Exhibit 8.7
PARTICIPATION AGREEMENT
Among
XXXXXXXXXXX VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
and
FEDERAL XXXXXX LIFE ASSURANCE (FKLA) COMPANY
THIS AGREEMENT (the "Agreement"), made and entered into as of the 8th
day of August 2003 by and among Federal Xxxxxx Life Assurance Company
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as it may be
amended from time to time by mutual consent (hereinafter collectively the
"Accounts"), Xxxxxxxxxxx Variable Account Funds (hereinafter the "Fund") and
OppenheimerFunds, Inc. (hereinafter the "Adviser").
WHEREAS, the Fund is an open-end management investment company and is
available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies, variable annuity contracts and other tax-deferred products
(collectively, the "Variable Insurance Products") offered by insurance companies
(hereinafter "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio", and each representing the
interests in a particular managed pool of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated July 16, 1986 (File No. 812-6324)
granting Participating Insurance Companies and variable annuity and variable
life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Mixed and Shared Funding Exemptive Order")
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act");
WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940;
WHEREAS, the Company has registered or will register certain variable
annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be duly organized, validly existing
segregated asset accounts, established by resolution of the Board of Directors
of the Company, to set aside and invest assets attributable to the aforesaid
variable contracts (the Separate Account(s) covered by the Agreement are
specified in Schedule 1 attached hereto, as may be modified by mutual consent
from time to time); and
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless an exemption from registration
is available);
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 2 attached hereto
as may be modified by mutual consent from time to time),
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on behalf of the Accounts to fund the Contracts, and the Fund is authorized to
sell such shares to unit investment trusts such as the Accounts at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the Fund,
the Adviser and the Company agree as follows:
ARTICLE I. Purchase and Redemption of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the Fund
which the Company orders on behalf of the Accounts, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives written (or facsimile) notice of
such order by 9:30 a.m. New York time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Fund agrees to make Fund shares available for purchase by the
Company for their separate Accounts listed in Schedule 1 on those days on which
the Fund calculates its net asset value pursuant to rules of the SEC; provided,
however, that the Board of Trustees of the Fund (hereinafter the "Trustees") may
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Trustees, acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of any Portfolio (including without limitation purchase orders that
individually or together with other contemporaneous orders represent large
transactions in shares of
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any Portfolio held for a relatively brief period of time). Such shares
shall be purchased at the applicable net asset value per share.
1.3. The Fund agrees to redeem, upon the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.3,
the Company shall be the designee of the Fund for receipt of requests for
redemption and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives written (or facsimile) notice of such request
for redemption by 9:30 a.m. New York time on the next following Business Day.
1.4. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information. The
Company shall not permit any person other than a Contract owner or other
authorized person to give instructions to the Company which would require the
Company to redeem or exchange shares of the Fund.
1.5 With respect to payment of the purchase price by the Company and
of redemption proceeds by the Fund, the Company and the Fund shall net all
purchase and redemption orders on a given Business Day and shall transmit one
net payment for all of the Portfolios. Payment shall be in federal funds
transmitted by wire with the reasonable expectation of receipt by 2:00 p.m.,
Eastern Time, on the next Business Day after receipt by the Fund or its designee
of the purchase order or redemption request. If payment in federal funds for any
redemption is not received or is received by the Company after the close of
business on such Business Day, the Fund shall promptly
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upon the Company's request reimburse the Company for any charges, costs, fees,
interest or other expenses incurred by the Company as a result of portfolio
transactions effected by the Company based upon such redemption request. After
consulting with the Company, the Fund reserves the right to delay payment of
redemption proceeds, but in no event may such payment be delayed longer than the
period permitted under Section 22(e) of the 0000 Xxx.
