Exhibit 8(d)
PARTICIPATION AGREEMENT
AMONG
FIRST SUNAMERICA LIFE INSURANCE COMPANY,
WM VARIABLE TRUST,
WM FUNDS DISTRIBUTOR, INC.
AND
WM ADVISORS,INC.
DATED AS OF
December 31, 2002
TABLE OF CONTENTS
Section 1 Introduction ..................................................... 1
1.1 Availability of Separate Account Divisions ...................... 1
1.2 Broker-Dealer Registration ...................................... 1
Section 2 Processing Transactions .......................................... 2
2.1 Timely Pricing and Orders ....................................... 2
2.2 Timely Payments ................................................. 2
2.3 Applicable Price ................................................ 2
2.4 Market Timing ................................................... 3
Section 3 Costs and Expenses ............................................... 3
3.1 General ......................................................... 3
3.2 Registration .................................................... 3
3.3 Other (Non-Sales-Related) ....................................... 3
3.4 Sales-Related ................................................... 3
3.5 Parties to Cooperate ............................................ 4
Section 4 Legal Compliance ................................................. 4
4.1 Tax Laws ........................................................ 4
4.2 Insurance and Certain Other Laws ................................ 5
4.3 Securities Laws ................................................. 6
4.4 Notice of Certain Proceedings and Other Circumstances ........... 7
4.5 FSLIC to Provide Documents ...................................... 7
4.6 Trust to Provide Documents ...................................... 7
Section 5 Mixed and Shared Funding ......................................... 8
5.1 General ......................................................... 8
5.2 Disinterested Trustees .......................................... 8
5.3 Monitoring for Material Irreconcilable Conflicts ................ 8
5.4 Conflict Remedies ............................................... 9
5.5 Notice to FSLIC ................................................. 10
5.6 Information Requested by Board of Trustees ...................... 10
5.7 Compliance with SEC Rules ....................................... 10
5.8 Requirements for Other Insurance Companies ...................... 11
5.9 Individuals Subject to Automatic Disqualification ............... 11
Section 6 Termination ...................................................... 11
6.1 Events of Termination ........................................... 11
6.2 Funds to Remain Available ....................................... 12
6.3 Survival of Warranties and Indemnifications ..................... 12
6.4 Continuance of Agreement for Certain Purposes ................... 12
Section 7 Parties to Cooperate Respecting Termination ...................... 13
Section 8 Assignment ....................................................... 13
Section 9 Notices .......................................................... 13
Section 10 Voting Procedures ................................................ 13
Section 11 Foreign Tax Credits .............................................. 14
Section 12 Indemnification .................................................. 14
-i-
12.1 Indemnification of Trust and Distributor by FSLIC ............... 14
12.2 Indemnification of FSLIC by Distributor ......................... 16
12.3 Effect of Notice ................................................ 18
Section 13 Applicable Law .................................................. 18
Section 14 Execution in Counterparts ....................................... 18
Section 15 Severability .................................................... 18
Section 16 Rights Cumulative ............................................... 19
Section 17 Scope of Liability .............................................. 19
Section 18 Headings ........................................................ 20
-ii-
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 31st day of December, 2002
("Agreement"), by and among First SunAmerica Life Insurance Company, a stock
life insurance company ("FSLIC") (on behalf of itself and its "Separate
Account," defined below), WM Variable Trust, a Massachusetts business trust (the
"Trust"), WM Funds Distributor, Inc., a Washington corporation (the
"Distributor"), the Trust's principal underwriter and the principal underwriter
with respect to the Contracts as defined in the Recital below, and WM Advisors,
Inc., the Trust's investment adviser (the "Adviser") (collectively, the
"Parties"),
RECITAL
WHEREAS the Distributor and the Trust desire that shares of the investment
funds of the Trust set forth in Exhibit A to the Agreement (the "Funds"); be
---------
made available by the Distributor to serve as underlying investment media for
those variable annuity contracts of FSLIC set forth on Exhibit B to the
Agreement and are the subject of FSLIC's Form N-4 registration statements filed
with the Securities and Exchange Commission (the "SEC") indicated on Exhibit B
---------
(the "Contracts"). Reference herein to the "Trust" shall include each Fund to
the extent the context requires.
