PARTICIPATION AGREEMENT
BY AND AMONG
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.,
SEI INVESTMENTS DISTRIBUTION CO.,
[______________] INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
___________ DISTRIBUTION COMPANY, INC.
TABLE OF CONTENTS
DESCRIPTION
PAGE
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Section 1. Available Funds
4
1.1 Availability
4
1.2 Addition, Deletion or Modification of Funds
4
1.3 No Sales to the General Public
4
Section 2. Processing Transactions
4
2.1 Timely Pricing and Orders
4
2.2 Timely Payments
5
2.3 Applicable Price
5
2.4 Dividends and Distributions
6
2.5 Book Entry
6
Section 3. Costs and Expenses
6
3.1 General
6
3.2 Registration
6
3.3 Other (Non-Sales-Related)
7
3.4 Other (Sales-Related)
7
3.5 Parties To Cooperate
7
Section 4. Legal Compliance
8
4.1 Tax Laws
8
4.2 Insurance and Certain Other Laws
10
4.3 Securities Laws
10
4.4 Notice of Certain Proceedings and Other
Circumstances 12
4.5 Company To Provide Documents; Information About
FAIP 12
4.6 FAIP To Provide Documents; Information About
Company 13
DESCRIPTION
PAGE
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Section 5. Mixed and Shared Funding
15
5.1 General
15
5.2 Disinterested Directors
15
5.3 Monitoring for Material Irreconcilable Conflicts
15
5.4 Conflict Remedies
16
5.5 Notice to Company
18
5.6 Information Requested by Board of Directors
18
5.7 Compliance with SEC Rules
18
5.8 Other Requirements
18
Section 6. Termination
19
6.1 Events of Termination
19
6.2 Notice Requirement for Termination
20
6.3 Funds To Remain Available
20
6.4 Survival of Warranties and Indemnifications
20
6.5 Continuance of Agreement for Certain Purposes
21
Section 7. Parties To Cooperate Respecting Termination
21
Section 8. Assignment
21
Section 9. Notices
21
Section 10. Voting Procedures
22
Section 11. Foreign Tax Credits
23
Section 12. Indemnification
23
12.1 Of FAIP and SEI by Company and Contract
Underwriter 23
12.2 Of Company and Contract Underwriter by FAIP and
SEI 25
12.3 Effect of Notice
28
12.4 Successors
28
Section 13. Applicable Law
28
Section 14. Execution in Counterparts
28
Section 15. Severability
28
Section 16. Rights Cumulative
29
Section 17. Headings
29
Section 18. Confidentiality
29
Section 19. Parties to Cooperate
30
Section 20. Amendments
30
Section 21. Assignment
30
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of
_________,
2000 ("Agreement"), by and among First American Insurance Portfolios,
Inc., a
Minnesota corporation ("FAIP"); SEI Investments Distribution Co., a
Delaware
corporation ("SEI"), [____________] Insurance Company, a __________ life
insurance company ("Company"), on behalf of itself and each of its
segregated
asset accounts listed in Schedule A hereto, as the parties hereto may
amend said
Schedule A from time to time (each, an "Account," and collectively, the
"Accounts"); and [______] Distribution Company, an affiliate of Company
and the
principal underwriter of the Contracts ("Contract Underwriter")
(collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, FAIP is registered with the Securities and Exchange
Commission
("SEC") as an open-end management investment company under the
Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, FAIP currently consists of three separate series
("Series"),
shares ("Shares") of each of which are registered under the Securities
Act of
1933, as amended (the "1933 Act") and may be sold to one or more
separate
accounts of life insurance companies to fund benefits under variable
annuity
contracts and variable life insurance contracts; and
WHEREAS, FAIP will make Shares of each Series listed on
Schedule A
hereto as the Parties hereto may amend said Schedule A from time to time
(each a
"Fund"; reference herein to "Fund" includes reference to each Fund, to
the
extent the context requires) available for purchase by the Accounts; and
WHEREAS, SEI is a broker-dealer registered with the SEC under
the
Securities Exchange Act of 1934 ("1934 Act") and a member in good
standing of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, Company will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set
forth on
Schedule A hereto, as the Parties hereto may amend said Schedule A from
time to
time, which Contracts, if required by applicable law, will be registered
under
the 1933 Act; and
WHEREAS, Company will fund the Contracts through the Accounts,
each of
which may be divided into two or more subaccounts ("Subaccounts";
reference
herein to an "Account" includes reference to each Subaccount thereof to
the
extent the context requires); and
WHEREAS, Company will serve as the depositor of the Accounts,
each of
which is registered as a unit investment trust investment company under
the 1940
Act (or exempt therefrom), and the security interests deemed to be
issued by the
Accounts under the Contracts will be registered as securities under the
1933 Act
(or exempt therefrom); and
64
WHEREAS, to the extent permitted by applicable insurance laws
and
regulations, Company intends to purchase Shares in one or more of the
Funds on
behalf of the Accounts to fund the Contracts; and
WHEREAS, Contract Underwriter is a broker-dealer registered
with the
SEC under the Securities Exchange Act of 1934 ("1934 Act") and a member
in good
standing of the National Association of Securities Dealers, Inc.
