EXHIBIT 8(c)
PARTICIPATION AGREEMENT
Among
FEDERATED INSURANCE SERIES,
FEDERATED ADVISERS,
FEDERATED SECURITIES CORP.
And
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
Table of Contents
Section Description Page
------- ----------- ----
1 Sales of Fund Shares.................. 1
2 Proxy Solicitations and Voting........ 3
3 Representations and Warranties........ 5
4 Sales Material and Information........ 9
5 Fees and Expenses..................... 12
6 Indemnification....................... 13
7 Potential Conflicts................... 23
8 Term and Termination.................. 26
9 Notices............................... 30
10 Miscellaneous......................... 31
11 Administrative Expenses............... 33
THIS AGREEMENT, made and entered into this 15th day of November, 1996, by
and among First Providian Life and Health Insurance Company ("Company"), on its
own behalf and on behalf of First Providian Life and Health Insurance Company
Separate Account C, a segregated asset account of the Company ("Account"),
Federated Insurance Series ("Fund"), the Fund's investment adviser, Federated
Advisers ("Adviser") and Federated Securities Corp. ("Underwriter")
(collectively, "Parties").
Company, Fund, Adviser and Underwriter intending to be legally bound,
hereby agree as follows:
1. Sales of Fund Shares
1.1 Fund shares shall be sold by the respective portfolios of Fund and
purchased by Company for the appropriate subaccount at the net asset value next
computed after receipt by Fund or its designee of each order of the Account or
its designee, in accordance with the provisions of this Agreement, and of the
then current prospectuses of the Fund, and the variable annuity contract that
uses the Fund as an underlying investment medium (the "Contracts"). Company may
purchase Fund shares for its own Account subject to (a) receipt of prior written
approval by Underwriter; and (b) such purchases being in accordance with the
then current prospectuses of the Fund and the Contracts. For purposes of this
Section, each purchaser of the Contracts ("Owner") shall be a designee of the
Account for placing such orders, to the extent that such Owner's orders are
consistent with the
provisions of the applicable Contract, and Underwriter shall be designee of Fund
for receipt of such orders. Orders or payments for shares purchased will be sent
promptly to Fund and will be made payable in the manner reasonably established
from time to time by Fund for the receipt of such payments.
1.2 Fund will redeem the shares when requested on behalf of the Company or
the corresponding subaccount of the Account at the net asset value next computed
after receipt of each request for redemption, as established in accordance with
the provisions of the then current prospectuses of the Fund and the Contracts.
Fund will make payment in the manner established from time to time by Fund for
the receipt of such redemption requests, but in no event shall payment be
delayed for a greater period than permitted by the Investment Company Act of
1940 or the rules, orders or regulations thereunder (the "1940 Act"). The Board
of Trustees of Fund ("Board") may refuse to sell shares of Fund or any
particular portfolio of Fund ("Portfolio") to any person, or suspend or
terminate the offering of shares of any particular 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 the Board's
duties under applicable law, necessary in the best interests of the shareholders
of any Portfolio.
1.3 Company agrees to purchase and redeem the shares of each Portfolio in
accordance with the provisions of this Agreement, of the Contracts and of the
then current
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prospectuses for the Contracts and Fund. Except as necessary to implement Owner
initiated transactions, or as otherwise permitted by state and/or federal laws
or regulations, Company shall not redeem Fund shares attributable to the
Contracts.
1.4 Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Shares ordered
from Fund will be recorded in appropriate book entry titles for the Account.
1.5 Fund shall furnish prompt notice followed by written confirmation to
Company or its delegates of any income, dividends or capital gain distributions
payable on the Fund's shares. Company hereby elects to receive all such
dividends and distributions as are payable on shares of a Portfolio in
additional shares of that portfolio. Fund shall notify Company or its delegates
of the number of shares so issued as payment of such dividends and
distributions.
1.6 Fund shall use its best efforts to make the net asset value per share
for each Portfolio available to Company or its delegates by 7:00 p.m. Louisville
(Eastern) time on each business day of Fund.
