Exhibit 1.A(8)(k)
PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and between The ▇▇▇▇▇ American Fund ("FUND"),
a Massachusetts business trust, ▇▇▇▇ ▇▇▇▇▇ MANAGEMENT, INC., a New York
corporation ("ADVISOR"), and SOUTHLAND LIFE INSURANCE COMPANY ("SOUTHLAND"), a
life insurance company organized under the laws of the State of Texas.
WHEREAS, FUND is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("'40 Act") as an open-end
diversified management investment company; and
WHEREAS, FUND is organized as a series fund, comprised of several
Portfolios which are listed on Appendix A hereto; and
WHEREAS, FUND was initially organized to act as the funding vehicle for
certain variable life insurance and/or variable annuity contracts ("Variable
Contracts") offered by life insurance companies through separate accounts of
such life insurance companies; and
WHEREAS, ADVISOR is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and as a broker-dealer under the
Securities Exchange Act of 1934, as amended; and
WHEREAS, ADVISOR is the investment adviser to FUND and the distributor
of the shares of FUND; and
WHEREAS, SOUTHLAND has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having FUND as one of the underlying funding vehicles for such
Variable Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, SOUTHLAND intends to purchase shares of FUND to fund the
aforementioned Variable Contracts and FUND is authorized to sell such shares to
SOUTHLAND at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, SOUTHLAND,
FUND and ADVISOR agree as follows:
1. FUND will make available to the designated Separate Accounts of
SOUTHLAND shares of the selected Portfolios for investment of purchase payments
of Variable Contracts allocated to the designated Separate Accounts as provided
in FUND's Prospectus.
2. FUND represents and warrants that all shares of the Portfolios of
FUND will be sold only to other insurance companies which have agreed to
participate in FUND to fund their Separate Accounts, all in accordance with the
requirements of Section 817 (h) of the Internal
Revenue Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5.
Shares of the Portfolios of FUND will not be sold directly to the general
public.
3. (a) FUND agrees to sell to SOUTHLAND those shares of the
selected Portfolios of FUND which SOUTHLAND orders, executing such orders on a
daily basis at the net asset value next computed after receipt by FUND or its
designee of the order for the shares of FUND. For purposes of this Section 3(a),
SOUTHLAND shall be the designee of FUND for receipt of such orders and receipt
by such designee shall constitute receipt by FUND; provided that FUND receives
notice of such order by 9:30 a.m. New York 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 FUND calculates its net asset value pursuant to
the rules of the SEC.
(b) FUND agrees to redeem for cash, on SOUTHLAND's request,
any full or fractional shares of FUND held by SOUTHLAND, executing such requests
on a daily basis at the net asset value next computed after receipt by FUND or
its designee of the request for redemption. For purposes of this Section 3(b),
SOUTHLAND shall be the designee of FUND for receipt of requests for redemption
and receipt by such designee shall constitute receipt by FUND; provided that
FUND receives notice of such request for redemption by 9:30 a.m. New York time
on the next following Business Day.
(c) FUND shall make the net asset value per share for the
selected Portfolio(s) available to SOUTHLAND on a daily basis as soon as
reasonably practical after the net asset value per share is calculated by shall
use its best efforts to make such net asset value available by 6:15 p.m. New
York time. If FUND provided SOUTHLAND with the incorrect share net asset value
information through no fault of SOUTHLAND, SOUTHLAND on behalf of the Separate
Accounts, shall be entitled to an adjustment to the number of shares purchased
or redeemed to reflect the correct share net asset value. Any error in the
calculation of net asset value, dividend and capital gain information greater
than or equal to $.01 per share of FUND, shall be reported immediately upon
discovery to SOUTHLAND. Any error of a lesser amount shall be corrected in the
next Business Day's net asses value per share for FUND.
