PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., INC.
THIS AGREEMENT, made and entered into as of this 8th day of July 1997 by and
among FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY (hereinafter
"FirstGWL&A"), a New York life insurance company, on its own behalf and on
behalf of its Separate Account Variable Annuity-1 Series Account (the
"Account"); INVESCO VARIABLE INVESTMENT FUNDS, INC., a corporation organized
under the laws of Maryland (hereinafter the "Fund"); INVESCO FUNDS GROUP, INC.
(hereinafter the "Adviser"), a Delaware corporation; and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO.,
INC., a California corporation (hereinafter "Schwab").
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and/or variable annuity
contracts collectively, the "Variable Insurance Products") to be offered by
insurance companies, including FirstGWL&A, which have entered into participation
agreements similar to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series of
shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (hereinafter the "SEC"), dated December 29, 1993, File No, 812-8590,
granting Participating Insurance Companies and variable annuity and variable
life insurance separate accounts exemptions from the provisions of sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the " 1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
life insurance companies that may or may not be affiliated with one another
(hereinafter the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and shares of the Portfolio(s) are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, FirstGWL&A has registered or will register certain variable annuity
contracts supported wholly or partially by the Account (the "Contracts") under
the 1933 Act and said Contracts are listed in Schedule A attached hereto and
incorporated herein by reference, as it may be amended from time to time by
mutual written agreement; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of FirstGWL&A on
January 15, 1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the Account as a unit
investment trust under the 1940 Act and has registered or will register the
securities deemed to be issued by the Account under the 1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in Schedule B
attached hereto and incorporated herein by reference, as it may be amended from
time to time by mutual written agreement (the "Designated Portfolio(s)"), on
behalf of the Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Account also intends to purchase shares in other open-end investment
companies or series thereof not affiliated with the Fund (the "Unaffiliated
Funds") on behalf of the Account to fund the Contracts; and
WHEREAS, Schwab will perform certain services for the Fund in
connection with the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, FirstGWL&A, Schwab,
the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1. 1. The Fund agrees to sell to FirstGWL&A those shares of the Designated
Portfolio(s) which the Account orders, executing such orders on each Business
Day at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the. Portfolios. For purposes of this
Section 1. 1, FirstGWL&A shall be the designee of the Fund for receipt of such
orders and receipt by such designee shall constitute receipt by the Fund,
provided that the Fund receives notice of any such order by 10:00 a.m. Eastern
time on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC.
1.2. The Fund agrees to make shares of the Designated Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&A and the
Account on those days on which the Fund calculates its Designated Portfolio(s)'
net asset value pursuant to rules of the SEC, and the Fund shall calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Directors of the Fund
(hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, 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 such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s) to any other
Participating Insurance Company or separate account unless an agreement
containing provisions substantially the same as Sections 2.1, 3.5, 3.6, 3.7, and
Article VII of this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on FirstGWL&A's request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such requests on
each Business Day at the net asset value next computed after receipt by the Fund
or its designee of the request for redemption. Requests for redemption
identified by FirstGWL&A, or its agent, as being in connection with surrenders,
annuitizations, or death benefits under the Contracts, upon prior written
notice, may be executed within seven (7) calendar days after receipt by the Fund
or its designee of the requests for redemption. This Section 1.4 may be amended,
in writing, by the parties consistent with the requirements of the 1940 Act and
interpretations thereof. For purposes of this Section 1.4,FirstGWL&A shall be
the designee of the Fund for receipt of requests for redemption and receipt by
such designee shall constitute receipt by the Fund, provided that the Fund
receives notice of any such request for redemption by 10:00 A.M. Eastern time on
the next following Business Day.
1.5. The Parties hereto acknowledge that the arrangement contemplated by this
Agreement is not exclusive; the Fund's shares may be sold to other Participating
Insurance Companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
1.6. FirstGWL&A shall pay for Fund shares by 3: 00 p.m. Eastern time on the next
Business Day after an order to purchase Fund shares is made in accordance with
the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire and/or by a credit for any shares redeemed the same day as
the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions of Fund shares
by 11: 00 a.m. Eastern Time on the next Business Day after a redemption order is
received in accordance with Section 1.4 hereof. Payment shall be in federal
funds transmitted by wire and/or a credit for any shares purchased the same day
as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to FirstGWL&A or the Account. Shares
ordered from the Fund will be recorded in an appropriate title for the Account
or the appropriate sub-account of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or capital gain
distributions payable on the Designated Portfolio(s)' shares. FirstGWL&A hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio.
FirstGWL&A reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
FirstGWL&A by the end of the next following Business Day of the number of shares
so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Designated
Portfolio available to FirstGWL&A on each Business Day as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:00 p.m.
Eastern time. In the event of an error in the computation of a Designated
Portfolio's net asset value per share ("NAV") or any dividend or capital gain
distribution (each, a "pricing error"), the Adviser or the Fund shall
immediately notify FirstGWL&A as soon as possible after discovery of the error.
