PARTICIPATION AGREEMENT
Among
XXXXXXX INSURANCE FUNDS,
XXXXXXX FUND DISTRIBUTORS, INC.
and
FIRST COVA LIFE INSURANCE COMPANY
THIS AGREEMENT is made and entered into as of this 1st day of May, 2000, by
and among FIRST COVA LIFE INSURANCE COMPANY, a New York corporation (hereinafter
the "Company"), on its own behalf and on behalf of each segregated asset account
of the Company set forth on Schedule A hereto as such schedule may be amended
from time to time (each such account hereinafter referred to as the "Account"
and collectively as the "Accounts"), and XXXXXXX INSURANCE FUNDS, a
Massachusetts Business Trust (hereinafter the "Investment Company"), and XXXXXXX
FUND DISTRIBUTORS, INC. a Washington corporation (hereinafter the
"Underwriter").
WHEREAS, Investment Company engages in business as a diversified open-end
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, the "Variable Insurance Products");
and
WHEREAS, the beneficial interest in the Investment Company is divided into
several series of shares, referred to individually as "Funds" and representing
the interest in a particular managed portfolio of securities and other assets;
and
WHEREAS, Investment Company is registered as an open-end management
investment company under the 1940 Act, and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Xxxxx Xxxxxxx Investment Management Company (the "Adviser") is
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
or annuity contracts or both under the 1933 Act, and offers or will offer for
sale certain variable life or annuity contracts or both which are or will be
exempt from registration; and
WHEREAS, each Account is a duly organized, validly existing, segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life or annuity
contracts; and
WHEREAS, the Company has registered or will register one of the Accounts as
a unit investment trust under the 1940 Act and other Accounts are exempt from
registration; and
WHEREAS, Investment Company has received "mixed and shared funding"
exemptive relief from the Securities and Exchange Commission permitting it to
offer its shares to life insurers in connection with variable annuity contracts
and variable life insurance policies offered by such insurers which may or may
not be affiliated with each other (SEC Release IC-16160, Dec. 7, 1987); and
WHEREAS, the Underwriter is registered as a broker/dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act") and is a member in good standing of the National Association of Securities
Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Funds on behalf of
each Account to fund certain of the aforesaid variable life or annuity contracts
or both, and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained and other good and valuable consideration the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I. SALE OF INVESTMENT COMPANY SHARES
1.1 The Underwriter agrees to sell to the Company those shares of
Investment Company which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Investment
Company or its designee of the order for the shares of the Investment Company.
For purposes of this Section 1.1, the Company shall be the designee of the
Investment Company for receipt of such orders from each Account and receipt by
such designee shall constitute receipt by the Investment Company; provided that
the Investment Company receives notice of such order by 8:00 a.m. Pacific 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 Investment Company
calculated its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.2 The Investment Company agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Investment Company calculates its net asset
value pursuant to rules of the Securities and Exchange Commission, and the
Investment Company shall use reasonable efforts to 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 Investment Company
(hereinafter the "Board") may refuse to sell shares of any Fund, or suspend or
terminate the offering of shares of any Fund if such action is required by law
or by regulatory authorities having jurisdiction or 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 Fund.
1.3 The Investment Company and the Underwriter agree that all shares of the
Investment Company will be sold only to Participating Insurance Companies which
have agreed to participate in the Investment Company to fund their Separate
Accounts and/or to Qualified Plans, all in accordance with the requirements of
Section 817(h)(4) of the Internal Revenue Code of 1986, as amended ("Code"), and
Treasury Regulation 1.817-5. No shares of any Investment Company will be sold to
the general public.
1.4 The Investment Company agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Investment Company held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Investment Company or its designee of the request
for redemption. For purposes of this Section 1.4, the Company shall be the
designee of the Investment Company for receipt of requests for redemption from
each Account, and receipt by such designee shall constitute receipt by the
Investment Company; provided that the Investment Company receives notice of such
request for redemption by 8:00 a.m. Pacific time on the next following Business
Day.
