Exhibit 9.7
FUND PARTICIPATION AGREEMENT
Xxxxxx Institutional Products Trust
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares.................................4
ARTICLE II. Representations and Warranties......................7
ARTICLE III. Prospectuses and Proxy Statements; Voting..........11
ARTICLE IV. Sales Material and Information.....................14
ARTICLE V. Fees and Expenses..................................16
ARTICLE VI. Diversification and Qualification..................17
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order...........21
ARTICLE VIII. Indemnification....................................24
ARTICLE IX. Applicable Law.....................................37
ARTICLE X. Termination........................................38
ARTICLE XI. Notices............................................41
ARTICLE XII. Miscellaneous......................................42
SCHEDULE A Contracts..........................................46
SCHEDULE B Designated Portfolios..............................47
SCHEDULE C Administrative Services............................48
SCHEDULE D Reports per Section 6.6............................49
SCHEDULE E Expenses...........................................52
PARTICIPATION AGREEMENT
-----------------------
Among
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
XXXXXX INSTITUTIONAL PRODUCTS TRUST,
XXXXXX ASSOCIATES, INC.,
XXXXXX DISTRIBUTORS, INC.
and
XXXXXXX XXXXXX & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY (hereinafter "GWL&A"), a Colorado life insurance company, on
its own behalf and on behalf of its Separate Account Variable Annuity-
1 Series Account (the "Account"); XXXXXX INSTITUTIONAL PRODUCTS TRUST,
a Delaware Business Trust (hereinafter the "Fund"); XXXXXX ASSOCIATES,
INC. (hereinafter the "Adviser"), a corporation organized under the
laws of Delaware; XXXXXX DISTRIBUTORS, INC., a corporation organized
under the laws of Colorado (hereinafter the "Distributor"); and
XXXXXXX XXXXXX & CO., INC., a California corporation (hereinafter
"Schwab").
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/or variable annuity contracts (collectively, the "Variable
Insurance Products") to be offered by insurance companies, including
GWL&A, which have entered into participation agreements similar to
this Agreement (hereinafter "Participating Insurance Companies"); and
1
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio" and repre-
senting 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 (hereinafter the "SEC"), dated April 24, 1996
(File No. 812-9852), 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 life insurance companies that may or may not be affiliated with one
another and qualified pension and retirement plans ("Qualified Plans")
(hereinafter the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the Portfolio(s)
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 Investment Advisers Act of 1940, as amended, and any
applicable state securities laws; and
WHEREAS, the Distributor is duly registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, (the "1934
Act") and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, GWL&A 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 attached
hereto and incorporated herein by reference, as such Schedule may be
amended from time to time by mutual written agreement; and
2
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of GWL&A on July 24, 1995, under the insurance laws of the
State of Colorado, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, GWL&A has registered the Account as a unit investment
trust under the 1940 Act and has registered the securities deemed to
be issued by the Account under the 1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, GWL&A intends to purchase shares in the Portfolio(s)
listed in Schedule B attached hereto and incorporated herein by
reference, as such Schedule may be amended from time to time by mutual
written agreement (the "Designated Portfolio(s)"), on behalf of the
Account to fund the Contracts, and the Fund is authorized to sell such
shares to unit investment trusts such as the Account at net asset
value; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other
open-end investment companies or series thereof not affiliated with
the Fund (the "Unaffiliated Funds") on behalf of the Account to fund
the Contracts; and
WHEREAS, Schwab will perform certain services for the Fund in
connection with the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, GWL&A,
Schwab, the Fund, the Distributor and the Adviser agree as follows:
3
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Fund agrees to sell to GWL&A those shares of the
Designated Portfolio(s) which the Account orders, executing such
orders on each Business Day 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, GWL&A shall be the
designee of the Fund for receipt of such orders and receipt by such
designee shall constitute receipt by the Fund, provided that the Fund
receives notice of any such order by 10:00 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 SEC.
1.2. The Fund agrees to make shares of the Designated Port-
folio(s) available for purchase at the applicable net asset value per
share by GWL&A and the Account on those days on which the Fund
calculates its Designated Portfolio(s)' net asset value pursuant to
rules of the SEC, 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 its fiduciary duties under
federal and any applicable state laws, necessary in the best interests
of the shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s)
to any other Participating Insurance Company separate account unless
an agreement containing provisions substantially the same as Sections
2.1, 3.5, 3.6, 3.7, and Article VII of this Agreement is in effect to
govern such sales.
1.4. The Fund agrees to redeem for cash, on GWL&A's request, any
full or fractional shares of the Fund held by GWL&A, executing such
requests on each Business Day at the net
4
asset value next computed after receipt by the Fund or its designee of
the request for redemption. However, if one or more of the Designated
Portfolios has determined to settle redemption transactions for all of
its shareholders on a delayed basis (more than one Business Day, but
in no event more than three Business Days, after the date on which the
redemption order is received, unless otherwise permitted by an order
of the Commission under Section 22(e) of the 1940 Act), the Fund shall
be permitted to delay sending redemption proceeds to GWL&A by the same
number of days that the Fund is delayed sending redemption proceeds to
the other shareholders of the Fund. This Section 1.4 may be amended,
in writing, by the parties consistent with the requirements of the
1940 Act and interpretations thereof. For purposes of this Section
1.4, GWL&A 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 notice of any such
request for redemption by 10:00 A.M. Eastern time 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 Participating 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. GWL&A shall pay for Fund shares by 3:00 p.m. Eastern time 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.
1.7. The Fund shall pay and transmit the proceeds of redemptions
of Fund shares by 3:00 p.m. Eastern Time on the next Business Day
after a redemption order is received in accordance with Section 1.4
hereof. Payment shall be in federal funds transmitted by wire and/or
a credit for any shares purchased the same day as the redemption.
5
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to GWL&A or the
Account. Shares ordered from the Fund will be recorded in an
appropriate title for the Account or the appropriate sub-account of
the Account.
1.9. The Fund shall furnish same day notice (by wire or tele-
phone, followed by written confirmation) to GWL&A of any income,
dividends or capital gain distributions payable on the Designated
Portfolio(s)' shares. GWL&A 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. GWL&A
reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund
shall notify GWL&A by the end of the next following Business Day 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 GWL&A on each Business Day as soon
as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:00 p.m. Eastern time. In the event of an
error in the computation of a Designated Portfolio's net asset value
per share ("NAV") or any dividend or capital gain distribution (each,
a "pricing error"), the Adviser or the Fund shall immediately notify
GWL&A as soon as possible after discovery of the error. Such
notification may be verbal, but shall be confirmed promptly in writing
in accordance with Article XI of this Agreement. A pricing error
shall be corrected as follows: (a) if the pricing error results in a
difference between the erroneous NAV and the correct NAV of less than
$0.01 per share, then no corrective action need be taken; (b) if the
pricing error results in a difference between the erroneous NAV and
the correct NAV equal to or greater than $0.01 per share, but less
than 1/2 of 1% of the Designated Portfolio's NAV at the time of the
error, then the Adviser shall reimburse the Designated Portfolio for
any loss, after taking into consideration any positive effect of such
error; however, no adjustments to Contractowner accounts need be made;
and (c) if the pricing error results in a difference between the
erroneous NAV and the correct NAV equal to or greater than 1/2 of 1%
of the
6
Designated Portfolio's NAV at the time of the error, then the Adviser
shall reimburse the Designated Portfolio for any loss (without taking
into consideration any positive effect of such error) and shall
reimburse GWL&A for the costs of adjustments made to correct
Contractowner accounts in accordance with the provisions of Schedule
E. If an adjustment is necessary to correct a material error which
has caused Contractowners to receive less than the amount to which
they are entitled, the number of shares of the applicable sub-account
of such Contractowners will be adjusted and the amount of any
underpayments shall be credited by the Adviser to GWL&A for crediting
of such amounts to the applicable Contractowners accounts. Upon
notification by the Adviser of any overpayment due to a material
error, GWL&A or Schwab, as the case may be, shall promptly remit to
Adviser any overpayment that has not been paid to Contractowners;
however, Adviser acknowledges that Schwab and GWL&A do not intend to
seek additional payments from any Contractowner who, because of a
pricing error, may have underpaid for units of interest credited to
his/her account. In no event shall Schwab or GWL&A be liable to
Contractowners for any such adjustments or underpayment amounts. A
pricing error within categories (b) or (c) above shall be deemed to be
"materially incorrect" or constitute a "material error" for purposes
of this Agreement.