("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and
promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
FAIP will make Shares of each Fund available to Company for
purchase
and redemption on behalf of the Accounts at net asset value and with no
sales
charges, subject to the terms and conditions of this Agreement. The
Board of
Directors of FAIP may refuse to sell Shares of any Fund to any person,
or
suspend or terminate the offering of Shares of any Fund if such action
is
required by law or by regulatory authorities having jurisdiction or if,
in the
sole discretion of the Directors acting in good faith and in light of
their
fiduciary duties under federal and any applicable state laws, such
action is
deemed in the best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other
Funds to
provide additional funding media for the Contracts, or to delete,
combine, or
modify existing Funds, by amending Schedule A hereto. Upon such
amendment to
Schedule A, any applicable reference to a Fund or its Shares herein
shall
include a reference to any such additional Fund. Schedule A, as amended
from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
FAIP represents and warrants that no shares of the Funds have
been or
will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) FAIP or its designated agent will use its best efforts
to
provide Company with the net asset value per Share for
each
Fund by 6:00 p.m. Central Time on each Business Day.
As used
herein, "Business Day" shall mean any day on which (i)
the New
York Stock Exchange is open for regular trading, (ii)
FAIP
calculates the Fund's net asset value, and (iii)
Company is
open for business.
65
(b) Company will use the data provided by FAIP each
Business Day
pursuant to paragraph (a) immediately above to
calculate
Account unit values and to process transactions that
receive
that same Business Day's Account unit values. Company
will
perform such Account processing the same Business Day,
and
will place corresponding orders to purchase or redeem
Shares
with FAIP by 9:00 a.m. Central Time the following
Business
Day; provided, however, that FAIP shall provide
additional
time to Company in the event that FAIP is unable to
meet the
6:00 p.m. time stated in paragraph (a) immediately
above. Such
additional time shall be equal to the additional time
that
FAIP takes to make the net asset values available to
Company.
(c) With respect to payment of the purchase price by
Company and
of redemption proceeds by FAIP, Company and FAIP shall
net
purchase and redemption orders with respect to each
Fund and
shall transmit one net payment per Fund in accordance
with
Section 2.2, below.
(d) If FAIP provides materially incorrect Share net asset
value
information (as determined under SEC guidelines),
Company
shall be entitled to an adjustment to the number of
Shares
purchased or redeemed to reflect the correct net asset
value
per Share. Any material error in the calculation or
reporting
of net asset value per Share, dividend or capital gain
information shall be reported promptly upon discovery
to
Company.
2.2 TIMELY PAYMENTS.
Company will wire payment for net purchases to a custodial
account
designated by Fund by 1:00 p.m. Central Time on the same day as the
order for
Shares is placed, to the extent practicable. FAIP will wire payment for
net
redemptions to an account designated by Company by 1:00 p.m. Central
Time on the
same day as the Order is placed, to the extent practicable, but in any
event
within three (3) calendar days after the date the order is placed in
order to
enable Company to pay redemption proceeds within the time specified in
Section
22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that
result from
purchase payments, premium payments, surrenders and
other
transactions under Contracts (collectively, "Contract
transactions") and that Company receives prior to the
close of
regular trading on the New York Stock Exchange on a
Business
Day will be executed at the net asset values of the
appropriate Funds next computed after receipt by Fund
or its
designated agent of the orders. For purposes of this
Section
2.3(a), Company shall be the designated agent of FAIP
for
receipt of orders relating to Contract transactions on
each
Business Day and receipt by such designated agent
shall
constitute receipt by FAIP; provided that FAIP
receives notice
of such orders by 9:00 a.m. Central Time on the next
following
Business Day or such later time as computed in
accordance with
Section 2.1(b) hereof.