1.5 The Company agrees to purchase and redeem the shares of selected Funds
offered by the then-current prospectus of the Investment Company and in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable life and annuity contracts with the
form number(s) which are listed on Schedule B attached hereto and incorporated
herein by this reference, as such Schedule B may be amended from time to time
hereafter by mutual written agreement of all the parties hereto (the
"Contracts"), may be invested in the Investment Company, in such other
investment companies advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, in the Company's general account or in other
separate accounts of the Company managed by the Company or an affiliate,
provided that such amounts may also be invested in an investment company other
than the Investment Company if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Funds of the Investment
Company and (b) the Company gives the Investment Company and the Underwriter 45
days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts and (c) the Investment Company
or Underwriter consents to the use of such other investment company.
1.6 The Company shall pay for Investment Company shares on the next
Business Day after an order to purchase Investment Company shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire.
1.7 Issuance and transfer of the Investment Company's shares will be by
book entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Investment Company will be recorded in an
appropriate title for each Account.
1.8 The Investment Company shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income
dividends or capital gain distributions payable on the Investment Company's
shares. The Company hereby elects to receive all such income dividends and
capital gain distributions as are payable on the Fund shares in additional
shares of that Fund. The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash.
Investment Company shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.9 The Investment Company shall make the net asset value per share for
each Fund available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 3:30 P.M. Pacific time.
If the Investment Company provides the Company with materially incorrect share
net asset value information through no fault of the Company, the Company on
behalf of the Separate Accounts, shall be entitled to an adjustment to the
number of shares purchased or redeemed to reflect the correct share net asset
value. Any material error in the calculation of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company. If a Separate Account, due to such error, has received amounts
in excess of the amounts to which it is entitled, the Company, when requested by
the Investment Company, shall make adjustments to the Separate Account to
reflect the change in the values of the shares as reflected in the unit values
of the affected Variable Contract owners who still have values in the applicable
Fund. No adjustment for an error shall be taken in any Separate Account until
such time as the parties hereto have agreed to a resolution of the error, but
the parties shall use all reasonable efforts to reach such agreement within two
business days after the discovery of the error.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are registered
under the 1933 Act or are exempt from registration thereunder; 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.
The Company 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 each Account prior to any issuance or sale thereof as a
segregated asset account under applicable state insurance law and that each
Account is or will be registered as a unit investment trust in accordance with
the provisions of the 1940 Act to serve as a segregated investment account for
the Contracts or is exempt from registration thereunder.
2.2 The Investment Company represents and warrants that Investment Company
shares sold pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for issuance and sold in compliance with the laws of the State
of Washington and all applicable federal and state securities laws and that the
Investment Company is and shall remain registered under the 1940 Act. The
Investment Company shall amend the Registration Statement for its shares under
the 1933 and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Investment Company shall register and
qualify the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Investment Company or the
Underwriter.
2.3 The Investment Company represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company 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.
2.4 The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Investment Company and the Underwriter immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5 The Investment Company currently does not intend to make any payments
to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the
Investment Company undertakes to have a board of trustees, a majority of whom
are not interested persons of the Investment Company, formulate and approve any
plan under Rule 12b-1 to finance distribution expenses.
2.6 The Investment Company makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states.
2.7 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Investment
Company shares in accordance with any applicable state laws and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 1940 Act.
2.8 The Investment Company represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations for the
Investment Company in compliance in all material respects any applicable state
laws and federal securities laws.
2.10 The Investment Company and Underwriter represent and warrant that all
of their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money or securities of the Investment
Company are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Investment Company in an amount
not less than the minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Investment Company are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Investment Company in an amount not less than five million dollars ($5
million). The aforesaid Bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company. 2.12 The Company represents
and warrants that the contracts that are variable life insurance contracts will
be offered only through insurance agents who are registered representatives of
X.X. Xxxxxxx & Sons, Inc.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1 The Underwriter shall provide the Company with as many printed copies
of the Investment Company's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Investment Company shall provide camera-ready film or
computer diskettes containing the Investment Company's prospectus and Statement
of Additional Information and such other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
and/or Statement of Additional Information for the Investment Company is amended
during the year) to have the prospectus for the Contracts and the Investment
Company's prospectus printed together in one document, and to have the Statement
of Additional Information for the Investment Company and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Investment Company's prospectus and/or
its Statement of Additional Information in combination with other fund
companies' prospectuses approved pursuant to Section 1.5 and statements of
additional information. Except as provided in the following three sentences, all
expenses of printing and distributing Investment Company prospectuses and
Statements of Additional Information shall be the expense of the Company. For
Prospectuses and Statement of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Investment Company. If the Company chooses to receive camera-ready film or
computer diskettes in lieu of receiving printed copies of the Investment
Company's prospectus, the Investment Company will reimburse the Company in an
amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Investment
Company's per unit cost of typesetting and printing the Investment Company's
prospectus. The same procedures shall be followed with respect to the Investment
Company's Statement of Additional Information.