(d) At the end of each Business Day, SOUTHLAND shall use the
information described in Section 3(c) to calculate Separate Account unit values
for the day. Using these unit values, SOUTHLAND shall process each such Business
Day's Separate Account transactions based on requests and premiums received by
it by the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m. New York time) to determine the net dollar amount of FUND
shares which shall be purchased or redeemed at that day's closing net asset
value per share. The net purchase or redemption orders so determined shall be
transmitted to FUND by SOUTHLAND by 9:30 a.m. New York time on the Business Day
next following SOUTHLAND's receipt of such requests and premiums in accordance
with the terms of Sections 3(a) and 3(b) hereof.
(e) If SOUTHLAND's order requests the purchase of FUND
shares, SOUTHLAND shall pay for such purchase by wiring federal funds to FUND or
its designated
2
custodial account on the day the order is transmitted by SOUTHLAND. If
SOUTHLAND's order requests a net redemption resulting in a payment of redemption
proceeds to SOUTHLAND, FUND shall wire the redemption proceeds to SOUTHLAND by
the next Business Day, unless doing so would require FUND to dispose of
portfolio securities or otherwise incur additional costs, but in such event,
proceeds shall be wired to SOUTHLAND within seven days and FUND shall notify the
person designated in writing by SOUTHLAND as the recipient for such notice of
such delay by 3:00 p.m. New York time the same Business Day that SOUTHLAND
transmits the redemption order to FUND. If SOUTHLAND's order requests the
application of redemption proceeds from the redemption of shares to the purchase
of shares of another portfolio managed or distributed by ADVISOR, FUND shall so
apply such proceeds the same Business Day that SOUTHLAND transmits such order to
FUND.
4. (a) FUND will bear the printing costs (or duplicating costs
with respect to the statement of additional information and mailing costs
associated with the delivery of the following FUND (or individual portfolio)
documents, and any supplements thereto, to existing Variable Contract owners of
SOUTHLAND whose Variable Contract values are invested in the Fund:
(i) prospectuses and statements of additional
information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
SOUTHLAND will submit any bills for printing, duplicating and/or
mailing costs relating to the FUND documents described above, to FUND for
reimbursement by FUND. SOUTHLAND shall monitor such costs and shall use its best
efforts to control these costs. SOUTHLAND will provide FUND on a semi-annual
basis, or more frequently as reasonably requested by FUND, with a current
tabulation of the number of existing Variable Contract owners of SOUTHLAND whose
Variable Contract values are invested in FUND. This tabulation will be sent to
FUND in the form of a letter signed by a duly authorized officer of SOUTHLAND
attesting to the accuracy of the information contained in the letter.
(b) FUND will provide, at its expense, SOUTHLAND with the
following FUND (or individual Portfolio) documents, and any supplements thereto,
with respect to prospective Variable Contract owners of SOUTHLAND:
(i) camera ready copy of the current prospectus for
printing by SOUTHLAND;
(ii) a copy of the statement of additional information
suitable for duplication;
(iii) camera ready copy of proxy material suitable for
printing; and
3
(iv) camera ready copy of the annual and semi-annual
reports for printing by SOUTHLAND.
(c) FUND shall provide SOUTHLAND with as many copies of the
current prospectus of FUND as SOUTHLAND may reasonably request. Where FUND is
not obligated to bear the costs of such prospectuses under Sections 4(a) and
(b), SOUTHLAND will reimburse FUND for the cost of providing the requested
prospectuses. If requested by SOUTHLAND, FUND shall provide such documentation
(including a final copy of FUND's prospectus as set in type or in camera-ready
copy) and other assistance as is reasonably necessary in order for SOUTHLAND to
print together in one document the current prospectus for the Variable Contracts
issued by SOUTHLAND and the current prospectus for FUND.
5. (a) SOUTHLAND will furnish, or will cause to be furnished, to
FUND and ADVISOR, each piece of sales literature or other promotional material
in which FUND or ADVISOR is named at least fifteen Business Days prior to its
intended use. No such material will be used if FUND or ADVISOR objects to its
use in writing within ten Business Days after receipt of such material.
