EX-99.B8d
Proposed Participation Agreement
PARTICIPATION AGREEMENT
THIS AGREEMENT, is made as of ___________________ __, 199_, by
and among ___________________________ ("Company"), on its own behalf and on
behalf of _______________________________ Separate Account ____, a segregated
asset account of the Company ("Account"), Strong Variable Insurance Funds, Inc.
(the "Insurance Funds") and Strong Special Fund II, Inc. ("Special Fund") (the
Insurance Funds and Special Fund shall individually be referred to as a "Fund"
and collectively as the "Funds"), the Funds' investment adviser and transfer
agent, Strong Capital Management, Inc. ("Adviser") and Strong Funds
Distributors, Inc. ("Distributors") (each, a "Party" and collectively, the
"Parties").
WHEREAS, beneficial interests in the Strong Variable Insurance Funds,
Inc. are divided into several series of shares, each representing the interest
in a particular managed portfolio of securities and other assets (the
"Portfolios", reference herein to a "Fund" or the "Funds" includes reference to
each Portfolio to the extent the context requires);
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Strong Special Fund
II, Inc., and the Portfolios named in Exhibit A, hereto (said series the
"Designated Portfolios"), as such Exhibit may be amended from time to time, on
behalf of the Account to fund the variable annuity contracts that use the
Designated Portfolios as an underlying investment medium (the "Contracts");
WHEREAS, the Company, Adviser and Distributors desire to facilitate the
purchase and redemption of shares of the Special Fund and the Designated
Portfolios by the Company for the Account through one account in the Special
Fund and in each Designated Portfolio (each an "Omnibus Account") to be
maintained of record by the Company, subject to the terms and conditions of this
Agreement; and
WHEREAS, the Company desires to provide administrative services and
functions (the "Services") for purchasers of contracts ("Owners") who are
beneficial owners of shares of the Special Fund or Designated Portfolios on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the Company, Fund, Adviser and Distributors agree as follows:
1. Performance of Services.
Company agrees to perform the administrative functions and services specified in
Exhibit B attached hereto with respect to the shares of the Designated
Portfolios beneficially owned by the Owners and included in the Account.
2. The Omnibus Accounts.
2.1 Each Omnibus Account will be opened based upon the information
contained in Exhibit C hereto. In connection with each Omnibus Account, Company
represents and warrants that it is authorized to act on behalf of each purchaser
of Contracts ("Owner") effecting transactions in the Omnibus Account and that
the information specified on Exhibit C hereto is correct.
2.2 The Fund shall designate each Omnibus Account with an account
number. Account numbers will be the means of identification when the parties are
transacting in the Omnibus Accounts. The assets in the Accounts are segregated
from the Company's own assets. The Adviser agrees to cause the Omnibus Accounts
to be kept open on the Designated Portfolio's or Special Fund's books, as
applicable, regardless of a lack of activity or small position size except to
the extent the Company takes specific action to close an Omnibus Account or to
the extent
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the Fund's prospectus reserves the right to close accounts which are inactive or
of a small position size. In the latter two cases, the Adviser will give prior
notice to the Company before closing an Omnibus Account.
2.3 The Company agrees to provide Adviser such information as Adviser
or Distributors may reasonably request concerning Owners as may be necessary or
advisable to enable Company and Distributors to comply with applicable laws,
including state "Blue Sky" laws relating to the sales of Fund shares to the
Accounts.
3. Transactions in Fund Shares. Designated Portfolio and Fund shares shall be
sold on behalf of the Fund by Distributors and purchased by Company for the
Account and, indirectly for the appropriate subaccount thereof at the net asset
value next computed after receipt by Distributors of each order of the Account
or its designee, in accordance with the provisions of this Agreement, the then
current prospectuses of the Designated Portfolio, and the Contracts. Company may
purchase Designated Portfolio and Fund shares for its own account subject to (a)
receipt of prior written approval by Distributors; and (b) such purchases being
in accordance with the then current prospectuses of the Portfolio and the
Contracts. The Board of Directors of each Fund ("Directors") may refuse to sell
shares of Fund to any person, or suspend or terminate the offering of shares of
the Fund if such action is required by law or by regulatory authorities having
jurisdiction. Company agrees to purchase and redeem the shares of the Fund in
accordance with the provisions of this Agreement, of the Contracts and of the
then current prospectuses for the Contracts and Designated Portfolio. Except as
necessary to implement transactions initiated by Owners, or as otherwise
permitted by state and/or federal laws or regulations, Company shall not redeem
Fund shares attributable to the Contracts.
3.1 Purchase and Redemption Orders. On each day that the Funds are open
for business (a "Business Day"), the Company shall aggregate and calculate the
net purchase or redemption order it receives for the Account from the Owners for
shares of the Fund that it received prior to the close of trading on the New
York Stock Exchange (the "NYSE") (i.e. 3:00 p.m., Central time, unless the NYSE
closes at an earlier time in which case such earlier time shall apply) and
communicate to Distributors, by telephone or facsimile (or by such other means
as the parties hereto may agree to in writing), the net aggregate purchase or
redemption order (if any) for the Omnibus Account for such Business Day (such
Business Day is sometimes referred to herein as the "Trade Date"). The Company
will communicate such orders to Distributors prior to 8:00 a.m., Central time,
on the next Business Day following the Trade Date. All trades communicated to
Distributors by the foregoing deadline shall be treated by Distributors as if
they were received by Distributors prior to the close of trading on the Trade
Date.
