Exhibit 8(a): Participation Agreement, as amended, by and among Companion Life
Insurance Company, Xxxx Xxxxx Management, Inc. and The Xxxxx American Fund.
PARTICIPATION AGREEMENT
Among
THE XXXXX AMERICAN FUND
XXXX XXXXX MANAGEMENT, INC.
and
COMPANION LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 20 day of November, 1995,
--
by and among COMPANION LIFE INSURANCE COMPANY (hereinafter "Companion"), a New
York life insurance company, on its own behalf and on behalf of its Separate
Account C (the "Account"), and The Xxxxx American Fund, a business trust
organized under the laws of Massachusetts (hereinafter the "Fund") and Xxxx
Xxxxx Management, Inc. (hereinafter the "Adviser"), a New York corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements similar to this
Agreement (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interests in the Fund are currently divided into
six series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated February 17, 1989 (File No. 812-7076), 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 "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the 1940 Act and shares of the Portfolios are
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
federal Investment Advisers Act of 1940, as amended, and any applicable state
securities laws and is the Fund's investment adviser and manager; and
WHEREAS, Companion has registered certain variable annuity contracts
supported wholly or partially by the Account (the "Contracts") under the 1933
Act and said Contracts are
listed in Schedule A hereto, as it may be amended from time to time by mutual
written agreement; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of Companion on the
date shown for such account on Schedule A hereto, to set aside and invest assets
attributable to the aforesaid variable annuity contracts; and
WHEREAS, Companion has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Companion intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts; and
WHEREAS, Companion and the Adviser have entered into a Service Agreement
dated _______________;
NOW, THEREFORE, in consideration of their mutual promises, Companion, the
Fund, and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1 The Fund agrees to sell to Companion those shares of the Designated
Portfolios which the Account orders, 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 Portfolios. For purposes of this Section 1.1,
Companion shall be the designee of the Fund for receipt of such orders and
receipt by such designee shall constitute receipt by the Fund. Companion will
use its best efforts to give the Fund notice of such order by 10 a.m. eastern
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 Securities and
Exchange Commission.
1.2 The Fund agrees to make shares of the Designated Portfolios available
indefinitely for purchase at the applicable net asset value per share by
Companion on behalf of the Account on those days on which the Fund calculates
its net asset value pursuant to rules of the Securities and Exchange Commission,
and the Fund shall calculate such net asset value on each day which the New York
Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of
Trustees of the Fund (hereinafter the "Board") 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 Board, acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Advisor agree that shares of the Designated
Portfolios will be sold only to Participating Insurance Companies, their
separate accounts, and other persons but only insofar as consistent with the
applicability of the "look-through rule" of paragraph (f)(2)(i)
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of Treas. Reg. (S) 1.817-5 pursuant to (S) 817(h)(4) of the Internal Revenue
Code of 1986, as amended (the "Code"). No shares of any Designated Portfolio
will be sold to the general public. The Fund will not sell shares of the
Designated Portfolios to any other insurance company or separate account unless
an agreement containing provisions substantially the same as Sections 3.4 and
3.5 and Articles I and VII of this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on Companion's request, any full
or fractional shares of the Fund held by Companion, 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, except that the Fund reserves the
right to suspend the right of redemption, consistent with Section 22(e) of the
1940 Act and any applicable rules thereunder. For purposes of this Section 1.4,
Companion shall be the designee of the Fund for receipt of requests for
redemption and receipt by such designee shall constitute receipt by the Fund.
Companion will use its best efforts to give the Fund notice of such request for
redemption by 10:00 a.m. on the next following Business Day.
1.5. The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
1.6. Companion shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire and/or
by a credit for any shares redeemed the same day as the purchase. For purposes
of Section 2.7 hereof, upon receipt by the Fund of the federal funds so wired,
such funds shall cease to be the responsibility of Companion and shall become
the responsibility of the Fund.
