Exhibit 8.6 (a)
PARTICIPATION AGREEMENT
BY AND AMONG
INVESCO VARIABLE INVESTMENT FUNDS, INC.,
INVESCO DISTRIBUTORS, INC.,
FEDERAL XXXXXX LIFE ASSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
[NAME OF UNDERWRITER],
UNDERWRITER OF VARIABLE CONTRACTS AND POLICIES
TABLE OF CONTENTS
Description Page
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Section 1. Available Funds....................................................2
1.1 Availability........................................................2
1.2 Addition, Deletion or Modification of Funds.........................2
1.3 No Sales to the General Public......................................2
Section 2. Processing Transactions............................................3
2.1 Timely Pricing and Orders...........................................3
2.2 Timely Payments.....................................................3
2.3 Applicable Price....................................................3
2.4 Dividends and Distributions.........................................4
2.5 Book Entry..........................................................4
Section 3. Costs and Expenses.................................................4
3.1 General.............................................................4
3.2 Parties To Cooperate................................................4
Section 4. Legal Compliance...................................................5
4.1 Tax Laws............................................................5
4.2 Insurance and Certain Other Laws....................................7
4.3 Securities Laws.....................................................7
4.4 Notice of Certain Proceedings and Other Circumstances...............9
4.5 FKLA To Provide Documents; Information About IVIF...................9
4.6 IVIF To Provide Documents; Information About FKLA..................10
Section 5. Mixed and Shared Funding..........................................12
5.1 General............................................................12
5.2 Disinterested Directors............................................12
5.3 Monitoring for Material Irreconcilable Conflicts...................12
5.4 Conflict Remedies..................................................13
5.5 Notice to FKLA.....................................................14
5.6 Information Requested by Board of Directors........................14
5.7 Compliance with SEC Rules..........................................15
5.8 Other Requirements.................................................15
Section 6. Termination.......................................................15
6.1 Events of Termination..............................................15
6.2 Notice Requirement for Termination.................................16
6.3 Funds To Remain Available..........................................16
6.4 Survival of Warranties and Indemnifications........................17
6.5 Continuance of Agreement for Certain Purposes......................17
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Section 7. Parties To Cooperate Respecting Termination.......................17
Section 8. Assignment........................................................17
Section 9. Notices...........................................................17
Section 10. Voting Procedures................................................18
Section 11. Foreign Tax Credits..............................................19
Section 12. Indemnification..................................................19
12.1 Of IVIF and INVESCO by FKLA and the Underwriter....................19
12.2 Of FKLA and the Underwriter by IVIF and INVESCO....................21
12.3 Effect of Notice...................................................24
12.4 Successors.........................................................24
Section 13. Applicable Law...................................................24
Section 14. Execution in Counterparts........................................24
Section 15. Severability.....................................................24
Section 16. Rights Cumulative................................................24
Section 17. Headings.........................................................24
Section 18. Confidentiality..................................................25
Section 19. Trademarks and Fund Names........................................25
Section 20. Parties to Cooperate.............................................26
Section 21. Amendments.......................................................26
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is made and entered into as of the day of
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, 2003 ("Agreement"), by and among INVESCO Variable Investment Funds,
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Inc., a Maryland corporation ("IVIF"), INVESCO Distributors, Inc., a Delaware
corporation ("INVESCO"), Federal Xxxxxx Life Assurance Company, as Illinois life
insurance company ("FKLA"), on behalf of itself and each of its segregated asset
accounts listed in Schedule A hereto, as the parties hereto may amend from time
to time (each, an "Account," and collectively, the "Accounts"); and [NAME OF
SEPARATE ACCOUNT UNDERWRITER], an affiliate of FKLA and the principal
underwriter of the Contracts (the "Underwriter") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, IVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, IVIF currently consists of eighteen separate series ("Series"),
shares ("Shares") each of which are registered under the Securities Act of 1933,
as amended (the "1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, IVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "IVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, FKLA will be the issuer of certain variable annuity contracts and
variable life insurance contracts ("Contracts") as set forth on Schedule A
hereto, as the Parties hereto may amend from time to time, which Contracts
(hereinafter collectively, the "Contracts"), if required by applicable law, will
be registered under the 1933 Act; and
WHEREAS, FKLA will fund the Contracts through the Accounts, each of which
may be divided into two or more subaccounts ("Subaccounts"; reference herein to
an "Account" includes reference to each Subaccount thereof to the extent the
context requires); and
WHEREAS, FKLA will serve as the depositor of the Accounts, each of which is
registered as a unit investment trust investment company under the 1940 Act (or
exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, FKLA intends to purchase Shares in one or more Funds on behalf of
the Accounts to fund the Contracts; and
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WHEREAS, the Underwriter is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, INVESCO is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
IVIF will make Shares of each Fund available to FKLA for purchase and
redemption at net asset value and with no sales charges, subject to the terms
and conditions of this Agreement. The Board of Directors of IVIF may refuse to
sell Shares of any Fund to any person, 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 if, in the sole discretion of the Directors
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, such action is deemed in the best interests of the
shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, IVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
IVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
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Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) IVIF or its designated agent will use its best efforts to provide FKLA
with the net asset value per Share for each Fund by 6:00 p.m. Central Time on
each Business Day. As used herein, "Business Day" shall mean any day on which
(i) the New York Stock Exchange is open for regular trading, (ii) IVIF
calculates IVIF's net asset value, and (iii) FKLA is open for business.