3.2 Settlement of Transactions.
(a) Purchases. Company will wire, or arrange for the wire of,
the purchase price of each purchase order to the custodian for the Fund in
accordance with written instructions provided by Distributors to the Company so
that either (1) such funds are received by the custodian for the Fund prior to
12:00 (noon), Central time, on the next Business Day following the Trade Date,
or (2) Distributors is provided with a Federal Funds wire system reference
number prior to such 12:00 noon deadline evidencing the entry of the wire
transfer of the purchase price to the applicable custodian into the Federal
Funds wire system prior to such time. Company agrees that if it fails to provide
funds to the Fund's custodian by the close of business on the next Business Day
following the Trade Date, then, at the option of Distributors, (i) the
transaction may be canceled, or (ii) the transaction may be processed at the
next-determined net asset value for the applicable Fund after purchase order
funds are received. In such event, the Company shall indemnify and hold harmless
Distributors, Adviser and/or the Fund from any liabilities, costs and damages
either may suffer as a result of such failure.
(b) Redemptions. The Adviser will use its best efforts to
cause to be transmitted to such custodial account as Company shall direct in
writing, the proceeds of all redemption orders placed by Company by 8:00 a.m.,
Central time, on the Business Day immediately following the Trade Date, by wire
transfer on that Business Day. Should Company need to extend the settlement on a
trade, it will contact Adviser to discuss the extension. For purposes of
determining the length of settlement, Adviser agrees to treat the Account no
less
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favorably than other shareholders of the designated Portfolio. Each wire
transfer of redemption proceeds shall indicate, on the Federal Funds wire
system, the amount thereof attributable to each Portfolio; provided, however,
that if the number of entries would be too great to be transmitted through the
Federal Funds wire system, the Adviser shall, on the day the wire is sent, fax
such entries to Company or if possible, send via direct or indirect systems
access until otherwise directed by the Company in writing.
(c) Authorized Persons. The following persons are each duly
authorized to act on behalf of the Company under this Agreement. The Funds,
Adviser and Distributors are entitled to conclusively rely on verbal or written
instructions that Adviser or Distributors reasonably believes were originated by
any one of said persons. The Company shall inform Adviser and Distributors of
additions to or subtractions from this list of authorized persons pursuant to
Section 13, hereof:
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3.3 Book Entry Only. Issuance and transfer of Fund shares will be
by book entry only. Stock certificates will not be issued to the Company or the
Account. Shares of the Fund ordered from Distributors will be recorded in the
appropriate book entry title for the Account.
3.4 Distribution Information. The Adviser or Distributors shall provide
the Company with all distribution announcement information as soon as it is
announced by the Fund. The distribution information shall set forth, as
applicable, ex-dates, record date, payable date, distribution rate per share,
record date share balances, cash and reinvested payment amounts and all other
information reasonably requested by the Company. Where possible, the Adviser or
Distributors shall provide the Company with direct or indirect systems access to
the Adviser's systems for obtaining such distribution information.
3.5 Reinvestment. All dividends and capital gains distributions will be
automatically reinvested on the payable date in additional shares of the
Designated Portfolio or Special Fund, as applicable, at net asset value in
accordance with each Portfolio's or the Special Fund's then current prospectus.
3.6 Pricing Information. Distributors shall use its best efforts to
furnish to the Company prior to 6:00 p.m., Central time, on each Business Day
the Designated Portfolio's and Special Fund's closing net asset value for that
day, and for those Funds for which such information is calculated, the daily
accrual for interest rate factor (mil rate). Such information shall be
communicated via fax, or indirect or direct systems access acceptable to the
Company.
3.7 Price Errors.
(a) In the event adjustments are required to correct any error
in the computation of the net asset value of Fund shares, Fund or
Adviser shall promptly notify Company after discovering the need for
those adjustments which result in a reimbursement to an Account in
accordance with such Fund's or Designated Portfolio's then current
policies on reimbursement. Notification may be made orally or via
direct or indirect systems access. Any such notification shall be
promptly followed by a letter shall be written on Fund or Adviser
letterhead and must state for each day for which an error occurred the
incorrect price, the correct price, and, to the extent communicated to
the Fund's shareholder, the reason for the price change. Fund and
Adviser agree that Company may send this writing, or derivation thereof
(so long as such derivation is approved in advance by Fund or Adviser,
which approval shall not be unreasonably withheld) to Owners that are
affected by the price change.
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(b) If the Account received amounts in excess of the amounts
to which it otherwise would have been entitled prior to an adjustment
for an error, Company, when requested by Fund or Adviser, will use its
best efforts to collect such excess amounts from the accounts of the
Owners. In no event, however, shall Company be liable to Fund or
Adviser for any such amounts.
(c) If an adjustment is to be made in accordance with
subsection (a) above to correct an error which has caused the Account
to receive an amount less than that to which it is entitled, Fund
and/or Adviser shall make all necessary adjustments (within the
parameters specified in subsection (a)) to the number of shares owned
in the Account and distribute to the Company the amount of such
underpayment for credit to the accounts of the Owners.
3.8 Agency. Distributors hereby appoints the Company as its agent for
the limited purpose of accepting purchase and redemption instructions from the
Owners for the purchase and redemption of shares of the Fund by the Company on
behalf of Account.
3.9 Quarterly Reports. Adviser agrees to provide Company a statement of
Special Fund and Designated Portfolio assets as soon as practicable and in any
event within 30 days after the end of each calendar quarter, and a statement
certifying the compliance by the Special Fund and the Designated Portfolios
during that fiscal quarter with the diversification requirements and
qualification as a regulated investment company. In the event of a breach of
Section 6.4(a), Adviser will take all reasonable steps (a) to notify Company of
such breach and (b) to adequately diversify the Portfolio so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
4. Proxy Solicitations and Voting. The Company shall, at its expense, distribute
or arrange for the distribution of all proxy materials furnished by the Fund to
the Account and shall: (i) solicit voting instructions from Owners; (ii) vote
the Fund shares in accordance with instructions received from Owners; and (iii)
vote the Fund shares for which no instructions have been received, as well as
shares attributable to it, in the same proportion as Fund shares for which
instructions have been received from Owners, so long as and to the extent that
the Securities and Exchange Commission (the "SEC") continues to interpret the
Investment Company Act of 1940, as amended (the "1940 Act"), to require
pass-through voting privileges for various contract owners. The Company and its
agents will not recommend action in connection with, or oppose or interfere
with, the solicitation of proxies for the Fund shares held for Owners.