66
(b) All other Share purchases and redemptions by Company
will be
effected at the net asset values of the appropriate
Funds next
computed after receipt by FAIP or its designated agent
of the
order therefor, and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
FAIP will furnish notice by wire or telephone (followed by
written
confirmation) on or prior to the payment date to Company of any income
dividends
or capital gain distributions payable on the Shares of any Fund. Company
hereby
elects to reinvest all dividends and capital gains distributions in
additional
Shares of the corresponding Fund at the ex-dividend date net asset
values until
Company otherwise notifies FAIP in writing, it being agreed by the
Parties that
the ex-dividend date and the payment date with respect to any dividend
or
distribution will be the same Business Day. Company reserves the right
to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of FAIP Shares will be by book entry
only. Stock
certificates will not be issued to Company. Shares ordered from FAIP
will be
recorded in an appropriate title for Company, on behalf of its Account.
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.
(a) FAIP will bear the cost of its registering as a
management
investment company under the 1940 Act and registering
its
Shares under the 1933 Act, and keeping such
registrations
current and effective; including, without limitation,
the
preparation of and filing with the SEC of Forms N-SAR
and Rule
24f-2 Notices with respect to FAIP and its Shares and
payment
of all applicable registration or filing fees with
respect to
any of the foregoing.
(b) Company will bear the cost of registering, to the
extent
required, each 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; including, without limitation, the
preparation and
filing with the SEC of Forms N-SAR and Rule 24f-2
Notices with
respect to each Account and its units of interest and
payment
of all applicable registration or filing fees with
respect to
any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
67
(a) FAIP will bear, or arrange for others to bear, the
costs of
preparing, filing with the SEC and setting for
printing FAIP's
prospectus, statement of additional information and
any
amendments or supplements thereto (collectively, the
"FAIP
Prospectus"), periodic reports to shareholders, FAIP
proxy
material and other shareholder communications.
(b) Company will bear the costs of preparing, filing with
the SEC
and setting for printing each Account's prospectus,
statement
of additional information and any amendments or
supplements
thereto (collectively, the "Account Prospectus"), any
periodic
reports to Contract owners, annuitants, insureds or
participants (as appropriate) under the Contracts
(collectively, "Participants"), voting instruction
solicitation material, and other Participant
communications.
(c) Company will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b)
above
and the prospectus provided by FAIP in camera ready
form. FAIP
will print the FAIP statement of additional
information, proxy
materials relating to FAIP and periodic reports of
FAIP.
3.4 OTHER (SALES-RELATED).
Company will bear the expenses of distribution. These expenses
would
include by way of illustration, but are not limited to, the costs of
distributing to Participants the following documents, whether they
relate to the
Account or FAIP: prospectuses, statements of additional information,
proxy
materials and periodic reports. These costs would also include the costs
of
preparing, printing, and distributing sales literature and advertising
relating
to the Funds, as well as filing such materials with, and obtaining
approval
from, the SEC, the NASD, any state insurance regulatory authority, and
any other
appropriate regulatory authority, to the extent required.
3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable,
in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of FAIP and the Accounts.
68
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) FAIP represents and warrants that each Fund is
currently
qualified as a regulated investment company ("RIC")
under
Subchapter M of the Internal Revenue Code of 1986, as
amended
(the "Code"), and represents that it will maintain
qualification of each Fund as a RIC. FAIP will notify
Company
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) FAIP represents that it will use its best efforts to
comply
and 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. FAIP will notify Company 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. In
the event of a breach of this Section 4.1(b) by FAIP,
it will
take all reasonable steps to adequately diversify the
Fund so
as to achieve compliance within the grace period
afforded by
Section 1.817-5 of the regulations under the Code.