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Trust and the Distributor will make shares in the Funds
available to FSLIC for this purpose at net asset value and with no sales
charges, all subject to the following provisions:
Section 1 Introduction
------------
1.1 Availability of Separate Account Divisions.
------------------------------------------
FSLIC represents that each separate account listed on Exhibit B hereto
(each a "Separate Account") is and will continue to be available to serve as an
investment vehicle for the Contracts. The Contracts provide for the allocation
of net amounts received by FSLIC to separate series (the "Divisions") of the
Separate Account for investment in the shares of corresponding Funds of the
Trust that are made available through the Separate Account to act as underlying
investment media. Reference herein to the "Separate Account" shall include
reference to each Division to the extent the context requires. The Trust may
from time to time add additional Funds, which will become subject to this
Agreement (with respect to Contracts other than Polaris Platinum Contracts) by
mutual agreement of the parties. Subject to reasonable notice and system
requirements, FSLIC will not unreasonably deny any request by the Distributor to
create new Divisions corresponding to such new Funds and Exhibit A shall be
---------
amended from time to time as necessary to identify all investment funds offered
under this Agreement.
1.2 Broker-Dealer Registration.
--------------------------
Distributor represents and warrants that it is registered as a broker
dealer with the SEC under the Securities Exchange Act of 1934, as amended, and
is a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD").
Section 2 Processing Transactions
-----------------------
2.1 Timely Pricing and Orders.
-------------------------
The Trust or its designated agent will provide closing net asset value,
dividend and capital gain information for each Fund to FSLIC at the close of
trading on each day (a "Business Day") on which (a) the New York Stock Exchange
is open for regular trading, (b) the Trust calculates its net asset value and
(c) FSLIC is open for business. The Trust or its designated agent will use its
best efforts to provide this information by 3:30 p.m., Pacific time. FSLIC will
use these data to calculate unit values, which in turn will be used to process
transactions that receive that same Business Day's Separate Account unit value.
The Separate Account processing will be done the same evening, and corresponding
orders with respect to Trust shares will be placed the morning of the following
Business Day. FSLIC will use its best efforts to place such orders with the
Trust by 6:15 a.m., Pacific time.
2.2 Timely Payments.
---------------
FSLIC will transmit orders for purchases and redemptions of Trust shares to
the Distributor, and will wire payment for net purchases to a custodial account
designated by the Trust on the same day as the order for Trust shares is placed,
to the extent practicable. Payment for net redemptions will be wired by the
Trust to an account designated by FSLIC on the same day as the order is placed,
to the extent practicable, and in any event be made within six calendar days
after the date the order is placed in order to enable FSLIC to pay redemption
proceeds within the time specified in Section 22(e) of the Investment Company
Act of 1940, as amended (the "1940 Act").
2.3 Applicable Price.
----------------
The Parties agree that orders resulting from purchase payments, surrenders,
partial withdrawals, routine withdrawals of charges, or other transactions under
Contracts will be executed at the net asset values as determined as of the close
of regular trading on the New York Stock Exchange on the Business Day that FSLIC
processes such transactions, which will be the Business Day prior to the
Distributor's receipt of such orders. All other purchases and redemptions will
be effected at the net asset values next computed after receipt by the Trust of
the order therefor, and such orders will be irrevocable. FSLIC hereby elects to
reinvest all dividends and capital gains distributions in additional shares of
the corresponding Fund at the record-date net asset values until FSLIC otherwise
notifies the Trust in writing, it being agreed by the Parties that the record
date and the payment date with respect to any dividend or distribution will be
the same Business Day.
-2-
2.4 Market Timing.
-------------
The Parties agree that they will cooperate and use their reasonable best
efforts to restrict the purchase through the Contracts of shares of WM Variable
Trust in connection with a pattern of short-term trading activity that the Trust
determines interferes with efficient portfolio management.
Section 3 Costs and Expenses
------------------
3.1 General.
-------
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 Registration.
------------
The Trust will pay the cost of its registering as a management investment
company under the 1940 Act and registering its shares under the Securities Act
of 1933, as amended (the "1933 Act"), and keeping such registrations current and
effective. FSLIC will pay the cost of registering the Separate Account as a unit
investment trust under the 1940 Act and registering units of interest under the
Contracts under the 1933 Act and keeping such registrations current and
effective.
3.3 Other (Non-Sales-Related).
-------------------------
As among the Parties, the Trust will bear the costs of preparing, filing
with the SEC and setting for printing the Trust's prospectus, statement of
additional information and any supplements thereto (collectively, the "Trust
Prospectus"), periodic reports to shareholders, Trust proxy material and other
shareholder communications. FSLIC will bear the costs of preparing, filing with
the SEC and setting for printing, the Separate Account's prospectus, statement
of additional information and any supplements thereto (collectively, the
"Separate Account Prospectus"), periodic reports to owners, annuitants or
participants under the Contracts (collectively, "Participants"), voting
instruction solicitation material, and other Participant communications. As
among the Parties, the Trust and FSLIC each will bear the costs of printing and
delivering to existing Participants the documents as to which it bears the cost
of preparation as set forth above in this Section 3.3, it being understood that
reasonable cost allocations will be made in cases where any such Trust and FSLIC
documents are printed or mailed on a combined or coordinated basis.