5. Customer Communications.
5.1 Prospectuses. The Adviser or Distributors, at its expense, will
provide the Company with as many copies of the current prospectus for the
Special Fund and Designated Portfolios as the Company may reasonably request for
distribution, at the Company's expense, to existing or prospective Owners.
5.2 Shareholder Materials. The Adviser and Distributors shall, as
applicable, provide in bulk to the Company or its authorized representative, at
a single address and at no expense to the Company, the following shareholder
communications materials prepared for circulation to Owners in quantities
requested by the Company which are sufficient to allow mailing thereof by the
Company and, to the extent required by applicable law, to all Owners: proxy
or information statements, annual reports, semi-annual reports, and all initial
and updated prospectuses, supplements and amendments thereof. Neither the Funds,
the Adviser nor Distributors shall be responsible for the cost of distributing
such materials to Owners.
6. Representations and Warranties.
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6.1 The Company represents and warrants that:
(a) It is an insurance company duly organized and in good
standing under the laws of the State of [Connecticut] and that it has
legally and validly established the Account prior to any issuance or
sale thereof as a segregated asset account and that the Company has and
will maintain the capacity to issue all Contracts that may be sold; and
that it is and will remain duly registered, licensed, qualified and in
good standing to sell the Contracts in all the jurisdictions in which
such Contracts are to be offered or sold;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and
federal laws;
(c) The Contracts are and will be registered under the
Securities Act of 1933, as amended (the "1933 Act"), and are and will
be registered and qualified for sale in the states where so required;
and the Account is and will be registered as a unit investment trust in
accordance with the 1940 Act and shall be a segregated investment
account for the Contracts;
(d) The Contracts are currently treated as annuity contracts,
under applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Company will maintain such treatment and
will notify Adviser, Distributors and Fund promptly 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;
(e) It is registered as a transfer agent pursuant to Section
17A of the Securities Exchange Act of 1934, as amended (the "1934
Act"), or is not required to be registered as such;
(f) The arrangements provided for in this Agreement will be
disclosed to the Owners; and
(g) It is registered as a broker-dealer under the 1934 Act and
any applicable state securities laws, including as a result of entering
into and performing the Services set forth in this Agreement, or is not
required to be registered as such.
6.2 The Funds each represent and warrant that Fund shares sold pursuant to this
Agreement are and will be registered under the 1933 Act and the Fund is and will
be registered as a registered investment company under the Investment Company
Act of 1940, in each case, except to the extent the Company is so notified in
writing;
6.3 Distributors represents and warrants that:
(a) It is and will be a member in good standing of the NASD and is
and will be registered as a broker-dealer with the SEC;
(b) It will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations; and
6.4 Adviser represents and warrants that:
(a) It will cause each Fund to invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable annuity
contracts under the Code and the regulations issued thereunder, and that each
Fund will comply with Section 817(h) of the Code as amended from time to time
and with all applicable regulations promulgated thereunder;
(b) It is and will remain duly registered and licensed in all material
respects under all applicable federal and state securities and insurance laws
and shall perform its obligations hereunder in compliance in all material
respects with any applicable state and federal laws; and
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6.5 Each of the parties hereto represents and warrants to the others that:
(a) It has full power and authority under applicable law, and has taken
all action necessary, to enter into and perform this Agreement and the person
executing this Agreement on its behalf is duly authorized and empowered to
execute and deliver this Agreement;
(b) This Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms and it shall comply in all
material respects with all laws, rules and regulations applicable to it by
virtue of entering into this Agreement;
(c) No consent or authorization of, filing with, or other act by or in
respect of any governmental authority, is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement;
(d) The execution, performance and delivery of this Agreement will not
result in it violating any applicable law or breaching or otherwise impairing
any of its contractual obligations;
(e) Each Party hereto is entitled to rely on any written records or
instructions provided to it by another Party; and
(f) Its directors, officers, employees, and investment advisers, and
other individuals/entities dealing with the money and/or securities of a Fund
are and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
amount required by the applicable rules of the National Association of
Securities Dealers, Inc. ("NASD") and the federal securities laws, which bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company;
7. Sales Material and Information.
7.1 NASD Filings. The Company shall promptly inform Distributors as to
the status of all sales literature filings pertaining to the Special Fund or
Designated Portfolios and shall promptly notify Distributors of all approvals or
disapprovals of sales literature filings with the NASD. For purposes of this
Section 7, the phrase "sales literature or other promotional material" shall be
construed in accordance with all applicable securities laws and regulations.
7.2 Company Representations. The Company shall not make any material
representations concerning the Adviser, the Distributors, or a Fund other than
the information or representations contained in: (a) a registration statement of
the Fund or prospectus of a Designated Portfolio or Special Fund, as amended or
supplemented from time to time; (b) published reports or statements of the Funds
which are in the public domain or are approved by Distributors and/or the Funds;
or (c) sales literature or other promotional material of the Funds.
7.3 Adviser, Distributors and Fund Representations. Neither Adviser,
Distributors nor a Fund shall make any material representations concerning the
Company other than the information or representations contained in: (a) a
registration statement or prospectus for the Contracts, as amended or
supplemented from time to time; (b) published reports or statements of the
Contracts or the Account which are in the public domain or are approved by the
Company; or (c) sales literature or other promotional material of the Company.
7.4 Trademarks, etc. Except to the extent required by applicable law,
no Party shall use any other Party's names, logos, trademarks or service marks,
whether registered or unregistered, without the prior consent of such Party.