(c) Notwithstanding Section 12.2 hereunder, Company agrees
that if
the Internal Revenue Service ("IRS") asserts in
writing in
connection with any governmental audit or review of
Company
or, to Company's knowledge, of any Participant, that
any Fund
has failed to comply with the diversification
requirements of
Section 817(h) of the Code or Company otherwise
becomes aware
of any facts that could give rise to any claim against
FAIP or
its affiliates as a result of such a failure or
alleged
failure:
(i) Company shall promptly notify FAIP of such
assertion
or potential claim (subject to the
Confidentiality
provisions of Section 18 as to any
Participant);
(ii) Company shall consult with FAIP as to how to
minimize
any liability that may arise as a result of
such
failure or alleged failure;
(iii) Company shall use its best efforts to minimize any
liability of
FAIP or its affiliates resulting from such failure, including,
without
limitation, demonstrating, pursuant to Treasury Regulations
Section
1.817-5(a)(2), to the Commissioner of the IRS that such failure
was
inadvertent;
(iv) Company shall permit FAIP, its affiliates and
their
legal and accounting advisors to participate
in any
conferences, settlement discussions or other
administrative or judicial proceeding or
contests
(including judicial appeals thereof) with the
IRS,
any Participant or any other claimant
regarding any
claims that could give rise to liability to
FAIP or
its affiliates as a result of such a failure
or
alleged failure; provided,
69
however, that Company will retain control of
the
conduct of such conferences discussions,
proceedings,
contests or appeals;
(v) any written materials to be submitted by
Company to
the IRS, any Participant or any other
claimant in
connection with any of the foregoing
proceedings or
contests (including, without limitation, any
such
materials to be submitted to the IRS pursuant
to
Treasury Regulations Section 1.817-5(a)(2)),
(a)
shall be provided by Company to FAIP
(together with
any supporting information or analysis);
subject to
the confidentiality provisions of Section 18,
at
least ten (10) business days or such shorter
period
to which FAIP and Company agree prior to the
day on
which such proposed materials are to be
submitted,
and (b) shall not be submitted by Company to
any such
person without the express written consent of
FAIP
which shall not be unreasonably withheld;
(vi) Company shall provide FAIP or its affiliates
and
their accounting and legal advisors with such
cooperation as FAIP shall reasonably request
(including, without limitation, by permitting
FAIP
and its accounting and legal advisors to
review the
relevant books and records of Company) in
order to
facilitate review by FAIP or its advisors of
any
written submissions provided to it pursuant
to the
preceding clause or its assessment of the
validity or
amount of any claim against its arising from
such a
failure or alleged failure;
(vii) Company shall not with respect to any claim
of the
IRS or any Participant that would give rise
to a
claim against FAIP or its affiliates (a)
compromise
or settle any claim, (b) accept any
adjustment on
audit, or (c) forego any allowable
administrative or
judicial appeals, without the express written
consent
of FAIP or its affiliates, which shall not be
unreasonably withheld, provided that Company
shall
not be required, after exhausting all
administrative
remedies, to appeal any adverse judicial
decision
unless FAIP or its affiliates shall have
provided an
opinion of independent counsel to the effect
that a
reasonable basis exists for taking such
appeal; and
provided further that the costs of any such
appeal
shall be borne equally by FAIP and Company
hereto
except that Company shall not be liable for
such
costs if the failure to comply with Section
817 (h)
arises from a failure to meet the
requirements of
Treasury Regulation Section 1.817-5(b)(1) or
(2) or
Treasury Regulation Section 1.817-5(f)
through no
fault of Company; and
(viii) FAIP and its affiliates shall have no
liability as a
result of such failure or alleged failure if
Company
fails to comply with any of the foregoing
clauses (i)
through (vii), and such failure could be
shown to
have materially contributed to the liability.
70
As used in this Agreement, the term "affiliates" shall
have
the same meaning as "affiliated person" as defined in
Section
2(a)(3) of the 1940 Act.
(d) Company represents and warrants that the Contracts
currently
are and will be treated as annuity contracts or life
insurance
contracts under applicable provisions of the Code and
that it
will maintain such treatment; Company will notify FAIP
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.
(e) Company represents and warrants that each Account is a
"segregated asset account" and that interests in each
Account
are offered exclusively through the purchase of or
transfer
into a "variable contract," within the meaning of such
terms
under Section 817 of the Code and the regulations
thereunder.
Company will continue to meet such definitional
requirements,
and it will notify FAIP immediately upon having a
reasonable
basis for believing that such requirements have ceased
to be
met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) FAIP will comply with any applicable state insurance
laws or
regulations, to the extent specifically requested in
writing
by Company, including, the furnishing of information
not
otherwise available to Company which is required by
state
insurance law to enable Company to obtain the
authority needed
to issue the Contracts in any applicable state.
(b) Company 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 ___________ 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 each Account as a segregated asset
account under
[State] Insurance Law and the regulations thereunder,
and
(iii) the Contracts comply in all material respects
with all
other applicable federal and state laws and
regulations.