1.6 The Fund shall make the daily closing net asset value, dividend
and capital gain information for each Portfolio available on a per share basis
to the Company as soon as reasonably practical after the information is
calculated and shall use its best efforts to make the information available by
6:00 p.m., Eastern Time, on each Business Day. Any material errors in the
calculation of net asset value, dividend and capital gain information shall be
reported immediately upon discovery to the Company. The Fund shall reimburse the
Accounts and Contract owners for any loss caused by any error in its calculation
of net asset value, dividend and capital gain information.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the securities deemed to
be issued by the Accounts under the Contracts are or will be registered under
the 1933 Act (unless an exemption from registration is available) and, that the
Contracts will be issued, offered and sold in compliance in all material
respects with all applicable federal and state laws and regulations, including
without limitation state insurance suitability requirements and National
Association of Securities Dealers, Inc. ("NASD") conduct rules. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable state law and that
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it has legally and validly established the Accounts prior to the issuance or
sale of units thereof as a segregated asset account and has registered the
Accounts as unit investment trusts in accordance with the provisions of the 1940
Act (unless an exemption from registration is available) to serve as segregated
investment accounts for the Contracts, and that it will maintain such
registration for so long as any Contracts are outstanding or until registration
is no longer required under federal and state securities laws. The Company shall
amend the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Accounts from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company shall register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants, for purposes other than
diversification under Section 817 of the Internal Revenue Code of 1986 as
amended (the "Code"), that the Contracts are currently and at the time of
issuance will be treated as life insurance or annuity contracts under applicable
provisions of the Code and the regulations issued thereunder, and that it will
make every effort to maintain such treatment and that it will notify the Fund
and the Adviser immediately upon having a reasonable basis for believing that
the Contracts have ceased to be so treated or that they might not be so treated
in the future. In addition, the Company represents and warrants that the
Accounts are "segregated asset accounts" and that interests in the Accounts 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 issued thereunder (and any amendments or other modifications to such
section or such regulations (and any revenue rulings, revenue procedures,
notices and other published announcements of the Internal Revenue Service
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interpreting these provisions). The Company shall continue to meet such
definitional requirements, and it will notify the Fund and the Adviser
immediately upon having a reasonable basis for believing that such requirements
have ceased to be met or that they might not be met in the future. The Company
represents and warrants that it will not purchase Fund shares with assets
derived from tax-qualified retirement plans except indirectly, through Contracts
purchased in connection with such plans.
2.3. Subject to Section 2.5 hereof, the Company represents and
warrants that the Contracts are currently and at the time of issuance will be
treated as life insurance or annuity contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Adviser immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.4. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance and sold in accordance with applicable state and federal law and that
the Fund is and shall remain registered under the 1940 Act for as long as the
Fund shares are sold. The Fund shall amend the registration statement for its
shares under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The 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 the Fund.
2.5. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the
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regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund and the Advisor represent and warrant that each Portfolio of the Fund will
comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating
to the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section or
Regulations (and any revenue rulings, revenue procedures, notices, and other
published announcements of the Internal Revenue Service interpreting these
provisions). In the event the Fund should fail to so qualify, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to resume
compliance with such diversification requirement within the grace period
afforded by Treasury Regulation 1.817.5. The Fund and Adviser represent that
each Portfolio is qualified as a Regulated Investment Company under Subchapter M
of the Code and that it will maintain such qualification (under Subchapter M or
any successor provision), and that it will notify the Company immediately upon
having a reasonable basis for believing that it has ceased to so qualify or that
it might not so qualify in the future.
2.6. If the Contracts purchase shares of a series and class of the
Fund that have adopted a plan under Rule 12b-1 under the 1940 Act to finance
distribution expenses (a "12b-1 Plan"), the Company agrees to provide the
Trustees any information as may be reasonably necessary for the Trustees to
review the Fund's 12b-1 Plan or Plans.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply with applicable provisions of the 1940 Act.
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2.8. The Adviser represents and warrants that it is and will remain
duly registered under all applicable federal and state securities laws and that
it shall perform its obligations for the Fund in compliance with any applicable
state and federal securities laws.