(b) FUND and ADVISOR will furnish, or will cause to be
furnished, to SOUTHLAND, each piece of sales literature or other promotional
material in which SOUTHLAND or its Separate Account are named, at least fifteen
Business Days prior to its intended use. No such material will be used if
SOUTHLAND objects to its use in writing within ten Business Days after receipt
of such material. FUND or ADVISOR will be responsible for making submissions to
the NASD or other regulatory authorities of such sales literature or other
promotional materials.
(c) FUND and its affiliates and agents shall not give any
information or make any representations on behalf of SOUTHLAND or concerning
SOUTHLAND, the Separate Accounts, or the information or representations
contained in a registration statement or prospectus for such Variable Contracts,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in reports for the Separate Accounts or prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by SOUTHLAND or its designee, except with
the permission of SOUTHLAND.
(d) SOUTHLAND and its affiliates and agents shall not give any
information or make any representations on behalf of FUND or concerning FUND or
ADVISOR other than the information or representations contained in a
registration statement or prospectus for FUND, as such registration statement
and prospectus may be amended or supplemented from time to time, or in published
reports for FUND which are in the public domain or approved by FUND or ADVISOR
for distribution, or in sales literature or other promotional material approved
by FUND or its designee, except with the permission of FUND.
4
(e) For purposes of this Agreement, the phrase "sales
literature or other promotional material" or words of similar import include,
without limitation, advertisements (such as material published, or designed for
use, in a newspaper, magazine or other periodical, radio, television, telephone
or tape recording, videotape display, signs or billboards, motion pictures or
other public media), sales literature (such as any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, or reprints or excerpts or 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,
registration statements, prospectuses, statements of additional information,
shareholder reports and proxy materials, and any other material constituting
sales literature or advertising under National Association of Securities
Dealers, Inc. ("NASD") rules, the '40 Act or the Securities Act of 1933 ("'33
Act").
6. Each Portfolio of FUND will 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 Regulation. In the event FUND becomes
aware that any Portfolio of FUND has failed to comply, it will take all
reasonable steps (a) to notify SOUTHLAND of such failure, and (b) to adequately
diversify the Portfolio so as to achieve compliance.
7. (a) Except as limited by and in accordance with the provisions
of Sections 7(b) and 7(c) hereof, SOUTHLAND agrees to indemnify and hold
harmless FUND and ADVISOR, each of the directors and members of the Board of
Trustees of FUND, each of the directors and officers of ADVISOR, and each
person, if any, who controls FUND or ADVISOR within the meaning of Section 15 of
the '33 Act (collectively, the "Indemnified Parties" for purposes of this
Section 7) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of SOUTHLAND) 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 FUND's
shares or the Variable 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 Variable Contracts
or contained in the Variable Contracts or sales
literature therefore (or any amendment or
supplement to any other foregoing), or arise out
of or are based upon the omission or the alleged
omission of 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 SOUTHLAND by or on
5
behalf of FUND for use in the registration
statement or prospectus for the Variable Contract
or in the Variable Contracts or sales literature
(or any amendment or supplement) or otherwise for
use in connection with the sale of the Variable
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 FUND
not supplied by SOUTHLAND, or persons under its
contract) or wrongful conduct of SOUTHLAND or
persons under its control, with respect to the
sale or distribution of the Variable 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, or sales
literature of 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
statement or omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to FUND or
ADVISOR by or on behalf of SOUTHLAND; or
(iv) arise as a result of any failure by SOUTHLAND to
substantially 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
SOUTHLAND in this Agreement or arise out of or
result from any other material breach of this
Agreement by SOUTHLAND.
(b) SOUTHLAND shall not be liable under this indemnification
provision for any losses, claims, damages or liabilities incurred or assessed
against an Indemnified Party arising 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 or to FUND, whichever is
applicable.
