EXHIBIT (h)(8)(a)
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this day of June, 2003, by and among ▇▇▇▇▇▇▇
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▇▇▇▇▇ VARIABLE SERIES FUNDS, INC., an open-end management investment company
organized as a Maryland corporation (the "Fund"), FAM DISTRIBUTORS, INC., a
broker-dealer registered as such under the Securities Exchange Act of 1934, as
amended (the "Underwriter"), and AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
OF NEW YORK, a life insurance company organized under the laws of the state of
New York (the "Company"), on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A, as may be amended from
time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Fund has filed a registration statement with the Securities
and Exchange Commission to register itself as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and to register the offer and sale of its shares under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Fund desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Fund (the "Participating Insurance
Companies"); and
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), is a member in good standing of The
National Association of Securities Dealers, Inc. (the "NASD") and acts as
principal underwriter of the shares of the Fund; and
WHEREAS, the capital stock of the Fund is divided into several series of
shares, each series representing an interest in a particular managed portfolio
of securities and other assets; and
WHEREAS, the several series of shares of the Fund offered by the Fund to
the Companies and the Accounts are set forth on Schedule B attached hereto
(each, a "Portfolio," and, collectively, the "Portfolios"); and
WHEREAS, the Fund has received an order from the SEC granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and rules 6e-2(b) (15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(the "Shared Fund Exemptive Order");
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WHEREAS, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Investment Managers, L.P. ("MLIM") is duly
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended, and is the Fund's investment adviser; and
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and/or variable annuity contracts
funded or to be funded through one or more of the Accounts (the "Contracts");
and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Companies intend to purchase shares in one or more of the
Portfolios (the "Shares") on behalf of the Accounts to fund the Contracts, and
the Fund intends to sell such Shares to the relevant Accounts at such Shares'
net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE 1
Sale of the Fund Shares
1.1 Subject to Section 1.3, the Fund shall cause the Underwriter to make
Shares available to the Accounts at the most recent net asset value provided to
the Company prior to receipt of such purchase order by the Fund (or the
Underwriter as its agent), in accordance with the operational procedures
mutually agreed to by the Underwriter and the Company from time to time and the
provisions of the then current prospectus of the Portfolios. Shares of a
particular Portfolio of the Fund shall be ordered in such quantities and at such
times as determined by the Company to be necessary to meet the requirements of
the Contracts. The Directors of the Fund (the "Directors") may refuse to sell
shares of any Portfolio to any person (including the Company and the Accounts),
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Directors acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2 Subject to Section 1.3, the Fund will redeem any full or fractional
shares of any Portfolio when requested by the Company on behalf of an Account at
the most recent net asset value provided to the Company prior to receipt by the
Fund (or the Underwriter as its agent) of the request for redemption, as
established in accordance with the operational procedures mutually agreed to by
the Underwriter and the Company from time to time and the provisions of the then
current prospectus of the Portfolios. The Fund shall make payment for such
shares in accordance with Section 1.4, but in no event shall payment be delayed
for a greater period than is permitted by the 1940 Act (including any Rule or
order of the SEC thereunder).
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1.3 The Fund shall accept purchase and redemption orders resulting from
investment in and payments under the Contracts on each Business Day, provided
that such orders are received prior to 9:00 a.m. Eastern Time and reflect
instructions received by the Company from Contract holders in good order prior
to the time the net asset value of each Portfolio is priced in accordance with
its prospectus on the prior Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC. Purchase and
redemption orders shall be provided by the Company in such written or electronic
form (including, without limitation, facsimile) as may be mutually acceptable to
the Company and the Underwriter. The Underwriter may reject purchase and
redemption orders which are not in the form prescribed in the Fund's prospectus
or statement of additional information. In the event that the Company and the
Underwriter agree to use a form of written or electronic communication which is
not capable of recording the time, date and recipient of any communication and
confirming good transmission, the Company agrees that it shall be responsible
for confirming with the Underwriter that any communication sent by the Company
was in fact received by the Underwriter in proper form. The Fund and its agents
shall be entitled to rely upon, and shall be fully protected from all liability
in acting upon, the instructions of the persons named in the list of authorized
individuals attached hereto as Schedule C, or any subsequent list of authorized
individuals provided to the Fund or its agents by the Company in such form,
without being required to determine the authenticity of the authorization or the
authority of the persons named therein.