1.7 The Fund generally shall pay and transmit the proceeds of
redemptions of Fund shares on the next Business Day after a redemption order is
received in accordance with Section 1.4 hereof (except that the Fund reserves
the right to postpone payment upon redemption consistent with Section 22(e) of
the 1940 Act and any applicable rules thereunder, to the extent consistent with
interpretations of the Securities and Exchange Commission or its staff). Payment
shall be in federal funds transmitted by wire and/or a credit for any shares
purchased the same day as the redemption.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to Companion or the Account. Shares
ordered from the Fund will be recorded in an appropriate title for the Account
or the appropriate subaccount of the Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to Companion of any income, dividends, or
capital gain distributions payable on the Designated Portfolios' shares.
Companion hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. Companion reserves the right to revoke this election and to
receive all such income, dividends, and capital gain distributions in cash. The
Fund shall notify Companion of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Designated Portfolio available to Companion on a daily basis as soon as
reasonably practical after the net asset value
3
per share is calculated and shall use its best efforts to make such net asset
value per share available by 6 p.m. eastern time. If the Fund provides incorrect
share net asset value information, Companion shall be entitled to an appropriate
adjustment. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gains information shall be reported to
Companion.
ARTICLE II. Representations and Warranties
------------------------------
2.1. Companion represents and warrants that the Contracts are or, prior
to issuance, will be registered under the 1933 Act; that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws and that the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements. Companion
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established the Account as a segregated asset account under the Nebraska
Insurance Laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2. The Fund represents and warrants that Portfolio shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with all applicable federal and
state securities laws including without limitation the 1933 Act, the Securities
Exchange Act of 1934 as amended (hereinafter the "1934 Act"), applicable
securities laws of the State of Nebraska, and the 1940 Act and that the Fund is
and shall remain registered under the 0000 Xxx. 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 shares of
the Designated Portfolios. The Fund shall register and qualify such shares for
sale in accordance with the laws of the various states if and to the extent
required by applicable law.
2.3. The Fund undertakes to have a Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant to Rule
12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that it will use its best efforts
to ensure that the investment policies, fees and expenses of the Designated
Portfolios are and shall at all times remain in compliance with applicable
insurance and other applicable laws of the State of Nebraska and any other
applicable state, to the extent required to perform this Agreement and to the
extent specifically requested in writing by Companion.
2.5. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall remain
duly registered under all applicable federal and state securities laws and that
it shall perform its obligations for the Fund in compliance in all material
respects with any applicable state and federal securities laws (and any other
applicable laws of the State of Nebraska to the extent specifically requested in
writing by Companion).
4
2.7. The Fund and the Adviser represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
coverage as required currently by Rule 17g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.8. The Fund will provide Companion with as much notice as is
reasonably practicable of any material change affecting the Fund (including, but
not limited to, any proxy solicitation and any material change in its
registration statement or prospectus) and consult with Companion in order to
implement any such change in an orderly manner.
ARTICLE III. Shareholder Communications
--------------------------
3.1. The Adviser shall provide Companion with a camera-ready copy of
each updated version of any of the Fund's then-current prospectuses relating to
a Designated Portfolio, any supplements thereto, the Fund's annual and semi-
annual reports, and any supplements thereto, and the Fund's proxy materials
relating to any Designated Portfolio.
3.2 The Adviser shall provide Companion with a copy of each updated
Statement of Additional Information ("SAI") for the Fund suitable for
duplication.
3.3. It is understood and agreed that, except with respect to
information regarding Companion, the Account or the Contracts supplied by
Companion or persons under its control, Companion is not responsible for the
content of the prospectus or SAI for the Designated Portfolios. It is also
understood and agreed that, except with respect to information regarding the
Fund, Adviser, or the Designated Portfolios provided by the Fund or the Adviser
or persons under their control, neither the Fund nor Adviser are responsible for
the content of the prospectus or SAI for the Contracts.
3.4. If and to the extent required by law or by the Shared Funding
Exemptive Order, Companion shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received from
Contract owners; and
(iii) vote Fund shares for which no instructions have been received or
which are not attributable to Contract owners in the same
proportion as Fund shares of such portfolio for which instructions
have been received, so long as and to the extent that the
Securities and Exchange Commission continues to interpret the 1940
Act to require passthrough voting privileges for variable contract
owners.
