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EXHIBIT 8 (a)
BUY-SELL AGREEMENT
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BUY-SELL AGREEMENT
THIS AGREEMENT is made on this ____th day of _____________,
1993 by and among the Canada Life Insurance Company of New York, a New York
corporation ("CLNY") on its own behalf and on behalf of its Variable Annuity
Account 2 (the "Separate Account"), Xxxxxxxx Portfolios, Inc. (formerly
Xxxxxxxx Mutual Benefit Portfolios, Inc.) (the "Fund") and J. & X. Xxxxxxxx &
Co. Incorporated ("JWSI").
WHEREAS, CLNY is a stock life insurance company incorporated
under the laws of the State of New York; and
WHEREAS, the Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940 ( "1940 Act") and it
is intended that certain variable annuity contracts (the "Contracts"), a form
of which is included herein as Exhibit A, shall be funded through the Separate
Account; and
WHEREAS, the Fund is registered as an open-end diversified
management investment company under the 1940 Act and is currently authorized to
issue six separate series of shares (the "Portfolios") and to create additional
Portfolios in the future; and
WHEREAS, JWSI is registered as an investment adviser under the
Investment Advisers Act of 1940 and is the Fund's investment adviser pursuant
to the terms of agreements between JWSI and the Fund dated December 29, 1988
and May 1, 1993 ("Management Agreement"); and
WHEREAS, it is the intention of the parties to this Agreement
that the Fund will serve as the sole funding vehicle for the Separate Account
under the variable accumulation options afforded by the Contracts;
NOW, THEREFORE, in consideration of the covenants, mutual
promises herein contained and other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, and intending
to be legally bound hereby, the parties agree as follows:
1. FUND SHARES.
A. CLNY agrees that the Fund will be the sole funding vehicle for
the Separate Account. The Fund agrees that, except for shares sold to JWSI at
the Fund's initial capitalization, and to The Mutual Benefit Life Insurance
Company through its Mutual Benefit Variable Contract Account 9 ("VCA-9) on
behalf of existing Mutual Benefit Life contract owners, the Fund will sell its
shares only to the Separate Account or to other separate accounts
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requests for redemption from Policy owners and receipt by such designee by 4:00
p.m. New York time on a Business Day shall constitute receipt by the Fund,
provided that the Fund receives notice of such request for redemption by 9:30
a.m. New York time on the next following Business Day. The Fund ordinarily
shall make payment to CLNY for shares on the next business day after the Fund
receives notice from CLNY. Payment shall be in federal funds transmitted by
wire or by a debit against any shares purchased.
E. Transfer of Portfolio shares will be by book entry. No stock
certificates will be issued to the Separate Account unless the Separate Account
so requests. Shares of each Portfolio will be recorded in an appropriate title
for the corresponding Sub-account on the books of CLNY. If, however, state law
requires transfer other than by book entry, then the Fund agrees to provide the
required form of transfer.
F. The Fund shall make the net asset value per share for each
Portfolio available to CLNY on a daily basis as soon as reasonably practicable
after the net asset value per share is calculated. The Fund will instruct its
recordkeeper to use all reasonable efforts to make such net asset value per
share available by 5:30 p.m. New York time, but in no event later than 6 p.m.
New York time. Notwithstanding the foregoing, the parties to this Agreement
recognize that the Fund is ultimately responsible for the pricing of its own
shares.
G. The Fund shall furnish notice on the ex-dividend date to CLNY
of any dividend or distribution payable on any shares underlying Sub-accounts.
All of such dividends and distributions as are payable on shares of a Portfolio
recorded in the title for the corresponding Sub-account shall be automatically
reinvested in additional shares of that Portfolio at the net asset value
computed on its dividend or distribution payable date. The Fund shall notify
CLNY of the number of shares so issued.
2. REPRESENTATIONS AND WARRANTIES OF THE FUND. The Fund
and JWSI hereby represent and warrant that:
A. The Fund is duly incorporated and in good standing under the
laws of the State of Maryland;
B. The Fund is duly registered under the 1940 Act as an open-end
diversified management investment company;
C. All actions necessary to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereunder have
been taken or will be taken prior to any sale hereunder;
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D. A Registration Statement on Form N-1A relating to the Fund,
including a Prospectus and statement of additional information, has been
prepared and filed with the SEC in accordance with applicable provisions of the
Securities Act of 1933 ("1933 Act") and the 1940 Act, and is effective;
E. The Registration Statement does not include any untrue
statements of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
F. The Fund will use its best efforts to ensure that the
Registration Statement continues to conform in all material respects to the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the SEC thereunder and its best efforts to ensure that at no time will the
Registration Statement include an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading.