(c) SOUTHLAND 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 SOUTHLAND 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 SOUTHLAND of any
such claim shall not relieve SOUTHLAND from
6
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 an Indemnified Party, SOUTHLAND shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from SOUTHLAND to such party of
SOUTHLAND's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and
SOUTHLAND 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. (a) Except as limited by and in accordance with the provisions
of Sections 8(b) and 8(c), ADVISOR agrees to indemnify and hold harmless
SOUTHLAND and each of its directors and officers and each person, if any, who
controls SOUTHLAND within the meaning of Section 15 of the '33 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8) against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of ADVISOR) 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 FUND's shares or the
Variable 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
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 of a material
fact required to be to 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 ADVISOR
or FUND by or on behalf of SOUTHLAND for use in
the registration statement or prospectus for FUND
or in sales literature (or any amendment or
supplement) or otherwise for use in connection
with the sale of the Variable 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 for the
Variable Contracts not supplied by ADVISOR or
persons under its control) or wrongful conduct of
FUND, ADVISOR or persons under their control, with
respect to the sale or distribution of the
Variable 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, or sales
7
literature covering the Variable 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 statements therein not
misleading, if such statement or omission or such
alleged statement or omission was made in reliance
upon and in conformity with information furnished
to SOUTHLAND by or on behalf of FUND; or
(iv) arise as a result of (a) a failure by FUND to
substantially provide the services and furnish the
materials under the terms of this Agreement; (b) a
failure by FUND to comply with the diversification
requirements of Section 817(h) of the Code; (c) a
failure by FUND to qualify as a Regulated
Investment Company under Subchapter M of the Code;
or (d) a failure by FUND to register its shares as
required by the laws of the various states;
(v) arise out of or result from any material breach of
any representation and/or warranty made by ADVISOR
in this Agreement or arise out of or result from
any other material breach of this Agreement by
ADVISOR.
(b) ADVISOR shall not be liable under this indemnification
provision for any losses, claims, damages or liabilities incurred or assessed
against an Indemnified Party arising 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 or SOUTHLAND.
(c) ADVISOR 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 ADVISOR 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 ADVISOR of any such
claim shall not relieve ADVISOR 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 an
Indemnified Party, ADVISOR shall be entitled to participate at its own expense
in the defense thereof. ADVISOR also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from ADVISOR to such party of ADVISOR's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and ADVISOR 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
9. FUND represents and warrants that FUND Shares sold pursuant to this
Agreement shall be registered under the '33 Act and duly authorized for
issuance, and shall be issued, in compliance in all material respects with
applicable law, and that FUND is and shall remain registered under the '40 Act
for so long as required thereunder. FUND further represents and warrants that
FUND currently qualifies and will make every effort to continue to qualify as a
Regulated Investment Company under Subchapter M of the Code, and to maintain
such qualification (under Subchapter M or any successor or similar provisions),
and that FUND will notify SOUTHLAND immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future. FUND will register and qualify its shares for sale in accordance
with the laws of the various states as may be required by law.
10. FUND will provide SOUTHLAND with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority.
SOUTHLAND will provide FUND with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account promptly after the filing of each
such document with the SEC or other regulatory authority.
11. FUND will disclose in its prospectus that (1) shares of FUND are
offered to affiliated or unaffiliated insurance company separate accounts which
fund both annuity and life insurance contracts, (2) due to differences in tax
treatment or other considerations, the interests of various Variable Contract
owners participating in FUND might at some time be in conflict, and (3) the
Board of Trustees of FUND will monitor for any material conflicts and determine
what action, if any, should be taken. FUND hereby notifies SOUTHLAND that
prospectus disclosure may be appropriate regarding potential risks of offering
shares of FUND to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
12. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (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.