Such notification may be verbal, but shall be confirmed promptly in writing in
accordance with Article XI of this Agreement. A pricing error shall be corrected
as follows: (a) if the pricing error results in a difference between the
erroneous NAV and the correct NAV of less than $0.01 per share, then no
corrective action need be taken; (b) if the pricing error results in a
difference between the erroneous NAV and the correct NAV equal to or greater
than $0.01 per share, but less than 1/2 of 1 % of the Designated Portfolio's NAV
at the time of the error, then the Adviser shall reimburse the Designated
Portfolio for any loss, after taking into consideration any positive effect of
such error; however, no adjustments to Contractowner accounts need be made; and
(c) if the pricing error results in a difference between the erroneous NAV and
the correct NAV equal to or greater than 1/2 of 1 % of the Designated
Portfolio's NAV at the time of the error, then the Adviser shall reimburse the
Designated Portfolio for any loss (without taking into consideration any
positive effect of such error) and shall reimburse FirstGWL&A for the costs of
adjustments made to correct Contractowner accounts in accordance with the
provisions of Schedule E. If an adjustment is necessary to correct a material
error which has caused Contractowners to receive less than the amount to which
they are entitled, the number of shares of the applicable sub-account of such
Contractowners will be adjusted and the amount of any underpayments shall be
credited by the Adviser to FirstGWL&A for crediting of such amounts to the
applicable Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a material error, FirstGWL&A or Schwab, as the case may be,
shall promptly remit to Adviser any overpayment that has not been paid to
Contractowners; however, Adviser acknowledges that Schwab and FirstGWL&A do not
intend to seek additional payments from any Contractowner who, because of a
pricing error, may have underpaid for units of interest credited to his/her
account. In no event shall Schwab or FirstGWL&A be liable to Contractowners for
any such adjustments or underpayment amounts. A pricing error within categories
(b) or (c) above shall be deemed to be "materially incorrect" or constitute a of
material error" for purposes of this Agreement.
The standards set forth in this Section 1. 10 are based on the Parties'
understanding of the views expressed by the staff of the Securities and Exchange
Commission ("SEC") as of the date of this Agreement. In the event the views of
the SEC staff are later modified or superseded by SEC or judicial
interpretation, the parties shall amend the foregoing provisions of this
Agreement to comport with the appropriate applicable standards, on terms
mutually satisfactory to all Parties.
ARTICLE II. Representations and Warranties
2.1. FirstGWL&A represents and warrants that the securities deemed to be issued
by the Account under the Contracts are or will be registered under the 1933 Act;
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the sale of the
Contracts shall comply in all material respects with state insurance suitability
requirements. FirstGWL&A further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that it has
legally and validly established the Account prior to any issuance or sale of
units thereof as a segregated asset account under Section 4240 of the New York
Insurance Law and has registered the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2. The Fund represents and warrants that Designated Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with all applicable federal
securities laws including without limitation the 1933 Act, the 1934 Act, and the
1940 Act and that the Fund is and shall remain registered under the ▇▇▇▇ ▇▇▇.
The Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule 12b-1 under
the 1940 Act and to impose an asset-based or other charge to finance
distribution expenses as permitted by applicable law and regulation. To the
extent that the Fund decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have its Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant to Rule
12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that it will make every effort to ensure
that the investment policies, fees and expenses of the Designated Portfolio(s)
are and shall at all times remain in compliance with the insurance and other
applicable laws of the State of New York and any other applicable state to the
extent required to perform this Agreement. The Fund further represents and
warrants that it will make every effort to ensure that Designated Portfolio(s)
shares will be sold in compliance with all state and federal securities laws and
all state insurance laws specifically designated by FirstGWL&A, in writing. The
Fund shall register and qualify the shares for sale in accordance with the laws
of the various states if and to the extent required by applicable law.
FirstGWL&A and the Fund will endeavor to mutually cooperate with respect to the
implementation of any modifications necessitated by any change in state
insurance laws, regulations or interpretations of the foregoing that affect the
Designated Portfolio(s) (a "Law Change"), and to keep each other informed of any
Law Change that becomes known to either party. In the event of a Law Change, the
Fund agrees that, except in those circumstances where the Fund has advised
FirstGWL&A that its Board of Directors has determined that implementation of a
particular Law Change is not in the best interest of all of the Fund's
shareholders with an explanation regarding why such action is lawful, any action
required by a Law Change will be taken.
2.5. The Fund represents and warrants that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall remain duly
registered under all applicable federal and state securities laws and that it
shall perform its obligations for the Fund in compliance in all material
respects with the laws of the State of New York and any applicable state and
federal securities laws.
2.7. The Fund and the Adviser represent and warrant that all of their respective
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the 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 minimal coverage required by
Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.8. Schwab represents and warrants that it has completed, obtained and
performed, in all material respects, all registrations, filings, approvals, and
authorizations, consents and examinations required by any government or
governmental authority as may be necessary to perform this Agreement. Schwab
does and will comply, in all material respects, with all applicable laws, rules
and regulations in the performance of its obligations under this Agreement.
2.9. The Fund will provide FirstGWL&A with as much advance notice as is
reasonably practicable of any material change affecting the Designated
Portfolio(s) (including, but not limited to, any material change in the
registration statement or prospectus affecting the Designated Portfolio(s)) and
any proxy solicitation affecting the Designated Portfolio(s) and consult with
FirstGWL&A in order to implement any such change in an orderly manner,
recognizing the expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the prospectus
for the Contracts. The Fund agrees to share equitably in expenses incurred by
FirstGWL&A as a result of actions taken by the Fund, consistent with the
allocation of expenses contained in Schedule E attached hereto and incorporated
herein by reference.