(b) FKLA will use the data provided by IVIF each Business Day pursuant to
paragraph (a) immediately above to calculate Account unit values and to process
transactions that receive that same Business Day's Account unit values. FKLA
will perform such Account processing the same Business Day, and will place
corresponding orders to purchase or redeem Shares with IVIF by 9:00 a.m. Central
Time the following Business Day; provided, however, that IVIF shall provide
additional time to FKLA in the event that IVIF is unable to meet the 6:00 p.m.
time stated in paragraph (a) immediately above. Such additional time shall be
equal to the additional time that IVIF takes to make the net asset values
available to FKLA.
(c) With respect to payment of the purchase price by FKLA and of redemption
proceeds by IVIF, FKLA and IVIF shall net purchase and redemption orders with
respect to each Fund and shall transmit one net payment per Fund in accordance
with Section 2.2, below.
(d) If IVIF provides materially incorrect Share net asset value information
(as determined under SEC guidelines), FKLA shall be entitled to an adjustment to
the number of Shares purchased or redeemed to reflect the correct net asset
value per Share. Any material error in the calculation or reporting of net asset
value per Share, dividend or capital gain information shall be reported promptly
upon discovery to FKLA. Materiality and reprocessing cost reimbursement shall be
determined in accordance with standards established by the Parties as provided
in Schedule B, attached hereto and incorporated herein.
2.2 Timely Payments.
FKLA will wire payment for net purchases to a custodial account designated
by IVIF by 1:00 p.m. Central Time on the same day as the order for Shares is
placed, to the extent practicable. IVIF will wire payment for net redemptions to
an account designated by FKLA by 1:00 p.m. Central Time on the same day as the
Order is placed, to the extent practicable, but in any event within five (5)
calendar days after the date the order is placed in order to enable FKLA to pay
redemption proceeds within the time specified in Section 22(e) of the 1940 Act
or such shorter period of time as may be required by law.
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2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that FKLA receives prior to the
close of regular trading on the New York Stock Exchange on a Business Day will
be executed at the net asset values of the appropriate Funds next computed after
receipt by IVIF or its designated agent of the orders. For purposes of this
Section 2.3(a), FKLA shall be the designated agent of IVIF for receipt of orders
relating to Contract transactions on each Business Day and receipt by such
designated agent shall constitute receipt by IVIF; provided that IVIF receives
notice of such orders by 9:00 a.m. Central Time on the next following Business
Day or such later time as computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by FKLA will be effected at
the net asset values of the appropriate Funds next computed after receipt by
IVIF or its designated agent of the order therefor, and such orders will be
irrevocable.
2.4 Dividends and Distributions.
IVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to FKLA of any income dividends or
capital gain distributions payable on the Shares of any Fund. FKLA hereby elects
to reinvest all dividends and capital gains distributions in additional Shares
of the corresponding Fund at the ex-dividend date net asset values until FKLA
otherwise notifies IVIF in writing, it being agreed by the Parties that the
ex-dividend date and the payment date with respect to any dividend or
distribution will be the same Business Day. FKLA reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 Book Entry.
Issuance and transfer of IVIF Shares will be by book entry only. Stock
certificates will not be issued to FKLA. Shares ordered from IVIF will be
recorded in an appropriate title for FKLA, on behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear, or arrange for others to bear, all
expenses incident to its performance under this Agreement.
3.2 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of IVIF and the Accounts.
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Section 4. Legal Compliance
4.1 Tax Laws.
(a) IVIF represents and warrants that each Fund is currently qualified as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and represents that it will use its best
efforts to qualify and to maintain qualification of each Fund as a RIC. IVIF
will notify FKLA immediately upon having a reasonable basis for believing that a
Fund has ceased to so qualify or that it might not so qualify in the future.