(c) FAIP represents and warrants that it is a corporation
duly
organized, validly existing, and in good standing
under the
laws of the State of Minnesota 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) Company represents and warrants that (i) interests in
each
Account pursuant to the Contracts will be registered
under the
1933 Act to the extent required by the 1933 Act, (ii)
the
Contracts will be duly authorized for issuance and
sold in
compliance with all applicable federal and state laws,
including, without limitation, the 1933
71
Act, the 1934 Act, the 1940 Act and [State] law, (iii)
each
Account is and will remain registered under the 1940
Act, to
the extent required by the 1940 Act, (iv) each Account
does
and will comply in all material respects with the
requirements
of the 1940 Act and the rules thereunder, to the
extent
required, (v) each 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, (vi) Company will amend the registration
statement
for its Contracts under the 1933 Act and for its
Accounts
under the 1940 Act from time to time as required in
order to
effect the continuous offering of its Contracts or as
may
otherwise be required by applicable law, and (vii)
each
Account Prospectus will at all times comply in all
material
respects with the requirements of the 1933 Act and the
rules
thereunder.
(b) Company will at its expense register and qualify the
Contracts
for sale in accordance with the laws of any state or
other
jurisdiction if and to the extent reasonably deemed
advisable
by Company.
(c) FAIP represents and warrants that (i) 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 Minnesota law,
(ii) FAIP
is and will remain registered under the 1940 Act to
the extent
required by the 1940 Act, (iii) FAIP 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,
(iv)
FAIP does and will comply in all material respects
with the
requirements of the 1940 Act and the rules thereunder,
(v)
FAIP's 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 (vi) FAIP's Prospectus will at all
times
comply in all material respects with the requirements
of the
1933 Act and the rules thereunder.
(d) FAIP will at its expense register and qualify its
Shares for
sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed
advisable
by FAIP.
(e) FAIP currently does not intend to make any payments to
finance
distribution expenses pursuant to Rule 12b-1 under the
1940
Act or otherwise, although it reserves the right to
make such
payments in the future. To the extent that it decides
to
finance distribution expenses pursuant to Rule 12b-1,
FAIP
undertakes to have its Board of Directors, a majority
of whom
are not "interested" persons of FAIP, formulate and
approve
any plan under Rule 12b-1 to finance distribution
expenses.
72
(f) FAIP represents and warrants that all of its
directors,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Funds are and continue to be at all
times
covered by a blanket fidelity bond or similar coverage
for the
benefit of the Funds in an amount not less than the
minimal
coverage as required currently by Rule 17g-(1) of the
1940 Act
or related provisions as may be promulgated from time
to time.
The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding
company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) FAIP will immediately notify Company 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
FAIP's
registration statement under the 1933 Act or FAIP
Prospectus,
(ii) any request by the SEC for any amendment to such
registration statement or Fund Prospectus that may
affect the
offering of Shares of FAIP, (iii) the initiation of
any
proceedings for that purpose or for any other purpose
relating
to the registration or offering of FAIP's Shares, or
(iv) any
other action or circumstances that may prevent the
lawful
offer or sale of Shares of any Fund in any state or
jurisdiction, including, without limitation, any
circumstances
in which (a) such Shares are not registered and, in
all
material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law
precludes
the use of such Shares as an underlying investment
medium of
the Contracts issued or to be issued by Company. FAIP
will
make every reasonable effort to prevent the issuance,
with
respect to any Fund, of any such 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.
(b) Company will immediately notify FAIP 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
each
Account's registration statement under the 1933 Act
relating
to the Contracts or each Account Prospectus, (ii) any
request
by the SEC for any amendment to such registration
statement or
Account Prospectus that may affect the offering of
Shares of
FAIP, (iii) the initiation of any proceedings for that
purpose
or for any other purpose relating to the registration
or
offering of each Account's interests pursuant to the
Contracts, or (iv) any other action or circumstances
that may
prevent the lawful offer or sale of said interests in
any
state or jurisdiction, including, without limitation,
any
circumstances in which said interests are not
registered and,
in all material respects, issued and sold in
accordance with
applicable state and federal law. Company will make
every
reasonable effort to prevent the issuance of any such
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.
73
4.5 COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT FAIP.
(a) Company will provide to FAIP or its designated agent
at least
one (1) complete copy of all SEC registration
statements,
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 each Account or
the
Contracts, contemporaneously with the filing of such
document
with the SEC or other regulatory authorities.
