AMENDED AND RESTATED
PARTICIPATION AGREEMENT
BY AND AMONG
AID ASSOCIATION FOR LUTHERANS
AND
AAL VARIABLE ANNUITY ACCOUNT I
AND
AAL VARIABLE ANNUITY ACCOUNT II
AND
AAL VARIABLE LIFE ACCOUNT I
AND
AAL CAPITAL MANAGEMENT CORPORATION
AND
AAL VARIABLE PRODUCT SERIES FUND, INC.,
DATED JANUARY 1, 2000
TABLE OF CONTENTS
Page
1. SALE OF FUND SHARES......................................................4
2. REPRESENTATIONS AND WARRANTIES...........................................5
3. PROSPECTUS AND PROXY STATEMENTS: VOTING..................................6
4. SALES MATERIAL AND INFORMATION...........................................6
5. FEES AND EXPENSES........................................................7
6. DIVERSIFICATION..........................................................8
7. MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.........................8
9. TERM AND TERMINATION OF THIS AGREEMENT..................................13
10. NOTICES.................................................................15
11. MISCELLANEOUS...........................................................16
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, is made and entered into as of this 1st day
of January, 2000, by and among AID ASSOCIATION FOR LUTHERANS ("AAL"), on its own
behalf and on behalf of AAL VARIABLE ANNUITY ACCOUNT I, AAL VARIABLE ANNUITY
ACCOUNT II, and AAL VARIABLE LIFE ACCOUNT I (the "ACCOUNTS"), AAL CAPITAL
MANAGEMENT CORPORATION ("AAL CMC"), and AAL VARIABLE PRODUCT SERIES FUND, INC.
(the "FUND"), (collectively the "Parties").
WITNESSETH:
WHEREAS, AAL is a fraternal benefit society organized under the laws of the
State of Wisconsin engaged in the writing of life insurance, annuity contracts,
and other insurance products, and serves as sponsor and depositor of the
ACCOUNTS;
WHEREAS, the ACCOUNTS are legally segregated asset accounts of AAL,
established pursuant to the laws of the State of Wisconsin, with several
subaccounts (the "Subaccounts"), for the purpose of funding certain variable
universal life insurance contracts and variable annuity contracts (collectively
the "Certificates");
WHEREAS, the FUND, is registered with the Securities and Exchange
Commission (the "SEC"), as a diversified, open-end management investment company
under the Investment Company Act of 1940 (the "1940 Act"), and its shares are
registered with the SEC under the Securities Act of 1933 (the "1933 Act");
WHEREAS, the FUND is a series company, meaning its Board of Directors may
designate various series ("Portfolios") into which the FUND's authorized shares
are to be divided from time to time, with each such Portfolio consisting of a
specific number of the FUND's authorized shares, representing an interest in a
separate portfolio of securities and other assets, and having its own investment
objectives, policies and restrictions;
WHEREAS, to the extent permitted by applicable insurance, tax and other
laws and regulations, AAL intends to purchase shares in the FUND on behalf of
the ACCOUNTS to fund the Certificates or on its own behalf for related purposes,
and the FUND is authorized to sell such shares to the ACCOUNTS and to AAL at net
asset value;
WHEREAS, the FUND has entered into an Investment Advisory Agreement with
AAL CMC, dated the 1st day of January, 2000, as amended, wherein AAL CMC has
agreed to serve as investment adviser to the FUND, and to accept certain
obligations of the FUND as set forth herein, i.e., to compute the daily net
asset value and the net asset value per share for each Portfolio and to comply
with Subchapter M and Section 817(h) of the Internal Revenue Code of 1986 (the
"Code"), as amended;
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein, and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the Parties agree as follows:
1. SALE OF FUND SHARES
1.1 The Certificates funded through the ACCOUNTS will provide for the
allocation of net amounts among certain Subaccounts for investment
in such shares of the Portfolios as may be offered from time to
time in the prospectus of the ACCOUNTS for the Certificates. The
selection of the particular Subaccount is to be made by the
Certificate owner, and such selection may be changed in accordance
with the terms of the Certificates.