1.4 Purchase orders that are transmitted to the Fund in accordance with
Section 1.3 shall be paid for no later than 3:00 p.m. Eastern Time on the next
Business Day after the Fund receives notice of the order. Payments shall be made
in federal funds transmitted by wire. In the event that the Company shall fail
to pay in a timely manner for any purchase order validly received by the
Underwriter on behalf of the Fund pursuant to Section 1.3 (whether or not such
failure is the fault of the Company), the Company shall hold the Fund harmless
from any losses reasonably sustained by the Fund as the result of acting in
reliance on such purchase order.
1.5 Issuance and transfer of Shares will be by book entry only. Share
certificates will not be issued to the Company or the Account. Shares ordered
from the Fund will be recorded in the appropriate title for each Account or the
appropriate subaccount of each Account.
1.6 The Fund shall furnish prompt notice to the Company of any income,
dividends or capital gain distribution payable on Shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on a Portfolio's Shares in additional Shares of that Portfolio. The
Fund shall notify the Company of the number of Shares so issued as payment of
such dividends and distributions.
1.7 The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7:00 p.m. Eastern Time. If the
Fund provides materially incorrect share net asset value information, it shall
make an adjustment to the number of shares purchased or redeemed for any
affected Account to reflect the correct net asset value per share. Any material
error in the calculation or
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reporting of net asset value per share, dividend or capital gains information
shall be reported promptly upon discovery to the Company.
1.8 The Company agrees that it will not take any action to operate an
Account as a management investment company under the 1940 Act without the Fund's
and the Underwriter's prior written consent.
1.9 The Fund agrees that its Shares will be sold only to Participating
Insurance Companies and their separate accounts. No Shares of any Portfolio will
be sold directly to the general public. The Company agrees that Shares will be
used only for the purposes of funding the Contracts and Accounts listed in
Schedule A, as amended from time to time.
1.10 The Fund agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding conflicts of interest
corresponding to those contained in Article 4 of this Agreement
1.11 So long as it shall be the intention of the Fund to maintain the net
asset value per share of any Portfolio at $1.00, on any day on which (a) the net
asset value per share of the Shares is determined, (b) the Underwriter
determines, in the manner described in the then-current prospectus of the Fund,
that the net income of such Portfolio on such day is negative, and (c) the
Underwriter delivers a certificate to the Company setting forth the reduction in
the number of outstanding Shares to be effected as described in the then-current
prospectus of the Fund in connection with such determination, the Company, on
behalf of itself and the Accounts, agrees to return to the Fund its pro rata
share of the number of Shares to be reduced and agrees that, upon delivery by
the Underwriter to the Company of such certificate, (a) the Company's ownership
interest in the Shares so to be returned shall immediately cease, (b) such
Shares shall be deemed to have been canceled and to be no longer outstanding,
and (c) all rights in respect of such Shares shall cease.
ARTICLE 2
Obligations of the Parties
2.1 The Fund shall prepare and be responsible for filing with the SEC and
any state securities regulators requiring such filing, all shareholder reports,
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional information
of the Fund required to be so filed. The Fund shall bear the costs of
registration and qualification of its Shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its Shares.
2.2 At least annually, the Underwriter or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule B hereto) for the Shares as
the Company may reasonably request for distribution to existing Contract owners
whose Contracts are funded by such Shares. The Underwriter or its designee shall
provide the Company, at the Company's expense, with as many copies of the
current prospectus for the Shares as the Company may reasonably require for
distribution to prospective purchasers of Contracts. If requested by the Company
in lieu thereof, the
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Underwriter or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the request of
the Company, a diskette in the form sent to the financial printer) and other
assistance as is reasonably necessary in order for the parties hereto once each
year (or more frequently if the prospectus for the Shares is supplemented or
amended) to have the prospectus for the Shares conform to the Company's private
placement memorandum or related materials; the expenses of such printing to be
borne by the Company. In the event that the Company requests that the
Underwriter or its designee provide the prospectus in a "camera ready" or
diskette format, the Underwriter shall be responsible solely for providing the
prospectus in the format in which it is accustomed to formatting prospectuses
and shall bear the expense of providing the prospectus in such format, and the
Company shall bear the expense of adjusting or changing the format to conform
with any of its private placement memorandum or related materials.
