asset value when received in its next business cycle for purposes of
calculating purchase orders and requests for redemption. However, if net asset
values are not available for an inclusion in the next business cycle and
purchase orders/redemptions are not able to be calculated and available to the
Company to execute within the time-frame identified in Section 2.3 (a), the Fund
shall reimburse and make the Company whole for any losses incurred as a result
of such delays.
1.8 Pricing Errors. Any material errors in the calculation of the net
asset value, dividends or capital gain information shall be reported immediately
upon discovery to the Company. An error shall be deemed "material" based on our
interpretation of the SEC's position and policy with regard to materiality, as
it may be modified from time to time. Neither the Fund, the Manager, 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 or on behalf of the Company or any other Participating Company to
the Fund or the Manager. The Fund shall make the Company whole for any payments
or adjustments to the number of shares in the Account that are reasonably
demonstrated to be required as a result of pricing errors.
ARTICILE II. REPRESENTATIONS AND WARRANTIES
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2.1 The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that sale of the Contracts shall comply in all material respects with state
insurance suitability requirements. The Company further represents and warrants
that is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established each Account
prior to any issuance or sale thereof as a segregated asset account under laws
of the State of Arizona and has registered or, prior to any issuance or sale of
the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2 The 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 with the applicable laws of the State of
Delaware and all applicable federal and state 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 its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund.
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify.
2.4 The Company represents that the Contracts are currently treated as
life insurance policies or annuity contracts, under applicable provisions of the
Code and that it will
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make every effort to maintain such treatment and that it will notify the Fund
immediately upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the future.
2.5 The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have its Board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6 The Fund makes no representation as to whether any aspect of Its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the applicable
laws of the State of Delaware and the Fund represents that its operations are
and shall at all times remain in material compliance with the applicable laws of
the State of Delaware to the extent required to perform this Agreement.
2.7 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 0000 Xxx.
2.8 The Manager represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws. The Manager further represents
that it will make reasonable efforts to verify that all subadvisers are
similarly registered.
2.9 The Fund represents and warrants that its trustees, officers,
employees, and other individuals/entities, if any, dealing with the money and/or
securities of the Fund are
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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
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid
blanket fidelity bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities, if
any, dealing with the money and/or securities of the Fund are covered by a
blanket fidelity bond or similar coverage, in an amount not less $5 million. The
aforesaid includes coverage for larceny and embezzlement is issued by a
reputable bonding company. 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 Manager in the event that such
coverage no longer applies.
ARTICLE III. SALES MATERIAL, PROSPECTUSES AND OTHER REPORTS
3.1 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 in which the Fund or the Manager is named, at least five Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably objects to such use within five Business Days after receipt of such
material. "Business Day" shall mean any day in which the New York Stock Exchange
is open for trading and in which the Fund calculates its net asset value
pursuant to the rules of the SEC.
3.2 Except with the express permission of the Fund, 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 for the Fund shares, as such registration statement and
prospectus may be amended or supplemented from time to
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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.
3.3 For purposes of this Article III, the phrase "sales literature or
other promotional material" shall mean advertisements (such as material
published, or designed for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape display, signs or
billboard or electronic media), and sales literature (such as brochures,
circulars, market letters and form letters), distributed or made generally
available to customers or the public.
3.4 The Fund shall provide a copy of its current prospectus within a
reasonable period of its effective filing date, and provide other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Fund is supplemented or amended) to have
the prospectus for the Contracts and the prospectus for the Fund printed
together in one document (such printing to be at the Company's expense). The
Manager shall be permitted to review and approve the typeset form of the Fund's
prospectus prior to such printing.
3.5 The Fund or the Manager shall provide the Company with either: (i)
a copy of the Fund's proxy material, reports to shareholders, other information
relating to the Fund necessary to prepare financial reports, and other
communications to shareholders for printing and distribution to Contract owners
at the Company's expense, or (ii) camera ready and/or printed copies, if
appropriate, of such material for distribution to Contract owners at the
Company's expense, within a reasonable period of the filing date for definitive
copies of such material. The Manager shall be permitted to review and approve
the typeset form of such proxy material, shareholder reports and communications
prior to such printing.