13. SOUTHLAND agrees to inform the Board of Trustees of FUND of the
existence of or any potential for any material irreconcilable conflict of
interest between the interest of the contract owners of the Separate Accounts of
SOUTHLAND investing in FUND and/or any other separate account of any other
insurance company investing in FUND upon SOUTHLAND having knowledge of same.
FUND agrees to inform SOUTHLAND of the existence of or any potential for any
material irreconcilable conflict of interest between the interests of the
contract owners of the Separate
9
Accounts of SOUTHLAND investing in FUND and/or any other separate account of any
other insurance company investing in FUND (upon FUND having knowledge of same).
A material irreconcilable conflict may arise for any one of a variety
of reasons, including:
(a) an action by any state insurance regulatory
authority;
(b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or
interpretive letter, or any similar action by
insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any
relevant proceeding;
(d) the manner in which the investments of any Portfolio
are being managed;
(e) a difference in voting instructions given by variable
annuity contact owners and variable life insurance
contract owners or by contract owners of different
life insurance companies utilizing FUND; or
(f) a decision by a participating life insurance company
to disregard the voting instructions of contract
owners.
The Board of Trustees of FUND shall promptly inform SOUTHLAND if it
determines that an irreconcilable material conflict exists and the implications
thereof.
SOUTHLAND will be responsible for assisting the Board of Trustees of
FUND in carrying out its responsibilities by providing the Board with all
information reasonably necessary for the Board to consider any issue raised
including information as to a decision by SOUTHLAND to disregard voting
instructions of contract owners.
It is agreed that if it is determined by a majority of the members of
the Board of Trustees of FUND or a majority of its disinterested Trustees that a
material irreconcilable conflict exists affecting SOUTHLAND, SOUTHLAND shall, at
its own expense, to the extent reasonably practicable, take whatever steps are
necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to,
(a) withdrawing the assets allocable to some or all of the
Separate Accounts from FUND or any Portfolio and reinvesting
such assets in a different investment medium, including
another Portfolio of FUND or submitting the questions of
whether such segregation should be implemented to a vote of
all affected contract owners and, as appropriate, segregating
the assets of any particular group (i.e., annuity contract
10
owners or life insurance contract owners) that votes in favor
of such segregation, or offering to the affected contract
owners the option of making such a change;
(b) establishing a new registered management investment company or
managed separate account.
If a material irreconcilable conflict arises because of SOUTHLAND's
decision to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, SOUTHLAND may
be required, at FUND's election, to withdraw its Separate Account's investment
in FUND. No charge or penalty will be imposed against a Separate Account of
SOUTHLAND as a result of such withdrawal. SOUTHLAND agrees that any remedial
action taken by it in resolving any material conflicts of interest will be
carried out in the interests of contract owners.
For purposes hereof, a majority of the disinterest members of the Board
of Trustees of FUND shall determine whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no event will FUND
be required to establish a new funding medium for any Variable Contracts.
SOUTHLAND shall not be required by the terms hereof to establish a new funding
medium for any Variable Contracts if an offer to do so has been declined by vote
of a majority of affected contract owners.
14. SOUTHLAND shall provide pass-through voting privileges, as provided
in this paragraph, to all Variable Contract owners so long as the SEC or its
staff continues to interpret the '40 Act to require such pass-through voting
privileges for Variable Contract owners. SOUTHLAND will vote shares for which it
has not received voting instructions as well as shares attributable to it in the
same proportion as it votes shares for which it has received instructions.
SOUTHLAND shall be responsible for assuring that each of its Separate Accounts
participating in FUND calculates voting privileges in a manner consistent with
other life companies utilizing FUND provided that each participating life
insurance company enters into an agreement containing a provision or provisions,
which do not vary in any material respect, from the terms of Section 13 hereof.
15. (a) This Agreement shall be effective as of the date
hereof and shall continue in force until terminated in accordance with the
provisions herein.
(b) This Agreement shall terminate automatically in the event
of its assignment unless such assignment is made with the written consent of
SOUTHLAND and FUND.