2.9. The Fund and Adviser each represent and warrant that all of its
respective directors, trustees, officers, employees, investment advisers, and
transfer agent of the Fund are and shall continue to be at all times covered by
a blanket fidelity bond (which may, at the Fund's election, be in the form of a
joint insured bond) or similar coverage for the benefit of the Fund in an amount
not less than the minimal coverage as required currently by Section 17(g) and
Rule 17g-1 of the 1940 Act or related provisions as may be promulgated from time
to time. The aforesaid Bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable insurance company. The Adviser agrees to make
all reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Company in the event
that such coverage no longer applies.
2.10. The Fund and the Adviser represent that they will make a good
faith effort to (a) materially comply with any applicable state insurance law
restrictions with which the Fund must comply to perform its obligations under
this Agreement, provided, however, that the Company provide specific
notification of such restrictions to the Fund and the Adviser in advance and in
writing,; and (b) furnish information to the Company about the Fund not
otherwise available to the Company which is required by state insurance law to
enable the Company to obtain the authority needed to issue the Contracts in any
applicable state.
ARTICLE III. Sales Material, Prospectuses and Other Reports
3.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the
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Adviser is named, at least ten Business Days prior to its use. No such material
shall be used if the Fund or its designee reasonably object to such use within
ten Business Days after receipt of such material. "Business Day" shall mean any
day in which the New York Stock Exchange is open for trading and in which the
Fund calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
3.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
3.3. For purposes of this Article III, the phrase "sales literature or
other promotional material" means 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 billboard
or electronic media), and sales literature (such as brochures, circulars, market
letters and form letters), distributed or made generally available to customers
or the public.
3.4. The Fund shall, at its expense, provide to Company a sufficient
number of its current prospectuses for distribution, at the Company's expense,
to existing Contract owners as required by applicable laws and regulations. In
lieu thereof, at the option of the Company, the Fund shall provide a copy of its
current prospectus within a reasonable period of its filing date, and provide
other assistance as is reasonably necessary in order for the Company once each
year (or more frequently if the prospectus for the Fund is supplemented or
amended) to have the prospectus for the Contracts and the Fund's prospectus
printed together in one document. In such case, the Fund agrees to reimburse the
Company for the cost of printing a sufficient number of prospectuses for
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distribution to existing Contract owners, in an amount equal to a prorata
portion of the cost of each printed document based on the ratio of the number of
pages provided by the Fund to the total number of pages in such printed
document. Distribution of the prospectuses shall be at Company's expense. The
Company shall bear the expenses of printing Fund prospectuses that are
distributed to prospective purchasers of Variable Contracts. If the Fund is not
provided with the typeset form of the Fund's prospectus prior to printing, the
Company agrees to immediately correct, at the Company's expense, any material
errors in the final printed version of the prospectus to the extent the printed
version varies from the document provided by the Fund.
3.5. The Fund or the Adviser, at its expense, shall provide the
Company with a sufficient number of of the Fund's proxy material, reports to
shareholders, other information relating to the Fund necessary to prepare
financial reports, and other communications to shareholders for distribution to
Contract owners at the Company's expense. With respect to reports to
shareholders, at the option of the Company, the Fund or Adviser shall provide a
copy of its current report to shareholders within a reasonable period of its
filing date, and provide other assistance as is reasonably necessary in order
for the Company to have the report and other reports attributable to the
Contracts printed together in one document. In such case, the Fund agrees to
reimburse the Company for the cost of printing a sufficient number of reports to
shareholders for distribution to existing Contract owners, in an amount equal to
a prorata portion of the cost of each document based on the ratio of the number
of pages provided by the Fund to the total number of pages in such printed
document. Distribution of the reports to shareholders shall be at Company's
expense. If the Fund is not provided with the typeset forms of such material
prior to printing, the Company agrees to immediately correct, at the Company's
expense, any material errors in the final printed versions of such material to
the extent the printed versions vary from the documents provided by the Fund.