(b) Company will provide to FAIP or its designated agent
at least
one (1) complete copy of each piece of sales
literature or
other promotional material in which FAIP or any of its
affiliates is named, at least five (5) Business Days
prior to
its use or such shorter period as the Parties hereto
may, from
time to time, agree upon. No such material shall be
used if
FAIP or its designated agent objects to such use
within five
(5) Business Days after receipt of such material or
such
shorter period as the Parties hereto may, from time to
time,
agree upon.
(c) Neither Company nor any of its affiliates, will give
any
information or make any representations or statements
on
behalf of or concerning FAIP or its affiliates in
connection
with the sale of the Contracts other than (i) the
information
or representations contained in the registration
statement,
including the FAIP Prospectus contained therein,
relating to
Shares, as such registration statement and FAIP
Prospectus may
be amended from time to time; or (ii) in reports or
proxy
materials for FAIP; or (iii) in published reports for
FAIP
that are in the public domain and approved by FAIP for
distribution; or (iv) in sales literature or other
promotional
material approved by FAIP, except with the express
written
permission of FAIP.
(d) Company shall adopt and implement procedures
reasonably
designed to ensure that information concerning FAIP
and its
affiliates that is intended for use only by brokers or
agents
selling the Contracts (i.e., information that is not
intended
for distribution to Participants) ("broker only
materials") is
so used, and neither FAIP nor any of its affiliates
shall be
liable for any losses, damages or expenses relating to
the
improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase
"sales
literature or other promotional material" includes,
but is not
limited to, 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, (e.g., on-line networks such as
the
Internet or other electronic messages), sales
literature
(i.e., any written communication distributed or made
generally
available to customers or the public, including
brochures,
circulars, research reports, market letters, form
letters,
seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published
article),
educational or training materials or other
communications
distributed or made generally available to some or all
agents
or employees,
74
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature
or advertising under the NASD rules, the 1933 Act or
the 1940
Act.
4.6 FAIP TO PROVIDE DOCUMENTS; INFORMATION ABOUT COMPANY.
(a) FAIP will provide to Company at least one (1) complete
copy of
all SEC registration statements, FAIP 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 FAIP or the Shares
of a
Fund, contemporaneously with the filing of such
document with
the SEC or other regulatory authorities.
(b) FAIP will provide to Company camera ready or computer
diskette
copies of all FAIP prospectuses and printed copies, in
an
amount specified by Company, of FAIP statements of
additional
information, proxy materials, periodic reports to
shareholders
and other materials required by law to be sent to
Participants
who have allocated any Contract value to a Fund. FAIP
will
provide such copies to Company in a timely manner so
as to
enable Company, as the case may be, to print and
distribute
such materials within the time required by law to be
furnished
to Participants.
(c) FAIP will provide to Company or its designated agent
at least
one (1) complete copy of each piece of sales
literature or
other promotional material in which Company, or any of
its
respective affiliates is named, or that refers to the
Contracts, at least five (5) Business Days prior to
its use or
such shorter period as the Parties hereto may, from
time to
time, agree upon. No such material shall be used if
Company or
its designated agent objects to such use within five
(5)
Business Days after receipt of such material or such
shorter
period as the Parties hereto may, from time to time,
agree
upon. Company shall receive all such sales literature
until
such time as it appoints a designated agent by giving
notice
to FAIP in the manner required by Section 9 hereof.
(d) Neither FAIP nor any of its affiliates will give any
information or make any representations or statements
on
behalf of or concerning Company, each Account, or the
Contracts other than (i) the information or
representations
contained in the registration statement, including
each
Account Prospectus contained therein, relating to the
Contracts, as such registration statement and Account
Prospectus may be amended from time to time; or (ii)
in
published reports for the Account or the Contracts
that are in
the public domain and approved by Company for
distribution; or
(iii) in sales literature or other promotional
material
approved by Company or its affiliates, except with the
express
written permission of Company.