2.10. FirstGWL&A represents and warrants, for purposes other than
diversification under Section 817 of the Internal Revenue Code of 1986 as
amended ("the Code"), that the Contracts are currently treated as annuity
contracts under applicable provisions of the Code, and that it will make every
effort to maintain such treatment and that it will notify Schwab, the Fund and
the Adviser immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future. In addition, FirstGWL&A represents and warrants that the Account is
a "segregated asset account" and that interests in the Account are offered
exclusively through the purchase of or transfer into a "variable contract"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. FirstGWL&A will use every effort to continue to meet
such definitional requirements, and it will notify Schwab, the Fund, and the
Adviser immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. At least annually, the Adviser shall provide FirstGWL&A and Schwab with as
many copies of the Fund's current prospectus for the Designated Portfolio(s) as
FirstGWL&A and Schwab may reasonably request for marketing purposes (including
distribution to Contractowners with respect to new sales of a Contract). If
requested by FirstGWL&A in lieu thereof, the Adviser or Fund shall provide such
documentation (including a camera-ready copy and computer diskette of the
current prospectus for the Designated Portfolio(s)) and other assistance as is
reasonably necessary in order for FirstGWL&A once each year (or more frequently
if the prospectuses for the Designated Portfolio(s) are amended) to have the
prospectus for the Contracts and the Fund's prospectus for the Designated
Portfolio(s) printed together in one document. The Fund and Adviser agree that
the prospectuses (and semi-annual and annual reports) for the Designated
Portfolio(s) will describe only the Designated Portfolio(s) and will not name or
describe any other portfolios or series that may be in the Fund unless, in the
reasonable judgment of the Fund's counsel, such disclosure is required by law.
3.2. If applicable state or federal laws or regulations require that the
Statement of Additional Information ("SAI") for the Fund be distributed to all
Contractowners, then the Fund and/or the Adviser shall provide FirstGWL&A with
copies of the Fund's SAI or documentation thereof for the Designated
Portfolio(s) in such quantities, with expenses to be borne in accordance with
Schedule E hereof, as FirstGWL&A may reasonably require to permit timely
distribution thereof to Contractowners. The SAIs may name or describe portfolios
or series other than the Designated Portfolio(s) that may be in the Fund. The
Adviser and/or the Fund shall also provide SAIs to any Contractowner or
prospective owner who requests such SAI from the Fund (although it is
anticipated that such requests will be made to FirstGWL&A or Schwab).
3.3. The Fund and/or the Adviser shall provide FirstGWL&A and Schwab with copies
of the Fund's proxy material, reports to stockholders and other communications
to stockholders for the Designated Portfolio(s) in such quantity, with expenses
to be borne in accordance with Schedule E hereof, as FirstGWL&A may reasonably
require to permit timely distribution thereof to Contractowners.
3.4. It is understood and agreed that, except with respect to information
regarding FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&A nor Schwab are responsible for the content of the prospectus or SAI
for the Designated Portfolio(s). It is also understood and agreed that, except
with respect to information regarding the Fund, the Adviser or the Designated
Portfolio(s) provided in writing by the Fund or the Adviser, neither the Fund
nor Adviser are responsible for the content of the prospectus or SAI for the
Contracts.
3.5. If and to the extent required by law FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in accordance with instructions
received from Contractowners: and
(iii) vote Designated Portfolio shares for which no instructions have been
received in the same proportion as Designated Portfolio(s) shares for which
instructions have been received from Contractowners, so long as and to the
extent that the SEC continues to interpret the 1940 Act to require pass-through
voting privileges for variable contract owners. FirstGWL&A reserves the right to
vote Fund shares held in any segregated asset account in its own right, to the
extent permitted by law.
3.6. FirstGWL&A shall be responsible for assuring that each of its separate
accounts holding shares of a Designated Portfolio calculates voting privileges
as directed by the Fund and agreed to by FirstGWL&A and the Fund. The Fund
agrees to promptly notify FirstGWL&A of any changes of interpretations or
amendments of the Mixed and Shared Funding Exemptive Order.
3.7. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular the Fund will either provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not
to require such meetings) or, as the Fund currently intends, comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of directors or trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be furnished, to the
Fund or its designee, a copy of each piece of sales literature or other
promotional material that FirstGWL&A or Schwab, respectively, develops or
proposes to use and in which the Fund (or a Portfolio thereof), its Adviser or
one of its sub-advisers is named in connection with the Contracts, at least ten
(10) Business Days prior to its use. No such material shall be used if the Fund
objects to such use within five (5) Business Days after receipt of such
material.
4.2. FirstGWL&A and Schwab shall not give any information or make any
representations or statements on behalf of the Fund in connection with the sale
of the Contracts other than the information or representations contained in the
registration statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or by the Adviser, except with the
permission of the Fund or the Adviser.
4.3. The Fund shall furnish, or shall cause to be furnished, to FirstGWL&A and
Schwab, a copy of each piece of sales literature or other promotional material
in which FirstGWL&A and/or its separate account(s), or Schwab is named at least
ten (10) Business Days prior to its use. No such material shall be used if
FirstGWL&A or Schwab objects to such use within five (5) Business Days after
receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of FirstGWL&A or concerning FirstGWL&A, the Account,
or the Contracts other than the information or representations contained in a
registration statement or prospectus for the Contracts, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
reports for the Account, or in sales literature or other promotional material
approved by FirstGWL&A or its designee, except with the permission of
FirstGWL&A.
4.5. FirstGWL&A, the Fund and the Adviser shall not give any information or make
any representations on behalf of or concerning Schwab, or use ▇▇▇▇▇▇'▇ name
except with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy statements,
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 the Designated Portfolio(s), contemporaneously with the filing of such
document(s) with the SEC or NASD or other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least one complete copy of
all registration statements, prospectuses, SAIs, 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 the Contracts or the Account,
contemporaneously with the filing of such document(s) with the SEC, NASD, or
other regulatory authority.
4.8. For purposes of Articles IV and VIII, the phrase "sales literature and
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media; e.g.,
on-line networks such as the Internet or other electronic media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, SAIs, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the NASD rules, 1933
Act or the ▇▇▇▇ ▇▇▇.