ARTICLE IV. FEES AND EXPENSES
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4.1 The Fund and Manager shall pay no fee or other compensation to the
Company under this Agreement, and the Company shall pay no fee or other
compensation to the Fund or Manager, except as provided herein.
4.2 All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. The Fund
shall ensure that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law.
4.3 The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.4) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners. The Fund shall bear the expense of
mailing such proxy materials in the event the proxy vote is a result of actions
initiated by the Fund.
4.4 In the event the Fund adds one or more additional Portfolios and
the parties desire to make such Portfolios available to the respective Contract
owners as an underlying investment medium, a new Schedule 3 which shall be an
amendment to this Agreement shall be executed by the parties authorizing the
issuance of shares of the new Portfolios to the particular Account. The
amendment may also provide for the sharing of expenses for the establishment of
new Portfolios among Participating Insurance Companies desiring to invest in
such Portfolios and the provision of funds as the initial investment in the new
Portfolios.
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4.5 Except as provided in this Section 4.2, all expenses of preparing,
setting in type and printing and distributing Fund prospectuses and statements
of additional information shall be the expense of the Company. For prospectuses
and statements of additional information provided by the Company to its existing
owners of Contracts who currently own shares of one or more of the Fund's
Portfolios, in order to update disclosure as required by the 1933 Act and/or the
1940 Act, the cost of printing shall be borne by the Fund. If the Company
chooses to receive camera-ready film or computer diskettes in lieu of receiving
printed copies of the Fund's prospectus, the Fund shall bear the cost of
typesetting to provide the Fund's prospectus to the Company in the format in
which the Fund is accustomed to formatting prospectuses, and the Company shall
bear the expense of adjusting or changing the format to conform with any of its
prospectuses. In such event, the Fund will reimburse the Company in an amount
equal to the product of x and y where x is the number of such prospectuses
distributed to owners of the Contracts who currently own shares of one or more
of the Fund's Portfolios, and y is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's statement of additional information. The Company agrees to
provide the Fund or its designee with such information as may be reasonably
requested by the Fund to assure that the Fund's expenses do not include the cost
of printing, typesetting, and distributing any prospectuses or statements of
additional information other than those actually distributed to existing owners
of the Contracts who currently own shares of one or more of the Fund's
Portfolios.
ARTICLE V. CONDITIONS OF THE ORDER: APPLICABLE LAW
5.1 The Company has reviewed a copy of the Order, and in particular,
has reviewed the conditions to the requested relief set forth therein. The
Company agrees to be bound by the responsibilities of a Participating Insurance
Company as set forth in the Order.
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5.2 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Delaware.
5.3 This Agreement shall be subject to the 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, the Order) and the terms hereof shall
be interpreted and construed in accordance therewith.
ARTICLE V. DIVERSIFICATION
6.1 The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
even of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance within the grace period afforded by Regulation
817-5. The Fund shall provide the Company information reasonably requested in
relation to Section 817(h) diversification requirements, including quarterly
reports and annual certifications.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between 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: (1) an action by any state insurance
regulatory authority: (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
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ruling, no-action or interpretative letter, or any similar action by insurance.
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a) The Company agrees to indemnify and hold harmless the Fund and
each member of the Board and officers, and each Adviser and each director and
officer of each Adviser, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party", 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, 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 Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus 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
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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 Company by or on behalf of the Fund for
use in the registration statement or prospectus 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 as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control and other
than statements or representations authorized by the Fund or an
Adviser) or unlawful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, 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 and in
conformity with information furnished to the Fund by or on behalf of
the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
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(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1 (c) hereof.
8.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from 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 or duties under this Agreement.
8.1(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 which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provisions. In case any such action is brought
against the Indemnified Parties, 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. 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
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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.