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7.5 Information From Distributors and Adviser. Upon request,
Distributors and/or Adviser will provide to Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the Designated Portfolios or the Special
Fund, in final form as filed with the SEC, NASD and other regulatory
authorities.
7.6 Information from Company. Company will provide to Distributors at
least one complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters and all amendments to any of the above, that
relate to a Fund and the Contracts, in final form as filed with the SEC, NASD
and other regulatory authorities.
7.7 Review of Marketing Materials. If so requested by Company, the
Adviser or Distributors will use its best efforts to review sales literature and
other marketing materials prepared by Company which relate to the Funds, the
Adviser or Distributors for factual accuracy as to such entities, provided that
the Adviser or Distributors is provided at least five (5) Business Days to
review such materials. Neither the Adviser nor Distributors will review such
materials for compliance with applicable laws. Company shall provide the Adviser
with copies of all sales literature and other marketing materials which refer to
the Funds, the Company or Distributors within five (5) Business Days after their
first use, regardless of whether the Adviser or Distributors has previously
reviewed such materials. If so requested by the Adviser or Distributors, Company
shall cease to use any sales literature or marketing materials which refer to
the Funds, the Adviser or Distributors that the Adviser or Distributors
determines to be inaccurate, misleading or otherwise unacceptable.
8. Fees and Expenses.
8.1 Fund Registration Expenses. Fund or Distributors shall bear the
cost of registration and qualification of Fund shares; preparation and filing of
Fund prospectuses and registration statements, proxy materials and reports;
preparation of all other statements and notices relating to Fund or Distributors
required by any federal or state law; payment of all applicable fees, including,
without limitation, all fees due under Rule 24f-2 of the 1940 Act, relating to
Fund; and all taxes on the issuance or transfer of Fund's shares on the Fund's
records.
8.2 Contract Registration Expenses. The Company shall bear the expenses
for the costs of preparation and filing of the Company's prospectus and
registration statement with respect to the Contracts; preparation of all other
statements and notices relating to the Account or Contracts required by any
federal or state law; expenses for the solicitation and sale of the Contracts
including all costs of printing and distributing all copies of advertisements,
prospectuses, Statements of Additional Information, proxy materials, and reports
to Owners or potential purchasers of the Contracts as required by applicable
state and federal law; payment of all applicable fees relating to the Contracts;
all costs of drafting, filing and obtaining approvals of the Contracts in the
various states under applicable insurance laws; filing of annual reports on form
N-SAR, and all other costs associated with ongoing compliance with all such laws
and its obligations hereunder.
9. Indemnification.
9.1 Indemnification By Company.
(a) Company agrees to indemnify and hold harmless the Funds, Adviser
and Distributors and each of their directors, officers, employees and agents,
and each person, if any, who controls any of them within the meaning of Section
15 of the 1933 Act (each, an "Indemnified Party" and collectively, the
"Indemnified Parties" for the purposes of this Section 9.1) from and against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of Company), and expenses (including
reasonable legal fees
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and expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise (collectively, hereinafter
"Losses"), insofar as such Losses:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the
Contracts or contained in the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this paragraph 9.1(a) shall not
apply as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with written information furnished to Company by or on
behalf of a Fund, Distributors or Adviser for use in the registration
statement or prospectus for the Contracts or in the Contracts (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or its agents, with
respect to the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering a Fund or any amendment
thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, if such a
statement or omission was made in reliance upon written information
furnished to a Fund, Adviser or Distributors by or on behalf of
Company; or
(iv) arise out of, or as a result of, any failure by Company
or persons under its control to provide the Services and furnish the
materials contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material breach of any
representation and/or warranty made by Company or persons under its
control in this Agreement or arise out of or result from any other
material breach of this Agreement by Company or persons under its
control; as limited by and in accordance with the provisions of
Sections 9.1(b) and (.1(c) hereof; or
(vi) arise out of, or as a result of, adherence by Adviser or
Distributors to instructions that it reasonably believes were
originated by persons specified in Section 3.2(c), hereof.
This indemnification provision is in addition to any liability which
the Company may otherwise have.
(b) Company shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would otherwise be
subject by reason of 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.
(c) Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Company of any such claim shall not
relieve Company from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against any Indemnified Party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party. After
notice from the
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(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of Designated Portfolio shares or the Contracts or the
operation of Fund.
9.2 Indemnification by Adviser and Distributors.
(a) Adviser and Distributors agrees to indemnify and hold harmless
Company and each of its directors, officers, employees and agents and each
person, if any, who controls Company within the meaning of Section 15 of the
1933 Act (each, and "Indemnified Party" and collectively, the "Indemnified
Parties" for purposes of this Section 9.2) against any and all Losses to which
the Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such Losses:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of a Fund (or
any amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this Section 9.2(a)
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with written information furnished to a Fund,
Adviser or Distributors by or on behalf of Company for use in the
registration statement or prospectus for a Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Adviser or Distributors or
persons under its control, with respect to the sale or distribution of
Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon written
information furnished to Company by or on behalf of Adviser or
Distributors; or
(iv) arise out of, or as a result of, any failure by Adviser
or Distributors or persons under its control to provide the services
and furnish the materials contemplated under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Adviser or Distributors or
persons under its control in this Agreement or arise out of or result
from any other material breach of this Agreement by Adviser or
Distributors or persons under its control; as limited by and in
accordance with the provisions of Sections 9.2(b) and 9.2(c) hereof.
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This indemnification provision is in addition to any liability which
Adviser and Distributors may otherwise have.
(b) Distributors shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to Company.