3.4 Sales-Related.
-------------
Except as may otherwise be agreed to by the Parties, FSLIC will bear the
cost of (a) preparing, printing and distributing all Trust and Separate Account
sales literature and advertising; (b) printing and delivering to offerees Trust
and Separate Account Prospectuses,
-3-
Trust and Separate Account periodic reports and Trust and FSLIC sales
literature, and placing any advertisements; and (c) filing any Trust or FSLIC
sales materials with, and obtaining approval from, any state insurance
regulatory authorities, to the extent required. Distributor shall be responsible
for, and bear the cost of, filing all Trust sales literature and advertising and
all Separate Account sales literature and advertising relating to the Contracts
with the NASD, as required.
3.5 Parties to Cooperate.
--------------------
The Trust, FSLIC, and Distributor each agrees to cooperate, in a timely
manner, with the others, as applicable, in arranging to print, mail and/or
deliver combined or coordinated prospectuses or other materials of the Trust and
Separate Account.
Section 4 Legal Compliance
----------------
4.1 Tax Laws.
--------
(a) The Trust represents that each Fund currently qualifies and
that it will make every effort to maintain qualification of each Fund
as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Trust
or the Distributor will notify FSLIC immediately upon having a
reasonable basis for believing that a Fund has ceased to so qualify or
that it might not so qualify in the future.
(b) FSLIC represents that the Contracts will be treated as
annuity contracts under applicable provisions of the Code and that it
will make every effort to maintain such treatment; FSLIC will notify
the Trust and the Distributor immediately upon having a reasonable
basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(c) The Trust represents that each Fund currently complies with
and it will make every effort to maintain each Fund's compliance with
the diversification requirements set forth in Section 817(h) of the
Code and Section 1.817- 5(b) of the regulations under the Code, and
the Trust or the Distributor will notify FSLIC immediately upon having
a reasonable basis for believing that a Fund has ceased to so comply
or that a Fund might not so comply in the future.
(d) FSLIC represents that the Separate Account is a "segregated
asset account" and that interests in the Separate Account are offered
exclusively through the purchase of or transfer into a "variable
contract," within the meaning of such terms under Section 817(h) of
the Code and the regulations thereunder. FSLIC will make every effort
to continue to meet such definitional requirements, and it will notify
the Trust and the Distributor immediately upon having a
-4-
reasonable basis for believing that such requirements have ceased to
be met or that they might not be met in the future.
(e) The Trust represents that, under the terms of its investment
advisory agreements with the Adviser, the Adviser is and will be
responsible for managing the Trust in compliance with the Trust's
investment objectives, policies and restrictions as set forth in the
Trust Prospectus. The Trust represents that these objectives, policies
and restrictions do and will include operating as a RIC in compliance
with Subchapter M of the Code and Section 817(h) of the Code and
regulations thereunder. The Trust has adopted and will maintain
procedures for ensuring that the Trust is managed in compliance with
Subchapter M and Section 817(h) and regulations thereunder. On
request, the Trust shall also provide FSLIC with such materials,
cooperation and assistance as may be reasonably necessary for FSLIC or
any person designated by FSLIC to review from time to time the
procedures and practices of the Adviser, each sub-adviser or other
provider of services to the Trust for ensuring that the Trust is
managed in compliance with Subchapter M and Section 817(h) and
regulations thereunder.
(f) Whenever any matter (a "Matter") comes to the attention of
the Trust that causes it to believe that any of the Funds was not a
RIC in compliance with Subchapter M of the Code and/or was not in
compliance with Section 817(h) of the Code and the regulations
thereunder as of the last day of a calendar quarter, the Trust shall
furnish a report of such Matter immediately to FSLIC. The Trust will
then take such action as is necessary or appropriate to cure any
noncompliance during a grace period of 30 calendar days after the end
of the calendar quarter covered by the report. If the Trust does not
so cure the noncompliance regarding each affected Fund's status as a
RIC, the Trust will pursue those efforts necessary to enable each
affected Fund to qualify once again for treatment as a RIC in
compliance with Subchapter M, including cooperation in good faith with
FSLIC. If the Trust does not so cure the noncompliance regarding a
Fund's status under Section 817(h), the Trust will cooperate in good
faith with FSLIC's efforts to obtain a ruling and closing agreement,
as provided in Revenue Procedure 92-95 issued by the Internal Revenue
Service (or any applicable ruling or procedure subsequently issued by
the Internal Revenue Service), that the affected Fund satisfies
Section 817(h) for the period or periods covered by the report.