G. The Fund will promptly furnish CLNY with copies of the Fund's
Registration Statement, all amendments and exhibits thereto, each definitive
Prospectus, each Prospectus supplement, and each periodic report under the 1940
Act, as filed with the SEC;
H. The Fund will promptly advise CLNY of any proposed amendment
to the Registration Statement or supplement to the Prospectus and shall provide
CLNY with a copy of such proposed amendment or supplement in advance of the
filing with the SEC of such amendment or supplement to permit CLNY's review of
such amendment or supplement, unless legal or regulatory requirements would
make such review impractical;
I. The Fund and JWSI represent that each Portfolio except for the
Xxxxxxxx Xxxxxxxxx Global Portfolio, which expects to be, is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended ("Code"), that they will use reasonable effort
to maintain such qualification (under Subchapter M or any successor or similar
provision), and that they will notify CLNY immediately upon having a reasonable
basis for believing that a Portfolio has ceased to so qualify or that it might
not so qualify in the future, and that it provide to CLNY not later than 14
days following the end of each calendar quarter, a report showing each
Portfolio's continued qualification;
J. The Fund and JWSI represent that each Portfolio except for the
Xxxxxxxx Xxxxxxxxx Global Portfolio, which expects to be, is currently in
compliance with the provisions of Section 817(h) of the Code and regulations
thereunder concerning diversification
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of the assets of the Portfolios of the Fund, and that they will use reasonable
effort to maintain such compliance (under Section 817(h) or any successor or
similar provision), provided that CLNY will promptly advise the Fund of any
changes in such provisions after the date of this Agreement, and that it will
provide to CLNY, not later than 14 days following the end of each calendar
quarter, a report showing each Portfolio's continued compliance;
K. The Fund will as directed in writing by CLNY make every effort
to comply with the requirements of the State of New York concerning permissible
investments for the Separate Account;
L. The Fund shall pay all its expenses incidental to its
performance under this Agreement. The Fund shall see to it that its shares are
continuously registered and authorized for issue in accordance with any
applicable federal and state laws for so long as this Agreement is in effect,
and for so long as CLNY may purchase shares of the Fund. Without limiting the
generality of the foregoing, the Fund shall bear any expenses in connection
with the cost of maintaining registration of Fund shares and a current
registration statement, proxy materials, any solicitation of Fund proxies, the
preparation of all statements and notices required by any federal or state law,
and taxes imposed upon the Fund on the issue or transfer of the Fund's shares
subject to this Agreement, to the extent such expenses are incurred. The
parties shall cooperate in the printing of the prospectuses of the Fund and of
any disclosure documents related to the Contracts; however, the cost of
printing prospectuses shall not be borne by the Fund; and
M. The Fund and JWSI represent and warrant that each of the
Fund's officers and employees that is a "covered person" as defined in Rule
17g-1 under the 1940 Act shall at all times be covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
the amount of coverage required by Section 17(g) of the 1940 Act and Rule 17g-1
thereunder. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable fidelity insurance company.
3. REPRESENTATIONS AND WARRANTIES OF JWSI. JWSI
represents and warrants that:
A. It will vote Fund shares which it owns in the same proportion
as instructions received from owners of variable contracts backed by the Fund;
B. It will not vote to elect a Director of the Fund unless the
composition of the Board of Directors of the Fund is in compliance with the
1940 Act; and
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C. JWSI agrees that in connection with the Fund's compliance with
Section 817(h) of the Code and any regulations thereunder, concerning
diversification of the assets of the Portfolios of the Fund, (i) JWSI will
provide CLNY within 14 days of the end of each quarter of the Fund's fiscal
year, a statement of each Portfolio's assets and (ii) JWSI will provide CLNY
with a copy of the procedures that have been established by JWSI for the
purpose of ascertaining and monitoring the Fund's compliance with the
diversification requirements of Section 817(h) and regulations thereunder.