(c) Adviser and Distributors shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified Adviser and Distributors
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify Adviser
and Distributors of any such claim shall not relieve Adviser and Distributors
from any liability which it may have to the Indemnified Party otherwise than on
account of this indemnification provision. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, assume the defense thereof, with
counsel satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action, the
Indemnified Party shall bear the expenses of any additional counsel obtained by
it, and the indemnifying party shall not be liable to such Indemnified Party
under this Section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation. The Indemnified Party may not settle any action without
the written consent of the indemnifying party. The indemnifying party may not
settle any action without the written consent of the Indemnified Party unless
such settlement completely and finally releases the Indemnified Party from any
and all liability. In either event, consent shall not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Adviser and
Distributors of the commencement of any litigation or proceedings against them
in connection with the issuance or sale of the Contracts or the operation of the
Account.
10. Potential Conflicts.
10.1 Monitoring by Directors for Conflicts of Interest. The Directors
of each Fund will monitor the Fund for any potential or existing material
irreconcilable conflict of interest between the interests of the contract owners
of all separate accounts investing in the Fund, including such conflict of
interest with any other separate account of any other insurance company
investing in the Fund. 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 interpretive letter, or any similar action by insurance, tax or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of the Fund are
being managed; (e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or by contract
owners of different life insurance companies utilizing the Fund; or (f) a
decision by Company to disregard the voting instructions of Owners. The
Directors shall promptly inform the Company, in writing, if they determine that
an irreconcilable material conflict exists and the implications thereof.
10.2 Monitoring by Company for Conflicts of Interest. The Company will
promptly notify the Directors, in writing, of any potential or existing material
irreconcilable conflicts of interest, as described in Section 10.1 above, of
which it is aware. The Company will assist the Directors in carrying out their
responsibilities under any applicable provisions of the federal securities laws
and/or any exemptive orders granted by the SEC ("Exemptive Order"), by providing
the Directors, in a timely manner, with all information reasonably necessary
10
for the Directors to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Directors whenever Owner
voting instructions are disregarded.
10.3 Remedies. If it is determined by a majority of the Directors, or a
majority of disinterested Directors, that a material irreconcilable conflict
exists, as described in Section 10.1 above, the Company shall, at its own
expense take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including, but not limited to: (a),
withdrawing the assets allocable to some or all of the separate accounts from
the applicable Fund and reinvesting such assets in a different investment
medium, including (but not limited to) another fund managed by the Adviser, or
submitting the question whether such segregation should be implemented to a vote
of all affected Owners and, as appropriate, segregating the assets of any
particular group that votes in favor of such segregation, or offering to the
affected owners the option of making such a change; and (b), establishing a new
registered management investment company or managed separate account.
10.4 Causes of Conflicts of Interest.
(a) State Insurance Regulators. 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 applicable Fund and terminate this Agreement with
respect to such Account within the period of time permitted by such
decision, but in no event later than six months after the Directors
inform 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 the foregoing period, the Distributors and Fund shall continue to
accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund to the extent such actions do not
violate applicable law.
(b) Disregard of Owner Voting. If a material irreconcilable
conflict arises because of Company's decision to disregard Owner voting
instructions and that decision represents a minority position or would
preclude a majority vote, Company may be required, at the applicable
Fund's election, to withdraw the Account's investment in said Fund. No
charge or penalty will be imposed against the Account as a result of
such withdrawal.
10.5 Limitations on Consequences. For purposes of Sections 10.3 through
10.5 of this Agreement, a majority of the disinterested Directors shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict. In no event will a Fund, the Adviser or the Distributors be
required to establish a new funding medium for any of the Contracts. The Company
shall not be required by Section 10.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of owners
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 applicable Fund and terminate this Agreement as quickly as may
be required to comply with applicable law, but in no event later than six (6)
months 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.
10.6 Changes in Laws. If and to the extent that Rule 6e-2 and Rule
6e3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from
any provision of the Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Fund's Exemptive Order) on terms and
conditions materially different from those contained in the Fund's Exemptive
Order, then (a) the Fund and/or the Company, as appropriate, shall take such
steps as may be necessary 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; and (b) Sections
10.1, 10.2, 10.3 and 10.4 of this
11
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
11. Maintenance of Records.
(a) Recordkeeping and other administrative services to Owners
shall be the responsibility of the Company and shall not be the
responsibility of the Fund, Adviser orDistributors. Neither the Funds,
the Adviser nor Distributors shall maintain separate accounts or
records for Owners. Company shall maintain and preserve all records
as required by law to be maintained and preserved in connection with
providing the Services and in making shares of the Funds available to
the Account.
(b) Upon the request of the Adviser or Distributors, the
Company shall provide copies of all the historical records relating to
transactions between the Funds and the Account, written communications
regarding the Funds to or from the Account and other materials, in each
case (1) as are maintained by the Company in the ordinary course of its
business, and (2) as may reasonably be requested to enable the Adviser
and Distributors, or its representatives, including without limitation
its auditors or legal counsel, to (A) monitor and review the Services,
(B) comply with any request of a governmental body or self-regulatory
organization or the Owners, (C) verify compliance by the Company with
the terms of this Agreement, (D) make required regulatory reports, or
(E) perform general customer supervision. The Company agrees that it
will permit the Adviser and Distributors or such representatives of
either to have reasonable access to its personnel and records in order
to facilitate the monitoring of the quality of the Services.
(c) Upon the request of the Company, the Adviser and
Distributors shall provide copies of all the historical records
relating to transactions between the Funds and the Account, written
communications regarding the Funds to or from the Account and other
materials, in each case (1) as are maintained by the Adviser and
Distributors, as the case may be, in the ordinary course of its
business and in compliance with applicable law, and (2) as may
reasonably be requested to enable the Company, or its representatives,
including without limitation its auditors or legal counsel, to (A)
comply with any request of a governmental body or self-regulatory
organization or the Owners, (B) verify compliance by the Adviser and
Distributors with the terms of this Agreement, (C) make required
regulatory reports, or (D) perform general customer supervision.
(d) The parties agree to cooperate in good faith in providing
records to one another pursuant to this Section 11.