4.2 Insurance and Certain Other Laws.
--------------------------------
(a) The Trust will use its best efforts to comply with any
applicable state insurance laws or regulations, to the extent
specifically requested in writing by FSLIC.
-5-
(b) FSLIC represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under
the laws of the State of New York and has full corporate power,
authority and legal right to execute, deliver and perform its duties
and comply with its obligations under this Agreement, (ii) it has
legally and validly established and maintains the Separate Account as
a segregated asset account under the laws of the State of New York,
and (iii) the Contracts comply in all material respects with all other
applicable federal and state laws and regulations.
(c) The Distributor represents and warrants that it is a
business corporation duly organized, validly existing, and in good
standing under the laws of the State of Washington and has full
corporate power, authority and legal right to execute, deliver, and
perform its duties and comply with its obligations under this
Agreement.
(d) The Distributor and the Trust represent and warrant that the
Trust is a business trust duly organized, validly existing, and in
good standing under the laws of the Commonwealth of Massachusetts and
has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this
Agreement.
4.3 Securities Laws.
---------------
(a) FSLIC represents and warrants that (i) it has registered the
Separate Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account
for its variable annuity contracts, including the Contracts, (ii) the
Separate Account does and will comply in all material respects with
the requirements of the 1940 Act and the rules thereunder, (iii) the
Separate Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act
and the rules thereunder, and (iv) the Separate Account Prospectus
will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(b) The Trust and the Distributor represent and warrant that (i)
Trust shares sold pursuant to this Agreement will be registered under
the 1933 Act to the extent required by the 1933 Act and duly
authorized for issuance and sold in compliance with Massachusetts law,
(ii) the Trust is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, and (iii) the Trust will amend the
registration statement for its shares under the 1933 Act and itself
under the 1940 Act from time to time as required in order to effect
the continuous offering of its shares.
-6-
(c) The Trust represents and warrants that (i) the Trust does
and will comply in all material respects with the requirements of the
1940 Act and the rules thereunder, including the exemptive order
issued by the Commission as Release No. IC-22047, which the Trust
further represents and warrants is applicable to the Trust, (ii) its
1933 Act registration statement, together with any amendments thereto,
will at all times comply in all material respects with the
requirements of the 1933 Act and rules thereunder, and (iii) the Trust
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(d) The Trust will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction only if
and to the extent reasonably deemed advisable by the Trust, FSLIC or
any other life insurance company utilizing the Trust.
4.4 Notice of Certain Proceedings and Other Circumstances.
-----------------------------------------------------
The Distributor or the Trust shall immediately notify FSLIC of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Trust's registration statement
under the 1933 Act or the Trust Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Trust Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Trust's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Trust shares in
any state or jurisdiction, including, without limitation, any circumstances in
which (x) the Trust's shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or (y) such
law precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by FSLIC. The Distributor and the Trust will
make every reasonable effort to prevent the issuance of any stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
4.5 FSLIC to Provide Documents.
--------------------------
FSLIC will provide to the Trust one complete copy of all SEC registration
statements, Separate Account Prospectuses, reports, any preliminary and final
voting instruction solicitation material, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate to
the Separate Account or the Contracts, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.6 Trust to Provide Documents.
--------------------------
The Trust will provide to FSLIC one complete copy of all SEC registration
statements, Trust Prospectuses, reports, any preliminary and final proxy
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to
-7-
the Trust or its shares, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
Section 5 Mixed and Shared Funding
------------------------
5.1 General.
-------
FSLIC acknowledges that the Trust has applied for, and received, an order
exempting it from certain provisions of the 1940 Act and rules thereunder so
that the Trust is available for investment by certain other entities, including,
without limitation, separate accounts funding variable life insurance policies,
separate accounts of insurance companies unaffiliated with FSLIC and trustees of
qualified pension and retirement plans ("Mixed and Shared Funding").