(b) IVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. IVIF will notify FKLA immediately upon having a reasonable basis for
believing that a Fund has ceased to so comply or that a Fund might not so comply
in the future. In the event of a breach of this Section 4.1(b) by IVIF, it will
take all reasonable steps to adequately diversify IVIF so as to achieve
compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) Notwithstandng any other provision of this Agreement, FKLA agrees that
if the Internal Revenue Service ("IRS") asserts in writing in connection with
any governmental audit or review of FKLA or, to FKLA's knowledge, of any
Contract owners, annuitants, insureds or participants (as appropriate) under the
Contracts (collectively, "Participants"), that any Fund has failed to comply
with the diversification requirements of Section 817(h) of the Code or FKLA
otherwise becomes aware of any facts that could give rise to any claim against
IVIF or its affiliates as a result of such a failure or alleged failure:
(i) FKLA shall promptly notify IVIF of such assertion or potential
claim (subject to the Confidentiality provisions of Section 18 as
to any Participant);
(ii) FKLA shall consult with IVIF as to how to minimize any liability
that may arise as a result of such failure or alleged failure;
(iii) FKLA shall use its best efforts to minimize any liability of
IVIF or its affiliates resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent;
(iv) FKLA shall permit IVIF, its affiliates and their legal and
accounting advisors to participate in any conferences, settlement
discussions or other administrative or judicial proceeding or
contests (including judicial appeals thereof) with the IRS, any
Participant or any other claimant regarding any claims that could
give rise to liability to IVIF or its affiliates as a result of
such a failure or alleged failure; provided, however, that FKLA
will retain control of the conduct of such conferences
discussions, proceedings, contests or appeals;
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(v) any written materials to be submitted by FKLA to the IRS, any
Participant or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation,
any such materials to be submitted to the IRS pursuant to
Treasury Regulations Section 1.817-5(a)(2)), (a) shall be
provided by FKLA to IVIF (together with any supporting
information or analysis); subject to the confidentiality
provisions of Section 18, at least ten (10) business days or such
shorter period to which the Parties hereto agree prior to the day
on which such proposed materials are to be submitted, and (b)
shall not be submitted by FKLA to any such person without the
express written consent of IVIF which shall not be unreasonably
withheld;
(vi) FKLA shall provide IVIF or its affiliates and their accounting
and legal advisors with such cooperation as IVIF shall reasonably
request (including, without limitation, by permitting IVIF and
its accounting and legal advisors to review the relevant books
and records of FKLA) in order to facilitate review by IVIF or its
advisors of any written submissions provided to it pursuant to
the preceding clause or its assessment of the validity or amount
of any claim against its arising from such a failure or alleged
failure;
(vii) FKLA shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against IVIF or its
affiliates (a) compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable administrative
or judicial appeals, without the express written consent of IVIF
or its affiliates, which shall not be unreasonably withheld,
provided that FKLA shall not be required, after exhausting all
administrative remedies, to appeal any adverse judicial decision
unless IVIF or its affiliates shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists
for taking such appeal; and provided further that the costs of
any such appeal shall be borne equally by the Parties hereto; and
(viii) IVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if FKLA fails to comply with any
of the foregoing clauses (i) through (vii), and such failure
could be shown to have materially contributed to the liability.
Should IVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, FKLA may, in
its discretion, authorize IVIF or its affiliates to act in the name of FKLA in,
and to control the conduct of, such conferences, discussions, proceedings,
contests or appeals and all administrative or judicial appeals thereof, and in
that event IVIF or its affiliates shall bear the fees and expenses associated
with the conduct of the proceedings that it is so authorized to control;
provided, that in no event shall FKLA have any liability resulting from IVIF's
refusal to accept the proposed settlement or compromise with respect to any
failure caused by IVIF. As used in this Agreement, the term "affiliates" shall
have the same meaning as "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
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(d) FKLA represents and warrants that the Contracts currently are and will
be treated as annuity contracts or life insurance contracts under applicable
provisions of the Code and that it will use its best efforts to maintain such
treatment; FKLA will notify IVIF immediately upon having a reasonable basis for
believing that any of the Contracts have ceased to be so treated or that they
might not be so treated in the future.
(e) FKLA represents and warrants that each Account is a "segregated asset
account" and that interests in each Account are offered exclusively through the
purchase of or transfer into a "variable contract," within the meaning of such
terms under Section 817 of the Code and the regulations thereunder. FKLA will
use its best efforts to continue to meet such definitional requirements, and it
will notify IVIF immediately upon having a reasonable basis for believing that
such requirements have ceased to be met or that they might not be met in the
future.
4.2 Insurance and Certain Other Laws.
(a) IVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by FKLA, including, the furnishing of information not otherwise available to
FKLA which is required by state insurance law to enable FKLA to obtain the
authority needed to issue the Contracts in any applicable state.
(b) FKLA represents and warrants that (i) it is an insurance company duly
organized, validly existing and in good standing under the laws of the State of
and has full corporate power, authority and legal right to execute,
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deliver and perform its duties and comply with its obligations under this
Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under the laws of the State of ,
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and (iii) the Contracts comply in all material respects with all other
applicable federal and state laws and regulations.
(c) IVIF represents and warrants that it is lawfully organized, validly
existing, and in good standing under the laws of the State of Delaware and has
full power, authority, and legal right to execute, deliver, and perform its
duties and comply with its obligations under this Agreement.
4.3 Securities Laws.
(a) FKLA represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the extent
required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and the
law(s) of FKLA's state(s) of organization and domicile, (iii) each Account is
and will remain registered under the 1940 Act, to the extent required by the
1940 Act, (iv) each Account does and will comply in all material respects with
the requirements of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder, (vi) FKLA will amend the registration statement for its Contracts
under the 1933 Act and for its Accounts under the 1940 Act from time to time as
required in order to effect the continuous offering of its Contracts or as may
otherwise be required by applicable law, and
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(vii) each Account Prospectus will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder.