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3.6. In the event a meeting of shareholders of the Fund (or any
Portfolio) is called by the Trustees, the Company shall, if and to the extent
required by law and so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting privileges for variable
contract owners:
(i) solicit voting instructions from Contract owners;
(ii) vote the Portfolio(s) shares held in the Account in accordance
with instructions received from Contract owners;
(iii) vote Portfolio shares held in the Account for which no
instructions have been received, as well as Portfolio shares held
by the Company, in the same proportion as Portfolio(s) shares for
which instructions have been received from Contract owners; and
(iv) take responsibility for assuring that the Accounts calculate
voting privileges in a manner consistent with other Participating
Insurance Companies. The Fund and Adviser agree to assist the
Company and the other Participating Insurance Companies in
carrying out this responsibility.
The Company reserves the right to disregard voting instructions to the extent
permitted by Rule 6e-2 or Rule 6e-3(T) under the 1940 Act or by applicable state
insurance laws, or the Fund's mixed and shared funding exemptive order. 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. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the Fund calculates voting privileges in a
manner consistent with the provisions set forth above.
ARTICLE IV. Fees and Expenses
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4.1. The Fund and Adviser shall pay no fee or other compensation to
the Company under this agreement, and the Company shall pay no fee or other
compensation to the Fund or Adviser, except as provided herein.
4.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. The Fund
shall see to it that all its shares are registered and authorized for issuance
in accordance with applicable federal law and, if and to the extent advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law.
4.3. The expenses of typesetting, printing and distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company shall be borne by the parties as described in Sections 3.4 and 3.5,
hereof
4.4. In the event the Fund adds one or more additional Portfolios and
the parties desire to make such Portfolios available to the respective Contract
owners as an underlying investment medium, a new Schedule 2 or an amendment to
this Agreement shall be executed by the parties authorizing the issuance of
shares of the new Portfolios to the particular Accounts. The amendment may also
provide for the sharing of expenses for the establishment of new Portfolios
among Participating Insurance Companies desiring to invest in such Portfolios
and the provision of funds as the initial investment in the new Portfolios.
ARTICLE V. Potential Conflicts
5.1. The Board of Trustees of the Fund (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
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variety of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or 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.
5.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. The Company agrees to be bound by the responsibilities
of a participating insurance company as set forth in the Mixed and Shared
Funding Exemptive Order, including without limitation the requirement that the
Company 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 in
monitoring such conflicts under the Mixed and Shared Funding Exemptive Order, by
providing the Board in a timely manner 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 Contract owner
voting instructions are disregarded and by confirming in writing, at the Fund's
request, that the Company is unaware of any such potential or existing material
irreconcilable conflicts.
5.3. 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, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees), take
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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 Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate accounts. The Company's obligations under this
Section 5.3 shall not depend on whether other affected participating insurance
companies fulfill a similar obligation.
5.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision could conflict with the majority of Contract owner instructions, the
Company may be required, at the Fund's election, to withdraw the Accounts'
investment in the Fund and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of the six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
5.5. 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
Accounts' investment in the Fund and terminate this Agreement
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within six 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 Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund,
subject to applicable regulatory limitation.
5.6. For purposes of Sections 5.3 through 5.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 5.3 to establish a new
funding medium for Contracts if an offer to do so has been declined by vote of a
majority of Contract 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 particular Accounts' 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 as determined by a majority of the
disinterested members of the Board.
ARTICLE VI. Applicable Law
6.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
6.2. This Agreement shall be subject to the provisions of the 1933
Act, the Securities Exchange Act of 1934 and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemption from those
statutes, rules and regulations as the Securities and
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Exchange Commission may grant (including, but not limited to, the Mixed and
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith, provided however that the term "Registration
Statement or Prospectus for the Variable Contracts" and terms of similar import
shall include (i) any offering circular or similar document and sales literature
or other promotional materials used to offer and/or sell the variable Contracts
in compliance with the private offering exemption in the 1933 Act and applicable
federal and state laws and regulations, and (ii) the term "Registration
Statement" and "Prospectus" as defined in the 1933 Act.