5.2 Disinterested Trustees.
----------------------
The Trust agrees that the Board of Trustees shall at all times consist of
trustees a majority of whom (the "Disinterested Trustees") are not interested
persons of the Adviser or the Distributor within the meaning of Section 2(a)(19)
of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
------------------------------------------------
The Trust agrees that the Board of Trustees will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants of all separate accounts of life insurance companies utilizing the
Trust, including the Separate Account. FSLIC agrees to inform the Board of
Trustees of the Trust of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder,
but the Parties recognize that such a conflict may arise for a variety of
reasons, including, without limitation:
(a) an action by any state insurance or other 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 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 Fund are being
managed;
(e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract participants or
by participants of different life insurance companies utilizing the
Trust; or
-8-
(f) a decision by a life insurance company utilizing the Trust
to disregard the voting instructions of participants.
Consistent with the SEC's requirements in connection with exemptive
proceedings of the type referred to in Section 5.1 hereof, FSLIC will assist the
Board of Trustees in carrying out its responsibilities by providing the Board of
Trustees with all information reasonably necessary for the Board of Trustees to
consider any issue raised, including information as to a decision by FSLIC to
disregard voting instructions of Participants.
5.4 Conflict Remedies.
-----------------
(a) It is agreed that if it is determined by a majority of the
members of the Board of Trustees or a majority of the Disinterested
Trustees that a material irreconcilable conflict exists, FSLIC and the
other life insurance companies utilizing the Trust will, at their own
expense and to the extent reasonably practicable (as determined by a
majority of the Disinterested Trustees), take whatever steps are
necessary to remedy or eliminate the material irreconcilable conflict,
which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting
such assets in a different investment medium, including
another Fund of the Trust, or submitting the question
whether such segregation should be implemented to a vote of
all affected participants and, as appropriate, segregating
the assets of any particular group (e.g., annuity contract
owners or participants, life insurance contract owners or
all contract owners and participants of one or more life
insurance companies utilizing the Trust) that votes in favor
of such segregation, or offering to the affected contract
owners or participants the option of making such a change;
and
(ii) establishing a new registered investment company of the
type defined as a "Management Company" in Section 4(3) of
the 1940 Act or a new separate account that is operated as a
Management Company.
(b) If the material irreconcilable conflict arises because of
FSLIC's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority
vote, FSLIC may be required, at the Trust's election, to withdraw the
Separate Account's investment in the Trust. No charge or penalty will
be imposed as a result of such withdrawal. Any such withdrawal must
take place within six months after the Trust gives notice to FSLIC
that this provision is being implemented, and until such withdrawal
the
-9-
Distributor and Trust shall continue to accept and implement orders by
FSLIC for the purchase and redemption of shares of the Trust.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to FSLIC
conflicts with the majority of other state regulators, then FSLIC will
withdraw the Separate Account's investment in the Trust within six
months after the Trust's Board of Trustees informs FSLIC that it has
determined that such decision has created a material irreconcilable
conflict, and until such withdrawal the Distributor and Trust shall
continue to accept and implement orders by FSLIC for the purchase and
redemption of shares of the Trust.
(d) FSLIC agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at
its expense and with a view only to the interests of Participants.
For purposes hereof, a majority of the Disinterested Trustees will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Trust or the Distributor
be required to establish a new funding medium for any of the Contracts. FSLIC
will not be required by the terms hereof to establish a new funding medium for
any of the Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to FSLIC.
---------------
The Trust will promptly make known in writing to FSLIC the Board of
Trustees' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Trustees.
------------------------------------------
FSLIC and the Trust will at least annually submit to the Board of Trustees
of the Trust such reports, materials or data as the Board of Trustees may
reasonably request so that the Board of Trustees may fully carry out the
obligations imposed upon them by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Trustees. All reports received by the Board of Trustees of
potential or existing conflicts, and all Board of Trustees actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Trust of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Trustees or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
-------------------------
-10-
If, at any time during which the Trust is serving an investment medium for
variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
mixed and shared funding, the Parties agree that they will comply with the terms
and conditions thereof and that the terms of this Section 5 shall be deemed
modified if and only to the extent required in order also to comply with the
terms and conditions of such exemptive relief that is afforded by any of said
rules that are applicable
5.8 Requirements for Other Insurance Companies.
------------------------------------------
The Trust will require that each insurance company utilizing the Trust
enter into an agreement with the Trust that contains in substance the same
provisions as are set forth in Sections 4.1 (b), 4.1 (d), 4.3 (a), 4.4, 4.5, 5,
10 and 17 of this Agreement.
5.9 Individuals Subject to Automatic Disqualification.
-------------------------------------------------
FSLIC will maintain at its home office available to the SEC a list of its
officers, directors, and employees who participate in the management and
administration of any separate account organized as a unit investment trust or
of any Fund, which individuals will continue to be subject to the automatic
disqualification provisions of Section 9(a) of the 1940 Act.