3.5. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in a Designated
Portfolio calculates voting privileges in a consistent manner as required by the
Shared Funding Exemptive Order.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with
5
Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors or trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. Companion shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature and other promotional
material that Companion develops or uses and in which the Fund (or a Portfolio
thereof) or Adviser or the underwriter for the Fund shares is named, at least 15
Business Days prior to its use. No such material shall be used if the Fund or
its designee objects to such use within 15 Business Days after receipt of such
material.
4.2. Companion shall not give any information or make any
representations or statements on behalf of the Fund or the Adviser or concerning
the Fund or the Adviser in connection with the sale of the Contracts other than
the information or representations contained in the registration statement or
prospectus or SAI for the Fund shares, as such registration statement and
prospectus or SAI may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature and other
promotional material approved by the Fund or its designee or by the Adviser,
except with the permission of the Fund or the Adviser or the designee of either.
4.3. The Fund or Adviser shall furnish, or shall cause to be furnished,
to Companion, each piece of sales literature and other promotional material in
which Companion and/or its separate account(s), is named at least 15 Business
Days prior to its use. No such material shall be used if Companion objects to
such use within 15 Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make
any representations on behalf of Companion or concerning Companion, the Account,
or the Contracts other than the information or representations contained in a
registration statement or prospectus or SAI for the Contracts, as such
registration statement and prospectus and SAI may be amended or supplemented
from time to time, or in reports for the Account, or in sales literature and
other promotional material approved by Companion or its designee, except with
the permission of Companion.
4.5. The Fund will provide to Companion at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Designated Portfolios, contemporaneously
with the filing of such document(s) with the Securities and Exchange Commission
or other regulatory authorities.
4.6. Companion will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
the Account, contemporaneously with the filing of such document(s) with the
Securities and Exchange Commission.
6
4.7. For purposes of this Article IV, the phrase "sales literature and
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), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and the Adviser shall pay no fee or other compensation to
Companion under this Agreement, and Companion shall pay no fee or other
compensation to the Fund or Adviser under this Agreement, although the parties
hereto will bear certain expenses in accordance with Articles III, V, and other
provisions of this Agreement, and payments will be made as specified in the
Service Agreement.
5.2. Except as otherwise specifically provided herein or in the Service
Agreement, each party will bear all expenses incident to its performance under
this Agreement. 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, setting the
prospectus in type, setting the proxy materials and reports to shareholders in
type, the preparation of all statements and notices required by any federal or
state law, and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Fund and Adviser acknowledge that a principal feature of the
Contracts is the Contract owner's ability to choose from a number of
unaffiliated mutual funds (and portfolios or series thereof) ("Unaffiliated
Funds"), and to transfer the Contract's cash value between funds and portfolios.
ARTICLE VI. Diversification and Qualification
---------------------------------
6.1. The Fund and Adviser represent and warrant that each Designated
Portfolio will at all times comply, to the extent that it is within the power of
the Fund and Adviser, with Section 817(h) of the Code and Treasury Regulation
(S)1.817-5, as amended from time to time, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments or other modifications
or successor provisions to such Section or Regulations. In the event that a
Designated Portfolio ceases so to comply, the Fund will take all reasonable
steps (a) to notify Companion of such noncompliance, and (b) to adequately
diversify the Designated Portfolios so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
6.2. The Fund and Adviser represent and warrant that each Designated
Portfolio is currently 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 or similar provisions) as long as this Agreement
is in effect. The Fund or Adviser will notify Companion immediately upon having
a reasonable basis for believing that any Designated Portfolio has
7
ceased to comply with the aforesaid Section 817(h) diversification or Subchapter
M qualification requirements or might not so comply in the future.
6.3. Companion shall make every effort to maintain the treatment of the
Contracts as annuity contracts under applicable provisions of the code, and
shall notify the Fund and the Adviser immediately upon having a reasonable basis
for believing that such Contracts have ceased to be so treated or that they
might not be so treated in the future.