The standards set forth in this Section 1.10 are based on the
Parties' understanding of the views expressed by the staff of the
Securities and Exchange Commission ("SEC") as of the date of this
Agreement. In the event the views of the SEC staff are later modified
or superseded by SEC or judicial interpretation, the parties shall
amend the foregoing provisions of this Agreement to comport with the
appropriate applicable standards, on terms mutually satisfactory to
all Parties.
ARTICLE II. Representations and Warranties
------------------------------
2.1. GWL&A represents and warrants that the Contracts and the
securities deemed to be issued by the Account under the Contracts are
or 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
7
state insurance suitability requirements. GWL&A 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 prior to any issuance or sale of units thereof
as a segregated asset account under Section 10-7-401, et. seq. of the
Colorado Insurance Law and has registered the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts and that it
will maintain such registration for so long as any Contracts are
outstanding as required by applicable law.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold pursuant to this Agreement shall be regis-
tered under the 1933 Act, duly authorized for issuance and sold in
compliance with all applicable federal securities laws including
without limitation the 1933 Act, the 1934 Act, 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 its shares.
2.3. The Fund reserves the right to adopt a plan pursuant to
Rule 12b-1 under the 1940 Act and to impose an asset-based or other
charge to finance distribution expenses as permitted by applicable law
and regulation. In any event, the Fund and Adviser agree to comply
with applicable provisions and SEC staff interpretations of the 1940
Act to assure that the investment advisory or management fees paid to
the Adviser by the Fund are in accordance with the requirements of the
1940 Act. To the extent that the Fund decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have its
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 make every
effort to ensure that the investment policies, fees and expenses of
the Designated Portfolio(s) are and shall at all times remain in
compliance with the insurance and other applicable laws of the State
of Colorado and any other applicable state to the extent required to
perform this Agreement. The Fund further
8
represents and warrants that it will make every effort to ensure that
Designated Portfolio(s) shares will be sold in compliance with the
insurance laws of the State of Colorado and all applicable state
insurance and securities laws. The Fund shall register and qualify
the shares for sale in accordance with the laws of the various states
if and to the extent required by applicable law. GWL&A and the Fund
will endeavor to mutually cooperate with respect to the implementation
of any modifications necessitated by any change in state insurance
laws, regulations or interpretations of the foregoing that affect the
Designated Portfolio(s) (a "Law Change"), and to keep each other
informed of any Law Change that becomes known to either party. In the
event of a Law Change, the Fund agrees that, except in those
circumstances where the Fund has advised GWL&A that its Board of
Directors has determined that implementation of a particular Law
Change is not in the best interest of all of the Fund's shareholders
with an explanation regarding why such action is lawful, any action
required by a Law Change will be taken.
2.5. The Fund represents and warrants that it is lawfully
organized and validly existing under the laws of the State of Delaware
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 the laws of the State of
Delaware and any applicable state and federal securities laws.
2.7. The Distributor 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 the laws of the State of
Colorado and any applicable state and federal securities laws.
2.8. The Fund and the Adviser represent and warrant that all of
their respective officers, employees, investment advisers, and other
individuals or entities dealing with the
9
money and/or securities of the Fund are, and shall continue to be at
all times, covered by one or more blanket fidelity bonds or similar
coverage for the benefit of the Fund in an amount not less than the
minimal coverage required by Rule 17g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid
bonds shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.9. Schwab represents and warrants that it has completed,
obtained and performed, in all material respects, all registrations,
filings, approvals, and authorizations, consents and examinations
required by any government or governmental authority as may be
necessary to perform this Agreement. Schwab does and will comply, in
all material respects, with all applicable laws, rules and regulations
in the performance of its obligations under this Agreement.
2.10. The Fund will provide GWL&A with as much advance notice as
is reasonably practicable of any material change affecting the
Designated Portfolio(s) (including, but not limited to, any material
change in the registration statement or prospectus affecting the
Designated Portfolio(s)) and any proxy solicitation affecting the
Designated Portfolio(s) and consult with GWL&A in order to implement
any such change in an orderly manner, recognizing the expenses of
changes and attempting to minimize such expenses by implementing them
in conjunction with regular annual updates of the prospectus for the
Contracts. The Fund agrees to share equitably in expenses incurred by
GWL&A as a result of actions taken by the Fund, consistent with the
allocation of expenses contained in Schedule E attached hereto and
incorporated herein by reference.
2.11. GWL&A 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 annuity contracts under applicable
provisions of the Code, and that it will make every effort to maintain
such treatment and that it will notify Schwab, the Fund, the
Distributor and the Adviser immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that
they might
10
not be so treated in the future. In addition, GWL&A represents and
warrants that the Account is a "segregated asset account" and that
interests in the Account are offered exclusively through the purchase
of or transfer into a "variable contract" within the meaning of such
terms under Section 817 of the Code and the regulations thereunder.
GWL&A will use every effort to continue to meet such definitional
requirements, and it will notify Schwab, the Fund, the Distributor 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. GWL&A 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.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. At least annually, the Adviser or Distributor shall provide
GWL&A and Schwab with as many copies of the Fund's current prospectus
for the Designated Portfolio(s) as GWL&A and Schwab may reasonably
request for marketing purposes (including distribution to
Contractowners with respect to new sales of a Contract), with expenses
to be borne in accordance with Schedule E hereof. If requested by
GWL&A in lieu thereof, the Adviser, Distributor or Fund shall provide
such documentation (including a camera-ready copy and computer
diskette of the current prospectus for the Designated Portfolio(s))
and other assistance as is reasonably necessary in order for GWL&A
once each year (or more frequently if the prospectuses for the
Designated Portfolio(s) are amended) to have the prospectus for the
Contracts and the Fund's prospectus for the Designated Portfolio(s)
printed together in one document. The Fund and Adviser agree that the
prospectus (and semi-annual and annual reports) for the Designated
Portfolio(s) will describe only the Designated Portfolio(s) and will
not name or describe any other portfolios or series that may be in the
Fund unless required by law.
3.2. If applicable state or federal laws or regulations require
that the Statement of Additional Information ("SAI") for the Fund be
distributed to all Contractowners, then the Fund, Distributor and/or
the Adviser shall provide GWL&A with copies of the Fund's SAI or
11
documentation thereof for the Designated Portfolio(s) in such quanti-
ties, with expenses to be borne in accordance with Schedule E hereof,
as GWL&A may reasonably require to permit timely distribution thereof
to Contractowners. The Adviser, Distributor and/or the Fund shall
also provide SAIs to any Contractowner or prospective owner who
requests such SAI from the Fund (although it is anticipated that such
requests will be made to GWL&A or Schwab).