The Company agrees to provide the Investment Company or its designee with
such information as may be reasonably requested by the Investment Company to
assure that the Investment Company's expenses do not include the cost of
printing any prospectuses or Statements of Additional Information other than
those actually distributed to existing owners of the Contracts.
3.2 The Investment Company's prospectus shall state that the Statement of
Additional Information for the Investment Company is available from the
Underwriter or the Company (or in the Fund's discretion, the Prospectus shall
state that such Statement is available from the Investment Company).
3.3 The Investment Company, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other required
communications (except for prospectuses and Statement of Additional Information,
which are covered in Section 3.1) to shareholders in such quantity as the
Company shall reasonably require for distributing to Contract owners.
3.4 The Company will provide pass-through voting privileges to all Contract
owners so long as the SEC continues to interpret the Investment Company Act of
1940 as requiring pass-through voting privileges for Contract owners.
Accordingly, the Company, where applicable, will vote shares of the Fund held in
its separate accounts in a manner consistent with voting instructions timely
received from its Variable Insurance Product owners. The Company will be
responsible for assuring that each of its Separate Accounts that participates in
the Investment Company calculates voting privileges in a manner consistent with
other participating insurance companies. The Company will vote shares for which
it has not received timely voting instructions, as well as shares it owns, in
the same proportion as it votes those shares for which it has received voting
instructions.
3.5 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule
6e-3 is adopted, to provide exemptive relief from any provision of the
Investment Company Act of 1940 or the rules thereunder with respect to mixed and
shared funding on terms and conditions materially different from any exemptions
granted in the Investment Company's mixed and shared funding exemptive order,
then the Investment Company, and/or the Company, as appropriate, shall take such
steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such Rules are applicable.
3.6 The Investment Company will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Investment Company will
either provide for annual or special meetings or comply with the requirements of
Section 16(c) of the 1940 Act (although the Investment Company 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 Investment Company will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the SEC
may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Investment Company or its designee, each piece of sales literature or other
promotional material, or component thereof, in which the Investment Company, the
Adviser, or the Underwriter is named, at least fifteen Business Days prior to
its use. No such material shall be used if the Investment Company or its
designee object to such use within fifteen Business Days after receipt of such
material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Investment Company or concerning the Investment
Company in connection with the sale of the Contracts other than the information
or representations contained in the registration statement or prospectus for the
Investment Company shares, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports or proxy statements for
the Investment Company, or in sales literature or other promotional material
approved by the Investment Company or its designee or by the Underwriter, except
with the permission of the Investment Company or the Underwriter or the designee
of either.
4.3 The Investment Company, the Underwriter, or their designees shall
furnish, or shall cause to be furnished, to the Company or its designee, each
piece of sales literature or other promotional material, or component thereof,
in which the Company or its separate Accounts are named at least fifteen
Business Days prior to its use. No such material shall be used if the Company or
its designee objects to such use within fifteen Business Days after receipt of
such material.
4.4 The Investment Company and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or offering
materials for the Contracts, as such may be amended or supplemented from time to
time, or in published reports for each Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Investment Company will provide to the Company at least one
complete copy of all registration statements, prospectuses, Statements of
Additional Information, 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 Investment
Company or its shares, contemporaneously with the filing of such document with
the Securities and Exchange Commission or other regulatory authorities.