(b) IVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Delaware
law, (ii) IVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) IVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) IVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) IVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
IVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) IVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by IVIF.
(d) IVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of IVIF are and continue to be at all times covered
by a blanket fidelity bond or similar coverage for the benefit of IVIF 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 includes coverage for larceny and embezzlement and is issued
by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) IVIF or INVESCO will immediately notify FKLA of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to IVIF's registration statement under the 1933 Act
or IVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or IVIF Prospectus that may affect the offering of Shares
of IVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of IVIF's Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by FKLA. IVIF and
INVESCO will make every reasonable effort to prevent the issuance, with respect
to any Fund, of any such stop order, cease and desist order or similar order
and, if any such order is issued, to obtain the lifting thereof at the earliest
possible time.
(b) FKLA or the Underwriter will immediately notify IVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of IVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's
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interests pursuant to the Contracts, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. FKLA and the Underwriter will
make every reasonable effort to prevent the issuance of any such stop order,
cease and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
4.5 FKLA To Provide Documents; Information About IVIF.
(a) FKLA will provide to IVIF or its designated agent at least one (1)
complete copy of all SEC registration statements, Account Prospectuses, reports,
any preliminary and final voting instruction solicitation material, applications
for exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to each Account or the Contracts, contemporaneously with the
filing of such document with the SEC or other regulatory authorities.
(b) FKLA will provide to IVIF or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which IVIF or any of its affiliates is named, at least five (5) Business Days
prior to its use or such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if IVIF or its designated agent
objects to such use within five (5) Business Days after receipt of such material
or such shorter period as the Parties hereto may, from time to time, agree upon.
IVIF hereby designates INVESCO as the entity to receive such sales literature,
until such time as IVIF appoints another designated agent by giving notice to
FKLA in the manner required by Section 9 hereof.
(c) Neither FKLA nor any of its affiliates, will give any information or
make any representations or statements on behalf of or concerning IVIF or its
affiliates in connection with the sale of the Contracts other than (i) the
information or representations contained in the registration statement,
including the IVIF Prospectus contained therein, relating to Shares, as such
registration statement and IVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for IVIF; or (iii) in published reports for
IVIF that are in the public domain and approved by IVIF for distribution; or
(iv) in sales literature or other promotional material approved by IVIF, except
with the express written permission of IVIF.
(d) FKLA shall adopt and implement procedures reasonably designed to ensure
that information concerning IVIF and its affiliates that is intended for use
only by brokers or agents selling the Contracts (i.e., information that is not
intended for distribution to Participants) ("broker only materials") is so used,
and neither IVIF nor any of its affiliates shall be liable for any losses,
damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, 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, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), 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
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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, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 0000 Xxx.
4.6 IVIF To Provide Documents; Information About FKLA.
(a) IVIF will provide to FKLA at least one (1) complete copy of all SEC
registration statements, IVIF Prospectuses, reports, any preliminary and final
proxy material, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to IVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) IVIF will provide to FKLA a camera ready copy of all IVIF prospectuses
and printed copies, in an amount specified by FKLA, of IVIF statements of
additional information, proxy materials, periodic reports to shareholders and
other materials required by law to be sent to Participants who have allocated
any Contract value to a Fund. IVIF will provide such copies to FKLA in a timely
manner so as to enable FKLA, as the case may be, to print and distribute such
materials within the time required by law to be furnished to Participants.
(c) IVIF will provide to FKLA or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which FKLA, or any of its respective affiliates is named, or that refers to the
Contracts, at least five (5) Business Days prior to its use or such shorter
period as the Parties hereto may, from time to time, agree upon. No such
material shall be used if FKLA or its designated agent objects to such use
within five (5) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. FKLA shall
receive all such sales literature until such time as it appoints a designated
agent by giving notice to IVIF in the manner required by Section 9 hereof.
(d) Neither IVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning FKLA, each
Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by FKLA for distribution; or (iii) in sales literature or other
promotional material approved by FKLA or its affiliates, except with the express
written permission of FKLA.
(e) IVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning FKLA, and
its respective affiliates that is intended for use only by brokers or agents
selling the Contracts (i.e., information that is not intended for distribution
to Participants) ("broker only materials") is so used, and neither FKLA, nor any
of its respective affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
10
(f) For purposes of this Section 4.6, 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, or other public media, (e.g., on-line
networks such as the Internet or other electronic messages), 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, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to IVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that IVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with FKLA, and
trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to IVIF. IVIF hereby notifies FKLA