12. Term and Termination.
12.1 Term and Termination Without Cause. The initial term of this
Agreement shall be for a period of one year from the date hereof. Unless
terminated upon not less than thirty (30) days prior written notice to the other
Party, this Agreement shall thereafter automatically renew from year to year,
subject to termination at the next applicable renewal date upon not less than 30
days prior written notice. Either Party may terminate this Agreement following
the initial term upon six (6) months advance written notice to the other.
12.2 Termination by Fund, Distributors or Adviser for Cause.
Adviser, Fund or Distributors may terminate this Agreement by written notice to
the Company, if any of them shall determine, in its sole judgment exercised in
good faith, that (a) the Company has suffered a material adverse change in its
business, operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or (b) any of the
Contracts are not registered, issued or sold in accordance with applicable state
and/or federal law or
12
such law precludes the use of Fund shares as the underlying investment media of
the Contracts issued or to be issued by the Company.
12.3 Termination by Company for Cause. Company may terminate this
Agreement by written notice to the Funds and the Distributors in the event that
(a) any of the Fund's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to be
issued by the Company; (b) the Funds cease to qualify as a Regulated Investment
Companies under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Funds may fail to so
qualify; or (c) a Fund fails to meet the diversification requirements specified
in Section 6.4(a).
12.4 Termination by any Party. This Agreement may be terminated by any
party at any time (A) by giving 30 days' written notice to the other parties in
the event of a material breach of this Agreement by the other party or parties
that is not cured during such 30-day period, and (B) (i) upon institution of
formal proceedings relating to the legality of the terms and conditions of this
Agreement against the Account, Company, Funds, Adviser or Distributors by the
NASD, the SEC or any other regulatory body provided that the terminating party
has a reasonable belief that the institution of formal proceedings is not
without foundation and will have a material adverse impact on the terminating
party, (ii) by the non-assigning party upon the assignment of this Agreement in
contravention of the terms hereof, or (iii) as is required by law, order or
instruction by a court of competent jurisdiction or a regulatory body or
self-regulatory organization with jurisdiction over the terminating party.
12.5 Limit on Termination. Notwithstanding the termination of this
Agreement, for so long as any Contracts remain outstanding and invested in a
Designated Portfolio or in the Special Fund each Party hereto shall continue to
perform such of its duties hereunder as are necessary to ensure the continued
tax deferred status thereof and the payment of benefits thereunder, except to
the extent proscribed by law, the SEC or other regulatory body.
13. Notices.
All notices hereunder shall be given in writing (and shall be deemed to
have been duly given upon receipt) by delivery in person, by facsimile, by
registered or certified mail or by overnight delivery (postage prepaid, return
receipt requested) to the respective parties as follows:
If to Insurance Fund:
Strong Variable Insurance Funds, Inc.
βββ ββββββββ βββββββ
βββββββββ, βββββββββ βββββ
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Special Fund:
Strong Special Fund II, Inc.
βββ ββββββββ βββββββ
βββββββββ, βββββββββ βββββ
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Adviser:
Strong Capital Management, Inc.
13
100 Heritage Reserve
βββββββββ, βββββββββ βββββ
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Distributors:
Strong Fund Distributors, Inc.
βββ ββββββββ βββββββ
βββββββββ, βββββββββ βββββ
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Company:
--------------------------------
--------------------------------
Attention:----------------------
Facsimile No.: -----------------
14. Miscellaneous.
14.1 Captions. The captions in this Agreement are included for
convenience of reference only and in no way affect the construction or effect of
any provisions hereof.
14.2 Enforceability. If any portion 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.
14.3 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which taken together shall constitute one
and the same instrument.
14.4 Remedies not Exclusive. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
14.5 Confidentiality. Subject to the requirements of legal process and
regulatory authority, the Fund and Distributors shall treat as confidential the
names and addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by the Company hereto and,
except as permitted by this Agreement, shall not disclose, disseminate or
utilize such names and addresses and other confidential information without the
express written consent of the Company until such time as it may come into the
public domain.
14.6 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of Wisconsin
applicable to agreements fully executed and to be performed therein; exclusive
of conflicts of laws;
14.7 Survivability. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5 hereof
shall survive termination of this Agreement. In addition, Sections 7.1, 7.6 and
10 shall survive termination of this Agreement in the event that any Contracts
are invested in Special Fund or a Designated Portfolio at the time the
termination becomes effective and shall survive for so long as such Contracts
remain so invested.
14
14.8 Amendment and Waiver. No modification of any provision of this
Agreement will be binding unless in writing and executed by the party to be
bound thereby. No waiver of any provision of this Agreement will be binding
unless in writing and executed by the party granting such waiver.
Notwithstanding anything in this Agreement to the contrary, the Company may
unilaterally amend Exhibit A hereto to add additional series of Insurance Funds
("New Funds") as Funds by sending to the Company a written notice of the New
Funds. Any valid waiver of a provision set forth herein shall not constitute a
waiver of any other provision of this Agreement. In addition, any such waiver
shall constitute a present waiver of such provision and shall not constitute a
permanent future waiver of such provision.
14.9 Assignment. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and assigns;
provided, however, that neither this Agreement nor any rights, privileges,
duties or obligations of the parties may be assigned by either party without the
written consent of the other party or as expressly contemplated by this
Agreement.
14.10 Entire Agreement. This Agreement contains the full and
complete understanding between the parties with respect to the transactions
covered and contemplated hereunder, and supersedes all prior agreements and
understandings between the parties relating to the subject matter hereof,
whether oral or written, express or implied.
14.11 Relationship of Parties; No Joint Venture, Etc. Except for the
limited purpose provided in Section 2.9, it is understood and agreed that the
Company shall be acting as an independent contractor and not as an employee or
agent of the Adviser, Distributors or the Funds, and none of the parties shall
hold itself out as an agent of any other party with the authority to bind such
party. Neither the execution nor performance of this Agreement shall be deemed
to create a partnership or joint venture by and among any of the Company, Fund,
Adviser, or Distributors.