4.9. At the request of any party to this Agreement, each other party will make
available to the other party's independent auditors and/or representative of the
appropriate regulatory agencies, all records, data and access to operating
procedures that may be reasonably requested in connection with compliance and
regulatory requirements related to this Agreement or any party's obligations
under this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to FirstGWL&A under this
Agreement, and FirstGWL&A shall pay no fee or other compensation to the Fund or
Adviser under this Agreement, although the parties hereto will bear certain
expenses in accordance with Schedule E, Articles III, V, and other provisions of
this Agreement.
5.2. All expenses incident to performance by the Fund and the Adviser under this
Agreement shall be paid by the appropriate party, as further provided in
Schedule E. The Fund shall see to it that all shares of the Designated
Portfolio(s) are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent required, in accordance with
applicable state laws prior to their sale.
5.3. The parties shall bear the expenses of routine annual distribution (mailing
costs) of the Fund's prospectus and distribution (mailing costs) of the Fund's
proxy materials and reports to owners of Contracts offered by FirstGWL&A, in
accordance with Schedule E. 15
5.4. The Fund and the Adviser acknowledge that a principal feature of the
Contracts is the Contractowner's ability to choose from a number of unaffiliated
mutual funds (and portfolios or series thereof), including the Designated
Portfolio(s) and the Unaffiliated Funds, and to transfer the Contract's cash
value between funds and portfolios. The Fund and the Adviser agree to cooperate
with FirstGWL&A and Schwab in facilitating the operation of the Account and the
Contracts as described in the prospectus for the Contracts, including but not
limited to cooperation in facilitating transfers within a Contract(s).
5.5. Schwab agrees to provide certain administrative services, specified in
Schedule C attached hereto and incorporated herein by reference, in connection
with the arrangements contemplated by this Agreement. The parties acknowledge
and agree that the services referred to in this Section 5.5 are recordkeeping,
shareholder communication, and other transaction facilitation and processing,
and related administrative services only and are not the services of an
underwriter or a principal underwriter of the Fund and that Schwab is not an
underwriter for the shares of the Designated Portfolio(s), within the meaning of
the 1933 Act or the ▇▇▇▇ ▇▇▇.
5.6. As compensation for the services specified in Schedule C hereto, the
Adviser agrees to pay Schwab a monthly Administrative Service Fee based on the
percentage per annum on Schedule C hereto applied to the average daily value of
the shares of the Designated Portfolio(s) held in the Account with respect to
Contracts sold by Schwab. This monthly Administrative Service Fee is due and
payable before the 15th (fifteenth) day following the last day of the month to
which it relates.
ARTICLE VI. Diversification and Qualification
6.1. The Fund and the Adviser represent and warrant that the Fund will at all
times sell its shares and invest its assets in such a manner as to ensure that
the Contracts will be treated as annuity contracts under the Code, and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund and Adviser represent and warrant that the Fund and each Designated
Portfolio thereof will at all times comply with Section 817(h) of the Code and
Treasury Regulation ss.1.817-5, as amended from time to time, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications or successor provisions to such Section or Regulations. The
Fund and the Adviser agree that shares of the Designated Portfolio(s) will be
sold only to Participating Insurance Companies and their separate accounts.
6.2. No shares of any Designated Portfolio of the Fund will be sold to the
general public.
6.3. The Fund and the Adviser represent and warrant that the Fund and each
Designated Portfolio is currently qualified as a Regulated Investment Company
under Subchapter M of the Code, and that each Designated Portfolio will maintain
such qualification (under Subchapter M or any successor or similar provisions)
as long as this Agreement is in effect.
6.4. The Fund or the Adviser will notify FirstGWL&A immediately upon having a
reasonable basis for believing that the Fund or any Designated Portfolio has
ceased to comply with the aforesaid Section 817(h) diversification or Subchapter
M qualification requirements or might not so comply in the future.
6.5. Without in any way limiting the effect of Sections 8.3 and 8.4 hereof and
without in any way limiting or restricting any other remedies available to
FirstGWL&A or Schwab, the Adviser will pay all costs associated with or arising
out of any failure, or any anticipated or reasonably foreseeable failure, of the
Fund or any Designated Portfolio to comply with Sections 6.1, 6.2, or 6.3
hereof, including all costs associated with reasonable and appropriate
corrections or responses to any such failure; such costs may include, but are
not limited to, the costs involved in creating, organizing, and registering a
new investment company as a funding medium for the Contracts and/or the costs of
obtaining whatever regulatory authorizations are required to substitute shares
of another investment company for those of the failed Portfolio (including but
not limited to an order pursuant to Section 26(b) of the 1940 Act); such costs
are to include, but are not limited to, fees and expenses of legal counsel and
other advisors to FirstGWL&A and any federal income taxes or tax penalties and
interest thereon (or "toll charges" or exactments or amounts paid in settlement)
incurred by FirstGWL&A with respect to itself or owners of its Contracts in
connection with any such failure.