(e) FAIP shall cause its principal underwriter to adopt
and
implement procedures reasonably designed to ensure
that
information concerning Company, and its respective
affiliates
that is intended for use only by brokers or agents
selling the
75
Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only
materials") is so
used, and neither Company, nor any of its respective
affiliates shall be liable for any losses, damages or
expenses
relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales
literature
or other promotional material" includes, but is not
limited
to, 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,
(e.g., on-line networks such as the Internet or other
electronic messages), sales literature (i.e., any
written
communication distributed or made generally available
to
customers or the public, including brochures,
circulars,
research reports, market letters, form letters,
seminar texts,
reprints or excerpts of any other advertisement, sales
literature, or published article), educational or
training
materials or other communications distributed or made
generally available to some or all agents or
employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature
or advertising under the NASD rules, the 1933 Act or
the 1940
Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to FAIP exempting it from certain
provisions of the 1940 Act and rules thereunder so that FAIP may be
available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life
insurance
contracts, separate accounts of insurance companies unaffiliated with
Company,
and trustees of qualified pension and retirement plans (collectively,
"Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms
and
conditions for such orders that are substantially identical to many of
the
provisions of this Section 5. FAIP hereby notifies Company that, in the
event
that FAIP implements Mixed and Shared Funding, it may be appropriate to
include
in the prospectus pursuant to which a Contract is offered disclosure
regarding
the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
FAIP agrees that a majority of the Board of Directors of the
FAIP
("Board") will consist of persons who are not "interested persons" of
the
Company, as defined by Section 2(a)(19) of the 1940 Act and the rules
thereunder
and as modified by any applicable orders of the SEC ("Disinterested
Directors"),
except that if this condition is not met by reason of the death,
disqualification, or bona fide resignation of any director, then the
operation
of this condition shall be suspended (a) for a period of forty-five (45)
days if
the vacancy or vacancies may be filled by the Board; (b) for a period of
sixty
(60) days if a vote of shareholders is required to fill the vacancy or
vacancies; or (c) for such longer period as the SEC may prescribe by
order upon
application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
76
FAIP agrees that its Board of Directors will monitor the Funds
for the
existence of any material irreconcilable conflict between the interests
of the
Participants in all separate accounts of life insurance companies
utilizing FAIP
("Participating Insurance Companies"), including each Account, and of
participants in qualified retirement and pension plans investing in the
Funds
("Participating Plans") and determine what action, if any, should be
taken in
response to such conflicts. A material irreconcilable conflict may arise
for a
variety of reasons, including:
(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 in Participating Plans;
(f) a decision by a Participating Insurance Company to
disregard
the voting instructions of Participant; or
(g) a decision by a Participating Plan to disregard the
voting
instructions of its Participants.
Consistent with the SEC's requirements in connection with
exemptive
orders of the type referred to in Section 5.1 hereof, FAIP and Company
will
report any potential or existing conflicts to the Board and will be
responsible
for assisting the Board in carrying out its responsibilities under these
conditions by providing the Board with all information reasonably
necessary for
the Board to consider any issues raised. This responsibility includes,
but is
not limited to, an obligation of Company to inform the Board whenever it
has
determined to disregard Participant voting instructions. Company agrees
that
such responsibilities will be carried out with a view only to the
interests 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 Directors or a majority of its
Disinterested Directors that a material irreconcilable
conflict exists, Company will, if it is a
Participating
Insurance Company for which a material irreconcilable
conflict
is relevant, at its own expense and to the extent
reasonably
practicable (as determined by a majority of the
Disinterested
Directors), take whatever steps are necessary to
remedy or
eliminate the material irreconcilable conflict, which
steps
may include, but are not limited to:
77
(i) withdrawing the assets allocable to some or
all of
the Accounts from FAIP or any Fund and
reinvesting
such assets in a different investment medium,
including another Fund of FAIP, 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., variable annuity
contract
owners or variable 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; and
(ii) establishing a new registered management
investment
company or a new separate account that is
operated as
a management company.
(b) If the material irreconcilable conflict arises because
of
Company's decision to disregard Participants' voting
instructions and that decision represents a minority
position
or would preclude a majority vote, Company may be
required, at
FAIP's election, to withdraw each Account's investment
in FAIP
or any Fund. No charge or penalty will be imposed as a
result
of such withdrawal. Any such withdrawal must take
place within
six (6) months after FAIP gives notice to Company that
this
provision is being implemented, and until such
withdrawal FAIP
shall continue to accept and implement orders by
Company for
the purchase and redemption of Shares of FAIP.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision
applicable to
Company conflicts with the majority of other state
regulators,
then Company will withdraw each Account's investment
in FAIP
within six (6) months after FAIP's Board of Directors
informs
Company that it has determined that such decision has
created
a material irreconcilable conflict, and until such
withdrawal
FAIP shall continue to accept and implement orders by
Company
for the purchase and redemption of Shares of FAIP. No
charge
or penalty will be imposed as a result of such
withdrawal.