2. Proxy Solicitations and Voting
2.1 Underwriter and Fund agree that the terms on which the Fund is offered
to the Account under this Agreement will not be materially altered without the
prior written consent of Company, which consent will not be unreasonably
withheld,
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during any period in which Fund shares are held by the Account.
2.2 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Owners;
(ii) vote the Fund shares in accordance with instructions reviewed
from Owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such Portfolio for which
instructions have been received,
so long and to the extent that the Securities and Exchange Commission (the
"SEC") continues to interpret the 1940 Act to require pass-through voting
privileges for various contract owners. The Company reserves the right to vote
Fund shares held in any segregated asset account in its own right, to the extent
permitted by law.
2.3 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 or comply with Section 16(c) of the 1940 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 trustees and with whatever rules the SEC
may promulgate with respect thereto.
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3. Representations and Warranties
3.1 Company 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 thereof as a
segregated asset account under the laws of New York and that it has and will
maintain the capacity to issue all Contracts that may be sold; and that it is
properly licensed, qualified and in good standing to sell the Contracts in New
York.
3.2 Company represents and warrants that the Contracts are or will be
registered under the Securities Act of 1933 (the "1933 Act").
3.3 Company represents and warrants that it has or will have 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.
3.4 Company represents that the Contracts are currently treated as annuity
contracts, under applicable provisions of the Internal Revenue Code of 1986, as
amended ("Code"), and that it will maintain such treatment and that it will
notify Underwriter and Fund promptly upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
3.5 Fund represents and warrants that it is lawfully established and
validly existing under the laws of the State of Massachusetts.
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3.6 Fund represents and warrants that Fund shares sold pursuant to this
Agreement are registered under the 1933 Act and duly authorized for issuance;
that 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; that Fund will sell such shares in compliance
with all applicable federal and state laws; and that Fund is and will remain
registered under and complies and will comply in all material respects with the
1940 Act. Fund 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
Fund.
3.7 Fund represents and warrants that it will invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable annuity contracts under the Code and the regulations issued thereunder,
and that Fund will comply with Section 817(h) of the Code as amended from time
to time and with all applicable regulations promulgated thereunder. Fund agrees
to notify Company immediately upon having a reasonable basis for believing that
any Portfolio has ceased to comply with Section 817(h) of the Code and to take
all reasonable steps to diversify such Portfolio so as to achieve compliance
within the grace period afforded by Treasury Regulation (S) 1.817-5.
3.8 Fund represents and warrants that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
maintain such qualification
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(under Subchapter M or any successor or similar provision) and that it will
promptly notify Company upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
3.9 Fund represents and warrants that Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with New York law
regarding separate accounts of domestic insurers and with any other applicable
state insurance laws of which it is aware, provided Fund shall have no
obligation to conduct an independent investigation, or of which Company has made
it aware. Fund further represents that its operations are and shall at all times
remain in material compliance with the laws of the State of Massachusetts to the
extent required to perform this Agreement.
3.10 Underwriter represents and warrants that it is and will be a member in
good standing of the National Association of Securities Dealers, Inc., ("NASD")
and is and will be registered as a broker-dealer with the SEC. Underwriter
further represents that it will sell and distribute Fund shares in accordance
with all applicable state and federal laws and regulations, including without
limitation the 1933 Act, the Securities Exchange Act of 1934 (the "1934 Act")
and the 1940 Act. Underwriter represents that its operations are and shall at
all times remain in material compliance with the laws of the State of
Pennsylvania to the extent required to perform this Agreement.
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3.11 Underwriter represents and warrants that it is and will remain duly
registered and licensed in all material respects under all applicable federal
and state securities laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and federal laws.
3.12 All parties hereto represent and warrant to each other that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of Fund in an amount not less than the amount required
by the applicable rules of the NASD and the federal securities laws. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. All parties hereto agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and each agrees to notify promptly the other
parties hereto in the event that such coverage no longer applies.