4.6 The Company will provide to the Investment Company at least one
complete copy of all registration statements, prospectuses, Statements of
Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities. In the case of
unregistered Contracts, in lieu of providing prospectuses and Statements of
Additional Information, the Company shall provide the Investment Company with
one complete copy of the offering materials for the Contracts.
4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, electronic media, or other public 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, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that Investment Company has received a "mixed
and shared funding" exemptive order from the SEC granting relief from various
provisions of the Investment Company Act of 1940 and the rules thereunder to the
extent necessary to permit Investment Company shares to be sold to and held by
Variable Insurance Products separate accounts of both affiliated and
unaffiliated participating insurance companies. The exemptive order requires the
Investment Company and each participating insurance company to comply with
conditions and undertakings substantially as provided in this Article V. The
Investment Company will not enter into a participation agreement with any other
participating insurance company unless it imposes the same conditions and
undertakings as are imposed on the Company.
5.2 The Investment Company's Board of Trustees ("Board") will monitor the
Investment Company for the existence of any material irreconcilable conflict
between the interests of Contract owners of all separate accounts investing in
the Investment Company. An irreconcilable material conflict may arise for a
variety of reasons, which may include: (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 or any similar action by insurance, tax or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of the Investment Company
are being managed; (e) a difference in voting instructions given by Contract
owners; and (f) a decision by a participating insurance company to disregard the
voting instructions of Contract owners.
5.3 The Company will report any potential or existing conflicts to the
Investment Company's Board. The Company will be responsible for assisting the
Board in carrying out its duties in this regard by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
The responsibility includes, but is not limited to, an obligation by the Company
to inform the Board whenever it has determined to disregard Contract owner
voting instructions. These responsibilities of the Company will be carried out
with a view only to the interests of the Contract owners.
5.4 If a majority of the Board or majority of its disinterested Trustees,
determines that a material irreconcilable conflict exists affecting the Company,
then the Company, at its expense and to the extent reasonably practicable (as
determined by a majority of the Board's disinterested Trustees), will take any
steps necessary to remedy or eliminate the irreconcilable material conflict,
including: (a) withdrawing the assets allocable to some or all of the separate
accounts from the Investment Company or any Fund thereof and reinvesting those
assets in a different investment medium, which may include another Fund of the
Investment Company, or another investment company; (b) submitting the question
as to 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., variable annuity or variable life insurance 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 (c) establishing a new registered management investment
company (or series thereof) or managed separate account. If a material
irreconcilable conflict arises because of the Company's decision to disregard
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, the Company may be required at the
election of the Investment Company, to withdraw its separate accounts'
investment in the Investment Company, and no charge or penalty will be imposed
as a result of such withdrawal. The responsibility to take such remedial action
shall be carried out with a view only to the interests of the Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict but in no event will
the Investment Company or any investment adviser of the Investment Company be
required to establish a new funding medium for any Contract. Further, the
Company shall not be required by this Section 5.4 to establish a new funding
medium for any Contract if any offer to do so has been declined by a vote of a
majority of Contract owners materially and adversely affected by the
irreconcilable material conflict.
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to the Company.
5.6. No less than annually, the Company shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out its obligations. Such reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
ARTICLE VI. FEES AND EXPENSES
6.1 The Investment Company and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Investment
Company or any Fund adopts and implements a plan pursuant to Rule 12b-1 to
finance distribution expenses, then the Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. No such payments shall be made directly
by the Investment Company. Currently, no such payments are contemplated.
6.2 All expenses incident to performance by the Investment Company under
this Agreement shall be paid by the Investment Company. The Investment Company
shall ensure that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Investment Company, in accordance with applicable state laws
prior to their sale. The Investment Company shall bear the expenses for the cost
of registration and qualification of the Investment Company's shares,
preparation and filing of the Investment Company's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Investment Company's shares.
6.3 The Company shall bear the expenses of distributing the Investment
Company's prospectus, proxy materials, and reports to owners of Contracts issued
by the Company.