(d) Company 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.
(e) For purposes hereof, a majority of the Disinterested
Directors
will determine whether or not any proposed action
adequately
remedies any material irreconcilable conflict. In no
event,
however, will FAIP or any of its affiliates be
required to
establish a new funding medium for any Contracts.
Company will
not be required by the terms hereof to establish a new
funding
medium for any 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.
(f) The Board's determination of the existence of a
material
irreconcilable conflict and its implications will be
made
known promptly and in writing to all Participants.
78
5.5 NOTICE TO COMPANY.
FAIP will promptly make known in writing to Company the Board
of
Directors' 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 DIRECTORS.
Company and FAIP (or its investment adviser) will at least
annually
submit to the Board of Directors of FAIP such reports, materials or data
as the
Board of Directors may reasonably request so that the Board of Directors
may
fully carry out the obligations imposed upon it by the provisions hereof
or any
exemptive order granted by the SEC to permit Mixed and Shared Funding,
and said
reports, materials and data will be submitted at any reasonable time
deemed
appropriate by the Board of Directors. All reports received by the Board
of
Directors of potential or existing conflicts, and all Board of Directors
actions
with regard to determining the existence of a conflict, notifying
Participating
Insurance Companies and Participating Plans of a conflict, and
determining
whether any proposed action adequately remedies a conflict, will be
properly
recorded in the minutes of the Board of Directors 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.
If and to the extent that Rules 6e-2 and 6e-3(T) under the 1940
Act are
amended (or if Rule 6e-3 under the 1940 Act is adopted) to provide
exemptive
relief from any provision of the 1940 Act, or the rules thereunder, with
respect
to mixed or shared funding on terms and conditions materially different
from any
exemptions granted in the order obtained by FAIP, then the FAIP and/or
Company,
as appropriate, shall take such steps as may be necessary to comply with
Rules
6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, to the extent
applicable.
5.8 OTHER REQUIREMENTS.
FAIP will require that each Participating Insurance Company and
Participating Plan enter into an agreement with FAIP that contains in
substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a),
4.4(b),
4.5(a), 5, and 10 of this Agreement.
79
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 any Party, with or without cause with
respect
to the Fund, upon six (6) months advance written
notice to the
other Parties, or, if later, upon receipt of any
required
exemptive relief from the SEC, unless otherwise agreed
to in
writing by the Parties; or
(b) at the option of FAIP upon institution of formal
proceedings
against Company or any of its affiliates by the NASD,
the SEC,
any state insurance regulator or any other regulatory
body
regarding Company's obligations under this Agreement
or
related to the sale of the Contracts, the operation of
any
Account, or the purchase of Shares, if, in each case,
FAIP
reasonably determines that such proceedings, or the
facts on
which such proceedings would be based, have a material
likelihood of imposing material adverse consequences
on the
Fund with respect to which the Agreement is to be
terminated;
or
(c) at the option of Company upon institution of formal
proceedings against FAIP, its principal underwriter,
or its
investment adviser by the NASD, the SEC, or any state
insurance regulator or any other regulatory body
regarding
FAIP's obligations under this Agreement or related to
the
operation or management of FAIP or the purchase of
Fund
Shares, if, in each case, Company reasonably
determines that
such proceedings, or the facts on which such
proceedings would
be based, have a material likelihood of imposing
material
adverse consequences on Company, or the Subaccount
corresponding to the Fund with respect to which the
Agreement
is 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 any applicable
federal or
state 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 Company; or
(e) upon termination of the corresponding Subaccount's
investment
in the Fund pursuant to Section 5 hereof; or
(f) at the option of Company if the Fund ceases to qualify
as a
RIC under Subchapter M of the Code or under successor
or
similar provisions, or if Company reasonably believes
that the
Fund may fail to so qualify; or
(g) at the option of Company if the Fund fails to comply
with
Section 817(h) of the Code or with successor or
similar
provisions, or if Company reasonably believes that the
Fund
may fail to so comply; or
80
(h) at the option of FAIP if the Contracts issued by
Company cease
to qualify as annuity contracts or life insurance
contracts
under the Code (other than by reason of the Fund's
noncompliance with Section 817(h) or Subchapter M of
the Code)
or if interests in an Account under the Contracts are
not
registered, where required, and, in all material
respects, are
not issued or sold in accordance with any applicable
federal
or state law; or
(i) upon another Party's material breach of any provision
of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and
until the
Party terminating