3.3. The Fund, Distributor and/or Adviser shall provide GWL&A
and Schwab with copies of the Fund's proxy material, reports to stock-
holders and other communications to stockholders for the Designated
Portfolio(s) in such quantity, with expenses to be borne in accordance
with Schedule E hereof, as GWL&A may reasonably require to permit
timely distribution thereof to Contractowners.
3.4. It is understood and agreed that, except with respect to
information regarding GWL&A or Schwab provided in writing by that
party, neither GWL&A nor Schwab are responsible for the content of the
prospectus or SAI for the Designated Portfolio(s). It is also
understood and agreed that, except with respect to information
regarding the Fund, the Distributor, the Adviser or the Designated
Portfolio(s) provided in writing by the Fund, the Distributor or the
Adviser, neither the Fund, Distributor nor Adviser are responsible for
the content of the prospectus or SAI for the Contracts.
3.5. If and to the extent required by law GWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares held in
the Account in accordance with instructions
received from Contractowners: and
(iii) vote Designated Portfolio shares held in the
Account for which no instructions have been
received in the same proportion as Designated
Portfolio(s) shares for which instructions have
been received from Contractowners, 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. GWL&A
reserves the right to vote Fund shares
12
held in any segregated asset account in its own right,
to the extent permitted by law.
3.6. GWL&A shall be responsible for assuring that each of its
separate accounts holding shares of a Designated Portfolio calculates
voting privileges as directed by the Fund and agreed to by GWL&A and
the Fund. The Fund agrees to promptly notify GWL&A of any changes of
interpretations or amendments of the Mixed and Shared Funding
Exemptive Order. GWL&A shall fulfill its obligations under, and abide
by the terms of, the Mixed and Shared Funding Exemptive Order.
3.7. 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 (except insofar as the SEC may
interpret Section 16 of the 1940 Act not to require such meetings) or,
as the Fund currently intends, comply with 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
SEC'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.
13
ARTICLE IV. Sales Material and Information
------------------------------
4.1. GWL&A and Schwab shall furnish, or shall cause to be fur-
nished, to the Fund or its designee, a copy of each piece of sales
literature or other promotional material that GWL&A or Schwab,
respectively, develops or proposes to use and in which the Fund (or a
Portfolio thereof), its Adviser or one of its sub-advisers or the
Distributor is named in connection with the Contracts, at least ten
(10) Business Days prior to its use. No such material shall be used
if the Fund or its designee objects to such use within five (5)
Business Days after receipt of such material.
4.2. GWL&A and Schwab shall not give any information or make any
representations or statements on behalf of 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, Distributor or Adviser, except with the
permission of the Fund, Distributor or Adviser.
4.3. The Fund or the Adviser shall furnish, or shall cause to be
furnished, to GWL&A and Schwab, a copy of each piece of sales litera-
ture or other promotional material in which GWL&A and/or its separate
account(s), or Schwab is named at least ten (10) Business Days prior
to its use. No such material shall be used if GWL&A or Schwab objects
to such use within five (5) Business Days after receipt of such
material.
4.4. The Fund, the Distributor and the Adviser shall not give
any information or make any representations on behalf of GWL&A or
concerning GWL&A, the Account, or the Contracts other than the
information or representations contained in a registration statement
or prospectus for the Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in
reports for the Account, or in sales literature or other
14
promotional material approved by GWL&A or its designee, except with
the permission of GWL&A.
4.5. GWL&A, the Fund, the Distributor and the Adviser shall not
give any information or make any representations on behalf of or
concerning Schwab, or use Xxxxxx'x name except with the permission of
Schwab.
4.6. The Fund will provide to GWL&A and Schwab at least one com-
plete copy of all registration statements, prospectuses, SAIs,
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 Portfolio(s), contemporaneously with the filing of such
document(s) with the SEC or NASD or other regulatory authorities.
4.7. GWL&A or Schwab will provide to the Fund at least one com-
plete copy of all registration statements, prospectuses, SAIs,
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 SEC, NASD, or other regulatory authority.
4.8. For purposes of Articles IV and VIII, 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; e.g., on-line
----
networks such as the Internet or other electronic 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, SAIs, shareholder reports,
15
and proxy materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act or the
0000 Xxx.
4.9. At the request of any party to this Agreement, each other
party will make available to the other party's independent auditors
and/or representative of the appropriate regulatory agencies, all
records, data and access to operating procedures that may be
reasonably requested in connection with compliance and regulatory
requirements related to this Agreement or any party's obligations
under this Agreement.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund, the Distributor and the Adviser shall pay no fee
or other compensation to GWL&A under this Agreement, and GWL&A and
Schwab shall pay no fee or other compensation to the Fund, Distributor
or Adviser under this Agreement, although the parties hereto will bear
certain expenses in accordance with Schedule E, Articles III, V, and
other provisions of this Agreement.
5.2. All expenses incident to performance by the Fund, the
Distributor and the Adviser under this Agreement shall be paid by the
appropriate party, as further provided in Schedule E. The Fund shall
see to it that all shares of the Designated Portfolio(s) are
registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent required, in accordance with
applicable state laws prior to their sale.
5.3. The parties shall bear the expenses of routine annual
distribution (mailing costs) of the Fund's prospectus and distribution
(mailing costs) of the Fund's proxy materials and reports to owners of
Contracts offered by GWL&A, in accordance with Schedule E.
5.4. The Fund, the Distributor and the Adviser acknowledge that
a principal feature of the Contracts is the Contractowner's ability to
choose from a number of unaffiliated mutual funds (and portfolios or
series thereof), including the Designated Portfolio(s) and the
Unaffiliated
16
Funds, and to transfer the Contract's cash value between funds and
portfolios. The Fund, the Distributor and the Adviser agree to
cooperate with GWL&A and Schwab in facilitating the operation of the
Account and the Contracts as described in the prospectus for the
Contracts, including but not limited to cooperation in facilitating
transfers between Unaffiliated Funds.
5.5. Schwab agrees to provide certain administrative services,
specified in Schedule C attached hereto and incorporated herein by
reference, in connection with the arrangements contemplated by this
Agreement. The parties acknowledge and agree that the services
referred to in this Section 5.5 are recordkeeping, shareholder
communication, and other transaction facilitation and processing, and
related administrative services only and are not the services of an
underwriter or a principal underwriter of the Fund, and that Schwab is
not an underwriter for the shares of the Designated Portfolio(s),
within the meaning of the 1933 Act or the 0000 Xxx.
5.6. As compensation for the services specified in Schedule C
hereto, the Adviser agrees to pay Schwab a monthly Administrative
Service Fee based on the percentage per annum on Schedule C hereto
applied to the average daily value of the shares of the Designated
Portfolio(s) held in the Account with respect to Contracts sold by
Schwab. This monthly Administrative Service Fee is due and payable
before the 15th (fifteenth) day following the last day of the month to
which it relates.
ARTICLE VI. Diversification and Qualification
---------------------------------
6.1. The Fund, the Distributor and the Adviser represent and
warrant that the Fund will at all times sell its shares and invest its
assets in such a manner as to ensure that the Contracts will be
treated as annuity contracts under the Code, and the regulations
issued thereunder. Without limiting the scope of the foregoing, the
Fund, Distributor and Adviser represent and warrant that the Fund and
each Designated Portfolio thereof will at all times comply with
Section 817(h) of the Code and Treasury Regulation Section 1.817-5, as
amended from time to time, and any Treasury interpretations thereof,
relating to the diversification
17
requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications or successor
provisions to such Section or Regulations. The Fund, the Distributor
and the Adviser agree that shares of the Designated Portfolio(s) will
be sold only to Participating Insurance Companies and their separate
accounts and to Qualified Plans.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general public.