1.2 The FUND will sell to AAL those shares of each available Portfolio
that AAL orders based on transactions under Certificates,
effecting such orders on a daily basis at the Portfolio's net
asset value per share next computed as provided in the FUND
prospectus.
1.3 The Board of Directors of the FUND (the "Board") may refuse to
sell shares of any Portfolio to AAL, 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 Board, 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 the
FUND.
1.4 The FUND agrees that its shares will be sold only to: (a) AAL, on
its own behalf and on behalf of separate accounts that it
establishes from time to time and maintains to fund variable
annuity contracts and variable life insurance contracts of AAL,
including the ACCOUNTS; (b) other life insurance companies,
whether affiliated or unaffiliated with AAL, on behalf of separate
accounts funding variable annuity contracts and variable life
insurance contracts of such other insurance companies; and (c)
qualified pension or retirement plans, whether for the benefit of
employees of AAL and/or its affiliates or for the benefit of
unaffiliated entities ("Qualified Plans"). AAL separate accounts
(including the ACCOUNTS) and separate accounts of other life
insurance companies eligible to purchase shares of the FUND are
referred to in this Agreement as "Separate Accounts." No shares of
any Portfolio will be sold to the general public or to any life
insurance company (on its own behalf, as opposed to a Separate
Account maintained by such other insurance company) other than
AAL.
1.5 The FUND will redeem for cash from AAL those full or fractional
shares of each Portfolio that AAL requests based on transactions
under Certificates, effecting such requests on a daily basis at
the Portfolio's net asset value per share next computed as
provided in the FUND prospectus.
1.6 Issuance and transfer of the FUND's shares will be by book entry
only. Stock certificates will not be issued to AAL. Shares ordered
from the FUND will be recorded in an appropriate title for AAL.
1.7 The FUND shall furnish notice promptly to AAL of any income,
dividends or capital gain distributions payable on the shares of
any Portfolio. AAL hereby elects to receive all such income,
dividends and capital gain distributions as are payable on FUND
shares in additional shares of that Portfolio. AAL reserves the
right to revoke this election and to receive all such income,
dividends and capital gain distributions in cash. The FUND shall
notify AAL of the number of shares so issued as payment of such
income, dividends and distributions.
1.8 The FUND shall make the net asset value per share for each
Portfolio available to AAL on a daily basis, as soon as reasonably
practical after the net asset value per share is calculated.
1.9 The FUND may establish additional Portfolios to provide additional
funding media for the Certificates, or delete, combine, or modify
existing Portfolios. The shares of any additional Portfolio may be
made available to the ACCOUNTS by the FUND, pursuant to the terms
of this Agreement, and any applicable reference to any Portfolio,
the FUND or its shares herein shall include a reference to any
such Portfolio.
2. REPRESENTATIONS AND WARRANTIES
2.1 AAL represents and warrants that interests in the ACCOUNTS under
the Certificates are or will be registered under the 1933 Act to
the extent required by the 1933 Act, that the Certificates will be
issued and sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the
Certificates will comply in all material respects with state
insurance and federal securities law suitability requirements. AAL
further represents and warrants that it is a fraternal benefit
society organized under the laws of the State of Wisconsin and
engaged in the writing of life insurance, annuity contracts, and
other insurance products; that it has legally and validly
established its ACCOUNTS as segregated asset accounts under
Wisconsin insurance law; and that it has registered or will
register the ACCOUNTS as unit investment trusts in accordance with
the provisions of the 1940 Act to serve as segregated investment
accounts for the Certificates, to the extent required by the ▇▇▇▇
▇▇▇.
2.2 AAL represents and warrants that any interests in the ACCOUNTS
being offered for sale under the Certificates are or will be
registered under the 1933 Act to the extent required by the 1933
Act, that the Certificates will be issued and sold in compliance
in all material respects with all applicable federal and state
laws, and that the sale of the Certificates will comply in all
material respects with state insurance law, and federal securities
laws, including the rules of the National Association of
Securities Dealers, Inc. ("NASD").