Section 6 Termination
-----------
6.1 Events of Termination.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of FSLIC, the Distributor or the Trust upon at
least 60 days advance written notice to the other Parties;
(b) at the option of the Trust upon institution of formal
proceedings against FSLIC by the SEC, any state insurance regulator or
any other regulatory body regarding FSLIC's duties under this
Agreement or related to the sale of the Contracts, the operation of
the Separate Account, or the purchase of the Trust shares, if, in each
case, the Trust reasonably determines that such proceedings, or the
facts on which such proceedings may be based, have a material
likelihood of imposing material adverse consequences on the Fund to be
terminated;
(c) at the option of FSLIC upon institution of formal
proceedings against the Trust, the Adviser or any sub-adviser to the
Trust, or the Distributor by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body, if,
in each case, FSLIC reasonably determines that such proceedings, or
the facts on which such proceedings may be based, have a
-11-
material likelihood of imposing material adverse consequences on FSLIC
or the Division corresponding to the Fund to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
shares are not registered and, in all material respects, issued and
sold in accordance with applicable state and federal law or (ii) such
law precludes the use of such shares as an underlying investment
medium of the Contracts issued or to be issued by FSLIC;
(e) upon termination of the corresponding Division's investment
in the Fund pursuant to Section 5 hereof;
(f) at the option of FSLIC if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar
provisions, or if FSLIC reasonably believes that the Fund may fail to
so qualify; or
(g) at the option of FSLIC if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or
if FSLIC reasonably believes that the Fund may fail to so comply.
6.2 Funds to Remain Available.
-------------------------
Except (i) as necessary to implement Participant-initiated transactions,
(ii) as required by state insurance laws or regulations, (iii) as required
pursuant to Section 5 of this Agreement, or (iv) with respect to any Fund as to
which this Agreement has terminated, FSLIC shall not (x) redeem Trust shares
attributable to the Contracts (as opposed to Trust shares attributable to
FSLIC's assets held in the Separate Account), (y) prevent Participants from
allocating payments to or transferring amounts from a Fund that was otherwise
available under the Contracts, or (z) apply for an order of the Securities and
Exchange Commission pursuant to Section 26(b) of the 1940 Act.
6.3 Survival of Warranties and Indemnifications.
-------------------------------------------
All warranties and indemnifications will survive the termination of this
Agreement.
6.4 Continuance of Agreement for Certain Purposes.
---------------------------------------------
If any Party terminates this Agreement with respect to any Fund, this
Agreement shall nevertheless continue in effect as to any shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which the Separate Account owns no shares of the affected Fund or a date
mutually agreed to by the Parties (the "Final Termination Date").
-12-
Section 7 Parties to Cooperate Respecting Termination
-------------------------------------------
The Parties agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that the Separate Account owns no shares of a Fund after the Final
Termination Date with respect thereto.
Section 8 Assignment
----------
This Agreement may not be assigned, except with the written consent of each
other Party.
Section 9 Notices
-------
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
First SunAmerica Life Insurance Company
c/o AIG SunAmerica Inc.
0 XxxXxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
Attn: Xxxx Xxxxxx Xxxxx, Executive Vice President
FAX: 310/000-0000
With a copy to: Xxxxxxxxx X. Xxxxx, Vice President
WM Variable Trust
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
FAX: 000-000-0000
WM Funds Distributor, Inc.
0000 Xxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxxx
FAX: 000-000-0000
Section 10 Voting Procedures
-----------------
Subject to the cost allocation procedures set forth in Section 3 hereof,
FSLIC will distribute all proxy material furnished by the Trust to Participants
and will vote Trust shares in accordance with instructions received from
Participants. FSLIC will vote Trust shares that are (a)
-13-
not attributable to Participants or (b) attributable to Participants, but for
which no instructions have been received, in the same proportion as Trust shares
for which said instructions have been received from Participants. FSLIC agrees
that it will disregard Participant voting instructions only to the extent it
would be permitted to do so pursuant to Rule 6e-3(T)(b)(15)(iii) under the 1940
Act if the Contracts were variable life insurance policies subject to that rule.
Other participating life insurance companies utilizing the Trust will be
responsible for calculating voting privileges in a manner consistent with that
of FSLIC, as prescribed by this Section 10.