14.12 Expenses. All expenses incident to the performance by each party
of its respective duties under this Agreement shall be paid by that party.
14.13 Time of Essence. Time shall be of the essence in this Agreement.
14.14 Non-Exclusivity. Each of the parties acknowledges and agrees that
this Agreement and the arrangements described herein are intended to be
non-exclusive and that each of the parties is free to enter into similar
agreements and arrangements with other entities.
14.15 Operations of Fund. In no way shall the provisions of this
Agreement limit the authority of the Funds, the Company or Distributors to take
such action as it may deem appropriate or advisable in connection with all
matters relating to the operation of such Fund and the sale of its shares. In no
way shall the provisions of this Agreement limit the authority of the Company to
take such action as it may deem appropriate or advisable in connection with all
matters relating to the provision of Services or the shares of funds other than
the Funds offered to the Account.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date first above written.
[COMPANY]
-----------------------------------------------
By:
Name:
15
Title:
STRONG CAPITAL MANAGEMENT, INC.
-----------------------------------------------
By:
Name: ββββββββ ββββ βββββββ
Title: President of Strong Advisory Services,
a division of Strong Capital Management,
Inc.
STRONG FUNDS DISTRIBUTORS, INC.
-----------------------------------------------
By:
Name: βββββββ β. βββββββββββ
Title: Vice President
STRONG VARIABLE INSURANCE FUNDS,
INC.
-----------------------------------------------
By:
Name:
Title:
STRONG VARIABLE INSURANCE FUNDS,
INC.
-----------------------------------------------
By:
Name:
Title:
16
EXHIBIT A
The following is a list of all series of the Insurance Fund which are to be made
available for investment by the Contracts pursuant to this Agreement:
Strong Advantage Fund II
Strong Asset Allocation Fund II
Strong Discovery Fund II
Strong Government Securities Fund II
Strong Growth Fund II
Strong International Stock Fund II
Strong Short-Term bond Fund II
17
EXHIBIT B
THE SERVICES
Company shall perform the following services. Such services
shall be the responsibility of the Company and shall not be the responsibility
of the Funds, Adviser or Distributors.
1. Maintain separate records for each Account, which records shall
reflect Fund shares ("Shares") purchased and redeemed, including the date and
price for all transactions, Share balances, and the name and address of each
Owner, including zip codes and tax identification numbers.
2. Credit contributions to individual Owner accounts and invest such
contributions in shares of the Special Fund or Designated Portfolios to the
extent so designated by the Owner.
3. Disburse or credit to the Owners, and maintain records of, all
proceeds of redemptions of Special Fund or Designated Portfolio shares and all
other distributions not reinvested in shares.
4. Prepare and transmit to the Owners, periodic account statements
showing, among other things, the total number of Special Fund or Designated
Portfolio shares owned as of the statement closing date, purchases and
redemptions of shares during the period covered by the statement, the net asset
value of the Special Fund and Designated Portfolios as of a recent date, and the
dividends and other distributions paid during the statement period (whether paid
in cash or reinvested in shares).
5. Transmit to the Owners, as required by applicable law, prospectuses,
proxy materials, shareholder reports, and other information provided by the
Adviser, Distributors or Funds and required to be sent to shareholders under the
Federal securities laws.
6. Transmit to Distributors purchase orders and redemption requests
placed by the Account and arrange for the transmission of funds to and from the
Funds.
7. Transmit to Distributors such periodic reports as Distributors shall
reasonably conclude is necessary to enable the Funds to comply with applicable
Federal securities and state Blue Sky requirements.
8. Transmit to the each Account confirmations of purchase orders and
redemption requests placed by each Account.
9. Maintain all account balance information for the Account and daily
and monthly purchase summaries expressed in shares and dollar amounts.
10. Prepare, transmit and file any Federal, state and local government
reports and returns as required by law with respect to each account maintained
on behalf of the Account.
11. Respond to Owners' inquiries regarding, among other things, share
prices, account balances, dividend options, dividend amounts, and dividend
payment dates.
18
EXHIBIT C
ACCOUNT INFORMATION
1. Entity in whose name each Account will be opened:_________________________
Mailing address: _________________________
_________________________
_________________________
2. Employer ID number (For internal usage only): _________________________
3. Authorized contact persons: The following persons are authorized on behalf
of the Company to effect transactions in each Account:
Name:_____________________________ Name:____________________________________
Phone:____________________________ Phone:___________________________________
4. Will the Accounts have telephone exchange? ____ Yes ____ No
(This option lets Company redeem shares by telephone and apply the proceeds
for purchase in another identically registered Strong Funds account.)
5. Will the Accounts have telephone redemption? ____ Yes ____ No
(This option lets Company sell shares by telephone. The proceeds will be
wired to the bank account specified below.)
6. All dividends and capital gains will be reinvested automatically.
7. Instructions for all outgoing wire transfers______________________________
______________________________
______________________________
8. If this Account Information Form contains changed information, the
undersigned authorized officer has executed this amended Account Information
Form as of the date set forth below and acknowledges the agreements and
representations set forth in the Participation Agreement between the
Company, the Funds, Adviser and Distributors:
------------------------------------- ----------------------------
(Signature of Authorized Officer) (Date)
9. Company represents under penalty of perjury that:
(i) The employer ID number on this form is correct; and
(ii) Company is not subject to backup withholding because (a) Company
is exempt from backup withholding, (b) Company has not been notified by the IRS
that it is subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified the Company that it is no
longer subject to
19
backup withholding. (Cross out (ii) if Company has been notified by the IRS
that it is subject to backup withholding because of underreporting interest
or dividends on its tax return.)