6.6. The Fund at the Fund's expense shall provide FirstGWL&A or its designee
with reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the times
provided for and substantially in the form attached hereto as Schedule D and
incorporated herein by reference; provided, however, that providing such reports
does not relieve the Fund of its responsibility for such compliance or of its
liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service ("IRS") asserts in
writing in connection with any governmental audit or review of FirstGWL&A or, to
FirstGWL&A's knowledge, or any Contractowner that any Designated Portfolio has
failed to comply with the diversification requirements of Section 817(h) of the
Code or FirstGWL&A otherwise becomes aware of any facts that could give rise to
any claim against the Fund or the Adviser as a result of such a failure or
alleged failure:
(a) FirstGWL&A shall promptly notify the Fund and the Adviser of such assertion
or potential claim;
(b) FirstGWL&A shall consult with the Fund and the Adviser as to how to minimize
any liability that may arise as a result of such failure or alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any liability of the Fund
and the Adviser resulting from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations, Section 1.817-5(a)(2), to the
commissioner of the IRS that such failure was inadvertent,
(d) any written materials to be submitted by FirstGWL&A to the IRS, any
Contractowner or any other claimant in connection with any of the foregoing
proceedings or contests (including, without limitation, any such materials to be
submitted to the IRS pursuant to Treasury Regulations, Section 1.817-5(a)(2))
shall be provided by FirstGWL&A to the Fund and the Adviser (together with any
supporting information or analysis) within at least two (2) business days prior
to submission;
(e) FirstGWL&A shall provide the Fund and the Adviser with such cooperation as
the Fund and the Adviser shall reasonably request (including, without
limitation, by permitting the Fund and the Adviser to review the relevant books
and records of FirstGWL&A) in order to facilitate review by the Fund and the
Adviser of any written submissions provided to it or its assessment of the
validity or amount of any claim against it arising from such failure or alleged
failure;
(f) FirstGWL&A shall not with respect to any claim of the IRS or any
Contractowner that would give rise to a claim against the Fund and the Adviser
(i) compromise or settle any claim, (ii) accept any adjustment on audit, or
(iii) forego any allowable administrative or judicial appeals, without the
express written consent of the Fund and the Adviser, which shall not be
unreasonably withheld; provided that, FirstGWL&A shall not be required to appeal
any adverse judicial decision unless the Fund and the Adviser shall have
provided an opinion of independent counsel to the effect that a reasonable basis
exists for taking such appeal; and further provided that the Fund and the
Adviser shall bear the costs and expenses, including reasonable attorney's fees,
incurred by FirstGWL&A in pursuing such judicial appeals.
ARTICLE VII. Potential Conflicts and Compliance With Mixed and
Shared Funding Exemptive Order
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts 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 interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners or by
contract owners of different Participating Insurance Companies; or (f) a
decision by a Participating Insurance Company to disregard the voting
instructions of contract owners. The Board shall promptly inform FirstGWL&A if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing conflicts of which it is
aware to the Board. FirstGWL&A will assist the Board in carrying out its
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by FirstGWL&A to inform the Board whenever contract owner voting instructions
are to be disregarded. Such responsibilities shall be carried out by FirstGWL&A
with a view only to the interests of its Contractowners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Fund, the Adviser or any
sub-adviser to any of the Designated Portfolios (the "Independent Directors"),
that a material irreconcilable conflict exists, FirstGWL&A and other
Participating Insurance Companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the Independent
Directors), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
Designated Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
FirstGWL&A to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, FirstGWL&A may
be required, at the Fund's election, to withdraw the Account's investment in the
Fund and terminate this Agreement; 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 Independent
Directors. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the end of that six month period the Adviser and the Fund
shall continue to accept and implement orders by FirstGWL&A for the purchase
(and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to FirstGWL&A conflicts with the
majority of other state regulators, then FirstGWL&A will withdraw the Account's
investment in the Fund and terminate this Agreement within six months after the
Board informs FirstGWL&A 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 members of the Board. Until the end of the foregoing six month
period, the Fund shall continue to accept and implement orders by FirstGWL&A for
the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the Independent Directors shall determine whether any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the Fund be
required to establish a new funding medium for the Contracts. FirstGWL&A shall
not be required by Section 7.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
Contractowners affected by the irreconcilable material conflict. In the event
that the Board determines that any proposed action does not adequately remedy
any irreconcilable material conflict, then FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs FirstGWL&A in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
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 3.5, 3.6, 3.7, 7.1, 7.2, 7.3, 7.4, and
7.5 of this 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.
ARTICLE VIII. Indemnification 8.1. Indemnification By FirstGWL&A
8. 1 (a). FirstGWL&A agrees to indemnify and hold harmless the Fund and the
Adviser and each of their officers and directors or trustees and each person, if
any, who controls the Fund or the Adviser 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, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of FirstGWL&A) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, expenses, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus or SAI covering the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to FirstGWL&A or
Schwab by or on behalf of the Adviser or Fund for use in the registration
statement or prospectus for the Contracts or in the Contracts or 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 (other than
statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by FirstGWL&A or persons
under its control) or wrongful conduct of FirstGWL&A or persons under its
control, 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 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 FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&A to provide the services and
furnish the materials 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 FirstGWL&A in this Agreement or arise out of or result from any
other material breach of this Agreement by FirstGWL&A, including without
limitation Section 2.10 and Section 6.7 hereof,
as limited by and in accordance with the provisions of Sections
8.1(b) and 8.1(c) hereof.
8. 1 (b). FirstGWL&A shall not be liable under this indemnification provision
with respect to any losses, claims, expenses, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or 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
any of the Indemnified Parties.
8. 1 (c). FirstGWL&A 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 FirstGWL&A 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 FirstGWL&A of any such claim shall not
relieve FirstGWL&A from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision, except to the extent that FirstGWL&A has been
prejudiced by such failure to give notice. In case any such action is brought
against the Indemnified Parties, FirstGWL&A shall be entitled to participate, at
its own expense, in the defense of such action. FirstGWL&A also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from FirstGWL&A to such party of FirstGWL&A's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and FirstGWL&A 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.