(c) This Agreement shall terminate without penalty at the
option of the terminating party in accordance with the following provisions:
(i) At the option of SOUTHLAND or FUND at any time
from the date hereof upon 180 days' advance
written notice, unless a shorter time is agreed to
by the parties;
11
(ii) At the option of SOUTHLAND if FUND shares are not
reasonably available to meet the requirements of
the Variable Contracts as determined by SOUTHLAND.
Notice of election to terminate shall be furnished
by SOUTHLAND and termination shall be effective
ten days after FUND's receipt of said notice
unless FUND makes available a sufficient number of
shares, to the satisfaction of SOUTHLAND, to meet
the requirements of the Variable Contracts within
said ten-day period;
(iii) At the option of SOUTHLAND, upon the institution
of formal proceedings against FUND by the SEC, the
NASD, or any other regulatory body, the expected
or anticipated ruling, judgment or outcome of
which would, in SOUTHLAND's reasonable judgment,
materially impair FUND's ability to meet and
perform FUND's obligations and duties hereunder.
Prompt notice of election to terminate under this
paragraph shall be furnished by SOUTHLAND with
said termination to be effective upon receipt of
notice;
(iv) At the option of SOUTHLAND, upon its good faith
determination, or at the option of FUND upon a
determination by a majority of the Board, or a
majority of disinterested Board members, that an
irreconcilable material conflict exists among the
interests of (i) owners of Variable Contracts
issued by participating life insurance companies;
or (ii) the interest of participating life
insurance companies;
(v) At the option of FUND, upon the institution of
formal proceedings against SOUTHLAND by the SEC,
the NASD, or any other regulatory body, the
expected or anticipated ruling, judgment or
outcome which would, in FUND's reasonable
judgement, materially impair SOUTHLAND's ability
to meet and perform its obligations and duties
hereunder. Prompt notice of election to terminate
under this paragraph shall be furnished by FUND
with said termination to be effective upon receipt
of notice;
(vi) At the option of FUND, if (1) FUND shall determine
in its sole judgement reasonably exercised in good
faith, that SOUTHLAND has suffered a material
adverse change in its business or financial
condition or is the subject of material adverse
publicity and such material adverse change or
material adverse publicity is likely to have a
material adverse impact upon the business and
operation of FUND and ADVISOR, (2) FUND shall have
notified SOUTHLAND in writing of such
determination and its intent to terminate this
12
Agreement, and, (3) after consideration of the
actions taken by SOUTHLAND and any other changes
in circumstances since the giving of such notice,
the determination of FUND shall continue to apply
on the sixtieth (60th) day since giving of such
notice, then such sixtieth day shall be the
effective date of termination;
(vii) At the option of SOUTHLAND after having been
notified by FUND of a termination or proposed
termination of the Investment Advisory Agreement
between FUND and ADVISOR or its successors, which
notice FUND shall provide promptly to SOUTHLAND,
the effective date of termination of the Agreement
to be as determined by SOUTHLAND;
(viii) In the event FUND's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law, or such law precludes the use
of such shares as the underlying investment medium
of Variable Contract issued or to be issued by
SOUTHLAND. Termination shall be effective
immediately upon such occurrence without notice;
(ix) At the option of FUND upon a reasonable
determination by the Board in good faith that it
is no longer advisable and in the best interests
of shareholders for FUND to continue to operate
pursuant to this Agreement;
(x) At the option of FUND if the Variable Contracts
cease to qualify as annuity contracts or life
insurance contracts, as applicable, under the
Code, or if FUND reasonably believes that the
Variable Contracts may fail to so qualify;
(xi) At the option of SOUTHLAND, upon FUND's breach of
any material provision of this Agreement, which
breach has not been cured to the satisfaction of
SOUTHLAND within ten days after written notice of
such breach is delivered to FUND;
(xii) At the option of FUND, upon SOUTHLAND's breach of
any material provision of this Agreement, which
breach has not been cured to the satisfaction of
FUND within ten days after written notice of such
breach is delivered to SOUTHLAND;
(xiii) At the option of FUND, if the Variable Contracts
are not registered, issued or sold in accordance
with applicable federal and/or state law.