Please Note: Distributors employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and may not be liable for
losses due to unauthorized or fraudulent instructions. Please see the prospectus
for the Special Fund or applicable Designated Portfolio for more information on
the telephone exchange and redemption privileges.
For Strong Internal Use: This Account Information Form may be a copy. The
original Account Information Form is attached to the Participation Agreement
with the Adviser and retained in the legal department.
PRTAGMT1.DOC
20
Re: Fee Letter Relating to the [Company] Participation Agreement.
Dear _________________________:
Pursuant to the Participation Agreement by and among Strong Capital
Management, Inc. ("Strong"),___________________________ (the "Company"), Strong
Variable Insurance Funds, Inc., Strong Special Fund II, Inc. and Strong Funds
Distributors, Inc. ("Distributors") dated _____________________, 1996 (the
"Participation Agreement"), the Company will provide certain administrative
services on behalf of the registered investment companies or series thereof
specified in Exhibit A (each a "Fund" and collectively the "Funds").
In recognition of the reduction in administrative expenses that derives
from the performance of said administrative services, Strong agrees to pay the
Company the fee specified below for each Fund specified in Exhibit A hereto.
(a) For average aggregate amounts (as calculated in paragraph
(b), below) invested through variable insurance products issued by the
Company and invested with the Funds, as such may be amended from time
to time, the annual fee shall equal the percentage of such aggregate
amount of the applicable fund specified in Exhibit A.
(b) For purposes of computing the fee contemplated in
paragraph (a) above, Strong shall pay the Company an amount with
respect to each Fund equal to the product of: (a) one-twelfth of the
applicable percentage specified in Exhibit A, hereto, multiplied by (b)
the average daily market value of the investments held in the
applicable Fund pursuant to the Participation Agreement computed by
totaling the aggregate investment (share net asset value multiplied by
the total number of shares held) on each business day during the
calendar month in the Fund and dividing by the total number of business
days during such month.
(c) Strong shall calculate the amount of the payment to be
made pursuant to this Letter Agreement at the end of each calendar
month and will make such payment to the Company within 30 days
thereafter. Fees will be paid, at Strong's election, by wire transfer
or by check. All payments hereunder shall be considered final unless
disputed by the Company in writing within 60 days of receipt.
(d) The parties agree that the fees contemplated herein are
solely for shareholder servicing and other administrative services
provided by the Company and do not constitute payment in any manner for
investment advisory, distribution, trustee, or custodial services.
(e) The Company agrees to provide Strong by the 15th day of
each month with a report which indicates the number of Owners that hold
through a Contract interests in each Account as of the last day of the
prior month.
(f) If requested in writing by Strong, and at Strong's
expense, the Company shall provide to Strong, by February 14th of each
year, a "Special Report" from a nationally recognized accounting firm
reasonably acceptable to Strong which substantiates for each month of
the prior calendar year: (a) the number of Owners that hold, through an
Account, interests in each Account maintained by the Company on the
last day of each month which held shares for which the fee provided for
in this Letter Agreement was received by the Company, (b) that any fees
billed to Strong for such month were accurately determined in
accordance with this Letter Agreement, and (c) such other information
in connection with this Agreement and the Participation Agreement as
may be reasonably requested by Strong.
21
(g) The parties hereto agree that Strong may unilaterally
amend Schedule A hereto to add additional investment companies or
series thereof ("New Funds") as Funds subject to the provisions of this
Letter Agreement by sending to the Company a written notice of the New
Funds and indicating therein the fees to be paid to the Company with
respect to the administrative services provided pursuant to the
Participation Agreement in connection with such New Funds.
(h) This Letter Agreement shall terminate upon termination of
the Participation Agreement. Accordingly, all payments pursuant to this
Letter Agreement shall cease upon termination of the Participation
Agreement.
(i) Capitalized terms not otherwise defined herein shall have
the meaning assigned to them in the Participation Agreement.
If you are in agreement with the foregoing, please sign and date below
where indicated and return one copy of this signed letter agreement to me.
Very truly yours,
ββββββββ ββββ βββββββ
President, Strong Advisory Services, a division
of Strong Capital Management, Inc.
Accepted and agreed to this ____ day of
__________________, 1996.
[COMPANY]
------------------------------------------
By:
Name:
Title:
22
EXHIBIT A
The Funds subject to this Agreement and applicable annual fees are as follows:
Fund Annual Fee
---- ----------
Strong Special Fund II, Inc. .20%
Strong Variable Insurance Funds, Inc.
Strong Discovery Fund II .20%
Strong International Stock Fund II .20%
Strong Growth Fund II .20%
Strong Asset Allocation Fund II .15%
Strong Government Securities Fund II .10%
Strong Short-Term Bond Fund II .10%
Strong Advantage Fund II .10%
23
STRONG CAPITAL MANAGEMENT, INC.
-ADVISORY SERVICE FEE SCHEDULE-
--------------------------------------------------------------------------------
FUNDS TYPE MANAGEMENT FEE
The Strong Special Fund II Equity 100 Basis Points
The Strong Discovery Fund II Equity 100 Basis Points
The Strong International Stock Fund II Equity 100 Basis Points
The Strong Growth Fund II Equity 100 Basis Points
The Strong Asset Allocation Fund II Balanced 80 Basis Points
The Strong Advantage Fund II Fixed 60 Basis Points
The Strong Government Securities Fund II Equity 60 Basis Points
--------------------------------------------------------------------------------
24
STRONG CAPITAL MANAGEMENT, INC.
-ADMINISTRATIVE SERVICES FEE SCHEDULE-
--------------------------------------------------------
FUND FEE SCHEDULE
---- -------------
Equity 20 Basis Points
Balanced 15 Basis Points
Fixed 10 Basis Points
Money Market 5 Basis Points
---------------------------------------------------------
25