6.3. The Fund, the Distributor and the Adviser represent and
warrant that the Fund and each Designated Portfolio is currently
qualified as a Regulated Investment Company under Subchapter M of the
Code, and that each Designated Portfolio will maintain such
qualification (under Subchapter M or any successor or similar
provisions) as long as this Agreement is in effect.
6.4. The Fund, Distributor or Adviser will notify GWL&A immedi-
ately upon having a reasonable basis for believing that the Fund or
any Designated Portfolio has ceased to comply with the aforesaid
Section 817(h) diversification or Subchapter M qualification
requirements or might not so comply in the future.
6.5. Without in any way limiting the effect of Sections 8.3, 8.4
and 8.5 hereof and without in any way limiting or restricting any
other remedies available to GWL&A or Schwab, the Adviser or
Distributor will pay all costs associated with or arising out of any
failure of the Fund or any Designated Portfolio to comply with
Sections 6.1, 6.2, or 6.3 hereof, including all costs associated with
reasonable and appropriate corrections or responses to any such fail-
ure; such costs may include, but are not limited to, the costs
involved in creating, organizing, and registering a new investment
company as a funding medium for the Contracts and/or the costs of
obtaining whatever regulatory authorizations are required to
substitute shares of another investment company for those of the
failed Portfolio (including but not limited to an order pursuant to
Section 26(b) of the 1940 Act); such costs are to include, but are not
limited to, fees and expenses of legal counsel and other advisors to
GWL&A and any federal income taxes or
18
tax penalties and interest thereon (or "toll charges" or exactments or
amounts paid in settlement) incurred by GWL&A with respect to itself
or owners of its Contracts in connection with any such failure or
anticipated or reasonably foreseeable failure.
6.6. The Fund at the Fund's expense shall provide GWL&A or its
designee with reports certifying compliance with the aforesaid Section
817(h) diversification and Subchapter M qualification requirements, at
the times provided for and substantially in the form attached hereto
as Schedule D and incorporated herein by reference; provided, however,
that providing such reports does not relieve the Fund of its responsi-
bility for such compliance or of its liability for any non-compliance.
6.7. GWL&A agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review
of GWL&A or, to GWL&A's knowledge, or any Contractowner that any
Designated Portfolio has failed to comply with the diversification
requirements of Section 817(h) of the Code or GWL&A otherwise becomes
aware of any facts that could give rise to any claim against the Fund,
Distributor or Adviser as a result of such a failure or alleged
failure:
(a) GWL&A shall promptly notify the Fund, the Distributor and
the Adviser of such assertion or potential claim;
(b) GWL&A shall consult with the Fund, the Distributor and the
Adviser as to how to minimize any liability that may arise as a
result of such failure or alleged failure;
(c) GWL&A shall use its best efforts to minimize any liability
of the Fund, the Distributor and the Adviser resulting from such
failure, including, without limitation, demonstrating, pursuant
to Treasury Regulations, Section 1.817-5(a)(2), to the
commissioner of the IRS that such failure was inadvertent;
19
(d) any written materials to be submitted by GWL&A to the IRS,
any Contractowner or any other claimant in connection with any of
the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the IRS
pursuant to Treasury Regulations, Section 1.817-5(a)(2)) shall be
provided by GWL&A to the Fund, the Distributor and the Adviser
(together with any supporting information or analysis) within at
least two (2) business days prior to submission;
(e) GWL&A shall provide the Fund, the Distributor and the Adviser
with such cooperation as the Fund, the Distributor and the
Adviser shall reasonably request (including, without limitation,
by permitting the Fund, the Distributor and the Adviser to review
the relevant books and records of GWL&A) in order to facilitate
review by the Fund, the Distributor and the Adviser of any
written submissions provided to it or its assessment of the
validity or amount of any claim against it arising from such
failure or alleged failure;
(f) GWL&A shall not with respect to any claim of the IRS or any
Contractowner that would give rise to a claim against the Fund,
the Distributor and the Adviser (i) compromise or settle any
claim, (ii) accept any adjustment on audit, or (iii) forego any
allowable administrative or judicial appeals, without the express
written consent of the Fund, the Distributor and the Adviser,
which shall not be unreasonably withheld; provided that, GWL&A
shall not be required to appeal any adverse judicial decision
unless the Fund and the Adviser shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists
for taking such appeal; and further provided that the Fund, the
Distributor and the Adviser shall bear the costs and expenses,
including reasonable attorney's fees, incurred by GWL&A in
complying with this clause (f).
20
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order
----------------------------------------
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Fund and the
participants of all Qualified Plans investing in the Fund. An irre-
concilable 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 by
contract owners of different Participating Insurance Companies; or (f)
a decision by a Participating Insurance Company to disregard the
voting instructions of contract owners. The Board shall promptly
inform GWL&A if it determines that an irreconcilable material conflict
exists and the implications thereof. The directors of the Fund shall
have sole authority to determine whether an irreconcilable material
conflict exists and their determination shall be binding upon GWL&A.
7.2. GWL&A will report any potential or existing conflicts of
which it is aware to the Board. GWL&A will assist the Board in
carrying out its responsibilities under the Mixed and 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 GWL&A to inform
the Board whenever contract owner voting instructions are to be
disregarded. Such responsibilities shall be carried out by GWL&A with
a view only to the interests of its Contractowners.
7.3. If it is determined by a majority of the Board, or a
majority of its directors who are not interested persons of the Fund,
the Distributor, the Adviser or any sub-adviser to any of the
Designated Portfolios (the "Independent Directors"), that a material
irreconcilable conflict exists, GWL&A and/or other Participating
Insurance Companies or Qualified Plans shall, at their expense and to
the extent reasonably practicable (as determined by a majority of the
Independent Directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material
21
conflict, up to and including: (1) withdrawing the assets allocable
to some or all of the separate accounts from the Fund or any
Designated 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 and obtaining any necessary approvals or orders of
the Commission in connection therewith.
7.4. If a material irreconcilable conflict arises because of a
decision by GWL&A to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a
majority vote, GWL&A 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
irreconcilable conflict as determined by a majority of the Independent
Directors. 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 GWL&A 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 GWL&A
conflicts with the majority of other state regulators, then GWL&A will
withdraw the Account's investment in the Fund and terminate this
Agreement within six months after the Board informs GWL&A 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
22
of the foregoing six month period, the Fund shall continue to accept
and implement orders by GWL&A 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. GWL&A 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 Contractowners materially and 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 GWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement within
six (6) months after the Board informs GWL&A 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
Independent Directors.