ARTICLE VII. Termination
7.1 This Agreement shall terminate:
(a) at the option of any party upon six month's advance written
notice to the other parties;
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of its
Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt notice of the
election to terminate for such cause and an explanation of such cause shall be
furnished by the Company;
(c) as provided in Article V;
(d) at the option of the Fund or the Adviser upon institution of
formal proceedings against the Company (or its parent) by the NASD, the SEC, the
insurance commission of any state or any other regulatory body having
jurisdiction over that party, which would have a material adverse effect on the
Company's ability to perform its obligations under this Agreement;
(e) at the option of the Company upon institution of formal
proceedings against the Fund or the Adviser (or its parent) by the NASD, the
SEC, or any state securities or
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insurance department or any other regulatory body having jurisdiction over that
party, which would have a material adverse effect on the Adviser's or the Fund's
ability to perform its obligations under this Agreement;
(f) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals or the vote of the Contract owners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares have
been selected to serve as the underlying investment media. The Company will give
45 days prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares;
(g) at the option of the Company or the Fund upon a determination
by a majority of the Board, or a majority of the disinterested Board members,
that an irreconcilable material conflict exists among the interests of (i) all
Contract owners of variable insurance products of all separate accounts or (ii)
the interests of the Participating Insurance Companies investing in the Fund as
delineated in Article VII of this Agreement;
(h) at the option of the Company if the Fund ceases to qualify as
a Regulated Investment Company under Subchapter M of the Code, or under any
successor or similar provision, or if the Company reasonably believes that the
Fund may fail to so qualify;
(i) at the option of the Company if the Fund fails to meet the
diversification requirements specified in section 2.5 hereof or if the Company
reasonably believes that the Fund will fail to meet such requirements;
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(j) at the option of any party to this Agreement, upon another
party's failure to cure a material breach of any provision of this Agreement
within thirty days after written notice thereof;
(k) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund or the Adviser
has suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company;
(l) at the option of the Fund or the Adviser, if the Fund or
Adviser respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or the Adviser;
(m) subject to the Fund's compliance with Section 2.5 hereof, at
the option of the Fund in the event any of the Contracts are not issued or sold
in accordance with applicable requirements of federal and/or state law; or
(n) at the option of the Company in the event any of the Fund's's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or exemptions therefrom, or such law precludes the use of
those shares as the underlying investment media of the Contracts issued or to be
issued by the Company.
7.2. Notwithstanding any termination of this Agreement pursuant to
Section 7.1,
-19-
for so long as the Fund continues to exist the Fund and the Adviser shall at the
option of the Company continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement ("Existing
Contracts"), provided that the Fund and/or Portfolio has not been terminated or
otherwise closed to new and/or current investors and investments. Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. Neither this, nor any other provision in the agreement, will
interfere with the Board's ability to take action it determines in good faith it
is required to take under the 1940 Act and/or state law. The parties agree that
this Section 7.2 shall not apply to any termination under Article V and the
effect of Article V terminations shall be governed by Article V of this
Agreement.
7.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 7.1(a) may be exercised for cause
or for no cause.
7.4. The provisions of Article VIII shall survive any termination of
this Agreement.
ARTICLE VIII. Indemnification
8.1.Indemnification By The Company
(a). The Company agrees to indemnify and hold harmless the Fund
and the Adviser, each member of their Board of Trustees or Board of Directors,
each of their officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act
-20-
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Contracts or contained in
sales literature or other promotional material 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 in light of the
circumstances which they were made; provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or
on behalf of the Fund or the Adviser for use in the
registration statement, prospectus or statement of
additional information for the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
by or on behalf of the Company (other than statements or
representations contained in the Fund registration
statement, Fund prospectus or sales literature or other
promotional material of the Fund not supplied by the Company
or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares,
provided any such statement or representation or such
wrongful conduct was not made in reliance upon and
-21-
in conformity with information furnished in writing, via fax
or via electronic means, to the Company by or on behalf of
the Advisor or the Fund; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, Fund prospectus, statement of
additional information or sales literature or other
promotional material of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading
in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon
information furnished in writing, via fax or via electronic
means, to the Fund or the Adviser by or on behalf of the
Company or persons under its control; or
(iv) arise out of or result from any material breach of this
Agreement by the Company.