2.3 The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Fund or its
designee. The Fund or its designee, at its expense, shall print and provide such
statement of additional information to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to any owner
of a Contract funded by the Shares. The Fund or its designee, at the Company's
expense, shall print and provide such statement to the Company (or a master of
such statement suitable for duplication by the Company) for distribution to a
prospective purchaser who requests such statement.
2.4 The Underwriter or its designee shall provide the Company free of
charge copies, if and to the extent applicable to the Shares, of the Fund's
proxy materials, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to Contract owners.
2.5 With respect to any prospectus, shareholder report or proxy
solicitation materials that concern solely the Fund and no other investment
vehicle funding the Accounts, the Fund shall pay for the Company's postage costs
in connection with mailing such materials to existing Contract owners. With
respect to any prospectus, shareholder report or proxy solicitation materials
that concern the Fund together with other investment vehicles funding the
Accounts, the Fund shall pay a proportionate amount of the Company's postage
costs, based on the percentage of such Account's overall assets that are
invested in the Fund, in connection with mailing such materials to existing
Contract owners.
2.6 The Company shall furnish, or cause to be furnished, to the Fund or its
designee, a copy of each prospectus for the Contracts or statement of additional
information for the Contracts in which the Fund, the Underwriter or MLIM ("Fund
Parties") is named prior to the filing of such document with the SEC. The
Company shall furnish, or shall cause to be furnished, to the Fund or its
designee, each piece of sales literature or other promotional material in which
the Fund, the Underwriter or MLIM is named, at least five Business Days prior to
is use. No such prospectus, statement of additional information or material
shall be used if any of the Fund Parties reasonably objects to such use within
five Business Days after receipt of such material.
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2.7 At the reasonable request of the Fund or its designee, the Company
shall furnish, or shall cause to be furnished, to the Fund or its designee
copies of the following reports:
(a) the Company's annual financial report (prepared under generally
accepted accounting principles ("GAAP", if any);
(b) the Company's quarterly statements, if any;
(c) any financial statement, proxy statement, notice or report of the
Company sent to policyholders;
(d) any registration statement (without exhibits) and financial reports of
the Company filed with any state insurance regulator; and
2.7 The Company shall not give any information or make any representations
or statements on behalf of or concerning the Fund Parties in connection with the
Contracts other than information or representations contained in and accurately
derived from the registration statement or prospectus for the Shares (as such
registration statement and prospectus may be amended or supplemented from time
to time), reports of the Fund, Fund-sponsored proxy statements, or in sales
literature or other promotional material approved by the Fund or Underwriter,
except with the written permission of the Fund or Underwriter.
2.8 Neither the Fund nor the Underwriter shall give any information or make
any representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the private placement memoranda or
other offering material for the Contracts (as such private placement memoranda
or other offering material may by amended or supplemented from time to time),
except with the written permission of the Company.
2.9 The Company shall register and qualify the Contracts for sale to the
extent required by applicable law. The Company shall amend the registration
statement of the Contracts under the 1933 Act and registration statement for
each Account under the 1940 Act from time to time as required in order to effect
the continuous offering of the Contracts or as may otherwise be required by
applicable law. The Company shall register and qualify the Contracts for sale to
the extent required by applicable securities laws and insurance laws of the
various states.
2.10 Solely with respect to Contracts and Accounts, if any, which may
subsequently become subject to the 1940 Act, so long as, and to the extent that
the SEC interprets the 1940 Act to require pass-through voting privileges for
variable policyowners: (a) the Company will provide pass-through voting
privileges to owners of policies whose cash values are invested, through the
Accounts, in Shares; (b) the Fund shall require all Participating Insurance
Companies that invest in the Fund on behalf of separate accounts which are
registered as unit investment trusts under the 1940 Act to calculate voting
privileges in the same manner and the Company shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by the
Fund; and (c) with respect to each Account, the Company will vote Shares held by
the Account and for which no timely voting instructions from policyowners are
received
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in the same proportion as the Company votes Shares held by the Account for which
timely voting instructions are received from policy owners. To the extent that
the Company provides pass-through voting privileges to owners of policies whose
cash values are invested, through the Accounts, in Shares, the Company and its
agents will in no way recommend or oppose or interfere with the solicitation of
proxies for Fund Shares held by Contract owners without the prior written
consent of the Fund, which consent may be withheld in the Fund's sole
discretion.