3.13 Company agrees not to solicit or cause to be solicited directly, or
indirectly at any time in the future, any proxies from the Owners in opposition
to proxies solicited by management of the Fund, unless a court of competent
jurisdiction shall have determined that the conduct of a majority of the Board
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard of their
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duties. This Section 3.13 will survive the term of this Agreement.
4. Sales Material and Information
4.1 Company shall promptly inform Underwriter as to the status of all such
sales literature filings and shall promptly notify Underwriter of all approvals
or disapprovals of sales literature filings in the States. Underwriter and Fund
shall promptly provide Company with copies of correspondence and reports of
inquiries, meetings and discussions concerning regulation of the Contracts and
Owner complaints respecting the Contracts.
4.2 Company shall not make any material representations concerning the
Adviser, the Underwriter, or the Fund other than the information or
representations contained in: (a) a registration statement or prospectus for the
Fund, as amended or supplemented from time to time; (b) published reports or
statements of the Fund which are in the public domain or are approved by Fund;
or (c) sales literature or other promotional material of the Fund.
4.3 Adviser, Underwriter, or the Fund shall not make any material
representations concerning Company other than the information or representations
contained in: (a) a registration statement or prospectus for the Contracts, as
amended or supplemented from time to time; (b) published reports or statements
of the Contracts or the Account which are in the public domain or are approved
by Company; or (c)
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sales literature or other promotional material of the Company.
4.4 No Party shall use any other Party's names, logos, trademarks or
service marks, whether registered or unregistered, without the prior consent of
such Party.
4.5 Fund will provide to Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, solicitations for voting instructions, 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 Fund or its shares, in final form as filed with the SEC, NASD and
other regulatory authorities. Fund agrees to notify Company of material changes
in the management of the Fund within a reasonable time prior to any such change
becoming effective.
4.6 Company will provide to Fund 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 Fund and the
Contracts, in final form as filed with the SEC, NASD and other regulatory
authorities. Company agrees to notify Fund of material changes in the management
of the Contracts within a reasonable time prior to any such changes becoming
effective. If requested by Company in lieu
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thereof, Fund shall provide such documentation (including a final copy of the
new prospectus as set in type at Fund's or Underwriter's expense) and other
assistance as is reasonably necessary in order for Company once each year (or
more frequently if the prospectus for Company is amended) to have the prospectus
for the Contracts and Fund's prospectus printed together in one document.
4.7 For purposes of this Section 4, the phrase "sales literature or other
promotional material" shall be construed in accordance with all applicable
securities laws and regulations.
4.8 To the extent required by applicable law, including the administrative
requirements of regulatory authorities, or as mutually agreed between Company
and Underwriter, Company reserves the right to modify any of the Contracts in
any respect whatsoever. Company reserves the right in its sole discretion to
suspend the sale of any of the Contracts, in whole or in part, or to accept or
reject any application for the sale of a Contract. Company agrees to notify the
other Parties promptly upon the occurrence of any event Company believes might
necessitate a material modification or suspension.
4.9 The Parties agree to review the Contracts and the Fund during the last
calendar quarter of each year for possible changes and will make their personnel
reasonably available for this purpose.
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5. Fees and Expenses
5.1 Fund or Underwriter shall bear the cost of registration and
qualification of Fund's shares; preparation and filing of Fund's prospectus and
registration statement, proxy materials and reports including postage;
preparation of all other statements and notices relating to Fund or Underwriter
required by any federal or state law; payment of all applicable fees, including,
without limitation, all fees due under Rule 24f-2 relating to Fund; all taxes on
the issuance or transfer of Fund's shares.