8. 1 (d). The Indemnified Parties will promptly notify FirstGWL&A of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by Schwab
8.2(a). Schwab agrees to indemnify and hold harmless the Fund and the Adviser
and each of their officers and directors or trustees and each person, if any,
who controls the Fund or Adviser 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, expenses, damages and liabilities (including
amounts paid in settlement with the written consent of Schwab) or litigation
(including reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of ▇▇▇▇▇▇'▇ dissemination of information regarding the Fund that
is both (A) materially incorrect and (B) that was neither contained in the
Fund's registration statement or sales literature nor other promotional material
of the Fund prepared by the Fund or provided in writing to Schwab, or approved
in writing, by or on behalf of the Fund or the Adviser; or
(ii) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in sales literature or other
promotional material prepared by Schwab for the Contracts or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
in writing to FirstGWL&A or Schwab by or on behalf of the Adviser or the Fund or
to Schwab by FirstGWL&A for use in the registration statement or prospectus for
the Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts;
or
(iii) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by Schwab or persons
under its control) or wrongful conduct of Schwab or persons under its control,
with respect to the sale or distribution of the Contracts; or
(iv) arise as a result of any failure by Schwab to provide the services and
furnish the materials 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 Schwab in this Agreement or arise out of or result from any
other material breach of this Agreement by Schwab;
as limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). Schwab shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or 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 any of the
Indemnified Parties.
8.2(c). Schwab 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 Schwab 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 Schwab of any such claim shall not relieve Schwab
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision,
except to the extent that Schwab has been prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified Parties,
Schwab shall be entitled to participate, at its own expense, in the defense of
such action. Schwab also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from Schwab
to such party of ▇▇▇▇▇▇'▇ election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Schwab 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.
8.2(d). The Indemnified Parties will promptly notify Schwab of the commencement
of any litigation or proceedings against them in connection with the issuance or
sale of the Fund Shares or the Contracts or the operation of the Fund.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless FirstGWL&A and Schwab
and each of their directors and officers and each person, if any, who controls
FirstGWL&A or Schwab within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Adviser) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts and:
(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 SAI or sales literature or other promotional material of the Fund
prepared by the Fund or the Adviser (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to the Adviser or
the Fund by or on behalf of FirstGWL&A or Schwab for use in the registration
statement or prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
the Fund shares; or (ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
registration statement, prospectus, SAI or sales literature or other promotional
material for the Contracts not supplied by the Adviser or persons under its
control) or wrongful conduct of the Fund or the Adviser or persons under their
control, 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, SAI, 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 statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished in writing to FirstGWL&A or Schwab by or on behalf of the
Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund or the Adviser to provide the
services and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of any representation and/or
warranty made by the Fund or the Adviser in this Agreement or arise out of or
result from any other material breach of this Agreement by the Adviser or the
Fund; or
(vi) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share or dividend or
capital gain distribution rate; as limited by and in accordance with the
provisions of Sections 8.3(b) and 8.3(c) hereof. This indemnification is in
addition to and apart from the responsibilities and obligations of the Adviser
specified in Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification provision
with respect to any losses, claims, expenses, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or 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
any of the Indemnified Parties.
8.3(c). The Adviser 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 the Adviser 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 Adviser of any such claim shall not
relieve the Adviser from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision, except to the extent that the Adviser has been
prejudiced by such failure to give notice. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser 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.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.4. Indemnification By the Fund
8.4(a). The Fund agrees to indemnify and hold harmless FirstGWL&A and Schwab and
each of their directors and officers and each person, if any, who controls
FirstGWL&A or Schwab within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.4)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including reasonable legal and other expenses) to which the Indemnified Parties
may be required to pay or become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, expenses, damages,
liabilities or expenses (or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services and
furnish the materials under the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified in Article VI of
this Agreement); or
(ii) 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;
8.4(b). The Fund shall not be liable under this indemnification provision with
respect to any losses, claims, expenses, damages, liabilities or litigation to
which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or 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
any of the Indemnified Parties.
8.4(c). The Fund 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 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 shall not relieve it
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision,
except to the extent that the Fund has been prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund shall also 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 shall 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.