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 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Exemptive Order) on terms and conditions materially different
from those contained in the Mixed and 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 3.5, 3.6, 3.7, 7.1,
7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only
to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
23
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By GWL&A
------------------------
8.1(a). GWL&A agrees to indemnify and hold harmless the Fund,
the Distributor and the Adviser and each of their officers, directors
or trustees, employees or agents and each person, if any, who controls
the Fund, Distributor or 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, expenses,
damages, liabilities (including amounts paid in settlement with the
written consent of GWL&A) or litigation (including reasonable 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 sale, acquisition or redemption of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus or SAI covering
the Contracts or contained in the Contracts or 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, 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 to GWL&A or Schwab by or
on behalf of the Adviser, Distributor or Fund for use in
the registration statement, prospectus or SAI covering the
Contracts or contained in the Contracts or sales literature
or other promotional material for the Contracts (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or represen-
tations (other than statements or representations contained
in the registration statement, prospectus, SAI or sales
literature or other promotional material of the Fund not
supplied by GWL&A or persons under its control) or wrongful
conduct of GWL&A 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 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, if such a statement or omission was made in
reliance upon information
24
furnished in writing to the Fund, Adviser or Distributor by
or on behalf of GWL&A; or
(iv) arise as a result of any failure by GWL&A 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 GWL&A in this
Agreement or arise out of or result from any other material
breach of this Agreement by GWL&A, including without
limitation Section 2.11 and Section 6.7 hereof,
as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). GWL&A shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, 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 or duties under this Agreement or to
any of the Indemnified Parties.
8.1(c). GWL&A 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 GWL&A 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 GWL&A of any such claim shall not relieve GWL&A
from any liability which it may have to the Indemnified Party against
whom such action is brought on account of this indemnification
provision, except to the extent that GWL&A has been prejudiced by such
failure to give notice. In addition, any failure by the Indemnified
Party to notify GWL&A of any such claim shall not relieve GWL&A from
any liability which it may have to the Indemnified Party against whom
the action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, GWL&A shall be entitled to participate, at
its own expense, in the defense of such action.
25
GWL&A also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to GWL&A, GWL&A shall not have the right
to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall GWL&A be liable for the fees and
expenses of more than one counsel for Indemnified Parties in
connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances). After notice from GWL&A to such party
of GWL&A's election to assume the defense thereof, and in the absence
of such a reasonable conclusion that there may be different or
additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and GWL&A 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 GWL&A 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.
26
8.2. Indemnification by Schwab
-------------------------
8.2(a). Schwab agrees to indemnify and hold harmless the Fund,
the Distributor and the Adviser and each of their officers, directors
or trustees, employees or agents, and each person, if any, who
controls the Fund, Distributor or Adviser 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,
expenses, damages and liabilities (including amounts paid in
settlement with the written consent of Schwab) or litigation
(including reasonable legal and other expenses), to which the Indemni-
fied 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, acquisition or redemption of the Fund's
shares or the Contracts and:
(i) arise out of Xxxxxx'x dissemination of information
regarding the Fund that is both (A) materially incorrect
and (B) that was neither contained in the Fund's
registration statement nor in the Fund's sales literature
or other promotional material or provided in writing to
Schwab, or approved in writing, by or on behalf of the
Fund, Distributor or Adviser; or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
sales literature or other promotional material prepared or
approved by Schwab for the Contracts 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 in
writing to GWL&A or Schwab by or on behalf of the Adviser,
Distributor or the Fund or to Schwab by GWL&A for use in
the registration statement, prospectus or SAI covering the
Contracts or contained in the Contracts or sales literature
or other promotional material for the Contracts (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts; or
(iii) arise out of or as a result of statements or represen-
tations (other than statements or representations contained
in the registration statement, prospectus, SAI or sales
literature or other promotional material of the Fund not
supplied by Schwab or persons under its control) or
wrongful conduct of Schwab or persons under its control,
with respect to the sale or distribution of the Contracts;
or
27
(iv) arise as a result of any failure by Schwab 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 Schwab in this
Agreement or arise out of or result from any other material
breach of this Agreement by Schwab;
as limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b). Schwab 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
or duties under this Agreement or to any of the Indemnified Parties.
8.2(c). Schwab 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 Schwab 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 Schwab of any such claim shall not relieve
Schwab from any liability which it may have to the Indemnified Party
against whom such action is brought on account of this indemnification
provision, except to the extent that Schwab has been prejudiced by
such failure to give notice. In addition, any failure by the
Indemnified Party to notify Schwab of any such claim shall not relieve
Schwab from any liability which it may have to the Indemnified Party
against whom the action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against
the Indemnified Parties, Schwab shall be entitled to participate, at
its own expense, in the defense of such action. Schwab also shall be
entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action; provided, however, that if the
Indemnified Party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to
those available to Xxxxxx,
00
Xxxxxx shall not have the right to assume said defense, but shall pay
the costs and expenses thereof (except that in no event shall Schwab
be liable for the fees and expenses of more than one counsel for
Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances). After notice from Schwab
to such party of Xxxxxx'x election to assume the defense thereof, and
in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party,
the Indemnified Party shall bear the fees and expenses of any addi-
tional counsel retained by it, and Schwab 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.
8.2(d). The Indemnified Parties will promptly notify Schwab 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.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless GWL&A
and Schwab and each of their directors, officers, employees or agents,
and each person, if any, who controls GWL&A or Schwab 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 Adviser) or litigation
(including reasonable 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, acquisition or
redemption 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 or other promotional material of the Fund
prepared by the Adviser (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
29
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 in
writing to the Adviser, the Distributor or the Fund by or
on behalf of GWL&A or Schwab for use in the registration
statement, prospectus or SAI for the Fund or in sales
literature or other promotional material (or any amendment
or supplement) or otherwise for use in connection with the
sale of the Contracts or the Fund shares; or
(ii) arise out of or as a result of statements or represen-
tations (other than statements or representations contained
in the registration statement, prospectus, SAI or sales
literature or other promotional material for the Contracts
not supplied by the Adviser or persons under its control)
or wrongful conduct of the 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 or other
promotional material 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 in
writing to GWL&A or Schwab by or on behalf of the Adviser,
the Distributor or the Fund; or
(iv) arise as a result of any failure by the Adviser to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional
or in good faith or otherwise, 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 8.3(b)
and 8.3(c) hereof. This indemnification is in addition to and apart
from the responsibilities and obligations of the Adviser specified in
Article VI hereof.
8.3(b). The Adviser shall not be liable under this
indemnification provision with respect to any losses, claims,
expenses, damages, liabilities or litigation to which an Indemnified
Party
30
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 or duties under this
Agreement or to any of the Indemnified Parties.
8.3(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 on
account of this indemnification provision, except to the extent that
the Adviser has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party 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 the 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; provided, however, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which
are different from or additional to those available to the Adviser,
the Adviser shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the
Adviser be liable for the fees and expenses of more than one counsel
for Indemnified Parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances). After notice from the
Adviser to such party of the Adviser's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there
may be different or additional defenses available to the Indemnified
Party, 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
31
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). GWL&A and Schwab agree to promptly notify the Adviser of
the commencement of any litigation or proceedings against GWL&A or
Schwab or any of their officers or directors in connection with the
issuance or sale of the Contracts or the operation of the Account.
8.4. Indemnification By the Fund
---------------------------
8.4(a). The Fund agrees to indemnify and hold harmless GWL&A and
Schwab and each of their directors, officers, employees or agents and
each person, if any, who controls GWL&A or Schwab within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 8.4) against any and all losses, claims,
expenses, 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 or regulation, at common law or
otherwise, insofar as such losses, claims, expenses, damages, liabili-
ties 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 failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, 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; or
(iii) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.4(b)
and 8.4(c) hereof.
8.4(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, damages,
liabilities or litigation to which an Indemnified Party
32
would otherwise be subject by reason of such Indemnified Party's will-
ful 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 or duties under this Agreement or to
any of the Indemnified Parties.
8.4(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 it
from any liability which it may have to the Indemnified Party against
whom such action is brought on account of this indemnification
provision, except to the extent that the Fund has been prejudiced by
such failure to give notice. In addition, any failure by the
Indemnified Party 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 the 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; provided, however, that
if the Indemnified Party shall have reasonably concluded that there
may be defenses available to it which are different from or additional
to those available to the Fund, the Fund shall not have the right to
assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Fund be liable for the fees and
expenses of more than one counsel for Indemnified Parties in
connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances). After notice from the Fund to such
party of the Fund's election to assume the defense thereof, and in the
absence of such a reasonable conclusion that there may be different or
additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any 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
33
by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.4(d). GWL&A and Schwab each agree to promptly notify the Fund
of the commencement of any litigation or proceeding against GWL&A or
Schwab or any of their respective officers or directors 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.
8.5. Indemnification by the Distributor
----------------------------------
8.5(a). The Distributor agrees to indemnify and hold harmless
GWL&A and Schwab and each of their directors, officers, employees or
agents and each person, if any, who controls GWL&A or Schwab within
the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.5) against any
and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the
Distributor) or litigation (including reasonable 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 sale,
acquisition or redemption 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 or other promotional material of the Fund
prepared by the Distributor (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 in writing to the
Adviser, the Distributor or Fund by or on behalf of GWL&A
or Schwab for use in the registration statement or SAI or
prospectus for the Fund or in sales literature or other
promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
34
(ii) arise out of or as a result of statements or represen-
tations (other than statements or representations contained
in the registration statement, prospectus, SAI, sales
literature or other promotional material for the Contracts
not supplied by the Distributor or persons under its
control) or wrongful conduct of the Distributor 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, sales literature or other
promotional material 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 in
writing to GWL&A or Schwab by or on behalf of the Adviser,
the Distributor or Fund; or
(iv) arise as a result of any failure by the Distributor to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, 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 Distributor in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Fund, Adviser or
Distributor;
as limited by and in accordance with the provisions of Sections 8.5(b)
and 8.5(c) hereof. This indemnification is in addition to and apart
from the responsibilities and obligations of the Distributor specified
in Article VI hereof.
8.5(b). The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims,
expenses, 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 or
such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this
Agreement or to any of the Indemnified Parties.
8.5(c) The Distributor shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have
35
notified the Distributor 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
Distributor of any such claim shall not relieve the Distributor from
any liability which it may have to the Indemnified Party against whom
such action is brought on account of this indemnification provision,
except to the extent that the Distributor has been prejudiced by such
failure to give notice. In addition, any failure by the Indemnified
Party to notify the Distributor of any such claim shall not relieve
the Distributor from any liability which it may have to the
Indemnified Party against whom the action is brought otherwise than on
account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Distributor will be
entitled to participate, at its own expense, in the defense thereof.
The Distributor also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to the Distributor, the Distributor
shall not have the right to assume said defense, but shall pay the
costs and expenses thereof (except that in no event shall the
Distributor be liable for the fees and expenses of more than one
counsel for Indemnified Parties in connection with any one action or
separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After
notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, and in the absence of such a
reasonable conclusion that there may be different or additional
defenses available to the Indemnified Party, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by
it, and the Distributor 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.
8.5(d) GWL&A and Schwab agree to promptly notify the
Distributor of the commencement of any litigation or proceedings
against GWL&A or Schwab or any of their
36
officers or directors in connection with the issuance or sale of the
Contracts or the operation of the Account.
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
Colorado, without regard to the Colorado Conflict of Laws provisions.
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 Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
37
ARTICLE X. Termination
-----------
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause,
with respect to some or all Portfolios, upon six (6) months
advance written notice delivered to the other parties;
provided, however, that such notice shall not be given
earlier than six (6) months following the date of this
Agreement; or
(b) at the option of GWL&A or Schwab by written notice to
the other parties with respect to any Portfolio based upon
GWL&A's or Xxxxxx'x determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) at the option of GWL&A or Schwab 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 GWL&A; or
(d) at the option of the Fund or the Adviser in the event
that formal administrative proceedings are instituted
against GWL&A or Schwab by the NASD, the SEC, the Insurance
Commissioner or like official of any state or any other
regulatory body regarding GWL&A's or Xxxxxx'x duties under
this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Fund
shares, if, in each case, the Fund reasonably determines in
its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of GWL&A or Schwab to perform its
obligations under this Agreement; or
(e) at the option of GWL&A or Schwab in the event that
formal administrative proceedings are instituted against
the Fund, the Distributor or the Adviser by the NASD, the
SEC, or any state securities or insurance department or any
other regulatory body, if Schwab or GWL&A reasonably
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, the
Distributor or the Adviser to perform their obligations
under this Agreement; or
(f) at the option of GWL&A by written notice to the Fund
with respect to any Portfolio if GWL&A reasonably believes
that the Portfolio will fail to meet the Section 817(h)
diversification requirements or Subchapter M qualifications
specified in Article VI hereof; or
(g) at the option of either the Fund, the Distributor or
the Adviser, if (i) the Fund, Distributor or Adviser,
respectively, shall determine, in their sole judgment
38
reasonably exercised in good faith, that either GWL&A or
Schwab has suffered a material adverse change in their
business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact on GWL&A's
or Xxxxxx'x ability to perform its obligations under this
Agreement, (ii) the Fund, Distributor or Adviser notifies
GWL&A or Schwab, as appropriate, of that determination and
its intent to terminate this Agreement, and (iii) after
considering the actions taken by GWL&A or Schwab and any
other changes in circumstances since the giving of such a
notice, the determination of the Fund, Distributor or
Adviser shall continue to apply on the sixtieth (60th) day
following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(h) at the option of either GWL&A or Schwab, if (i) GWL&A
or Schwab, respectively, shall determine, in its sole
judgment reasonably exercised in good faith, that the Fund,
Distributor or Adviser has suffered a material adverse
change in its business or financial condition or is the
subject of material adverse publicity and that material
adverse change or publicity will have a material adverse
impact on the Fund's, Distributor's or Adviser's ability to
perform its obligations under this Agreement, (ii) GWL&A or
Schwab notifies the Fund, Distributor or Adviser, as
appropriate, of that determination and its intent to
terminate this Agreement, and (iii) after considering the
actions taken by the Fund, Distributor or Adviser and any
other changes in circumstances since the giving of such a
notice, the determination of GWL&A or Schwab shall continue
to apply on the sixtieth (60th) day following the giving of
that notice, which sixtieth day shall be the effective date
of termination; or
(i) at the option of GWL&A in the event that formal
administrative proceedings are instituted against Schwab by
the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other
regulatory body regarding Xxxxxx'x duties under this
Agreement or related to the sale of the Fund's shares or
the Contracts, the operation of any Account, or the
purchase of the Fund shares, provided, however, that GWL&A
determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a
material adverse effect upon the ability of Schwab to
perform its obligations related to the Contracts; or
(j) at the option of Schwab in the event that formal
administrative proceedings are instituted against GWL&A by
the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other
regulatory body regarding GWL&A's duties under this
Agreement or related to the sale of the Fund's shares or
the Contracts, the operation of any Account, or the
purchase of the Fund shares, provided, however, that Schwab
determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a
material adverse effect upon the ability of GWL&A to
perform its obligations related to the Contracts; or
39
(k) at the option of any non-defaulting party hereto in
the event of a material breach of this Agreement by any
party hereto (the "defaulting party") other than as
described in 10.1(a)-(j); provided, that the non-defaulting
party gives written notice thereof to the defaulting party,
with copies of such notice to all other non-defaulting
parties, and if such breach shall not have been remedied
within thirty (30) days after such written notice is given,
then the non-defaulting party giving such written notice
may terminate this Agreement by giving thirty (30) days
written notice of termination to the defaulting party.
10.2. Notice Requirement. No termination of this Agreement shall
------------------
be effective unless and until the party terminating this Agreement
gives prior written notice to all other parties of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event any termination is based upon the provisions of
Article VII, or the provisions of Section 10.1(a), 10.1(g) or
10.1(h) of this Agreement, the prior written notice shall be
given in advance of the effective date of termination as required
by those provisions unless such notice period is shortened by
mutual written agreement of the parties;
(b) in the event any termination is based upon the provisions of
Section 10.1(d), 10.1(e), 10.1(i) or 10.1(j) of this Agreement,
the prior written notice shall be given at least sixty (60) days
before the effective date of termination; and
(c) in the event any termination is based upon the provisions of
Section 10.1(b), 10.1(c) or 10.1(f), the prior written notice
shall be given in advance of the effective date of termination,
which date shall be determined by the party sending the notice.
10.3. Effect of Termination. Notwithstanding any termination of
---------------------
this Agreement, other than as a result of a failure by either the Fund
or GWL&A to meet Section 817(h) of the Code diversification
requirements, the Fund, the Distributor and the Adviser shall, at the
option of GWL&A or Schwab, continue to make available additional
shares of the Designated Portfolio(s) 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
40
reallocate investments in the Designated Portfolio(s), redeem
investments in the Designated Portfolio(s) and/or invest in the
Designated Portfolio(s) upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this
Section 10.3 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by
Article VII of this Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of
--------------------
this Agreement, each party's obligations under Article VIII to
indemnify other parties shall survive and not be affected by any
termination of this Agreement. In addition, with respect to Existing
Contracts, all provisions of this Agreement shall also survive and not
be affected by any termination of this Agreement.
10.5. Survival of Agreement. A termination by Schwab shall
---------------------
terminate this Agreement only as to Schwab, and this Agreement shall
remain in effect as to the other parties; provided, however, that in
the event of a termination by Schwab the other parties shall have the
option to terminate this Agreement upon 60 (sixty) days notice, rather
than the six (6) months specified in Section 10.1(a).
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:
Xxxxxx Institutional Products Trust
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxx
If to GWL&A:
Great-West Life & Annuity Insurance Company
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Assistant Vice President, Savings Products
41
If to the Adviser:
Xxxxxx Associates, Inc.
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxx
If to the Distributor:
Xxxxxx Distributors, Inc.
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
If to Schwab:
Xxxxxxx Xxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: General Counsel
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 has designated as 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.
42
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 SEC, 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 Colorado 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 GWL&A are being conducted in a manner
consistent with the Colorado Variable Annuity Regulations and any
other applicable law or regulations.
12.6. Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration in a
forum jointly selected by the relevant parties (but if applicable law
requires some other forum, then such other forum) in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
12.7. 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.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written
consent of all parties hereto.
43
12.9. Schwab and GWL&A agree that the obligations assumed by the
Fund, the Distributor and the Adviser pursuant to this Agreement shall
be limited in any case to the Fund, the Distributor and Adviser and
their respective assets and neither Schwab nor GWL&A shall seek
satisfaction of any such obligation from the shareholders of the Fund
or the Adviser, the directors, officers, employees or agents of the
Fund or Adviser, or any of them, except to the extent permitted under
this Agreement.
12.10. The Fund, the Distributor and the Adviser agree that
the obligations assumed by GWL&A and Schwab pursuant to this Agreement
shall be limited in any case to GWL&A and Schwab and their respective
assets and neither the Fund, Distributor nor Adviser shall seek
satisfaction of any such obligation from the shareholders of the GWL&A
or Schwab, the directors, officers, employees or agents of the GWL&A
or Schwab, or any of them, except to the extent permitted under this
Agreement.
12.11. No provision of this Agreement may be deemed or
construed to modify or supersede any contractual rights, duties, or
indemnifications, as between the Adviser and the Fund, and the
Distributor and the Fund.
44
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.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ X.X. Xxxx
----------------------------------------------
Title: Vice President, Marketing and Product
Development
Date: April 1, 1997
XXXXXX INSTITUTIONAL PRODUCTS TRUST
By its authorized officer,
By:/s/ Xxxxxx X. Xxxxx
----------------------------------------------
Title: Xxxxxx X. Xxxxx, President
Date: March 25, 1997
XXXXXX ASSOCIATES, INC.
By its authorized officer,
By:/s/ Xxxxxx X. Xxxxx
----------------------------------------------
Title: Xxxxxx X. Xxxxx, President
Date: March 25, 1997
XXXXXX DISTRIBUTORS, INC.
By its authorized officer,
By:/s/ Xxxxx X. Xxxxxx
----------------------------------------------
Title: Xxxxx X. Xxxxxx, President
Date: March 24, 1997
XXXXXXX XXXXXX & CO., INC.
By its authorized officer,
By:/s/ Xxxx Xxxxxx
----------------------------------------------
Title: Vice President, Annuities & Life
Insurance
Date: March 31, 1997
45
Schwab Variable Annuity
SCHEDULE A
----------
Contracts Form Numbers
--------- ------------
Great-West Life & Annuity Insurance Company
-------------------------------------------
Group Variable/Fixed Annuity Contract J434
Individual Variable/Fixed Annuity Contract J434IND
SCHEDULE B
----------
Designated Portfolios
---------------------
Xxxxxx IPT-Small Company Growth Fund
SCHEDULE C
----------
ADMINISTRATIVE SERVICES
-----------------------
To be performed by Xxxxxxx Xxxxxx & Co., Inc.
X. Xxxxxx will provide the properly registered and licensed
personnel and systems needed for all customer servicing and support -
for both fund and annuity information and questions - including:
respond to Contractowner inquiries
delivery of prospectus - both fund and annuity;
entry of initial and subsequent orders;
transfer of cash to insurance company and/or funds;
explanations of fund objectives and characteristics;
entry of transfers between funds;
fund balance and allocation inquiries;
mail fund prospectus.
B. For the services, Schwab shall receive a fee of 0.25% per annum
applied to the average daily value of the shares of the fund held by
Xxxxxx'x customers, payable by the Adviser directly to Schwab, such
payments being due and payable within 15 (fifteen) days after the last
day of the month to which such payment relates.
C. The Fund will calculate and Schwab will verify with GWL&A the
asset balance for each day on which the fee is to be paid pursuant to
this Agreement with respect to each Designated Portfolio.
X. Xxxxxx will communicate all purchase, withdrawal, and exchange
orders it receives from its customers to GWL&A who will retransmit
them to each fund.
48
SCHEDULE D
----------
Reports per Section 6.6
-----------------------
With regard to the reports relating to the quarterly testing of
compliance with the requirements of Section 817(h) and Subchapter M
under the Internal Revenue Code (the "Code") and the regulations
thereunder, the Fund shall provide within twenty (20) Business Days of
the close of the calendar quarter a report to GWL&A in the Form D1
attached hereto and incorporated herein by reference, regarding the
status under such sections of the Code of the Designated Portfolio(s),
and if necessary, identification of any remedial action to be taken to
remedy non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred
to hereinafter as "RIC status," the Fund will provide the reports on
the following basis: (i) the last quarter's quarterly reports can be
supplied within the 20-day period, and (ii) a year-end report will be
provided 45 days after the end of the calendar year. However, if a
problem with regard to RIC status, as defined below, is identified in
the third quarter report, on a weekly basis, starting the first week
of December, additional interim reports will be provided specially
addressing the problems identified in the third quarter report. If
any interim report memorializes the cure of the problem, subsequent
interim reports will not be required.
A problem with regard to RIC status is defined as any violation
of the following standards, as referenced to the applicable sections
of the Code:
(a) Less than ninety percent of gross income is derived from
sources of income specified in Section 851(b)(2);
(b) Thirty percent or greater gross income is derived from the
sale or disposition of assets specified in Section 851(b)(3);
(c) Less than fifty percent of the value of total assets consists
of assets specified in Section 851(b)(4)(A); and
(d) No more than twenty-five percent of the value of total assets
is invested in the securities of one issuer, as that requirement
is set forth in Section 851(b)(4)(B).
49
FORM D1
CERTIFICATE OF COMPLIANCE
I, ____________________________, a duly authorized officer,
director or agent of ______________ Fund hereby swear and affirm that
__________________________________ Fund is in compliance with all
requirements of Section 817(h) and Subchapter M of the Internal
Revenue Code (the "Code") and the regulations thereunder as required
in the Fund Participation Agreement among Great-West Life & Annuity
Insurance Company, Xxxxxxx Xxxxxx & Co., Inc. and _______________
other than the exceptions discussed below:
Exceptions Remedial Action
---------- ---------------
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
_____________________________________
________________________________________
If no exception to report, please indicate "None."
Signed this _______ day of _______, _______.
_________________________________________
(Signature)
By:______________________________________
(Type or Print Name and Title/Position)
SCHEDULE E
EXPENSES
--------
The Fund and/or the Distributor and/or Adviser, and GWL&A will
coordinate the functions and pay the costs of the completing these
functions based upon an allocation of costs in the tables below.
Costs shall be allocated to reflect the Fund's share of the total
costs determined according to the number of pages of the Fund's
respective portions of the documents.
-------------------------------------------------------------------------------------------------------------------
Item Function Party Responsible for Party Responsible
Coordination for Expense
-------------------------------------------------------------------------------------------------------------------
Mutual Fund Prospectus Printing of combined GWL&A Fund, Distributor
prospectuses or Adviser, as
applicable
-------------------------------------------------------------------------------------------------------------------
Fund, Distributor or GWL&A Fund, Distributor
Adviser shall supply or Adviser, as
GWL&A with such applicable
numbers of the
Designated Portfolio(s)
prospectus(es) as
GWL&A shall
reasonably request
-------------------------------------------------------------------------------------------------------------------
Distribution to New and GWL&A GWL&A
Inforce Clients
-------------------------------------------------------------------------------------------------------------------
Distribution to Prospecve Schwab Schwab
Clients
-------------------------------------------------------------------------------------------------------------------
Product Prospectus Printing for Inforce GWL&A GWL&A
Clients
-------------------------------------------------------------------------------------------------------------------
Printing for Prospectiv GWL&A Schwab
Clients
-------------------------------------------------------------------------------------------------------------------
Distribution to New and GWL&A GWL&A
Inforce Clients
-------------------------------------------------------------------------------------------------------------------
Distribution to Prospecve Schwab Schwab
Clients
-------------------------------------------------------------------------------------------------------------------
Item Function Party Responsible for Party Responsible
Coordination for Expense
-------------------------------------------------------------------------------------------------------------------
Mutual Fund Prospectus If Required by Fund, Fund Distributor or Fund Distributor
Update & Distribution Distributor or Adviser Adviser or Adviser
-------------------------------------------------------------------------------------------------------------------
If Required by GWL&A GWL&A GWL&A
-------------------------------------------------------------------------------------------------------------------
If Required by Schwab Schwab Schwab
-------------------------------------------------------------------------------------------------------------------
Product Prospectus If Required by Fund, GWL&A Fund Distributor
Update & Distribution Distributor or Adviser or Adviser
-------------------------------------------------------------------------------------------------------------------
52
-------------------------------------------------------------------------------------------------------------------
Item Function Party Responsible for Party Responsible
Coordination for Expense
-------------------------------------------------------------------------------------------------------------------
If Required by GWL&A GWL&A GWL&A
-------------------------------------------------------------------------------------------------------------------
If Required by Schwab Schwab Schwab
-------------------------------------------------------------------------------------------------------------------
Mutual Fund SAI Printing Fund, Distributor or Fund, Distributor
Adviser or Adviser
-------------------------------------------------------------------------------------------------------------------
Distribution GWL&A GWL&A
-------------------------------------------------------------------------------------------------------------------
Product SAI Printing GWL&A GWL&A
-------------------------------------------------------------------------------------------------------------------
Distribution GWL&A GWL&A
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Item Function Party Responsible for Party Responsible
Coordination for Expense
-------------------------------------------------------------------------------------------------------------------
Proxy Material for Printing if proxy Fund, Distributor or Fund, Distributor
Mutual Fund: required by Law Adviser or Adviser
-------------------------------------------------------------------------------------------------------------------
Distribution (including GWL&A Fund, Distributor
labor) if proxy or Adviser
required by Law
-------------------------------------------------------------------------------------------------------------------
Printing & distributionf GWL&A GWL&A
required by GWL&A
-------------------------------------------------------------------------------------------------------------------
Printing & distributionf GWL&A Schwab
required by Schwab
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Item Function Party Responsible for Party Responsible
Coordination for Expense
-------------------------------------------------------------------------------------------------------------------
Mutual Fund Annual & Printing of combined GWL&A Fund, Distributor
Semi-Annual Report reports or Adviser
-------------------------------------------------------------------------------------------------------------------
Distribution GWL&A GWL&A and Schwab
-------------------------------------------------------------------------------------------------------------------
Other communication to If Required by the Fund Schwab Fund, Distributor
New and Prospective Distributor or Adviser or Adviser
clients
-------------------------------------------------------------------------------------------------------------------
If Required by GWL&A Schwab GWL&A
-------------------------------------------------------------------------------------------------------------------
53
-------------------------------------------------------------------------------------------------------------------
Item Function Party Responsible for Party Responsible
Coordination for Expense
-------------------------------------------------------------------------------------------------------------------
If Required by Schwab Schwab Schwab
-------------------------------------------------------------------------------------------------------------------
Other communication to Distribution (including GWL&A Fund, Distributor
inforce labor) if required by t or Adviser
Fund, Distributor or
Adviser
-------------------------------------------------------------------------------------------------------------------
If Required by GWL&A GWL&A GWL&A
-------------------------------------------------------------------------------------------------------------------
If Required by Schwab GWL&A Schwab
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Item Function Party Responsible for Party Responsible
Coordination for Expense
-------------------------------------------------------------------------------------------------------------------
Errors in Share Price Cost of error to GWL&A Fund or Adviser
calculation pursuant to participants
Section 1.10
-------------------------------------------------------------------------------------------------------------------
Cost of administrative GWL&A Fund or Adviser
work to correct error
-------------------------------------------------------------------------------------------------------------------
Operations of the Fund All operations and Fund, Distributor or Fund or Adviser
related expenses, Adviser
including the cost of
registration and
qualification of shares
taxes on the issuance o
transfer of shares, cos
of management of the
business affairs of the
Fund, and expenses paid
or assumed by the fund
pursuant to any Rule
12b-1 plan
-------------------------------------------------------------------------------------------------------------------
Operations of the Federal registration of GWL&A GWL&A
Account units of separate accou
(24f-2 fees)
-------------------------------------------------------------------------------------------------------------------
54