5.2 Company shall see to it that the Contracts are registered under the 1933
Act, and that the Account is registered as a unit investment trust in accordance
with the 1940 Act. Company shall bear the expenses for the costs of preparation
and filing of Company's prospectus and registration statement with respect to
the Contracts; preparation of all other statements and notices relating to the
Account or the Contracts required by any federal or state law; expenses for the
solicitation and sale of the Contracts, including all costs of printing and
distributing all copies of advertisements, prospectuses, Statements of
Additional Information, proxy materials, and reports to Owners or potential
purchasers of the Contracts as required by applicable state and federal law;
payment of all applicable fees, including, without limitation, all fees due
under Rule 24f-2 relating to the Contracts; all costs of drafting, filing and
obtaining approvals of the Contracts in the
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various states under applicable insurance laws; filing of annual reports on form
N-SAR, and all other costs associated with ongoing compliance with all such laws
and its obligations hereunder.
6. Indemnification
6.1 Indemnification By Company
6.1(a) Company agrees to indemnify and hold harmless Fund and
Underwriter and each of their directors and officers, and each person, if any,
who controls any of them within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 6.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of 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, 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, prospectus or sales literature for the
Contracts or contained in the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or
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necessary to make the statements therein not misleading, provided
that this paragraph 6.1(a) shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to Company by or on behalf of Fund for use
in the registration statement or prospectus for the Contracts or
in the Contracts (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or 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 covering 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
14
make the statements therein not misleading, if such a statement
or omission was made in reliance upon information furnished to
Fund by or on behalf of Company; or
(iv) arise out of, or as a result of, any failure by
Company or persons under its control to provide the services and
furnish the materials contemplated under the terms of this
Agreement; or
(v) arise out of, or result from, any material breach of
any representation and/or warranty made by Company or persons
under its control in this Agreement or arise out of or result
from any other material breach of this Agreement by Company or
persons under its control;
as limited by and in accordance with the provisions of sections 6.1(b) and
6.1(c) hereof.
6.1(b) Company 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 or duties under this Agreement or to
Fund.
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6.1(c) Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify Company of any such
claim shall not relieve Company from any liability which it may have to the
Indemnified Party otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, Company
shall be entitled to participate, at its own expense, in the defense of such
action. Company also shall be entitled to assume and to control the defense
thereof. After notice from Company to such Party of 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 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.
6.1(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or
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sale of Fund shares or the Contracts or the operation of Fund.
6.2 Indemnification by Underwriter
6.2(a) Underwriter agrees to indemnify and hold harmless Company and
each of its directors and officers and each person, if any, who controls Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 6.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Underwriter) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, and:
(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 Fund
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this section 6.2(a) shall not apply as
to any Indemnified Party if such statement or omission or such
alleged
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statement or omission was made in reliance upon and in conformity
with information furnished to Fund by or on behalf of Company for
use in the registration statement or prospectus for Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Underwriter or Fund 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, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the
statements therein not misleading, if such statement or omission
was made in reliance upon information furnished to Company by or
on behalf of Fund; or
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(iv) arise out of, or as a result of, any failure by
Underwriter, Fund or persons under their control to provide the
services and furnish the materials contemplated under the terms
of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Underwriter, Fund or
persons under their control in this Agreement or arise out of or
result from any other material breach of this Agreement by
Underwriter, Fund or persons under their control;
as limited by and in accordance with the provisions of Sections 6.2(b) and
6.2(c) hereof.
6.2(b) 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
Company or the Account.
6.2(c) Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party
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shall have notified 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 Underwriter of any such claim shall not relieve
Underwriter from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, Underwriter will be entitled
to participate, at its own expense, in the defense thereof. Underwriter also
shall be entitled to assume and to control the defense thereof. After notice
from Underwriter to such Party of 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 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.
6.2(d) The Indemnified Parties will promptly notify Underwriter of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.
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6.3 Indemnification by Adviser of the Fund
6.3(a) Adviser agrees to indemnify and hold harmless Company and
each of its directors and officers and each person, if any, who controls Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 6.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Fund or Adviser) or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, and:
(i) arise out of, or as a result of, any failure by
Adviser, Fund or persons under their control to provide the
services and furnish the materials contemplated under the terms
of this Agreement; or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by Adviser, Fund or persons
under their control in this Agreement or arise out of or result
from any other material breach of this Agreement by Adviser, Fund
or persons under their control;
as limited by and in accordance with the provisions of Sections 6.3(b) and
6.3(c) hereof.