Section 11 Foreign Tax Credits
-------------------
The Trust agrees to consult in advance with FSLIC concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
Section 12 Indemnification
---------------
12.1 Indemnification of Trust by FSLIC.
---------------------------------
(a) Except to the extent provided in Sections 12.l(b) and
12.l(c), below, FSLIC agrees to indemnify and hold harmless the Trust
each of its trustees, directors and officers, and each person, if any,
who controls the Trust within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this
Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
FSLIC) or actions in respect thereof (including, to the extent
reasonable, 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 actions are related to the sale or acquisition of the Trust's
shares and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Separate Account's 1933 Act registration statement, the
Separate Account Prospectus, the Contracts or, to the extent
prepared by FSLIC, sales literature or advertising for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to FSLIC by or on
behalf of the Trust, the Distributor or the Adviser for use
in the Separate Account's 1933 Act registration statement,
the Separate Account Prospectus, the
-14-
Contracts, or sales literature or advertising (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Trust's 1933 Act registration statement,
Trust Prospectus, sales literature or advertising of the
Trust, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
FSLIC ) or wrongful conduct of FSLIC or persons under its
control (including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph
(m) of Article I of the NASD's By-Laws), in connection with
the sale or distribution of the Contracts or Trust shares;
or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Trust's 1933 Act registration statement, Trust
Prospectus, sales literature or advertising of the Trust, or
any amendment or supplement to any of the foregoing, 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 Trust by or on behalf of FSLIC
for use in the Trust's 1933 Act registration statement,
Trust Prospectus, sales literature or advertising of the
Trust, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by FSLIC to perform
the obligations, provide the services and furnish the
materials required of them under the terms of this
Agreement.
(b) FSLIC shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of
its reckless disregard of obligations or duties under this Agreement.
(c) FSLIC shall not be liable under this indemnification
provision with respect to any action against an Indemnified Party
unless the Trust or the Distributor shall have notified FSLIC in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the action 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
-15-
failure to notify FSLIC of any such action shall not relieve FSLIC
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, FSLIC shall be entitled to participate, at its
own expense, in the defense of such action. FSLIC also shall be
entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from FSLIC to such Indemnified
Party of FSLIC's election to assume the defense thereof, the
Indemnified Party will cooperate fully with FSLIC and shall bear the
fees and expenses of any additional counsel retained by it, and FSLIC
will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified
Party independently in connection with the defense thereof, other than
reasonable costs of investigation.
12.2 Indemnification of FSLIC by Distributor and Adviser.
---------------------------------------------------
(a) Except to the extent provided in Sections 12.2(b) and
12.2(c) hereof, the Distributor and the Adviser agree to indemnify and
hold harmless FSLIC, each of its directors and officers, and each
person, if any, who controls FSLIC within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of
this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Distributor) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities
or actions are related to the sale or acquisition of the Trust's
shares and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Trust's 1933 Act registration statement, Trust
Prospectus, sales literature or advertising of the Trust or,
to the extent not prepared by FSLIC, sales literature or
advertising for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the
Distributor or Trust by or on behalf of FSLIC for use in the
Trust's 1933 Act registration statement, Trust
-16-
Prospectus, or in sales literature or advertising (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Separate Account's 1933 Act registration
statement, Separate Account Prospectus, sales literature or
advertising for the Contracts, or any amendment or
supplement to any of the foregoing, not supplied for use
therein by or on behalf of the Distributor, Trust or
Adviser) or wrongful conduct of the Trust, Distributor or
Adviser or persons under their control (including, without
limitation, their employees and Associated Persons), in
connection with the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Separate Account's 1933 Act registration statement,
Separate Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or supplement to
any of the foregoing, 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 was made in reliance upon and
in conformity with information furnished to FSLIC by or on
behalf of the Trust, the Adviser or the Distributor for use
in the Separate Account's 1933 Act registration statement,
Separate Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or supplement to
any of the foregoing; or
(iv) arise as a result of any failure by the Trust, the
Distributor or the Adviser to perform the obligations,
provide the services and furnish the materials required of
them under the terms of this Agreement;
(b) The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or actions to which an Indemnified Party would otherwise
be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties
or by reason of its reckless disregard of obligations and duties under
this Agreement.
(c) The Distributor shall not be liable under this
indemnification provision with respect to any action against an
Indemnified Party unless FSLIC
-17-
shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information
of the nature of the action 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 Distributor of any such action shall not relieve the Distributor
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, the Distributor will be entitled to participate,
at its own expense, in the defense of such action. The Distributor
also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval
shall not be unreasonably withheld. After notice from the Distributor
to such Indemnified Party of the Distributor's election to assume the
defense thereof, the Indemnified Party will cooperate fully with the
Distributor and shall bear the fees and expenses of any additional
counsel retained by it, and the Distributor will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.3 Effect of Notice.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Section 12.1 or 12.2 above of participation in or control of any action by
the indemnifying Party will in no event be deemed to be an admission by the
indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
Section 13 Applicable Law
--------------
This Agreement will be construed and the provisions hereof interpreted
----------------------------------------------------------------------
under and in accordance with Washington law, without regard for that state's
----------------------------------------------------------------------------
principles of conflict of laws.