13
Termination shall be effective immediately upon
such occurrence without notice;
(xiv) At the option of SOUTHLAND, if SOUTHLAND shall
determine, in its sole judgment reasonably
exercised in good faith, that FUND is the subject
of material adverse publicity and such material
adverse publicity is likely to have a material
adverse impact on the sale of the Variable
Contracts and/or the operations or business
reputation of SOUTHLAND, SOUTHLAND shall have
notified FUND in writing of such determination and
its intent to terminate this Agreement, and, after
consideration of the actions taken by FUND and any
other changes in circumstances since the giving of
such notice, the determination of SOUTHLAND shall
continue to apply on the sixtieth (60th) day since
giving of such notice, which sixtieth day shall be
the effective date of termination;
(xv) Upon requisite vote of the Variable Contract
owners having an interest in the Separate Accounts
to substitute the shares of another investment
company for the corresponding shares of FUND in
accordance with the terms of the Variable
Contracts for which those shares had been selected
to serve as the underlying investment media.
(d) Notwithstanding any termination of this Agreement pursuant
to Section 15(c) hereof, at the election of SOUTHLAND, FUND shall continue to
make available additional FUND shares, as provided below, pursuant to the terms
and conditions of this Agreement, for all Variable Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, at the election of
SOUTHLAND, the owners of the Existing Contracts or SOUTHLAND, whichever shall
have legal authority to do so, shall be permitted to reallocate investments in
FUND, redeem investments in FUND and/or invest in FUND upon the payment of
additional premiums under the Existing Contracts. In the event of a termination
of this Agreement pursuant to Section 15(c) hereof, SOUTHLAND, as promptly as is
practicable under the circumstances, shall notify FUND whether SOUTHLAND shall
elect to continue to have FUND make shares available after such termination. If
FUND shares continue to be made available after such termination, the provisions
of this Agreement shall remain in effect and thereafter either FUND or SOUTHLAND
may terminate the Agreement, as so continued pursuant to this Section 15(d),
upon prior written notice to the other party such notice to be for a period that
is reasonable under the circumstances but, if given by FUND, need not be for
more than six months. In determining whether to elect to continue to make
available additional FUND shares, SOUTHLAND shall act in good faith, giving due
consideration to the interests of existing shareholders, including holders of
Existing Contracts.
14
16. This Agreement shall be subject to the provisions of the '40 Act
and the rules and regulations thereunder, including any exemptive relief
therefrom and the orders of the SEC setting forth such relief.
17. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
18. It is understood by the parties that this Agreement is not an
exclusive arrangement.
19. This Agreement is made by FUND pursuant to authority granted by the
Trustees, and the obligations created hereby are binding on FUND and its
property, but not on any of the Trustees or shareholders of FUND individually.
15
Executed this 22nd day August, 1995.
THE ▇▇▇▇▇ AMERICAN FUND
ATTEST: /s/ ▇▇▇▇▇ Staple BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
SOUTHLAND LIFE INSURANCE
COMPANY
ATTEST: /s/ B. ▇▇▇▇▇ ▇▇▇▇▇▇ BY: /s/ P. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ MANAGEMENT, INC.
ATTEST: /s/ ▇▇▇▇▇ Staple BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
16
Appendix A
Portfolios of the Fund available as funding vehicles under the Contracts:
▇▇▇▇▇ American Small Capitalization Portfolio
▇▇▇▇▇ American MidCap Growth Portfolio
▇▇▇▇▇ American Growth Portfolio
▇▇▇▇▇ American Leveraged AllCap Portfolio