6.3(b) Adviser shall not be liable under this indemnification
provision with respect to any losses, claims,
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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 Company or the Account.
6.3(c) 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 Fund or 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 Fund or Adviser of
any such claim shall not relieve Adviser from any liability which it may have to
the Indemnified Party otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
Adviser will be entitled to participate, at its own expense, in the defense
thereof. Adviser also shall be entitled to assume and to control the defense
thereof. After notice from Adviser to such Party of 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 Adviser will not be liable to such
party under this
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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.
6.3(d) The Indemnified Parties will promptly notify Fund or Adviser
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.
7. Potential Conflicts
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 interpretive letter, or any similar action by
insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
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7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under any applicable provisions of the federal securities laws
and/or any exemptive orders granted by the SEC ("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 the
Company to inform the Board whenever Owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company shall, to the extent reasonably practicable, 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 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 Owners and, as appropriate, segregating
the assets of any appropriate group that votes in favor of such segregation, or
offering to the affected Owners the option of making such a change; and (2),
establishing a new registered management investment company or managed separate
account.
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7.4 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six (6) months after the Board informs the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5 For purposes of Sections 7.3 through 7.5 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict. The Company
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 Owners
materially adversely 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 the Company will withdraw the
Account's
25
investment in the Fund and terminate this Agreement within six (6) months after
the Board informs the Company in writing of the foregoing determination,
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict.
7.6 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 any Exemptive Order) on terms and conditions materially different
from those contained in any Exemptive Order, then (a) the Fund and/or the
Company, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 7.1, 7.2, 7.3 and 7.4 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.
8. Term and Termination
8.1 The initial term of this Agreement shall be from November 15, 1996
through November 14, 1999. Unless terminated upon thirty (30) days' prior
written notice to the other Party, this Agreement shall thereafter automatically
renew from year to year, provided that any Party may terminate this Agreement
without cause following the initial
26
term upon six (6) months' advance written notice to the other.
8.2 Notwithstanding any other provision of this Agreement, Underwriter or
the Fund may terminate this Agreement for cause on not less than thirty (30)
days' prior written notice to the Company, unless Company has cured such cause
within thirty (30) days of receiving such notice, for any material breach by
Company of any representation, warranty, covenant or obligation hereunder.
8.3 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement for cause on not less than thirty (30) days' prior
written notice to Underwriter and Fund unless Underwriter or Fund has cured such
cause within thirty (30) days of receiving such notice, for any material breach
by Underwriter or Fund of any representation, warranty, covenant or obligation
hereunder.
8.4 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Underwriter with
respect to any Portfolio based upon the Company's determination that shares of
such Portfolio are not reasonably available to meet the requirements of the
Contracts.
8.5 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Underwriter with
respect to any Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable
27
state and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by the
Company.
8.6 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Underwriter with
respect to any Portfolio in the event that such Portfolio 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
Fund may fail to so qualify.
8.7 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Underwriter with
respect to any Portfolio in the event that such Portfolio fails to meet the
diversification requirements specified in Paragraph 3.7.
8.8 Notwithstanding any other provision of this Agreement, Fund or
Underwriter may terminate this Agreement by written notice to the Company, if
either one or both shall determine, in their sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity, or if formal proceedings against
Company have been instituted by the NASD, SEC or any state securities or
insurance department or any other regulatory body regarding Company's duties
under this Agreement or
28
related to the sale of the Contracts, the operation of the Account or the
purchase of Fund shares; provided, however, that the Fund determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of Company to perform its
obligations under this Agreement.
8.9 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Underwriter, if
the Company shall determine, in its sole judgment exercised in good faith, that
either the Fund 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 if formal
proceedings against Fund or Underwriter have been instituted by the NASD, SEC or
any state securities or insurance department or any other regulatory body;
provided, however, that Company determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a material
adverse effect upon the ability of Fund or Underwriter to perform its
obligations under this Agreement.