4. REPRESENTATIONS AND WARRANTIES OF CLNY. CLNY
represents and warrants that:
A. All actions necessary to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereunder have
been taken;
B. All actions required to authorize investment by the Separate
Account in the Fund have been taken;
C. It will comply with applicable law, including state insurance
law, in connection with its obligations hereunder;
D. It will provide to Contract owners voting privileges with
respect to Fund shares attributable to the variable annuity contracts of such
Contract owners. Pass-through voting privileges will be calculated with
reference to the number of shares of the Fund attributable to a particular
Contract or pursuant to any other method of calculation recommended by the SEC
or its staff. CLNY will vote its own shares and shares for which no
instructions have been received in the same proportion as instructions received
from Contract owners for that Portfolio;
E. The shares of the Fund qualify as an eligible investment for
the Separate Account; and
F. The Separate Account has been established in accordance with
Section 4240 of the New York Insurance Law and Regulation 47 thereunder.
(i) Section 4240(a)(1) provides that income, gains and losses,
whether or not realized, from assets allocated to a separate account
shall, in accordance with the applicable agreement or agreements, be
credited to or charged against such account without regard to other
income, gains or losses of the insurer. Section 4240(a)(12) provides
that, if and to the extent so provided in the applicable agreements,
the assets in a separate account shall not be chargeable with
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liabilities arising out of any other business of the insurer.
(ii) Subsection 3(a) (2) of Regulation 47 provides that a separate
account annuity contract may provide that the portion of the assets of
the separate account not exceeding the reserves and other contract
liabilities with respect to such Separate Account shall not be
chargeable with liabilities arising out of any other business of the
insurer.
(iii) The Contracts provide that although CLNY owns the assets in
the Separate Account, these assets are held separately from CLNY's
other assets and are not part of CLNY's general account; and the
assets in the Separate Account are used to support the operation of
and provide the variable values and benefits for the Contracts and
similar policies. Further, the Contracts provide that the portion of
the assets of the Separate Account equal to the reserves and other
contract liabilities of the Separate Account will not be charged with
liabilities that arise from any other business that CLNY conducts.
CLNY has the right to transfer to its general account any assets of
the Separate Account which are in excess of such reserves and other
liabilities.
(iv) Section 7435(b) of the New York Insurance Law provides that
every claim under a separate account agreement providing, in effect,
that the assets in the separate account shall not be chargeable with
liabilities arising out of any other business of the insurer shall be
satisfied out of the assets in the separate account equal to the
reserves maintained in such account for such agreement and, to the
extent, if any, not fully discharged thereby, shall be treated as a
class four claim against the estate of the life insurance company.
Section 7435(a) (4) defines a "Class Four" claim as all claims under
insurance policies, annuity contracts and funding agreements, and all
claims of The Life Insurance Company Guaranty Corporation of New York
or any other guaranty corporation or association of the state of New
York or another jurisdiction, other than (i) claims provided for in
paragraph one of subsection (a) of Section 7435, and (ii) claims for
interest. (Paragraph one refers to claims for the actual and
necessary costs of administration of the estate of the insolvent
company.)
(v) Based on the foregoing, CLNY believes that the portion of the
assets of the Separate Account equal to the reserves and other
contract liabilities of the Separate Account will not be charged with
liabilities that arise from any other business that CLNY conducts.
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5. INDEMNIFICATION.
A. The Fund and JWSI will indemnify and hold harmless CLNY and
the Separate Account against any and all losses, claims, damages, liabilities
or expenses (including, without limitation, any expenses reasonably incurred in
investigating or defending against any litigation commenced or threatened, or
any claim) to which CLNY or the Separate Account may become subject arising out
of or based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or Prospectus relating to
the Fund or any amendment or supplement thereto; (ii) 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; or (iii) any material
breach of any representation and/or warranty made by the Fund or JWSI in this
Agreement or any material breach of this Agreement by the Fund or JWSI;
provided, however, JWSI and the Fund shall not be liable in any such case under
(i) and (ii) above to the extent that any such loss, claim, damage, liability
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the Registration Statement or
Prospectus relating to the Fund made in good faith reliance upon and in
conformity with written information furnished by CLNY or the Separate Account
specifically for use in the preparation thereof.