ARTICLE VII. Potential Conflicts and Compliance With Shared Funding Exemptive
----------------------------------------------------------------
Order
-----
7.1. 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
and determine what action, if any, should be taken in response to such
conflicts. An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
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 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 Companion if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. Companion will report any potential or existing conflicts of which
it is aware to the Board. Companion will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by Companion
to inform the Board whenever contract owner voting instructions are disregarded
and on all other matters referred to in this Article VII.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested members, that a material irreconcilable conflict exists,
Companion and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, 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 account.
7.4. If a material irreconcilable conflict arises because of a decision
by Companion to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Companion may
be required, at the Fund's election, to withdraw the Account's 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
8
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 that six month period the Fund shall continue
to accept and implement orders by Companion for the purchase (and redemption) of
shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Companion conflicts with the
majority of other state regulators, then Companion will withdraw the Account's
investment in the Fund and this Agreement shall terminate within six months
after the Board informs Companion 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
Companion for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 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. Companion shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of 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 Companion will withdraw the Account's investment in the Fund and
this Agreement shall terminate within six (6) months after the Board informs
Companion 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.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
be deemed modified to the extent necessary also to comply with the terms and
conditions contained in such Rule(s) as so amended or adopted.
7.8. Companion shall at least annually submit to the Board of Trustees
of the Fund such reports, materials or data as the Trustees may reasonably
request so that the Trustees may fully carry out the obligations imposed upon
them by the Shared Funding Exemptive Order, and said reports, materials and data
shall be submitted more frequently if deemed appropriate by the Board of
Trustees
7.9. Companion agrees that any remedial action taken by it in resolving
any irreconcilable conflict will be carried out at its expense and with a view
only to the interests of Contract owners.
9
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By Companion
----------------------------
8.1(a). Companion agrees to indemnify and hold harmless the Fund, the
Adviser, each of their officers, each member of their Boards and each person, if
any, who controls the Adviser within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Companion), or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute or 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 or prospectus or SAI for the Contracts or contained in
the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or 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 Companion by or on behalf
of the Fund for use in the Registration Statement or prospectus or
SAI for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus, SAI, or sales literature of the Fund not
supplied by Companion or persons under its control) or wrongful
conduct of Companion or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
SAI, or sales literature 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 if such a statement
or omission was made in reliance upon information furnished to the
Fund by or on behalf of Companion; or
(iv) arise as a result of any material failure by Companion to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Companion in this Agreement
or arise out of or result from any other material breach of this
Agreement by Companion;
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
10
8.1(b). Companion 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 negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties.
8.1(c). Companion shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified Companion in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Companion of any such claim shall not
relieve Companion from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, Companion shall be entitled to participate, at its own
expense, in the defense of such action. Companion also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from Companion to such party of Companion's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and Companion will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify Companion of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by the Adviser
------------------------------
8.2(a). The Adviser agrees to indemnify and hold harm-less Companion and
each of Companion's directors and officers and each person, if any, who controls
Companion within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser), or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or 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 or prospectus or SAI 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, 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 Adviser or Fund by
or on behalf of Companion for use in the Registration Statement or
prospectus or SAI for the Fund or in sales
11
literature (or any amendment or supplement) or other-wise 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
(other than statements or representations contained in the
Registration Statement, prospectus, SAI, or sales literature for
the Contracts not supplied by the Adviser or Fund or persons under
their control) or wrongful conduct of the Fund or Adviser or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
SAI, or sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to Companion by or on behalf of the
Fund; or
(iv) arise as a result of any material failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including a material failure, whether unintentional or
in good faith or other-wise, to comply with the diversification
and other qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Adviser;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The 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 negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
Companion or the Account, whichever is applicable.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such
12
party independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). Companion agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against any Indemnified Party in