2.3 The FUND represents and warrants that its shares sold pursuant to
this Agreement are or will be registered under the 1933 Act to the
extent required by the 1933 Act, duly authorized for issuance and
sold in compliance with the laws of the state of Maryland and all
applicable federal securities laws and that the FUND is or will be
registered under the 1940 Act to the extent required by the 1940
Act. The FUND will amend the registration statement for its shares
under the 1933 Act, as well as its registration statement under
the 1940 Act, as required in order to effect the continuous
offering of its shares. The FUND will register or qualify the
shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the FUND.
2.4 AAL represents and warrants that its Certificates are currently
treated as annuity contracts and universal life insurance
contracts under applicable provisions of the Code and that it will
make every effort to maintain such treatment.
2.5 The FUND makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses)
complies with the insurance laws or regulations of the various
states. On the request of any state insurance department, the FUND
agrees to provide and furnish to the department any information or
reports in connection with the FUND's operations or services that
will allow the insurance department to determine if the variable
product operations of AAL are being conducted in a manner
consistent with state laws. The FUND intends to comply with the
insurance laws of any relevant state regarding any Portfolio's
investment objectives, policies and restrictions to the extent
that AAL CMC advises the FUND, in writing, of such laws or any
change in such laws, provided the FUND's Board of Directors and/or
shareholders approve such changes as required by the ▇▇▇▇ ▇▇▇.
2.6 The FUND represents and warrants that each of its Portfolios will
qualify as a regulated investment company under Subchapter M of
the Code and that the investments of each of its Portfolios will
comply with the diversification requirements of Section 817(h) of
the Code and the regulations thereunder, and that it will notify
AAL immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the
future.
3. PROSPECTUS AND PROXY STATEMENTS: VOTING
3.1 The FUND will provide such documentation (including a final copy
of any new prospectus, statement of additional information
("SAI"), or supplement) and other assistance as is reasonably
necessary in order for AAL or its designee to timely distribute
the current FUND prospectus, SAI and any supplement thereto, or,
in the alternative, to have the prospectus of the ACCOUNTS for the
Certificates and the FUND's prospectus printed together in one
document once each year (or more frequently if the prospectus for
the FUND is amended) (such FUND prospectus printing to be at the
FUND's expense, as provided in Section 5.1).
3.2 The FUND will provide such documentation (including a final copy
of any proxy material, report to shareholders, and other
communication to shareholders) and other assistance as is
reasonably necessary for AAL or its designee to timely distribute
the proxy material, report to shareholders, and other
communication (such printing and distribution to be the FUND's
expense, as provided in Section 5.1).
3.3 If, and to the extent required by law, AAL shall, at AAL's
expense, as provided in Section 5.2:
(a) solicit voting instructions from Certificate owners;
(b) vote Portfolio shares in accordance with instructions
received from Certificate owners;
(c) vote Portfolio shares for which no instructions have been
received, as well as Portfolio shares attributable to AAL
other than under Certificates, in the same proportion as
shares of such Portfolio for which instructions have been
received, so long as and to the extent that the SEC continues
to interpret the 1940 Act to require pass-through voting
privileges. AAL reserves the right to vote Portfolio shares
held in any segregated asset accounts or in general accounts
in its own right, to the extent permitted by law.
3.4 The FUND reserves the right to take all actions, including but not
limited to the dissolution, merger, and sale of all assets of the
FUND solely upon the authorization of its Board and/or
shareholders as required by the 1940 Act.
4. SALES MATERIAL AND INFORMATION
4.1 AAL or its designee will furnish, or will cause to be furnished,
to the FUND or its designee, each piece of sales literature or
other promotional material in which the FUND or AAL is named, at
least fifteen (15) days prior to its intended use. No such
material will be used if the FUND or its designee objects to such
intended use within fifteen (15) days after receipt of such
material.