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b). The 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 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.
8.2.Indemnification by Adviser and Fund
8.2(a)(1). The Adviser agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement
-22-
with the written consent of the Adviser) or litigation (including reasonable
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus, statement of
additional information or sales literature of the 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 in light of the circumstances in which they
were made; provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished
in writing, via fax or via electronic means, to the Adviser
or the Fund by or on behalf of the Company for use in the
Fund registration statement, prospectus or statement of
additional information, or sales literature or other
promotional material for the Contracts or of the Fund; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Contracts or in the Contract registration statement, the
Contract prospectus, statement of additional information, or
sales literature or other promotional material for the
Contracts not supplied by the Adviser or the Fund or persons
under the control of the Adviser or the Fund respectively)
or wrongful conduct of the Adviser or persons under its
control, with respect to the sale or distribution of the
Contracts, provided any such statement or representation or
such wrongful conduct was not made in reliance upon and in
conformity with information furnished in writing, via fax or
via electronic means, to the Adviser or the Fund by or on
behalf of the Company; or
-23-
(iii) arise out of any untrue statement or allegedly untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information
or sales literature covering the Contracts (or any amendment
thereof or supplement thereto), or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statement or
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing, via fax or via electronic means, to the Company by
or on behalf of the Fund or persons under the control of the
Adviser; or
(iv) arise out of or result from any material breach of this
Agreement by the Adviser (including a failure to comply with
the diversification requirements specified in Section 2.5 of
this Agreement);
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Adviser may
otherwise have.
8.2(a)(2) The Fund agrees to indemnify and hold harmless the
Indemnified Parties [as defined in Section 8.2(a)(1)] against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the operations of the Fund or the sale or acquisition of the
Fund's shares and:
(i) arise out of or are based upon (a) any untrue statement or
alleged untrue statement of any material fact or (b) the omission
or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made,
not misleading, if such fact, statement or omission is contained
in the registration statement for the Fund or the Contracts, or
in the
-24-
prospectus or statement of additional information for the
Contracts or the Fund, or in any amendment to any of the
foregoing, or in sales literature or other promotional material
for the Contracts or of the Fund, provided, however, that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement, fact or omission or such alleged
statement, fact or omission was made in reliance upon and in
conformity with information furnished in writing, via fax or via
electronic means, to the Adviser or the Fund by or on behalf of
the Indemnified Party; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Contracts or in the Contract registration statement, the Contract
prospectus, statement of additional information, or sales
literature or other promotional material for the Contracts not
supplied by the Adviser or the Fund or persons under the control
of the Adviser or the Fund respectively) or wrongful conduct of
the Fund or persons under its control with respect to the sale or
distribution of Contracts, provided any such statement or
representation or such wrongful conduct was not made in reliance
upon and in conformity with information furnished in writing, via
fax or via electronic means, to the Adviser or the Fund by or on
behalf of the Company; or
(iii) arise out of or result from any material breach of this
Agreement by the Fund (including a failure to comply with the
diversification requirements specified in Section 2.5 of this
Agreement);
except to the extent provided in Section 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
(b). The Fund and Adviser 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.
-25-
8.3 Indemnification Procedure
Any person obligated to provide indemnification under this Article
VIII ("indemnifying party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("indemnified party" for the purpose of this Section 8.3) unless such
indemnified party shall have notified the indemnifying party 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 party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provisions of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party's election to assume the defense thereof, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party 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, unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
-26-
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify to the
other party.