that, in the event that IVIF implements Mixed and Shared Funding, it may be
appropriate to include in the prospectus pursuant to which a Contract is offered
disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
IVIF agrees that its Board of Directors shall at all times consist of
trustees a majority of whom (the "Disinterested Directors") are not interested
persons of IVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
11
5.3 Monitoring for Material Irreconcilable Conflicts.
IVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing IVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in IVIF ("Participating
Plans"). FKLA agrees to inform the Board of Directors of IVIF of the existence
of or any potential for any such material irreconcilable conflict of which it is
aware. The concept of a "material irreconcilable conflict" is not defined by the
1940 Act or the rules thereunder, but the Parties recognize that such a conflict
may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting
instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions
of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, FKLA will assist the Board of
Directors in carrying out its responsibilities by providing the Board of
Directors with all information reasonably necessary for the Board of Directors
to consider any issue raised, including information as to a decision by FKLA to
disregard voting instructions of Participants. FKLA's responsibilities in
connection with the foregoing shall be carried out with a view only to the
interests of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, FKLA will, if it is a Participating
Insurance Company for which a material irreconcilable conflict is relevant, at
its own expense and to the extent reasonably practicable (as determined by a
majority of the Disinterested Directors), take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict, which steps may
include, but are not limited to:
12
(i) withdrawing the assets allocable to some or all of the Accounts
from IVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of IVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate,
segregating the assets of any particular group (e.g., annuity
Participants, life insurance Participants or all Participants)
that votes in favor of such segregation, or offering to the
affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of FKLA's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, FKLA may be
required, at IVIF's election, to withdraw each Account's investment in IVIF or
any Fund. No charge or penalty will be imposed as a result of such withdrawal.
Any such withdrawal must take place within six (6) months after IVIF gives
notice to FKLA that this provision is being implemented, and until such
withdrawal IVIF shall continue to accept and implement orders by FKLA for the
purchase and redemption of Shares of IVIF.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to FKLA conflicts with the majority of
other state regulators, then FKLA will withdraw each Account's investment in
IVIF within six (6) months after IVIF's Board of Directors informs FKLA that it
has determined that such decision has created a material irreconcilable
conflict, and until such withdrawal IVIF shall continue to accept and implement
orders by FKLA for the purchase and redemption of Shares of IVIF. No charge or
penalty will be imposed as a result of such withdrawal.
(d) FKLA agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will IVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. FKLA
will not be required by the terms hereof to establish a new funding medium for
any Contracts if an offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
13
5.5 Notice to FKLA.
IVIF will promptly make known in writing to FKLA the Board of Directors'
determination of the existence of a material irreconcilable conflict, a
description of the facts that give rise to such conflict and the implications of
such conflict.
5.6 Information Requested by Board of Directors.
FKLA and IVIF (or its investment adviser) will at least annually submit to
the Board of Directors of IVIF such reports, materials or data as the Board of
Directors may reasonably request so that the Board of Directors may fully carry
out the obligations imposed upon it by the provisions hereof or any exemptive
order granted by the SEC to permit Mixed and Shared Funding, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying Participating Insurance
Companies and Participating Plans of a conflict, and determining whether any
proposed action adequately remedies a conflict, will be properly recorded in the
minutes of the Board of Directors or other appropriate records, and such minutes
or other records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which IVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, IVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 Other Requirements.
IVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with IVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
14
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to IVIF,
upon six (6) months advance written notice to the other parties, or, if later,
upon receipt of any required exemptive relief from the SEC, unless otherwise
agreed to in writing by the parties; or
(b) at the option of IVIF upon institution of formal proceedings against
FKLA or its affiliates by the NASD, the SEC, any state insurance regulator or
any other regulatory body regarding FKLA's obligations under this Agreement or
related to the sale of the Contracts, the operation of each Account, or the
purchase of Shares, if, in each case, IVIF reasonably determines that such
proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on IVIF with
respect to which the Agreement is to be terminated; or
15
(c) at the option of FKLA upon institution of formal proceedings against
IVIF, its principal underwriter, or its investment adviser by the NASD, the SEC,
or any state insurance regulator or any other regulatory body regarding IVIF's
obligations under this Agreement or related to the operation or management of
IVIF or the purchase of IVIF Shares, if, in each case, FKLA reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on FKLA, or the Subaccount corresponding to IVIF with respect to which the
Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) IVIF's Shares are not
registered and, in all material respects, issued and sold in accordance with any
applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by FKLA; or
(e) upon termination of the corresponding Subaccount's investment in IVIF
pursuant to Section 5 hereof; or
(f) at the option of FKLA if IVIF ceases to qualify as a RIC under
Subchapter M of the Code or under successor or similar provisions, or if FKLA
reasonably believes that IVIF may fail to so qualify; or
(g) at the option of FKLA if IVIF fails to comply with Section 817(h) of
the Code or with successor or similar provisions, or if FKLA reasonably believes
that IVIF may fail to so comply; or
(h) at the option of IVIF if the Contracts issued by FKLA cease to qualify
as annuity contracts or life insurance contracts under the Code (other than by
reason of IVIF's noncompliance with Section 817(h) or Subchapter M of the Code)
or if interests in an Account under the Contracts are not registered, where
required, and, in all material respects, are not issued or sold in accordance
with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
16
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, IVIF will, at the option
of FKLA, continue to make available additional shares of IVIF 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 will be permitted to reallocate investments in IVIF (as in
effect on such date), redeem investments in IVIF and/or invest in IVIF upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 6.3 will not apply to any terminations under Section 5
and the effect of such terminations will be governed by Section 5 of this
Agreement.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that FKLA may, by written notice shorten said six (6) month period in the case
of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
17
Section 9. Notices
Notices and communications required or permitted will be given by means
mutually acceptable to the Parties concerned. Each other notice or communication
required or permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other persons,
addresses or facsimile numbers as the Party receiving such notices or
communications may subsequently direct in writing:
INVESCO Variable Investment Funds, Inc.