4.2 AAL will not give any information or make any representation or
statement, or cause such information to be given or representation
to be made, on behalf of the FUND or concerning any Portfolio in
connection with the sale of the Certificates other than the
information or representations contained in the registration
statement, prospectus, and SAI for FUND shares, as such
registration statement, prospectus, and SAI may be amended or
supplemented from time to time, or in reports or proxy materials
for the FUND, or in sales literature or other promotional material
approved by the FUND or its designee, except with the permission
of the FUND or its designee.
4.3 The FUND or its designee will furnish, or will cause to be
furnished, to AAL or its designee, each piece of sales literature
or other promotional material of the FUND in which AAL and/or its
ACCOUNTS is named, at least fifteen (15) days prior to its
intended use. No such material will be used if AAL or its designee
objects to such intended use within fifteen (15) days after
receipt of such material.
4.4 The FUND will not give any information or make any representations
or statements, or cause such information to be given or
representations to be made, on behalf of AAL or concerning AAL,
its ACCOUNTS or its Certificates other than the information or
representations contained in a registration statement or
prospectus for such ACCOUNTS, as such registration statement and
prospectus may be amended or supplemented from time to time, or in
published reports for the ACCOUNTS that are in the public domain
or approved by AAL for distribution to owners, or in sales
literature or other promotional material approved by AAL or its
designee, except with the permission of AAL or its designee .
4.5 The FUND will provide to AAL one complete copy of all registration
statements, prospectuses, SAI's, reports, proxy material, sales
literature and other promotional material, applications for
exemptions, requests for no-action letters, and all amendments to
any of the above, that relate to the FUND or its shares,
contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.6 AAL will provide to the FUND one complete copy of all registration
statements, prospectuses, SAI's, reports, solicitations for voting
instructions, sales literature and other promotional material,
applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the ACCOUNTS or
its Certificates, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
5. FEES AND EXPENSES
5.1 The FUND will pay all expenses incident to the FUND's performance
under this Agreement. In addition to the investment advisory fee,
subject to the expense reimbursement arrangement discussed below,
each Portfolio will bear all of its operating expenses that are
not specifically assumed by AAL, including the following: (i)
interest and taxes (ii) brokerage commissions; (iii) insurance
premiums; (iv) compensation and expenses for those Directors who
are not "interested" persons under Section 2(a)(19) of the Act;
(v) independent legal and audit expenses; (vi) fees and expenses
of the FUND's custodian, shareholder servicing or transfer agent
and accounting services agent; (vii) expenses incident to the
issuance of its shares, including stock certificates and issuance
of shares on the payment of, or reinvestment of dividends; (viii)
fees and expenses incident to the registration under Federal or
state securities laws of the FUND or its shares; (ix) FUND or
portfolio organizational expenses; (x) FUND expenses of preparing,
printing and mailing reports and notices, proxy material and
prospectuses to shareholders of the FUND; (xi) all other expenses
incidental to holding meetings of the FUND's shareholders; (xii)
dues or assessments of or contributions to the Investment Company
Institute or any successor or other industry association; (xiii)
such non-recurring expenses as may arise, including litigation
affecting the FUND and the legal obligations which the FUND may
have to indemnify its officers and Directors with respect thereto;
and (xiv) cost of daily valuation of each of the Portfolio's
securities and net asset value per share.
5.2 AAL will pay all expenses incident to AAL's performance under this
Agreement. In addition, AAL will bear the expenses of printing and
distributing to its Certificate owners the FUND proxy materials,
proxy cards and voting instruction forms (collectively "proxy
information"), tabulating the results of proxy solicitations to
its Certificate owners, printing and distributing to its
Certificate owners the FUND prospectus, SAI, supplement, proxy
material, report to shareholders, and other communication to
shareholders, and any expenses associated with administration of
its Certificates.