ARTICLE 3
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the state of New York and
has established each Account as a segregated asset account under such law on the
date set forth in Schedule A.
3.2 The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts. The Company further represents
and warrants that the Contracts will be registered under the 1933 Act prior to
any issuance or sale of the Contracts; the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws;
and the sale of the Contracts shall comply in all material respects with state
insurance requirements.
3.3 The Company represents and warrants that the Contracts are currently
and at the time of issuance will be treated as annuity contracts or life
insurance policies, whichever is appropriate, under applicable provisions of the
Internal Revenue Code of 1986, as amended. The Company shall make every effort
to maintain such treatment and shall notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the future.
3.4 The Fund represents and warrants that it is duly organized and validly
existing under the laws of the State of Maryland.
3.5 The Fund represents and warrants that the Fund Shares offered and sold
pursuant to this Agreement will be registered under the 1933 Act and the Fund is
registered under the ▇▇▇▇ ▇▇▇. The Fund shall amend its registration statement
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its shares. If the Fund determines that notice
filings are appropriate, the Fund shall use its best efforts to make such notice
filings in accordance with the laws of such jurisdictions reasonably requested
by the Company.
3.6 The Fund represents that it will comply and maintain each Portfolio's
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5 of the regulations under the Code. The Fund will
notify the Company immediately upon having a reasonable basis for believing that
a Portfolio has ceased to so comply or that a Portfolio might not so comply in
the future. In the event of a breach of this Section 3.6 by the Fund, it will
take
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all reasonable steps to adequately diversify the Portfolio so as to achieve
compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
3.7 The Fund represents and warrants that each Portfolio is currently
qualified as a regulated investment company ("RIC") under Subchapter M of the
Code, and represents that it will use its best efforts to qualify and to
maintain qualification of each Portfolio as a RIC. The Fund will notify the
Company immediately upon having a reasonable basis for believing that a
Portfolio has ceased to so qualify or that it might not so qualify in the
future.
ARTICLE 4
Potential Conflicts
4.1 The parties acknowledge that the Fund's Shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Directors of the Fund will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Directors shall promptly inform the Company if they determine that
an irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Directors. The Company will assist the
Directors in carrying out their responsibilities under the Shared Fund Exemptive
Order by providing the Directors with all information reasonably necessary for
them to consider any issues raised including, but not limited to, information as
to a decision by the Company to disregard Contract owner voting instructions.
4.3 If it is determined by a majority of the Directors, or a majority of
the Fund's Directors who are not affiliated with the Adviser or the Underwriter
(the "Disinterested Directors"), that a material irreconcilable conflict exists
that affects the interests of Contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its expense and to the extent reasonably practicable (as determined
by the Directors) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Fund or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the question of whether
or not such segregation should be implemented to a vote of all affected
Contracts owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one
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or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (b) establishing a new registered management investment
company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Disinterested Directors. Any such withdrawal
and termination must take place within 30 days after the Fund gives written
notice that this provision is being implemented, subject to applicable law but
in any event consistent with the terms of the Shared Fund Exemptive Order. Until
the end of such 30 day period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of Shares.
4.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within 30 days after the Fund informs the Company in writing that
it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Disinterested Directors. Until the end of
such 30 day period, the Fund shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Fund.
4.6 For purposes of section 4.3 through 4.6 of this Agreement, a majority
of the Disinterested Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Directors determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within 30 days
after the Directors inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the Disinterested Directors.
4.7 The Company shall at least annually submit to the Directors such
reports, materials or data as the Directors may reasonably request so that the
Directors may fully carry out the duties imposed upon them by the Shared Fund
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if deemed appropriate by the Directors.