INVESCO Distributors, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Federal Xxxxxx Life Assurance Company
0 Xxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
Attn: General Counsel
[Underwriter]
Street Address
City, State, Zip Code
Attn: General Counsel
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof,
FKLA will distribute all proxy material furnished by IVIF to Participants to
whom pass-through voting privileges are required to be extended and will solicit
voting instructions from Participants. FKLA will vote Shares in accordance with
timely instructions received from Participants. FKLA will vote Shares that are
(a) not attributable to Participants to whom pass-through voting privileges are
extended, or (b) attributable to Participants, but for which no timely
instructions have been received, in the same proportion as Shares for which said
instructions have been received from Participants, so long as and to the extent
that the SEC continues to interpret the 1940 Act to require pass through voting
privileges for Participants. Neither FKLA nor any of its affiliates will in any
way recommend action in connection with or oppose or interfere with the
solicitation of proxies for the Shares held for such Participants. FKLA reserves
the right to vote shares held in any Account in its own right, to the extent
permitted by law. FKLA shall be responsible for assuring that each of its
Accounts holding Shares calculates voting privileges in a manner consistent with
that of other Participating Insurance Companies or in the manner required by the
Mixed and Shared Funding exemptive order obtained by IVIF. IVIF will notify FKLA
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. IVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, IVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although IVIF is not one of the trusts described in
18
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, IVIF 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.
Section 11. Foreign Tax Credits
IVIF agrees to consult in advance with FKLA concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 Of IVIF and INVESCO by FKLA and the Underwriter.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
FKLA and the Underwriter agree to indemnify and hold harmless IVIF, INVESCO,
their affiliates, and each person, if any, who controls IVIF, INVESCO, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective trustees and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
FKLA and the Underwriter) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise;
provided, the Account owns shares of IVIF and insofar as such losses, claims,
damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising 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 FKLA or the
Underwriter by or on behalf of IVIF or INVESCO for use in any
Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising or
otherwise for use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the foregoing);
or
19
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in IVIF's 1933 Act registration statement, IVIF
Prospectus, sales literature or advertising of IVIF, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of FKLA, the Underwriter or their
respective affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of FKLA,
the Underwriter or their respective affiliates or persons under
their control (including, without limitation, their employees and
"persons associated with a member," as that term is defined in
paragraph (q) of Article I of the NASD's By-Laws), in connection
with the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in IVIF's 1933
Act registration statement, IVIF Prospectus, sales literature or
advertising of IVIF, or any amendment or supplement to any of the
foregoing, 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 and in conformity with
information furnished to IVIF, INVESCO or their affiliates by or
on behalf of FKLA, the Underwriter or their respective affiliates
for use in IVIF's 1933 Act registration statement, IVIF
Prospectus, sales literature or advertising of IVIF, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by FKLA or the Underwriter to
perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or
any material breach of any representation and/or warranty made by
FKLA or the Underwriter in this Agreement or arise out of or
result from any other material breach of this Agreement by FKLA
or the Underwriter; or
(v) arise as a result of failure by the Contracts issued by FKLA to
qualify as annuity contracts or life insurance contracts under
the Code, otherwise than by reason of any Fund's failure to
comply with Subchapter M or Section 817(h) of the Code.
(b) Neither FKLA nor the Underwriter shall be liable under this Section
12.1 with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
IVIF or INVESCO.
20
(c) Neither FKLA nor the Underwriter shall be liable under this Section
12.1 with respect to any action against an Indemnified Party unless IVIF or
INVESCO shall have notified FKLA and the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action 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 FKLA and the
Underwriter of any such action shall not relieve FKLA and the Underwriter from
any liability which they may have to the Indemnified Party against whom such
action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, FKLA and the Underwriter shall be entitled to participate, at
their own expense, in the defense of such action and also shall be entitled to
assume the defense thereof, with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from FKLA or the Underwriter to such Indemnified Party of FKLA's or the
Underwriter's election to assume the defense thereof, the Indemnified Party will
cooperate fully with FKLA and the Underwriter and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY nor
the Underwriter will be liable to such Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 Of FKLA and the Underwriter by IVIF and INVESCO.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, IVIF and INVESCO agree to indemnify and hold harmless FKLA, the
Underwriter, their respective affiliates, and each person, if any, who controls
FKLA, the Underwriter or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective trustees and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of IVIF and/or INVESCO) or actions in
respect thereof (including, to the extent reasonable, legal and other expenses),
to which the Indemnified Parties may become subject under any statute,
regulation, at common law, or otherwise; provided, the Account owns shares of
IVIF and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in IVIF's 1933
Act registration statement, IVIF Prospectus or sales literature
or advertising of IVIF (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 IVIF or its
affiliates by or on behalf of FKLA, the Underwriter or their
respective affiliates for use in IVIF's 1933 Act registration
statement, IVIF Prospectus, or in sales literature or advertising
or
21
otherwise for use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of IVIF,
INVESCO or their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of IVIF, INVESCO or their affiliates or persons under
their control (including, without limitation, their employees and
"persons associated with a member" as that term is defined in
Section (q) of Article I of the NASD By-Laws), in connection with
the sale or distribution of IVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, 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 and in conformity with information furnished to FKLA, the
Underwriter or their respective affiliates by or on behalf of
IVIF or INVESCO for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by IVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any material
breach of any representation and/or warranty made by IVIF in this
Agreement or arise out of or result from any other material
breach of this Agreement by IVIF.