6. DIVERSIFICATION
6.1 The Portfolios will be invested in such a manner as to ensure that
the Certificates will be treated as variable life insurance
contracts and variable annuity contracts under the Code and the
regulations thereunder insofar as such investment is required for
such treatment. Without limiting the scope of the foregoing, the
Portfolios will at all times comply with Section 817(h) of the
Code and Treasury Regulations Section 1.817-5 relating to the
diversification requirements for variable annuity, endowment, or
life insurance contracts and any amendments or other modifications
to such Section or Regulations.
6.2 The FUND shall furnish to AAL on a regular basis reports of all of
the investments of each Portfolio in a form sufficient to permit
AAL to determine whether each Portfolio is in compliance with the
diversification requirements of Section 817(h) of the Code and the
Regulations thereunder and shall take immediate action, on
learning through its own monitoring, or on advice from AAL, that
any Portfolio is not in compliance with such requirements, to
return to compliance with such requirements.
6.3 If any Portfolio is found not to comply with the diversification
requirements at the end of a calendar quarter and the 30-day grace
period allowed under the Regulations, the FUND shall take all
appropriate efforts immediately to restore any such Portfolio to
compliance and shall fully cooperate with AAL in any effort to
correct such diversification failure under procedures established
by the Internal Revenue Service, including those set forth in
Revenue Procedure 92-25.
7. MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS
7.1 The FUND's Board of Directors will monitor the FUND for the
existence of any material irreconcilable conflict between and
among the interests of the certificateholders of the Separate
Accounts (including the ACCOUNTS) investing in the FUND and the
participants of any of the Qualified Plans investing in the FUND.
A material irreconcilable conflict may arise for a variety of
reasons, including: (a) 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 investment of the
FUND are being managed; (e) a difference in voting instructions
given by the Separate Accounts vis-a-vis voting instructions
provided by the trustees of the Qualified Plans; (f) a decision by
AAL or another life insurance company to disregard the voting
instructions of Certificate owners in one or more Separate
Accounts; or (g) if applicable, a decision by the trustee of a
Qualified Plan to disregard the voting instructions of the
participants of such Qualified Plan. A determination by the FUND's
Board that a material irreconcilable conflict exists will be a
final determination.
7.2 If it is determined by a majority of the FUND's Board, or by a
majority of its disinterested directors, that a material
irreconcilable conflict exists, AAL (on behalf of the ACCOUNTS)
shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors of the
FUND), take whatever steps are necessary to remedy or eliminate
the material irreconcilable conflict. Such steps could include:
(a) withdrawing the assets allocable to some or all of the
ACCOUNTS from the FUND or any Portfolio of the FUND and
reinvesting such assets in a different investment medium,
including another portfolio of the FUND; (b) submitting the
question as to whether such segregation should be implemented to a
vote of all affected Certificate owners and, as appropriate,
segregating the assets of any appropriate (i.e., variable annuity
Certificate owners or variable life insurance Certificate owners
of one or more of AAL and any other insurance companies with
Separate Accounts investing in the FUND) that votes in favor of
such segregation, or offering to the affected Certificate owners
the option of making such change; or (c) establishing a new
registered management investment company or managed separate
account. If a material irreconcilable conflict arises because of a
decision by AAL to disregard voting instructions of owners of
Certificates in one or more of the ACCOUNTS, and that decision
represents a minority position or would preclude a majority vote
with respect to the vote being taken by shareholders of the FUND,
then AAL shall, at the election and direction of the FUND's Board,
withdraw each affected ACCOUNT's investment in the FUND (but no
charge or penalty shall be imposed as a result of such
withdrawal).
7.3 AAL is responsible, to the extent permitted by applicable law, for
taking remedial action on behalf of the affected ACCOUNT(s) in the
event that the FUND's Board determines a material irreconcilable
conflict exists. AAL will take remedial action only as it pertains
to assets of the affected ACCOUNT(s) and in accordance with its
fiduciary responsibility to Certificate owners in such affected
ACCOUNT(s). AAL, as the sponsor of the affected ACCOUNT(s), will
be responsible for the cost of any such remedial action. For the
purpose of this Section, a majority of the disinterested members
of the FUND's Board will determine whether or not any proposed
action adequately remedies any material irreconcilable conflict.