connection with the issuance or sale of the Contracts or the operation of the
Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless Companion and each
of its directors and officers and each person, if any, who controls Companion
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of the Fund), or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
expenses, damages, liabilities, or expenses (or actions in respect thereof) or
settlements, are related to the operations of the Fund and:
(i) arise as a result of any material failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including a material failure, whether unintentional or
in good faith or other-wise, to comply with the diversification
and other qualification requirements specified in Article VI of
this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund 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 negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to Companion, the
Fund, the Adviser or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
13
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). Companion agrees promptly to notify the Fund of the commencement of any
litigation or proceeding against any Indemnified Party in connection with the
Agreement, the issuance or sale of the Contracts, the operation of the Account,
or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Nebraska.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as
the Securities and Exchange Commission may grant (including, but not
limited to, the Shared Funding Exemptive Order) and the terms hereof
shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until the first
to occur of:
(a) termination by any party, with or without cause, with respect
to some or all Portfolios, by six (6) months' advance written notice
delivered to the other parties (unless a shorter time is agreed to
in writing by the non-terminating party(ies)); or
(b) termination by Companion by written notice to the other parties
with respect to any Portfolio based upon Companion's determination
that shares of such Portfolio are not reasonably available to meet
the requirements of the Contracts; or
(c) termination by Companion by written notice to the other parties
with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued, or sold in accordance with
applicable state and/or federal law or such law precludes the use of
such shares as the underlying investment media of the Contracts
issued or to be issued by Companion; or
(d) termination by the Fund in the event that formal administrative
proceedings are instituted against Companion by the National
Association of Securities Dealers, Inc. ("NASD"), the Securities and
Exchange Commission, the Insurance Commissioner or like official of
any state or any other regulatory body regarding Companion's duties
under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Fund shares,
provided, however, that the Fund determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse
14
effect upon the ability of Companion to perform its obligations
under this Agreement; or
(e) termination by Companion in the event that formal
administrative proceedings are instituted against the Fund or
Adviser by the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other regulatory
body, provided, however, that Companion determines in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Fund or Adviser to perform its obligations under this Agreement;
or
(f) termination by Companion by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such
Portfolio fails to meet the Section 817(h) diversification
requirements or Subchapter H qualifications specified in Article VI
hereof or if Companion reasonably believes that the Portfolio may
fail to meet either of those requirements; or
(g) termination by either the Fund or the Adviser by written notice
to Companion, if either one or both of the Fund or the Adviser
respectively, shall determine, in their sole judgment exercised in
good faith, that Companion has suffered a material adverse change in
its business operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(h) termination by Companion by written notice to the Fund and the
Adviser, if Companion shall determine, in its sole judgment
exercised in good faith, that the Fund or the Adviser has suffered a
material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(i) termination by either the Fund or the Adviser by written notice
to Companion, in the event that the Con-tracts cease to qualify as
annuity contracts under the Code or if the Contracts are not
registered, issued, or sold in material compliance with applicable
state and/or federal law; or
(j) termination by Companion upon a material breach of this
Agreement or of any representation or warranty herein by the Fund or
the Adviser; or
(k) termination by either the Fund or the Adviser upon a material
breach of this Agreement or of any representation or warranty herein
by Companion.
10.2. Effect of Termination. If this Agreements is terminated pursuant to
---------------------
any of paragraphs (b), (e), (g), (h), or (j) of Section 10.1, then,
notwithstanding such termination, the Fund and the Adviser shall, at the option
of Companion and only to the extent consistent with applicable law, 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 (hereinafter referred to as "Existing
Contracts"). 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.
15
10.3. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligation under Article VIII to indemnify other parties
shall survive and not be affected by any termination of this Agreement.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
The Xxxxx American Fund
00 Xxxxxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxx
If to Companion:
Companion of Omaha Life Insurance Company
3 - Law Division
Mutual of Xxxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Variable Products Counsel
If to the Adviser:
Xxxx Xxxxx Management, Inc.
00 Xxxxxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxx
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate, or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party reasonably considers to be proprietary.
12.2. 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.
16
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. 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.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD, and state insurance regulators)
and shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the Nebraska Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable annuity operations of Companion are being
conducted in a manner consistent with the Nebraska Variable Annuity Regulations
and any other applicable law or regulations.
12.6. The rights, remedies, and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.7. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
12.8. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents, or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
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 hereto as of the date specified below.