(b) The parties agree that the foregoing indemnification by IVIF shall not
apply to any acts or omissions of INVESCO. Except to the extent provided in
Sections 12.2(c), 12.2(d) and 12.2(e) hereof, IVIF and INVESCO agree to
indemnify and hold harmless the Indemnified Parties from and against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
thereof with, the written consent of IVIF and/or INVESCO) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses) to which
the Indemnified Parties may become subject directly or indirectly under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or actions directly or indirectly result from or arise out of the
failure of any Fund to operate as a regulated investment company in compliance
with (i) Subchapter M of the Code and regulations thereunder, or (ii) Section
817(h) of the Code and regulations thereunder, including, without limitation,
any income taxes and related penalties, rescission charges,
22
liability under state law to Participants asserting liability against FKLA
pursuant to the Contracts, the costs of any ruling and closing agreement or
other settlement with the IRS, and the cost of any substitution by FKLA of
Shares of another investment company or portfolio for those of any adversely
affected Fund as a funding medium for each Account that FKLA reasonably deems
necessary or appropriate as a result of the noncompliance.
(c) Neither IVIF nor INVESCO shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to FKLA, the
Underwriter, each Account or Participants.
(d) Neither IVIF nor INVESCO shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified IVIF and/or INVESCO in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the action 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 IVIF or INVESCO of any such action shall not
relieve IVIF or INVESCO from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
Section 12.2. Except as otherwise provided herein, in case any such action is
brought against an Indemnified Party, IVIF and/or INVESCO will be entitled to
participate, at its own expense, in the defense of such action and also shall be
entitled to assume the defense thereof (which shall include, without limitation,
the conduct of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from IVIF and/or INVESCO to such Indemnified Party of IVIF's or INVESCO's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with IVIF and INVESCO and shall bear the fees and expenses of any
additional counsel retained by it, and IVIF and INVESCO will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
(e) In no event shall IVIF or INVESCO be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, FKLA, the Underwriter or any other Participating Insurance
Company or any Participant, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of any
representation, warranty, and/or covenant made by FKLA or the Underwriter
hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and covenants; (ii)
the failure by FKLA or any Participating Insurance Company to maintain its
segregated asset account (which invests in any Fund) as a legally and validly
established segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the 1940 Act (unless
exempt therefrom); or (iii) the failure by FKLA or any Participating Insurance
Company to maintain its variable annuity or life insurance
23
contracts (with respect to which any Fund serves as an underlying funding
vehicle) as annuity contracts or life insurance contracts under applicable
provisions of the Code.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Delaware law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
24
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
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, that the Parties are entitled to under federal and state
laws.
25
Section 17. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
Section 18. Confidentiality
IVIF acknowledges that the identities of the customers of FKLA or any of
its affiliates (collectively, the "FKLA Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the FKLA Protected
Parties or any of their employees or agents in connection with FKLA's
performance of its duties under this Agreement are the valuable property of the
FKLA Protected Parties. IVIF agrees that if it comes into possession of any list
or compilation of the identities of or other information about the FKLA
Protected Parties' customers, or any other information or property of the FKLA
Protected Parties, other than such information as may be independently developed
or compiled by IVIF from information supplied to it by the FKLA Protected
Parties' customers who also maintain accounts directly with IVIF, IVIF will hold
such information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with FKLA's
prior written consent; or (b) as required by law or judicial process. FKLA
acknowledges that the identities of the customers of IVIF or any of its
affiliates (collectively, the "IVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the IVIF Protected
Parties or any of their employees or agents in connection with IVIF's
performance of its duties under this Agreement are the valuable property of the
IVIF Protected Parties. FKLA agrees that if it comes into possession of any list
or compilation of the identities of or other information about the IVIF
Protected Parties' customers or any other information or property of the IVIF
Protected Parties, other than such information as may be independently developed
or compiled by FKLA from information supplied to it by the IVIF Protected
Parties' customers who also maintain accounts directly with FKLA, FKLA will hold
such information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with IVIF's
prior written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 18 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
(a) Except as may otherwise be provided in a License Agreement among A I M
Management Group Inc., FKLA and the Underwriter, neither FKLA nor the
Underwriter or any of their respective affiliates, shall use any trademark,
trade name, service xxxx or logo of IVIF,
26
INVESCO or any of their respective affiliates, or any variation of any such
trademark, trade name, service xxxx or logo, without IVIF's or INVESCO's prior
written consent, the granting of which shall be at IVIF's or INVESCO's sole
option.