ARTICLE VII. DIVERSIFICATION
7.1 The Investment Company will at all times invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Internal Revenue Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Investment Company
will at all times comply with Section 817(h) of the Code and Treasury Regulation
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.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Investment
Company and each member of the Board and officers and each person, if any, who
controls the Investment Company 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 the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or action in respect thereof)
or settlements are related to the sale or acquisition of the Investment
Company'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 any Registration Statement,
prospectus or other offering materials for 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 to the Company by or on behalf of the Investment
Company for use in any 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 Investment Company's 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 Investment Company not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Investment Company 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 Investment Company 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 to the Investment Company by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide the services and
furnish the materials under the terms of this Agreement; or
(v) arise out of a result from any material breach of any representation or
warranty made by the Company in this Agreement or arise out of or result
from any other material breach of this Agreement by the Company, as limited
by and in accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Investment Company, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company 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. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company'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
Company 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 the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Investment Company shares or the Contracts or the
operation of the Investment Company.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
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 Investment Company'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 sales literature of the Investment Company (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 to the Underwriter or Investment Company by or on
behalf of the Company for use in the Registration Statement or prospectus
for the Investment Company or in the sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Investment Company shares; or
(ii) arise out of or as a result of statements or representations (other than
statements or representations contained in any Registration Statement,
prospectus, other offering materials or sales literature for the Contracts
not supplied by the Underwriter or persons under its control) or wrongful
conduct of the Investment Company, Adviser, or Underwriter or persons under
their control, with respect to the sale or distribution of the Contracts or
Investment Company shares; or
(iii)arise out of any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, prospectus, other offering
materials 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 to the Company by
or on behalf of the Investment Company; or
(iv) arise as a result of any failure by the Investment Company 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 requirements specified in Article VII of
this Agreement); or
(v) arise out of or result from any material breach of any representation or
warranty made by the Underwriter in this Agreement or arise out of or
result from any other material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. 8.2(b). The Underwriter 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 gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company or each Account, whichever is applicable.
8.2(c). The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter 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. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter'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 Underwriter 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 Company agrees promptly to notify the Underwriter 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 any Account.
8.3 INDEMNIFICATION BY THE INVESTMENT COMPANY
8.3(a). The Investment Company agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Investment Company or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful misconduct of
the Board or any member thereof, are related to the operations of the Investment
Company and:
(i) arise as a result of any failure by the Investment Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VII of this Agreement); or
(ii) arise out of or result from any material breach of any representation or
warranty made by the Investment Company in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Investment Company, as limited by and in accordance with the provisions of
Sections 8.3(b) and 8.3(c) hereof.
8.3(b). The Investment Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's will misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Investment Company, the Underwriter
or any Account, which ever is applicable.
8.3(c). The Investment Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Investment Company
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Investment Company of any such claim shall not relieve the Investment Company
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.
In case any such action is brought against the Indemnified Parties, the
Investment Company will be entitled to participate, at its own expense, in the
defense thereof. The Investment Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Investment Company to such party of the Investment
Company'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
Investment Company 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). The Company and the Underwriter agree promptly to notify the
Investment Company of the commencement of any litigation or proceeding against
it or any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the operation
of any Account, or the sale or acquisition of shares of the Investment Company.
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 Washington.
9.2 To the extent they are applicable, 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 and the terms
hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION OF AGREEMENT
10.1 This Agreement shall continue in full force and effect until the first
to occur of:
(a) termination by any party for any reason by one hundred twenty (120)
days advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any fund based upon the Company's
determination that shares of such Fund are not reasonable available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any Fund in the event any of the Fund's
shares are not registered, issued, or sold materially in accordance with
applicable state or federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or to be issued by the
Company; or
(d) Termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any Fund in the event that such Fund ceases
to qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Investment Company may fail to so qualify; or
(e) termination by the Company by written notice to the Investment Company
and the Underwriter with respect to any Fund in the event that such Fund fails
to meet the diversification requirements specified in Article VII hereof or if
the Company reasonably believes that the Fund may fail to so qualify; or
(f) termination by either the Investment Company or the Underwriter by
written notice to the Company, if either one or both of the Investment Company
or the Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company or its affiliated companies has
suffered a material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(g) termination by the Company by written notice to the Investment Company
and the Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Investment Company or the Underwriter
has suffered a material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(h) the Company, upon the institution of formal proceedings against the
Investment Company by the SEC, the National Association of Securities Dealers,
Inc., or any other regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in the Company's reasonable judgment, materially
impair the Investment Company's ability to meet and perform the Investment
Company's obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by the Company with said termination to be
effective upon receipt of notice;
(i) termination by the Investment Company upon the institution of formal
proceedings against the Company by the SEC, the National Association of
Securities Dealers, Inc., or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in the Investment
Company's reasonable judgment, materially impair the Company's ability to meet
and perform its obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by the Investment Company with said termination to
be effective upon receipt of notice;
(j) termination by the Company, upon the Investment Company's or the
Underwriter's breach of any material provision of this Agreement, which breach
has not been cured to the satisfaction of the Company within ten days after
written notice of such breach is delivered to the Investment Company;
(k) termination by the Investment Company upon the Company's breach of any
material provision of this Agreement, which breach has not been cured to the
satisfaction of the Investment Company within ten days after written notice of
such breach is delivered to the Company.