8.4(d). FirstGWL&A and Schwab each agree promptly to notify the Fund of the
commencement of any litigation or proceeding against itself or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York, without regard
to the New York Conflict of Laws provisions.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Mixed and
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with respect to some or
all Portfolios, upon six (6) months advance written notice delivered to the
other parties; provided, however, that such notice shall not be given earlier
than six (6) months following the date of this Agreement; or
(b) at the option of FirstGWL&A or Schwab by written notice to the other parties
with respect to any Portfolio based upon FirstGWL&A's or ▇▇▇▇▇▇'▇ reasonable
determination that shares of such Portfolio are not reasonably available to meet
the requirements of the Contracts; or
(c) at the option of FirstGWL&A or Schwab by written notice to the other parties
with respect to any Portfolio in the event any of the Portfolio'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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal administrative
proceedings are instituted against FirstGWL&A or Schwab by the NASD, the SEC,
the Insurance Commissioner or like official of any state or any other regulatory
body regarding FirstGWL&A's or ▇▇▇▇▇▇'▇ duties under this Agreement or related
to the sale of the Contracts, the operation of any Account, or the purchase of
the Fund shares, if, in each case, the Fund reasonably determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of FirstGWL&A or Schwab to
perform its obligations under this Agreement or related to the Contracts; or
(e) at the option of FirstGWL&A or Schwab in the event that formal
administrative proceedings are instituted against the Fund or the Adviser by the
NASD, the SEC, or any state securities or insurance department or any other
regulatory body, if Schwab or FirstGWL&A reasonably 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 or the Adviser to
perform their obligations under this Agreement; or
(f) at the option of FirstGWL&A by written notice to the Fund with respect to
any Portfolio if FirstGWL&A reasonably believes that the Portfolio will fail to
meet the Section 817(h) diversification requirements or Subchapter M
qualifications specified in Article VI hereof; or
(g) at the option of either the Fund or the Adviser, if (i) the Fund or Adviser,
respectively, shall determine, in their sole judgment reasonably exercised in
good faith, that either FirstGWL&A or Schwab has suffered a material adverse
change in their business or financial condition or is the subject of material
adverse publicity and that material adverse change or publicity will have a
material adverse impact on FirstGWL&A's or ▇▇▇▇▇▇'▇ ability to perform its
obligations under this Agreement, (ii) the Fund or the Adviser notifies
FirstGWL&A or Schwab, as appropriate, of that determination and its intent to
terminate this Agreement, and (iii) after considering the actions taken by
FirstGWL&A or Schwab and any other changes in circumstances since the giving of
such a notice, the determination of the Fund or the Adviser shall continue to
apply on the sixtieth (60th) day following the giving of that notice, which
sixtieth day shall be the effective date of termination; or
(h) at the option of either FirstGWL&A or Schwab, if (i) FirstGWL&A or Schwab,
respectively, shall determine, in its sole judgment reasonably exercised in good
faith, that either the Fund or the Adviser has suffered a material adverse
change in its business or financial condition or is the subject of material
adverse publicity and that material adverse change or publicity will have a
material adverse impact on the Fund's or the Adviser's ability to perform its
obligations under this Agreement, (ii) FirstGWL&A or Schwab notifies the Fund or
the Adviser, as appropriate, of that determination and its intent to terminate
this Agreement, and (iii) after considering the actions taken by the Fund or the
Adviser and any other changes in circumstances since the giving of such a
notice, the determination of FirstGWL&A or Schwab shall continue to apply on the
sixtieth (60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(i) at the option of FirstGWL&A in the event that formal administrative
proceedings are instituted against Schwab by the NASD, the Securities and
Exchange Commission, or any state securities or insurance department or any
other regulatory body regarding ▇▇▇▇▇▇'▇ duties under this Agreement or related
to the sale of the Fund's shares or the Contracts, the operation of any Account,
or the purchase of the Fund shares, provided, however. that FirstGWL&A
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of Schwab to perform its obligations related to the Contracts; or at the option
of Schwab in the event that formal administrative proceedings are instituted
against FirstGWL&A by the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other regulatory body regarding
FirstGWL&A's duties under this Agreement or related to the sale of the Fund's
shares or the Contracts, the operation of any Account, or the purchase of the
Fund shares, provided, however, that Schwab determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of FirstGWL&A to perform its
obligations related to the Contracts; or
(k) at the option of any non-defaulting party hereto in the event of a material
breach of this Agreement by any party hereto (the "defaulting party") other than
as described in 10.1(a)-(j); provided, that the non-defaulting party gives
written notice thereof to the defaulting party, with copies of such notice to
all other non-defaulting parties, and if such breach shall not have been
remedied within thirty (30) days after such written notice is given, then the
nondefaulting party giving such written notice may terminate this Agreement by
giving thirty (30) days written notice of termination to the defaulting party.
10.2. Notice Requirement. No termination of this Agreement shall he effective
unless and until the party terminating this Agreement gives prior written notice
to all other parties of its intent to terminate, which notice shall set forth
the basis for the termination Furthermore,
(a) in the event any termination is based upon the provisions of Article VII, or
the provisions of Section 10.1(a), 10. 1(g) or 10. 1(h) of this Agreement, the
prior written notice shall be given in advance of the effective date of
termination as required by those provisions unless such notice period is
shortened by mutual written agreement of the parties;
(b) in the event any termination is based upon the provisions of Section
10.1(d), 10.1(e), 10.1(i) or 10.10) of this Agreement, the prior written notice
shall be given at least sixty (60) days before the effective date of termination
and
(c) in the event any termination is based upon the provisions of Section
10.1(b), 10. 1 (c) or 10. 1 (f), the prior written notice shall be given in
advance of the effective date of termination, which date shall be determined by
the party sending the notice.
10.3. Effect of Termination. Notwithstanding any termination of this Agreement,
other than as a result of a failure by either the Fund or FirstGWL&A to meet
Section 817(h) of the Code diversification requirements, the Fund and the
Adviser shall, at the option of FirstGWL&A or Schwab, continue to make available
additional shares of the Designated Portfolios pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Designated
Portfolios, redeem investments in the Designated Portfolios and/or invest in the
Designated Portfolios upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.3 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of this Agreement,
each party's obligations under Article VIII to indemnify other parties shall
survive and not be affected by any termination of this Agreement. In addition,
with respect to Existing Contracts, all provisions of this Agreement shall also
survive and not be affected by any termination of this Agreement.
10.5. Survival of Agreement. A termination by Schwab shall terminate this
Agreement only as to Schwab, and this Agreement shall remain in effect as to the
other parties; provided, however, that in the event of a termination by Schwab
the other parties shall have the option to terminate this Agreement upon 60
(sixty) days notice, rather than the six (6) months specified in Section
10.1(a).
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Fund:
INVESCO Variable Investment Funds, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Assistant Vice President, Savings Products
If to the Adviser:
INVESCO Funds Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
If to Schwab:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party 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 affected party until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party has designated as proprietary.
12.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
12.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of FirstGWL&A are being conducted in a manner consistent with the New
York Variable Annuity Regulations and any other applicable law or regulations.