4.8 If and to the extent that (a) Rule 6e-2 and Rule 6e-3 (T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules
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promulgated thereunder with respect to mixed or shared funding (as defined in
the application for the Shared Fund Exemptive Order) on terms and conditions
materially different from those contained in the application for the Shared Fund
Exemptive Order, or (b) the Shared Fund Exemptive Order is granted on terms and
conditions that differ from those set forth in this Article 4, then the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary (a) to comply with Rules 6e-2 and 6e-3 (T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are applicable, or
(b) to conform this Article 4 to the terms and conditions contained in the
Shared Fund Exemptive Order, as the case may be.
ARTICLE 5
Indemnification
5.1 The Company agrees to indemnify and hold harmless the Fund Parties and
each of their respective Directors, officers, employees and agents and each
person, if any, who controls a Fund Party within the meaning of Section 15 of
the 1933 Act (collectively the "Indemnified Parties" for purposes of this
Article 5) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the private placement
memoranda or other offering material for the Contracts or in the Contracts
themselves or in sales literature generated or approved by the Company on
behalf of the Contracts or Accounts (or any amendment or supplement to any
of the foregoing) (collectively, "Company Documents" for the purposes of
this Article 5), 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 indemnity 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 was accurately derived from written information
furnished to the Company by or on behalf of the Fund or Underwriter for use
in Company Documents or otherwise for use in connection with the sale of
the Contracts or Shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Fund Documents as defined in Section 5.2(a)) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Fund Documents as defined in
Section 5.2(a) or the omission or alleged omission to state therein a
material fact
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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
accurately derived from written information furnished to the Fund or
Underwriter by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company.
5.2 The Underwriter and the Fund agree to indemnify and hold harmless the
Company and each of its directors, officers, employees and agents and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Article
5) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund Parties) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Indemnified Parties
may become subject under any statute or regulation, or at common law or other
wise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statement of any material fact contained in the registration
statement or prospectus for the Fund (or any amendment or supplement
thereto) (collectively, "Fund Documents" for the purposes of this Article
5), 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 indemnity
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 was
accurately derived from written information furnished to the Fund Parties
by or on behalf of the Company for use in Fund Documents or otherwise for
use in connection with the sale of the Contracts or Shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Company Documents) or wrongful conduct of a Fund Party or persons under its
respective control, with respect to the sale or acquisition of the
Contracts or Shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the omission
or alleged omission to state therein a material fact required to be stated
therein
11
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of the Fund
Parties; or
(d) arise out of or result from any failure by the Underwriter or the
Fund to provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter or the Fund in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Underwriter or the Fund.
5.3 Neither the Company, the Underwriter nor the Fund shall be liable under
the indemnification provisions of Section 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against any Indemnified Party to the
extent such Losses arise out of or result from such Indemnified Party's willful
misfeasance, bad faith or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
5.4 Neither the Company, the Underwriter nor the Fund shall be liable under
the indemnification provisions of Section 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the other party in writing within a reasonable time
after the summons, or other first written notification, giving information of
the nature of the claim shall have been served upon or otherwise received by
such Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent), but
failure to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of Sections 5.1 and 5.2 unless such party shall
be prejudiced in its ability to defend as a result of such failure to notify.
5.5 In case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
such action. After notice from the indemnifying party to the Indemnified Party
of an election to assume such defense, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
12
ARTICLE 6
Termination
6.1 This Agreement may be terminated by either party for any reason by six
(6) months' advance written notice delivered to the other party.
6.2 This Agreement may be terminated at the option of either the
Underwriter or the Fund upon institution of formal proceedings against the
Company by the NASD, the SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of the Account, the administration
of the Contracts or the purchase of the Shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Fund's or the Underwriter's
respective reasonable judgment, materially impair the Company's ability to meet
and perform the Company's obligations and duties hereunder.
6.3 This Agreement may be terminated at the option of the Fund or the
Underwriter if the Internal Revenue Service determines that the Contracts cease
to qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund or Underwriter reasonably believes that the Contracts
may fail to so qualify.
6.4 This Agreement may be terminated by the Fund or the Underwriter, at
either's option, if either the Fund or the Underwriter shall determine, in its
sole judgment exercised in good faith, that either (1) the Company shall have
suffered a material adverse change in its business or financial condition, (2)
the Company shall have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and operations of
either the Fund or the Underwriter, or (3) the Company breaches any obligation
under this Agreement in a material respect and such breach shall continue
unremedied for thirty (30) days after receipt by the Company of notice from the
Fund or Underwriter of such breach.