8.1(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 MANAGER
8.2(a). Each Manager agrees, with respect to each Portfolio that it
manages, 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"
and individually, "Indemnified Party," 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 Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of shares of the Portfolio
that it manages 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 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
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statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Fund by or on behalf of the Company for use in the registration
statement or prospectus 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 Portfolio 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 or sales literature for the
Contracts not supplied by the Fund or persons under its control and
other than statements or representations authorized by the Company) or
unlawful conduct of the Fund or Manager(s) or persons under their
control, with respect to the sale or distribution of the Contracts or
Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, 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
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Manager in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Manager;
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as limited by and in accordance with the provisions of Section 8.2(b)
and 8.2(c) hereof.
8.2(b). The Manager shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from 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 under this Agreement.
8.2(c) The Manager 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 Manager 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 Manager of any
such claim shall not relieve the Manager from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Manager will be entitled to participate, at
its own expense, in the defense thereof. The Manager also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Manager to such party of the Manager'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 Manager 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.
18
8.2(d). The Company agrees promptly to notify the Manager of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3 INDEMNIFICATION BY THE FUND
8.3(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 (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for purposes of this Section 8.3) against any and all losses, claims, 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 become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements result from the gross
negligence (except for failure to comply with Section 6.1 of this Agreement for
which the standard is negligence), bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including any failure to comply with Section 6.1 of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
19
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from 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 under this Agreement.
8.3(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. 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. 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.
8.3(d). The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in
20
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of either Account, or the sale or acquisition of shares
of the Fund.
ARTICLE IX. TERMINATION
9.1 This Agreement shall terminate with respect to some or all
Portfolios:
(a) at the option of any party upon six month's advance written
notice to the other parties at the address specified in Section X of this
Agreement; or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of its
Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt written notice
of the election to terminate for such cause and an explanation of such cause
shall be furnished by the Company.
9.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 9.(a) may be exercised for cause or
for no cause.
ARTICLE X. 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 parties to this Agreement.
If to the Fund:
LSA Variable Series Trust
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
ATTN: Law Department, J5B
If to the Manager:
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LSA Asset Management LLC
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
ATTN: Law Department, J5B
If to the Company:
Northbrook Life Insurance Company
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
ATTN: Law Department, J5B
ARTICLE XI. MISCELLANEOUS
11.1 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
the 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 it may come into the public domain.
11.2 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.
11.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.4 If any provision of this Agreement shall be held or made invalid
by a court decision, status, rule, or otherwise, the remainder of the Agreement
shall not be affected thereby.
22
11.5 Each party hereto shall cooperate with all appropriate
governmental authorities (including without limitation the SEC, the National
Association of Securities Dealers, Inc. 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. Each party hereto shall promptly notify the
other parties to this Agreement, by written notice to the addresses specified in
Section V, of any such investigation or inquiry.
11.6 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
11.7 It is understood by the parties that this Agreement is not an
exclusive arrangement.
11.8 The Company and the Manager each understand and agree that the
obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Manager separately represent that each has notice
of the provisions of the Declaration of Trust of the Fund disclaiming
shareholder liability for acts or obligations of the Fund.
11.9 This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.
11.10 This Agreement sets forth the entire agreement between the
parties and supercedes all prior communications, agreements and understandings,
oral or written, between the parties regarding the subject matter hereof.
23
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and ratified in its name and on its behalf by its duly
authorized representative as of the day and year above written.
NORTHBROOK LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx Pas
---------------------------------
Title: Senior Vice President and Director
LSA VARIABLE SERIES TRUST
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Title: President
LSA ASSET MANAGEMENT LLC
By: /s/ Xxxxxxxx X. Xxxxxxx
---------------------------------
Title: Chief Operating Officer
24
SCHEDULE 1
SEPARATE ACCOUNTS
Northbrook Variable Annuity Account II
25
SCHEDULE 2
AUTHORIZED PORTFOLIOS
LSA Variable Series Trust Aggressive Growth Fund
26
SCHEDULE 3
CONTRACTS
Variable Annuity II
Variable Annuity II Asset Manager
Preferred Client Variable Annuity
Variable Annuity 3
Variable Annuity 3 Asset Manager
27