8.10 Notwithstanding the termination of this Agreement, each Party shall
continue for so long as any Contracts remain outstanding to perform such of its
duties hereunder as are necessary to ensure the continued tax deferred status
thereof and the payment of benefits thereunder, except to the extent proscribed
by law, the SEC or other regulatory body.
29
9. Notices
Any notice shall be deemed 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 Fund:
Xxxx X. XxXxxxxxx
Federated Investors Tower
Xxxxxxxxxx, XX 00000-0000
If to Adviser:
Xxxx X. XxXxxxxxx
Federated Investors Tower
Xxxxxxxxxx, XX 00000-0000
If to Underwriter:
Xxxx X. XxXxxxxxx
Federated Investors Tower
Xxxxxxxxxx, XX 00000-0000
If to Company:
Xxxxxxx X. Xxxxxxx
Providian Corporation
000 Xxxx Xxxxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxxxxx, Xxxxxxxx 00000
With a copy to:
Marketing Director
First Providian Life and Health Insurance Company
000 Xxxxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxx 00000
10. Miscellaneous
10.1 The captions in this Agreement are included for convenience of
reference only and in no way affect the construction or effect of any provisions
hereof.
30
10.2 If any portion of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
10.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.4 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance and securities regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement.
10.5 Each Party hereto grants to the other the right to audit its records
relating to the terms and conditions of this Agreement upon reasonable notice
during reasonable business hours in order to confirm compliance with this
Agreement.
10.6 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.
10.7 Subject to the requirements of legal process and regulatory authority,
the Fund and Underwriter shall treat as confidential the names and addresses of
the owners of the Contracts and all information reasonably identified as
confidential in writing by the Company hereto and, except as
31
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the Company until such time as it may come into the public
domain.
10.8 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.
10.9 In any dispute arising hereunder, each party waives its right to
demand a trial by jury and hereby consents to a bench trial of all such
disputes.
10.10 The terms of this Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of Kentucky; provided,
however, that all performances rendered hereunder shall be subject to compliance
with all applicable state and federal laws and regulations.
10.11 Sections 1, 2, 3, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 6, 7.4, 8, 9 and
11 hereof shall survive termination of this Agreement.
10.12 Company is hereby expressly put on notice of the limitation of
liability as set forth in the Declarations of Trust of the Fund and the Adviser
and agrees 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 that Company shall not seek satisfaction of any such
obligation from the
32
shareholders of the Fund or the Adviser, the Trustees, officers, employees or
agents of the Fund or Adviser, or any of them.
11. Administrative Expenses
11.1 Administrative services to Owners shall be the responsibility of
Company. Fund, Adviser and Underwriter recognize Company as the sole shareholder
of record of Fund shares under this Agreement. Fund, Adviser and Underwriter
further recognize that they will derive a substantial savings in administrative
expense by virtue of having a sole shareholder rather than multiple
shareholders. In consideration of the administrative savings resulting from such
arrangement, Underwriter agrees to pay to Company an amount computed at an
annual rate of .25 of 1% of the average daily net asset value of shares held in
subaccounts for which Company provides administrative services. Underwriter's
payments to Company are for administrative services only and do not constitute
payment in any manner for investment advisory services.
11.2 Underwriter will calculate the reimbursement of administrative
expenses at the end of each calendar quarter and will make such reimbursement to
Company within thirty days thereafter. The reimbursement check will be
accompanied by a statement showing the calculation of the amounts payable by
Underwriter and such other supporting data as may be reasonably requested by
Company.
33
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first set forth above.
Company:
FIRST PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------
Fund:
FEDERATED INSURANCE SERIES
By: /s/ Xxxx X. XxXxxxxxx
-----------------------
Fund Adviser:
FEDERATED ADVISERS
By: /s/
-----------------------
Underwriter:
FEDERATED SECURITIES CORP.
By: /s/
-----------------------
34