6.5 This Agreement may be terminated at the option of the Company if (A)
the Internal Revenue Service determines that any Portfolio fails to qualify as a
"Regulated Investment Company" under the Code or fails to comply with the
diversification requirements of Section 817(h) of the Code, or (B) the Company
shall determine, in its sole judgment exercised in good faith, that either (1)
the Fund or the Underwriter shall have been the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company, or (2) the Fund or Underwriter breaches any
obligation under this Agreement in a material respect and such breach shall
continue unremedied for thirty (30) days after receipt of notice to the Fund or
the Underwriter from the Company of such breach.
6.6 Notwithstanding any termination of this Agreement, the Fund will, upon
the mutual agreement of the parties hereto, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all existing Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if the Fund and Underwriter so agree to make
additional Shares available, the owners of the Existing Contracts will be
permitted to reallocate investments in the
13
Fund (as in effect on such date), redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts.
6.7 In the event of a termination of this Agreement pursuant to this
Article 6, the Fund and the Underwriter shall promptly notify the Company
whether the Underwriter and the Fund will continue to make Shares available
after such termination; if the Underwriter and the Fund will continue to make
Shares so available, the provisions of this Agreement shall remain in effect
except for Section 6.1 and thereafter either the Fund, Underwriter or the
Company may terminate the Agreement as so continued pursuant to this Section 6.7
upon prior written notice to the other parties, such notice to be for a period
that is reasonable under the circumstances but need not be greater than six
months.
6.8 The provisions of Article 5 shall survive the termination of this
Agreement, and the provisions of Article 4 and Sections 2.4 and 2.10 shall
survive the termination of this Agreement as long as shares of the Fund are held
on behalf of Contract owners in accordance with Section 6.7.
ARTICLE 7
Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund or the Underwriter:
▇▇▇▇▇▇▇ ▇▇▇▇▇ Variable Series Funds, Inc.
c/o FAM Distributors, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company:
American International Life Assurance Company of New York
Attention:
ARTICLE 8
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
14
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York without reference
to the conflict of laws provisions thereof, and shall, to the extent applicable,
be subject to the provisions of the 1933, 1934, and 1940 Acts, and the rules,
regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant and the terms hereof shall
be interpreted and construed in accordance therewith.
8.5 The parties to this Agreement acknowledge and agree that the Fund is a
Maryland corporation, and that all liabilities of the Fund arising, directly or
indirectly, under this Agreement, of any and every nature whatsoever, shall be
satisfied solely out of the assets of the relevant Portfolio(s) of the Fund and
that no Director, officer, agent or holder of Shares of the Fund shall be
personally liable for any such liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 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, to which the parties hereto are entitled under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other
parties.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by all
parties.
15
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
AMERICAN INTERNATIONAL LIFE
ASSURANCE COMPANY OF NEW YORK
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ VARIABLE SERIES FUNDS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FAM DISTRIBUTORS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
16
Schedule A
Segregated Accounts of American International Life Assurance Company of New York
Participating in Portfolios of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Variable Series Funds, Inc.
Schedule B
Portfolios and Classes of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Variable Series Funds, Inc.
Offered to Segregated Accounts of American International Life Assurance Company
of New York
▇▇▇▇▇▇▇ ▇▇▇▇▇ Basic Value V.I. Fund - Class A Shares
▇▇▇▇▇▇▇ ▇▇▇▇▇ Small Cap Value V.I. Fund - Class A Shares
▇▇▇▇▇▇▇ ▇▇▇▇▇ Fundamental Growth ▇.▇.▇▇▇▇ - Class A Shares
▇▇▇▇▇▇▇ ▇▇▇▇▇ Government Bond V.I. Fund - Class A Shares
Schedule C
Persons Authorized to Act on Behalf of American International Life Assurance
Company of New York
The Fund, the Underwriter and their respective agents are authorized to
rely on instructions from the following individuals on behalf of American
International Life Assurance Company of New York:
Name Signature
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