(b) Except as otherwise expressly provided in this Agreement, neither IVIF,
its investment adviser, its principal underwriter, or any affiliates thereof
shall use any trademark, trade name, service xxxx or logo of FKLA, the
Underwriter or any of their affiliates, or any variation of any such trademark,
trade name, service xxxx or logo, without FKLA's or the Underwriter's prior
written consent, the granting of which shall be at FKLA's or the Underwriter's
sole option.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
Section 21. Amendments
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
INVESCO Variable Investment Funds, Inc. Attest:
By: By:
------------------------------------ ---------------------------------
Name: Xxxxxx X. Xxxxxx Name:
-------------------------------
Title: Treasurer Title:
------------------------------
INVESCO Funds Group, Inc. Attest:
By: By:
------------------------------------ ---------------------------------
Name: Xxxxxx X. Xxxxxx Name:
-------------------------------
Title: Senior Vice President & Treasurer Title:
------------------------------
27
Federal Xxxxxx Life Assurance Company Attest:
By: By:
------------------------------------ ---------------------------------
Name: Name:
---------------------------------- -------------------------------
Title: Title:
--------------------------------- ------------------------------
[Underwriter] Attest:
By: By:
------------------------------------ ---------------------------------
Name: Name:
---------------------------------- -------------------------------
Title: Title:
--------------------------------- ------------------------------
28
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
.. INVESCO VARIABLE INVESTMENT FUNDS, INC.
[LIST APPLICABLE PORTFOLIOS]
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
29
SCHEDULE B
INVESCO's PRICING ERROR POLICIES
Determination of Materiality
In the event that INVESCO discovers an error in the calculation of IVIF's net
asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered
immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following
thresholds are applied:
a. If the amount of the difference in the erroneous net asset value and
the correct net asset value is less than .5% of the correct net asset
value, INVESCO will reimburse the affected Fund to the extent of any
loss resulting from the error. No other adjustments shall be made.
b. If the amount of the difference in the erroneous net asset value and
the correct net asset value is .5% of the correct net asset value or
greater, then INVESCO will determine the impact of the error to the
affected Fund and shall reimburse such Fund (and/or FKLA, as
appropriate, such as in the event that the error was not discovered
until after FKLA processed transactions using the erroneous net asset
value) to the extent of any loss resulting from the error. To the
extent that an overstatement of net asset value per share is detected
quickly and FKLA has not mailed redemption checks to Participants,
FKLA and INVESCO agree to examine the extent of the error to determine
the feasibility of reprocessing such redemption transaction (for
purposes of reimbursing IVIF to the extent of any such overpayment).
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to
paragraph (b), above, INVESCO shall reimburse FKLA for FKLA's reprocessing costs
in an amount not to exceed $1.00 per contract affected by $10 or more.
The Pricing Policies described herein may be modified by IVIF as approved by its
Board of Directors. INVESCO agrees to use its best efforts to notify FKLA at
least five (5) days prior to any such meeting of the Board of Directors of IVIF
to consider such proposed changes.
30
SCHEDULE C
EXPENSE ALLOCATIONS
================================================================================
FKLA IVIF/INVESCO
--------------------------------------------------------------------------------
preparing and filing the Account's Preparing and filing IVIF's
registration statement registration statement
--------------------------------------------------------------------------------
text composition for Account text composition for Fund prospectuses
prospectuses and supplements and supplements
--------------------------------------------------------------------------------
text alterations of prospectuses text alterations of prospectuses
(Account) and supplements (Account) (Fund) and supplements (Fund)
--------------------------------------------------------------------------------
printing Account and Fund prospectuses a camera ready Fund prospectus
and supplements
--------------------------------------------------------------------------------
text composition and printing Account text composition and printing Fund
SAIs SAIs
--------------------------------------------------------------------------------
mailing and distributing Account SAIs mailing and distributing Fund SAIs to
to policy owners upon request by policy policy owners upon request by policy
owners owners
--------------------------------------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal
Securities Laws and to prospective
purchasers
--------------------------------------------------------------------------------
text composition (Account), printing, text composition of annual and
mailing, and distributing annual and semi-annual reports (Fund)
semi-annual reports for Account (Fund
and Account as, applicable)
--------------------------------------------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction statements and voting instruction
solicitation materials to policy owners solicitation materials to policy
with respect to proxies related to the owners with respect to proxies related
Account to IVIF
--------------------------------------------------------------------------------
preparation, printing and distributing
sales material and advertising relating
to IVIF, insofar as such materials
relate to the Contracts and filing such
materials with and obtaining approval
from, the SEC, the NASD, any state
insurance regulatory authority, and any
other appropriate regulatory authority,
to the extent required
================================================================================
31