Companion:
COMPANION LIFE INSURANCE COMPANY
By its authorized officer
SEAL By: /s/ Xxxxxxx X. Xxxx
--------------------------------------------
Title: Second Vice President & Assistant
Treasurer
Date:
Fund:
THE XXXXX AMERICAN FUND
By its authorized officer
SEAL By: /s/ Xxxxxxx Xxxx
-----------------------------------
17
Title: Treasurer
Date: November 20, 1995
Adviser:
XXXX XXXXX MANAGEMENT, INC.
By its authorized officer
SEAL By: /s/ Xxxxxxx Xxxx
----------------------------------------
Title: Executive Vice President
Date: November 20, 1995
18
SCHEDULE A
----------
===============================================================================
SEPARATE ACCOUNTS, ASSOCIATED CONTRACTS,
AND DESIGNATED PORTFOLIOS
--------------------------------------------------------------------------------
Name of Seperate
Account and Date Contracts Funded by Designated
Established Separate Account Portfolios
--------------------------------------------------------------------------------
Separate Account C 000X Xxxxx American
(2/18/94) Small Capitalization
Portfolio
Xxxxx American Growth
Portfolio
===============================================================================
AMENDMENT NO. 1
This is an Amendment to the Participation Agreement (Agreement) dated November
20, 1995, among Xxxxx American Fund (the Fund), Xxxx Xxxxx Management, Inc. (the
Adviser) and Companion Life Insurance Company (the Company). This Amendment is
effective May 1,1997.
The Fund, Adviser and the Company hereby agree to replace the Schedule A of the
Agreement by inserting the following in its entirety:
Schedule A
Name of Separate Account and Contracts Funded Designated
Date Established by Board of Directors By Separate Account Portfolios
---------------------------------------- ------------------- ------------------------------
Companion Life Insurance Company 000X Xxxxx American
Separate Account C (2-18-94) Small Capitalization Portfolio
(Variable Annuities) Xxxxx American Growth Portfolio
Companion Life Insurance Company 000X-0/00 Xxxxx American
Separate Account B (8-27-94) _________ Small Capitalization Portfolio
(Variable Life) Xxxxx American Growth Portfolio
Signed by the parties:
Companion Life Insurance Company
By its authorized officer,
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Title: Assistant Secretary
Date: June 26, 0000
Xxxxx American Fund
By its authorized officer,
By: /s/ Xxxx Xxxxxxx-Xxxxxxx
------------------------------------------
Title: Secretary
Date: June 26, 1997
Xxxx Xxxxx Management, Inc.
By its authorized officer,
By: /s/ Xxxx Xxxxxxx-Xxxxxxx
------------------------------------------
Title: Secretary
Date: June 26, 1997
AMENDMENT NO. 2
This is an Amendment to the Participation Agreement (Agreement) dated November
20,1995, among The Xxxxx American Fund (the Fund), Xxxx Xxxxx Management, Inc.
(the Adviser) and Companion Life Insurance Company (the Company). This
Amendment is effective May 1,1997.
The Fund, Adviser and the Company hereby agree to replace the Schedule A of the
Agreement by inserting the following in its entirety:
Schedule A
Name of Separate Account and Date Contracts Funded by Designated Portfolios
Established by Board of Directors Separate Account
Companion Life Insurance Company 000X Xxxxx American
Separate Account C (2-18-94) 6500L-0898 Small Capitalization Portfolio
(Variable Annuities) Xxxxx American Growth Portfolio
Companion Life Insurance Company 000X-0/00 Xxxxx American
Separate Account B (8-27-94) Small Capitalization Portfolio
(Variable Life) Xxxxx American Growth Portfolio
Signed by the parties:
Companion Life Insurance Company
By its authorized officer,
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Title: Assistant Treasurer
Date: July 22, 1999
The Xxxxx American Fund
By its authorized officer,
By: /s/ Xxxxxxx Xxxx
---------------------------------------
Title: Treasurer
Date: July 22, 0000
Xxxx Xxxxx Management, Inc.
By its authorized officer,
By: /s/ Xxxxxxx Xxxx
---------------------------------------
Title: Executive Vice President
Date: July 22, 1999