10.2 Notwithstanding any termination of this Agreement, the Investment
Company and the Underwriter shall at the option of the Company, continue to make
available additional shares of the Investment Company 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 investment in the Investment Company,
redeem investments in the Investment Company, or invest in the Investment
Company upon the making of additional purchase payments under the Existing
Contracts.
10.3 The Company shall not redeem Investment Company shares attributable to
the Contracts (as opposed to Investment Company shares attributable to the
Company's assets held in any of the Accounts) except (i) as necessary to
implement Contract Owner initiated transactions, or (ii) as required by state or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption").
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a Fund
that was otherwise available under the Contracts without first giving the
Investment Company or the Underwriter ninety (90) days notice of its intention
to do so.
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 Investment Company:
000 X Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxx, Esq.
If to the Company:
Xxx Xxxxx Xxxx
Xxxxx 0000
Xxxxxxxx Xxxxxxx, XX 00000
Attention: General Counsel
If to the Underwriter:
000 X. Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxx, Esq.
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Investment Company must look solely to
the property of the Investment Company for the enforcement of any claims against
the Investment Company as neither the Board, officers, agents or shareholders
assume any personal liability for obligations entered into on behalf of the
Investment Company.
12.2 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 until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provisions 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.
12.6 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 California 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 life
insurance operations of the Company are being conducted in a manner consistent
with the California Variable Life Insurance Regulations and any other applicable
law or regulations.
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 Agreements or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9 The Master Trust Agreement dated 11 July 1996, as amended from time to
time, establishing the Investment Company, which is hereby referred to and a
copy of which is on file with the Secretary of The Commonwealth of
Massachusetts, provides that the name Xxxxxxx Insurance Funds means the Trustees
from time to time serving (as Trustees but not personally) under said Master
Trust Agreement. It is expressly acknowledged and agreed that the obligations of
the Investment Company hereunder shall not be binding upon any of the
shareholders, Trustees, officers, employees or agents of the Investment Company,
personally, but shall bind only the trust property of the Investment Company as
provided in its Master Trust Agreement. The execution and delivery of this
Agreement have been authorized by the Trustees of the Investment Company and
signed by the President of the Investment Company, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Investment Company as provided in its Master Trust Agreement.
12.10 In the event of the termination of this Agreement, the parties agree
that ARTICLE VIII and Section 12.6 shall remain in effect after termination.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name and on behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date first written above.
FIRST COVA LIFE
INSURANCE COMPANY
ATTEST: BY:
Secretary Title:
XXXXXXX INSURANCE FUNDS
ATTEST: BY:
Assistant Secretary Title:
XXXXXXX FUND DISTRIBUTORS, INC.
ATTEST: BY:
Assistant Secretary Title:
SCHEDULE A
ACCOUNTS
Name of Account Date of Resolution of Company's
Board which Established the Account
First Cova Variable Annuity Account One December 31, 1992
SCHEDULE B
CONTRACTS
1. Contract Form Numbers: CNY-672
2. Funds currently available to act as investment vehicles for certain of
the above-listed contracts:
Xxxxxxx Insurance Funds: Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Core Bond Fund
Real Estate Securities