-------------------------------
Section 14 Execution in Counterparts
-------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15 Severability
------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
-18-
Section 16 Rights Cumulative
-----------------
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17 Scope of Liability
------------------
It is understood and expressly agreed that the obligations and liabilities
of the Trust hereunder will not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Trust, as provided
in the Declaration of Trust. The execution and delivery of this Agreement have
been authorized by the Board of Trustees and this Agreement has been signed by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Board of Trustees nor such execution and delivery by such
officer will be deemed to have been made by any of the Trustees individually or
to impose any liability on any of them personally, but will bind only the assets
and property of the relevant Fund, as provided in the Trust's Declaration of and
state laws.
Section 18 Confidentiality
---------------
"Confidential Information" of a Party shall mean all confidential or
proprietary information, including trade secrets of such Party and
documentation, the terms of this Agreement and any customer information. All
Confidential Information relating to a Party shall be held in confidence by each
other Party to the same extent and in at least the same manner as such Party
protects its own confidential or proprietary information. No Party shall
disclose, publish, release, transfer or otherwise make available Confidential
Information of another Party in any form to, or for the use or benefit of, any
person or entity without such Party's consent. Each Party shall, however, be
permitted to disclose relevant aspects of another Party's Confidential
Information to its officers, agents, subcontractors and employees to the extent
that such disclosure is reasonably necessary for the performance of its duties
and obligations under this Agreement and such disclosure is not prohibited by
the Xxxxx-Xxxxx-Xxxxxx Act of 1999 (Public Law 106-102, 113 Stat. 1138), as it
may be amended from time to time (the "GLB Act"), the regulations promulgated
thereunder or other applicable law; provided, however, that such Party shall
take all reasonable measures to ensure that Confidential Information of each
other Party is not disclosed or duplicated in contravention of the provisions of
this Agreement by such officers, agents, subcontractors and employees. The
obligations in this section shall not restrict any disclosure by any Party
pursuant to any applicable law, or by order of any court or government agency
(provided that the disclosing Party shall give prompt notice to each other
affected Party of such order) and shall not apply with respect to information
which (1) is developed by a Party without violating a disclosing Party's
proprietary rights, (2) is or becomes publicly known (other than through
unauthorized disclosure), (3) is disclosed by the owner of such information to a
third party free of any obligation of confidentiality, (4) is already known by
such Party without an obligation of confidentiality other than pursuant to this
Agreement or any confidentiality agreements entered into before the effective
date between the parties hereto
-19-
or (5) is rightfully received by a Party free of any obligation of
confidentiality. If the GLB Act, the regulations promulgated thereunder or other
applicable law now or hereafter in effect imposes a higher standard of
confidentiality to the Confidential Information, such standard shall prevail
over the provisions of this section.
Section 19 Headings
--------
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
-20-
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
FIRST SUNAMERICA LIFE INSURANCE COMPANY
By:_______________________________________
Title: Xxxx X. Xxxxx, Senior Vice President
WM VARIABLE TRUST
By:_______________________________________
Title:
WM FUNDS DISTRIBUTOR, INC.
By:_______________________________________
Title:
WM ADVISORS, INC.
By:_______________________________________
Title:
-21-
EXHIBIT A
---------
INVESTMENT FUNDS OF THE TRUST
AS OF DECEMBER 31, 2002
With respect to WM Diversified Strategies (3 year surrender charge) (Class 2
shares):
.. Money Market Fund
.. Short-Term Income Fund
.. U.S. Government Securities Fund
.. Income Fund
.. Bond & Stock Fund
.. Growth & Income Fund
.. Growth Fund
.. Growth Fund of the Northwest
.. Small Cap Stock Fund
.. International Growth Fund
.. Strategic Growth Portfolio
.. Conservative Growth Portfolio
.. Balanced Portfolio
.. Flexible Income Portfolio
.. Income Portfolio
-22-
EXHIBIT B
---------
CONTRACTS
AS OF DECEMBER 31, 2002
.. WM Diversified Strategies/III/ Variable Annuity (3 year surrender charge)
(SEC File No. 333-101487); FS Variable Separate Account
-23-