In no event shall the FUND, or AAL in its capacity as advisor to
the FUND, be required to establish a Portfolio or new funding
medium for any Certificate or any ACCOUNT. Nor, in its capacity as
sponsor of any ACCOUNT, shall AAL be required to establish a new
funding medium for any Certificate or any ACCOUNT if any offer to
do so has been declined by a vote of a majority of the Certificate
owners materially and adversely affected by the material
irreconcilable conflict.
7.4 The FUND promptly shall notify AAL in writing of any determination
by the FUND's Board as to the existence of a material
irreconcilable conflict and its implications
7.5 All reports of potential or existing conflicts received by the
FUND's Board and all Board actions with regard to or determining
the existence of a conflict of interest, notifying AAL of a
conflict, and determining whether any proposed action adequately
remedies a conflict, will be properly recorded in the minutes of
the FUND's Board or other appropriate records, and such minutes or
other records will be made available to the SEC upon request.
7.6 The FUND will disclose in its prospectus that (a) shares of the
FUND may be offered to Separate Accounts and Qualified Plans; (b)
material irreconcilable conflicts may arise between the interest
of various certificateholders investing in the Separate Accounts
and the interests of participants in the Qualified Plans investing
in the FUND; and (c) the FUND's Board will monitor events in order
to identify the existence of any material conflict and determine
what action, if any, should be taken in response to such material
irreconcilable conflict.
7.7 No less than annually, AAL will submit to the FUND's Board such
reports, materials and data as the Board may reasonably request so
that the Board may carry out fully its obligations under this
Section. Such reports, materials and data will be submitted more
frequently if deemed appropriate by the FUND's Board. In any
event, AAL will promptly notify the FUND's Board in writing if it
becomes aware of any facts or circumstances that could give rise
to a material irreconcilable conflict between the interests of
various Certificate owners in the ACCOUNTS and the interests of
Qualified Plan participants investing in the FUND. All reports
submitted to the FUND's Board under this Section 7.7 shall include
all information reasonably necessary for the Board to consider the
conflict issues raised. In this regard, AAL promptly shall notify
the FUND's Board whenever AAL has determined to disregard voting
instructions of the Certificate owners of any ACCOUNT(s) on any
matter submitted to a vote of shareholders of the FUND.
8. INDEMNIFICATION
8.1 Indemnification By AAL
(a) AAL will indemnify and hold harmless the FUND and each of its
Directors, officers, and employees and each person, if any,
who controls the FUND within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement
with the written consent of AAL) or litigation (including
legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common
law or otherwise, and which:
(i) arise out of or are based upon any failure by AAL to
perform the duties or assume the general business
responsibilities of AAL with respect to the design,
drafting, state approvals, issuance, servicing and
administration of the Certificates, or the establishment
and maintenance of the ACCOUNTS; or
(ii) 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 SAI for the
Certificates, or the ACCOUNTS, or contained in the
Certificates or sales literature for the Certificates (or
any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this Agreement to indemnify
will not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to AAL by or on behalf of
the FUND for use in the registration statement,
prospectus, or SAI for the Certificates or the ACCOUNTS or
in the Certificates or sales literature (or any amendment
or supplement) or otherwise for use in connection with the
sale of the Certificates or FUND shares; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI,
or sales literature of the FUND not supplied by AAL, or
persons under its control) or wrongful conduct of AAL or
persons under its control, or failure to supervise persons
under AAL's control or entities or individuals with which
AAL contracts, with respect to the sale or distribution of
the Certificates or FUND shares; or
(iv)arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the 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 information
furnished in writing to the FUND by or on behalf of AAL;
or
(v) arise out of or result from any failure by AAL to provide
the services and furnish the materials contemplated
by this Agreement; or
(vi)arise out of or result from any material breach of any
representation and/or warranty made by AAL in this
Agreement or arise out of or result from any other
material breach of this Agreement by AAL, as limited by
and in accordance with the provisions of Sections 8.1(b).
and 8.1(c) hereof.