If to the Fund:
Xxxxxxxxxxx Variable Account Funds
0000 Xxxxx Xxxxxx Xxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
If to the Adviser:
OppenheimerFunds, Inc.
0000 Xxxxx Xxxxxx Xxx
Xxxxxxxxxx, XX 00000
Attn: General Counsel
If to the Company:
Zurich Life
0000 XxXxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: General Counsel
-27-
ARTICLE X. Miscellaneous
10.1. The Company represents and warrants that any Contracts eligible
to purchase shares of the Fund and offered and/or sold in private placements
will comply in all material respects with the exemptions from the registration
requirements of the 1933 Act and applicable federal and state laws and
regulations.
10.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
(i) this Agreement and (ii) by Title V, Subtitle A of the Xxxxx-Xxxxx-Xxxxxx Act
and by regulations adopted thereunder by regulators having jurisdiction over the
parties hereto, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as it may come into the public domain.
10.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
10.6. Each party hereto shall cooperate with, and promptly notify each
other party and all appropriate governmental authorities (including without
limitation the Securities and Exchange Commission, the National Association of
Securities Dealers, Inc. and state insurance
-28-
regulators) and shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
10.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
10.8. It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.
10.9. The Company and the Adviser each understand and agree that the
obligations of the Fund under this Agreement are not binding upon any Trustee or
shareholder of the Fund personally, but bind only the Fund with respect to the
Portfolio and the Portfolio's property; the Company and the Adviser each
represent that it has notice of the provisions of the Declaration of Trust of
the Fund disclaiming Trustee and shareholder liability for acts or obligations
of the Fund.
10.10. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties. Notwithstanding the
foregoing or anything to the contrary set forth in this Agreement, the Adviser
may transfer or assign its rights, duties and obligations hereunder or interest
herein to any entity owned, directly or indirectly, by Xxxxxxxxxxx Acquisition
Corp. (the Adviser's parent corporation) or to a successor in interest pursuant
to a merger, reorganization, stock sale, asset sale or other transaction,
without the consent of the Company, as long as (i) that assignee agrees to
assume all the obligations imposed on the Adviser by this Agreement, and (ii)
the Fund consents to that assignment.
10.11. This Agreement sets forth the entire agreement between the
parties and supercedes all prior communications, agreements and understandings,
oral or written, between the parties regarding the subject matter hereof.
-29-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed as of the date specified
below.
FEDERAL XXXXXX LIFE ASSURANCE
(FKLA) COMPANY
By:
-------------------------
Title:
----------------------
Date:
-----------------------
XXXXXXXXXXX VARIABLE ACCOUNT
FUNDS
By:
-------------------------
Xxxxx X. Xxxxxxx
Title: Assistant Secretary
Date:
-----------------------
OPPENHEIMERFUNDS, INC.
By:
-------------------------
Xxxxx X. Xxxxxxx
Title: Vice President
Date:
-----------------------
-30-
SCHEDULE 1
Separate Accounts Products
----------------- --------
KILICO Variable Annuity Separate Account Xxxxxx Advantage III
Zurich Preferred
Zurich Preferred Plus
Zurich Archway
-31-
SCHEDULE 2
Portfolios of Xxxxxxxxxxx Variable Account Funds shown below do not include
service class shares unless expressly indicated:
Xxxxxxxxxxx Aggressive Growth Fund/VA: Service Shares
Xxxxxxxxxxx Capital Appreciation Fund/VA: Service Shares
Xxxxxxxxxxx Global Securities Fund/VA: Service Shares
Xxxxxxxxxxx High Income Fund/VA: Service Shares
Xxxxxxxxxxx Main Street Fund/VA: Service Shares
Xxxxxxxxxxx Main Street Small Cap Fund/VA: Service Shares
Xxxxxxxxxxx Strategic Bond Fund/VA: Service Shares
-32-