12.6. Any controversy or claim arising out of or relating to this Agreement, or
breach thereof, may be settled by arbitration in a forum jointly selected by the
relevant parties (but if applicable law requires some other forum, then such
other forum) in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, or other arbitration rules as mutually agreed upon by
the relevant parties, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may not be
assigned by any party without the prior written consent of all parties hereto.
12.9. Schwab and FirstGWL&A are hereby expressly put on notice of the limitation
of liability as set forth in the Articles of Incorporation of the Fund and the
Adviser and agree that the obligations assumed by the Fund and the Adviser
pursuant to this Agreement shall be limited in any case to the Fund and Adviser
and their respective assets and neither Schwab nor FirstGWL&A shall seek
satisfaction of any such obligation from the shareholders of the Fund or the
Adviser, the Trustees, officers, employees or agents of the Fund or Adviser, or
any of them, except to the extent permitted under this Agreement.
12.10. The Fund and the Adviser agree that the obligations assumed by FirstGWL&A
and Schwab pursuant to this Agreement shall be limited in any case to FirstGWL&A
and Schwab and their respective assets and neither the Fund nor the Adviser
shall seek satisfaction of any such obligation from the shareholders of the
FirstGWL&A or Schwab, the directors, officers, employees or agents of the
FirstGWL&A or Schwab, or any of them, except to the extent permitted under this
Agreement.
12.11. No provision of this Agreement may be deemed or construed to modify or
supersede any contractual rights, duties, or indemnifications, as between the
Adviser and the Fund.
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 date specified below.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By: /s/
Title: V.P., Marketing and Product Development
Date: 4/2/97
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: Treasurer
Date: 3/10/97
INVESCO FUNDS GROUP, INC.:
By its authorized officer,
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: Senior Vice President and Treasurer
Date: 3/10/97
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., INC.
By its authorized officer,
By: /s/▇▇▇▇ ▇▇▇▇▇▇
------------------------------
VP Annuities Ins.
Date: 3/31/97
Schwab Variable Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
SCHEDULE B
Designated Portfolios:
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
SCHEDULE C
Administrative Services
To be performed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
▇. ▇▇▇▇▇▇ will provide the properly registered and licensed personnel and
systems needed for all customer servicing and support - for both fund and
annuity information and questions - including:
respond to Contractowner inquiries
delivery of prospectus - both fund and annuity;
entry of initial and subsequent orders;
transfer of cash to insurance company and/or funds;
explanations of fund objectives and characteristics;
entry of transfers between funds;
fund balance and allocation inquiries;
mail fund prospectus.
B. For the services, Schwab shall receive a fee of 0.25% per annum applied to
the average daily value of the shares of the fund held by ▇▇▇▇▇▇'▇ customers,
payable by the Adviser directly to Schwab, such payments being due and payable
within 15 (fifteen) days after the last day of the month to which such payment
relates.
C. The Fund will calculate and Schwab will verify with FirstGWL&A the asset
balance for each day on which the fee is to be paid pursuant to this Agreement
with respect to each Designated Portfolio.
▇. ▇▇▇▇▇▇ will communicate all purchase, withdrawal, and exchange orders it
receives from its customers to FirstGWL&A who will retransmit them to each fund.
SCHEDULE D
Reports per Section 6.6
With regard to the reports relating to the quarterly testing of compliance
with the requirements of Section 817(h) and Subchapter M under the Internal
Revenue Code (the "Code") and the regulations thereunder, the Fund shall provide
within twenty (20) Business Days of the close of the calendar quarter a report
to FirstGWL&A in the Form D1 attached hereto and incorporated herein by
reference, regarding the status under such sections of the Code of the
Designated Portfolio(s), and if necessary, identification of any remedial action
to be taken to remedy non-compliance.
With regard to the reports relating to the year-end testing of compliance
with the requirements of Subchapter M of the Code, referred to hereinafter as
"RIC status," the Fund will provide the reports on the following basis: (i) the
last quarter's quarterly reports can be supplied within the 20-day period, and
(ii) a year-end report will be provided 45 days after the end of the calendar
year. However, if a problem with regard to RIC status, as defined below, is
identified in the third quarter report, on a weekly basis, starting the first
week of December, additional interim reports will be provided specially
addressing the problems identified in the third quarter report. If any interim
report memorializes the cure of the problem, subsequent interim reports will not
be required.
A problem with regard to RIC status is defined as any violation of the
following standards, as referenced to the applicable sections of the Code:
(a)Less than ninety percent of gross income is derived from sources
of income specified in Section 851(b)(2);
(b) Thirty percent or greater gross income is derived from the
sale or disposition of assets specified in Section 851(b)(3);
(c) Less than fifty percent of the value of total assets consists of
assets specified in Section 851(b)(4)(A); and
(d) No more than twenty-five percent of the value of total assets is
invested in the securities of one issuer, as that requirement is set
forth in Section 851(b)(4)(B).
FORM D1
CERTIFICATE OF COMPLIANCE
I,________________, a duly authorized officer, director or agent of
________________ Fund hereby swear and affirm that _________________ Fund is in
compliance with all requirements of Section 817(h) and Subchapter M of the
Internal Revenue Code (the "Code") and the regulations thereunder as required in
the Fund Participation Agreement among First Great-West Life & Annuity Insurance
Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc. and other than the exceptions discussed
below:
Exceptions Remedial Action
---------------------------------- -----------------------------
---------------------------------- -----------------------------
---------------------------------- -----------------------------
---------------------------------- -----------------------------
If no exception to report, please indicate "None."
Signed this ____ day of ______, _________
----------------------------------------------------
(Signature)
By: -----------------------------------------------
(Type or Print Name and Title/Position)