(b) AAL will not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would 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 or to the FUND, whichever is applicable.
(c) AAL will not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified AAL 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
AAL of any such claim will not relieve AAL from any liability
that it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, AAL shall be entitled to
participate, at its own expense, in the defense thereof. AAL
also will be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After
notice from AAL to such party of AAL's election to assume the
defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and AAL
will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other
than reasonable costs of investigation.
(d) The Indemnified Party will promptly notify AAL of the
commencement of any litigation or proceeding against it or any
of its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
8.2 Indemnification By the FUND
(a) The FUND will indemnify and hold harmless AAL and each of its
directors, officers and employees and each person, if any, who
controls AAL within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of FUND) or litigation (including legal and
other expenses) to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, which:
(i) arise out of or are based upon any failure by the FUND to
perform the duties or assume the general business
responsibilities required by this Agreement with respect
to the sale of shares of the FUND to AAL; or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the sales literature for the FUND and/or the
Certificates, or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to
the FUND by or on behalf of AAL for use in the
registration statement, prospectus, or SAI for use in the
sales literature or otherwise for use in connection with
the sale of Portfolio shares; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI,
or sales literature of the FUND not supplied by the FUND,
or persons under its control) or wrongful conduct of the
FUND or persons under its control, or failure to supervise
persons under the FUND's control or entities or
individuals with which the FUND contracts, with respect to
the sale or distribution of the Certificates or FUND
shares; or
(iv)arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the 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 information
furnished in writing to AAL by or on behalf of AAL; or
(v) arise out of or result from any failure by the FUND to
provide the services and furnish the materials
contemplated by this Agreement; or
(vi)arise out of or result from any material breach of any
representation and/or warranty made by the FUND in this
Agreement or arise out of or result from any other
material breach of this Agreement by the FUND, except to
the extent provided in Section 8.2(b) and 8.2(c) hereof.
(b) The FUND will not be liable under this indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
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 or to the FUND, whichever is
applicable.
(c) The FUND will not be liable under this indemnification
provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have
notified the FUND 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 the FUND of any such claim will not relieve
the FUND from any liability that it may have to the
Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified
Parties, the FUND shall be entitled to participate, at its own
expense, in the defense thereof. The FUND also will be
entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice
from the FUND to such party of the FUND's election to assume
the defense thereof, the Indemnified Party will bear the fees
and expenses of any additional counsel retained by it, and the
FUND will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof
other than reasonable costs of investigation.
(d) The Indemnified Party will promptly notify the FUND of the
commencement of any litigation or proceeding against it or any
of its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
9. TERM AND TERMINATION OF THIS AGREEMENT
9.1 This Agreement will terminate:
(a) as to any party hereto, at the option of that party, upon
prior written notice to the other party as provided in Section
9.3 herein; or
(b) at the option of the FUND in the event that formal
administrative proceedings are instituted against AAL by the
NASD, the SEC, any state securities or insurance commissioner
or any other regulatory body regarding AAL's duties under this
Agreement or related to the sale of the Certificates, the
operation of the ACCOUNTS, or the purchase of FUND shares,
provided, however, that the FUND determines, in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of AAL to perform its obligations under this
Agreement; or
(c) at the option of AAL in the event that formal administrative
proceedings are instituted against the FUND by the NASD, the
SEC, or any state securities or insurance commission or any
other regulatory body, regarding the FUND's duties under this
Agreement or related to the sale of FUND shares or the
operation of the FUND, provided, however, that AAL determines,
in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect
upon the ability of the FUND to perform its obligations under
this Agreement; or
(d) at the option of AAL with respect to the ACCOUNTS, upon
requisite authority to substitute the shares of another
investment company for shares of the FUND in accordance with
the terms of the Certificates or in accordance with the
ACCOUNTS investment policy or standards of conduct; or
(e) at the option of AAL, in the event any of the FUND's shares
are not registered, issued, or sold in accordance with
applicable federal and any state law or such law precludes the
use of such shares as the underlying investment media of the
Certificates issued or to be issued by AAL; or
(f) at the option of AAL, if the FUND fails to meet the
requirements specified in Sections 2.3 or 2.6 hereof; or
(g) at the option of the FUND, if the investments of the ACCOUNTS
fail to satisfy the diversification requirements of the Code
and the regulations thereunder, or
(h) at the option of AAL, if the FUND dissolves or becomes
otherwise unable to sell shares to fund the ACCOUNTS.