B. CLNY will indemnify and hold harmless the Fund and JWSI
against any and all losses, claims, damages, liabilities, or expense (including
without limitation, any expense reasonably incurred in investigating or
defending against any litigation commenced or threatened, or any claim) to
which the Fund or JWSI becomes subject arising out of or based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement or prospectus relating to the Contracts or any
amendment or supplement thereto, or (ii) 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; or (iii) any material breach of any
representation and/or warranty made by CLNY in this Agreement or of any
material breach of this Agreement by CLNY; provided, however, that CLNY shall
not be liable in any such case under (i) and (ii) above to the extent that any
such loss, claim, damage, liability or expense arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
in the registration statement or prospectus relating to the Contracts made in
good faith reliance upon and in conformity with written information furnished
by the Fund or JWSI specifically for use in the preparation thereof; and that
CLNY shall not be liable to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon the Fund's failure to
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comply with the investment policies and restrictions set forth in its
Registration Statement.
C. Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action by a third party, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 5, notify the indemnifying party of the
commencement thereof. The omission so to notify the indemnifying party shall
not relieve it from liability which it may have to any indemnified party under
this Section 5, except to the extent that the omission results in a failure of
actual notice to the indemnifying party and such indemnifying party is damaged
solely as a result of the failure to give such notice; however, it shall not
relieve it otherwise. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
6. TERM OF AGREEMENT. This Agreement shall continue in
full force and effect for a period of five (5) years from the effective date of
this Agreement, unless otherwise agreed upon by the parties to terminate sooner
or if terminated for such reasons as set forth in Section 7 below. After such
5 year period, it will be deemed extended thereafter from year to year, subject
to termination at will by any party hereto upon 60 days prior written notice to
the other party.
7. TERMINATION. This Agreement shall terminate:
A. At the option of CLNY, upon the institution of formal
proceedings against the Fund, JWSI, or SFSI by the SEC, the National
Association of Securities Dealers, Inc. ("NASD"), any state securities or
insurance department or any other regulatory body provided that CLNY determines
in good faith in its sole judgment, that such institution will have a material
adverse impact upon the Fund or JWSI's ability to perform its obligations under
this Agreement; or
B. At the option of the Fund, upon the institution of formal
proceedings against The Canada Life Assurance Company ("CLA"), CLNY or Canada
Life of America Financial Services, Inc.
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("CLAFS") brought by a Canadian regulatory authority, the SEC, the NASD, or any
formal proceedings involving a material matter brought by any state securities
or state insurance department or any other regulatory body regarding CLNY or
CLAFS provided that the Fund determines in good faith in its sole judgment that
such institution will have a material adverse impact upon CLA's or CLNY's
ability to perform its obligations under this Agreement; or
C. At the option of the Fund, if there is a material adverse
change in the financial condition of CLA or CLNY; or
D. At the option of the Fund, if there is material adverse
publicity regarding CLA or CLNY; or
E. At the option of CLNY, if the Fund fails to meet the
diversification requirements in Section 817(h) of the Code and the regulations
thereunder; or
F. At the option of CLNY, if there is a material adverse change
in the financial condition of the Fund or JWSI; or
G. At the option of CLNY, if there is material adverse publicity
regarding the Fund or JWSI; or
H. At the option of CLNY, if JWSI hires a sub-adviser for a
Portfolio of the Fund without the prior written consent of CLNY. CLNY agrees
that Xxxxxxxx Xxxxxxxxx Company shall act as sub-adviser for the Xxxxxxxx
Xxxxxxxxx Global Portfolio of the Fund; or
I. If such action is required by law or by regulatory authorities
having jurisdiction or is, in the discretion of the Board of Directors of CLNY
or the Board of Directors of the Fund acting in good faith and in light of
their fiduciary duties under applicable federal and state laws, necessary in
the best interests of the shareholders of the Fund or Contract owners;
J. At the option of CLNY or the Fund, upon the termination of the
Management Agreements; or
K. At the option of CLNY or the Fund, if the Promotional Agent
Distribution Agreement terminates.
In the event that JWSI shall cease to serve as the Fund's
investment adviser, the obligations of JWSI hereunder shall terminate, provided
only that any liability for action taken by JWSI in accordance with its
representations, warranties, and obligations hereunder during the period that
JWSI served as investment adviser to the Fund shall survive such termination.
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