Exhibit 1.A.9.K
PARTICIPATION AGREEMENT
BY AND AMONG
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.,
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION,
AND
CONSECO VARIABLE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS.
TABLE OF CONTENTS
DESCRIPTION PAGE
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Section 1. Available Funds 2
1.1 Availability 2
1.2 Addition, Deletion or Modification of Funds 2
1.3 No Sales to the General Public 2
Section 2. Processing Transactions 2
2.1 Timely Pricing and Orders 2
2.2 Timely Payments 3
2.3 Applicable Price 4
2.4 Dividends and Distributions 4
2.5 Book Entry 4
Section 3. Costs and Expenses 4
3.1 General 4
3.2 Registration 5
3.3 Other (Non-Sales-Related) 5
3.4 Parties To Cooperate 6
Section 4. Legal Compliance 6
4.1 Tax Laws 6
4.2 Insurance and Certain Other Laws 7
4.3 Securities Laws 8
4.4 Notice of Certain Proceedings and Other Circumstances 9
4.5 Company To Provide Documents; Information About FAIP 10
4.6 FAIP To Provide Documents; Information About Company 11
Section 5. Mixed and Shared Funding 12
5.1 General 12
5.2 Disinterested Directors 12
5.3 Monitoring for Material Irreconcilable Conflicts 13
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DESCRIPTION PAGE
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5.4 Conflict Remedies 13
5.5 Notice to Company 15
5.6 Information Requested by Board of Directors 15
5.7 Compliance with SEC Rules 15
5.8 Other Requirements 15
Section 6. Termination 15
6.1 Events of Termination 16
6.2 Notice Requirement for Termination 17
6.3 Funds To Remain Available 17
6.4 Survival of Warranties and Indemnifications 18
6.5 Continuance of Agreement for Certain Purposes 18
Section 7. Parties To Cooperate Respecting Termination 18
Section 8. Assignment 18
Section 9. Notices 18
Section 10. Voting Procedures 19
Section 11. Foreign Tax Credits 20
Section 12. Indemnification 20
12.1 Of FAIP and the Advisor by Company 20
12.2 Of Company by FAIP and Advisor 22
12.3 Effect of Notice 25
12.4 Successors 25
Section 13. Applicable Law 25
Section 14. Execution in Counterparts 25
Section 15. Severability 25
Section 16. Rights Cumulative 26
Section 17. Headings 26
Section 18. Confidentiality 26
Section 19. Parties to Cooperate 27
Section 20. Amendments 27
Section 21. Assignment 27
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of 4, 2001
("Agreement"), by and among First American Insurance Portfolios, Inc., a
Minnesota corporation ("FAIP"); First American Asset Management, a division of
U.S. Bank National Association, a national banking association organized and
existing under the laws of the United States of America (the "Advisor"); and
Conseco Variable Insurance Company, a Texas life insurance company ("Company."),
on behalf of itself and each of its segregated asset accounts listed in Schedule
A hereto, as the parties hereto may amend said Schedule A from time to time
(each, an "Account," and collectively, the "Accounts") (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, FAIP is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, FAIP currently consists of five separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and may be sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, FAIP will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend said Schedule A from time to time (each a
"Fund"; reference herein to "Fund" includes reference to each Fund, to the
extent the context requires) available for purchase by the Accounts; and
WHEREAS, Company will be the issuer of certain variable annuity contracts
and variable life insurance contracts ("Contracts") as set forth on Schedule A
hereto, as the Parties hereto may amend said Schedule A from time to time, which
Contracts, if required by applicable law, will be registered under the 1933 Act;
and
WHEREAS, Company will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, Company will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Company intends to purchase Shares in one or more of the Funds on
behalf of the Accounts to fund the Contracts.
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NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
FAIP will make Shares of each Fund available to Company for purchase and
redemption on behalf of the Accounts at net asset value and with no sales
charges, subject to the terms and conditions of this Agreement. The Board of
Directors of FAIP may refuse to sell Shares of any Fund to any person, or
suspend or terminate the offering of Shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Board of Directors acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, such action
is deemed in the best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
In the event FAIP intends to terminated the existence of a Fund, the
Advisor shall be liable for the payment of all expenses incurred in connection
with any fund substitution undertaken by the Company as a result of such
termination. Such expenses shall include but not be limited to legal, accounting
and brokerage costs.
1.3 NO SALES TO THE GENERAL PUBLIC.
FAIP represents and warrants that Shares of the Funds have been and will
be sold only to variable annuity separate accounts and variable life insurance
separate accounts of participating insurance companies for the purpose of
funding variable annuity contracts or variable life insurance policies and no
Shares of the Funds have been or will be sold to the general public.
Notwithstanding this, under Treas. Reg. 1.817-5(f)(3)(ii), shares may be held by
the Advisor in connection with the creation of FAIP (or by a person related to
the Advisor in a manner specified in Section 267(d) of the Code).
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) FAIP or its designated agent will use its best efforts to provide
Company with the net asset value per Share for each Fund by 5:00
p.m. Central Time on each Business Day. As used herein, "Business
Day" shall mean any day on which (i)
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the New York Stock Exchange is open for regular trading, and (ii)
on which FAIP calculates the Fund's net asset value pursuant to
the rules of the SEC.
(b) Company will use the data provided by FAIP each Business Day
pursuant to paragraph (a) immediately above to calculate Account
unit values and to process transactions that receive that same
Business Day's Account unit values. Company will perform such
Account processing the same Business Day, and will place
corresponding orders to purchase or redeem Shares with FAIP by
9:00 a.m. Central Time the following Business Day; provided,
however, that FAIP shall provide additional time to Company in the
event that FAIP is unable to meet the 5:00 p.m. time stated in
paragraph (a) immediately above. Such additional time shall be no
more than the additional time that FAIP took to make the net asset
values available to Company.
(c) With respect to payment of the purchase price by Company and of
redemption proceeds by FAIP, Company and FAIP shall net purchase
and redemption orders with respect to each Fund and shall transmit
one total net payment for all Funds in accordance with Section
2.2, below.
(d) If FAIP provides materially incorrect Share net asset value
information (as determined under SEC guidelines and the net asset
value error policy as approved by the Board of Directors of
FAIP), Company shall be entitled to an adjustment to the number
of Shares purchased or redeemed to reflect the correct net asset
value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain
information shall be reported promptly upon discovery to Company.
If an Account, due to such error has received amounts in excess of
the amounts to which it is entitled, the Company, when requested
by FAIP or the Advisor, shall make adjustments to the Account to
reflect the change in the values of the Shares as reflected in the
unit values of the affected contract owners who still have values
in the Funds. The Advisor shall be liable for the reasonable
administrative costs incurred by the Company in relation to the
correction of any material error. Administrative costs shall
include reasonable allocation of staff time, costs of outside
service providers, printing and postage.
2.2 TIMELY PAYMENTS.
Company will wire payment in federal funds for net purchases to a
custodial account designated by Fund by 2:00 p.m. Central Time on the same day
as the order for Shares is placed, to the extent practicable. FAIP will wire
payment for net redemptions in federal funds to an account designated by Company
by 2:00 p.m. Central Time on the same day as the order is placed.
Notwithstanding the foregoing, if the payment of redemption proceeds would
require the Fund to dispose of portfolio securities or otherwise incur
substantial additional costs, and if the Fund has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds in
federal funds shall be wired after the date the order is placed, but in any
event within three (3) calendar days after the date the order is placed in order
to enable Company to pay
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redemption proceeds within the time specified in Section 22(e) of the 1940 Act
or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and all other
Participant transactions under Contracts (collectively, "Contract
transactions") that Company receives prior to the close of
regular trading on the New York Stock Exchange on a Business Day
will be executed at the net asset values of the appropriate Funds
next computed after receipt by Fund or its designated agent of the
orders. For purposes of this Section 2.3(a), Company shall be the
designated agent of FAIP for receipt of orders relating to
Contract transactions on each Business Day and receipt by such
designated agent shall constitute receipt by FAIP, provided that
FAIP receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day, or such later time as computed in
accordance with Section 2.1(b) hereof.
(b) Share purchases and redemptions by Company not received by FAIP in
accordance with Section 2.3(a) hereof, will be effected at the net
asset values of the appropriate Funds next computed after receipt
by FAIP of the order therefor, and such orders will be
irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
FAIP will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to Company of any income dividends
or capital gain distributions payable on the Shares of any Fund. Company hereby
elects to reinvest all dividends and capital gains distributions in additional
Shares of the corresponding Fund at the ex-dividend date net asset values until
Company otherwise notifies FAIP in writing, it being agreed by the Parties that
the ex-dividend date and the payment date with respect to any dividend or
distribution will be the same business day. Company reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of FAIP Shares will be by book entry only. Stock
certificates will not be issued to Company. Shares ordered from FAIP will be
recorded in an appropriate title for Company, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
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3.2 REGISTRATION.
(a) FAIP will bear the cost of its registering as a management
investment company under the 1940 Act and registering its Shares
under the 1933 Act, and keeping such registrations current and
effective; including, without limitation, the preparation of and
filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to FAIP and its Shares and, to the extent required,
payment of all applicable registration or filing fees with respect
to any of the foregoing.
(b) Company will bear the cost of registering, to the extent required,
each Account as a unit investment trust under the 1940 Act and
registering units of interest under the Contracts under the 1933
Act and keeping such registrations current and effective;
including, without limitation, the preparation and filing with the
SEC of Forms N-SAR and Rule 24f-2 Notices with respect to each
Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) FAIP will provide camera-ready film or computer diskettes
containing the Funds' prospectus, statement of additional
information, reports to shareholders and, as required, other
communications to shareholders, for Company to print and
distribute to prospective and existing Contract owners.
(i) The Company, at its expense, will print and deliver
prospectuses, statements of additional information, reports
to shareholders, and other shareholder communications to
prospective and existing Contract owners; and
(ii) The Company may elect upon 10 (ten) days notice that, in
lieu of camera-ready film or computer diskettes containing
the Funds' prospectus, statement of additional information,
reports to shareholders or other communications to
shareholders, that FAIP will provide, at Fund's expense, as
many printed copies of such shareholder information as
Company may reasonably request to deliver, at Company's
expense, to prospective and existing Contract owners. The
Company will be liable for the expense for prospective
Contract owners.
(b) The Company may elect to print prospectuses, statements of
additional information and reports to shareholders in combination
with other fund companies' prospectuses, statements of additional
information, and reports. In such event, the expenses of such
printing will be apportioned between the Company and FAIP in
proportion to the number of pages of the Contract, other fund
prospectuses and the Funds Prospectus, taking account of other
relevant factors affecting the expense of printing, such as
covers, columns, graphs and
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charts; the Funds to bear the cost of printing the Fund's
prospectus portion of such document for distribution only to
owners of existing Contracts funded by the Funds and the Company
to bear the expense of printing the portion of such documents
relating to the Account; provided, however, the Company shall bear
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing
contracts not invested in the Fund.
(c) FAIP, at its expense, will provide the Company with as many
printed copies of its proxy solicitations as may be required to
deliver to existing Contract owners. The Company, at FAIP's
expense, will distribute proxy materials in accordance with the
procedures set forth in Section 10 hereof.
(d) Unregistered separate accounts subject to the Employee Retirement
Income Security Act of 1974 ("ERlSA") will refrain from voting
shares for which no instructions are received if such shares are
held subject to the provisions of ERISA.
3.4 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of FAIP and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) FAIP and the Advisor represent and warrant (i) that each Fund is
currently qualified as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) that they will maintain
qualification of each Fund as a RIC. FAIP and the Advisor will
notify Company immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might
not so qualify in the future.
(b) FAIP and the Advisor represent and warrant that, at all times,
each Fund will comply with the diversification requirements set
forth in Section 817(h) of the Code and Section 1.817-5(b) of the
regulations under the Code. FAIP and the Advisor will notify
Company immediately upon having a reasonable basis for believing
that a Fund has ceased to so comply or that a Fund might not so
comply in the future. In the event a Fund ceases to comply, FAIP
and the Advisor will take all reasonable steps to adequately
diversify the Fund so as to achieve compliance within the grace
period afforded by Section 1.817-5 of the regulations under the
Code.
(c) The Parties hereto agree that if the Internal Revenue Service
("IRS") asserts, in connection with any governmental audit or
review of Company, FAIP or the
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Advisor, that any Fund has failed to comply with the
diversification requirements of Section 817(h) of the Code and
Section 1.817-5(b) of the regulations under the Code, or if a
Party otherwise becomes aware of any facts that could give rise to
any claim against Company, FAIP or the Advisor as a result of such
failure or alleged failure to comply with these requirements:
(i) Such Party shall promptly notify the other Parties of such
potential claims;
(ii) The Parties shall consult with each other as to how to
minimize any liability that may arise as a result of such
failure or alleged failure; and
(iii) The Parties shall provide each other with reasonable access
to books and records related to any such failure or alleged
failure, and shall provide any written materials provided
to the IRS associated with any proceedings arising out of
any such failure or alleged failure.
(d) Company represents and warrants that the Contracts, upon issuance,
will be treated as annuity contracts or life insurance contracts
under applicable provisions of the Code and that it will maintain
such treatment. Company will notify FAIP immediately upon having a
reasonable basis for believing that any of the Contracts have
ceased to be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code or that they
might not be so treated in the future.
(e) Company represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable
contract," within the meaning of such terms under Section 817 of
the Code and the regulations thereunder. Company will notify FAIP
immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met
in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) FAIP will comply with any applicable state insurance laws or
regulations, to the extent specifically requested in writing by
Company, including, the furnishing of information not otherwise
available to Company which is required by state insurance law to
enable Company to obtain the authority needed to issue the
Contracts in any applicable state.
(b) Company represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing
under the laws of the State of Texas and has full corporate power,
authority and legal right to execute, deliver and perform its
duties and comply with its obligations under this Agreement, (ii)
it has legally and validly established and maintains each Account
as a segregated asset account under Texas Insurance Law and the
regulations thereunder, and (iii)
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the Contracts comply in all material respects with all other
applicable federal and state laws and regulations.
(c) FAIP and the Advisor represent and warrant that FAIP is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Minnesota and has full power,
authority, and legal right to execute, deliver, and perform its
duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) Company represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to
the extent required by the 1933 Act, (ii) the Contracts will be
duly authorized for issuance and sold in compliance with all
applicable federal and state laws, including, without limitation,
the 1933 Act, the 1934 Act, the 1940 Act and Connecticut law,
(iii) each Account is and will remain registered under the 1940
Act, to the extent required by the 1940 Act, (iv) each Account
does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, to the
extent required, (v) each Account's 1933 Act registration
statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with
the requirements of the 1933 Act and the rules thereunder, (vi)
Company will amend the registration statement for its Contracts
under the 1933 Act and for its Accounts under the 1940 Act from
time to time as required in order to effect the continuous
offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all
times comply in all material respects with the requirements of the
1933 Act and the rules thereunder.
(b) Company will at its expense register and qualify the Contracts for
sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed advisable by
Company.
(c) FAIP represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent
required by the 1933 Act and duly authorized for issuance and sold
in compliance with Minnesota law, (ii) FAIP is and will remain
registered under the 1940 Act to the extent required by the 1940
Act, (iii) FAIP will amend the registration statement for its
Shares under the 1933 Act and itself under the 1940 Act from time
to time as required in order to effect the continuous offering of
its Shares, (iv) FAIP does and will comply in all material
respects with the requirements of the 1940 Act and the rules
thereunder, (v) FAIP's 1933 Act registration statement, together
with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) FAIP's Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and
the rules thereunder.
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(d) FAIP will at its expense register and qualify its Shares for sale
in accordance with the laws of any state or other jurisdiction if
and to the extent reasonably deemed advisable by FAIP.
(e) FAIP has adopted a distribution plan pursuant to Rule 12b-1 of the
1940 Act for its Class lB shares. FAIP shall fully disclose in
each Contract prospectus any fees paid or to be paid by the
relevant Portfolios.
(f) FAIP represents and warrants that all of its directors, officers,
employees, investment advisers, and other individuals/entities
having access to the Funds and/or securities of the Funds are and
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Funds in an amount not
less than the minimal coverage as required currently by Rule
17g-(1) of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond includes
coverage for larceny and embezzlement and is issued by a reputable
bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) FAIP will immediately notify Company of (i) the issuance by any
court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to FAIP's registration
statement under the 1933 Act or FAIP Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or
Fund Prospectus that may affect the offering of Shares of FAIP,
(iii) the initiation of any proceedings for that purpose or for
any other purpose relating to the registration or offering of
FAIP's Shares, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of Shares of any Fund in any
state or jurisdiction, including, without limitation, any
circumstances in which (a) such Shares are not registered and, in
all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the
use of such Shares as an underlying investment medium of the
Contracts issued or to be issued by Company. FAIP will make every
reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar
order and, if any such order is issued, to obtain the lifting
thereof at the earliest possible time.
(b) Company will immediately notify FAIP of (i) the issuance by any
court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's
registration statement under the 1933 Act relating to the
Contracts or each Account Prospectus, (ii) any request by the SEC
for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of FAIP, (iii)
the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of each
Account's interests pursuant to the Contracts, or (iv) any other
action or circumstances that may prevent the lawful offer or sale
of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which
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said interests are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal
law. Company will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar
order and, if any such order is issued, to obtain the lifting
thereof at the earliest possible time.
4.5 COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT FAIP.
(a) Company will provide to FAIP or its designated agent at least one
(1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting
instruction solicitation material, applications for exemptions,
requests for no-action letters, and all amendments to any of the
above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
(b) Company will provide to FAIP or its designated agent at least one
(1) complete copy of each piece of sales literature or other
promotional material in which FAIP or any of its affiliates is
named, at least fifteen (15) Business Days prior to its use or
such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if FAIP or its
designated agent objects to such use within ten (10) Business Days
after receipt of such material or such shorter period as the
Parties hereto may, from time to time, agree upon.
(c) Neither Company nor any of its affiliates, will give any
information or make any representations or statements on behalf of
or concerning FAIP or its affiliates in connection with the sale
of the Contracts other than (i) the information or representations
contained in the registration statement, including the FAIP
Prospectus contained therein, relating to Shares, as such
registration statement and FAIP Prospectus may be amended from
time to time; or (ii) in reports or proxy materials for FAIP; or
(iii) in published reports for FAIP that are in the public domain
and approved by FAIP for distribution; or (iv) in sales literature
or other promotional material approved by FAIP, except with the
express written permission of FAIP.
(d) Company shall adopt and implement procedures reasonably designed
to ensure that information concerning FAIP and its affiliates that
is intended for use only by brokers or agents selling the
Contracts (i.e., information that is not intended for distribution
to Participants) ("broker only materials") is so used, and
neither FAIP nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature
or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use
in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media, (e.g.,
on-line networks such
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as the Internet or other electronic messages), sales literature (i.e.,
any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials and any
other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 0000 Xxx.
4.6 FAIP TO PROVIDE DOCUMENTS; INFORMATION ABOUT COMP ANY.
(a) FAIP will provide to Company at least one (1) complete copy of all
SEC registration statements, FAIP Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions,
requests for no-action letters, and all amendments to any of the
above, that relate to FAIP or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
(b) FAIP will provide to Company camera ready or computer diskette
copies of all FAIP shareholder communication information (including
prospectuses, statements of additional information and reports to
shareholders) pursuant to Section 3.3. FAIP will provide such
information to Company in a timely manner so as to enable Company,
as the case may be, to print and distribute such materials within
the time required by law to be furnished to Participants.
(c) FAIP will provide to Company or its designated agent at least one
(1) complete copy of each piece of sales literature or other
promotional material in which Company, or any of its respective
affiliates is named, or that refers to the Contracts, at least
fifteen (15) Business Days prior to its use or such shorter period
as the Parties hereto may, from time to time, agree upon. No such
material shall be used if Company or its designated agent objects to
such use within ten (10) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time
to time, agree upon. Company shall receive all such sales literature
until such time as it appoints a designated agent by giving notice
to FAIP in the manner required by Section 9 hereof.
(d) Neither FAIP nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning
Company, each Account, or the Contracts other than (i) the
information or representations contained in the registration
statement, including each Account Prospectus contained therein,
relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in the
public domain and approved by Company for distribution; 01 (iii) in
sales literature or other promotional material approved by Company
or its affiliates, except with the express written permission of
Company.
11
(e) FAIP and Advisor shall adopt and implement procedures reasonably
designed to ensure that information concerning Company, and its
respective affiliates that is intended for use only by brokers or
agents selling the Contracts (i.e., information that is not intended
for distribution to Participants) ("broker only materials") is so
used, and neither Company, nor any of its respective affiliates
shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media, (e.g., on-line networks such
as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally
available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials
or other communications distributed or made generally available to
some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder
reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act
or the 0000 Xxx.
5.1 SECTION 5. MIXED AND SHARED FUNDING
GENERAL.
FAIP has applied to the SEC for an order exempting it from certain
provisions of the 1940 Act and rules thereunder so that FAIP may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with Company,
and trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC may impose terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. FAIP hereby notifies Company that it intends to
include in the Fund Prospectus disclosure regarding the potential risks of Mixed
and Shared Funding.
5.2 DISINTERESTED DLRECTORS.
FAIP agrees that a majority of the Board of Directors of FAIP ("Board")
will consist of persons who are not "interested persons" of the Company, as
defined by Section 2(a)(19) of the 1940 Act and the rules thereunder and as
modified by any applicable orders of the SEC ("Disinterested Directors"), except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be
12
filled by the Board; (b) for a period of sixty (60) days if a vote of
shareholders is required to fill the vacancy or vacancies; or (c) for such
longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
FAIP agrees that its Board of Directors will monitor the Funds for the
existence of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing FAIP
("Participating Insurance Companies"), including each Account, and of
participants in qualified retirement and pension plans investing in the Funds
("Participating Plans") and determine what action, if any, should be taken in
response to such conflicts. A material irreconcilable conflict may arise for a
variety of reasons, including:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action
by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by
Participants in Participating Plans;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participant; or
(g) a decision by a Participating Plan to disregard the voting
instructions of its Participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, FAIP and Company will
report any potential or existing conflicts to the Board and will be responsible
for assisting the Board in carrying out its responsibilities under these
conditions by providing the Board with all information reasonably necessary for
the Board to consider any issues raised. This responsibility includes, but is
not limited to, an obligation of Company to inform the Board whenever it has
determined to disregard Participant voting instructions. Company agrees that
such responsibilities will be carried out with a view only to the interests of
Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of its Disinterested
Directors that a material irreconcilable conflict exists, Company
will, if it is a Participating Insurance Company for
13
which a material irreconcilable conflict is relevant, at its own
expense and to the extent reasonably practicable (as determined by
a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable
conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from FAIP or any Fund and reinvesting such assets
in a different investment medium, including another Fund of
FAIP, or submitting the question whether such segregation
should be implemented to a vote of all affected
Participants and, as appropriate, segregating the assets of
any particular group (e.g., variable annuity contract
owners or variable life insurance contract owners) that
votes in favor of such segregation, or offering to the
affected contract owners the option of making such a
change; and
(ii) establishing a new registered management investment company
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of
Company's decision to disregard Participants' voting instructions
and that decision represents a minority position or would preclude
a majority vote, Company may be required, at FAIP's election, to
withdraw each Account's investment in FAIP or any Fund. No charge
or penalty will be imposed as a result of such withdrawal. Any
such withdrawal must take place within six (6) months after FAIP
gives notice to Company that this provision is being implemented,
and until such withdrawal FAIP shall continue to accept and
implement orders by Company for the purchase and redemption of
Shares of FAIP.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Company
conflicts with the majority of other state regulators, then
Company will withdraw each Account's investment in FAIP within six
(6) months after FAIP's Board of Directors informs Company that it
has determined that such decision has created a material
irreconcilable conflict, and until such withdrawal FAIP shall
continue to accept and implement orders by Company for the
purchase and redemption of Shares of FAIP. No charge or penalty
will be imposed as a result of such withdrawal.
(d) Company agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately
remedies any material irreconcilable conflict. In no event,
however, will FAIP or any of its affiliates be required to
establish a new funding medium for any Contracts. Company will not
be required by the terms hereof to establish a new funding medium
for any
14
Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the
material irreconcilable conflict.
(f) The Board's determination of the existence of a material
irreconcilable conflict and its implications will be made known
promptly and in writing to all Participants.
5.5 NOTICE TO COMPANY.
FAIP will promptly make known in writing to Company the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Company and FAIP (or the Advisor) will, upon request, submit to the Board
of Directors of FAIP such reports, materials or data as the Board of Directors
may reasonably request so that the Board of Directors may fully carry out the
obligations imposed upon it by the provisions hereof or any exemptive order
granted by the SEC to permit Mixed and Shared Funding, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying Participating Insurance
Companies and Participating Plans of a conflict, and determining whether any
proposed action adequately remedies a conflict, will be properly recorded in the
minutes of the Board of Directors or other appropriate records, and such minutes
or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If and to the extent that Rules 6e-2 and 6e-3(T) under the 1940 Act are
amended (or if Rule 6e-3 under the 1940 Act is adopted) to provide exemptive
relief from any provision of the 1940 Act, or the rules thereunder, with respect
to mixed or shared funding on terms and conditions materially different from any
exemptions granted in the order obtained by FAIP, then FAIP and/or Company, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, or Rule 6e-3, as adopted, to the extent applicable.
5.8 OTHER REQUIREMENTS.
FAIP will require that each Participating Insurance Company and
Participating Plan enter into an agreement with FAIP that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
15
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any Party, with or without cause with respect to
the Fund, upon six (6) months advance written notice to the other
Parties, unless otherwise agreed to in writing by the Parties; or
(b) at the option of FAIP upon institution of formal proceedings
against Company or any of its affiliates by the NASD, the SEC, any
state insurance regulator or any other regulatory body regarding
Company's obligations under this Agreement or related to the sale
of the Contracts, the operation of any Account, or the purchase of
Shares, if, in each case, FAIP reasonably determines that such
proceedings, or the facts on which such proceedings would be
based, have a material likelihood of imposing material adverse
consequences on the Fund with respect to which the Agreement is to
be terminated; or
(c) at the option of Company upon institution of formal proceedings
against FAIP, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any
other regulatory body regarding FAIP's obligations under this
Agreement or related to the operation or management of FAIP or the
purchase of Fund Shares, if, in each case, Company reasonably
determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing
material adverse consequences on Company, or the Subaccount
corresponding to the Fund with respect to which the Agreement is
to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold
in accordance with any applicable federal or state law, or (ii)
such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by
Company; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of Company if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar
provisions, or if the Company reasonably believes that the Fund
may fail to so qualify or comply; or
(g) at the option of Company if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if
the Company reasonably believes that the Fund may fail to so
qualify or comply; or
16
(h) at the option of FAIP if the Contracts issued by Company cease to
qualify as annuity contracts or life insurance contracts under the
Code (other than by reason of the Fund's noncompliance with
Section 817(h) or Subchapter M of the Code), or if FAIP reasonably
believes that the Contracts issued by Company may fail to so
qualify or comply; or
(i) at the option of FAIP if interests in an Account under the
Contracts are not registered, where required, and, in all material
respects, are not issued or sold in accordance with any applicable
federal or state law, or if FAIP reasonably believes that the
interests in an Account under the Contracts are not registered,
issued, or sold in accordance with any applicable federal and
state law. upon another Party's material breach of any provision
of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Parties
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6. 1 (a) or 6.1(e) hereof, such prior written notice
shall be given at least six (6) months in advance of the effective
date of termination unless a shorter time is agreed to by the
Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall
be given at least sixty (60) days in advance of the effective date
of termination unless a shorter time is agreed to by the Parties
hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1 (d), 6.1(f), 6.1(g), 6.1(h), 6.1(i) or 6.1(j) hereof,
such prior written notice may be given at any time after the
terminating Party learns of the event causing termination to be
required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, FAIP will, at the
option of Company, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"), unless such further sale of shares of the
Fund is proscribed by law, regulation of applicable regulating body.
Specifically, without limitation, the owners of the Existing Contracts will be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The Parties agree that
17
this Section 6.3 will not apply to any terminations under Section 5 and the
effect of such terminations will be governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6.1(a), 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h), 6.1(i) or
6.1(j) hereof, this Agreement shall nevertheless continue in effect as to any
Shares of that Fund that are outstanding as of the date of such termination (the
"Initial Termination Date"). This continuation shall extend to the date as of
which an Account owns no Shares of the affected Fund (the "Final Termination
Date").
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto. Such steps may include combining the affected Account
with another Account, substituting other mutual fund's shares for those of the
affected Fund, or otherwise terminating participation by the Contracts in such
Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
FIRST AMERICAN INSURANCE PORTFOLIOS, INC.
000 Xxxxxx Xxxxxx South, MPFP 1816
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxx, Senior Vice President
18
U.S. BANCORP XXXXX XXXXXXX ASSET MANAGEMENT
000 Xxxxxx Xxxxxx South, MPFP 1816
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxx
cc: U.S. BANCORP XXXXX XXXXXXX ASSET MANAGEMENT
000 Xxxxxx Xxxxxx South, MPFP 2016
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Corporate Counsel
Conseco Variable Insurance Company
00000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx Xxxxxxxxx, Senior Vice President
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Company will distribute all proxy material furnished by FAIP to Participants to
whom pass-through voting privileges are required to be extended and will solicit
voting instructions from Participants. Company will vote Shares in accordance
with timely instructions received from Participants. Company will vote Shares
that are (a) not attributable to Participants to whom pass-through voting
privileges are extended, or (b) attributable to Participants, but for which no
timely instructions have been received, in the same proportion as Shares for
which said instructions have been received from Participants, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require pass
through voting privileges for Participants. Neither Company nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. Company reserves the right to vote shares held in any Account in
its own right, to the extent permitted by law. Company shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by FAIP. FAIP will notify Company of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. FAIP
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, FAIP either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although 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, FAIP
will act in accordance with the
19
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
FAIP agrees to consult in advance with Company concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF FAIP AND THE ADVISOR BY COMPANY
(a) Except to the extent provided in Sections 12.1(b), 12.1(c), and
12.1(d), hereof, Company agrees to indemnify and hold harmless
FAIP and the Advisor, and each person, if any, who controls FAIP
within the meaning of Section 15 of the 1933 Act and each of its
directors and officers, (collectively, the "Indemnified Parties"
for purposes of this Section 12.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement
with the written consent of Company) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses),
to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise; provided, the
Account owns or at the relevant time owned shares of the Funds and
insofar as such losses, claims, damages, liabilities or actions
and are related to the sale or acquisition of Fund 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
any Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or
advertising for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in
writing to Company by or on behalf of FAIP specifically for
use in any Account's 1933 Act registration statement, any
Account Prospectus, the Contracts, or sales literature or
advertising or otherwise for use in connection with the
sale of Contracts or Shares (or any amendment or supplement
to any of the foregoing) or was consented to by FAIP
pursuant to Section 4.5(c); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in FAIP's 1933 Act registration statement, FAIP
Prospectus, sales literature or advertising of
20
(c)
FAIP, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
Company or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of Company or its affiliates or persons under their
control (including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph
(m) of Article I of the NASD's By-Laws), in connection
with the sale or distribution of the Contracts or Shares;
or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
FAIP's 1933 Act registration statement, FAIP Prospectus,
sales literature or advertising of FAIP, or any amendment
or supplement to any of the foregoing, or the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was
made in reliance upon and in conformity with information
furnished in writing to FAIP or its affiliates by or on
behalf of Company or its affiliates specifically for use in
FAIP's 1933 Act registration statement, FAIP Prospectus,
sales literature or advertising of FAIP, or any amendment
or supplement to any of the foregoing or was consented to
by Company pursuant to Section 4.6 (d); or
(iv) arise as a result of any failure by Company to perform the
obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any
material breach of any representation and/or warranty made
by Company in this Agreement or arise out of or result from
any other material breach of this Agreement by Company; or
(v) arise as a result of failure by the Contracts issued by
Company to qualify as annuity contracts or life insurance
contracts under the Code, otherwise than by reason of any
Fund's failure to comply with Subchapter M or Section
817(h) of the Code.
(b) Company shall not be liable under this Section 12.1 with respect
to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by
that Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or duties
under this Agreement;
(c) Company shall not be liable under this Section 12.1 with respect
to any action against an Indemnified Party unless the Indemnified
Party shall have notified Company in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the action shall have been served
upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but
failure to notify Company of
21
any such action shall not relieve Company from any liability which
they may have to the Indemnified Party against whom such action is
brought unless the ability of Company to defend such action is
materially impaired thereby, except as otherwise provided herein,
in case any such action is brought against an Indemnified Party,
Company shall be entitled to participate, at their own expense, in
the defense of such action and also shall be entitled to assume
the defense thereof, with counsel approved by the Indemnified
Party named in the action, which approval shall not be
unreasonably withheld. After notice from Company to such
Indemnified Party of Company's election to assume the defense
thereof (which shall include, without limitation, the conduct of
any ruling request or closing agreement or offer settlement
proceeding with the IRS), the Indemnified Party will cooperate
fully with Company and shall bear the fees and expenses of any
additional counsel retained by it, and Company will not be liable
to such Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than
reasonable costs of investigation.
(d) In no event shall the Company be liable under the indemnification
provisions contained in this Agreement to any Indemnified Party
with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any
representation, warranty, and/or covenant made by FAIP or Advisor
hereunder; (ii) the failure by FAIP to qualify as a legally and
validly established corporation under applicable state law and as
duly registered under the 1940 Act; or (iii) the failure by FAIP
or Advisor to maintain the qualification of any fund under
Subchapter M of the Code or Section 817 of the Code.
12.2 OF COMPANY BY FAIP AND ADVISOR
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), hereof, FAIP and the Advisor agree to indemnify and hold
harmless Company, its affiliates, and each person, if any, who
controls Company or its affiliates within the meaning of Section
15 of the 1933 Act and each of their respective directors and
officers, (collectively, the "Indemnified Parties" for purposes of
this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of FAIP) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute,
regulation, at common law, or otherwise; provided, insofar as such
losses, claims, damages, liabilities or actions are related to the
sale or acquisition of FAIP'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
FAIP's 1933 Act registration statement, FAIP Prospectus or
sales literature or advertising of FAIP (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
22
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 FAIP
or its affiliates by or on behalf of Company or its
affiliates specifically for use in FAIP's 1933 Act
registration statement, FAIP Prospectus, or in sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing) or was
consented to by Company pursuant to Section 4.6(d); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising for
the Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
FAIP or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of FAIP or its affiliates or persons under their
control (including, without limitation, their employees and
"Associated Persons" as that Term is defined in Section
(ee) of Article I of the NASD By-Laws), in connection with
the sale or distribution of FAIP Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon and in
conformity with information furnished in writing to Company
or its affiliates by or on behalf of FAIP or its affiliates
specifically for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or
supplement to any of the foregoing or was consented to by
FAIP pursuant to Section 4.5(c); or
(iv) arise as a result of any failure by FAIP or the Advisor to
perform the obligations, provide the services and furnish
the materials required of it under the terms of this
Agreement, or any material breach of any representation
and/or warranty made by FAIP or the Advisor in this
Agreement or arise out of or result from any other material
breach of this Agreement by FAIP or the Advisor.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, FAIP and the Advisor agree to indemnify and hold
harmless the Indemnified Parties from and against any and all
losses, claims, damages, liabilities (including
23
amounts paid in settlement thereof with, the written consent of
FAIP) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses) to which the Indemnified
Parties may become subject directly or indirectly under any
statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any fund to operate as
a regulated investment company in compliance with (i) Subchapter M
of the Code and regulations thereunder, or (ii) Section 817(h) of
the Code and regulations thereunder, including, without
limitation, any income taxes and related penalties, rescission
charges, liability under state law to Participants asserting
liability against Company pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS,
and the cost of any substitution by Company of Shares of another
investment company or portfolio for those of any adversely
affected fund as a funding medium for each account that Company
reasonably deems necessary or appropriate as a result of the
noncompliance.
(c) FAIP and the Advisor shall not be liable under this Section 12.2
with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence
in the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its
obligations and duties under this Agreement.
(d) FAIP and the Advisor shall not be liable under this Section 12.2
with respect to any action against an Indemnified Party unless the
Indemnified Party shall have notified FAIP in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the action shall have been
served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such. service on any
designated agent), but failure to notify FAIP of any such action
shall not relieve FAIP from any liability which it may have to the
Indemnified Party against whom such action is brought unless the
ability of Company to defend such action is materially impaired
thereby, except as otherwise provided herein, in case any such
action is brought against an Indemnified Party and/or FAIP will be
entitled to participate, at its own expense, in the defense of
such action and also shall be entitled to assume the defense
thereof (which shall include, without limitation, the conduct of
any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified
Party named in the action, which approval shall not be
unreasonably withheld. After notice from FAIP to such Indemnified
Party of FAIP's election to assume the defense thereof, the
Indemnified Party will cooperate fully with FAIP and shall bear
the fees and expenses of any additional counsel retained by it,
and FAIP will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the
defense thereof, other than reasonable costs of investigation.
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(e) In no event shall FAIP and the Advisor be liable under the
indemnification provisions contained in this Agreement to any
Indemnified Party, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a
breach of any representation, warranty, and/or covenant made by
Company; (ii) the failure by Company to maintain its segregated
asset account (which invests in any Fund) as a legally and validly
established segregated asset account under applicable state law
and as a duly registered unit investment trust under the
provisions of the 1940 Act (unless exempt therefrom); or (iii) the
failure by Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an
underlying funding vehicle) as annuity contracts or life insurance
contracts under applicable provisions of the Code other than where
such failure arises from the Funds' non-compliance with Subchapter
M of the Code or Section 817 of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1 (c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LA W
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Minnesota law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
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SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
FAIP and the Advisor acknowledge that the identities of the customers of
Company or any of its affiliates (collectively, the "Company Protected Parties"
for purposes of this Section 18), information maintained regarding those
customers, and all computer programs and procedures or other information
developed by the Company Protected Parties or any of their employees or agents
in connection with Company's performance of its duties under this Agreement are
the valuable property of the Company Protected Parties. FAIP agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the Company Protected Parties' customers, or any other
information or property of the Company Protected Parties, other than such
information as may be independently developed or compiled by FAIP from
information supplied to it by the Company Protected Parties' customers who also
maintain accounts directly with FAIP, FAIP will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with Company's prior written
consent; or (b) as required by law or judicial process. Company acknowledges
that the identities of the customers of FAIP or any of its affiliates
(collectively the "FAIP Protected Parties" for purposes of this Section 18)~
information maintained regarding those customers, and all computer programs and
procedures or other information developed by the FAIP Protected Parties or any
of their employees or agents in connection with FAIP's performance of its duties
under this Agreement are the valuable property of the FAIP Protected Parties.
Company agrees that if it comes into possession of any list or compilation of
the identities of or other information about the FAIP Protected Parties'
customers or any other information or property of the FAIP Protected Parties~
other than such information as may be independently developed or compiled by
Company from information supplied to it by the FAIP Protected Parties' customers
who also maintain accounts directly with Company, Company will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with FAIP's
prior written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 18 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate. Furthermore, subject to the requirements of
legal process and regulatory authority, each Party hereto shall treat as
confidential any "non-public personal information" about any "consumer" of
another Party as such terms are defined in SEC Regulation S-P, and shall not
disclose or use such
26
information without the express written consent of such Party. Such written
consent shall specify the purposes for which such information may be disclosed
or used, which disclosure or use shall be consistent with SEC Regulation S-P.
SECTION 19. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 20. AMENDMENTS
No provision of this Agreement may be amended or modified in any manner
except by a Agreement executed by all parties hereto.
SECTION 21. ASSIGNMENT
This Agreement may not be assigned without the prior written consent of
all parties here.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
FIRST AMERICAN INSURANCE
PORTFOLIOS, INC.
By /s/ Illegible
-----------------------------------------
Its VP
-------------------------------------
FIRST AMERICAN ASSET MANAGEMENT,
a division of U.S. Bank National Association
By /s/ Illegible
-----------------------------------------
Its
--------------------------------------
CONSECO VARIABLE INSURANCE COMPANY
By /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Its VP
--------------------------------------
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o First American Insurance Portfolios, Inc.;
Large Cap Growth Portfolio Class IB Shares
Mid Cap Growth Portfolio Class IB Shares
SEPARATE ACCOUNTS AND CONTRACTS
Conseco Variable Annuity Separate Account C - Maxiflex Individual Contract
Maxiflex Group Contract
Conseco Variable Annuity Separate Account E - Achievement/Education Series
Contracts
Conseco Variable Annuity Separate Account F - Conseco Advantage Series Contract
Conseco Variable Annuity Separate Account G - Monument Series Contract
Conseco Variable Annuity Separate Account H - Advantage Plus Series Contract
Conseco Variable Annuity Separate Account I - Conseco Advantage Strategy Series
A-1