9.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 9.1(a) may be
exercised for any reason or for no reason.
9.3 Notice Requirement for Termination
No termination of this Agreement will be effective unless and
until the party terminating this Agreement gives prior written
notice to the other party to this Agreement of its intent to
terminate, and such notice shall set forth the basis for such
termination. Furthermore,
(a) in the event that any termination is based upon the provisions
of Section 9.1(a) hereof, such prior written notice shall be
given at least one hundred eighty (180) days in advance of the
effective date of termination as required by such provision;
(b) in the event that any termination is based upon the provisions
of Section 9.1(b) or Section 9.1(c) hereof, such prior written
notice shall be given at least ninety (90) days in advance of
the effective date of termination;
(c) in the event that any termination is based upon the provisions
of Section 9.1(d) hereof, AAL will give at least sixty (60)
days prior written notice to the FUND of the date of any
proposed action to substitute FUND shares, including the
filing of any applicable exemptive application under the 1940
Act relating to the ACCOUNTS; and AAL will provide the FUND
with a copy of any such exemptive application; and
(d) in the event that any termination is based upon the provisions
of Section 9.1(e), Section 9.1(f), or Section 9.1(g) hereof,
such prior written notice shall be given as soon as possible
within twenty-four (24) hours after the terminating party
learns of the event causing termination to be required.
9.4 Partial Termination
It is also understood that this Agreement may be terminated with
regard to a specific Portfolio or Portfolios of the FUND, or the
entire FUND at the discretion of the terminating party.
Notwithstanding any termination of this Agreement, the FUND, or
any Portfolio, provided its shares are then available for sale to
any persons, shall at the option of AAL, continue to make
available additional shares of the FUND pursuant to the terms and
conditions of this Agreement, for all Certificates in effect on
the effective date of termination of this Agreement (hereinafter
referred to as "Existing Certificates"). Specifically, without
limitation, the owners of the Existing Certificates shall be
permitted to transfer or reallocate investments under the
Certificates, redeem investments in the FUND and/or invest in the
FUND upon the making of additional purchase payments under the
Existing Certificates.
10. NOTICES
Any notice will 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 AAL: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇, Secretary
If to AAL CMC ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Same
If to the FUND: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
11. MISCELLANEOUS
11.1 This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Maryland, where the sale of any FUND share shall be deemed to have
been made; provided, however, that if such laws or any of the
provisions of this Agreement conflict with applicable Provisions
of the 1940 Act, the latter shall control.
11.2 If any provision of this Agreement will be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement will not be effected thereby.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the 1st day of January, 2000.
AID ASSOCIATION FOR LUTHERANS,
AAL VARIABLE ANNUITY ACCOUNT I,
AAL VARIABLE ANNUITY ACCOUNT II AAL VARIABLE PRODUCT SERIES FUND, INC.
AND
AAL VARIABLE LIFE ACCOUNT I
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇ ▇. Same
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. Same
President and President
Chief Executive Officer
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇ By: /s/▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President, Secretary
Secretary and General Counsel
AAL CAPITAL MANAGEMENT CORPORATION
By: /s/▇▇▇▇▇▇ ▇. Same
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▇▇▇▇▇▇ ▇. Same
President
By: /s/▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary