As filed with the Securities and Exchange Commission on April 15,
1997.
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(X)
PRE-EFFECTIVE AMENDMENT NO. ( )
POST-EFFECTIVE AMENDMENT NO. ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
(X)
Amendment No. ( )
(Check appropriate box or boxes)
VARIABLE ANNUITY-1 SERIES ACCOUNT
(Exact name of Registrant)
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Name of Depositor)
Albany, New York
(Address of Depositor's Principal Executive Offices) (Zip
Code)
Depositor's Telephone Number, including Area Code:
(800) 537-2033
William T. McCallum
President and Chief Executive Officer
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copy to:
James F. Jorden, Esq.
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Public Offering: Upon the effective
date of
this Registration Statement
It is proposed that this filing will become effective on as soon as
practicable.
The Registrant has chosen to register an indefinite number of
securities in
accordance with Rule 24f-2.
The Registrant hereby amends this registration statement on such
date or
dates as may be necessary to delay its effective date until the
Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in
accordance with
Section 8(a) of the Securities Act of 1933 or until the
registration
statement shall become effective on such date as the Commission
acting
pursuant to said Section 8(a) may determine.<PAGE>
VARIABLE ANNUITY-1 SERIES ACCOUNT
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
FORM N-4 ITEM PROSPECTUS CAPTION
1. Cover Page.......................... Cover Page
2. Definitions......................... Definitions
3. Synopsis............................ Fee Table; Key
Features of
the Annuity
4. Condensed Financial Information..... Performance Data
5. General Description of
Registrant, Depositor and
Portfolio Companies............... First Great-West Life
& Annuity
Insurance Company and
the Series
Account; Eligible
Funds;
Voting Rights
6. Deductions and Expenses............ Charges and
Deductions; Appendix
A; Distribution of the
Contracts
7. General Description of
Variable Annuity Contracts........ The Contracts;
Eligible Funds;
Statement of
Additional
Information
8. Annuity Period...................... Payment Options
9. Death Benefit....................... Death Benefit
10. Purchases and Contract Value........ Application and
Contributions;
Annuity Account Value
11. Redemptions......................... Cash Withdrawals;
Payment
Options; Key Features
of the Annuity
12. Taxes............................... Federal Tax
Consequences
13. Legal Proceedings................... Legal Proceedings
14. Table of Contents of
Statement of Additional
Information....................... Statement of
Additional
Information
STATEMENT OF
ADDITIONAL
FORM N-4 ITEM INFORMATION CAPTION
15. Cover Page.......................... Cover Page
16. Table of Contents................... Table of Contents
17. General Information and
History........................... General Information;
First
Great-West Life &
Annuity and
the Variable Annuity-1
Series
Account
18. Services............................ Services
19. Purchase of Securities
Being Offered..................... Not Applicable
20. Underwriters........................ Services - Principal
Underwriter
21. Calculation of
Performance Data.................. Calculation of
Performance
Data
22. Annuity Payments.................... Calculation of Annuity
Payments
23. Financial Statements................ Financial Statements<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY SUCH STATE.
THE SCHWAB VARIABLE ANNUITY
A FLEXIBLE PREMIUM DEFERRED FIXED AND VARIABLE ANNUITY
Distributed by
CHARLES SCHWAB & CO., INC.
_____________________________________________
Issued by
First GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
This prospectus describes interests under a flexible premium
deferred annuity contract, The Schwab Variable
Annuity (the "Contract"). The Contract is issued on a group basis
by First Great-West Life & Annuity
Insurance Company (the "Company"). Participation in the Contract
will be accounted for by the issuance of
a certificate showing your interest under the Contract. Your
certificate is also hereafter referred to as the
"Contract."
Your investment in the Contract may be allocated among twenty-four
Investment Divisions of the Variable
Annuity-1 Series Account ("Series Account") and the available
Guarantee Periods under the Guarantee Period
Fund. The Investment Divisions invest in various underlying funds
(open-end investment companies) offered
by fund families such as Federated, INVESCO, Janus, Lexington,
Berger, Alger, Schwab Funds, Stein Roe,
Strong, Montgomery, American Century, SAFECO and Van Eck. You also
have the option of allocating some
or all of your investment in the Contract to the Guarantee Period
Fund which allows you to select one or
more Guarantee Periods, each of which offers you a specified
interest rate for a specified period. There may
be a market value adjustment on the amounts withdrawn from the
Guarantee Period Fund.
The minimum initial investment is $5,000 ($2,000 if an IRA) or
$1,000 if made under an Automatic Contribution
Plan ("ACP"). The minimum subsequent Contribution is $500 (or $100
per month if made under an ACP).
There are no sales charges, redemption, surrender or withdrawal
charges. The Contract provides a Free
Look Period of 10 days from your receipt of the Contract, during
which time you may cancel your investment
in the Contract. During the Free Look Period, all Contributions
allocated to an Investment Division will be
allocated first to the Schwab Money Market Investment Division and
will remain there until the next
Transaction Date following the end of the Free Look Period.
Contributions to the Guarantee Period Fund will
be allocated immediately into the specified Guarantee Period(s).
Your Variable Account Value will increase or decrease based on the
investment performance of the options
you select. You bear the entire investment risk under the Contract
prior to the annuity commencement
date for all amounts in your Variable Sub Accounts. While there is
a guaranteed death benefit, there is
no guaranteed or minimum Variable Account Value on amounts
allocated to Investment Divisions. Therefore,
the Annuity Account Value you receive could be less than the total
amount of your Contributions.
<PAGE>
Amounts allocated to the Guarantee Period Fund may be subject to a
Market Value Adjustment which
could result in receipt of less than your Contributions if you
surrender, Transfer, make a partial
withdrawal, apply amounts to purchase an annuity or take a
distribution upon the death of the Owner
or Annuitant before a Guarantee Period Maturity Date. Whether such
a result actually occurs depends on
the timing of the transaction, the amount of the Market Value
Adjustment and the interest rate credited. The
interest rate in subsequent Guarantee Periods may be more or less
than the rate of a previous Guarantee
Period.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERS
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. PLEASE READ THIS PROSPECTUS AND KEEP IT FOR
FUTURE REFERENCE.
Prospectus Dated ______________, 1997
The Contracts are not deposits of, or guaranteed or endorsed by any
bank, nor are the Contracts federally
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government
agency. The Contracts involve certain investment risks, including
possible loss of principal.
To Place Orders and for Account Information: Contact the Schwab
Annuity Service Center at 800-838-0650
or P.O. Box 7666, San Francisco, California 94120-7666.
About This Prospectus: This Prospectus concisely presents important
information you should have before
investing in the Contract. Please read it carefully and retain it
for future reference. You can find more
detailed information pertaining to the Contract in the Statement of
Additional Information dated
_____________, 1997 (as may be amended from time to time), and
filed with the Securities and Exchange
Commission. The Statement of Additional Information is
incorporated by reference into this Prospectus, and
may be obtained without charge by contacting the Schwab Annuity
Service Center at 800-838-0650 or P.O.
Box 7666 San Francisco, California 94120-7666.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
KEY FEATURES OF THE ANNUITY . . . . . . . . . . . . . . . . . . .
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE SERIES ACCOUNT . . . . . . . . . . . . . . . .
.
THE ELIGIBLE FUNDS. . . . . . . . . . . . . . . . . . . . . . . .
.
THE GUARANTEE PERIOD FUND . . . . . . . . . . . . . . . . . . . .
.
THE MARKET VALUE ADJUSTMENT . . . . . . . . . . . . . . . . . . .
.
APPLICATION AND CONTRIBUTIONS . . . . . . . . . . . . . . . . . .
.
ANNUITY ACCOUNT VALUE . . . . . . . . . . . . . . . . . . . . . .
.
TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
CASH WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . . . . .
.
TELEPHONE TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . .
.
DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . .
.
CHARGES AND DEDUCTIONS. . . . . . . . . . . . . . . . . . . . . .
.
PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . .
.
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . .
.
ASSIGNMENTS OR PLEDGES. . . . . . . . . . . . . . . . . . . . . .
.
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . .
.
DISTRIBUTION OF THE CONTRACTS . . . . . . . . . . . . . . . . . .
.
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . .
.
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . .
.
RIGHTS RESERVED BY THE COMPANY. . . . . . . . . . . . . . . . . .
.
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . .
.
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . .
.
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . .
.
EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . F-1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER,
SALESPERSON, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
The Contract is not available in all states.
<PAGE>
___________________________________________________________________
DEFINITIONS
___________________________________________________________________
Accumulation Period - The period between the Effective Date and the
Payment Commencement Date.
Annuitant - The person named in the application upon whose life the
payment of an annuity is based and
who will receive annuity payments. If a Contingent Annuitant is
named, then the Annuitant will be considered
the Primary Annuitant. While the Annuitant is living and at least
30 days prior to the annuity commencement
date, the Owner may, by Request, change the Annuitant.
Annuity Account - An account established by the Company in the name
of the Owner that reflects all
account activity under this Contract.
Annuity Account Value - The sum of the Variable and Fixed
Sub-Accounts credited to the Owner under the
Annuity Account; less Transfers, partial withdrawals, amounts
applied to an annuity option, periodic
withdrawals, charges deducted under the Contract and, less Premium
Tax, if any.
Annuity Payment Period - The period beginning on the annuity
commencement date and continuing until
all annuity payments have been made under the Contract.
Annuity Unit - An accounting measure used to determine the dollar
value of any variable annuity payment
after the first annuity payment is made.
Automatic Contribution Plan ("ACP") - A plan which allows for
automatic periodic Contributions. The
Contribution amount will be withdrawn from a designated
pre-authorized account and automatically credited
to the Annuity Account.
Beneficiary - The person(s) designated by the Owner, in the
application, or as subsequently changed by
the Owner by Request, to receive any death benefit which may become
payable under the terms of the
Contract. If the surviving spouse of an Owner is the surviving
Joint Owner, the surviving spouse will become
the Beneficiary upon such Owner's death and may elect to take the
death benefit, if any, or elect to continue
the Contract in force.
Company - First Great-West Life & Annuity Insurance Company, the
issuer of this annuity, located at 125
Wolf Road, Albany, New York 12205.
Contingent Annuitant - The person named in the application, unless
later changed by the Owner by Request
while the Annuitant is alive and before annuity payments have
commenced, who becomes the Annuitant
when the Primary Annuitant dies. No new Contingent Annuitant may
be designated after the death of the
Primary Annuitant.
Contractual Guarantee of a Minimum Rate of Interest - The minimum
interest rate applicable to each Fixed
Sub-Account equal to an annual effective rate in effect at the time
the Contribution is made and as reflected
in written confirmation of the Contribution. This is the minimum
rate allowed by law and is subject to change
in accordance with changes in applicable law.
Contributions - Purchase amounts received under the Contract and
allocated to the Fixed or Variable Sub-
Account(s) prior to any Premium Tax or other deductions.
Effective Date - The date on which the first Contribution is
credited to the Annuity Account.
Eligible Fund - A registered management investment company, or
portfolio thereof, in which the assets of
the Series Account may be invested.
Fixed Sub-Accounts - The subdivision(s) of the Owner's Annuity
Account reflecting the value of Contributions
made to a fixed interest investment option available under the
Contract and any Fixed Sub-Account Riders.
Guarantee Period - One of the time intervals available in the
Guarantee Period Fund during which the
Company will credit a stated rate of interest. The Company may
stop offering any time interval at any time
for new Contributions. Amounts allocated to one or more Guaranteed
Periods may be subject to a Market
Value Adjustment.
Guarantee Period Fund - A Fixed Sub-Account in which amounts
allocated will be credited a stated rate of
interest for the applicable Guarantee Period(s).
Guarantee Period Maturity Date - The last day of any Guarantee
Period.
Individual Retirement Annuity (IRA) - An annuity contract used in
a retirement savings program that is
intended to satisfy the requirements of Section 408 of the Internal
Revenue Code of 1986, as amended.
Investment Division - A division of the Series Account containing
the shares of an Eligible Fund. There is
an Investment Division for each Eligible Fund.
Market Value Adjustment - An adjustment which may be made to
amounts paid out before the Guarantee
Period Maturity Date due to surrenders, partial withdrawals,
Transfers, amounts applied to the periodic
withdrawal option or to purchase an annuity, and distributions
resulting from death of the Owner or Annuitant,
as applicable. The Market Value Adjustment may increase or
decrease the amount payable on one of the
above-described distributions. A negative adjustment may result in
an effective interest rate lower than the
applicable Contractual Guarantee of a Minimum Rate of Interest and
the value of the Contribution(s) allocated
to the Guarantee Period being less than the Contribution(s) made.
The Market Value Adjustment is detailed
on page ---.
Non-Qualified Annuity Contract - An annuity contract which is not
intended to be part of a qualified
retirement plan and is not intended to satisfy the requirements of
Section 408 of the Internal Revenue Code
of 1986, as amended.
Owner (Joint Owner) or You - The person(s), while the Annuitant is
living, named in the Contract Data Page
who is entitled to exercise all rights and privileges under the
Contract. Joint Owners must be husband and
wife as of the date the Contract is issued. The Annuitant will be
the Owner unless otherwise indicated in the
application. If a Contract is purchased as an IRA, the Owner and
the Annuitant must be the same individual
and no Joint Owner may be named. Any reference to Owner in the
singular tense shall include the plural,
and vice versa, as applicable.
Payment Commencement Date - The date on which annuity payments or
periodic withdrawals commence
under a payment option. The Payment Commencement Date must be at
least one year after the Effective
Date of the Contract. If a Payment Commencement Date is not shown
on the Contract Data Page, annuity
payments will commence on the first day of the month of the
Annuitant's 90th birthday. The Payment
Commencement Date may be changed by the Owner within 60 days prior
to commencement of annuity
payments or it may be changed by the Beneficiary upon the death of
the Owner. If this is an IRA, payments
which satisfy the minimum distribution requirements of the Internal
Revenue Code of 1986, as amended, must
begin no later than the Owner's attainment of age 70 1/2.
Premium Tax - The amount of tax, if any, charged by a state or
other governmental authority.
Request - Any instruction in a form satisfactory to the Company and
received at the Schwab Annuity Service
Center (or other annuity service center subsequently named) from
the Owner or the Owner's designee (as
specified in a form acceptable to the Company) or the Beneficiary
(as applicable) as required by any
provision of the Contract or as required by the Company. All
Requests are subject to any action taken or
payment made by the Company before it was processed.
Schwab Annuity Service Center - P.O. Box 7666, San Francisco,
California 94120-7666, telephone 800-838-
0650.
Series Account - The segregated account established by the Company
under New York law and registered
as a unit investment trust under the Investment Company Act of
1940, as amended.
Simplified Employee Pension - An individual retirement annuity
(IRA) which may accept contributions from
one or more employers under a retirement savings program intended
to satisfy the requirements of Section
408(k) of the Internal Revenue Code of 1986, as amended.
Surrender Value - The Annuity Account Value with a Market Value
Adjustment, if applicable, on the effective
date of the surrender, less Premium Tax, if any.
Transaction Date - The date on which any Contribution or Request
from the Owner will be processed by the
Company at the Schwab Annuity Service Center. Contributions and
Requests received after 4:00 p.m.
EST/EDT will be deemed to have been received on the next business
day. Requests will be processed and
the Variable Account Value will be determined on each day that the
New York Stock Exchange is open for
trading.
Transfer - The moving of money from among and between the
Investment Division(s) and the Guaranteed
Period Fund.
Variable Account Value - The sum of the values of the Variable
Sub-Accounts credited to the Owner under
the Annuity Account.
Variable Sub-Accounts - The sub-division(s) of the Owner's Annuity
Account containing the value credited
to the Owner under the Annuity Account from an Investment Division.
We, our, us, or First GWL&A: First Great-West Life & Annuity
Insurance Company.
<PAGE>
KEY FEATURES OF THE ANNUITY
The Contract currently allows you to invest in your choice of
twenty-four different Investment Divisions offered
by thirteen different mutual fund investment advisers. You can
also invest in the Guarantee Period Fund.
Your Annuity Account Value allocated to an Investment Division will
vary with the investment performance of
the Investment Division you select. You bear the entire investment
risk for all amounts invested in the
Investment Division(s). Your Annuity Account Value could be less
than the total amount of your
Contributions.
Who should invest. The Contract is designed for investors who are
seeking long-term tax deferred asset
accumulation with a wide range of investment options. The Contract
can be used for retirement or other
long-term investment purposes. The deferral of income taxes is
particularly attractive to investors in high
federal and state tax brackets who have already fully taken
advantage of their ability to make IRA
contributions or "pre-tax" contributions to their employer
sponsored retirement or savings plans.
A Wide Range of Variable Investment Choices. The Contract gives
you an opportunity to select among
twenty-four different Investment Divisions. Each Investment
Division invests in shares of an Eligible Fund.
The Eligible Funds cover a wide range of investment objectives as
follows:
Investment Objective Eligible Funds
Aggressive Growth SteinRoe Capital Appreciation
Fund
Janus Aspen Aggressive Growth
Portfolio
Alger American Small
Capitalization Portfolio
Berger IPT-Small Company Growth
Fund
Strong Discovery Fund II
International Aggressive Growth Montgomery Variable Series:
International
Small Cap Fund
Lexington Emerging Markets Fund
Growth Schwab Asset Director - High
Growth Portfolio
Janus Aspen Growth Portfolio
Alger American Growth Portfolio
American Century VP Capital
Appreciation
Montgomery Variable Series:
Growth Fund
International Growth Janus Aspen Worldwide Growth
Portfolio
American Century VP
International
Index Schwab S&P 500 Portfolio
Growth & Income SAFECO RST Equity Portfolio
Federated American Leaders Fund
II
Equity Income Federated Utility Fund II
INVESCO VIF-Industrial Income
Portfolio
Balanced/Asset Allocation INVESCO VIF-Total Return
Portfolio
Gold and Precious Metals Van Eck Worldwide Hard Assets
Fund
High Yield Bond INVESCO VIF-High Yield Portfolio
Government Bond Federated Fund for U.S.
Government Securities II
Money Market Schwab Money Market Portfolio
The distinct investment objectives and policies for each Eligible
Fund are more fully described in their
individual fund prospectuses which are available from the Schwab
Annuity Service Center, P.O. Box 7666,
San Francisco, California 94120-7666, or via telephone at
1-800-838-0650.
The Guarantee Period Fund. The Contract also gives you an
opportunity to allocate your Contributions and
to transfer your Annuity Account Value to the Guarantee Period
Fund. This Fixed Sub-Account option is
comprised of Guarantee Periods, each of which has its own stated
rate of interest and its own maturity date.
The stated rate of interest for the Guarantee Period will depend on
the date the Guarantee Period is
established and the duration of the Guarantee Period you select
from among those available. The rates
declared are subject to a minimum (Contractual Guarantee of a
Minimum Rate of Interest), but the Company
may declare higher rates (the stated rate of interest). The
Contractual Guarantee of a Minimum Rate of
Interest will be disclosed in the written confirmation. The stated
rate of interest will not be less than the
Contractual Guarantee of a Minimum Rate of Interest and will also
be disclosed in the written confirmation.
Amounts withdrawn or transferred from a Guarantee Period prior to
the Guarantee Period Maturity Date may
be subject to a Market Value Adjustment. (See "Market Value
Adjustment," page __.)
How to Invest. You must complete a Contract application form in
order to invest in the Contract and you
must pay by check or instruct us to transfer funds from your Schwab
account. The minimum initial
investment is $5,000 (or $2,000 if in an IRA). Subsequent
investments must be at least $500. The minimum
initial investment may be reduced to $1,000 should the Owner agree
to make additional $100 per month
minimum recurring deposits through an ACP.
Free Look Period. The Contract provides for a Free Look Period
which allows you to cancel your investment
generally within 10 days of your receipt of the Contract. You can
cancel the Contract during the Free Look
Period by delivering or mailing the Contract to the Schwab Annuity
Service Center. The cancellation is not
effective unless we receive a notice which is postmarked before the
end of the Free Look Period. If the
Contract is returned, the Contract will be void from the start and
the greater of: (a) Contributions received
less surrenders, withdrawals and distributions, or (b) the Annuity
Account Value less surrenders, withdrawals
and distributions, will be refunded. These procedures may vary
where required by state law. (See
"Application and Contributions," page ___.)
Allocation of the Initial Investment. Any initial Contribution
allocated to an Investment Division (other than
certain 1035 exchanges - see "Application and Contributions," page
__) will be allocated to the Schwab
Money Market Portfolio until the next Transaction Date following
the end of the Free Look Period. At that
time, the Variable Account Value will be allocated to the
Investment Divisions in accordance with your
instructions. (See "Annuity Account Value," page __.) Your
initial investment in the Guarantee Period Fund
will be immediately allocated to the Guarantee Period(s) specified
in the application.
Charges and Deductions Under the Contract. The Contract is a "no
load" variable annuity and, as such,
imposes no sales charges, redemption or withdrawal charges.
There is a Mortality and Expense Risk Charge at an effective annual
rate of 0.85% of the value of the net
assets in the Variable Account. A Contract Maintenance Charge of
$25 will be deducted annually from your
Annuity Account Value. There will be a transfer fee of $10 for
each Transfer in excess of twelve Transfers
per calendar year. (See "Charges and Deductions," page __.)
Depending on your state of residence, we may deduct a charge for
Premium Tax from purchase payments
or amounts withdrawn or at the Payment Commencement Date. (See
"Charges and Deductions," page __.)
The Market Value Adjustment may increase or decrease the value of
a Guarantee Period if the Guarantee
Period is broken prior to the Guarantee Period Maturity Date. A
negative adjustment may result in an
effective interest rate lower than the stated rate of interest for
the Guarantee Period and the Contractual
Guarantee of a Minimum Rate of Interest and the value of the
Guarantee Period being less than
Contribution(s). (See "Market Value Adjustment," page __.)
Switching Investments. You may switch Contributions among the
Investment Divisions or Guarantee Period
Fund as often as you like with no immediate tax consequences. You
may make a Transfer Request to the
Schwab Annuity Service Center. A transfer fee may apply. (See
"Charges and Deductions," page __.)
Amounts Transferred out of a Guarantee Period prior to the
Guarantee Period Maturity Date may be subject
to a Market Value Adjustment. (See "Market Value Adjustment," page
__.)
Full and Partial Withdrawals. You may withdraw all or part of your
Annuity Account Value before the earlier
of the annuity commencement date you selected or the Annuitant's or
Owner's death. Withdrawals may be
taxable and if made prior to age 59 1/2 may be subject to a 10%
penalty tax. Withdrawals of amounts
allocated to a Guarantee Period prior to the Guarantee Period
Maturity Date may be subject to Market Value
Adjustment. (See "Market Value Adjustment," page __.) The minimum
partial withdrawal prior to the Market
Value Adjustment is $500. There is no limit on the number of
withdrawals made. The Company may delay
payment of withdrawals from your Variable Sub-Accounts by up to 7
days and may delay withdrawals from
the Guarantee Period Fund by up to 6 months. (See "Cash
Withdrawals," page __.)
Annuity Options. Beginning on the first day of the month
immediately following the annuity commencement
date you select, you may elect to receive annuity payments on a
fixed or variable basis. (The default date
is the first day of the month that the Annuitant attains age 91.)
A wide range of annuity options are available
to provide flexibility in choosing an annuity payment schedule that
meets your particular needs. These
annuity options include alternatives designed to provide payments
for life (for either a single or joint life), with
or without a guaranteed minimum number of payments. (See "Payment
Options," page __.)
Death Benefit. The amount of the death benefit, if payable before
annuity payments commence, will be the
greater of (a) the Annuity Account Value with a Market Value
Adjustment, if applicable, as of the date a
Request for payment is received, less Premium Tax, if any; or (b)
the sum of Contributions paid, less partial
withdrawals and Periodic Withdrawals, less charges deducted under
the Contract, if any, less Premium Tax,
if any. (See "Death Benefit," page __.)
Customer Service. Schwab's professional representatives are
available toll-free to assist you. If you have
any questions about your Contract, please telephone the Schwab
Annuity Service Center (800-838-0650) or
write to the Schwab Annuity Service Center at P.O. Box 7666, San
Francisco, California 94120-7666. All
inquiries should include the Contract number and the Owner's name.
As a Contract Owner you will receive
periodic statements confirming any transactions relating to your
Contract, as well as a quarterly statement
and an annual report.
<PAGE>
VARIABLE ANNUITY FEE TABLE
The purpose of this table and the examples that follow is to
assist you in understanding the various
costs and expenses that you will bear directly or indirectly when
investing in the Contract. The table and
examples reflect expenses related to the Investment Divisions as
well as of the Eligible Funds. The table
assumes that the entire Annuity Account Value is allocated to one
or more Investment Divisions. The
information set forth should be considered together with the
narrative provided under the heading "Charges
and Deductions," page __ of this Prospectus, and with the Funds'
prospectuses. In addition to the expenses
listed below, Premium Tax may be applicable.
Contract Owner Transaction Expenses
Sales Load None
Surrender Fee None
Transfer Fee (First 12 Per Year) None
Annual Contract Maintenance Charge $25.00
Investment Division Annual Expenses1
(as a percentage of average Variable
Account assets)
Mortality and Expense Risk Charge 0.85%
Administrative Expense Charge 0.00%
Other Fees and Expenses of the Variable Account0.00%
Total Investment Division Annual Expenses 0.85%
<PAGE>
Eligible Fund Annual Expenses (1)
(as a percentage of Eligible Fund net assets, after expenses
reimbursements)
Total
Management Other 12b-1 Eligible
Fees Expenses Fees Fund
Expenses
Portfolio
Alger American Growth Portfolio.75%.04% 0% .79%
Alger American Small
Capitalization Portfolio.85% .03% 0% .88%
American Century VP Capital Appreciation1.00% 0%0%1.00%
American Century VP International1.50% 0% 0% 1.50%
Berger IPT-Small Company Growth Fund .0%1.15%0% 1.15%
Federated American Leaders Fund II.53%.32% 0% .85%
Federated Fund for U.S. Government Securities II.0%.80%0%.80%
Federated Utility Fund II.24% .61% 0% .85%
INVESCO VIF-High Yield Portfolio.60%.27% 0% .87%
INVESCO VIF-Industrial Income Portfolio.75%.20%0% .95%
INVESCO VIF-Total Return Portfolio.75%.19% 0% .94%
Janus Aspen Aggressive
Growth Portfolio .72% .04% 0% .76%
Janus Aspen Growth Portfolio.65%.04% 0% .69%
Janus Aspen Worldwide
Growth Portfolio .66% .14% 0% .80%
Lexington Emerging Markets Fund.85%.90% 0% 1.75%
Montgomery Variable Series: Growth Fund .00%.01%0% .01%
Montgomery Variable Series:
International Small Cap Fund1.25%.25% 0% 1.50%
SAFECO RST Equity Portfolio .70% .02% 0% .72%
Schwab Asset Director -
High Growth Portfolio.60% .15% 0% .75%
Schwab Money Market Portfolio.44%.06% 0% .50%
Schwab S&P 500 Portfolio.20% .15% 0% .35%
SteinRoe Capital Appreciation Fund.50%.26% 0% .76%
Strong Discovery Fund II1.00% .31% 0% 1.31%
Van Eck Worldwide Hard Assets Fund.90%.18% 0% 1.08%
_________________________________
(1) The figures given above reflect the amounts deducted before
expense offset arrangements, if any, from the Eligible Funds during
1996.
From time to time, an Eligible Fund's investment adviser, in its
sole discretion, may waive all or part of its fees and/or
voluntarily assume
certain expenses. For a more complete description of the Eligible
Funds' fees and expenses, see the Eligible Funds' prospectuses. As
of the date of this Prospectus, certain fees are being waived or
expenses are being assumed, in each case on a voluntary basis.
Without
such waivers or reimbursements, the total Eligible Fund annual
expenses that would have been incurred for the last completed
fiscal year
would be: 8.57% for Berger IPT-Small Company Growth Fund; 1.07% for
Federated American Leaders Fund II; 1.81% for Federated Fund
for U.S. Government Securities II; 1.32% for INVESCO VIF-High Yield
Portfolio; 1.19% for INVESCO VIF-Industrial Income Portfolio; 1.30%
for INVESCO VIF-Total Return Portfolio; .83% for Janus Aspen
Aggressive Growth Portfolio; .83% for Janus Aspen Growth Portfolio;
.91%
for Janus Aspen Worldwide Growth Portfolio; 4.09% for Lexington
Emerging Markets Fund; 6.98% for Montgomery Variable Series: Growth
Fund; and 1.02% for Schwab Money Market Portfolio. See the
Eligible Funds' prospectuses for a discussion of fee waiver and
expense
reimbursements. <PAGE>
Examples(1)
If you retain, annuitize, or surrender the Contract at the end of
the applicable time period, you would pay the following fees and
expenses
on a $1,000 investment, assuming a 5% annual return on assets:
Investment Divisions 1 Year 3 Years
Alger American Growth Portfolio $ 8.26 $27.11
Alger American Small
Capitalization Portfolio $ 9.20 $30.16
American Century VP Capital Appreciation$10.45 $34.21
American Century VP International $15.63 $50.93
Berger IPT-Small Company Growth Fund$12.00 $39.25
Federated American Leaders Fund II $ 8.89 $29.14
Federated Fund for U.S. Government Securities II$ 8.37$27.45
Federated Utility Fund II $ 8.89 $29.14
INVESCO VIF-High Yield Portfolio $ 9.09 $29.82
INVESCO VIF-Industrial Income Portfolio$ 9.93 $32.52
INVESCO VIF-Total Return Portfolio $ 9.82 $32.19
Janus Aspen Aggressive
Growth Portfolio $ 7.95 $26.09
Janus Aspen Growth Portfolio $ 7.22 $23.71
Janus Aspen Worldwide
Growth Portfolio $ 8.37 $27.45
Lexington Emerging Markets Fund $18.21 $59.20
Montgomery Variable Series: Growth Fund$ 0.10 $ 0.35
Montgomery Variable Series:
International Small-Cap Fund $15.63 $50.93
SAFECO RST Equity Portfolio $ 7.53 $24.73
Schwab Asset Director -
High Growth Portfolio $ 7.84 $25.75
Schwab Money Market Portfolio $ 5.24 $17.23
Schwab S&P 500 Portfolio $ 3.67 $12.09
SteinRoe Capital Appreciation Fund $ 7.95 $26.09
Strong Discovery Fund II $13.66 $44.61
Van Eck Worldwide Hard Assets Fund $11.28 $36.90
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR
FUTURE EXPENSES.
ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN,
SUBJECT TO THE
GUARANTEES IN THE CONTRACT.
These examples assume that no premium taxes have been assessed
(although premium taxes may be
applicable - see "Premium Tax," page __).
(1) The Eligible Fund Annual Expenses and these examples are based
on data provided by the Eligible
Funds. The Company has no reason to doubt the accuracy or
completeness of that data, but the Company
has not verified the Eligible Funds' figures. In preparing the
Eligible Fund Expense table and the Examples
above, the Company has relied on the figures provided by the
Eligible Funds.
<PAGE>
___________________________________________________________________
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE SERIES ACCOUNT
___________________________________________________________________
First Great-West Life & Annuity Insurance Company ("First GWL&A")
The Company is a stock life insurance company organized under
the laws of the state of New York.
First GWL&A was incorporated on April 9, 1996 and is a wholly owned
subsidiary of Great-West Life &
Annuity Insurance Company ("Great-West"). First GWL&A commenced
operations upon receipt of its
certificate of authority from the Superintendent of Insurance of
New York on , 1997.
First GWL&A is principally engaged in the sale of life
insurance, accident and health insurance and
annuities. It is admitted to do business in the states of New York
and Iowa.
Great-West is a wholly-owned subsidiary of The Great-West Life
Assurance Company ("GWL"). GWL
is a subsidiary of Great-West Lifeco Inc., a holding company.
Great-West Lifeco Inc. is in turn a subsidiary
of Power Financial Corporation, a financial services company.
Power Corporation of Canada, a holding and
management company, has voting control of Power Financial
Corporation. Mr. Paul Desmarais, through a
group of private holding companies, which he controls, has voting
control of Power Corporation of Canada.
The Series Account
The Variable Annuity-1 Series Account ("Series Account") was
established by the Company on
January 15, 1997 as a separate account under the laws of the State
of New York. The Series Account is
registered with the Securities and Exchange Commission
("Commission") under the Investment Company
Act of 1940, as amended ("1940 Act"), as a unit investment trust.
The Series Account meets the definition
of a "separate account" under the federal securities laws. However,
such registration does not involve
supervision of the management of the Series Account or the Company
by the Commission.
The Company does not guarantee the investment performance of
the Series Account. The
portion of the Annuity Account Value attributable to the Series
Account and the amount of variable
annuity payments depend on the investment performance of the
Eligible Funds. Thus, the Contract
Owner bears the full investment risk for all Contributions
allocated to the Series Account.
The Series Account is administered and accounted for as part
of the general business of the
Company; but the income, capital gains, or capital losses of each
Investment Division are credited to or
charged against the assets held in that Investment Division in
accordance with the terms of the Contract,
without regard to other income, capital gains or capital losses of
any other Investment Division or arising
out of any other business the Company may conduct. Under New York
law, the assets of the Series
Account are not chargeable with liabilities arising out of any
other business the Company may conduct.
Nevertheless, all obligations arising under the Contracts are
generally corporate obligations of the
Company.
The Series Account currently has twenty-four Investment
Divisions available for allocation of
Contributions. If, in the future, the Company determines that
marketing needs and investment conditions
warrant, it may establish additional Investment Divisions which
will be made available to Owners to the
extent and on a basis to be determined by the Company, (See
"Addition, Deletion, or Substitution").
Each Investment Division invests in shares of an Eligible Fund,
each having a specific investment
objective.
<PAGE>
___________________________________________________________________
THE ELIGIBLE FUNDS
___________________________________________________________________
The Eligible Funds described below are offered exclusively for
use as funding vehicles for
insurance products and, consequently, are not publicly available
mutual funds. Each Eligible Fund has
separate investment objectives and policies. As a result, each
Eligible Fund operates as a separate
investment portfolio and the investment performance of one Eligible
Fund has no effect on the investment
performance of any other Eligible Fund. See the Eligible Funds'
prospectuses for more information.
The Alger American Fund
Alger American Small Capitalization Portfolio: Seeks long-term
capital appreciation by investing
at least 65% of its total assets, except during temporary
defensive periods, in equity securities of
companies that, at the time of purchase, have total market
capitalization within the range of
companies included in the Russell 2000 Growth Index ("Russell
Index") or the S&P SmallCap 600
Index ("S&P Index"), updated quarterly. Both indexes are
broad indexes of small capitalization
stocks. As of March 31, 1997, the range of market
capitalization of the companies in the Russell
Index was $10 million to $1.94 billion; the range of market
capitalization of the companies in the
S&P Index at that date was $32 million to $2.579 billion. The
combined range as of that date was
$10 million to $2.579 billion. The Portfolio may invest up to
35% of its total assets in equity
securities of companies that, at the time of purchase, have
total market capitalization outside this
combined range, and in excess of that amount (up to 100% of
its assets) during temporary
defensive periods.
Alger American Growth Portfolio: Seeks long-term capital
appreciation by investment of at least
65% of its total assets, except during temporary defensive
periods, in equity securities of
companies that, at the time of purchase of the securities,
have total market capitalization of $1
billion or greater. The Portfolio may invest up to 35% of its
total assets in equity securities of
companies that, at the time of purchase, have total market
capitalization of less than $1 billion.
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation: Seeks capital
growth by investing in common
stocks (including securities convertible into common stocks
and other equity equivalents) and
other securities that meet certain fundamental and technical
standards of selection and have, in
the opinion of the investment manager, better-than-average
potential for appreciation. The
Portfolio's investment manager intends to stay fully invested
in such securities, regardless of the
movement of stock prices generally.
American Century VP International: Seeks capital growth by
investing primarily in an
internationally diversified portfolio of securities of foreign
companies that meet certain
fundamental and technical standards of selection and have, in
the opinion of the investment
manager, potential for capital appreciation. The Portfolio
will invest primarily in common stocks
(defined to include depository receipts for common stock and
other equity equivalents) of such
companies. Investment in securities for foreign issues
typically involves a greater degree of risk
than an investment in domestic securities.
Berger Institutional Products Trust
Berger IPT-Small Company Growth Fund: Seeks capital
appreciation by investing primarily in
equity securities (including common and preferred stocks,
convertible debt securities and other
securities having equity features) of small growth companies
with market capitalization of less
than $1 billion at the time of initial purchase.
Federated Insurance Series
Federated American Leaders Fund II: Seeks to achieve long-term
growth of capital as a primary
objective and seeks to provide income as a secondary objective
through investment of at least 65
% of its total assets (under normal circumstances) in common
stocks of "blue chip" companies.
Federated Fund for U.S. Government Securities II: Seeks to
provide current income through
investment of at least 65% of its total assets in securities
which are primary or direct obligations
of the U.S. government or its agencies or instrumentalities or
which are guaranteed as to
principal and interest by the U.S. government, its agencies,
or instrumentalities and in certain
collateralized mortgage obligations, and repurchase
agreements.
Federated Utility Fund II: Seeks to provide high current
income and moderate capital
appreciation by investing in a professionally-managed,
diversified portfolio of utility company
equity and debt securities.
INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Industrial Income Portfolio: Seeks the best
possible current income while
following sound investment practices. Capital growth
potential is an additional consideration in
the selection of portfolio securities. The Portfolio normally
invests at least 65% of its total assets
in dividend-paying common stocks. Up to 10% of the
Portfolio's total assets may be invested in
equity securities that do not pay regular dividends. The
remaining assets are invested in other
income-producing securities such as corporate bonds. The
Portfolio also has the flexibility to
invest in other types of securities.
INVESCO VIF-Total Return Portfolio: Seeks a high total return
on investment through capital
appreciation and current income. The Total Return Portfolio
seeks to achieve its investment
objective by investing in a combination of equity securities
(consisting of common stocks and, to
a lesser degree, securities convertible into common stock) and
fixed income securities.
INVESCO VIF-High Yield Portfolio: Seeks a high level of
current income by investing
substantially all of its assets in lower rated bonds and other
debt securities and in preferred
stock. These bonds and other securities are sometimes
referred to as "junk bonds." The High
Yield Portfolio pursues its investment objective through
investment in a variety of long-term,
intermediate-term, and short-term bonds. Potential capital
appreciation is a factor in the selection
of investments, but is secondary to the Portfolio's primary
objective.
Janus Aspen Series
Janus Aspen Aggressive Growth Portfolio: Seeks long-term
growth of capital in a manner
consistent with the preservation of capital. The Portfolio
normally invests at least 50% of its equity
assets in securities issued by medium-sized companies.
Medium-sized companies are those
whose market capitalizations fall within the range of
companies in the S&P MidCap 400 Index (the
"MidCap Index"). Companies whose capitalization falls outside
this range after the Portfolio's
initial purchase continue to be considered medium-sized
companies for the purpose of this
policy. As of December 30, 1996, the MidCap Index included
companies with capitalizations
between approximately $192 million to $6.5 billion. The range
of the MidCap Index is expected to
change on a regular basis. Subject to the above policy, the
Portfolio may also invest in smaller
or larger issuers.
Janus Aspen Growth Portfolio: Seeks long-term growth of
capital in a manner consistent with
the preservation of capital. The Portfolio pursues its
objective by investing in common stocks of
companies of any size. This Portfolio generally invests in
larger, more established issuers.
Janus Aspen Worldwide Growth Portfolio: Seeks long-term growth
of capital in a manner
consistent with the preservation of capital. The Portfolio
pursues its objective primarily through
investments in common stocks of foreign and domestic issuers.
The Portfolio has the flexibility to
invest on a worldwide basis in companies and organizations of
any size, regardless of country of
organization or place of principal business activity. The
Portfolio normally invests in issuers from
at least five different countries, including the United
States; however, it may at times invest in
fewer than five countries or even a single country.
Lexington Emerging Markets Fund, Inc.
Lexington Emerging Markets Fund: Seeks long term growth of
capital primarily through
investment in equity securities of companies domiciled in, or
doing business in emerging
countries and emerging markets. For purposes of its
investment objective, the Fund considers
emerging country equity securities to be any country whose
economy and market the World Bank
or United Nations considers to be emerging or developing. The
Fund may also invest in equity
securities and equivalents traded in any market of companies
that derive 50% or more of their
total revenue from either goods or services produced in such
emerging countries or markets or
sales made in such countries.
Montgomery Variable Series
Montgomery Growth Fund: Seeks capital appreciation by
investing at least 65% of its total
assets (under normal conditions) in the equity securities of
domestic corporations. In addition to
capital appreciation, this Fund emphasizes value. While the
Fund emphasizes investments in
common stock, it also invests in other types of equity
securities (including options on equity
securities, warrants and futures contracts on equity
securities). The Fund may invest up to 35%
of its total assets in debt securities rated within the three
highest grades of S&P, Moody's or
Fitch, or unrated debt securities deemed to be of comparable
quality by its portfolio manager
using guidelines approved by the Board of Trustees.
Montgomery International Small Cap Fund: Seeks capital
appreciation by investing at least
65% of its total assets (under normal conditions) in equity
securities of companies outside the
United States having total market capitalizations of less than
$1 billion, sound fundamental values
and potential for long-term growth at a reasonable price. The
Fund generally invests the
remaining 35% of its total assets in a similar manner but may
invest those assets in companies
having market capitalizations of $1 billion or more, or in
debt securities, including up to 5% of its
total assets in debt securities rated below investment grade.
SAFECO Resource Series Trust
SAFECO RST Equity Portfolio: Seeks long-term growth of
capital and reasonable current
income. The Portfolio ordinarily invests principally in
common stocks or securities convertible into
common stocks.
Schwab Annuity Portfolios
Schwab Money Market Portfolio: Seeks maximum current income
consistent with liquidity and
stability of capital. It seeks to achieve its objective by
investing in short-term money market
instruments. This Portfolio is neither insured nor guaranteed
by the United States Government
and there can be no assurance that it will be able to maintain
a stable net asset value of $1.00
per share.
Schwab Asset Director-High Growth Portfolio: seeks to provide
high capital growth with less
volatility than an all stock portfolio. The High Growth Fund
seeks to meet its investment objective
by investing in a mix of stocks, bonds, and cash equivalents.
Schwab S&P 500 Portfolio: seeks to track the price and
dividend performance (total return) of
common stocks of U.S. companies, as represented in the
Standard & Poor's Composite Index of
500 stocks (the "Index"). The S&P 500 Fund invests primarily
in the common stocks of
companies composing the Index.
SteinRoe Variable Investment Trust
SteinRoe Capital Appreciation Fund: Seeks capital growth by
investing primarily in common
stocks, convertible securities, and other securities selected
for prospective capital growth.
Strong Discovery Fund II, Inc.
Strong Discovery Fund II: Seeks capital growth. The Fund
invests in securities that the Fund's
investment adviser believes represent attractive growth
opportunities. The Fund normally
emphasizes equity investments, although it has the flexibility
to invest in any security the Fund's
investment adviser believes has the potential for capital
appreciation.
Van Eck Worldwide Insurance Trust
Van Eck Worldwide Hard Assets Fund: Seeks long-term capital
appreciation by investing in
Hard Asset securities; i.e., commodities or securities of
firms involved (directly or indirectly) in the
following areas: precious metals, ferrous and non-ferrous
metals, energy, real estate, and other
non-agricultural commodities. The Fund seeks opportunities in
all the global stock, bond, and
commodity markets, including domestic markets. Current income
is not an investment objective.
The two Alger American Funds are advised by Fred Alger
Management, Inc. of New York, New
York. The two American Century Variable Portfolios, Inc., are
advised by American Century Investment
Management of Kansas City, Missouri, advisers to the American
Century family of mutual funds. The
Berger IPT-Small Company Growth Fund is advised by Berger
Associates of Denver, Colorado. The three
Federated Insurance Series Portfolios are advised by Federated
Advisers of Pittsburgh, Pennsylvania.
The three INVESCO Variable Investment Funds, Inc., Portfolios are
advised by INVESCO Funds Group,
Inc., of Denver, Colorado. INVESCO Trust Company is the
sub-adviser for the INVESCO VIF-Industrial
Income Portfolio. The three Janus Aspen Series Portfolios are
advised by Janus Capital Corporation of
Denver, Colorado. The Lexington Emerging Markets Fund is advised
by Lexington Management
Corporation of Saddle Brook, New Jersey. The two Montgomery
Variable Series Funds are advised by
Montgomery Asset Management, L.P. of San Francisco, California.
The SAFECO RST Equity Portfolio is
advised by SAFECO Asset Management Company of Seattle, Washington.
The three Schwab Annuity
Portfolios are advised by Charles Schwab Investment Management,
Inc., of San Francisco, California.
The SteinRoe Capital Appreciation Fund is advised by Stein Roe &
Farnham Incorporated of Chicago,
Illinois. Strong Discovery Fund II is advised by Strong Capital
Management, Inc. of Milwaukee, Wisconsin.
The Van Eck Worldwide Hard Assets Fund is advised by Van Eck
Associates Corporation of New York,
New York.
***
Meeting investment objectives depends on various factors,
including, but not limited to, how well
the Eligible Fund managers anticipate changing economic and market
conditions. THERE IS NO
ASSURANCE THAT ANY OF THESE ELIGIBLE FUNDS WILL ACHIEVE THEIR
STATED OBJECTIVES.
The Contracts are not deposits of, or guaranteed or endorsed
by, any bank, nor are the Contracts
federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other
government agency. The Contracts involve certain investment risks,
including possible loss of principal.
Each Eligible Fund is registered with the Commission as an
open-end management investment
company or portfolio thereof. The Commission does not supervise
the management or the investment
practices and policies of any of the Eligible Funds.
Since some of the Eligible Funds are available to registered
separate accounts of other insurance
companies offering variable annuity and variable life products,
there is a possibility that a material conflict
may arise between the interests of the Series Account and one or
more other separate accounts
investing in the Eligible Funds. In the event of a material
conflict, the affected insurance companies are
required to take any necessary steps to resolve the matter,
including stopping their separate accounts
from investing in the Eligible Funds. See the Eligible Funds'
prospectuses for more details.
Additional information concerning the investment objectives
and policies of all of the Eligible
Funds and the investment advisory services and administrative
services and charges can be found in the
current prospectuses for the Eligible Funds, which can be obtained
by calling the Schwab Annuity
Service Center at 800-838-0650, or by writing to Schwab Annuity
Service Center, P.O. Box 7666, San
Francisco, California 94120-7666. The Eligible Funds' prospectuses
should be read carefully before
any decision is made concerning the allocation of Contributions to,
or Transfers among, the
Investment Divisions.
Addition, Deletion, or Substitution
The Company does not control the Eligible Funds and cannot
guarantee that any of the Eligible
Funds will always be available for allocation of Contributions or
Transfers. The Company retains the
right to make changes in the Series Account and in its investments.
Currently, Schwab must approve
certain changes.
First GWL&A and Schwab reserve the right to eliminate the
shares of any Eligible Fund held by
an Investment Division and to substitute shares of another Eligible
Fund or of another investment
company, for the shares of any Eligible Fund, if the shares of the
Eligible Fund are no longer available for
investment or if, in First GWL&A's or Schwab's judgment, investment
in any Eligible Fund would be
inappropriate in view of the purposes of the Series Account. To
the extent required by the 1940 Act, a
substitution of shares attributable to the Owner's interest in an
Investment Division will not be made
without prior notice to the Owners and the prior approval of the
Commission. Nothing contained herein
shall prevent the Series Account from purchasing other securities
for other series or classes of variable
annuity policies, or from effecting an exchange between series or
classes of variable policies on the basis
of Requests made by you.
New Investment Divisions may be established when, in our
discretion, marketing, tax, investment
or other conditions so warrant. Any new Investment Divisions will
be made available to Owners on a
basis to be determined by us. Each additional Investment Division
will purchase shares in a Eligible
Fund or in another mutual fund or investment vehicle. We may also
eliminate one or more Investment
Divisions if, in our sole discretion, marketing, tax, investment or
other conditions so warrant. In the event
any Investment Division is eliminated, we will notify the Owners
and request a re-allocation of the
amounts invested in the eliminated Investment Division.
In the event of any such substitution or change, we may make
such changes to your Contract as
may be necessary or appropriate to reflect such substitution or
change. Furthermore, if deemed to be in
the best interests of persons having voting rights under the
Contracts, the Series Account may be
operated as a management company under the 1940 Act or any other
form permitted by law, may be de-
registered under such Act in the event such registration is no
longer required, or may be combined with
one or more other separate accounts. Such changes will be made in
compliance with applicable law.
___________________________________________________________________
THE GUARANTEE PERIOD FUND
___________________________________________________________________
Guarantee Period Fund
Amounts allocated to the Guarantee Period Fund under the
Contract will be deposited to, and
accounted for, in a non-unitized market value separate account
established by the Company under
Section 4240 of the New York Insurance Code and in accordance with
New York Regulation 128. These
amounts accordingly, are not part of the Series Account. A
non-unitized market value separate account
is a separate account in which the Owner does not participate in
the performance of the assets through
unit values. Therefore, Owners allocating Contributions do not
receive a unit ownership of assets
accounted for in this separate account. The assets accrue solely
to the benefit of the Company and any
gain or loss in the separate account is borne entirely by the
Company. For amounts allocated to the
Guarantee Period Fund, Owners will receive the Contract guarantees
made by the Company.
Contributions allocated to or amounts transferred to the
Guarantee Period Fund will establish a
new Guarantee Period of a duration selected by the Owner from those
currently being offered by the
Company. Every Guarantee Period offered by the Company will have
a time interval of at least one year.
Contributions allocated to the Guarantee Period Fund will be
credited on the Transaction Date.
Each Guarantee Period will have its own stated rate of
interest and Guarantee Period Maturity
Date. The stated rate of interest applicable to a Guarantee Period
will depend on the date the Guarantee
Period is established and the duration chosen by the Owner.
As of the date of this Prospectus, Guarantee Periods with
annual time intervals of 1 to 10 years
are offered. The Guarantee Periods may be changed in the future;
however, any such modification will
not have an impact on any Guarantee Period then in effect.
The value of amounts in each Guarantee Period is the Owner's
Contributions, less Premium Tax,
if any, in that Guarantee Period, plus interest earned, less
amounts distributed, withdrawn (in whole or in
part), Transferred or applied to an annuity option, periodic
withdrawals, and charges deducted under the
Contract. If a Guarantee Period is broken, a Market Value
Adjustment may be assessed. Any such
amount withdrawn or Transferred from a Guarantee Period will be
paid in accordance with the MVA
formula (See "Market Value Adjustment," page __.)
Investments
The Company intends to invest in assets which, in the
aggregate, have characteristics, especially
cash flow patterns, reasonably related to the characteristics of
its liabilities. Various techniques will be
used to achieve the objective of close aggregate matching of assets
and liabilities. The Company will
primarily invest in investment-grade fixed income securities
including:
Securities issued by the U.S. Government or its agencies
or instrumentalities, which
issues may or may not be guaranteed by the U.S. Government.
Debt securities which have an investment grade, at the
time of purchase, within the four
highest grades assigned by Moody's Investment Services, Inc.
(Aaa, Aa, A or Baa), Standard &
Poor's Corporation (AAA, AA, A or BBB) or any other nationally
recognized rating service.
Other debt instruments, including, but not limited to,
issues of banks or bank holding
companies and of corporations, which obligations, although not
rated by Moody's, Standard &
Poor's, or other nationally recognized rating firms, are
deemed by the Company's management to
have an investment quality comparable to securities which may
be purchased as stated above.
Commercial paper, cash or cash equivalents, and other
short-term investments having a
maturity of less than one year which are considered by the
Company's management to have
investment quality comparable to securities which may be
purchased as stated above.
In addition, the Company may invest in futures and options.
Financial futures and related options
thereon and options on securities are purchased solely for
non-speculative hedging purposes. The
Company may sell a futures contract or purchase a put option on
futures or securities to protect the
value of securities held in or to be sold for the general account
or the non-unitized separate account in
the event the securities prices are anticipated to decline.
Similarly, if securities prices are expected to
rise, the Company may purchase a futures contract or a call option
thereon against anticipated positive
cash flow or may purchase options on securities.
WHILE THE FOREGOING GENERALLY DESCRIBES THE INVESTMENT
STRATEGY FOR THE
GUARANTEE PERIOD FUND, THE COMPANY IS NOT OBLIGATED TO INVEST THE
ASSETS
ATTRIBUTABLE TO THE GUARANTEE PERIOD FUND ACCORDING TO ANY
PARTICULAR
STRATEGY, EXCEPT AS MAY BE REQUIRED BY NEW YORK AND OTHER STATE
INSURANCE
LAWS, NOR WILL THE STATED RATE OF INTEREST THAT THE COMPANY
ESTABLISHES
NECESSARILY RELATE TO THE PERFORMANCE OF THE NON-UNITIZED MARKET
VALUE
SEPARATE ACCOUNT.
Subsequent Guarantee Periods
Prior to the date annuity payments commence, you may invest
the value of amounts held in a
maturing Guarantee Period in any Guarantee Period that we offer at
that time. On the quarterly
statement issued prior to the end of any Guarantee Period, we will
notify you of the upcoming maturity of
a Guarantee Period. THE GUARANTEE PERIOD AVAILABLE FOR NEW
CONTRIBUTIONS MAY BE
CHANGED AT ANY TIME, INCLUDING BETWEEN THE DATE OF NOTIFICATION OF
A MATURING
GUARANTEE PERIOD AND THE DATE A SUBSEQUENT GUARANTEE PERIOD BEGINS.
Information
regarding the current Guarantee Periods then available and their
stated rate of interest may be obtained
by calling the Schwab Annuity Service Center at:
1-800-838-0650.
If the Company receives no direction from the Contract Owner
by the Guarantee Period Maturity
Date, the Company will automatically allocate the amount from the
maturing Guarantee Period to a
Guarantee Period equal in duration to the one just ended. If at
that time, the duration previously chosen
is no longer available, the amount will be allocated to the next
shortest available Guarantee Period
duration. If none of the above is available, the value of matured
Guarantee Periods will be allocated to
the Schwab Money Market Investment Division. In any event, a
Guarantee Period will not renew for a
term equal in duration to the one just ended if the Guarantee
Period will mature after the Payment
Commencement Date. No Guarantee Period may mature later than six
months after a Payment
Commencement Date. For example, if a 3-year Guarantee Period
matures and the Payment
Commencement Date begins 1 3/4 years from the Guarantee Period
Maturity Date, the matured value
will be transferred to a 2-year Guarantee Period.
Breaking A Guarantee Period
Any Transfer, withdrawal or the selection of an annuity option
prior to the Guarantee Period
Maturity Date will be known as breaking a Guarantee Period. When
a Request to break a Guarantee
Period is received, the Guarantee Period that is closest to the
Guarantee Period Maturity Date will be
broken first. If a Guarantee Period is broken, a Market Value
Adjustment may be assessed. The Market
Value Adjustment may increase or decrease the value of the amount
Transferred or withdrawn from the
Guarantee Period Fund. The Market Value Adjustment may reduce the
value of amounts held in a
Guarantee Period below the amount of your Contribution(s) allocated
to that Guarantee Period. (See
"Market Value Adjustment," page __.)
Interest Rates
Declared rates are effective annual rates of interest. The
rate is guaranteed throughout the
Guarantee Period. FOR GUARANTEE PERIODS NOT YET IN EFFECT, FIRST
GWL&A MAY DECLARE
INTEREST RATES DIFFERENT THAN THOSE CURRENTLY IN EFFECT. When a
subsequent Guarantee
Period begins, the rate applied will not be less than the rate then
applicable to new Contracts of the
same type with the same Guarantee Period.
The stated rate of interest must be at least equal to the
Contractual Guarantee of a Minimum
Rate of Interest. The Company may declare higher rates. The
Contractual Guarantee of a Minimum Rate
of Interest is based on the applicable state standard
non-forfeiture law which is currently 3% for the
Contract.
The determination of the stated rate of interest is influenced
by, but does not necessarily
correspond to, interest rates available on fixed income investments
which the Company may acquire
using funds deposited into the Guarantee Period Fund. In addition,
the Company will consider other
items in determining the stated rate of interest including
regulatory and tax requirements, sales
commissions and administrative expenses borne by the Company,
general economic trends, and
competitive factors.
Market Value Adjustment
Distributions from the amounts allocated to a Guarantee Period
due to a full surrender or partial
withdrawal, Transfer, application of amounts to the periodic
withdrawal option or to purchase an annuity,
or distributions resulting from the death of the Owner or Annuitant
prior to a Guarantee Period Maturity
Date will be subject to a Market Value Adjustment ("MVA"). An MVA
may increase or decrease the
amount payable on one of the above described distributions. Amount
available for a full surrender,
partial withdrawal or Transfer = amount Requested + MVA. The MVA
is calculated by multiplying the
amount Requested by the Market Value Adjustment Factor ("MVAF").
The MVA reflects the relationship as of the time of its
calculation between (a) the U.S. Treasury
Strip ask side yield as published in the Wall Street Journal on the
last business day of the week prior to
the date the stated rate of interest was established for the
Guarantee Period; and (b) the U.S. Treasury
Strip ask side yield as published in the Wall Street Journal on the
last business day of the week prior to
the week the Guarantee Period is broken. There would be a downward
adjustment if Treasury rates at
the time the Guarantee Period is broken, exceed Treasury rates when
the Guarantee Period was created.
There would be an upward adjustment if Treasury rates at the time
the Guarantee Period is broken, are
lower than when the Guarantee Period was created. The MVA factor
is the same for all Contracts.
1. The formula used to determine the MVA is:
MVA = (amount applied) X (MVAF)
The Market Value Adjustment Factor (MVAF) is:
MVAF = {[(1 + i)/(1 + j)] N/12} - 1
where:
a) i is the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal
on the last business day of the week prior to the date
the stated rate of interest was
established for the Guarantee Period. The term of i is
measured in years and equals the
term of the Guarantee Period;
b) j is the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal
on the last business day of the week prior to the week
the Guarantee Period is broken.
The term of j equals the remaining term to maturity of
the Guarantee Period, rounded up
to the higher number of years; and
c) N is the number of complete months remaining until
maturity.
If N is less than 6, the MVA will equal 0.
2. The Market Value Adjustment will apply to any Guarantee Period
six or more months prior to the
Guarantee Period Maturity Date in each of the following situations:
a) Transfer to another Guarantee Period or to an
Investment Division offered under
this Contract; or
b) Surrenders, partial withdrawals, annuitization or
Periodic Withdrawals; or
c) A single sum payment upon death of the Owner or
Annuitant.
3. The Market Value Adjustment will not apply to any Guarantee
Period having fewer than six
months prior to the Guarantee Period Maturity Date in each of the
following situations:
a) Transfer to an Investment Division offered under
this Contract; or
b) Surrenders, partial withdrawals, annuitization or
Periodic Withdrawals.
c) A single sum payment upon death of the Owner or
Annuitant.
See Appendix A for Illustrations of the MVA.
___________________________________________________________________
APPLICATION AND CONTRIBUTIONS
___________________________________________________________________
Contributions
All Contributions may be paid at the Schwab Annuity Service
Center by a check payable to the
Company or by transfer to the Company of available funds from your
Schwab account.
The initial Contribution for the Contract must be at least
$5,000 (or $2,000 if for an IRA).
Subsequent Contributions must be at least $500. This minimum
initial investment may be reduced to
$1,000, but only if you participate in an Automatic Contribution
Plan and contribute at least $100 per
month through a recurring deposit. A confirmation will be issued
to you upon the acceptance of each
Contribution.
Your Contract will be issued and your Contribution generally
will be accepted and credited within
two business days after receipt of an acceptable application and
receipt of the initial Contribution at the
Schwab Annuity Service Center. All Contributions should be paid to
the Schwab Annuity Service Center
by check (payable to First GWL&A) or by instructing Schwab to
transfer to First GWL&A available funds
from your account with Schwab. Acceptance is subject to there
being sufficient information in a form
acceptable to us and we reserve the right to reject any application
or Contribution.
The Schwab Annuity Service Center will process your
application and Contributions. If your
application is complete and your initial Contribution is being
transferred from funds available in your
Schwab account, then the Contribution will generally be credited
within two business days following
receipt of the application. If your application is incomplete, the
Schwab Annuity Service Center will either
complete the application from information Schwab has on file, or
contact you for the additional
information. No transfer of funds will be made from your Schwab
account until your application is
complete. The funds will be credited as Contributions to the
Contract when they are transferred.
If your Contribution is by check, and the application is
complete, Schwab will use its best efforts
to credit the Contribution on the day of receipt, but in all such
cases it will be credited to your Contract
within two business days of receipt. If your application is
incomplete, the Schwab Annuity Service Center
will complete the application from information Schwab has on file
or contact you by telephone to obtain
the required information. If your application remains incomplete
for five business days, we will return to
you both the check and the application unless you consent to our
retaining the initial Contribution and
crediting it as soon as the requirements are fulfilled.
A Contract may be returned within ten days after receipt
("Free Look Period"). During the Free
Look Period, all contributions will be processed as follows:
(1) Amounts to be allocated to one or more of the then
available Guarantee Periods will be
allocated as directed, effective upon the Transaction
Date.
(2) Amounts the Owner has directed to be allocated to one or
more of the Investment
Divisions will first be allocated to the Schwab Money
Market Investment Division until the
next Transaction Date following the end of the Free Look
Period. On that date, the
Variable Account Value held in the Schwab Money Market
Investment Division will be
allocated to the Investment Divisions selected by the
Owner.
(3) During the Free Look Period, you may change the
allocation percentages among the
Investment Divisions and/or your selection of Investment
Divisions to which Contributions
will be allocated after the Free Look Period.
(4) If the Contract is returned, the contract will be void
from the start and the greater of:
(a) Contributions received less surrenders, withdrawals
and distributions, or (b) the
Annuity Account Value less surrenders, withdrawals and
distributions, will be refunded.
Exercising the return privilege requires the return of
the Contract to the Company or to
the Schwab Annuity Service Center.
Amounts the Owner has contributed from a 1035 exchange of the
variable annuity issued by
Transamerica Occidental Life Insurance Company and First
Transamerica Occidental Life Insurance
Company distributed by Charles Schwab & Co., Inc. (previously
referred to as the Schwab Investment
Advantage Annuity Contract) will be immediately allocated to the
Investment Divisions selected by the
Owner. If the Contract is returned, it will be void from the start
and the greater of: (a) Contributions
received less surrenders, withdrawals and distributions, or (b) the
Annuity Account Value less surrenders,
withdrawals and distributions, will be refunded.
Additional Contributions may be made at any time prior to the
Payment Commencement Date, as
long as the Annuitant is living. Additional Contributions must be
at least $500 or $100 per month if under
an ACP. Additional Contributions will be credited within two days
following receipt.
Total Contributions may exceed $1,000,000 with our prior
approval.
The Company reserves the right to modify the limitations set
forth in this section.
___________________________________________________________________
ANNUITY ACCOUNT VALUE
___________________________________________________________________
Before the date annuity payments commence, your Annuity
Account Value is the sum of each
Variable and Fixed Sub-Account established under your Contract.
Before the annuity commencement date, the Variable Account
Value is the total dollar amount of
all Accumulation Units under each of your Variable Sub-Accounts.
Initially, the value of each
Accumulation Unit was set at $10.00. Each Variable Sub-Account's
value prior to the Payment
Commencement Date is equal to: (a) net Contributions allocated to
the corresponding Investment
Division; plus or minus (b) any increase or decrease in the value
of the assets of the Variable Sub-
Account due to investment results; less (c) the daily Mortality and
Expense Risk Charge; less (d)
reductions for the Contract Maintenance Charge deducted on the last
business day of each Contract
Year; less (e) any applicable Transfer Fees; and less (f) any
withdrawals or Transfers from the Variable
Sub-Account.
A Valuation Period is the period between successive Valuation
Dates. It begins at the close of
the New York Stock Exchange (generally 4:00 p.m. ET) on each
Valuation Date and ends at the close of
the New York Stock Exchange on the next succeeding Valuation Date.
A Valuation Date is each day that
the New York Stock Exchange is open for regular business. The
value of an Investment Division's assets
is determined at the end of each Valuation Date. To determine the
value of an asset on a day that is not
a Valuation Date, the value of that asset as of the end of the
previous Valuation Date will be used.
The Variable Account Value is expected to change from
Valuation Period to Valuation Period,
reflecting the investment experience of the selected Investment
Division(s) as well as the deductions for
charges.
Contributions which you allocate to an Investment Division are
used to purchase Variable
Accumulation Units in the Investment Division(s) you select. The
number of Accumulation Units to be
credited will be determined by dividing the portion of each
Contribution allocated to the Investment
Division by the value of an Accumulation Unit determined at the end
of the Valuation Period during which
the Contribution was received. In the case of the initial
Contribution, Accumulation Units for that payment
will be credited to the Variable Account Value (and, except for
certain 1035 exchanges), held in the
Schwab Money Market Investment Division until the end of the Free
Look Period (see "Application and
Contributions," page __). In the case of any subsequent
Contribution, Accumulation Units for that
payment will be credited at the end of the Valuation Period during
which we receive the Contribution.
The value of an Accumulation Unit for each Investment Division for
a Valuation Period is established at
the end of each Valuation Period and is calculated by multiplying
the value of that unit at the end of the
prior Valuation Period by the Investment Division's Net Investment
Factor for the Valuation Period.
Unlike a brokerage account, amounts held under a Contract are
not covered by the Securities
Investor Protection Corporation ("SIPC") .
___________________________________________________________________
TRANSFERS
___________________________________________________________________
In General
Prior to the Payment Commencement Date you may Transfer all or
part of your Annuity Account
Value among and between the Investment Divisions and the available
Guarantee Periods by sending a
Request to the Schwab Annuity Service Center. The Request must
specify the amounts being
Transferred, the Investment Division(s) and/or Guarantee Period(s)
from which the Transfer is to be made,
and the Investment Division(s) and/or Guarantee Period(s) that will
receive the Transfer.
Currently, there is no limit on the number of Transfers you
can make among the Investment
Divisions during any Contract Year. There is no charge for the
first twelve Transfers each Contract Year,
but there will be a charge of $10 for each additional Transfer in
each Contract Year. We reserve the right
to limit the number of Transfers you make. The charge will be
deducted from the amount transferred. All
Transfers made on a single Transaction Date will be aggregated to
count as only one Transfer toward the
twelve free Transfers; however, if a one time rebalancing Transfer
also occurs on the Transaction Date, it
will be counted as a separate and additional Transfer.
Transfers involving the Guarantee Period Fund (including
Transfers to or from the Investment
Division(s)) are not limited during any calendar year. These
Guarantee Period Fund Transfers are
counted against your twelve free Transfer as discussed above. The
$10 charge will apply to each
Transfer made in excess of the first twelve Transfers each calendar
year.
A Transfer generally will be effective on the date the Request
for Transfer is received by the
Schwab Annuity Service Center if received before 4:00 p.m. Eastern
Time. Under current law, there will
not be any tax liability to you if you make a Transfer.
Transfers involving the Investment Divisions will result in
the purchase and/or cancellation of
Accumulation Units having a total value equal to the dollar amount
being Transferred to or from a
particular Investment Division. The purchase and/or cancellation
of such units generally shall be made
using the Variable Account Value as of the end of the Valuation
Date on which the Transfer is effective.
When a Transfer is made from amounts in a Guarantee Period
before the Guarantee Period
Maturity Date, the amount Transferred may be subject to a Market
Value Adjustment. (See "Market Value
Adjustment," page --.) A Request for Transfer from amounts in a
Guarantee Period made prior to the
Guarantee Period Maturity Date for Transfers on the Guarantee
Period Maturity Date will not be counted
for the purpose of determining any Transfer Fee on Transfers in
excess of the twelve Transfers per year if
these Transfers are to take place on the Guarantee Period Maturity
Date.
Possible Restrictions
We reserve the right without prior notice to modify, restrict,
suspend or eliminate the Transfer
privileges at any time. For example, restrictions may be necessary
to protect Owners from adverse
impacts on portfolio management of large and/or numerous Transfers
by market timers or others. We
have determined that the movement of significant amounts from one
Investment Division to another may
prevent the underlying Eligible Fund from taking advantage of
investment opportunities because the
Eligible Fund must maintain a significant cash position in order to
handle redemptions. Such movement
may also cause a substantial increase in Eligible Fund transaction
costs which must be indirectly borne
by Owners. Therefore, we reserve the right to require that all
Transfer Requests be made by the Owner
and not by an Owner's designee and to require that each Transfer
Request be made by a separate
communication to us. We also reserve the right to request that
each Transfer Request be submitted in
writing and be manually signed by the Owner; facsimile Transfer
Requests may not be allowed.
Transfers among the Investment Divisions may also be subject to
such terms and conditions as may be
imposed by the Eligible Funds.
Custom Transfer: Dollar Cost Averaging (Automatic Transfers)
The Owner may Request to automatically Transfer at regular
intervals, predetermined amounts
from one Investment Division selected from among those being
allowed under this option (which may be
modified by the Company from time to time) to any of the other
Investment Divisions. The intervals
between Transfers may be monthly, quarterly, semi-annually or
annually. The Transfer will be initiated on
the Transaction Date one frequency period following the date of the
Request. Transfers will continue on
that same day each interval unless terminated by you or for other
reasons as set forth in the Contract. If
there are insufficient funds in the applicable Variable Sub-Account
on the date of Transfer, no Transfer
will be made; however, Dollar Cost Averaging will resume once there
are sufficient funds in the applicable
Variable Sub-Account. Dollar Cost Averaging will terminate
automatically upon the annuity
commencement date. Amounts transferred through Dollar Cost
Averaging are not counted against the
twelve free Transfers allowed in a calendar year.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the
selected Investment Division is $100
per month.
2. The Owner must specify dollar amount to be Transferred,
designate the Investment Division(s)
to which the Transfer will be made and the percent to be allocated
to such Investment Division(s). The
Accumulation Unit values will be determined on the Transfer Date.
Dollar Cost Averaging may be used to purchase Accumulation
Units of the Investment Divisions
over a period of time. The Owner, by Request, may cease Dollar
Cost Averaging at any time.
Participation in Dollar Cost Averaging does not, however, assure a
greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company
reserves the right to modify, suspend or
terminate Dollar Cost Averaging at any time.
Custom Transfer: Rebalancer Option
The Owner may Request to automatically Transfer among the
Investment Divisions on a periodic
basis by electing the Rebalancer Option. This option automatically
reallocates the Variable Account
Value to maintain a particular allocation among Investment
Divisions selected by the Owner. The amount
allocated to each Investment Division will increase or decrease at
different rates depending on the
investment experience of the Investment Division.
The Owner may Request that the rebalancing occur one time
only, in which case the Transfer will
take place on the Transaction Date of the Request. This Transfer
will count as one Transfer towards the
twelve free Transfers allowed in a calendar year. (See "Transfer
Fee," page __.)
Rebalancing may also be set up on a quarterly, semiannual or
annual basis, in which case the
first Transfer will be initiated on the Transaction Date one
frequency period following the date of the
Request. On the Transaction Date for the specified Request, assets
will be automatically reallocated to
the selected Investment Divisions. Rebalancing will continue on
the same Transaction Date for
subsequent periods. In order to participate in the Rebalancer
Option, the entire Variable Account Value
must be included. Transfers set up with these frequencies will not
count against the twelve free Transfers
allowed in a calendar year.
The Owner must specify the percentage of Variable Account
Value to be allocated to each
Investment Division and the frequency of rebalancing. The Owner,
by Request, may modify the
allocations or cease the Rebalancer Option at any time. The
Rebalancer Option will terminate
automatically upon the Payment Commencement Date. Participation in
the Rebalancer Option and Dollar
Cost Averaging at the same time is not allowed. Participation in
the Rebalancer Option does not assure
a greater profit, nor will it prevent or necessarily alleviate
losses in a declining market. The Company
reserves the right to modify, suspend, or terminate the Rebalancer
Option at any time.
___________________________________________________________________
CASH WITHDRAWALS
___________________________________________________________________
Withdrawals
You (the Owner) may withdraw from the Contract all or part of
your Annuity Account Value at any
time during the life of the Annuitant and prior to the date annuity
payments commence by Request at the
Schwab Annuity Service Center subject to the rules below. Federal
or state laws, rules or regulations
may apply. The amount payable to you if you surrender your
Contract is your Annuity Account Value,
with a Market Value Adjustment, if applicable, on the effective
date of the surrender, and less any
applicable Premium Tax. No withdrawals may be made after the date
annuity payments commence.
A Request for a partial withdrawal will result in a reduction
in your Annuity Account Value equal to
the sum of the dollar amount withdrawn. A Market Value Adjustment
may apply. (See "Market Value
Adjustment," page __.) The partial withdrawal proceeds may be
greater or less than the amount
requested, depending on the effect of the Market Value Adjustment.
The minimum partial withdrawal before application of the MVA
is $500. Partial withdrawals are
unlimited; however, you must specify the Investment Division(s) or
Guarantee Period(s) from which the
withdrawal is to be made. After any partial withdrawal, if the
remaining Annuity Account Value is less
than $2,000, then a full surrender may be required.
The following terms apply:
(a) No partial withdrawals are permitted after the date
annuity payments commence.
(b) A partial withdrawal will be effective upon the
Transaction Date.
(c) A partial withdrawal from amounts in a Guarantee Period
may be subject to the Market
Value Adjustment provisions, the Guarantee Period Fund
provisions of the Contract, and
the terms of the attached Guarantee Period Fund Rider(s),
if any.
Withdrawals may be taxable (this includes Periodic
Withdrawals, discussed below). Moreover, the
Internal Revenue Code (the "Code") provides that a 10% penalty tax
may be imposed on the taxable
portions of certain early withdrawals. The Code generally requires
us to withhold federal income tax from
withdrawals. However, generally you will be entitled to elect, in
writing, not to have tax withholding apply
unless withholding is mandatory for your Contract. Withholding
applies to the portion of the withdrawal
which is included in your income and subject to federal income tax.
The tax withholding rate is 10% of
the taxable amount of the withdrawal. Withholding applies only if
the taxable amount of the withdrawal is
at least $200. Some states also require withholding for state
income taxes. (See "Federal Tax Matters,"
page __.)
Withdrawal Requests must be in writing to ensure that your
instructions regarding withholding are
followed. If an adequate election is not made, the Request will be
denied and no withdrawal or partial
withdrawal will be processed.
After a withdrawal of all of your total Annuity Account Value,
or at any time that your Annuity
Account Value is zero, all your rights under the Contract will
terminate.
Since IRAs are offered by this Prospectus, reference should be
made to the applicable provisions
of the Code for any additional limitations or restrictions on cash
withdrawals.
___________________________________________________________________
TELEPHONE TRANSACTIONS
___________________________________________________________________
We will employ reasonable procedures to confirm that
instructions communicated by telephone
are genuine and if we follow such procedures we will not be liable
for any losses due to unauthorized or
fraudulent instructions. However, we may be liable for such losses
if we do not follow those reasonable
procedures. The procedures we will follow for telephone
transactions may include requiring some form of
personal identification prior to acting on instructions received by
telephone, providing written confirmation
of the transaction, and/or tape recording the instructions given by
telephone.
We reserve the right to suspend telephone transaction
privileges at any time, for some or all
Contracts, and for any reason. Withdrawals are not permitted by
telephone.
___________________________________________________________________
DEATH BENEFIT
___________________________________________________________________
Payment of Death Benefit
Before the date annuity payments commence, the death benefit,
if any, will be equal to the
greater of: (a) the Annuity Account Value with an MVA, if
applicable, as of the date the Request for
payment is received, less Premium Tax, if any, or (b) the sum of
Contributions paid, less partial
withdrawals and/or Periodic Withdrawals, less Premium Tax, if any.
The death benefit will become
payable following the Company's receipt of a Request from the
Beneficiary. When an Owner or the
Annuitant dies before the annuity commencement date and a death
benefit is payable to a Beneficiary,
the death benefit proceeds will remain invested in accordance with
the allocation instructions given by
the Owner(s) until new allocation instructions are Requested by the
Beneficiary or until the death benefit
is actually paid to the Beneficiary. The death benefit will be
determined as of the date payments
commence; however, on the date a payment option is processed,
amounts in the Variable Sub-Account
will be Transferred to the Money Market Investment Division unless
the Beneficiary otherwise elects by
Request. Subject to the distribution rules set forth below,
payment of the death benefit may be
Requested to be made as follows:
A. Proceeds from the Variable Sub-Account(s)
1. payment in a single sum; or
2. payment under any of the variable annuity options
provided under this Contract.
B. Proceeds from the Guarantee Period(s)
1. payment in a single sum with respect to which a
Market Value Adjustment may
apply; or
2. payment under any of the annuity options provided
under this Contract with
respect to which a Market Value Adjustment may
apply; or
3. payment on the Guarantee Period Maturity Date so
that a Market Value
Adjustment will not apply.
In any event, no payment of benefits provided under the
Contract will be allowed that does not
satisfy the requirements of Section 72(s) of the Code and any other
applicable federal or state laws, rules
or regulations.
Distribution Rules
1. Death of Annuitant
Upon the death of the Annuitant while the Owner is living, and
before the annuity commencement
date, the Company will pay the death benefit to the Beneficiary
unless there is a Contingent Annuitant.
If a Contingent Annuitant was named by the Owner(s) prior to
the Annuitant's death, and the
Annuitant dies before the annuity commencement date while the Owner
and Contingent Annuitant are
living, no death benefit will be payable by reason of the
Annuitant's death and the Contingent Annuitant
will become the Annuitant.
If the Annuitant dies after the date annuity payments commence
and before the entire interest
has been distributed, any benefit payable must be distributed to
the Beneficiary in accordance with and
at least as rapidly as under the payment option applicable to the
Annuitant on the Annuitant's date of
death.
If a corporation or other non-individual is an Owner, or if
the deceased Annuitant is an Owner, the
death of the Annuitant will be treated as the death of an Owner and
the Contract will be subject to the
"Death of Owner" provisions described below.
2. Death of Owner
If the Owner is not the Annuitant:
(1) If there is a Joint Owner who is the surviving spouse of
the deceased Owner, the Joint Owner
will become the Owner and Beneficiary and may elect to take
the death benefit or elect to
continue the Contract in force.
(2) In all other cases, the Company will pay the death
benefit to the Beneficiary even if a Joint
Owner (who was not the Owner's spouse on the date of the
Owner's death), the Annuitant and/or
the Contingent Annuitant are alive at the time of the Owner's
death, unless the sole Beneficiary is
the deceased Owner's surviving spouse and the Beneficiary
elects to become the Owner and
Annuitant and to continue the Contract in force.
If the Owner is not the Annuitant, and the Owner dies after
annuity payments commence and
before the entire interest has been distributed while the Annuitant
is living, any benefit payable will
continue to be distributed to the Annuitant at least as rapidly as
under the payment option applicable on
the Owner's death. All rights granted the Owner under the Contract
will pass to any surviving Joint
Owner and, if none, to the Annuitant.
If the Owner is the Annuitant (Owner/Annuitant):
(1) If there is a Joint Owner who is the surviving spouse of
the deceased Owner and a
Contingent Annuitant, the Joint Owner will become the Owner
and the Beneficiary, the Contingent
Annuitant will become the Annuitant, and the Contract will
continue in force.
(2) If there is a Joint Owner who is the surviving spouse of
the deceased Owner but no
Contingent Annuitant, the Joint Owner will become the Owner,
Annuitant and Beneficiary and
may elect to take the death benefit or continue the Contract
in force.
(3) In all other cases, the Company will pay the death
benefit to the Beneficiary, even if a Joint
Owner (who was not the Owner's spouse on the date of the
Owner's death), Annuitant and/or
Contingent Annuitant are alive at the time of the Owner's
death, unless the sole Beneficiary is the
deceased Owner's surviving spouse and the Beneficiary Requests
to become the Owner and
Annuitant and to continue the Contract in force.
Any death benefit payable to the Beneficiary upon an Owner's
death will be distributed as follows:
(1) If the Owner's surviving spouse is the person entitled to
receive benefits upon the Owner's
death, the surviving spouse will be treated as the Owner and
will be allowed to take the death
benefit or continue the Contract in force; or
(2) If the Beneficiary is a non-spouse individual, she/he may
elect, not later than one year after
the Owner's date of death, to receive the death benefit in
either a single sum or payment under
any of the variable or fixed annuity options available under
the Contract, provided that (a) such
annuity is distributed in substantially equal installments
over the life or life expectancy of the
Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary; and (b)
such distributions begin not later than one year after the
Owner's date of death. If no election is
received by the Company from a non-spouse Beneficiary such
that substantially equal
installments have begun not later than one year after the
Owner's date of death, then the entire
amount must be distributed within five years of the Owner's
date of death. The death benefit will
be determined as of the date the payments commence; or
(3) If a corporation or other non-individual entity is
entitled to receive benefits upon the Owner's
death, the death benefit must be completely distributed within
five years of the Owner's date of
death.
Beneficiary
You may select one or more Beneficiaries. If more than one
Beneficiary is selected, unless you
indicate otherwise, they will share equally in any death benefit
payable. You may change the Beneficiary
any time before the Annuitant's death.
You may, while the Annuitant is living, change the Beneficiary
by Request. A change of
Beneficiary will take effect as of the date the Request is
processed by the Schwab Annuity Service
Center, unless a certain date is specified by the Owner. If the
Owner dies before the Request was
processed, the change will take effect as of the date the Request
was made, unless the Company has
already made a payment or otherwise taken action on a designation
or change before receipt or
processing of such Request. A beneficiary designated irrevocably
may not be changed without the
written consent of that Beneficiary, except as allowed by law.
The interest of any Beneficiary who dies before the Owner or
the Annuitant will terminate at the
death of the Beneficiary. The interest of any Beneficiary who dies
at the time of, or within 30 days after,
the death of an Owner or the Annuitant will also terminate if no
benefits have been paid to such
Beneficiary, unless the Owner otherwise indicates by Request. The
benefits will then be paid as though
the Beneficiary had died before the deceased Owner or Annuitant.
If no Beneficiary survives the Owner
or Annuitant, as applicable, the Company will pay the death benefit
proceeds to the Owner's estate.
If the surviving spouse of an Owner is the surviving Joint
Owner, the surviving spouse will
become the Beneficiary upon such Owner's death and may elect to
take the death benefit or may elect to
continue the Contract in force. If there is no surviving Joint
Owner, and no named Beneficiary is alive at
the time at the time of an Owner's death, any benefits payable will
be paid to the Owner's estate.
Contingent Annuitant
While the Annuitant is living, the Owner(s) may, by Request,
designate or change a Contingent
Annuitant from time to time. A change of Contingent Annuitant will
take effect as of the date the Request
is processed at the Schwab Annuity Service Center, unless a certain
date is specified by the Owner(s).
___________________________________________________________________
CHARGES AND DEDUCTIONS
___________________________________________________________________
No deductions are made from Contributions except for any
applicable Premium Tax. Therefore,
the full amount of the Contributions (less any applicable Premium
Tax) are invested in the Contract.
As more fully described below, charges under the Contract are
assessed only as deductions for
Premium Tax, if applicable, for certain Transfers, as a Contract
Maintenance Charge, and as charges
against the assets in the Owner's Variable Sub-Account(s) for our
assumption of mortality and expense
risks. In addition, a Market Value Adjustment may apply to
withdrawals and surrenders, Transfers,
amounts applied to purchase an annuity, and distributions resulting
from death of the Owner or Annuitant
if the amounts held in a Guarantee Period are paid out prior to the
Guarantee Period Maturity Date.
Mortality and Expense Risk Charge
We deduct a Mortality and Expense Risk Charge from your
Variable Sub-Account(s) at the end of
each Valuation Period to compensate us for bearing certain
mortality and expense risks under the
Contract. This is a daily charge equal to an effective annual rate
of 0.85% of the value of the net assets
in your Variable Sub-Account(s). The approximate portion of this
charge attributable to mortality risks is
0.68%; the approximate portion of this charge estimated to be
attributable to expense risk is 0.17% of the
value of the net assets in your Variable Sub-Account(s). We
guarantee that this charge will never
increase beyond 0.85%.
The Mortality and Expense Risk Charge is reflected in the
Accumulation Unit Values for each of
your Variable Sub-Accounts. Thus, this charge will continue to be
applicable should you choose a
variable annuity payment option or the periodic withdrawal option.
Annuity Account Values and annuity payments are not affected
by changes in actual mortality
experience incurred by us. The mortality risks assumed by us arise
from our contractual obligations to
make annuity payments determined in accordance with the annuity
tables and other provisions contained
in the Contract. Thus you are assured that neither the Annuitant's
longevity nor an unanticipated
improvement in general life expectancy will adversely affect the
annuity payments under the Contract.
We bear substantial risk in connection with the death benefit
before the annuity commencement
date, since we will pay a death benefit equal to the greater of the
Annuity Account Value with a Market
Value Adjustment, if applicable, as of the later of the date of
death or the date the Request for payment is
received, less Premium Tax, if any; or the sum of the Contributions
paid, less partial withdrawals and/or
Periodic Withdrawals, less any charges under Contract less Premium
Tax, if any (i.e., we bear the risk of
unfavorable experience in your Variable Sub-Accounts).
The expense risk assumed is the risk that our actual expenses
in administering the Contracts and
the Series Account will be greater than anticipated, or exceed the
amount recovered through the
Contract Maintenance Charge plus the amount, if any, recovered
through Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to
cover actual costs and risks assumed,
the loss will fall on us. Conversely, if this charge is more than
sufficient, any excess will be profit to us.
Currently, we expect a profit from this charge. Our expenses for
distributing the Contracts will be borne
by our general assets, including any profits from this charge.
Contract Maintenance Charge
We currently deduct a $25 annual Contract Maintenance Charge
from the Annuity Account Value
only on each Contract anniversary date. This charge partially
covers our costs for administering the
Contracts and the Series Account. Once you have selected a payment
option, this charge will cease to
apply other than for the Periodic Withdrawal Option. The Contract
Maintenance Charge is deducted from
your Annuity Account Value allocated to the Schwab Money Market
Investment Division. If you do not
have sufficient Annuity Account Value allocated to the Schwab Money
Market Investment Division to cover
the Contract Maintenance Charge, then the charge or any portion
thereof will be deducted on a pro rata
basis from all your Variable Sub-Accounts with current value. If
the entire Annuity Account is held in the
Guarantee Period Fund or there are not enough funds in any Variable
Sub-Account to pay the entire
charge, then the Contract Maintenance Charge will be deducted on a
pro rata basis from amounts held
in all Guarantee Periods. There is no MVA on amounts deducted from
a Guarantee Period for the
Contract Maintenance Charge. We do not expect a profit from
amounts received from the Contract
Maintenance Charge.
Premium Tax
We may be required to pay state premium taxes or retaliatory
taxes currently ranging from 0% to
3.5% in connection with Contributions or values under the
Contracts. Depending on applicable state law,
we will deduct charges for the premium taxes we incur with respect
to a particular Contract from the
Contributions, from amounts withdrawn, or from amounts applied on
the Payment Commencement Date.
In some states, charges for both direct premium taxes and
retaliatory premium taxes may be imposed at
the same or different times with respect to the same Contribution,
depending on applicable state law.
Transfer Fee
There will be a $10 charge for each Transfer in excess of
twelve Transfers in any calendar year.
We do not expect a profit from the Transfer fee for excess
Transfers.
Other Taxes
Under present laws, we will incur state or local taxes (in
addition to the Premium Tax described
above) in New York. No charges are currently made for taxes other
than Premium Tax. However, we
reserve the right to deduct charges in the future for federal,
state, and local taxes or the economic
burden resulting from the application of any tax laws that we
determine to be attributable to the
Contracts.
Expenses of the Eligible Funds
The value of the assets in the Investment Divisions reflect
the value of Eligible Fund shares and
therefore the fees and expenses paid by each Eligible Fund. A
complete description of the fees,
expenses, and deductions from the Eligible Funds are found in the
Eligible Funds' prospectuses. (See
"The Eligible Funds," page __.) Current prospectuses for the
Funds can be obtained by calling the
Schwab Annuity Service Center at 800-838-0650, or by writing to the
Schwab Annuity Service Center,
P.O. Box 7666, San Francisco, California 94120-7666.
___________________________________________________________________
PAYMENT OPTIONS
___________________________________________________________________
Periodic Withdrawal Option
The Owner may Request that all or part of the Annuity Account
Value be applied to a Periodic
Withdrawal Option. The amount applied to a Periodic Withdrawal is
the Annuity Account Value with an
MVA, if applicable, less Premium Tax, if any.
In Requesting Periodic Withdrawals, the Owner must elect:
- The withdrawal frequency of either 12-, 6-, 3-, or
1-month intervals;
- A withdrawal amount; a minimum of $100 is required;
- The calendar day of the month on which withdrawals will
be made;
- One withdrawal option; and
- The allocation of withdrawals from the Owner's Variable
and/or Fixed Sub-Account(s) as
follows:
1) Prorate the amount to be paid across all Variable
and Fixed Sub-Accounts in
proportion to the assets in each sub-account; or
2) Select the Variable and/or Fixed Sub-Account(s) from
which withdrawals will be
made. Once the Variable and/or Fixed Sub-Accounts
have been depleted, the
Company will automatically prorate the remaining
withdrawals against all
remaining available Variable and/or Fixed
Sub-Accounts unless the Owner
Requests the selection of another Variable and/or
Fixed Sub-Account.
The Owner may elect to change the withdrawal option and/or the
frequency once each calendar
year.
While Periodic Withdrawals are being received:
1. the Owner may continue to exercise all contractual rights
that are available prior to
electing an annuity option, except that no Contributions
may be made;
2. for Periodic Withdrawals from Guarantee Periods six or
more months prior to its
Guarantee Period Maturity Date, a Market Value
Adjustment, if applicable, will be
assessed;
3. the Owner may keep the same investment options as were in
force before periodic
withdrawals began;
4. charges and fees under the Contract continue to apply;
and
5. maturing Guarantee Periods renew into the shortest
Guarantee Period then available.
Periodic Withdrawals will cease on the earlier of the date:
1. the amount elected to be paid under the option selected
has been reduced to zero;
2. the Annuity Account Value is zero;
3. the Owner Requests that withdrawals stop; or
4. an Owner or the Annuitant dies.
The Owner must elect one of the following five (5) withdrawal
options:
1. Income for a Specified Period for at least thirty-six
(36) months - The Owner elects the
duration over which withdrawals will be made. The amount paid
will vary based on the duration.
2. Income of a Specified Amount for at least thirty-six (36)
months - The Owner elects the
dollar amount of the withdrawals. Based on the amount
elected, the duration may vary; or
3. Interest Only - The withdrawals will be based on the
amount of interest credited to the
Guarantee Period Fund between each withdrawal. Available only
if 100% of the account value is
invested in the Guarantee Period Fund; or
4. Minimum Distribution - If this is an IRA contract, the
Owner may Request minimum
distributions as specified under Code Section 401(a)(9); or
5. Any Other Form for a period of at least thirty-six (36)
months - Any other form of Periodic
Withdrawal which is acceptable to the Company.
If Periodic Withdrawals cease, the Owner may resume making
Contributions. The Owner may
elect to restart a Periodic Withdrawal program; however, the
Company may limit the number of times the
Owner may restart a Periodic Withdrawal program.
Periodic withdrawals may be taxable, subject to withholding
and subject to the 10% penalty tax.
IRAs are subject to complex rules with respect to restrictions on
and taxation of distributions, including
the applicability of penalty taxes. A competent tax adviser should
be consulted before a Periodic
Withdrawal Option is requested. (See "Federal Tax Matters," page
__.)
Annuity Date
The date annuity payments commence may be chosen when the
Contract is purchased or at a
later date. This date must be at least one year after the initial
Contribution. In the absence of an earlier
election, the annuity date is the first day of the month of the
Annuitant's 90th birthday.
If an option has not been elected within 30 days of the
annuity commencement date, the Annuity
Account Value held in the Fixed Sub-Account(s) will be applied
under Annuity Payment Option 3,
discussed below, to provide payments for life with a guaranteed
period of 20 years. The Annuity
Account Value held in the Variable Sub-Account(s) will be applied
under Variable Annuity Payment
Option 1, discussed below, to provide payments for life with a
guaranteed period of 20 years.
Under section 401(a)(9) of the Code, a Contract which is
purchased and used in connection with
an Individual Retirement Account or with certain other plans
qualifying for special federal income tax
treatment is subject to complex "minimum distribution"
requirements, which require that distributions
under such a plan must begin by a specific date, and also that the
entire interest of the plan participant
must be distributed within certain specified periods under formulas
that specify minimum annual
distributions. The application of the minimum distribution
requirements to each person will vary
according to the person's age and other circumstances. A
prospective purchaser may wish to consult a
competent tax adviser regarding the application of the minimum
distribution requirements. (See "Federal
Tax Matters," page __.)
Annuity Options
An annuity option may be selected by the Owner when the
Contract is purchased, or at a later
date. This selection may be changed, by Request, at any time up to
30 days before the annuity date. In
the absence of an election, payments will automatically commence on
the annuity date as described
above. The amount to be applied is the Annuity Account Value on
the annuity date. The minimum
amount that may be withdrawn from the Annuity Account Value to
purchase an annuity payment option is
$2,000 with an MVA, if applicable. If the amount is less than
$2,000, the Company may pay the amount
in a single sum subject to the Contract provisions applicable to a
partial withdrawal. Payments may be
elected to be received monthly, quarterly, semi-annually or
annually. Payments to be made under the
annuity payment option selected must be at least $50. The Company
reserves the right to make
payments using the most frequent payment interval which produces a
payment of not less than $50. The
maximum amount that may be applied under any payment option is
$1,000,000, unless prior approval is
obtained from the Company.
A single sum payment may be elected. If it is, then the
amount to be paid is the Surrender
Value. If the Owner elects a variable annuity with funds from the
Owner's Variable Sub-Accounts, then
the amount to be applied is the Annuity Account Value held in the
Variable Sub-Account(s), as of the
annuity commencement date, less any applicable Premium Tax. If the
Owner elects a fixed annuity with
funds from the Fixed Sub-Accounts, then the amount to be applied is
the Annuity Account Value held in
the Fixed Sub-Account(s), as of the annuity commencement date with
an MVA, if applicable, less any
applicable Premium Tax.
Fixed Annuity Payment Options
Option 1: Income of Specified Amount
The amount applied under this option may be paid in equal
annual, semiannual, quarterly or
monthly installments of the dollar amount elected for not more than
240 months. Upon death of the
Annuitant, the Beneficiary will begin to receive the remaining
payments at the same interval that was
elected by the Owner.
Option 2: Income for a Specified Period
Payments are paid annually, semiannually, quarterly or
monthly, as elected, for a selected
number of years not to exceed 240 months. Upon death of the
Annuitant, the Beneficiary will begin to
receive the remaining payments at the same interval that was
elected by the Owner.
Option 3: Fixed Life Annuity with Guaranteed Period
This option provides for monthly payments during a designated
period and thereafter throughout
the lifetime of the Annuitant. The designated period may be 5, 10,
15 or 20 years. Upon death of the
Annuitant, for each remaining designated period, the amounts
payable under this payment option will be
paid to the Beneficiary.
Option 4: Fixed Life Annuity
This annuity is payable monthly during the lifetime of the
Annuitant, terminating with the last
payment due prior to the death of the Annuitant. Since no minimum
number of payments is guaranteed,
this option may offer the maximum level of monthly payments of the
annuity options. It is possible that
only one payment may be made if the Annuitant died before the date
on which the second payment was
due. Upon the death of the Annuitant, all payments cease and no
amounts are payable to the
Beneficiary.
Option 5: Any Other Form
This option allows an Owner the ability to choose any other
form of annuity which is acceptable
to the Company.
Variable Annuity Payment Options
Option 1: Variable Life Annuity with Guarantee Period
This option provides for payments during a designated period
and thereafter throughout the life
time of the Annuitant. The designated period may be 5, 10, 15 or
20 years. Upon death of the
Annuitant, for each remaining designated period, the amounts
payable under this payment option will be
paid to the Beneficiary.
Option 2: Variable Life Annuity
This annuity is payable during the lifetime of the Annuitant.
The annuity terminates with the last
payment due prior to the death of the Annuitant. Since no minimum
number of payments is guaranteed,
this option may offer the maximum level of monthly payments of the
annuity options. It is possible that
only one payment may be made if the Annuitant died before the date
on which the second payment was
due. Upon the death of the Annuitant, all payments cease and no
amounts are payable to the
Beneficiary.
Variable annuity payment options are subject to the following
provisions:
Amount of First Payment
The first payment under a variable annuity payment option will
be based on the value of the
amounts held in each Variable Sub-Account on the 5th Valuation Date
preceding the annuity
commencement date. It will be determined by applying the
appropriate rate to the amount applied under
the payment option.
Annuity Units
The number of Annuity Units paid to the Annuitant for each
Variable Sub-Account is determined
by dividing the amount of the first monthly payment by its
Accumulation Unit Value on the 5th Valuation
Date preceding the date the first payment is due. The number of
Annuity Units used to calculate each
payment for a Variable Sub-Account remains fixed during the Annuity
Payment Period.
Amount of Payments after the First
Payments after the first will vary depending upon the
investment experience of the Investment
Divisions. The subsequent amount paid from each sub-account is
determined by multiplying (a) by (b)
where (a) is the number of sub-account Annuity Units to be paid and
(b) is the sub-account Annuity Unit
value on the 5th Valuation Date preceding the date the annuity
payment is due. The total amount of
each variable annuity payment will be the sum of the variable
annuity payments for each Variable Sub-
Account. The Company guarantees that the dollar amount of each
payment after the first will not be
affected by variations in expenses or mortality experience.
Transfers After the Annuity Commencement Date
Once annuity payments have begun, no Transfers may be made
from a fixed annuity payment
option to a variable annuity payment option, or vice versa;
however, for variable annuity payment options,
Transfers may be made among Investment Divisions. Transfers after
the annuity commencement date
will be made by converting the number of Annuity Units being
Transferred to the number of Accumulation
Units of the Variable Sub-Account to which the Transfer is made.
The result will be that the next annuity
payment, if it were made at that time, would be the same amount
that it would have been without the
Transfer. Thereafter, annuity payments will reflect changes in the
value of the new Annuity Units.
***
For annuity options involving life income, the actual age
and/or sex of the Annuitant will affect the
amount of each payment. We reserve the right to ask for
satisfactory proof of the Annuitant's age. We may
delay annuity payments until satisfactory proof is received. Since
payments to older Annuitants are expected
to be fewer in number, the amount of each annuity payment under a
selected annuity form will be greater
for older Annuitants than for younger Annuitants.
If the age or sex of the Annuitant has been misstated, the
payments established will be made on the
basis of the correct age or sex. If payments were too large
because of misstatement, the difference with
interest may be deducted by the Company from the next payment or
payments. If payments were too small,
the difference with interest may be added by the Company to the
next payment. This interest is at an annual
effective rate which will not be less than the Contractual
Guarantee of a Minimum Rate of Interest or greater
than 6% as determined by the Company.
The Payment Commencement Date and annuity options available
for IRAs may also be controlled
by endorsements, the plan documents, or applicable law.
Once payments start under the annuity form selected by the
Owner: (a) no changes can be made
in the annuity form, (b) no additional Contributions will be
accepted under the Contract, and (c) no further
withdrawals, other than withdrawals made to provide annuity
benefits, will be allowed.
***
A portion or the entire amount of the annuity payments may be
taxable as ordinary income. If, at the
time the annuity payments begin, we have not received a proper
written election not to have federal income
taxes withheld, we must by law withhold such taxes from the taxable
portion of such annuity payments and
remit that amount to the federal government (an election not to
have taxes withheld is not permitted for
certain Qualified Contracts). State income tax withholding may
also apply. (See "Federal Tax-Matters,"
below.)
___________________________________________________________________
FEDERAL TAX MATTERS
___________________________________________________________________
Introduction
The following discussion is a general description of federal
income tax considerations relating to the
Contracts and is not intended as tax advice. Further, this
discussion is based on the assumption that the
Contract qualifies as an annuity contract for federal income tax
purposes. This discussion is not intended
to address the tax consequences resulting from all of the
situations in which a person may be entitled to or
may receive a distribution under the Contract. Any person
concerned about these tax implications should
consult a competent tax adviser before initiating any transaction.
This discussion is based upon our
understanding of the present federal income tax laws as they are
currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of
the continuation of the present federal
income tax laws or of the current interpretation by the Internal
Revenue Service. Moreover, no attempt has
been made to consider any applicable state or other tax laws.
The Contract may be purchased on a non-tax qualified basis
("Non-Qualified Contract") or purchased
and used in connection with IRAs. The ultimate effect of federal
income taxes on the amounts held under
a Contract, on annuity payments, and on the economic benefit to
you, the Annuitant, or the Beneficiary may
depend on the type of Contract, and on the tax status of the
individual concerned. In addition, certain
requirements must be satisfied in purchasing an IRA and receiving
distributions from an IRA in order to
continue receiving favorable tax treatment. Therefore, purchasers
of IRAs should seek competent legal and
tax advice regarding the suitability of the Contract for their
situation, the applicable requirements, and the
tax treatment of the rights and benefits of the Contract. The
following discussion assumes that an IRA is
purchased with proceeds from and/or Contributions that qualify for
the intended special federal income tax
treatment.
Tax Status
The Company is taxed as a life insurance company under Part I
of Subchapter L of the Code.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in
general. An Owner who is a natural person
generally is not taxed on increases (if any) in the value of an
Annuity Account Value until distribution occurs
by withdrawing all or part of the Annuity Account Value (e.g.,
withdrawals or annuity payments under the
annuity form elected). However, under certain circumstances, the
Owner may be subject to taxation
currently. In addition, an assignment, pledge, or agreement to
assign or pledge any portion of the Annuity
Account Value generally will be treated as a distribution. The
taxable portion of a distribution (in the form
of a single sum payment or an annuity) is taxable as ordinary
income. An IRA Contract may not be assigned
as collateral.
The Owner of any annuity contract who is not a natural person
(e.g. a corporation) generally must
include in income any increase in the excess of the Annuity Account
Value over the "investment in the
contract" (discussed below) during each taxable year. The rule
does not apply where the non-natural person
is the nominal owner of a Contract and the beneficial owner is a
natural person. The rule also does not apply
in the following circumstances: (1) where the annuity Contract is
acquired by the estate of a decedent, (2)
where the Contract is held under an IRA, (3) where the Contract is
a qualified funding asset for a structured
settlement, and (4) where the Contract is purchased on behalf of an
employee upon termination of a qualified
plan. A prospective Owner that is not a natural person may wish to
discuss these matters with a competent
tax adviser.
The following discussion generally applies to a Contract owned
by a natural person.
Withdrawals
In the case of a withdrawal under an IRA, including
withdrawals under the Periodic Withdrawal Option,
a ratable portion of the amount received may be non-taxable. The
amount of the non-taxable portion is
generally determined by the ratio of the "investment in the
contract" to the individual's total accrued benefit
under the retirement plan. The "investment in the contract"
generally equals the amount of any nondeductible
Contributions paid by or on behalf of any individual. Special tax
rules may be available for certain
distributions from an IRA.
With respect to Non-Qualified Contracts, partial withdrawals,
including Periodic Withdrawals, are
generally treated as taxable income to the extent that the Annuity
Account Value immediately before the
withdrawal exceeds the "investment in the contract" at that time.
If a partial withdrawal is made from a
Guarantee Period which is subject to a Market Value Adjustment,
then the Annuity Account Value immediately
before the withdrawal will not be altered to take into account the
Market Value Adjustment. As a result, for
purposes of determining the taxable portion of the partial
withdrawal, the Annuity Account Value will not
reflect the amount, if any, deducted from or added to the Guarantee
Period due to the Market Value
Adjustment. Full surrenders are treated as taxable income to the
extent that the amount received exceeds
the "investment in the contract." The taxable portion of any
annuity payment is taxed at ordinary income tax
rates.
Annuity Payments
Although the tax consequences may vary depending on the
annuity form elected under the Contract,
in general, only the portion of the annuity payment that represents
the amount by which the Annuity Account
Value exceeds the "investment in the contract" will be taxed; after
the investment in the contract is recovered,
the full amount of any additional annuity payments is taxable. For
fixed annuity payments, in general there
is no tax on the portion of each payment which represents the same
ratio that the "investment in the contract"
bears to the total expected value of the annuity payments for the
term of the payments; however, the
remainder of each annuity payment is taxable. Once the investment
in the Contract has been fully recovered,
the full amount of any additional annuity payments is taxable. If
the annuity payments cease as a result of
an Annuitant's death before full recovery of the "investment in the
contract," you should consult a competent
tax adviser regarding the deductibility of the unrecovered amount.
Penalty Tax
In the case of a distribution pursuant to a Non-Qualified
Contract, there may be imposed a federal
income tax penalty equal to 10% of the amount treated as taxable
income. In general, however, there is no
penalty tax on distributions: (1) made on or after the date on
which the recipient of payments under the
Contract attains age 59 1/2; (2) made as a result of death or
disability of the recipient of payments under the
Contract; or (3) received in substantially equal periodic payments
as a life annuity or a joint and survivor
annuity for the lives or life expectancies of the Owner and a
"designated beneficiary." Other exemptions or
tax penalties may apply to certain distributions pursuant to an
IRA. For more details regarding these
exemptions or penalties consult a competent tax adviser.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the Contract because of the
death of an Owner or the Annuitant.
Generally such amounts are includible in the income of the
recipient as follows: (1) if distributed in a lump
sum, they are taxed in the same manner as a full surrender, as
described above, or (2) if distributed under
an annuity form, they are taxed in the same manner as annuity
payments, as described above.
Distribution-at-Death Rules
In order to be treated as an annuity contract, the terms of
the Contract must provide the following
two distribution rules: (A) if any Contract Owner dies on or after
the date annuity payments commence, and
before the entire interest in the Contract has been distributed,
the remainder of his interest will not be
distributed under a slower distribution schedule than that provided
for in the method in effect on the Contract
Owner's death; and (B) if any Contract Owner dies before the date
annuity payments commence, his entire
interest must generally be distributed within five years after the
date of death provided that if such interest
is payable to a designated Beneficiary, then such interest may be
made over the life of that designated
Beneficiary or over a period not extending beyond the life
expectancy of that Beneficiary, so long as
payments commence within one year after the Contract Owner's death.
If the sole designated Beneficiary
is the spouse of the Contract Owner, the Contract may be continued
in the name of the spouse as Contract
Owner. The designated Beneficiary is the natural person designated
by the terms of the Contract or by the
Contract Owner as the individual to whom ownership of the contract
passes by reason of the Contract
Owner's death. If the Contract Owner is not an individual, then
for purposes of the distribution at death rules,
the Primary Annuitant is considered the Contract Owner. In
addition, when the Contract Owner is not an
individual, a change in the Primary Annuitant is treated as the
death of the Contract Owner.
Transfers, Assignments, or Exchanges
A Transfer of ownership of a Contract, the designation of an
Annuitant, Payee or other Beneficiary
who is not also the Owner, or the exchange of a Contract may result
in adverse tax consequences to the
Owner that are not discussed herein. An Owner contemplating any
such designation, transfer, assignment,
or exchange of a Contract should contact a competent tax adviser
with respect to the potential tax effects
of such a transaction.
Multiple Contracts
All deferred, non-qualified annuity contracts that are issued
by the Company (or our affiliates) to the
same Owner during any calendar year will be treated as one annuity
contract for purposes of determining
the amount includible in gross income under section 72(e) of the
Code. Amounts received under any such
Contract may be taxable (and may be subject to the 10% Penalty Tax)
to the extent of the combined income
in all such Contracts. In addition, the Treasury Department has
specific authority to issue regulations that
prevent the avoidance of section 72(e) through the serial purchase
of annuity contracts or otherwise.
Congress has also indicated that the Treasury Department may have
authority to treat the combination
purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity
contract under its general authority to prescribe rules as may be
necessary to enforce the income tax laws.
Withholding
Annuity distributions generally are subject to withholding for
the recipient's federal income tax liability
at rates that vary according to the type of distribution and the
recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax
withheld from distributions. Certain
distributions from IRAs are subject to mandatory federal income tax
withholding.
Possible Changes in Taxation
In past years, legislation has been proposed that would have
adversely modified the federal taxation
of certain annuities. For example, one such proposal would have
changed the tax treatment of non-qualified
annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity.
There is always the possibility that the tax treatment of annuities
could change by legislation or other means
(such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date
of the change).
Section 1035 Exchanges
Code Section 1035 provides that no gain or loss shall be
recognized on the exchange of one annuity
contract for another. A replacement contract obtained in a
tax-free exchange of contracts succeeds to the
status of the original contract. Special rules apply to Contracts
issued prior to August 14, 1982. Prospective
Owners wishing to take advantage of a Section 1035 exchange should
consult their tax adviser.
Individual Retirement Annuities
The Contract may be used with IRAs as described in Section 408
of the Code. Section 408 of the
Code permits eligible individuals to contribute to an individual
retirement program known as an Individual
Retirement Annuity. Also, certain kinds of distributions from
certain types of qualified and non-qualified
retirement plans may be "rolled over" following the rules set out
in the Code to maintain favorable tax
treatment, to an Individual Retirement Annuity. The sale of a
Contract for use with an IRA may be subject
to special disclosure requirements of the Internal Revenue Service.
Purchasers of the Contract for use with
IRA's will be provided with supplemental information required by
the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke
their purchase within seven days of
purchase of the IRA Contract.
Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions
in excess of $150,000 annually, distributions that do not satisfy
specified requirements, and certain other
transactions. The Contract will be amended as necessary to conform
to the requirements of the Code.
Purchasers should seek competent advice as to the suitability of
the Contract for use with IRA's.
If a Contract is issued in connection with an employer's
Simplified Employee Pension ("SEP") plan,
Owners, Annuitants and Beneficiaries are cautioned that the rights
of any person to any of the benefits under
the Contract may be subject to the terms and conditions of the plan
itself, regardless of the terms and
conditions of the Contract.
If a Contract is purchased to fund an IRA the Annuitant must
also be the Owner. In addition, if a
Contract is purchased to fund an IRA, minimum distributions must
commence not later than April 1st of the
calendar year following the calendar year in which you attain age
70 1/2. You should consult your tax adviser
concerning these matters.
The Contract and prototype IRA endorsement have been submitted
for IRS approval and
determination that they are acceptable under Section 408 of the
Code, so that each individual who purchases
a Contract with an IRA endorsement will be considered to have
adopted a retirement savings program that
satisfies the requirements of Section 408 of the Code. The IRS
approval is a determination only as to the
form of the Contract and does not represent a determination of the
merits of the Contract.
At the time the Initial Contribution is paid, a prospective
purchaser must specify whether he or she
is purchasing a Non-Qualified Contract or an IRA. If the initial
Contribution is derived from an exchange or
surrender of another annuity contract, we may require that the
prospective purchaser provide information with
regard to the federal income tax status of the previous annuity
contract. We will require that persons
purchase separate Contracts if they desire to invest monies
qualifying for different annuity tax treatment
under the Code. Each such separate Contract would require the
minimum initial Contribution stated above.
Additional Contributions under a Contract must qualify for the same
federal income tax treatment as the initial
Contribution under the Contract; we will not accept an additional
Contribution under a Contract if the federal
income tax treatment of such Contribution would be different from
that of the initial Contribution.
Seek Tax Advice
The foregoing discussion of the federal income tax
consequences is only a brief summary and is not
intended as tax advice. Further, the federal income tax
consequences discussed herein reflect our
understanding of current law and the law may change. Federal
estate tax consequences and state and local
estate, inheritance, and other tax consequences of ownership or
receipt of distributions under a Contract
depend on the individual circumstances of each Owner or recipient
of the distribution. A COMPETENT TAX
ADVISER SHOULD BE CONSULTED FOR FURTHER INFORMATION.
<PAGE>
___________________________________________________________________
ASSIGNMENTS OR PLEDGES
___________________________________________________________________
Generally, rights in the Contract may be assigned or pledged
for loans at any time during the life of
the Annuitant; however, if the Contract is an IRA, the Owner may
not assign the Contract as collateral.
If a non-IRA Contract is assigned, the interest of the
assignee has priority over the interest of the
Owner and the interest of the Beneficiary. Any amount payable to
the assignee will be paid in a single sum.
A copy of any assignment must be submitted to the Company at
the Schwab Annuity Service Center.
Any assignment is subject to any action taken or payment made by
the Company before the assignment was
processed. The Company is not responsible for the validity or
sufficiency of any assignment.
If any portion of the Annuity Account Value is assigned or
pledged for a loan, it may be treated as
a distribution. A competent tax adviser should be consulted for
further information.
___________________________________________________________________
PERFORMANCE DATA
___________________________________________________________________
From time to time, we may advertise yields and average annual
total returns for the Investment
Divisions. In addition, we may advertise the effective yield of
the Schwab Money Market Investment Division.
These figures will be based on historical information and are not
intended to indicate future
performance.
The yield of the Schwab Money Market Investment Division
refers to the annualized income generated
by an investment in that Investment Division over a specified
seven-day period. The yield is calculated by
assuming that the income generated for that seven-day period is
generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly
but, when annualized, the income earned by an investment in that
Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this
assumed reinvestment.
The yield of an Investment Division (other than the Schwab
Money Market Investment Division) refers
to the annualized income generated by an investment in that
Investment Division over a specified thirty-day
period. The yield is calculated by assuming that the income
generated by the investment during that thirty-
day period is generated each thirty-day period over a twelve-month
period and is shown as a percentage
of the investment.
The yield calculations do not reflect the effect of any
Premium Tax that may be applicable to a
particular Contract. To the extent that premium taxes are
applicable to a particular Contract, the yield of that
Contract will be reduced. For a description of the methods used to
determine yield and total returns, see
the Statement of Additional Information.
Below is a table of performance related information for the Money
Market Investment Division for the stated
periods ended December 31, 1996:
Investment Division<PAGE>
Effective Yield Money Market 4.10%
The average annual total return of an Investment Division
refers to return quotations assuming an
investment has been held in the Investment Division for various
periods of time including, but not limited to,
a period measured from the date the Investment Division commenced
operations. When an Investment
Division has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these
periods will be provided. The average annual total return
quotations will represent the average annual
compounded rates of return that would equate an initial investment
of $1,000 to the redemption value of that
investment (excluding Premium Tax) as of the last day of each of
the periods for which total return quotations
are provided. For additional information regarding yields and
total returns calculated using the standard
formats briefly described herein, please refer to the Statement of
Additional Information.
Investment Division
One Year
Three Year
Five Year
Since Inception
Inception Date of Underlying Fund
Alger American
Growth Portfolio
12.39%
15.18%
15.60%
17.58%
1/9/89
Alger American Small
Capitalization Portfolio
3.30%
11.89%
10.04%
17.70%
9/21/88
American Century VP Capital
Appreciation
- -5.11%
6.49%
5.23%
9.78%
11/20/87
American Century VP International
13.35%
N/A
N/A
12.17%
5/1/94
Berger IPT-Small Company
Growth Fund
N/A
N/A
N/A
- -0.89%
4/15/96
Federated American Leaders
Fund II
20.55%
N/A
N/A
17.01%
2/10/94
Federated Fund for U.S.
Government Securities
3.32%
N/A
N/A
4.71%
3/28/94
Federated Utility Fund II
11.56%
N/A
N/A
10.63%
2/10/94
INVESCO VIF-High
Yield Portfolio
15.60%
N/A
N/A
12.61%
5/1/94
INVESCO VIF-Industrial
Income Portfolio
21.25%
N/A
N/A
20.41%
8/1/94
INVESCO VIF-Total
Return Portfolio
11.23%
N/A
N/A
12.98%
6/1/94
Janus Aspen Aggressive
Growth Portfolio
7.04%
15.97%
N/A
20.27%
9/13/93
Janus Aspen
Growth Portfolio
17.45%
15.57%
N/A
15.21%
9/13/93
Janus Aspen Worldwide
Growth Portfolio
27.95%
17.59%
N/A
22.13%
9/13/93
Lexington Emerging Markets Fund
6.55%
N/A
N/A
0.56%
3/30/94
Montgomery Variable Series:
Growth Fund
N/A
N/A
N/A
26.14%
2/9/96
Montgomery Variable Series:
International Small-Cap Fund
N/A
N/A
N/A
N/A
11/27/96
SAFECO RST Equity Portfolio
Schwab Asset Director-High
Growth Portfolio
N/A
N/A
N/A
N/A
11/1/96
Schwab S&P 500 Portfolio
N/A
N/A
N/A
N/A
11/1/96
SteinRoe Capital Appreciation
Fund
25.87%
11.84%
16.37%
16.50%
1/1/89
Strong Discovery Fund II
- -0.04%
7.92%
N/A
11.30%
5/8/92
Van Eck Worldwide Hard Assets
Fund
17.04%
6.72%
13.54%
7.25%
9/1/89
Performance information for any Investment Division reflects
only the performance of a hypothetical
Contract under which Annuity Account Value is allocated to an
Investment Division during a particular time
period on which the calculations are based. Performance
information should be considered in light of the
investment objectives and policies and characteristics of the
Eligible Funds in which the Investment Division
invests, and the market conditions during the given time period,
and should not be considered as a
representation of what may be achieved in the future.
Reports and promotional literature may also contain other
information including (1) the ranking of any
Investment Division derived from rankings of variable annuity
separate accounts or their investment products
tracked by Lipper Analytical Services, Inc., VARDS, Morningstar,
Value Line, IBC/Donoghue's Money Fund
Report, Financial Planning Magazine, Money Magazine, Bank Rate
Monitor, Standard & Poor's Indices, Dow
Jones Industrial Average, and other rating services, companies,
publications, or other persons who rank
separate accounts or other investment products on overall
performance or other criteria, and (2) the effect
of tax-deferred compounding on investment returns, or returns in
general, which may be illustrated by graphs,
charts, or otherwise, and which may include a comparison, at
various points in time, of the return from an
investment in a Contract (or returns in general) on a tax-deferred
basis (assuming one or more tax rates) with
the return on a currently taxable basis. Other ranking services
and indices may be used.
We may from time to time also disclose cumulative
(non-annualized) total returns for the Investment
Divisions. We may from time to time also disclose yield and
standard total returns for any or all Investment
Divisions.
We may also advertise performance figures for the Investment
Divisions based on the performance
of an Eligible Fund prior to the time the Series Account commenced
operations.
For additional information regarding the calculation of other
performance data, please refer to the
Statement of Additional Information.
___________________________________________________________________
DISTRIBUTION OF THE CONTRACTS
___________________________________________________________________
Charles Schwab & Co., Inc. ("Schwab") is the principal
underwriter and distributor of the Contracts.
Schwab is registered with the Securities and Exchange Commission as
a broker/dealer and is a member of
the National Association of Securities Dealers, Inc. ("NASD"). Its
principal offices are located at 101
Montgomery, San Francisco, California 94104, telephone
800-838-0650.
Certain administrative services are provided by Schwab to
assist the Company in the processing of
the Contracts, which services are described in written agreements
between Schwab and the Company. The
Company has agreed to indemnify Schwab (and its agents, employees,
and controlling persons) for certain
damages arising out of the sale of the Contracts, including those
arising under the securities laws.
___________________________________________________________________
SELECTED FINANCIAL DATA
___________________________________________________________________
First GWL&A was incorporated on April 9, 1996 and had no
operations until receipt of its certificate
of authority from the Superintendent of Insurance of New York on
, 1997. Please see the financial
statements of First Great-West Life & Annuity Insurance Company
included elsewhere in this Prospectus for
information related to its financial condition.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company
The Company commenced operations as a New York domiciled life
insurer as of , 1997.
Accordingly, as of the date of this Prospectus, the Company has not
had a significant operating history. The
Company will operate in one business segment as a provider of life,
health and annuity products to groups
of individuals associated with employers or distributors; however,
the business operations of First GWL&A
will be segregated into two major business units: the Employee
Benefits division, which distributes life,
health, disability income insurance and 401(k) products to employee
groups, primarily to small-to-mid-sized
corporations; and the Financial Services Division, which
distributes accumulation and payout annuity
products for both group and individual clients, primarily in the
public\non-profit sectors, as well as insurance
products for individual clients.
Liquidity and Capital Resources
The principal short- and long-term liquidity needs of the
Company will be closely managed to satisfy
policyholder benefits. The liquidity needs of the Company will be
closely managed through cash flow
matching of assets and liabilities, and the forecasting of earned
and required yields to ensure consistency
between policyholder requirements and the yield of assets.
Regulation and Reserves
The Company is subject to regulation and supervision by the
insurance departments of the state in
which it is licensed. This regulation covers a variety of areas,
including policy reserve requirements,
adequacy of company capital and surplus, operational standards, and
financial accounting policies and
procedures.
Pursuant to state insurance laws and regulations, the Company
is obligated to hold policy reserves
to meet its obligations under all outstanding insurance contracts.
These reserves are based on a number
of assumptions as to future experience. Neither the reserve
requirements nor the other aspects of state
insurance regulation provide absolute protection to holders of
insurance contracts if the Company were to
experience unexpected losses (e.g., infectious diseases or
catastrophic investment losses).
Competition
The Company is engaged in a business that is highly
competitive due to the large number of
insurance companies and other entities competing in marketing,
administering, and selling insurance
products. There are approximately 2,300 insurers in the life
insurance business in the United States.
Segment Information
The Company operates in one business segment as a provider of
life, health and annuity products
to groups of individuals associated with employers or distributors.
Employees and Facilities
The Company has an administrative services agreement with
Great-West Life & Annuity Insurance
Company, to provide administrative support for all aspects of the
Company's business. Great-West Life &
Annuity has approximately 4,300 employees in its U.S. operations.
The Company's executive offices are
located at 125 Wolf Road, Albany, New York 12205.
State Regulation
As a life insurance company organized and operated under New
York law, First GWL&A is subject
to provisions governing such companies and regulation by the New
York Superintendent of Insurance.
First GWL&A's books and accounts are subject to review and
examination by the New York Division
of Insurance at any time, and a full examination of its operations
is conducted triennially.
In addition, First GWL&A is subject to comprehensive and
detailed regulation and supervision by the
supervisory agencies in each jurisdiction in which it conducts
business. Each state's supervisory agency
has broad administrative authority which includes, but is not
limited to, the power to regulate licenses to
transact business, trade practices, agent licensing, policy forms,
claims practices, underwriting practices,
reserve requirements, fixing maximum interest rates on life
insurance policy loans and minimum rates for
accumulation of surrender values, the form and content of required
financial statements and the type and
amounts of investments permitted. First GWL&A is required to file
detailed annual reports with supervisory
agencies in each of the jurisdictions in which it does business and
its accounts are subject to examination
by such agencies at regular intervals. Under insurance guaranty
fund laws in most states, insurers can be
assessed up to prescribed limits for insurance contract losses
incurred by insolvent companies.
In addition, most jurisdictions, including New York, regulate
affiliated groups of insurers such as First
GWL&A and its affiliates under insurance holding company
legislation. Under such laws, intercorporate
transfers of assets and dividend payments from insurance
subsidiaries may be subject to prior notice or
approval, depending on the size of such transfers and payments in
relation to the financial position of the
company making the transfer. Changes in control also are regulated
under these laws.
Although the federal government generally does not directly
regulate the business of insurance,
federal initiatives often have an impact on the business in a
variety of ways. Current and proposed federal
measures which may significantly affect First GWL&A's insurance
business include employee benefits
regulation, controls on medical care costs, insurance reform,
managed care regulation, medical entitlement
programs (e.g., Medicare), removal of barriers preventing banks
from engaging in the insurance and mutual
fund businesses, the taxation of insurance companies and the tax
treatment of insurance products.
The Securities and Exchange Commission regulates certain
separate accounts of First GWL&A and
the mutual funds used as funding vehicles for those accounts.
Directors and Officers
Set forth below is information concerning the Company's
directors and executive officers, together
with their principal occupation for the past five years. Unless
otherwise indicated, all of the directors and
executive officers have been engaged for not less than five years
in their present principal occupation or in
another executive capacity with the companies or firms identified.
Directors Principal Occupation Last 5 Years
Marcia D. Alazraki Partner, Simpson Thacher & Bartlett
James Balog Director of Great-West since March 1993;
previously Chairman,
Lambert Brussels Capital Corporation
James W. Burns, O.C. Chairman of the Boards of Lifeco1 and GWL;
Deputy Chairman,
PCC2
Paul Desmarais, Jr. Chairman and Co-Chief Executive Officer,
PCC; Chairman, PFC3
Robert Gratton Chairman of the Board of Great-West;
President and Chief Executive
Officer, PFC
N. Berne Hart Director of Great-West since February
1992; previously Chairman,
United Banks of Colorado, Inc.
Stuart Z. Katz Partner, Fried, Frank, Harris, Shriver &
Jacobson
William T. McCallum President and Chief Executive Officer,
Great-West; President and
Chief Executive Officer (U.S. Operations),
GWL
Brian E. Walsh Partner, Trinity L.P. since January 1996;
previously Managing
Director and Co-head, Global Investment
Bank, Bankers Trust
Company
1 Great-West Lifeco Inc.
2 Power Corporation of Canada
3 Power Financial Corporation
Executive Officers Principal Occupation Last 5 Years
William T. McCallum President and Chief Executive Officer of
the Company and Great-
West; President and Chief Executive
Officer (U.S. Operations), GWL
Dennis Low Executive Vice President, Financial
Services of the Company, Great-
West and GWL
James D. Motz Executive Vice President, Employee
Benefits of the Company, Great-
West and GWL
Robert D. Bond Senior Vice President, Financial Services
of the Company, Great-
West and GWL; prior to May 1992, National
Director, Public
Marketing, Aetna Life Insurance Company
John T. Hughes Senior Vice President, Chief Investment
Officer of the Company,
Great-West and GWL
D. Craig Lennox Senior Vice President, General Counsel and
Secretary of the
Company and Great-West; Senior Vice
President and Chief U.S.
Legal Officer, GWL
Martin L. Rosenbaum Senior Vice President, Employee Benefits
Operations of the
Company, Great-West and GWL
Douglas L. Wooden Senior Vice President, Financial Services
of the Company, Great-
West and GWL
Executive Compensation
Executive officers of the Company may also serve one or more
affiliated companies of First GWL&A.
Allocations have been made as to each individual's time devoted to
his duties as an executive officer of the
Company. The following table shows the cash compensation paid,
based on these allocations, to the Chief
Executive Officer and the other four most highly compensated
executive officers (collectively, the "Named
Executive Officers") whose allocated compensation exceeded $60,000,
for services rendered in all capacities
to the Company in 1996.
Compensation Table
Name and
Principal Position
Year
Annual
Compensation(1) / Salary ($) Bonus ($)
Long-Term
Compensation Awards / Securities Under Options Granted (2)
W.T. McCallum,
President and
Chief Executive
Officer
1996
0 0
None
D. Low, Executive
Vice President,
Financial Services
1996
0 0
None
J.T. Hughes, Senior
Vice President, Chief
Investment Officer
1996
0 0
None
D.L. Wooden, Senior
Vice President,
Financial Services
1996
0 0
None
J.D. Motz,
Executive Vice
President, Employee
Benefits
1996
0 0
None
(1) The aggregate of perquisites and other personal benefits,
securities or property provided to each Named
Executive Officer in 1996 did not exceed the lesser of $50,000 and
10% of the total of the individual's annual
salary and bonus.
(2) Options are for common shares of Lifeco ("Lifeco Options").
Lifeco options are granted by Great-West
Lifeco pursuant to the Great-West Lifeco Inc. Stock Option Plan
which was approved by Great-West Lifeco
shareholders on April 24, 1996. Lifeco options become exercisable
20% per year commencing on the first
anniversary date of the grant and expire 10 years after the date of
the grant.
Pension Plan Table
The following table sets out the pension benefits payable to
the Named Executive Officers by Great-
West Life or the Company, as of December 31, 1996.
Employees' Pension Plan
Remuneration ($)
Years of Service
15 20 25 30 35
400,000
120,000 160,000 200,000 240,000 240,000
500,000
150,000 200,000 250,000 300,000 300,000
600,000
180,000 240,000 300,000 360,000 360,000
700,000
210,000 280,000 350,000 420,000 420,000
800,000
240,000 320,000 400,000 480,000 480,000
900,000
270,000 360,000 450,000 540,000 540,000
1,000,000
300,000 400,000 500,000 600,000 600,000
The Named Executive Officers have the following years of service:
Name Years of Service
W.T. McCallum 30
D. Low 31
J.T. Hughes 6
D.L. Wooden 5
J.D. Motz 27
For W.T. McCallum, the benefits shown are payable commencing
December 31, 2000, and remuneration is
the average of the highest 36 consecutive months of compensation
during the last 86 months of employment.
For D. Low, J.T. Hughes, D.L. Wooden and J.D. Motz, the benefits
shown are payable upon the attainment
of age 62, and remuneration is the average of the highest 60
consecutive months of compensation during
the last 86 months of employment. Compensation includes salary and
bonuses prior to any deferrals. The
normal form of pension is a life only annuity. Other optional
forms of pension payment are available on an
actuarially equivalent basis. The benefits listed in the table are
subject to deduction for social security and
other retirement benefits.
<PAGE>
Ownership of Securities
All of the Company's outstanding shares are owned by
Great-West Life & Annuity Insurance
Company, 8515 East Orchard Road, Englewood, CO 80111. GWL&A is in
turn owned 100% by the Great-
West Life Assurance Company, 100 Osborne Street North, Winnipeg,
Manitoba, Canada R3C 3A5. The
Great-West Life Assurance Company is owned 99.5% by Great-West
Lifeco Inc., both of which share the
same address. Great-West Lifeco Inc. is owned 86.5% by Power
Financial Corporation, 751 Victoria Square,
Montreal, Quebec, Canada H2Y 2J3. It is owned 68.3% by 171263
Canada Inc., which is owned 100% by
Power Corporation of Canada, both of which share the same address
as Power Financial Corporation. Mr.
Paul Desmarais, 751 Victoria Square, Montreal, Quebec, Canada H2Y
2J3, through a group of private holding
companies, which he controls, has voting control of Power
Corporation of Canada.
___________________________________________________________________
VOTING RIGHTS
___________________________________________________________________
To the extent required by applicable law, all Eligible Fund
shares held in the Series Account will be
voted by the Company at regular and special shareholder meetings of
the respective Eligible Funds in
accordance with instructions received from persons having voting
interests in the corresponding Investment
Division. If, however, the 1940 Act or any regulation thereunder
should be amended, or if the present
interpretation thereof should change, or if we determine that we
are allowed to vote all Eligible Funds shares
in our own rights, we may elect to do so.
Before the annuity commencement date, you the Owner, have the
voting interest. The number of
votes which are available to you will be calculated separately for
each of your Variable Sub-Accounts. That
number will be determined by applying your percentage interest, if
any, in a particular Investment Division
to the total number of votes attributable to that Investment
Division. You hold a voting interest in each
Investment Division to which your Annuity Account Value is
allocated. If you select a variable annuity option,
the votes attributable to a Contract will decrease as annuity
payments are made.
The number of votes of an Eligible Fund will be determined as
of the date coincident with the date
established by that Eligible Fund for determining shareholders
eligible to vote at the meeting of the Eligible
Funds. Voting instructions will be solicited by written
communication prior to such meeting in accordance
with procedures established by the respective Eligible Funds.
Shares as to which no timely instructions are received and
shares held by us as to which Owners
have no beneficial interest will be voted in proportion to the
voting instructions which are received with
respect to all Contracts participating in the Investment Division.
Voting instructions to abstain on any item
to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person or entity having a voting interest in a Investment
Division will receive proxy material,
reports and other material relating to the appropriate Eligible
Fund.
It should be noted that generally the Eligible Funds are not
required to, and do not intend to, hold
annual or other regular meetings of shareholders.
Contract Owners have no voting rights in the Company.
<PAGE>
___________________________________________________________________
RIGHTS RESERVED BY THE COMPANY
___________________________________________________________________
The Company reserves the right to make certain changes if, in
its judgment, they would best serve
the interests of Owners and Annuitants or would be appropriate in
carrying out the purposes of the
Contracts. Any changes will be made only to the extent and in the
manner permitted by applicable laws.
Also, when required by law, the Company will obtain your approval
of the changes and approval from any
appropriate regulatory authority. Such approval may not be
required in all cases, however. Examples of the
changes the Company may make include:
- To operate the Series Account in any form permitted under
the Investment Company Act of 1940
or in any other form permitted by law.
- To transfer any assets in any Investment Division to
another Investment Division, or to one or more
separate accounts, or to a Guarantee Period; or to add,
combine or remove Investment Divisions of
the Series Account.
- To substitute, for the Eligible Fund shares in any
Investment Division, the shares of another Eligible
Fund or shares of another investment company or any other
investment permitted by law.
- To make any changes required by the Internal Revenue Code
or by any other applicable law in
order to continue treatment of the Contract as an annuity.
- To change the time or time of day at which a Valuation Date
is deemed to have ended.
- To make any other necessary technical changes in the
Contract in order to conform with any
action the above provisions permit the Company to take,
including to change the way the Company
assess charges, but without increasing as to any then
outstanding Contract the aggregate amount
of the types of charges which the Company has guaranteed.
___________________________________________________________________
LEGAL PROCEEDINGS
___________________________________________________________________
There are at present no material legal proceedings to which
the Series Account is a party or to which
the assets of the Series Account are subject. The Company is not
currently a party to, and its property is
not currently subject to, any material legal proceedings. The
lawsuits to which the Company is a party are,
in the opinion of management, in the ordinary course of business,
and are not expected to have a material
adverse effect on the financial results, conditions or prospects of
the Company.
___________________________________________________________________
LEGAL MATTERS
___________________________________________________________________
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue
and sale of the Contract has been provided by Jorden Burt Berenson
& Johnson LLP. The organization of
the Company, the Company's authority to issue the Contract, and the
validity of the form of the Contract have
been passed upon by W. Kay Adam, Vice President, Counsel and
Associate Secretary of the Company.
___________________________________________________________________
EXPERTS
___________________________________________________________________
The balance sheet of First Great-West Life & Annuity Insurance
Company as of April 4, 1997 included
in this prospectus has been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report
appearing herein, and is included in reliance upon the report of
such firm given upon their authority as
experts in accounting and auditing.
___________________________________________________________________
AVAILABLE INFORMATION
___________________________________________________________________
We have filed a registration statement ("Registration
Statement") with the Commission under the 1933
Act relating to the Contracts offered by this Prospectus. This
Prospectus has been filed as a part of the
Registration Statement and does not contain all of the information
set forth in the Registration Statement and
exhibits thereto. Reference is hereby made to the Registration
Statement and exhibits for further information
relating to us and the Contracts. Statements contained in this
Prospectus, as to the content of the Contracts
and other legal instruments, are summaries. For a complete
statement of the terms thereof, reference is
made to the instruments as filed as exhibits to the Registration
Statement. The Registration Statement and
its exhibits may be inspected and copied at the offices of the
Commission located at 450 Fifth Street, N.W.,
Washington, D.C.
The Statement of Additional Information contains more specific
information relating to the Series
Account and First GWL&A. The Table of Contents of the Statement of
Additional Information is set forth
below:
1. General Information
2. First Great-West Life & Annuity Insurance Company and the
Variable Annuity-1 Series
Account
3. Calculation of Annuity Payments
4. Postponement of Payments
5. Services
6. Withholding
7. Calculation of Performance Data
<PAGE>
Appendix A
On the following pages are four examples of Market Value
Adjustments illustrating (1) increasing interest
rates, (2) decreasing interest rates, (3) flat interest rates (i
and j are within .10% of each other), and (4) less
than 6 months to maturity.
Example #1 - Increasing Interest Rates
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period:10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 7.00%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j)]N/12} - 1
= {[1.0615/1.07]65/12} - 1
= .957718 - 1
= -.042282
MVA = (amount Transferred or surrendered) x MVAF
= $10,000 x - .042282
= - $422.82
Surrender Value = (amount Transferred or surrendered +
MVA)x(1-CDSC)
= ($10,000 + - $422.82)x(1-0)
= $9,577.18
Example #2 - Decreasing Interest Rates
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period:10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 5.00%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j)]N/12} - 1
= {[1.0615/1.05]65/12} - 1
= .060778
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x .060778
= $607.78
Surrender Value = (amount Transferred or surrendered +
MVA)x(1-CDSC)
= ($10,000 + $607.78)x(1-0)
= $10,607.78
Example #3 - Flat Interest Rates
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period:10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 6.24%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j)]N/12} - 1
= {[1.0615/1.0624]65/12} - 1
= .995420 - 1
= -.004580
MVA = (amount Transferred or surrendered) x MVAF
= $10,000 x -.004589
= $45.80
Surrender Value = (amount Transferred or surrendered +
MVA)x(1-CDSC)
= ($10,000 + $45.80)x(1-0)
= $9,954.20
Example #4 - N<6 (less than 6 months to maturity)
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period:10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2005
j: 7.00%
Amount Surrendered: $10,000
N: 5
MVAF = {[(1 + i)/(1 + j)]N/12} - 1
= {[1.0615/1.071]5/12} - 1
= .99629 - 1
= -.00371
However, N<6, so MVAF = 0
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x 0
= $0
Surrender Value = (amount Transferred or surrendered +
MVA)x(1-CDSC)
= ($10,000 + $0)x(1-0)
= $10,000
<PAGE>
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(A wholly-owned subsidiary of
Great-West Life & Annuity Insurance Company)
Balance Sheet as of April 4, 1997 and
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
of First Great-West Life & Annuity Insurance Company:
We have audited the accompanying balance sheet of First Great-West
Life & Annuity Insurance Company (a wholly-owned subsidiary of
Great-West Life & Annuity Insurance Company) as of April 4, 1997.
This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of First Great-West Life & Annuity
Insurance Company as of April 4, 1997 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Denver, Colorado
April 14, 1997
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
BALANCE SHEET
APRIL 4, 1997
ASSETS
Cash
$6,000,000
TOTAL ASSETS
$6,000,000
STOCKHOLDER'S EQUITY
Common stock, $1,000 par value, 2,000 shares authorized,
$2,000,000
issued and outstanding
Additional paid-in capital
$4,000,000
TOTAL STOCKHOLDER'S EQUITY
$6,000,000
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
APRIL 4, 1997
1. ORGANIZATION
Organization - First Great-West Life & Annuity Insurance
Company (the Company) is a wholly-owned subsidiary of Great-West
Life & Annuity Insurance Company (The Parent Corporation). The
Company was incorporated as a stock life insurance company on April
9, 1996 in the State of New York and was capitalized on April 4,
1997 through a $6,000,000 cash investment from its Parent for 2,000
shares of common stock. The Company is currently seeking licensure
as an insurance company in the State of New York.
Basis of Presentation - The preparation of financial
statements in conformity with generally accepted accounting
principles which requires management to make estimates and
assumptions that affected the reported amounts of assets and
liabilities at the date of the financial statements. Actual
results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING PRINCIPLES
Cash - cash includes only amounts in demand deposit accounts.
<PAGE>
VARIABLE ANNUITY-1 SERIES ACCOUNT
Contracts Under
Flexible Premium Deferred
Combination Variable and Fixed Annuity Contracts
issued by
First Great-West Life & Annuity Insurance Company
126 Wolf Road
Albany, New York 12205
Telephone: (800) 537-2033
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus
and should be read
in conjunction with the Prospectus, dated , 1997
which is available without
charge by contacting the Schwab Annuity Service Center, P.O. Box
7785, San Francisco,
California 94120-9420 or at 1-800-838-0650.
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . .B-3
FIRST GREAT-WEST LIFE & ANNUITY
AND THE VARIABLE ANNUITY-1 SERIES ACCOUNT. . . . . . . . . .B-3
CALCULATION OF ANNUITY PAYMENTS. . . . . . . . . . . . . . . .B-3
POSTPONEMENT OF PAYMENTS . . . . . . . . . . . . . . . . . . .B-4
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
- Safekeeping of Series Account Assets. . . . . . . . . .B-4
- Experts . . . . . . . . . . . . . . . . . . . . . . . .B-4
- Principal Underwriter . . . . . . . . . . . . . . . . .B-5
- Administrative Services Agreement . . . . . . . . . . .B-5
WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . . . . .B-5
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . .B-5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . .B-7
<PAGE>
GENERAL INFORMATION
In order to supplement the description in the Prospectus, the
following provides additional information
about the Contracts and other matters which may be of interest to
you. Terms used in this Statement of
Additional Information have the same meanings as are defined in the
Prospectus under the heading
"Definitions."
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE VARIABLE ANNUITY-1 SERIES ACCOUNT
First Great-West Life & Annuity Insurance Company (the "Company"),
the issuer of the Contract, is a New
York corporation qualified to sell life insurance and annuity
contracts in New York and Iowa. It was
qualified to do business on , 1997 and, therefore,
has no prior history. The Company is a
wholly-owned subsidiary of Great-West Life & Annuity Insurance
Company, a Colorado stock life insurance
company, which is a wholly owned subsidiary of The Great-West Life
Assurance Company, a stock life
insurance company incorporate under the laws of Canada. The
Great-West Life Assurance Company is
in turn 86.4% by Great-West Lifeco Inc., a holding company.
Great-West Lifeco Inc. is owned 68.4% by
Power Financial Corporation of Canada, a financial services
company. Power Corporation of Canada, a
holding and management company, has voting control of Power
Financial Corporation of Canada. Mr.
Paul Desmarais, through a group of private holding companies, which
he controls, has voting control of
Power Corporation of Canada.
The assets allocated to the Series Account are the exclusive
property of the Company.
Registration of the Series Account under the Investment Company Act
of 1940 does not involve
supervision of the management or investment practices or policies
of the Series Account or of the
Company by the Securities and Exchange Commission. The Company may
accumulate in the Series
Account proceeds from charges under the Contracts and other amounts
in excess of the Series Account
assets representing reserves and liabilities under the Contract and
other variable annuity contracts issued
by the Company. The Company may from time to time transfer to its
general account any of such excess
amounts. Under certain remote circumstances, the assets of one
Investment Division may not be
insulated from liability associated with another Investment
Division
CALCULATION OF ANNUITY PAYMENTS
A. Fixed Annuity Options
The amount of each annuity payment under a fixed annuity
option is fixed and guaranteed
by the Company. On the Payment Commencement Date, the Annuity
Account Value held in the Fixed
Sub-Account(s), with a Market Value Adjustment, if applicable, less
Premium Tax, if any, is computed and
that portion of the Annuity Account Value which will be applied to
the fixed annuity option selected is
determined. The amount of the first monthly payment under the
fixed annuity option selected will be at
least as large as would result from using the annuity tables
contained in the Contract to apply to the
annuity option selected. The dollar amounts of any fixed annuity
payments will not vary during the entire
period of annuity payments and are determined according to the
provisions of the annuity option selected.
<PAGE>
B. Variable Annuity Options
To the extent a variable annuity option has been
selected, the Company converts the
Accumulation Units for each of the Owner's Variable Sub-Accounts
into Annuity Units for each Variable
Sub-Account at their values determined as of the end of the
Valuation Period which contains the Payment
Commencement Date. The number of Annuity Units paid for each
Variable Sub-Account is determined
by dividing the amount of the first monthly payment by the
sub-account's Annuity Unit Value on the fifth
Valuation Date preceding the date the first payment is due. The
number of Annuity Units used to
calculate each payment for a Variable Sub-Account remains fixed
during the annuity payment period.
The first payment under a variable annuity payment option
will be based on the value of
each Variable Sub-Account on the fifth Valuation Date preceding the
Payment Commencement Date. It
will be determined by applying the appropriate rate to the amount
applied under the Payment Option.
Payments after the first will vary depending upon the investment
experience of the Variable Sub-Accounts.
The subsequent amount paid from each sub-account is determined by
multiplying (a) by (b) where (a)
is the number of sub-account Annuity Units to be paid and (b) is
the sub-account Annuity Unit value on
the fifth Valuation Date preceding the date the annuity payment is
due. The total amount of each Variable
Annuity Payment will be the sum of the Variable Annuity Payments
for each Variable Sub-Account.
POSTPONEMENT OF PAYMENTS
With respect to amounts allocated to the Series Account,
payment of any amount due
upon a total or partial surrender, death or under an annuity option
will ordinarily be made within seven
days after all documents required for such payment are received by
the Schwab Annuity Service Center.
However, the determination, application or payment of any death
benefit, Transfer, full surrender, partial
withdrawal or annuity payment may be deferred to the extent
dependent on Accumulation or Annuity Unit
Values, for any period during which the New York Stock Exchange is
closed (other than customary
weekend and holiday closings) or trading on the New York Stock
Exchange is restricted as determined
by the Securities and Exchange Commission, for any period during
which any emergency exists as a
result of which it is not reasonably practicable for the Company to
determine the investment experience,
of such Accumulation or Annuity Units or for such other periods as
the Securities and Exchange
Commission may by order permit for the protection of investors.
SERVICES
A. Safekeeping of Series Account Assets
The assets of Variable Annuity-1 Series Account (the
"Series Account") are held by First
Great-West Life & Annuity Insurance Company ("First GWL&A"). The
assets of the Series Account are kept
physically segregated and held separate and apart from the general
account of First GWL&A. First
GWL&A maintains records of all purchases and redemptions of shares
of the underlying funds. Additional
protection for the assets of the Series Account is afforded by
blanket fidelity bonds issued to The Great-
West Life Assurance Company in the amount of $25 million, which
covers all officers and employees of
First GWL&A.
B. Experts
The accounting firm of Deloitte & Touche LLP performs
certain accounting and auditing
services for First GWL&A and the Series Account. The principal
business address of Deloitte & Touche
LLP is 555 Seventeenth Street, Suite 3600, Denver, Colorado 80202.
The balance sheet of First GWL&A at April 4, 1997
included in the prospectus has been
audited by Deloitte & Touche LLP, independent auditors, as set
forth in their report appearing therein and
is included in reliance upon such report given upon the authority
of such firm as experts in accounting
and auditing.
C. Principal Underwriter
The offering of the Contracts is made on a continuous basis by
Charles Schwab & Co., Inc.
("Schwab"). Schwab is a California corporation and is a member of
the National Association of Securities
Dealers ("NASD"). The Company does not anticipate discontinuing
the offering of the Contract, although
it reserves the right to do so. The Contract generally will be
issued for Annuitants from birth to age ninety.
D. Administrative Services Agreement
First GWL&A and Great-West Life & Annuity Insurance Company
("GWL&A") have entered into an
Administrative Services Agreement dated , 1997.
Pursuant to the agreement, GWL&A performs
certain corporate support services, investment services and other
back office administrative services for
First GWL&A. In addition, certain of GWL&A's property, equipment,
personnel and facilities are made
available for First GWL&A for its operations. All charges for
services and use of facilities to the extent
practicable reflect actual costs, and are intended to be in
accordance with New York Insurance Laws.
WITHHOLDING
Annuity payments and other amounts received under the
Contract are subject to income
tax withholding unless the recipient elects not to have taxes
withheld. The amounts withheld will vary
among recipients depending on the tax status of the individual and
the type of payments from which taxes
are withheld.
Notwithstanding the recipient's election, withholding may
be required with respect to
certain payments to be delivered outside the United States and,
with respect to certain distributions from
certain types of qualified retirement plans, unless the proceeds
are transferred directly to another qualified
retirement plan. Moreover, special "backup withholding" rules may
require the Company to disregard the
recipient's election if the recipient fails to supply the Company
with a "TIN" or taxpayer identification
number (social security number for individuals), or if the Internal
Revenue Service notifies the Company
that the TIN provided by the recipient is incorrect.
CALCULATION OF PERFORMANCE DATA
A. Yield and Effective Yield Quotations for the Money Market
Investment Division
The yield quotation for the Money Market Investment Division
will be for the seven-day period and
is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical
pre-existing account having a balance of one Accumulation Unit in
the Money Market Investment Division
at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Participant
accounts, and dividing the difference by the value of the account
at the beginning of the base period to
obtain the base period return, and then multiplying the base period
return by (365/7) with the resulting
yield figure carried to the nearest hundredth of one percent.
The effective yield quotation for the Money Market Investment
Division will be for the seven-day
period and is carried to the nearest hundredth of one percent,
computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one
Accumulation Unit in the Money Market Investment Division at the
beginning of the period, subtracting
a hypothetical charge reflecting deductions from Participant
accounts, and dividing the difference by the
value of the account at the beginning of the base period to obtain
the base period return, and then
compounding the base period return by adding 1, raising the sum to
a power equal to 365 divided by 7,
and subtracting 1 from the result, according to the following
formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN +1)365/7]-1.
For purposes of the yield and effective yield computations,
the hypothetical charge reflects all
deductions that are charged to all Participant accounts in
proportion to the length of the base period, and
for any fees that vary with the size of the account, the account
size is assumed to be the Money Market
Investment Division's mean account size. The specific percentage
applicable to a particular withdrawal
would depend on a number of factors including the length of time
the Contract Owner has participated
under the Contracts. (See "Charges and Deductions" on page 17 of
the Prospectus.) No deductions or
sales loads are assessed upon annuitization under the Contracts.
Realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of
the Money Market Investment Division
and the Fund are excluded from the calculation of yield.
B. Total Return and Yield Quotations for All Investment Divisions
(Other than Money Market)
The total return quotations for all Investment Divisions,
other than the Money Market, will be
average annual total return quotations for the one-year period.
The quotations are computed by finding
the average annual compounded rates of return over the relevant
periods that would equate the initial
amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n = ERV
Where:P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV =ending redeemable value of a hypothetical
$1,000 payment made at the
beginning of the particular period at the end
of the particular period
For purposes of the total return quotations for these Investment
Divisions, the calculations take into effect
all fees that are charged to the Contract Value , and for any fees
that vary with the size of the account,
the account size is assumed to be the respective Investment
Divisions' mean account size. The
calculations also assume a complete redemption as of the end of the
particular period.
The yield quotations for these Investment Divisions set forth
in the Prospectus are based on the
thirty-day period ended on December 31, 1996, and are computed by
dividing the net investment income
per Accumulation Unit earned during the period by the maximum
offering price per unit on the last day
of the period, according to the following formula:
YIELD = 2[((a-b)cd +1)6 -1]
Where:a = net investment income earned during the period by
the corresponding portfolio
of the Fund attributable to shares owned by the
Investment Division.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of Accumulation Units
outstanding during the
period.
d = the maximum offering price per Accumulation
Unit on the last day of the
period.
For purposes of the yield quotations for these Investment
Divisions, the calculations take into effect all fees
that are charged to the Contract Value, and for any fees that vary
with the size of the account, the
account size is assumed to be the respective Investment Divisions'
mean account size.
FINANCIAL STATEMENTS
The balance sheet of First GWL&A as contained in the
prospectus should be considered only as
bearing upon First GWL&A's ability to meet its obligations under
the Contracts, and they should not be
considered as bearing on the investment performance of the Series
Account. The interest of Contract
Owners under the Contracts are affected solely by the investment
results of the Series Account. This
Statement of Additional Information contains no financial
statements for the Series Account because the
Series Account has not yet commenced operations, has no assets or
liabilities, and has received no
income nor incurred any expenses as of the date of this Statement
of Additional Information.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements for First Great-West Life & Annuity
Insurance Company are included in the
prospectus.
(b) Exhibits
(1) Certified copy of resolution of Board of Directors
or Depositor establishing Registrant is
attached as Exhibit 1.
(2) Not applicable.
(3) Copy of distribution contract between Depositor and
Principal Underwriter is attached as
Exhibit 3.
(4) Copy of the form of the variable annuity contract is
attached as Exhibit 4.
(5) Copy of the form of application to be used with the
variable annuity contract provided pursuant
to (4) is attached as Exhibit 5.
(6) Copy of Articles of Incorporation and Bylaws of
Depositor are attached as Exhibits 6.a. and 6.b.
respectively.
(7) Not applicable.
(8) Copies of participation agreements with underlying
funds are attached as Exhibit 8.
(9) Opinion of counsel and consent of
to be filed by amendment.
(10) (a) Written Consent of Jorden Burt Berenson &
Johnson LLP is attached as Exhibit 10a.
(b) Written Consent of Deloitte & Touche LLP is attached
as Exhibit 10b.
(c) Written Consent of W. Kay Adam is attached as
Exhibit 10c.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule for computation of each performance
quotation provided in response to Item 21 is
attached as Exhibit 13.
(14) Financial Data Schedule is attached as Exhibit 14.
<PAGE>
Item 25. Directors and Officers of the Depositor
Position and
Offices
Name Principal Business Address with Depositor
Marcia D. Alazraki 425 Lexington Avenue Director
New York City, New York 10017
James Balog 2205 North Southwinds BoulevardDirector
Vero Beach, Florida 39263
James W. Burns, O.C. (4) Director
Paul Desmarais, Jr. (4) Director
Robert Gratton (5) Chairman
N. Berne Hart 2552 East Alameda Avenue, #99 Director
Denver, Colorado 80209
Stuart Z. Katz One New York Plaza Director
New York City, New York 10004
William T. McCallum (1) President and
Chief Executive
Officer
Brian E. Walsh Trinity L.P. Director
115 East Putnam Avenue
Greenwich, Connecticut 06830
Robert D. Bond (1) Senior Vice
President,
Financial
Services
Glen Derback (1) Vice President
and Controller
John T. Hughes (1) Senior Vice
President,
Chief Investment
Officer
D. Craig Lennox (1) Senior Vice
President,
General Counsel
and
Secretary
Dennis Low (1) Director,
Executive Vice
President,
Financial Services
James D. Motz (2) Executive Vice
President,
Employee Benefits
Martin L. Rosenbaum (2) Senior Vice
President,
Employee Benefits
Operations
Douglas L. Wooden (1) Director, Senior
Vice
______________________________________ President,
Financial Services
(1) 8515 East Orchard Road, Englewood, Colorado 80111.
(2) 8505 East Orchard Road, Englewood, Colorado 80111.
Item 26. Persons controlled by or under common control with the
Depositor or Registrant
Power Corporation of Canada
100% - Marquette Communications Corporation
100% - 171263 Canada Inc.
68.1% - Power Financial Corporation
86.4% - Great-West Lifeco Inc.
99.5% - The Great-West Life Assurance Company
100% - Great-West Life & Annuity Insurance Company
100% First Great-West Life & Annuity Insurance Company
100% - GW Capital Management, Inc.
100% - Financial Administrative Services Corporation
100% - One Corporation
100% - One Health Plan of Illinois, Inc.
100% - One Health Plan of Texas, Inc.
100% - One Health Plan of California, Inc.
100% - One Health Plan of Colorado, Inc.
100% - One Health Plan of Georgia, Inc.
100% - One Health Plan of North Carolina, Inc.
100% - One Health Plan of Washington, Inc.
100% - One Orchard Equities, Inc.
100% - Great-West Benefit Services, Inc.
13% - Private Healthcare Systems, Inc.
100% - Benefits Communication Corporation
100% - BenefitsCorp Equities, Inc.
94% - Maxim Series Fund, Inc.
100% - Greenwood Property Corporation
100% - GWL Properties Inc.
100% - Great-West Realty Investments, Inc.
50% - Westkin Properties Ltd.
100% - Confed Admin Services, Inc.
Item 27. Number of Contractowners
Not applicable.
Item 28. Indemnification
Provisions exist under the laws of the state of New York
and the Bylaws of First GWL&A whereby
First GWL&A may indemnify a director, officer, or controlling
person of First GWL&A against liabilities arising
under the Securities Act of 1933. The following excerpts contain
the substance of these provisions:
New York Corporate Code
Section 721. Nonexclusivity of statutory provisions for
indemnification of directors and officers.
The indemnification and advancement of expenses granted pursuant
to, or provided by, this article shall not be
deemed exclusive of any other rights to which a director or officer
seeking indemnification or advancement of
expenses may be entitled, whether contained in the certificate of
incorporation or the by-laws or, when authorized
by such certificate of incorporation or by-laws, (i) a resolution
of shareholders, (ii) a resolution of directors, or (iii)
an agreement providing for such indemnification, provided that no
indemnification may be made to or on behalf of
any director or officer if a judgment or other final adjudication
adverse to the director or officer establishes that his
acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause
of action so adjudicated, or that he personally gained in fact a
financial profit or other advantage to which he was
not legally entitled. Nothing contained in this article shall
affect any rights to indemnification to which corporate
personnel other than directors and officers may be entitled by
contract or otherwise under law.
Section 722. Authorization for indemnification of directors and
officers.
(a) A corporation may indemnify any person made, or threatened to
be made, a party to an action or proceeding (
other than one by or in the right of the corporation to procure a
judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of
any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the
corporation served in any capacity at the request of the
corporation, by reason of the fact that he, his testator or
intestate, was a director or officer of the corporation, or served
such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement
and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer
acted, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best
interests of the corporation and, in criminal
actions or proceedings, in addition, had no reasonable cause to
believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action or
proceeding by judgment, settlement, conviction or upon
a plea of nolo contendere, or its equivalent, shall not in itself
create a presumption that any such director or officer
did not act, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the
best interests of the corporation or that he had reasonable cause
to believe that his conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened to
be made, a party to an action by or in the right
of the corporation to procure a judgment in its favor by reason of
the fact that he, his testator or intestate, is or was
a director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer
of any other corporation of any type or kind, domestic or foreign,
of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in
settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him in connection with
the defense or settlement of such action, or in
connection with an appeal therein, if such director or officer
acted, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best
interests of the corporation, except that no
indemnification under this paragraph shall be made in respect of
(1) a threatened action, or a pending action which
is settled or otherwise disposed of, or (2) any claim, issue or
matter as to which such person shall have been adjudged
to be liable to the corporation, unless and only to the extent that
the court in which the action was brought, or, if
no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such portion of the settlement
amount and expenses as the court deems proper.
(d) For the purpose of this section, a corporation shall be deemed
to have requested a person to serve an employee
benefit plan where the performance by such person of his duties to
the corporation also imposes duties on, or
otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan
pursuant to applicable law shall be considered fines;
and action taken or omitted by a person with respect to an employee
benefit plan in the performance of such person's
duties for a purpose reasonably believed by such person to be in
the interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which is not opposed
to the best interests of the corporation.
Section 723. Payment of indemnification other than by court award.
(a) A person who has been successful, on the merits or otherwise,
in the defense of a civil or criminal action or
proceeding of the character described in section 722 shall be
entitled to indemnification as authorized in such section.
(b) Except as provided in paragraph (a), any indemnification under
section 722 or otherwise permitted by section
721, unless ordered by a court under section 724 (Indemnification
of directors and officers by a court), shall be made
by the corporation, only if authorized in the specific case:
(1) By the board acting by a quorum consisting of directors who are
not parties to such action or proceeding upon
a finding that the director or officer has met the standard of
conduct set forth in
section 722 or established pursuant to section 721, as the case may
be, or,
(2) If a quorum under subparagraph (1) is not obtainable or, even
if obtainable, a quorum of disinterested directors
so directs; (A) By the board upon the opinion in writing of
independent legal counsel that indemnification is proper
in the circumstances because the applicable standard of conduct set
forth in such sections has been met by such
director or officer, or (B) By the shareholders upon a finding that
the director or officer has met the applicable
standard of conduct set forth in such sections.
(c) Expenses incurred in defending a civil or criminal action or
proceeding may be paid by the corporation in advance
of the final disposition of such action or proceeding upon receipt
of an undertaking by or on behalf of such director
or officer to repay such amount as, and to the extent, required by
paragraph (a) of section 725.
Section 724. Indemnification of directors and officers by a court.
(a) Notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary resolution of
the board or of the shareholders in the specific case under section
723 (Payment of indemnification other than by
court award), indemnification shall be awarded by a court to the
extent authorized under section 722 (Authorization
for indemnification of directors and officers), and paragraph (a)
of section 723. Application therefor may be made,
in every case, either:
(1) In the civil action or proceeding in which the expenses were
incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which case
the application shall set forth the disposition of
any previous application made to any court for the same or similar
relief and also reasonable cause for the failure
to make application for such relief in the action or proceeding in
which the expenses were incurred or other amounts
were paid.
(b) The application shall be made in such manner and form as may be
required by the applicable rules of court or,
in the absence thereof, by direction of a court to which it is
made. Such application shall be upon notice to the
corporation. The court may also direct that notice be given at the
expense of the corporation to the shareholders and
such other persons as it may designate in such manner as it may
require.
(c) Where indemnification is sought by judicial action, the court
may allow a person such reasonable expenses,
including attorneys' fees, during the pendency of the litigation as
are necessary in
connection with his defense therein, if the court shall find that
the defendant has by his pleadings or during the
course of the litigation raised genuine issues of fact or law.
Section 725. Other provisions affecting indemnification of
directors and officers.
(a) All expenses incurred in defending a civil or criminal action
or proceeding which are advanced by the corporation
under paragraph (c) of section 723 (Payment of indemnification
other than by court award) or allowed by a court
under paragraph (c) of section 724 (Indemnification of directors
and officers by a court) shall be repaid in case the
person receiving such advancement or allowance is ultimately found,
under the procedure set forth in this article,
not to be entitled to indemnification or, where indemnification is
granted, to the extent the expenses so advanced
by the corporation or allowed by the court exceed the
indemnification to which he is
entitled.
(b) No indemnification, advancement or allowance shall be made
under this article in any circumstance where it
appears:
(1) That the indemnification would be inconsistent with the law of
the jurisdiction of incorporation of a foreign
corporation which prohibits or otherwise limits such
indemnification;
(2) That the indemnification would be inconsistent with a provision
of the certificate of incorporation, a by-law, a
resolution of the board or of the shareholders, an agreement or
other proper corporate action, in effect at the time
of the accrual of the alleged cause of action asserted in the
threatened or pending action or proceeding in which the
expenses were incurred or other amounts were paid, which prohibits
or otherwise limits indemnification; or
(3) If there has been a settlement approved by the court, that the
indemnification would be inconsistent with any
condition with respect to indemnification expressly imposed by the
court in approving the settlement.
(c) If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by
the shareholders, the corporation shall, not later than the next
annual meeting of shareholders unless such meeting
is held within three months from the date of such payment, and, in
any event, within
fifteen months from the date of such payment, mail to its
shareholders of record at the time entitled to vote for the
election of directors a statement specifying the persons paid, the
amounts paid, and the nature and status at the time
of such payment of the litigation or threatened litigation.
(d) If any action with respect to indemnification of directors and
officers is taken by way of amendment of the
by-laws, resolution of directors, or by agreement, then the
corporation shall, not later than the next annual meeting
of shareholders, unless such meeting is held within three months
from the date of such action, and, in any event,
within fifteen months from the date of such action, mail to its
shareholders of record at the time entitled to vote for
the election of directors a statement specifying the action taken.
(e) Any notification required to be made pursuant to the foregoing
paragraph (c) or (d) of this section by any
domestic mutual insurer shall be satisfied by compliance with the
corresponding provisions of section one thousand
two hundred sixteen of the insurance law.
(f) The provisions of this article relating to indemnification of
directors and officers and insurance therefor shall
apply to domestic corporations and foreign corporations doing
business in this state, except as provided in section
1320 (Exemption from certain provisions).
Section 726. Insurance for indemnification of directors and
officers.
(a) Subject to paragraph (b), a corporation shall have power to
purchase and maintain insurance:
(1) To indemnify the corporation for any obligation which it incurs
as a result of the indemnification of directors and
officers under the provisions of this article, and
(2) To indemnify directors and officers in instances in which they
may be indemnified by the corporation under the
provisions of this article, and
(3) To indemnify directors and officers in instances in which they
may not otherwise be indemnified by the
corporation under the provisions of this article provided the
contract of insurance covering such directors and officers
provides, in a manner acceptable to the superintendent of
insurance, for a retention amount and for co-insurance.
(b) No insurance under paragraph (a) may provide for any payment,
other than cost of defense, to or on behalf of
any director or officer:
(1) if a judgment or other final adjudication adverse to the
insured director or officer establishes that his acts of
active and deliberate dishonesty were material to the cause of
action so adjudicated, or that he personally gained in
fact a financial profit or other advantage to which he was not
legally entitled, or
(2) in relation to any risk the insurance of which is prohibited
under the insurance law of this state.
(c) Insurance under any or all subparagraphs of paragraph (a) may
be included in a single contract or supplement
thereto. Retrospective rated contracts are prohibited.
(d) The corporation shall, within the time and to the persons
provided in paragraph (c) of section 725 (Other
provisions affecting indemnification of directors or officers),
mail a statement in respect of any insurance it has
purchased or renewed under this section, specifying the insurance
carrier, date of the contract, cost of the insurance,
corporate positions insured, and a statement explaining all sums,
not previously reported in a statement to
shareholders, paid under any indemnification insurance contract.
(e) This section is the public policy of this state to spread the
risk of corporate management, notwithstanding any
other general or special law of this state or of any other
jurisdiction including the federal government.
Bylaws of First GWL&A
Article II, Section 11. Indemnification of Directors.
The corporation may, by resolution of the Board of Directors,
indemnify and save harmless out of the funds of the
Company to the extent permitted by applicable law, any Director,
Officer, or employee of the corporation or any
member or officer of any Committee, and his or her heirs, executors
and administrators, from and against all claims,
liabilities, costs, charges, and expenses whatsoever that any such
Director, Officer, employee or any such member or
officer sustains or incurs in or about any action, suit, or
proceeding that is brought, commenced, or prosecuted
against him or her for or in respect of any act, deed, matter or
thing whatsoever made, done, or permitted by him
or her in or about the execution of the duties of his or her office
or employment with the corporation, or in or about
the execution of his or her duties as a Director or Officer of
another company which he or she so serves at the
request and on behalf of the corporation, or in or about the
execution of his or her duties as a member or officer
of any such Committee, and all other claims, liabilities, costs,
charges and expenses that he or she sustains or incurs,
in or about or in relation to any such duties or the affairs of the
corporation, the affairs of such other company which
he or she so serves or the affairs of such Committee, except such
claims, liabilities, costs, charges or expenses as are
occasioned by acts of omissions which were in bad faith, involved
intentional misconduct, a violation of the New York
Insurance Law or a knowing violation of any other law or which
resulted in such person gaining in fact a financial
profit or other advantage to which he or she was not entitled. The
corporation may, by resolution of the Board of
Directors, indemnify and save harmless out of the funds of the
corporation to the extent permitted by applicable law,
any Director, Officer, or employee of any subsidiary corporation of
the corporation on the same basis, and within
the same constraints as, described in the preceding sentence. No
payment of indemnification shall be made unless
notice has been filed with the Superintendent of Insurance pursuant
to Section 1216 of the New York Insurance Law.
Item 29.Principal Underwriter
(a) Charles Schwab & Co., Inc. ("Schwab") is the
distributor of securities of the Registrant.
(b) Directors and Officers of Schwab
Position and Offices
Name Principal Business Address with Underwriter
Charles R. Schwab (1) Chairman and
Director
David S. Pottruck (1) President and Chief
Executive Officer
and Director
Steven L. Scheid (1) Executive Vice
President and
Chief Financial
Officer and Director
Tom D. Seip (1) Executive Vice
President -
Retail
John P. Coghlan (1) Executive Vice
President,
Schwab Institutional
Linnet Deily (1) Executive Vice
President, Services
for
Investment Managers
Carrie Dwyer (1) Executive Vice
President, Corporate
Oversight
Lon Gorman (1) Executive Vice
President and
President, Schwab
Capital
Markets and Trading
Daniel O. Leemon (1) Executive Vice
President
Business Strategy
Dawn G. Lepore (1) Executive Vice
President, and
Chief Information
Officer - SITE
Timothy F. McCarthy (1) Executive Vice
President and
President, Financial
Products and
International -
Group
Elizabeth G. Sawi (1) Executive Vice
President -
Electronic Brokerage
Richard Tinervin (1) Executive Vice
President -
Retirement Plan
Services
Luis E. Valencia (1) Executive Vice
President and Chief
Administrative
Officer
Suzanne D. Lyons (1) Executive Vice
President -
Retail Marketing
Karen Chang (1) Executive Vice
President -
Head of Branches
William J. Klipp (1) Executive Vice
President -
SchwabFunds
Peter J. McIntosh (1) Executive Vice
President -
Brokerage Operations
and
National Investor
Services
Parkash P. Ahuja (1) Senior Vice
President-
Administrative
Services
Rhet Andrews (1) Senior Vice
President -
Schwab Institutional
Trading
and Operations
William S. Baughman (1) Senior Vice
President -
Strategic Marketing
Rochelle A. Bays (1) Senior Vice
President -
CM & T Support
Services
Michelle B. Blieberg (1) Senior Vice
President -
HR Support Services
Reid P. Conklin (1) Senior Vice
President -
Southeast Group
John Danton (1) Senior Vice
President, Retail
Financial Planning
Martha J. Deevy (1) Senior Vice
President -
SITE Specialized
Services
Evelyn S. Dilsaver (1) Senior Vice
President
Christopher V. Dodds (1) Senior Vice
President
and Treasurer
Sidney J. Dorr (1) Senior Vice
President -
Capital Markets and
Trading
Wayne W. Fieldsa (1) Senior Vice
President -
Securities
Operations
Edward V. Garlich, Jr.(1) Senior Vice
President and
Managing
Director -
Washington Research
Group
Therese Haberle (1) Senior Vice
President -
Chief Compliance
Officer
James M. Hackley (1) Senior Vice
President -
Active Trader
Gerry L. Hansen (1) Senior Vice
President -
Controller
Barbara R. Heinrich (1) Senior Vice
President -
Fixed Income
Jan K. Hier-King (1) Senior Vice
President -
Schwab Institutional
Technology
Colleen M. Hummer (1) Senior Vice
President -
Mutual Fund
Operations
Daniel J. Keller (1) Senior Vice
President -
Mutual Funds
Technology
Michael S. Knight (1) Senior Vice
President -
Midwest Group
Gloria J. Lau (1) Senior Vice
President -
Schwab International
Thomas N. Lawrie (1) Senior Vice
President -
Electronic Brokerage
Services
James G. Losi (1) Senior Vice
President -
Retail
Jeffrey M. Lyons (1) Senior Vice
President -
Mutual Funds
Marketing
Elinor MacKinnon (1) Senior Vice
President -
Retail Systems
Frederick F. Matteson (1) Senior Vice
President -
SITE Operations and
Infrastructure
John McGonigle (1) Senior Vice
President -
Active Trader
Roger G. Neaves (1) Senior Vice
President -
Production Services
Geoffrey Penney (1) Senior Vice
President -
Financial Products
and International
Technology Solutions
Kenneth W. Perlman (1) Senior Vice
President -
Capital Markets &
Trading -
Regulatory Division
Earlene Perry (1) Senior Vice
President -
Retail Operations
Hugo W. Quackenbush (1) Senior Vice
President -
Corporate
Communications
Edward M. Rodden (1) Senior Vice
President -
Affluent Customer
Enterprise
Myra Rothfield (1) Senior Vice
President -
Customer Development
and
Retention
Louise J. Rothman (1) Senior Vice
President -
Compensation and
Benefits
Gideon Sasson (1) Senior Vice
President -
Electronic Brokerage
Site
Arthur V. Shaw (1) Senior Vice
President -
Electronic Brokerage
Leonard Short (1) Senior Vice
President -
CRS Advertising and
Brand
Management
Betsy Snow (1) Senior Vice
President -
ISD Technical
Operations
Ray Straka (1) Senior Vice
President -
Finance and
Corporate
Administration
Technology Support
Michelle Swenson (1) Senior Vice
President -
Mutual Funds
Marketing and
Development
Mary B. Templeton (1) Senior Vice
President -
General Counsel and
Corporate
Secretary
Mark C. Thompson (1) Senior Vice
President -
Government and
Public Affairs
Daniel J. Voet (1) Senior Vice
President -
Controller
Steven Ward (1) Senior Vice
President -
Investment Officer
- SchwabFunds
Portfolio
Cynthia K. Holbrook (1) Vice President
______________________________________
(1) 101 Montgomery, San Francisco, California 94104.
(c) Commissions and other compensation received by
Principal Underwriter during registrant's last fiscal
year:
Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commissions Redemption
CommissionsCompensation
Schwab -0- -0- -0- -0-
Item 30.Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the 1940 Act and
the rules promulgated thereunder are maintained by the
registrant through First GWL&A,
, Albany, New York .
Item 31.Management Services
Not Applicable.
Item 32.Undertakings
(a) Registrant undertakes to file a post-effective
amendment to this Registration Statement as
frequently as is necessary to ensure that the audited
financial statements in the Registration
Statement are never more than 16 months old for so long
as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of
any application to purchase a contract
offered by the Prospectus, a space that an applicant
can check to request a Statement of
Additional Information, or (2) a postcard or similar
written communication affixed to or included
in the Prospectus that the applicant can remove to send
for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of
Additional Information and any financial
statements required to be made available under this
form promptly upon written or oral request.
(d) Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of the
registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities
(other than the payment by the registrant of expenses
incurred or paid by a director, officer or
controlling person of the registrant in the successful
defense of any action, suit or proceeding)
is asserted by such director, officer or controlling
person in connection with the securities being
registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.
(e) First GWL&A represents that the fees and charges
deducted under the Contracts, in the
aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred, and
the risks assumed by First GWL&A.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this Registration Statement on Form N-4 to be signed on its behalf,
in the City of Englewood, State of Colorado, on this 15th day of
April , 1997.
VARIABLE ANNUITY-1 SERIES ACCOUNT
(Registrant)
By: /s/ William T. McCallum
William T. McCallum, President
and Chief Executive Officer of
First Great-West Life & Annuity
Insurance Company
FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
(Depositor)
By: /s/ William T. McCallum
William T. McCallum, President
and Chief Executive Officer
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities with First Great-West Life & Annuity Insurance Company
and on the dates indicated:
Signature and Title Date
/s/ Robert Gratton* 4/15 , 1997
Director and Chairman of the
Board (Robert Gratton)
/s/ William T. McCallum 4/15 , 1997
Director, President and Chief Executive
Officer (William T. McCallum)
Signature and Title Date
/s/ Glen R. Derback 4/15 , 1997
Controller (Glen R. Derback)
/s/ Marcia D. Alazraki* 4/15 , 1997
Director, (Marcia D. Alazraki)
/s/ James Balog* 4/15 , 1997
Director, (James Balog)
/s/ James W. Burns* 4/15 , 1997
Director, (James W. Burns)
/s/ Paul Desmarais, Jr.* 4/15 , 1997
Director (Paul Desmarais, Jr.)
/s/ N. Berne Hart* 4/15 , 1997
Director (N. Berne Hart)
/s/ Stuart Z. Katz* 4/15 , 1997
Director (Stuart Z. Katz)
/s/ Brian E. Walsh* 4/15 , 1997
Director (Brian E. Walsh)
*By: /s/ D.C. Lennox 4/15 , 1997
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed with
this Registration Statement.
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, James Balog, a Member of
the Board of Directors
of First Great-West Life & Annuity Insurance Company, a New York
corporation, do
hereby constitute and appoint each of D.C. Lennox and G.R. Derback
as my true and
lawful attorney and agent for me and in my name and on my behalf to
do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things
and to execute any and all instruments which either said attorney
and agent may deem
necessary or desirable to enable First Great-West Life & Annuity
Insurance Company and
Variable Annuity-1 Series Account, a separate and distinct account
of First Great-West
Life & Annuity Insurance Company governed under the provisions of
the New York
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company
Act of 1940 and any rules, regulations, and requirements of the
Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of variable
annuity contracts, including specifically, but without limiting the
generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, to
the Registration
Statement (Form N-4) of First Great-West Life & Annuity Insurance
Company and Schwab
Variable Annuity Series Account, and to any and all amendments
thereto, and I hereby
ratify and confirm all that either said attorney and agent shall do
or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of
April , 1997.
/s/ James Balog
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ Charlote Dickinson
Name: Charlote Dickinson
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, James W. Burns, O.C., a
Member of the Board
of Directors of First Great-West Life & Annuity Insurance Company,
a New York
corporation, do hereby constitute and appoint each of D.C. Lennox
and G.R. Derback as
my true and lawful attorney and agent for me and in my name and on
my behalf to do,
individually and without the concurrence of the other attorney and
agent, any and all acts
and things and to execute any and all instruments which either said
attorney and agent
may deem necessary or desirable to enable First Great-West Life &
Annuity Insurance
Company and Variable Annuity-1 Series Account, a separate and
distinct account of First
Great-West Life & Annuity Insurance Company governed under the
provisions of the New
York Insurance Code, to comply with the Securities Act of 1933 and
the Investment
Company Act of 1940 and any rules, regulations, and requirements of
the Securities and
Exchange Commission thereunder, in connection with the registration
under said Acts of
variable annuity contracts, including specifically, but without
limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as
a Member of the
Board of Directors of First Great-West Life & Annuity Insurance
Company, to the
Registration Statement (Form N-4) of First Great-West Life &
Annuity Insurance Company
and Schwab Variable Annuity Series Account, and to any and all
amendments thereto,
and I hereby ratify and confirm all that either said attorney and
agent shall do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of
April , 1997.
/s/ James W. Burns, O.C.
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ D.C. Lennox
Name: D.C. Lennox
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, Paul Desmarais, Jr., a
Member of the Board of
Directors of First Great-West Life & Annuity Insurance Company, a
New York corporation,
do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and
lawful attorney and agent for me and in my name and on my behalf to
do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things
and to execute any and all instruments which either said attorney
and agent may deem
necessary or desirable to enable First Great-West Life & Annuity
Insurance Company and
Variable Annuity-1 Series Account, a separate and distinct account
of First Great-West
Life & Annuity Insurance Company governed under the provisions of
the New York
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company
Act of 1940 and any rules, regulations, and requirements of the
Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of variable
annuity contracts, including specifically, but without limiting the
generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, to
the Registration
Statement (Form N-4) of First Great-West Life & Annuity Insurance
Company and Schwab
Variable Annuity Series Account, and to any and all amendments
thereto, and I hereby
ratify and confirm all that either said attorney and agent shall do
or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of
April , 1997.
/s/ Paul Desmarais, Jr.
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ Lucie Filteau
Name: Lucie Filteau
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, Robert Gratton, a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, a
New York corporation,
do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and
lawful attorney and agent for me and in my name and on my behalf to
do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things
and to execute any and all instruments which either said attorney
and agent may deem
necessary or desirable to enable First Great-West Life & Annuity
Insurance Company and
Variable Annuity-1 Series Account, a separate and distinct account
of First Great-West
Life & Annuity Insurance Company governed under the provisions of
the New York
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company
Act of 1940 and any rules, regulations, and requirements of the
Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of variable
annuity contracts, including specifically, but without limiting the
generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, to
the Registration
Statement (Form N-4) of First Great-West Life & Annuity Insurance
Company and Schwab
Variable Annuity Series Account, and to any and all amendments
thereto, and I hereby
ratify and confirm all that either said attorney and agent shall do
or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of
April , 1997.
/s/ Robert Gratton
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ Nicole Barolet
Name: Nicole Barolet
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, N. Berne Hart, a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, a
New York corporation,
do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and
lawful attorney and agent for me and in my name and on my behalf to
do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things
and to execute any and all instruments which either said attorney
and agent may deem
necessary or desirable to enable First Great-West Life & Annuity
Insurance Company and
Variable Annuity-1 Series Account, a separate and distinct account
of First Great-West
Life & Annuity Insurance Company governed under the provisions of
the New York
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company
Act of 1940 and any rules, regulations, and requirements of the
Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of variable
annuity contracts, including specifically, but without limiting the
generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, to
the Registration
Statement (Form N-4) of First Great-West Life & Annuity Insurance
Company and Schwab
Variable Annuity Series Account, and to any and all amendments
thereto, and I hereby
ratify and confirm all that either said attorney and agent shall do
or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of
April , 1997.
/s N. Berne Hart
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ Wilma J. Hart
Name: Wilma J. Hart
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, Brian E. Walsh, a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, a
New York corporation,
do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and
lawful attorney and agent for me and in my name and on my behalf to
do, individually
and without the concurrence of the other attorney and agent, any
and all acts and things
and to execute any and all instruments which either said attorney
and agent may deem
necessary or desirable to enable First Great-West Life & Annuity
Insurance Company and
Variable Annuity-1 Series Account, a separate and distinct account
of First Great-West
Life & Annuity Insurance Company governed under the provisions of
the New York
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company
Act of 1940 and any rules, regulations, and requirements of the
Securities and Exchange
Commission thereunder, in connection with the registration under
said Acts of variable
annuity contracts, including specifically, but without limiting the
generality of the foregoing,
power and authority to sign my name, in my capacity as a Member of
the Board of
Directors of First Great-West Life & Annuity Insurance Company, to
the Registration
Statement (Form N-4) of First Great-West Life & Annuity Insurance
Company and Schwab
Variable Annuity Series Account, and to any and all amendments
thereto, and I hereby
ratify and confirm all that either said attorney and agent shall do
or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of
April , 1997.
/s/ Brian E. Walsh
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ Margaret Canty
Name: Margaret Canty
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, Marcia D. Alazraki, a
Member of the Board of Directors of First Great-West Life & Annuity
Insurance Company, a New York corporation, do hereby constitute and
appoint each of D.C. Lennox and G.R. Derback as my true
and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other
attorney and agent, any and all acts and things and to execute any
and all instruments which either said attorney and agent may
deem necessary or desirable to enable First Great-West Life &
Annuity Insurance Company and Variable Annuity-1 Series Account,
a separate and distinct account of First Great-West Life & Annuity
Insurance Company governed under the provisions of the New York
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company Act of 1940 and any rules, regulations, and
requirements of the Securities and Exchange Commission thereunder,
in connection with the registration under said Acts of variable
annuity contracts, including specifically, but without limiting the
generality of the foregoing, power and authority to sign my name,
in my capacity as a Member of the Board of Directors of First
Great-West Life & Annuity Insurance Company, to the Registration
Statement (Form N-4) of First Great-West Life & Annuity Insurance
Company and Schwab Variable Annuity Series Account, and to
any and all amendments thereto, and I hereby ratify and confirm all
that either said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of
April , 1997.
/s/ Marcia D. Alazraki
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ Patricia Matecki
Name: Patricia Matecki
<PAGE>
POWER OF ATTORNEY
RE
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, Stuart Z. Katz, a Member of
the Board of Directors of First Great-West Life & Annuity Insurance
Company, a New York corporation, do hereby constitute and appoint
each of D.C. Lennox and G.R. Derback as my true and lawful
attorney and agent for me and in my name and on my behalf to do,
individually and without the concurrence of the other attorney
and agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem
necessary or desirable to enable First Great-West Life & Annuity
Insurance Company and Variable Annuity-1 Series Account, a
separate and distinct account of First Great-West Life & Annuity
Insurance Company governed under the provisions of the New York
Insurance Code, to comply with the Securities Act of 1933 and the
Investment Company Act of 1940 and any rules, regulations, and
requirements of the Securities and Exchange Commission thereunder,
in connection with the registration under said Acts of variable
annuity contracts, including specifically, but without limiting the
generality of the foregoing, power and authority to sign my name,
in my capacity as a Member of the Board of Directors of First
Great-West Life & Annuity Insurance Company, to the Registration
Statement (Form N-4) of First Great-West Life & Annuity Insurance
Company and Schwab Variable Annuity Series Account, and to
any and all amendments thereto, and I hereby ratify and confirm all
that either said attorney and agent shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day
of April , 1997.
/s/ Stuart Z. Katz
Member, Board of Directors
First Great-West Life & Annuity
Insurance Company
Witness:
/s/ Lola M. Kador
Name: Lola M. Kador
<PAGE>
Exhibit Table
Form N-4
Exhibit
1. Certified copy of resolution of Board
of Directors establishing Registrant1
3. Copy of distribution contract between
Depositor and Principal Underwriter1
4. Copy of the form of variable
annuity contract 1
5. Copy of the form of application to
be used with the variable contract 1
6. (a) Copy of Articles of Incorporation of Depositor1
(b) Copy of Bylaws of Depositor 1
8. Copies of participation agreements
with underlying funds 1
9. Opinion and consent of 2
10. (a) Consent of Jorden Burt Berenson & Johnson LLP1
(b) Consent of Deloitte & Touche LLP1
(c) Consent of W. Kay Adam 2
13. Schedule for computation of each
performance quotation 1
14. Financial Data Schedule 1
1 Filed with this Registration Statement.
2 To be filed by amendment.
EXHIBIT 1
This will certify that the following is a true and correct copy of
a resolution adopted by unanimous consent
by the Board of Directors of First Great-West Life & Annuity
Insurance Company effective the fifteenth day
of January, 1997, and that said resolution is still in full force
and effect:
1. That the Company hereby authorizes the establishment of
a separate account designated
Schwab Variable Annuity Series Account (hereinafter "the
Account"), subject to such conditions
as hereafter set forth, said use, purposes, and conditions to
be in full compliance with Section
4240 of the New York Insurance Code and all rules and
regulations of the New York Department
of Insurance;
Further, that the Account shall be established for the purpose
of allowing the Company to issue
individual annuity contracts authorized by Section 408 of the
Internal Revenue Code and such
other individual variable annuity contracts ("Contracts") as
the President or a Vice-President may
designate and shall constitute a separate account into which
will be allocated amounts paid to
the Company which are to be applied under the terms of such
Contracts; and
Further, that the income, gains and losses, realized or
unrealized, from assets allocated to the
Account shall be credited to or charged against such Account
without regard to other income,
gains, or losses of the Company to the extent provided in the
Contracts; and
Further, that the fundamental investment policy of the Account
shall be to invest or reinvest the
assets of the Account in securities issued by investment
companies registered under the
Investment Company Act of 1940; and
Further, that eleven separate investment divisions be, and
hereby are, established within the
Account to which net payments under the Contracts will be
allocated in accordance with
instructions received from contractholders, and that the
President or a Vice-President each be,
and hereby is, authorized to increase or decrease the number
of investment divisions in the
Account as may be necessary or appropriate; and
Further, that each investment division may be comprised of two
subdivisions, one to hold the
amounts contributed under Contracts qualifying for favorable
tax treatment under the Internal
Revenue Code, as amended, and the other to hold amounts
contributed under Contracts which
do not qualify for such tax treatment; and
Further, that the President or a Vice-President each be, and
hereby is, authorized to deposit such
amounts in the Account or in each investment division as may
be necessary or appropriate to
facilitate the commencement of the Account's operations; and
Further, that the President or a Vice-President each be, and
hereby is, authorized to transfer funds
from time to time into the Account in order to establish the
Account or to support the operation
of the Contracts with respect to the Account or to transfer
funds from time to time out of the
Account if transfer is made by cash or securities having a
readily determined market value, if such
transfer is approved by the Commissioner of the Division of
Insurance; and
Further, that the President or a Vice-President each be, and
is hereby authorized to change the
designation of the Account to such other designation as he may
deem necessary or appropriate;
and
Further, that the appropriate officers of the Company, with
such assistance from the Company's
auditors, legal counsel and independent consultants or others
as they may require, be, and they
hereby are, authorized and directed to take all action
necessary to: (a) register the Account as
a unit investment trust under the Investment Company Act of
1940, as amended; (b) register the
Contracts in such amounts, which may be an indefinite amount,
as the officers of the Company
shall from time to time deem appropriate, under the Securities
Act of 1933; and (c) take all other
actions which are necessary in connection with the offering of
said Contracts for sale and the
operation of the Account in order to comply with the
Investment Company Act of 1940, the
Securities Exchange Act of 1934, the Securities Act of 1933
and other applicable federal laws,
including the filing of any amendments to registration
statements, any undertakings, and any
applications for exemptions from the Investment Company Act of
1940 or other applicable federal
laws as the officers of the Company shall deem necessary or
appropriate; and
Further, that the appropriate officers of the Company be, and
they hereby are, authorized on
behalf of the Account and on behalf of the Company to take any
and all action they may deem
necessary or advisable in order to sell the Contracts,
including any registrations, filings and
qualifications of the Company, its officers, agents and
employees, and the Contracts under the
insurance and securities laws of any of the states of the
United States of America or other
jurisdictions, and in connection therewith to prepare,
execute, deliver and file all such applications,
reports, covenants, resolutions, applications for exemptions,
consents to service of process and
other papers and instruments as may be required under such
laws, and to take any and all further
action which said officers or counsel of the Company may deem
necessary or desirable (including
entering into whatever agreements may be necessary) in order
to maintain such registrations or
qualifications for as long as said officers or counsel deem it
to be in the best interests of the
Account and the Company; and
Further, that the President, the Vice-Presidents and the
Secretary of the Company be, and they
hereby are, each authorized in the names and on behalf of the
Account and the Company to
execute and file irrevocable written consents on the part of
the Account and of the Company to
be used in such states wherein such consents to service of
process may be required under the
insurance or securities laws therein in connection with said
registration or qualification of the
Contracts and to appoint the appropriate state official or
such other person as may be allowed
by said insurance or securities laws, agent of the Account and
of the Company for the purpose
of receiving and accepting process; and
Further, that the President or a Vice-President each be, and
hereby is, authorized to cause the
Company to institute procedures for providing voting rights
for owners of such Contracts with
respect to securities owned by the Account; and
Further, that the President or a Vice-President each be, and
is hereby authorized to execute such
agreement or agreements as deemed necessary and appropriate
with underwriters and
distributors for the Contracts in connection with the
establishment and maintenance of the
Account or the design, administration and offer and sale of
the Contracts; provided, however, that
the Company is directed to finalize such agreements before
effecting any registrations or filings
of the Contracts or the Account; and
Further, that the appropriate officers of the Company are
hereby authorized to execute whatever
agreement or agreements may be necessary or appropriate to
enable the Account to invest in
securities issued by one or more investment companies
registered under the Investment
Company Act of 1940 as may be specified in the respective
Contracts; and
Further, that the appropriate officers of the Company, and
each of them, are hereby authorized
to execute and deliver all such documents and papers and to do
or cause to be done all such
acts and things as they may deem necessary or desirable to
carry out the foregoing resolutions
and the intent and purposes thereof; and
Further, that the term "appropriate officers" as used herein,
shall include all of the elected and
appointed officers of the Company, either severally or
individually, subject to any applicable
resolutions of the Board of Directors dealing with signing
authority for the Company.
2. That the Company hereby authorizes the establishment of
a separate account pursuant
to C.R.S. section 10-7-402 designated as the Fixed Annuity Account
(hereinafter, "the Account"), subject
to such conditions as hereafter set forth, said use, purposes,
and conditions to be in full
compliance with C.R.S. section 10-7-402 and all rules and
regulations of the Colorado Division of
Insurance;
Further, that the Account shall be established for the purpose
of allowing the Company to issue
market value adjusted (modified guaranteed) annuity contracts
on a group and individual basis
as the President or a Vice President may designate for such
purpose and shall constitute a
separate account into which are allocated amounts paid to the
Company which are to be applied
under the terms of such Contracts; and
Further, that the income, gains and losses, realized or
unrealized, from assets allocated to the
Account shall be credited to or charged against such Account
without regard to other income,
gains, or losses of the Company to the extent provided in the
Contracts; and
Further, that the fundamental investment policy of the Account
shall be to invest or reinvest the
assets of the Account in investment grade (at the time of
purchase) fixed income securities, which
assets, in the aggregate, have characteristics, in particular
cash flow patterns, reasonably related
to the characteristics of the liabilities including but not
limited to securities issued by the U.S.
Government or its agencies or instrumentalities, corporate
debt securities, commercial paper, cash
or cash equivalents and other short-term investments; and
Further, that the President or a Vice President each be, and
hereby is, authorized to deposit such
amount in the Account as may be necessary or appropriate to
facilitate the commencement of
the Account's operations; and
Further, that the President or a Vice President each be, and
hereby is, authorized to transfer funds
from time to time into the Account in order to establish the
Account and to support the operation
of the Contracts with respect to the Account or to transfer
funds from time to time out of the
Account if transfer is made by cash or securities having a
readily determined market value, if such
transfer of securities is approved by the Commissioner of the
Division of Insurance; and
Further, that the President or a Vice President each be, and
is hereby authorized to change the
designation of the Account to such other designation as he may
deem necessary or appropriate;
and
Further, that the appropriate officers of the Company, with
such assistance from the Company's
auditors, legal counsel and independent consultants or others
as they may require, be, and they
hereby are, authorized and directed to take all action
necessary to: (a) register the Contracts in
such amounts, which may be an indefinite amount, as the
officers of the Company shall from time
to time deem appropriate, under the Securities Act of 1933;
and, (b) to take all other actions
which are necessary in connection with the offering of said
Contracts for sale and the operation
of the Account in order to comply with the Securities Act of
1933 and the Securities Exchange
Act of 1934 and other applicable federal laws, including the
filing of any amendments to
registration statements, any undertakings, and any
applications for exemptions from applicable
federal law as the officers of the Company shall deem
necessary or appropriate; and
Further, that the appropriate officers of the Company be, and
they hereby are, authorized on
behalf of the Account and on behalf of the Company to take any
and all action they may deem
necessary or advisable in order to sell the Contracts,
including any registrations, filings and
qualifications of the Company, its officers, agents and
employees, and the Contracts under the
insurance and securities laws of any of the states of the
United States of America or other
jurisdictions, and in connection therewith to prepare,
execute, deliver and file all such applications,
reports, covenants, resolutions, applications for exemptions,
consents to service of process and
other papers and instruments as may be required under such
laws, and to take any and all further
action which said officers or counsel of the Company may deem
necessary or desirable (including
entering into whatever agreements may be necessary) in order
to maintain such registrations or
qualifications for as long as said officers or counsel deem it
to be in the best interests of the
Account and the Company; and
Further, that the President, the Vice-Presidents and the
Secretary of the Company be, and they
hereby are, each authorized in the names and on behalf of the
Account and the Company to
execute and file irrevocable written consents on the part of
the Account and of the Company to
be used in such states wherein such consents to service of
process may be required under the
insurance or securities laws therein in connection with said
registration or qualification of the
Contracts and to appoint the appropriate state official or
such other person as may be allowed
by said insurance or securities laws, agent of the Account and
of the Company for the purpose
of receiving and accepting process; and
Further, that the President or a Vice-President each be, and
is hereby authorized to execute such
agreement or agreements as deemed necessary and appropriate
with underwriters and
distributors for the Contracts in connection with the
establishment and maintenance of the
Account or the design, administration, offer and sale of the
Contracts; provided, however, that the
Company is directed to finalize such agreements before
effecting any registrations or filings of the
Contracts or the Account; and
Further, that the appropriate officers of the Company are
hereby authorized to execute whatever
agreement or agreements may be necessary or appropriate to
enable the Account to invest in
the specified securities as may be specified in the respective
Contracts or otherwise required by
law; and
Further, that the appropriate officers of the Company are
hereby authorized to execute and deliver
all such documents and papers and to do or cause to be done
all such acts and things as they
may deem necessary or desirable to carry out the foregoing
resolutions and the intent and
purposes thereof; and
Further, that the term "appropriate officers" as used herein,
shall include all of the elected and
appointed officers of the Company, either severally or
individually, subject to any applicable
resolutions of the Board of Directors dealing with signing
authority for the Company.
Dated at Englewood, /s/ W.K. Adam
Colorado this 3rd W.K. Adam, Secretary
day of April , 1997.
EXHIBIT 3
DISTRIBUTION AGREEMENT
BY AND BETWEEN
CHARLES SCHWAB & CO., INC.
AND
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
TABLE OF CONTENTS
Description
SECTION 1. AVAILABLE CONTRACTS 2
1.1 Availability 2
1.2 Modification of Contracts; Suspension or Restriction of
Sales 2
1.3 Reinsurance of Contracts 3
SECTION 2. CONTRACT DISTRIBUTION 3
2.1 Exclusive Appointments; Efforts; Independent Contractor 3
2.2 Registration of Associated Persons 4
2.3 Insurance Agent Licensing 5
2.4 Sales Agreements 5
2.5 Supervisory Responsibilities 6
2.6 Suitability Determinations 6
2.7 Marketing Materials 6
2.8 Non-marketing Materials 7
2.9 Banking Arrangements 8
2.10 Limitations on Authority 8
SECTION 3. RECORDKEEPING 9
3.1 Recordkeeping 9
SECTION 4. LEGAL COMPLIANCE 10
4.1 Securities Laws 10
4.2 Tax Laws 12
4.3 Insurance Laws and Other Laws 12
4.4 Notice of Certain Proceedings and Other Circumstances 14
4.5 Parties to Cooperate 15
4.6 Information About FIRST GREAT-WEST and SCHWAB 15
SECTION 5. COSTS AND EXPENSES 16
5.1 FIRST GREAT-WEST to Pay Employees 16
5.2 SCHWAB to Pay Employees 16
5.3 Each Party To Bear Own Costs 16
SECTION 6. INDEMNIFICATION 17
6.1 Indemnification by FIRST GREAT-WEST 17
6.2 Indemnification by SCHWAB 18
6.3 Limitation on Liability 20
6.4 Injunctive Relief 20
SECTION 7. TERM AND TERMINATION 20
7.1 Term 20
7.2 Events of Termination 20
7.3 Events of Default 22
7.4 Parties to Cooperate Respecting Termination 22
SECTION 8. CONFIDENTIALITY 22
SECTION 9. ARBITRATION 23
SECTION 10. BONDING AND INSURANCE 25
SECTION 11. NOTICES 25
SECTION 12. TRADEMARKS 25
SECTION 13. MISCELLANEOUS 27
13.1 Amendment 27
13.2 Non-Assignment 27
13.3 Governing Law 27
13.4 Survival of Provisions 27
13.5 Severability 27
13.6 Waiver 28
13.7 Right to Audit 28
13.8 Force Majeure 28
13.9 Entire Agreement 28
SCHEDULE 1 30
SCHEDULE 1.1 31
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") is made as of the
day of ________, 1997, by and between Charles Schwab & Co., Inc.,
a California corporation ("SCHWAB"), and First Great-West Life &
Annuity Insurance Company, a New York insurance company ("FIRST
GREAT-WEST"), on behalf of itself and each of its separate accounts
listed on Schedule 1 hereto, as the same may be amended from time
to time (each an "Account") (each, a "Party," collectively, the
"Parties").
RECITALS
WHEREAS, FIRST GREAT-WEST is a New York life insurance company duly
licensed as required by applicable law to issue life insurance and
annuity contracts identified on Schedule 1.1, as may be amended
from time to time, (each a "Contract," collectively, the
"Contracts") in certain states and other jurisdictions; and
WHEREAS, FIRST GREAT-WEST, has developed or is developing
Contracts, some of which shall be funded by segregated asset
accounts; and
WHEREAS, SCHWAB is licensed or will become licensed as required by
applicable law to market such Contracts pursuant to applicable
state law and is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "1934 Act") and under the securities laws
in all fifty (50) states, and is a member of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, FIRST GREAT-WEST has extensive experience in the operation
of its insurance business and has trained personnel, equipment, and
facilities for conducting its present and future insurance
operations; and
WHEREAS, SCHWAB has extensive experience in the operation of its
business as a registered broker-dealer and has trained (and
NASD-registered) personnel, equipment, and facilities for
conducting its present and future broker-dealer operations; and
WHEREAS, certain personnel of SCHWAB may engage, or deemed to be
engaged, directly or indirectly, in the offering, selling,
advertising or marketing of certain Contracts the interests under
which are required to be registered under the Securities Act of
1933, as amended (the "1933 Act") ("registered Contracts"); the
confirming of transactions under registered Contracts as required
by the 1934 Act Rule 10b-10; the maintenance of records with
respect to registered Contracts as required by 1934 Act Rules 17a-3
and 17a-4 or other SEC or NASD rules applicable to registered
broker-dealers (all Distributor personnel engaged in these
activities, as well as all other persons whom Section 3(a)(18) of
the 1934 Act defines as associated persons of SCHWAB, are
collectively referred to herein as "Associated Persons"); and
WHEREAS, FIRST GREAT-WEST and SCHWAB desire to enter into an
agreement to have SCHWAB act as the principal underwriter and/or
insurance agent, as applicable, for the sale of the Contracts.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and of the mutual expectations of
benefit occurring from the activities herein contemplated, the
Parties hereto agree as follows:
SECTION 1. AVAILABLE CONTRACTS
1.1 Availability
(a) SCHWAB shall have exclusive marketing and distribution rights
for certain Contracts specifically identified in Schedule 1.1
(hereinafter, "Exclusive Contracts"). SCHWAB shall have
non-exclusive marketing and distribution rights for all Contracts
identified in Schedule 1.1 (hereinafter, "Other Contracts").
Schedule 1.1 may be amended from time to time as mutually agreed to
in writing between the two Parties. The Parties have agreed that
certain Contracts will be designed to be sold into the Internal
Revenue Code Section 403(b), 457 and 401(k) markets and made available
for distribution by SCHWAB and added to Schedule 1.1 when
available. SCHWAB acknowledges that FIRST GREAT-WEST is currently
marketing contracts similar to the Exclusive Contracts and may
develop and market contracts in the future with similar terms to
those contained in the Contracts. In no event may FIRST GREAT-WEST
directly or indirectly develop, issue, market or otherwise promote
any Contract that bears the name SCHWAB or any other proprietary
SCHWAB tradenames, trademarks or service mark without the prior
written approval of SCHWAB, except as permitted by and in
accordance with Section 12.1 hereof.
1.2 Modification of Contracts; Suspension or Restriction of Sales
(a) FIRST GREAT-WEST may modify the terms of any Contract, to the
extent permitted or required by applicable law. Any modification,
other than a modification required to be made to conform the
Contracts to a change in applicable law, shall be approved by
SCHWAB, which approval shall not be unreasonably withheld. SCHWAB
may, from time to time, propose modifications to the terms of any
Contract, and FIRST GREAT-WEST agrees to implement any such
modification in a timely manner, subject to FIRST GREAT-WEST's
approval, which shall not be unreasonably withheld. Prior to
implementation of any modification, the Parties must mutually agree
on such change or changes and agree as to who will bear the costs
associated with such change.
(b) Upon 180 days' prior written notice, FIRST GREAT-WEST may
suspend or restrict the sale of any Contract in any state or other
jurisdiction, FIRST GREAT-WEST will effect such withdrawal in
accordance with all applicable law. FIRST GREAT-WEST reserves the
right to immediately withdraw any fixed annuity contract (or
portion thereof) with respect to future sales where the declared
interest rate, as determined by FIRST GREAT-WEST's usual and
customary business practices, would be below that Contract's
declared minimum guaranteed interest rate. In addition,
notwithstanding any provision herein to the contrary, FIRST
GREAT-WEST may refuse to sell any Contract to any applicant for any
reason so long as such refusal does not violate any applicable
state insurance law. FIRST GREAT-WEST shall communicate the
reasons for any refusal to SCHWAB.
1.3 Reinsurance of Contracts
FIRST GREAT-WEST may reinsure any of the Contracts with a reinsurer
of its choice at any time in accordance with applicable law.
SECTION 2. CONTRACT DISTRIBUTION
2.1 Exclusive Appointments; Efforts; Independent Contractor
(a) FIRST GREAT-WEST appoints SCHWAB, and SCHWAB accepts FIRST
GREAT-WEST's appointment, as the exclusive principal underwriter,
and, as applicable, exclusive insurance agent for the offer and
sale of the Exclusive Contracts and as non-exclusive principal
underwriter and insurance agent of the Other Contracts offered by
SCHWAB to the public, during the term of this Agreement, in each
state and other jurisdiction in which such Contracts may lawfully
be offered and sold. Notwithstanding anything herein to the
contrary, SCHWAB shall not act as, or be deemed to be, the
principal underwriter of any Contract that is not registered under
the 1933 Act and which appears on any of the Schedules attached
hereto.
(b) SCHWAB shall use all commercially reasonable efforts to
offer the Contracts for sale and distribution, but shall be under
no obligation to effectuate any particular amount of sales of
Contracts. SCHWAB shall, however, provide FIRST GREAT-WEST in
writing new product sales projections for the initial twelve (12)
month period of this Agreement and every twelve (12) month period
thereafter. The estimate should contain quarterly information for
the period in question. The estimate should also provide sales
estimates on a Contract by Contract basis, and include all
projected premiums. FIRST GREAT-WEST acknowledges that SCHWAB
currently sells, and may in the future sell, annuity contracts
and/or life insurance policies issued by life insurance companies
unaffiliated with FIRST GREAT-WEST.
(c) SCHWAB shall at all times function as, and be deemed to be, an
independent contractor.
(d) Except as may be necessary to comply with the requirements of
any applicable law or regulation, SCHWAB shall not, absent FIRST
GREAT-WEST's consent, actively promote the replacement of any
Contract or the redirection of the cash value of a Contract into
any other product; provided, however, that FIRST GREAT-WEST's
consent shall be presumed granted (i) upon the occurrence, with
respect to FIRST GREAT-WEST, of any event described in Sections
7.2(a)(iii) or 7.2(b) hereof only to the extent of Contract owners
in those jurisdictions in the events under 7.2(b)(ii) and (iii) or
(ii) upon the failure of FIRST GREAT-WEST to cure a default
pursuant to Section 7.3 hereof. "Actively promote" shall include,
but not be limited to, mailings specifically sent to or
conversations specifically held with Contract owners or licensed
agents of SCHWAB which induce or attempt to induce a Contract owner
to surrender the Contract and replace it with another product
(other than a product offered by FIRST GREAT-WEST or it
affiliates), or to direct premiums, cash values or deposits from a
Contract to any other product (other than a product offered by
FIRST GREAT-WEST or its affiliates). Notwithstanding the
foregoing, in no event shall this provision prevent SCHWAB from
concurrently or subsequently offering and selling to a Contract
owner any non-insurance product, whether or not offered by FIRST
GREAT-WEST or its affiliates. This provision shall survive the
termination of this Agreement other than pursuant to Sections
7.2(a)(iii), 7.2(b) or 7.3 hereof.
2.2 Registration of Associated Persons
(a) SCHWAB shall be responsible for ensuring, at its sole cost,
that each Associated Person involved with the offer or sale of
registered Contracts is duly registered and qualified pursuant to
the 1934 Act, NASD regulations, and any other required securities
regulatory body.
(b) In connection with such registration, SCHWAB shall conduct
such background investigations of the SCHWAB employees necessary to
determine their qualifications, good character and moral fitness to
offer and sell the Contracts. Such information shall be available
to FIRST GREAT-WEST upon request.
(c) SCHWAB shall continuously monitor the status of SCHWAB and
each of SCHWAB's registered employees to ensure that they are and
remain properly registered and qualified.
2.3 Insurance Agent Licensing
(a) Neither SCHWAB nor any of its employees shall engage in
any activities that would require insurance agent licensing in the
state or jurisdiction where such activities are performed, unless
and until SCHWAB and its employees are properly licensed to perform
such services in the particular state or other jurisdiction. As
used herein, "properly licensed" includes the filing of an
appointment by FIRST GREAT-WEST, SCHWAB and/or other person when
required by the laws or regulations of the applicable state or
jurisdiction.
(b) SCHWAB shall, from time to time, advise FIRST GREAT-WEST of
the SCHWAB employees that it wishes FIRST GREAT-WEST to appoint as
FIRST GREAT-WEST insurance agents. In that connection, SCHWAB shall
conduct background investigations of the SCHWAB employees to
determine their qualifications, good character and moral fitness to
offer and sell the Contracts, and shall prepare and submit
completed agent appointment forms for FIRST GREAT-WEST's approval.
FIRST GREAT-WEST shall forward all approved agent appointment forms
in a timely manner to the appropriate state insurance departments
and pay all required appointment fees.
(c) SCHWAB shall be responsible for ensuring that all SCHWAB
employees engaged in the offer or sale of Contracts (whether or not
registered with the SEC under the 1933 Act) are properly licensed
and remain properly licensed under the insurance laws of the
applicable states and other jurisdictions to sell the Contracts. In
furtherance of this obligation, SCHWAB shall continuously monitor
the status of SCHWAB's and each SCHWAB employee's insurance agent
license and renewal in each state and jurisdiction in which the
Contracts may be offered and sold. SCHWAB shall notify FIRST
GREAT-WEST in a timely manner of any license not renewed.
(d) SCHWAB agrees to undertake all actions necessary and to pay
all costs to effect licensing of itself and its employees and
renewals thereof as required for the business of this Agreement.
FIRST GREAT-WEST agrees to take all actions necessary and to pay
all costs to effect the appointment as insurance agents of SCHWAB
and its employees and renewals thereof as required for the business
of this Agreement.
(e) FIRST GREAT-WEST, in its sole discretion, may refuse to
appoint or renew the appointment of a SCHWAB employee as a FIRST
GREAT-WEST insurance agent. In the event FIRST GREAT-WEST refuses
to renew the appointment of a SCHWAB employee, it shall not act
except upon ten (10) days prior written notice to SCHWAB.
2.4 Sales Agreements
FIRST GREAT-WEST and SCHWAB may, from time to time, enter into
separate written agreements ("Sales Agreements"), on such terms and
conditions as they may determine to be not inconsistent with this
Agreement, with one or more organizations that agree to participate
in the distribution of the Contracts, provided, that such
organizations, shall to the extent required by law, be both
registered as a broker-dealer under the 1934 Act and a member of
the NASD, and provided further, that such organizations and their
agents or representatives soliciting applications for Contracts
shall be properly licensed, registered or otherwise qualified to
offer and sell the Contracts under the applicable insurance and
other laws of each state or other jurisdiction in which FIRST
GREAT-WEST is licensed to sell the Contracts. Such written
agreements with other organizations shall be subject to approval by
FIRST GREAT-WEST and shall incorporate terms and provisions
establishing requirements and standards of conduct on the sale of
the Contracts by the organization.
2.5 Supervisory Responsibilities
(a) SCHWAB shall be responsible for training, monitoring and
controlling the activities of SCHWAB employees involved in the
offer and sale of the Contracts. FIRST GREAT-WEST shall participate
in, and shall bear responsibility with respect to, such training,
monitoring, and control to the extent required by applicable NASD
rules, SEC laws, state insurance laws, or other applicable laws.
(b) Notwithstanding the above, FIRST GREAT-WEST shall provide
adequate training to SCHWAB supervisory personnel with respect to
the Contracts.
2.6 Suitability Determinations
SCHWAB agrees to establish written procedures that will require
SCHWAB employees to review all Contract applications to determine
that the Contracts are a "suitable" investment vehicle for the
applicant. While not limited to the following, such written
procedures must provide that a determination of suitability shall
be based on information furnished to a SCHWAB employee after
reasonable inquiry of such applicant concerning the applicant's
investment objectives and financial situation. In no event shall
Contracts be sold describing premiums as "vanishing" or Contracts
as being paid up at a time other than the date described in the
Contract itself.
2.7 Marketing Materials
(a) SCHWAB shall have the responsibility for developing, printing,
and distributing, at its sole cost, all marketing materials to be
used in connection with the offer and sale of the Contracts. As
used herein, "marketing materials" shall mean any "advertisement"
or "sales literature," as those terms are defined in NASD Conduct
Rule 2210(a), as amended from time to time, including any so-called
"dealer only" materials, and including any material intended to be
spoken in the solicitation of a Contract, such as telephone
scripts, scripted answers to questions and slide show scripts but
excluding Contract Prospectuses, registration statements, annual
and semi-annual reports and other materials that are developed by
FIRST GREAT-WEST.
(b) SCHWAB shall submit definitive copies of all marketing
materials to FIRST GREAT-WEST for its written approval, which shall
not be unreasonably withheld, at least five (5) business days prior
to printing or finalization.
(c) SCHWAB shall, to the extent required, file in a timely manner
all marketing materials with the NASD, the SEC, or any other
securities regulatory body, as appropriate, and shall obtain any
necessary approval of these regulatory bodies of such marketing
materials.
(d) FIRST GREAT-WEST shall, to the extent required by law, file in
a timely manner all marketing materials with the various state
insurance regulatory bodies, and shall obtain any necessary
approval of these regulatory bodies of such marketing materials.
2.8 Non-marketing Materials
(a) FIRST GREAT-WEST shall be responsible for preparing, printing
in quantity and delivering to SCHWAB, at FIRST GREAT-WEST's sole
cost: (i) all Contract forms, applications and related materials,
(ii) all forms pertaining to the processing of premium payments,
refunds and other monies, and (iii) all forms pertaining to
transactions, claims, and other features available under the
Contracts, including, but not limited to, full or partial
surrenders, exchanges, transfers, loans, systematic purchases,
death claims, changes in premium allocations, and changes in
beneficiary. FIRST GREAT-WEST shall submit definitive copies of
all materials to SCHWAB for its written approval, which shall not
be unreasonably withheld, at least five (5) business days prior to
printing or finalization.
(b) SCHWAB shall be responsible for preparing, printing, and
distributing, at its sole cost, all correspondence with Contract
owners, except for correspondence or other communication prepared,
printed, and distributed by FIRST GREAT-WEST. FIRST GREAT-WEST and
SCHWAB agree that SCHWAB shall submit copies of all prototypes of
correspondence, with all variations, and copies of all materials
being mass mailed to Contract owners to FIRST GREAT-WEST for its
written approval, which shall not be unreasonably withheld, at
least five (5) business days prior to printing or finalization.
(c) FIRST GREAT-WEST shall be responsible for preparing, printing,
and distributing, or causing the same to be done, at its sole cost:
(i) all Contract owner account statements, (ii) confirmations of
Contract owner transactions required to be delivered to Contract
owners pursuant to Section 4.1(g), and (iii) all documents
described in Sections 4.1(b), 4.1(h) and 4.2(c)hereof. FIRST
GREAT-WEST and SCHWAB agree that FIRST GREAT-WEST shall submit the
form of all items (i) and (ii) and definitive copies of (iii) to
SCHWAB for its written approval, which shall not be unreasonably
withheld, at least five (5) business days prior to printing or
finalization. FIRST GREAT-WEST acknowledges that these materials,
with the exception of 4.2(c), are marketing materials and may be
used as such by SCHWAB.
(d) SCHWAB and FIRST GREAT-WEST agree that correspondence or other
communication to any policyowner involving a complaint shall be
submitted to the other for written approval prior to mailing or
communicating with the policyowner.
2.9 Banking Arrangements
(a) SCHWAB agrees to handle all premium payments or other monies
that it receives in connection with the sale of the Contracts as a
fiduciary for the benefit of FIRST GREAT-WEST. All such premium
payments shall be the property of FIRST GREAT-WEST.
(b) Premium payments may be received by either SCHWAB or FIRST
GREAT-WEST. SCHWAB shall deposit and maintain any premium payments
received by SCHWAB (whether such premium payments are received in
the form of a check, pursuant to an authorization to wire transfer
monies from a SCHWAB client's account, or in any other manner) in
one or more segregated accounts maintained by FIRST GREAT-WEST in
its name (or in the name of an Account) at one or more banks or
other financial institutions, and in connection therewith SCHWAB
shall: (i) send FIRST GREAT-WEST a copy of the deposit slip or
wire transfer ticket by overnight mail or fax, and (ii) immediately
deposit any monies received with an application into such
depository account or accounts as designated from time to time by
FIRST GREAT-WEST. FIRST GREAT-WEST shall be responsible for
depositing any premium payments received at the offices of FIRST
GREAT-WEST.
2.10 Limitations on Authority
(a) SCHWAB and its employees shall have no authority to, and shall
not: (i) add, alter, waive or discharge any Contract or application
provision or Prospectus provision or represent that such can be
done by FIRST GREAT-WEST or SCHWAB; (ii) extend the time of making
any payments; (iii) alter or substitute FIRST GREAT-WEST's forms in
any manner; (iv) give or offer to give, on behalf of FIRST
GREAT-WEST, any tax or legal advice related to the purchase of a
Contract; (v) guarantee the issuance of any Contract or the
reinstatement of any lapsed Contract; or (vi) exercise any
authority on behalf of FIRST GREAT-WEST other than that expressly
conferred on SCHWAB or its employees by this Agreement.
(b) FIRST GREAT-WEST and its employees shall have no authority to,
and shall not (i) give or offer to give on behalf of SCHWAB, any
tax or legal advice related to the purchase of a Contract, or (ii)
exercise any authority on behalf of SCHWAB other than that
expressly conferred on FIRST GREAT-WEST or its employees by this
Agreement.
SECTION 3. RECORDKEEPING
3.1 Recordkeeping
(a) Each Party agrees to keep, at its principal office, all
accounts, books and other records required by and in accordance
with applicable federal and state law, including any state
insurance laws, and the regulations of any regulatory body having
jurisdiction over such accounts, books, and other records,
including but not limited to Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940 (" 1940 Act") and Rules 17a-3 and
17a-4 under the 1934 Act.
(b) Any and all accounts, books and other records of FIRST
GREAT-WEST, the Accounts, and SCHWAB as may pertain to the
Contracts and this Agreement shall be maintained so as to clearly
and accurately disclose the nature and details of Contract
transactions or any transactions related thereto.
(c) Any accounts, books, and other records maintained by FIRST
GREAT-WEST, at its expense, as agent for the benefit of SCHWAB
shall conform to the requirements of Rules 17a-3 and 17a-4 under
the 1934 Act, and as further amplified in SEC Release 34-8389.
Furthermore, such accounts, books, and other records shall remain
the property of SCHWAB, shall be surrendered promptly to SCHWAB at
its request without charge, and shall at all times be subject to
inspection by SCHWAB, the SEC pursuant to Section 17(a) of the 1934
Act and any other appropriate governmental agency. SCHWAB shall
have responsibility for maintaining the records required of it by
applicable law or regulations with respect to broker-dealer
operations, although, in SCHWAB's discretion and at FIRST
GREAT-WEST's expense, SCHWAB may use FIRST GREAT-WEST as its agent
for this purpose.
(d) Any accounts, books, and other records maintained by SCHWAB,
at its expense, as agent for the benefit of FIRST GREAT-WEST or the
Accounts, shall conform to the requirements of Rules 31a-1 and
31a-2 under the 1940 Act or such other SEC requirement as relates
to non-1940 Act products or as required by state insurance
regulators and conveyed to SCHWAB in writing. Furthermore, such
accounts, books, and records shall remain the property of FIRST
GREAT-WEST or the Accounts, shall be surrendered promptly to FIRST
GREAT-WEST or the Accounts upon request by FIRST GREAT-WEST without
charge, and shall at all times be subject to inspection by FIRST
GREAT-WEST, whether acting on behalf of itself or the Accounts, the
SEC pursuant to Section 31(b) of the 1940 Act and any other
appropriate governmental agency. FIRST GREAT-WEST or the Accounts
shall have responsibility for maintaining the records required of
them by applicable law or regulations with respect to investment
company operations, although, in FIRST GREAT-WEST's discretion and
at the Distributor's expense, FIRST GREAT-WEST and the Accounts may
use SCHWAB as their agent for this purpose.
(e) Upon the written request of either Party to the other, or upon
termination of this Agreement, a Party shall provide to the other
without charge the originals, if the requesting Party is required
to maintain such originals, or, at the requesting Party's cost,
copies of the accounts, books and other records or electronic
information representing the accounts, books and records if that is
the format in which they are maintained.
SECTION 4. LEGAL COMPLIANCE
4.1 Securities Laws
(a) FIRST GREAT-WEST represents and warrants that:
(i) interests in each Account funding any Contract or 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 sale in
compliance with all applicable federal and state laws, including,
without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
New York 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) FIRST GREAT-WEST 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, subject to its right to discontinue or withdraw
from future sale any Contract pursuant to 1.2(b) of this Agreement,
and
(vii) each prospectus for the Contracts, including any statement of
additional information (collectively, as the context requires,
"Contract Prospectus") will at all times comply in all material
respects with the requirements of the 1933 Act and the rules
thereunder.
(b) FIRST GREAT-WEST represents and warrants that it will prepare,
print, and deliver, in a timely manner annual and semi-annual
reports for the Accounts, Contract Prospectuses, voting instruction
forms, as required, and related materials to all existing Contract
owners, as appropriate. The costs of preparing and delivering the
foregoing materials shall be borne by FIRST GREAT-WEST.
(c) SCHWAB represents and warrants that it is duly registered with
the SEC as a broker-dealer under the 1934 Act, that it is licensed
as a broker-dealer in all 50 states, and that the activities of
SCHWAB and its employees in connection with the offer and sale of
Contracts shall be in compliance with applicable federal and state
securities laws in all material respects.
(d) SCHWAB agrees that neither it nor its employees shall make any
representations concerning the Contracts, except those contained in
or reasonably derived from the Contract Prospectus, registration
statements, annual or semi-annual reports of the Accounts, or in
other written materials prepared by or on behalf of FIRST
GREAT-WEST.
(e) SCHWAB shall reimburse FIRST GREAT-WEST for the cost of
printing the Contract Prospectuses for persons other than existing
Contract owners, and SCHWAB shall pay for all costs of delivering
Contract Prospectuses to such persons.
(f) SCHWAB agrees to execute such papers and do such acts and
things as shall from time to time be reasonably requested by FIRST
GREAT-WEST for the purpose of maintaining the registration of the
Contracts under the 1933 Act and any Account under the 1940 Act and
any applicable insurance regulatory authority.
(g) SCHWAB, directly or through FIRST GREAT-WEST (at FIRST
GREAT-WEST's expense), shall, upon or prior to the completion of
each Contract transaction for which a confirmation is legally
required, send a written confirmation to the Contract owner for
each such transaction, in a form and manner which complies with the
requirements of the 1934 Act, state laws and regulations, and the
disclosure requirements of the NASD. Such confirmations shall be
furnished to all Contract owners in accordance with securities
laws, shall reflect the facts of the transaction, and, if
applicable, shall show that they are being sent by FIRST GREAT-WEST
on behalf of SCHWAB. The Parties agree that the form and the manner
of use of confirmations in connection with transactions occurring
in Contract accounts shall be supervised by SCHWAB. FIRST
GREAT-WEST shall prepare and distribute such confirmations in
accordance with SCHWAB's instructions. FIRST GREAT-WEST shall make
no changes or variations in either the form or the manner of
distribution of such confirmations without the written approval of
SCHWAB and shall cause such confirmations to be issued as directed
by SCHWAB and on behalf of SCHWAB.
(h) FIRST GREAT-WEST represents and warrants that it shall
prepare, print, deliver and file with the SEC or other appropriate
regulatory body, or cause the same to be done, as required by law
and in a timely manner, all registration statements, annual and
semi-annual reports, proxies and related materials, and other
documents relating to all underlying investment vehicles to which
Contract owner premiums may be allocated. FIRST GREAT-WEST's
obligations in this regard, and the allocation of expenses relating
thereto, shall be delineated in a separate agreement with each
underlying investment vehicle and SCHWAB, to which FIRST GREAT-WEST
shall be a party.
4.2 Tax Laws
(a) FIRST GREAT-WEST represents and warrants that the Contracts
currently are treated as annuity, endowment, or life insurance
contracts under applicable provisions of the Internal Revenue Code
of 1986, as amended ("Code") and that it will make every effort to
maintain such treatment; FIRST GREAT-WEST will notify SCHWAB
immediately upon having a reasonable basis for believing that any
of the Contracts have ceased to be so treated or that they might
not be so treated in the future.
(b) FIRST GREAT-WEST 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 to the extent
required by law. FIRST GREAT-WEST will make every effort to
continue to meet such definitional requirements, and it will notify
SCHWAB 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.
(c) FIRST GREAT-WEST agrees to administer the Contracts in a
manner that will comply with all federal and state tax law.
(d) FIRST GREAT-WEST agrees to prepare, print, and deliver to
Contract owners, and, to the extent required, file with the
Internal Revenue Service and any other appropriate regulatory body,
all reports, forms, and other information necessary for FIRST
GREAT-WEST to comply with applicable federal and state tax law.
4.3 Insurance Laws and Other Laws
(a) FIRST GREAT-WEST shall take all actions necessary to the
extent required by law to obtain and maintain all regulatory
approvals required to issue the Contracts for sale in any states
where the contracts are being offered for sale.
(b) SCHWAB shall take all actions necessary to ensure that it and
its employees are properly licensed and appointed by FIRST
GREAT-WEST to sell insurance and annuities in the jurisdictions in
which they are selling and shall execute such papers and do such
acts and things as shall from time to time be reasonably requested
by FIRST GREAT-WEST for the purpose of qualifying and maintaining
qualification of the Contracts for sale under the applicable laws
of any state.
(c) FIRST GREAT-WEST 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 New York 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 will legally and validly establish and maintain each
Account as a segregated asset account under Section 4220of the New
York Insurance Code and the regulations thereunder, and
(iii) the Contracts comply in all material respects with all other
applicable federal and state laws and regulations.
(d) SCHWAB represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of California and has full power, authority, and legal
right to execute, deliver, and perform its duties and comply with
its obligations under this Agreement.
(e) SCHWAB represents and warrants that it is a member in good
standing of the NASD and that it has obtained all approvals
necessary to offer the Contracts and otherwise enter into and carry
out all transactions contemplated by this Agreement, has obtained
or will obtain all approvals, licenses, authorizations, orders or
consents, and shall be duly registered and appointed or otherwise
qualified under the securities and insurance laws of any state or
other jurisdiction where offers or sales of the Contracts may be
made.
(f) SCHWAB agrees that it shall be bonded as required by all
applicable laws and regulations. SCHWAB shall be responsible for
carrying out its sales and underwriting obligations hereunder in
continued compliance with applicable NASD Rules of Fair Practice
and federal and state securities laws and regulations and state
insurance laws and regulations.
4.4 Notice of Certain Proceedings and Other Circumstances
(a) FIRST GREAT-WEST shall immediately notify SCHWAB 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 any
Contract or to any Account's registration statement under the 1933
Act relating to the Contracts or any Contract Prospectus,
(ii) any request by the SEC or other regulatory body for any
amendment to such registration statement or Contract Prospectus,
(iii) the initiation of any proceeding materially affecting the
offering or sale of the Contracts or the ability of FIRST
GREAT-WEST to issue or sell such Contracts,
(iv) any other actions or circumstances that may prevent the
lawful offer or sale of any of the Contracts in any state.
FIRST GREAT-WEST shall make every 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.
(b) SCHWAB shall immediately notify FIRST GREAT-WEST of:
(i) the issuance by any court or regulatory body of any order
having a material effect with respect to SCHWAB's ability to
perform its obligations hereunder,
(ii) the initiation of any proceeding materially affecting the
offering or sale of the Contracts or the ability of SCHWAB to sell
such Contracts, and
(iii) any other actions or circumstances that may prevent the
lawful offer or sale of any of the Contracts in any state.
(c) SCHWAB shall notify FIRST GREAT-WEST within three (3) business
days if it or any of its officers, directors, employees or
registered representatives who are licensed to sell insurance and
are appointed by FIRST GREAT-WEST is or becomes subject to any
proceedings or is sanctioned or suspended (i) by the SEC or NASD,
(ii) by any court for securities, insurance or financial
institution law violations, or (iii) by any state regulatory
authority.
(d) In the case of an oral or written consumer or regulatory
agency complaint, SCHWAB and FIRST GREAT-WEST shall notify the
other within three (3) business days of receipt and shall
coordinate and fully cooperate in responding to such complaints.
SCHWAB and FIRST GREAT-WEST shall develop procedures to coordinate,
investigate and respond to such complaints.
4.5 Parties to Cooperate
SCHWAB and FIRST GREAT-WEST shall cooperate fully in any insurance
or securities regulatory examination, investigation, or proceeding
or any judicial proceeding with respect to FIRST GREAT-WEST,
SCHWAB, and their respective affiliates, agents and representatives
to the extent that such examination, investigation, or proceeding
arises in connection with Contracts distributed under this
Agreement. SCHWAB and FIRST GREAT-WEST shall furnish applicable
federal and state regulatory authorities with any information or
reports in connection with its services or sales under this
Agreement, which authorities may lawfully request in order to
ascertain whether FIRST GREAT-WEST or SCHWAB sales and operations
are being conducted in a manner consistent with any applicable law
or regulations. The Parties shall, at least 10 business days prior
to provision of such information, notify the other to enable that
Party, if it so desires, to interpose any legal objections to
provision of the reports or information.
4.6 Information About FIRST GREAT-WEST and SCHWAB
(a) FIRST GREAT-WEST shall provide to SCHWAB or its designated
agent at least one complete copy of all SEC registration
statements, Contract Prospectuses, reports, any required 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, at least five
(5) business days prior to the filing of such document with the SEC
or other regulatory authorities for approval.
(b) Neither FIRST GREAT-WEST nor any of its affiliates will give
any information or make any representations or statements on behalf
of or concerning SCHWAB 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 Contract Prospectus contained therein, as such registration
statement and Prospectus may be amended from time to time; or (ii)
in reports or voting instruction solicitation materials for the
Accounts; or (iii) in marketing material prepared by SCHWAB, except
with the express written permission of SCHWAB.
(c) Except with the express written permission of FIRST
GREAT-WEST, neither SCHWAB nor any of its affiliates, officers or
employees will give any information or make any representations or
statements on behalf of or concerning FIRST GREAT-WEST or its
affiliates or the Contracts or Accounts, in connection with the
sale of the Contracts other than
(i) the information or representations contained in the Contracts,
the registration statement, including the Contract Prospectus
contained therein, as such registration statement and Prospectus
may be amended from time to time, or the Prospectuses of the
underlying funds; or
(ii) in reports or voting instruction solicitation materials for
the Accounts; or
(iii) in marketing material or other material approved or developed
by FIRST GREAT-WEST.
SECTION 5. COSTS AND EXPENSES
5.1 FIRST GREAT-WEST to Pay Employees
FIRST GREAT-WEST shall have the responsibility for paying any
compensation due its employees. FIRST GREAT-WEST specifically
agrees to indemnify, hold harmless and defend SCHWAB against any
and all expense, cost, causes of action, liability, loss or damage,
including reasonable attorneys' fees, resulting or arising from or
related to any claim against SCHWAB for compensation allegedly owed
to a FIRST GREAT-WEST employee. FIRST GREAT-WEST specifically
agrees that it shall not represent to any employee, broker-dealer,
or registered representative that any compensation or fees are
payable to them from SCHWAB.
5.2 SCHWAB to Pay Employees
SCHWAB shall have the responsibility for paying any compensation
due its employees. SCHWAB specifically agrees to indemnify, hold
harmless and defend FIRST GREAT-WEST against any and all expense,
cost, causes of action, liability, loss or damage, including
reasonable attorneys' fees, resulting or arising from or related to
any claim against FIRST GREAT-WEST for compensation allegedly owed
to a SCHWAB employee. SCHWAB specifically agrees that it shall not
represent to any employee, broker-dealer, or registered
representative that any compensation or fees are payable to them
from FIRST GREAT-WEST.
5.3 Each Party To Bear Own Costs
Except as otherwise expressly provided, each Party to this
Agreement shall bear all expenses of fulfilling its duties and
obligations hereunder.
SECTION 6. INDEMNIFICATION
6.1 Indemnification by FIRST GREAT-WEST
(a) FIRST GREAT-WEST shall indemnify and hold harmless SCHWAB
against any loss, liability, claim, damage or expense (including
the reasonable cost of investigating or defending any alleged loss,
liability, claim, damage or expense, and reasonable counsel fees
incurred in connection therewith) arising by reason of any person's
acquiring any Contract, which may be based upon any federal or
state securities act, or on any other statute or at common law,
(i) on the ground that the Contract, offering document,
registration statement or related Contract Prospectus, as from time
to time amended and supplemented, or the annual or interim reports
to Contract owners, any published marketing materials or
communications with any Contract owner or prospective Contract
owner concerning the Contract, include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, if such statement or omission was made in reliance
upon, and in conformity with, information furnished by or on behalf
of FIRST GREAT-WEST to SCHWAB; or
(ii) on the ground that FIRST GREAT-WEST, its employees, officers,
or directors, failed to comply with any applicable securities or
other laws and regulations in connection with its rendering of
Contract issue, recordkeeping, confirmation or other services under
this Agreement; or
(iii) on the ground of FIRST GREAT-WEST's negligence or
misconduct, or that of FIRST GREAT-WEST's employees, officers, or
directors, in the performance of its duties hereunder, or breach by
FIRST GREAT-WEST of any representation or warranty hereunder.
The indemnities in this Section 6.1 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director,
officer and employee of SCHWAB and any person controlling or
controlled by SCHWAB within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act.
(b) In no case is the indemnity of FIRST GREAT-WEST in favor of
SCHWAB and any such controlling or controlled persons to be deemed
to protect SCHWAB or any such controlling or controlled persons
thereof against any liability to FIRST GREAT-WEST, or the Accounts
or its Contract owners to which SCHWAB or any such controlling or
controlled persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of reckless disregard of its obligations
and duties under this Agreement. In addition, in no case is FIRST
GREAT-WEST to be liable under its indemnity agreement contained in
Section 6.1(a) with respect to any claim made against SCHWAB or any
such controlling or controlled persons, unless SCHWAB or such
controlling or controlled persons, as the case may be shall have
notified FIRST GREAT-WEST in writing by fax or overnight mail
within two (2) days after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon SCHWAB or such controlling or controlled persons (or
after SCHWAB or such controlling or controlled persons shall have
received notice of such service on any designated agent), but
failure to notify FIRST GREAT-WEST of any such claim shall not
relieve FIRST GREAT-WEST from any liability which it may have to
the person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph.
FIRST GREAT-WEST will be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any
suit brought to enforce any such liability, but if FIRST GREAT-WEST
elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to SCHWAB or such controlling
or controlled person or persons, defendant or defendants in the
suit. In the event FIRST GREAT-WEST elects to assume the defense of
any such suit and retains such counsel, SCHWAB or such controlling
or controlled person or persons, defendant or defendants in the
suit, shall bear the fees and expense of any additional counsel
retained by SCHWAB or such controlling or controlled person or
persons, but, in case FIRST GREAT-WEST does not elect to assume the
defense of any such suit, it will reimburse SCHWAB or such
controlling or controlled person or persons, defendant or
defendants in the suit, for the reasonable fees and expense of any
counsel retained by them. FIRST GREAT-WEST shall promptly notify
SCHWAB of the commencement of any litigation or proceedings against
FIRST GREAT-WEST or any of its officers, directors, employees or
agents in connection with the issuance or sale of the Contracts.
6.2 Indemnification by SCHWAB
(a) SCHWAB shall indemnify and hold harmless FIRST GREAT-WEST and
the Accounts against any loss, liability, claim, damage or expense
(including the reasonable cost of investigating or defending any
alleged loss, liability, claim, damage or expense and reasonable
counsel fees incurred in connection therewith) arising by reason of
any person's acquiring any Contract, which may be based upon any
federal or state securities act, or on any other statute or at
common law:
(i) on the ground that the Contract, offering document,
registration statement or related Contract Prospectus, as from time
to time amended and supplemented, or the annual or interim reports
to Contract owners, any published marketing materials or
communications with any Contract owner or prospective Contract
owner concerning the Contract, include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, if such statement or omission was made in reliance
upon, and in conformity with, information furnished in connection
therewith by or on behalf of SCHWAB to FIRST GREAT-WEST; or
(ii) on the ground that SCHWAB, its employees, officers or
directors failed to comply with any applicable securities or other
laws and regulations in connection with its rendering of Contract
issue, recordkeeping, confirmation or other services under this
Agreement; or
(iii) on the ground of SCHWAB's negligence or misconduct, or that
of SCHWAB's employees, officers or directors, in the performance of
its duties hereunder, or breach of any representation or warranty
hereunder.
The indemnities in this Section 6.2 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director,
officer and employee of FIRST GREAT-WEST and any person controlling
or controlled by FIRST GREAT-WEST within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act.
(b) In no case is the indemnity of SCHWAB in favor of FIRST
GREAT-WEST and any such controlling or controlled persons to be
deemed to protect FIRST GREAT-WEST or any such controlling or
controlled persons thereof against any liability to SCHWAB to which
FIRST GREAT-WEST or any such controlling or controlled persons
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by
reason of reckless disregard of its obligations and duties under
this Agreement. In addition, in no case is SCHWAB to be liable
under its indemnity agreement contained in Section 6.2(a) with
respect to any claim made against FIRST GREAT-WEST or any such
controlling or controlled persons, unless FIRST GREAT-WEST or such
controlling or controlled persons, as the case may be shall have
notified SCHWAB in writing within two (2) days after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon FIRST GREAT-WEST or such
controlling or controlled persons (or after FIRST GREAT-WEST or
such controlling or controlled persons 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 person against whom such action
is brought otherwise than on account of its indemnity agreement
contained in this paragraph. SCHWAB will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but
if SCHWAB elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to FIRST
GREAT-WEST or such controlling or controlled person or persons,
defendant or defendants in the suit. In the event SCHWAB elects to
assume the defense of any such suit and retain such counsel, FIRST
GREAT-WEST or such controlling or controlled person or persons,
defendant or defendants in the suit, shall bear the fees and
expense of any additional counsel retained by FIRST GREAT-WEST or
such controlling or controlled person or persons, but, in case
SCHWAB does not elect to assume the defense of any such suit, it
will reimburse FIRST GREAT-WEST or such controlling or controlled
person or persons, defendant or defendants in the suit, for the
reasonable fees and expense of any counsel retained by them. SCHWAB
shall promptly notify FIRST GREAT-WEST of the commencement of any
litigation or proceedings against SCHWAB or any of its officers,
directors, employees or agents in connection with the issuance or
sale of the Contracts.
6.3 Limitation on Liability
In no event shall either Party under this Agreement be liable for
lost profits or for exemplary, special, punitive or consequential
damages alleged to have been sustained by the other Party, as
opposed to a third party.
6.4 Injunctive Relief
The Parties each agree that monetary damages may be an inadequate
remedy in the event of a breach by either Party of any of the
covenants in this Agreement, and that any such breach by a Party
may cause the other Party great and irreparable injury and damage.
Accordingly, nothing in this Agreement shall limit a Party's right
to obtain equitable relief when appropriate.
SECTION 7. TERM AND TERMINATION
7.1 Term
This Agreement shall be effective as of the date first above
written and shall remain in full force and effect thereafter,
subject to Section 7.2 below.
7.2 Events of Termination
(a) In addition to the provisions of Section 7.3, this Agreement
shall terminate at either Party's option, without penalty:
(i) with or without cause, on not less than 180 days written notice
to the other Party;
(ii) upon the mutual written consent of the Parties;
(iii) upon written notice of one Party to the other in the event of
bankruptcy or insolvency of the Party to which notice is given; or
(b) This Agreement shall terminate at the option of SCHWAB, in the
event of
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by FIRST GREAT-WEST;
(ii) the dissolution or disqualification of FIRST GREAT-WEST to do
business under any applicable state or federal law where FIRST
GREAT-WEST's ability to perform is materially impaired; however,
such termination shall extend only to the jurisdiction(s) where
FIRST GREAT-WEST is prohibited from doing business;
(iii) the suspension or revocation of any material license or
permit held by FIRST GREAT-WEST by the appropriate governmental
agency or authority; however, such termination shall extend only to
the jurisdiction(s) where FIRST GREAT-WEST is prohibited from doing
business;
(iv) the sale (without the prior written consent of SCHWAB, which
consent shall not be unreasonably withheld) of the FIRST GREAT-WEST
business relating to the Contracts, which sale is to an
unaffiliated person or entity, whether by merger, consolidation, or
sale of substantially all of FIRST GREAT-WEST's assets or stock
related to the Contracts, during the term of, and any extension of,
this Agreement;
(v) upon institution of formal proceedings against FIRST
GREAT-WEST by the NASD, SEC, or any other regulatory body regarding
FIRST GREAT-WEST's duties under this Agreement, the sale of the
Contracts, or the operation of any Account, which would materially
impair the marketability of the Contracts, provided that such
proceedings result in a finding of material wrongdoing by FIRST
GREAT-WEST, or which result in disqualification from continued
membership with the NASD or registration with the SEC; or
(vi) any termination at the option of SCHWAB of that
certain Administration Agreement of even date herewith between
FIRST GREAT-WEST and SCHWAB (the "Administration Agreement")
pursuant to Section 7.2(a)(iii), 7.2(b)(i)-(iv), or 7.3 of the
Administration Agreement.
(c) This Agreement shall terminate at the option of FIRST
GREAT-WEST, in the event of:
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by SCHWAB;
(ii) the dissolution or disqualification of SCHWAB to do business
under any applicable state or federal law where SCHWAB's ability to
perform is materially impaired; however, such termination shall
extend only to the jurisdiction(s) where SCHWAB is prohibited from
doing business;
(iii) the suspension or revocation of any material license or
permit held by SCHWAB by the appropriate governmental agency or
authority; however, such termination shall extend only to the
jurisdiction(s) where SCHWAB is prohibited from doing business;
(iv) the sale (without the prior written consent of FIRST
GREAT-WEST, which consent shall not be unreasonably withheld) of
SCHWAB's business to an unaffiliated person or entity, whether by
merger, consolidation, or sale of substantially all of SCHWAB's
assets or stock or otherwise, during the term of, and any extension
of, this Agreement;
(v) upon institution of formal disciplinary proceedings against
SCHWAB by the NASD, SEC, or any other regulatory body, which would
materially impair the marketability of the Contracts, provided that
such proceedings result in a finding of material wrongdoing by
SCHWAB, or which result in disqualification from continued
membership with the NASD or registration with the SEC; or
(vi) any termination at the option of FIRST GREAT-WEST of the
Administration Agreement pursuant to Section 7.2(a)(iii),
7.2(c)(i)-(iv), or 7.3 of the Administration Agreement.
7.3 Events of Default
If either Party breaches this Agreement or is in default in the
performance of any of its duties and obligations hereunder (the
"defaulting Party"), the non-defaulting Party may give written
notice thereof to the defaulting Party, and if such breach or
default is not remedied within 90 days after such written notice is
given, then the non-defaulting Party may terminate this Agreement
by giving 90 days written notice of such termination to the
defaulting Party.
7.4 Parties to Cooperate Respecting Termination
The Parties agree to cooperate and give reasonable assistance to
one another in effecting an orderly transition following
termination.
SECTION 8. CONFIDENTIALITY
Subject to the requirements of legal process and regulatory
authority, each Party shall treat as confidential (a) the identity
of existing or prospective Contract owners and the investment
managers enrolled in SCHWAB's Financial Advisor Service Program
("investment managers"), (b) any financial or other information
provided by existing or prospective Contract owners or investment
managers, and (c) any other information reasonably identified as
confidential in writing by any other Party hereto (collectively
"confidential information"). Except as permitted by this Agreement,
no Party shall disclose, disseminate or utilize any confidential
information without the express written consent of the affected
Party until such time as such information may come into the public
domain, except as permitted by this Agreement or as otherwise
necessary to service the Contracts and/or respond to appropriate
regulatory authorities. Each Party shall take all reasonable
precautions to prevent the unauthorized disclosure of any
confidential information. Nothing in this Section 8 shall prevent
SCHWAB from using the confidential information pertaining to
existing or prospective Contract owners for marketing purposes. In
no event shall confidential information pertaining to existing or
prospective Contract owners be furnished by FIRST GREAT-WEST to any
other company or person (except as required by law or regulation)
or be used to solicit sales of any kind, including but not limited
to any other products, securities or services for a period of two
years following termination of this Agreement. Without limiting the
foregoing, no Party shall disclose any information that another
Party reasonably considers to be proprietary. For purposes of this
Agreement, proprietary information includes, but is not limited to,
computer system and client information. The intent of this Section
8 is that no Party or any affiliate thereof shall utilize, or
permit to be utilized, its knowledge of the other Party that is
derived as a result of the relationship created by this Agreement
and any related agreements, except to the extent necessary by the
terms of this Agreement or the related agreements.
SECTION 9. ARBITRATION
Any controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by arbitration
under the rules of the NASD in effect at that time. If the NASD
refuses jurisdiction, or the Parties mutually agree in writing, the
arbitration procedure described herein shall be used. In either
event, the decision of the arbitrator(s) is final and judgment upon
the award rendered may be entered in any court having jurisdiction
thereof.
To initiate arbitration, either FIRST GREAT-WEST or SCHWAB shall
notify the other Party in writing of its desire to arbitrate,
stating the nature of its dispute and the remedy sought. The Party
to which the notice is sent shall respond to the notification in
writing within ten (10) days of its receipt.
The arbitration hearing shall be before a panel of three
arbitrators, each of whom must be (1) a present or former officer
of a life insurance or reinsurance company and/or (2) an officer
and principal of a registered Broker-Dealer. The panel must contain
at least one representative from each of (1) and (2). An
arbitrator may not be a present or former director, officer,
employee, attorney, or consultant of FIRST GREAT-WEST or SCHWAB or
either's affiliates.
FIRST GREAT-WEST and SCHWAB shall each name five (5) candidates to
serve as an arbitrator. FIRST GREAT-WEST and SCHWAB shall each
choose one candidate from the other Party's list, and these two
candidates shall serve as the first two arbitrators. FIRST
GREAT-WEST and SCHWAB shall each present their initial lists of
five (5) candidates by written notification to the other Party
within twenty-five (25) days of the date of the mailing of the
notification initiating the arbitration. Any subsequent additions
to the list which are required shall be presented within ten (10)
days of the date the naming Party receives notice that a candidate
that has been chosen declines to serve.
The two arbitrators shall then select the third arbitrator from the
eight (8) candidates remaining on the lists of FIRST GREAT-WEST and
SCHWAB within fourteen (14) days of the acceptance of their
positions as arbitrators. If the two arbitrators cannot agree on
the choice of a third, then this choice shall be referred back to
the Parties. FIRST GREAT-WEST and SCHWAB shall take turns striking
the name of one of the remaining candidates from the initial eight
(8) candidates until only one candidate remains. If the candidate
so chosen shall decline to serve as the third arbitrator, the
candidate whose name was stricken last shall be nominated as the
third arbitrator. This process shall continue until a candidate has
been chosen and accepted. This candidate shall serve as the third
arbitrator. The first turn at striking the name of a candidate
shall belong to the Party that is responding to the other Party's
initiation of the arbitration. Once chosen, the arbitrators are
empowered to decide all substantive and procedural issues by a
majority of votes.
It is agreed that each of the three arbitrators should be impartial
regarding the dispute. Therefore, at no time will either Party
contact or otherwise communicate with any person who is to be or
who has been designated as a candidate to serve as an arbitrator
concerning the dispute, except upon the basis of jointly drafted
communications provide by both Parties to inform those candidates
actually chosen as arbitrators of the nature and facts of the
dispute. Likewise, any written or oral arguments provided to the
arbitrators concerning the dispute shall be coordinated with the
other Party and shall be provided simultaneously to the other Party
or shall take place in the presence of the other Party. Further, at
no time shall any arbitrator be informed that the arbitrator has
been named or chosen by one Party or the other.
The arbitration hearing shall be held on a date fixed by the
arbitrators. In no event shall this date be later than six (6)
months after the appointment of the third arbitrator. As soon as
possible, the arbitrators shall establish pre-arbitration
procedures as warranted by the facts and issues of the particular
case. At least ten (10) days prior to the arbitration hearing, each
Party shall provide the other Party and the arbitrators with a
detailed statement of the facts and arguments it will present at
the arbitration hearing. The arbitrators may consider any relevant
evidence; they shall give the evidence such weight as they deem it
entitled to after consideration of any objections raised concerning
it. The Party initiating the arbitrations shall have the burden of
proving its case by a preponderance of the evidence. Each Party may
examine any witnesses who testify at the arbitration hearing, the
arbitrators shall apportion the costs of arbitration, which shall
include but not be limited to their own fees and expenses, as they
deem appropriate.
SECTION 10. BONDING AND INSURANCE
Each Party shall maintain sufficient fidelity bond coverage
(including coverage for larceny and embezzlement) and errors and
omissions insurance coverage as may be required by applicable law
or as such Party deems necessary in light of its obligations under
this Agreement.
SECTION 11. NOTICES
Any notice required or permitted to be sent under this Agreement
shall 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 GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
8515 East Orchard Road
Englewood, CO 80111
303-689-4356
Dennis Low
CHARLES SCHWAB & CO., INC.
Office of Corporate Counsel
101 Montgomery Street
San Francisco, CA 94104
415-636-6100
Mary Templeton
SECTION 12. TRADEMARKS
12.1 SCHWAB owns all right, title and interest in and to the name,
trademark and service mark "SCHWAB", and SCHWAB owns (or will own
prior to use) all other tradenames, trademarks and service marks
that may be used by SCHWAB in performing SCHWAB's obligations under
this Agreement (collectively with the "SCHWAB" name, trademark and
service mark, the "SCHWAB licensed marks" or the "licensor's
licensed marks"). SCHWAB hereby grants to FIRST GREAT-WEST
(including its affiliates) a non-exclusive license to use the
SCHWAB licensed marks in connection with FIRST GREAT-WEST's
performance of the services contemplated under this Agreement
subject to the terms and conditions set forth in this Section 12.
12.2 FIRST GREAT-WEST owns all right, title and interest in and to
the name, trademark and service mark "First Great-West Life &
Annuity Insurance Company", and FIRST GREAT-WEST owns (or will own
prior to use) all other tradenames, trademarks and service marks
that may be used by FIRST GREAT-WEST in performing FIRST
GREAT-WEST's obligations under this Agreement (collectively with
the "First Great-West Life & Annuity Insurance Company" name,
trademark and service mark, the "FIRST GREAT-WEST licensed marks"
or the "licensor's licensed marks"). FIRST GREAT-WEST hereby grants
to SCHWAB (including its affiliates) a non-exclusive license to use
the FIRST GREAT-WEST licensed marks in connection with SCHWAB's
performance of the services contemplated by this Agreement, subject
to the terms and conditions set forth in this Section 12.
12.3 The grant of license by SCHWAB and FIRST GREAT-WEST (each, a
"licensor") to the other and affiliates thereof (the "licensees")
shall terminate automatically when the Contracts cease to be
outstanding or by either Party at its election upon termination of
this Agreement. Upon automatic termination, each licensee shall
cease to use a licensor's licensed marks. Upon FIRST GREAT-WEST's
elective termination of this license, SCHWAB (including its
affiliates) shall immediately cease to distribute promotional,
sales or advertising material relating to any Contract and shall
likewise cease any activity that suggests that it has any right
under the FIRST GREAT-WEST licensed marks or that it has any
association with FIRST GREAT-WEST or any affiliate of FIRST
GREAT-WEST in connection with any such Contracts. Similarly, upon
SCHWAB's elective termination of this license, FIRST GREAT-WEST
(including its affiliates) shall cease to issue as soon as
reasonably practicable, any new Contracts bearing any of the SCHWAB
licensed marks and shall likewise cease any activity which suggests
that it has any right under any of the SCHWAB licensed marks or
that it has any association with SCHWAB or any affiliate of SCHWAB,
except that FIRST GREAT-WEST shall have the right to administer any
outstanding Contracts bearing any of the SCHWAB licensed marks and
in connection therewith to use the SCHWAB licensed marks.
12.4 Notwithstanding any provision in this Agreement to the
contrary, a licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials
bearing the licensor's licensed marks. The licensor's approval
shall not be unreasonably withheld.
12.5 During the term of this grant of license, a licensor may
request that a licensee submit samples of any materials bearing any
of the licensor's licensed marks that were previously approved by
the licensor but, due to changed circumstances, the licensor may
wish to reconsider, or that were not previously approved in the
manner set forth above. If, on the reconsideration or on initial
review, respectively, any such samples fail to meet with the
written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The
licensor's approval shall not be unreasonably withheld. The
licensee shall obtain the prior written approval of the licensor
for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
12.6 Each licensee hereunder: (i) acknowledges and stipulates that
the licensor's licensed marks are valid and enforceable trademarks
and/or service marks and that such licensee does not own the
licensor's licensed marks and claims no rights therein other than
as a licensee under this Agreement; (ii) agrees never to contend
otherwise in legal proceedings or in other circumstances; and (iii)
acknowledges and agrees that the use of the licensor's licensed
marks pursuant to this grant of license shall inure to the benefit
of the licensor.
SECTION 13. MISCELLANEOUS
13.1 Amendment
This Agreement may be amended at any time by a writing executed by
the Parties.
13.2 Non-Assignment
This Agreement shall not be assigned by either Party without the
prior written consent of the other Party, provided, however, that
FIRST GREAT-WEST or SCHWAB may subcontract or assign provision of
services to affiliates or subsidiaries, including Financial
Administrative Services Corporation. Such assignment or
subcontracting does not relieve FIRST GREAT-WEST or SCHWAB of any
responsibility with regard to its obligations under this Agreement
for such services.
13.3 Governing Law
This Agreement shall be interpreted in accordance with and governed
by the laws of the State of New York.
13.4 Survival of Provisions
Sections 2.1(d), 3.1, 4.4, 4.5, 4.6, 5, 6, 8, 9, 10, 12, and 13.7
shall survive termination of this Agreement.
13.5 Severability
Should any provision of this Agreement be held or made invalid by
a court decision, statute, rule, or otherwise, the remainder of
this Agreement shall not be affected thereby.
13.6 Waiver
Any failure or delay by either Party to enforce at any time any of
the provisions of this Agreement, or to exercise any right or
option which is herein provided, or to require at any time the
performance of any of the provisions hereof, shall in no way be
construed to be a waiver of such provision of this Agreement.
13.7 Right to Audit
FIRST GREAT-WEST, its employees or authorized representatives may
audit, inspect and examine at reasonable times, during regular
business hours and with at least 24 hours prior notice, all books
and records of SCHWAB and its agents of all transactions arising
under this Agreement. FIRST GREAT-WEST agrees to limit its review
of the books and records to the extent necessary and as often as
necessary to fulfill all contractual obligations to the holders of
Contracts, to comply with all legal and regulatory requirements, to
meet the requirements of FIRST GREAT-WEST auditors and to ensure
compliance with this Agreement.
SCHWAB, its employees or authorized representatives may audit,
inspect and examine at reasonable times, during regular business
hours and with at least 24 hours prior notice, all books and
records of FIRST GREAT-WEST and its agents of all transactions
arising under this Agreement. SCHWAB agrees to limit its review of
the books and records to the extent necessary and as often as
necessary to fulfill all contractual obligations to the holders of
Policies, to comply with all legal and regulatory requirements, to
meet the requirements of SCHWAB auditors and to ensure compliance
with this Agreement.
13.8 Force Majeure
Neither Party shall be liable for damages due to delay or failure
to perform any obligation under this Agreement where such delay or
failure results directly or indirectly from circumstances beyond
the control and without the fault or negligence of such Party.
13.9 Entire Agreement
This Agreement shall be the sole and only agreement between FIRST
GREAT-WEST and SCHWAB regarding the distribution of the Contracts,
and it supersedes all prior and contemporaneous agreements
regarding the distribution of the Contracts. This Agreement may not
be amended, supplemented, or modified, except as expressly
permitted herein, without the written agreement of the Parties.
IN WlTNESS WHEREOF, the Parties hereto have executed this Agreement
as of the day and year first written above.
CHARLES SCHWAB & CO., INC. FIRST GREAT-WEST LIFE &
ANNUITY
INSURANCE COMPANY
BY: _/s/ Jeff Benton _________ BY:_/s/ Dennis
Low_________________
Jeff Benton Dennis Low
Vice President, Annuities & Life Insurance Executive Vice
President, Financial Services
BY: _/s/ D.C. Lennox______________
D.C. Lennox
Sr. Vice President, General Counsel
and Secretary
SCHEDULE 1
SEPARATE ACCOUNTS OF
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Variable Annuity-1 Series Account, a separate account established
under New York law on January 15, 1997.
Fixed Annuity Account, a separate account established under New
York law on January 15, 1997.
SCHEDULE 1.1
CONTRACTS AVAILABLE FOR OFFER AND SALE
1. The Schwab Variable Annuity. Form J434. Exclusive marketing.
Registered with SEC. Contributions may be allocated among a number
of investment options. The value of the contributions allocated to
the variable annuity option will vary according to the investment
experience of the investment options. Also, contributions may be
allocated to one or more guaranteed certificate periods. If, prior
to maturity of a certificate, the Contract is surrendered in full
or in part or amounts allocated to a certificate are transferred,
a market value adjustment to the Contract value will be made. The
market value adjustment may be a positive or negative adjustment
based on the results of an indexed calculation. This product may
be issued as an IRA or non-qualified contract.
2. The Schwab Fixed Annuity. Form J424. Flexible Premium Deferred
Market Value Adjusted Annuity. Exclusive marketing. Registered
with SEC. Contributions may be allocated to one or more guaranteed
certificate periods. If, prior to maturity of a certificate, the
Contract is surrendered in full or in part or amounts allocated to
a certificate are transferred, a market value adjustment to the
Contract value will be made. The market value adjustment may be a
positive or negative adjustment based on the results of an indexed
calculation. This product may be issued as an IRA or non-qualified
contract.
3. Single Premium Immediate Annuity. Non-exclusive marketing. Not
registered with SEC. Form numbers J260, J261.
schwab1stgwl&a
31
EXHIBIT 4
First Great-West Life & Annuity Insurance Company
A Stock Company
125 Wolf Road Albany, NY 12205
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED
GROUP ANNUITY
PLEASE READ THIS ANNUITY CERTIFICATE CAREFULLY.
PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT VALUE MAY BE SUBJECT
TO A MARKET VALUE ADJUSTMENT, AND MAY RESULT IN POSITIVE AND
NEGATIVE ADJUSTMENTS TO AMOUNTS PAYABLE DUE TO SURRENDERS AND
TRANSFERS, AMOUNTS APPLIED TO PURCHASE AN ANNUITY. THE
MARKET VALUE ADJUSTMENT IS APPLIED TO THE AMOUNT OF TRANSFER OR
WITHDRAWAL REQUESTED AND A NEGATIVE ADJUSTMENT MAY CAUSE THE AMOUNT
TRANSFERRED OR WITHDRAWN TO BE LESS THAN THE AMOUNT REQUESTED. THE
MARKET VALUE ADJUSTMENT WILL NOT APPLY TO ANY GUARANTEE PERIOD
HAVING FEWER THAN 6 MONTHS PRIOR TO THE GUARANTEE PERIOD MATURITY
DATE FOR:
1) TRANSFER TO ANOTHER GUARANTEE PERIOD, FIXED SUB-ACCOUNT OR TO
A VARIABLE SUB-ACCOUNT OFFERED UNDER THIS CERTIFICATE; OR
2) SURRENDERS, PARTIAL WITHDRAWALS, ANNUITIZATION OR PERIODIC
WITHDRAWALS; OR
3) A SINGLE SUM PAYMENT UPON DEATH OF AN OWNER OR THE ANNUITANT.
ALL PAYMENTS AND VALUES BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT VALUE ARE VARIABLE, MAY INCREASE OR DECREASE
ACCORDINGLY, AND ARE NOT GUARANTEED AS TO AMOUNT.
THE SMALLEST ANNUAL RATE OF INVESTMENT RETURN WHICH WOULD HAVE TO
BE EARNED ON THE ASSETS OF THE SEPARATE ACCOUNT SO THAT THE DOLLAR
AMOUNT OF VARIABLE ANNUITY PAYMENTS WILL NOT DECREASE IS 5%.
A 10% FEDERAL TAX PENALTY MAY APPLY IF A SURRENDER, WITHDRAWAL, OR
DISTRIBUTION IS TAKEN PRIOR TO THE TAXPAYER'S ATTAINMENT OF AGE 59
1/2.
FREE LOOK PERIOD
10 DAY RIGHT TO EXAMINE CERTIFICATE. IF NOT SATISFIED WITH THE
CERTIFICATE, RETURN IT TO THE COMPANY OR THE SCHWAB ANNUITY SERVICE
CENTER WITHIN 10 DAYS OF RECEIVING IT. THE CERTIFICATE WILL BE VOID
FROM THE START, AND THE COMPANY WILL REFUND THE GREATER OF: 1)
CONTRIBUTIONS RECEIVED; OR 2) THE ANNUITY ACCOUNT VALUE LESS
SURRENDERS, WITHDRAWALS, AND DISTRIBUTIONS.
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED GROUP ANNUITY.
Contributions may be made until the Payment Commencement Date or
until the death benefit is payable to a Beneficiary. The Owner is
as shown on the Certificate Data Page unless changed as provided
for in this Certificate. The Company will pay the Annuitant the
first of a series of annuity payments on the annuity commencement
date by applying the Annuity Account Value with a Market Value
Adjustment, if applicable, of the Owner's Annuity Account according
to the Payment Options Provisions. Subsequent payments will be paid
on the same day of each frequency period according to the
provisions of this Certificate.
Non-Participating. Not eligible to share in the Company's
divisible surplus.
Signed for First Great-West Life & Annuity Insurance Company on the
issuance of this Certificate.
D.C. Lennox, W.T. McCallum,
Secretary President and Chief Executive Officer
J434 NY (97)<PAGE>
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED GROUP ANNUITY.
Contributions may be made until the Payment Commencement Date or
until the death benefit is payable to a Beneficiary. The Owner is
as shown on the Certificate Data Page unless changed as provided
for in this Certificate. The Company will pay the Annuitant the
first of a series of annuity payments on the annuity commencement
date by applying the Annuity Account Value with a Market Value
Adjustment, if applicable, of the Owner's Annuity Account according
to the Payment Options Provisions. Subsequent payments will be paid
on the same day of each frequency period according to the
provisions of this Certificate.
Non-Participating. Not eligible to share in the Company's
divisible surplus.
CORPORATE HEADQUARTERS - Albany, New York
J434 NY
<PAGE>
CERTIFICATE DATA PAGE
ANNUITY INFORMATION OWNER INFORMATION
Annuity Certificate Number: 1234567
Effective Date: March 1, 1996
Status of Annuity: Non-Qualified
Initial Contribution: $5,000
Payment Commencement Date: March 1, 2006
Owner: JOHN C. DOE
Date of Birth: April 1, 1944
Tax ID Number: 111-11-1111
Joint Owner: JANE B. DOE
Date of Birth: November 12, 1948
Tax ID Number: ###-##-####
ANNUITANT INFORMATION
Annuitant: JOHN C. DOE
Date of Birth: March 22, 1942
Tax ID Number: ###-##-####
Contingent Annuitant: DAVID J. DOE
Date of Birth: June 6, 1964
Tax ID Number: ###-##-####
CERTIFICATE INFORMATION
This Certificate Data Page, together with the Initial Premium
Allocation Confirmation, reflects the information with which your
Certificate has been established as of the Effective Date. If you
wish to change or correct any information on this page, please call
the Schwab Annuity Service Center immediately at 1-800-838-0650.
CONTRACTUAL GUARANTEE OF A MINIMUM RATE OF INTEREST: [3%]
CHARGES: Charges at the time we issued this Certificate are
shown below.
Risk Charge:
Mortality: Expense: Total:
.68% maximum .17% maximum .85% maximum
Certificate Maintenance Charge: $25.00 maximum annually
PAYMENT COMMENCEMENT DATE: The date on which annuity payments or
periodic withdrawals will start. This Certificate Data Page
indicates the date that you selected, or if no date is specified,
the latest date on which payments can start. (You may change the
Payment Commencement Date prior to commencement of annuity
payments, or it may be changed by the Beneficiary upon the death of
an Owner.)
SERVICE CENTER:
Schwab Annuity Service Center
P.O. Box 7666
San Francisco, California 94120-7666
1-800-838-0650
POLICYHOLDER INFORMATION
Policyholder
BENEFICIARY INFORMATION
Beneficiary: Sally Smith
Date of Birth: January 17, 1956
Tax ID Number: ###-##-####
J434 NY Page i
J434 Page ii
J434 NY Page ii
<PAGE>
Table of Contents
Use this Table of Contents to locate specific topics in this
annuity Certificate.
DEFINITIONS 3
GENERAL PROVISIONS
Entire Contract 5
Certificate Modification 5
Non-Participating 5
Misstatement of Age or Sex 5
Reports 6
Notice and Proof 6
Tax Consequences of Payments 6
Currency 6
Voting Rights 6
OWNERSHIP PROVISIONS
Rights of Owner 6
Beneficiary 6
Designation of Beneficiary 6
Change of Beneficiary 7
Death of Beneficiary 7
Successive Beneficiaries 7
Annuitant 7
Contingent Annuitant 7
Change of Ownership 7
Collateral Assignment 7
Ownership of Series Account 7
CONTRIBUTIONS PROVISIONS
Effective Date 8
Contributions 8
Allocation of Contributions 8
ACCOUNT VALUE AND MARKET VALUE ADJUSTMENT PROVISIONS
Certificate Maintenance Charge 8
Variable Account Value 8
Accumulation Units 9
Accumulation Unit Value 9
Net Investment Factor 9
Risk Charge 9
Guarantee Period Fund 9
Value of Guarantee Period 10
Allocation at Guarantee Period Maturity Date 10
Breaking a Guarantee Period 10
Market Value Adjustment 11
J434 NY Page 1<PAGE>
Table of Contents (continued)
Use this Table of Contents to locate specific topics in this
annuity Certificate.
TRANSFER PROVISIONS
Transfers 11
Dollar Cost Averaging 12
The Rebalancer Option 12
DEATH BENEFIT PROVISIONS
Payment of Death Benefit 13
Distribution Rules 13
Compliance with Code Section 72(s) 14
SURRENDERS AND PARTIAL WITHDRAWALS
Surrender Benefit 14
Partial Withdrawals 14
Postponement 15
PAYMENT OPTIONS
How to Elect 15
Selection of Payment Options 15
Variable Annuity Payment Options 15
Fixed Annuity Payment Options 16
Periodic Withdrawal Option 17
How to Elect Periodic Withdrawals 17
Periodic Withdrawal Options Available 17
J434 NY Page 2
J401 Page 2<PAGE>
Definitions
Accumulation Period - the period between the Effective Date and the
Payment Commencement Date.
Accumulation Unit - an accounting measure used to determine the
Variable Account Value before the date annuity payments commence.
Annuitant - the person named in the application and in the
Certificate Data Page upon whose life the payment of an annuity is
based and who will receive annuity payments. If a Contingent
Annuitant is named, then the Annuitant will be considered the
Primary Annuitant.
Annuity Account - an account that reflects the total value of the
Owner's Variable and Fixed Sub-Accounts.
Annuity Account Value - the sum of the Variable and Fixed
Sub-Accounts credited to the Owner under the Annuity Account.
Annuity Payment Period - the period beginning on the Payment
Commencement Date and continuing until all annuity payments have
been made under this Certificate.
Annuity Unit - an accounting measure used to determine the dollar
value of any variable dollar annuity payment after the first
annuity payment is made.
Automatic Contribution Plan - a plan provided to the Owner to allow
for automatic payment of Contributions. The Contribution amount
will be withdrawn from a pre-authorized account and automatically
credited to the Annuity Account.
Beneficiary - the person(s) designated by the Owner to receive
death proceeds which may become payable upon the death of an Owner
or the Annuitant. If the surviving spouse of an Owner is the
surviving Joint Owner, the surviving spouse will be deemed to be
the Beneficiary upon such Owner's death and may take the death
benefit or elect to continue this Certificate in force. The
Beneficiary is shown on the Certificate Data Page unless later
changed by the Owner.
Certificate - the document issued to the Owner which specifies the
rights and obligations of the Owner.
Company - First Great-West Life & Annuity Insurance Company, the
underwriter for this annuity, located at 125 Wolf Road, Albany, New
York 12205.
Contingent Annuitant - the person named in the application who will
become the Annuitant upon the death of the Primary Annuitant. The
Contingent Annuitant is the person named in the Certificate Data
Page, unless later changed by Request while the Primary Annuitant
is alive and before annuity payments have commenced.
Contract - the document issued to the Policyholder which specifies
the rights and obligations of the Policyholder.
Contractual Guarantee of a Minimum Rate of Interest - the minimum
interest rate applicable to each Fixed Sub-Account in effect at the
time the Contribution is made. This is the minimum interest rate
allowed by law and is subject to change in accordance with changes
in applicable law.
Contributions - purchase amounts received and allocated to the
Variable or Fixed Sub-Account(s) prior to any Premium Tax or other
deductions.
Effective Date - the date on which the first Contribution is
credited to the Annuity Account.
Eligible Fund - a registered management investment company in which
the assets of the Series Account may be invested.
Fixed Account Value - the sum of the values of the Fixed
Sub-Accounts credited to the Owner under the Annuity Account.
Fixed Sub-Accounts - the sub-division(s) of the Annuity Account
described in the Certificate and in the attached Fixed Sub-Account
Riders, if any.
Guarantee Period - one of the time intervals of the Guarantee
Period Fund available under this Certificate. The Company will
specify the Guarantee Period time intervals that are available and
the predetermined rate of interest that will apply to each of the
Guarantee Period time intervals. This rate of interest will be
equal to the annual effective rate in effect at the time the
Contribution is made and as reflected in written confirmation of
the Contribution. The Company may stop offering any time interval
at any time for new Contributions. Amounts allocated to one or
more Guarantee Periods may be subject to a Market Value Adjustment.
J418 Page 4
J434 NY Page 3<PAGE>
Definitions (continued)
Guarantee Period Fund - A type of Fixed Sub-Account.
Guarantee Period Maturity Date - the last day of any Guarantee
Period.
Individual Retirement Annuity (IRA) - an annuity Contract used for
a retirement savings program that is intended to satisfy the
requirements of Section 408 of the Internal Revenue Code of 1986,
as amended.
Investment Division - a division of the Series Account containing
the shares of a specific portfolio of the Eligible Fund. There is
an Investment Division for each portfolio of the Eligible Fund.
Market Value Adjustment - an adjustment which may be made to
amounts paid out before the Guarantee Period Maturity Date due to
surrenders, partial withdrawals, Transfers, and amounts applied to
a periodic withdrawal or to purchase an annuity. The Market Value
Adjustment may increase or decrease the amount payable on one of
the above described distributions. A negative adjustment may
result in an effective interest rate lower than the Contractual
Guarantee of a Minimum Rate of Interest applicable to this Contract
and the value of the Contribution(s) allocated to the Guarantee
Period being less than the Contribution(s) made.
Non-qualified Annuity Certificate - an annuity Certificate which is
not intended to be a part of a qualified retirement plan and is not
intended to satisfy the requirements of Section 408 of the Internal
Revenue Code of 1986, as amended.
Owner (Joint Owners) - the person or persons named in the
Certificate Data Page. The Owner is entitled to exercise all
rights and privileges under the Certificate, while the Annuitant is
living, except as reserved by the Policyholder. Joint Owners must
be husband and wife as of the Effective Date. The Annuitant will
be the Owner unless otherwise indicated in the application. If a
Certificate is purchased as an Individual Retirement Annuity under
Section 408 of the Code, the Annuitant must be the sole Owner; no
Joint Owner may be named.
Payment Commencement Date - the date on which annuity payments or
periodic withdrawals commence under a payment option. The Payment
Commencement Date must be at least one year after this
Certificate's Effective Date. If a Payment Commencement Date is
not shown on the Certificate Data Page, annuity payments will begin
on the first day of the month of the Annuitant's 90th birthday.
The Payment Commencement Date may be changed by the Owner prior to
commencement of annuity payments or it may be changed by the
Beneficiary upon the death of an Owner. If this is an IRA
Certificate, payments which satisfy the minimum distribution
requirements of the Code must begin no later than the
Owner/Annuitant's attainment of age 70 1/2.
Policyholder - the organization entering into the contract and
whose name appears on the Certificate Data Page as the
Policyholder.
Premium Tax - the amount of tax, if any, charged by a state or
other governmental authority.
Request - any instruction in a form satisfactory to the Company and
received at the Schwab Annuity Service Center (or other annuity
service center subsequently named) from the Owner or the Owner's
designee (as specified in a form acceptable to the Company) or the
Beneficiary, (as applicable) as required by any provision of this
Certificate or as required by the Company. The Request is subject
to any action taken or payment made by the Company before it was
processed.
Schwab Annuity Service Center - Post Office Box 7666, San
Francisco, California 94120-7666. The toll-free telephone number
is 1-800-838-0650.
Simplified Employee Pension (SEP) - an Individual Retirement
Annuity (IRA) which may accept Contributions from one or more
employers under a retirement savings program intended to satisfy
the requirements of Section 408(k) of the Internal Revenue Code of
1986, as amended.
Series Account - the segregated investment account established by
the Company under New York law and registered as a unit investment
trust under the Investment Company Act of 1940, as amended.
Surrender Value - will be equal to:
(a) Annuity Account Value with a Market Value Adjustment, if
applicable, on the effective date of the surrender; less
(b) Premium Tax, if any.
J434 NY Page 4
J434 4/1/97 Page 4<PAGE>
Definitions (continued)
Transaction Date - the date on which any Contribution or Request
from the Owner will be processed by the Company at the Schwab
Annuity Service Center. Contributions and Requests received after
4:00 p.m. EST/EDT will be deemed to have been received on the next
business day. Requests will be processed and the Variable Account
Value will be valued on each date that the New York Stock Exchange
is open for trading.
Transfer - the moving of money from one sub-account to one or more
sub-account(s).
Valuation Date - the date on which the net asset value of each
Eligible Fund is determined.
Valuation Period - the period between two successive Valuation
Dates.
Variable Account Value - the sum of the values of the Variable
Sub-Accounts credited to the Owner under the Annuity Account. The
Variable Account Value is credited with a return based upon the
investment experience of the Investment Division(s) selected by the
Owner and will increase or decrease accordingly.
Variable Sub-Accounts - sub-division(s) of the Owner's Annuity
Account containing the value credited to the Owner from an
Investment Division.
General Provisions
What is your agreement with us?
ENTIRE CONTRACT
This Certificate, Certificate Data Page, riders and amendments, if
any, form the Entire Contract between the Owner and the Company.
This Entire Contract supersedes all prior representations,
statements, warranties, promises and agreements of any kind,
whether oral or written, relating to the subject matter of this
Certificate. All statements in the application made by an Owner or
the Annuitant will be considered representations and not
warranties.
How can this Certificate be modified?
CERTIFICATE MODIFICATION
This Certificate may be modified only by written agreement between
the Company and the Policyholder, except that upon 30 days notice
to the Policyholder, the Company may at any time and without the
consent of the Policyholder or any other person, modify this
Certificate as needed to conform to changes in tax or other law.
Such modifications will become part of this Certificate. Nothing in
the group annuity contract invalidates or impairs any right granted
to the Certificate Owner by New York Statutes Insurance Law Section
3219 or the Certificate.
If this Certificate is purchased as an IRA, the Company reserves
the right to modify this Certificate to the extent necessary to
qualify it as an Individual Retirement Annuity as described in
Section 408 of the Internal Revenue Code of 1986, as amended, and
all related sections and regulations which are in effect during the
term of this Certificate.
The Company may terminate certain Variable and Fixed Sub-Accounts.
In that event, the Owner, by Request, may change the allocation of
the Contributions and maturing Guarantee Periods. If no Request is
made by the date the sub-account is terminated, future
Contributions and maturing Guarantee Periods will be allocated to
the Money Market Sub-Account. Any modification will not affect the
terms, provisions or conditions which are, or may be, applicable to
Contributions previously made to any such Variable Sub-Account.
Any modification will not affect the terms of any unmatured
Guarantee Period or other Fixed Sub-Account, except as may be
described in the attached Fixed Sub-Account riders, if any.
The Company may cease offering existing variable or fixed annuity
payment options.
ONLY THE PRESIDENT, A VICE-PRESIDENT, OR THE SECRETARY OF THE
COMPANY CAN MODIFY OR WAIVE ANY PROVISION OF THIS CERTIFICATE.
NON-PARTICIPATING
This Certificate is non-participating. It is not eligible to share
in the Company's divisible surplus.
What if the Annuitant's age or sex is misstated?
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, the annuity
payments established will be made on the basis of the correct age.
If payments were too large because of misstatement, the difference
with interest may be deducted by the Company from the next payment
or payments. If payments were too small, the difference with
interest may be added by the Company to the next payment. This
interest will result in an annual effective rate which will not be
less than the Contractual Guarantee of a Minimum Rate of Interest
or greater than 6% per year, as determined by the Company.
J434 NY Page 5<PAGE>
General Provisions (continued)
How will the Contract values be reported?
REPORTS
The Company will furnish the Owner, at least annually, a statement
of the Annuity Account Value and the Surrender Value. The Company
will furnish the Owner copies of any other notices, reports or
documents required by law.
What are the notice and proof requirements?
NOTICE AND PROOF
Any notice or demand by the Company to or upon the Owner, or any
other person may be given by mailing it to that person's last known
address as stated in the Company's file. In the event of the death
of an Owner or the Annuitant, the Company will require proof of
death.
Any application, report, Request, election, direction, notice or
demand by the Owner, or any other person, must be made in a form
satisfactory to the Company.
What are the tax consequences?
TAX CONSEQUENCES OF PAYMENTS
The Owner or Beneficiary, as the case may be, must determine the
timing and amount of any benefit payable. Payments elected by the
Owner in the form of periodic withdrawals, surrenders or partial
withdrawals will be tax reported to the Owner. Annuity payments
are payable to the Annuitant and will be tax reported to the
Annuitant. Payments made to a Beneficiary will be tax reported to
the Beneficiary.
It is recommended that a competent tax adviser be consulted prior
to obtaining any distribution from, or changing the ownership of,
this Certificate. A 10% federal tax penalty may apply if a
surrender, withdrawal, or distribution is taken prior to the
taxpayer's attainment of age 59 1/2.
Nothing contained herein will be construed to be tax or legal
advice. Neither the Policyholder nor the Company assumes any
responsibility or liability for any damages or costs, including but
not limited to taxes, penalties, interest or attorney's fees
incurred by the Owner, the Annuitant, the Beneficiary, or any other
person arising out of any such determination.
CURRENCY
All Contributions and all transactions will be in the currency of
the United States of America.
What are the voting rights?
VOTING RIGHTS
The Company will vote the shares of an Eligible Fund. To the extent
required by law, the Company will vote according to the
instructions of the Owner in proportion to the interest in the
Variable Sub-Account. In such event, the Company will send proxy
materials and form(s) to the Owner for a reply. If no reply is
received by the date specified in the proxy materials, the Company
will vote shares of the appropriate Eligible Fund in the same
proportion as shares of the Eligible Fund for which replies have
been received.
During the Annuity Payment Period, the number of votes will
decrease as the assets held to fund annuity payments decrease. The
Owner will be entitled to receive the proxy materials and form(s).
Ownership Provisions
What are the Owner's rights?
RIGHTS OF OWNER
While the Annuitant is living, the Owner has the sole and absolute
power to exercise all rights and privileges in this Certificate.
Upon the death of an Owner or the Annuitant, the Death Benefit
Provisions section will apply.
How is the Beneficiary determined?
BENEFICIARY
The Owner may, while the Annuitant is living, designate or change
a Beneficiary by Request from time to time as provided below. If
an Owner dies and the surviving Joint Owner is the surviving spouse
of the deceased Owner, such surviving spouse will become the
Beneficiary and may take the death benefit or elect to continue
this Certificate in force.
DESIGNATION OF BENEFICIARY
Unless changed as provided below, or as otherwise required by law,
the Beneficiary will be as shown on the Certificate Data Page.
Unless otherwise indicated, if more than one Beneficiary is
designated, then each such Beneficiary so designated will share
equally in any benefits and or rights granted by the Contract to
such Beneficiary or allowed by the Company. If the Beneficiary is
a partnership, any benefits will be paid to the partnership as it
existed at the time of an Owner's or the Annuitant's death. The
Company may rely on an affidavit by any responsible person to
identify a Beneficiary or verify the non-existence of a Beneficiary
not identified by name.
J434 NY Page 6
J434 4/3/97 Page 5<PAGE>
Ownership Provisions (continued)
CHANGE OF BENEFICIARY
The Owner may, while the Annuitant is living, change the
Beneficiary by Request. The Company shall not be bound by any
change of Beneficiary unless it is made in writing and recorded at
the Schwab Annuity Service Center. A change of Beneficiary will
take effect as of the date the Request is processed at the Schwab
Annuity Service Center, unless a certain date is specified by the
Owner.
If an Owner dies before the date the Request was processed, the
change will take effect as of the date of the Request, unless the
Company has already made a payment or has otherwise taken action on
a designation or change before receipt or processing of such
Request. A Beneficiary designated irrevocably may not be changed
without the written consent of that Beneficiary, except to the
extent required by law.
DEATH OF BENEFICIARY
The interest of any Beneficiary who dies before an Owner or the
Annuitant will terminate at the death of such Beneficiary. The
interest of any Beneficiary who dies at the time of, or within 30
days after, the death of an Owner or the Annuitant will also
terminate if no benefits have been paid to such Beneficiary, unless
the Owner has indicated otherwise by Request. The benefits will
then be paid as though the Beneficiary had died before the deceased
Owner or Annuitant.
SUCCESSIVE BENEFICIARIES
If an Owner dies, and the surviving Joint Owner is the surviving
spouse of the deceased Owner, the surviving spouse will become the
Beneficiary and may take the death benefit or elect to continue
this Certificate in force. If there is no surviving Joint Owner,
and no named Beneficiary is alive at the time of an Owner's death,
any benefits payable will be paid to the Owner's estate.
ANNUITANT
While the Annuitant is living and at least 30 days prior to the
annuity commencement date, the Owner may, by Request, change the
Annuitant. A change of Annuitant will take effect as of the date
the Request is processed at the Schwab Annuity Service Center.
How is the Contingent Annuitant determined?
CONTINGENT ANNUITANT
While the Annuitant is alive, the Owner may, by Request, designate
or change a Contingent Annuitant from time to time. A change of
Contingent Annuitant will take effect as of the date the Request is
processed at the Schwab Annuity Service Center, unless a certain
date is specified by the Owner.
Can the ownership of this Certificate be changed?
CHANGE OF OWNERSHIP
If this is an IRA Certificate, the Owner's right to change the
ownership is restricted. An IRA Certificate may not be sold,
assigned, transferred, discounted or pledged as collateral for a
loan or as security for the performance of an obligation or for any
other purpose to any person other than as may be required or
permitted under Section 408 of the Internal Revenue Code of 1986,
or under any other applicable section of the Code, as amended.
If this is a non-qualified Certificate, the Owner may change the
ownership while the Annuitant is living. Any change of ownership
must be made by Request on a form satisfactory to the Company. The
change will take effect as of the date the Request is processed at
the Schwab Annuity Service Center, unless a certain date is
specified by the Owner, and is subject to any action taken or
payment made by the Company before it was processed.
Can this Certificate be assigned?
COLLATERAL ASSIGNMENT
If this is an IRA Certificate, the Owner may not assign this
Certificate as collateral.
If this is a non-qualified Certificate, the Owner can assign this
Certificate as collateral while the Annuitant is living. The
interest of the assignee has priority over the interest of the
Owner and the interest of any Beneficiary. Any amounts payable to
the assignee will be paid in a single sum.
A copy of any assignment must be submitted to the Company at the
Schwab Annuity Service Center. Any assignment is subject to any
action taken or payment made by the Company before the assignment
was processed. The Company is not responsible for the validity of
any assignment. An assignment, pledge or agreement to assign or
pledge any portion of the Annuity Account Value generally will be
treated as a distribution. It is recommended that a competent tax
adviser be consulted prior to making such a change to this
Certificate.
Who owns the Series Account?
OWNERSHIP OF SERIES ACCOUNT
The Company has absolute ownership of the assets of the Series
Account. The portion of the assets of the Series Account equal to
the reserves and other Certificate liabilities with respect to the
Series Account are not chargeable with liabilities arising out of
any other business the Company may conduct.
J418 Page 4
J434 NY Page 7<PAGE>
Ownership Provisions (continued)
CHANGE OF BENEFICIARY
The Owner may, while the Annuitant is living, change the
Beneficiary by Request. The Company shall not be bound by any
change of Beneficiary unless it is made in writing and recorded at
the Schwab Annuity Service Center. A change of Beneficiary will
take effect as of the date the Request is processed at the Schwab
Annuity Service Center, unless a certain date is specified by the
Owner.
If an Owner dies before the date the Request was processed, the
change will take effect as of the date of the Request, unless the
Company has already made a payment or has otherwise taken action on
a designation or change before receipt or processing of such
Request. A Beneficiary designated irrevocably may not be changed
without the written consent of that Beneficiary, except to the
extent required by law.
DEATH OF BENEFICIARY
The interest of any Beneficiary who dies before an Owner or the
Annuitant will terminate at the death of such Beneficiary. The
interest of any Beneficiary who dies at the time of, or within 30
days after, the death of an Owner or the Annuitant will also
terminate if no benefits have been paid to such Beneficiary, unless
the Owner has indicated otherwise by Request. The benefits will
then be paid as though the Beneficiary had died before the deceased
Owner or Annuitant.
SUCCESSIVE BENEFICIARIES
If an Owner dies, and the surviving Joint Owner is the surviving
spouse of the deceased Owner, the surviving spouse will become the
Beneficiary and may take the death benefit or elect to continue
this Certificate in force. If there is no surviving Joint Owner,
and no named Beneficiary is alive at the time of an Owner's death,
any benefits payable will be paid to the Owner's estate.
ANNUITANT
While the Annuitant is living and at least 30 days prior to the
annuity commencement date, the Owner may, by Request, change the
Annuitant. A change of Annuitant will take effect as of the date
the Request is processed at the Schwab Annuity Service Center.
How is the Contingent Annuitant determined?
CONTINGENT ANNUITANT
While the Annuitant is alive, the Owner may, by Request, designate
or change a Contingent Annuitant from time to time. A change of
Contingent Annuitant will take effect as of the date the Request is
processed at the Schwab Annuity Service Center, unless a certain
date is specified by the Owner.
Can the ownership of this Certificate be changed?
CHANGE OF OWNERSHIP
If this is an IRA Certificate, the Owner's right to change the
ownership is restricted. An IRA Certificate may not be sold,
assigned, transferred, discounted or pledged as collateral for a
loan or as security for the performance of an obligation or for any
other purpose to any person other than as may be required or
permitted under Section 408 of the Internal Revenue Code of 1986,
or under any other applicable section of the Code, as amended.
If this is a non-qualified Certificate, the Owner may change the
ownership while the Annuitant is living. Any change of ownership
must be made by Request on a form satisfactory to the Company. The
change will take effect as of the date the Request is processed at
the Schwab Annuity Service Center, unless a certain date is
specified by the Owner, and is subject to any action taken or
payment made by the Company before it was processed.
Can this Certificate be assigned?
COLLATERAL ASSIGNMENT
If this is an IRA Certificate, the Owner may not assign this
Certificate as collateral.
If this is a non-qualified Certificate, the Owner can assign this
Certificate as collateral while the Annuitant is living. The
interest of the assignee has priority over the interest of the
Owner and the interest of any Beneficiary. Any amounts payable to
the assignee will be paid in a single sum.
A copy of any assignment must be submitted to the Company at the
Schwab Annuity Service Center. Any assignment is subject to any
action taken or payment made by the Company before the assignment
was processed. The Company is not responsible for the validity of
any assignment. An assignment, pledge or agreement to assign or
pledge any portion of the Annuity Account Value generally will be
treated as a distribution. It is recommended that a competent tax
adviser be consulted prior to making such a change to this
Certificate.
Who owns the Series Account?
OWNERSHIP OF SERIES ACCOUNT
The Company has absolute ownership of the assets of the Series
Account. The portion of the assets of the Series Account equal to
the reserves and other Certificate liabilities with respect to the
Series Account are not chargeable with liabilities arising out of
any other business the Company may conduct.
J418 Page 4
J434 NY Page 7<PAGE>
Contributions Provisions
What is the Effective Date?
EFFECTIVE DATE
The Effective Date, shown on the Certificate Data Page, is the date
the initial Contribution is credited to the Annuity Account.
How may Contributions be made?
CONTRIBUTIONS
Contributions should be payable to First Great-West Life & Annuity
Insurance Company (the Company) at the Schwab Annuity Service
Center at any time during the Accumulation Period. All
Contributions must be paid in a form acceptable to the Company,
during the lifetime of the Annuitant and before the Payment
Commencement Date. Coverage will begin on the Effective Date.
At any time after the Effective Date, the Owner may make additional
Contributions. The minimum amount accepted after the initial
Contribution is $500 except subsequent payments made via an
Automatic Contribution Plan have a minimum of $100 per month. Total
Contributions while this Certificate is in force may exceed
$1,000,000 with prior approval from the Company. The Company may
modify these limitations.
How are Contributions allocated?
ALLOCATION OF CONTRIBUTIONS
During the Free Look Period, all Contributions will be processed as
follows:
* Amounts to be allocated to one or more of the Fixed Sub-Accounts
will be allocated as directed, effective upon the Transaction Date.
(Allocation will not be delayed until the end of the Free Look
Period.)
* Amounts to be allocated to one or more of the Variable
Sub-Accounts will first be allocated to the Money Market
Sub-Account and will remain there until the next Transaction Date
following end of the Free Look Period plus five calendar days. On
that date, the Variable Account Value held in the Money Market
Sub-Account will be allocated to the Variable Sub-Accounts selected
by the Owner. During the Free Look Period, the Owner may
re-allocate among the Variable Sub-Accounts.
If the Certificate is returned during the Free Look Period, it will
be void from the start, and the Company will refund the greater of:
1) Contributions received; or 2) the Annuity Account Value less
surrenders, withdrawals, and distributions.
After the Free Look Period, subsequent Contributions will be
allocated in the Annuity Account as Requested by the Owner. If
there are no accompanying instructions, then allocations will be
made in accordance with standing instructions. Allocations will be
effective upon the Transaction Date.
Account Value and Market Value Adjustment Provisions
What is the annual Certificate Maintenance Charge?
CERTIFICATE MAINTENANCE CHARGE
The following charge is applicable to the Annuity Account Value.
Each year, beginning on the first anniversary of the Certificate
Effective Date, a Certificate Maintenance Charge of not more than
$25 will be deducted from the Annuity Account. This charge will be
deducted from the Money Market Fund Sub-Account. If there is not
sufficient value in the Money Market Sub-Account to cover all of
the Certificate Maintenance Charge, the remainder will be deducted
proportionately from the other Variable Sub-Accounts based on their
relative values. If there is not sufficient value in the Variable
Sub-Accounts, then the remainder will be deducted from the Fixed
Sub-Accounts. There is no Market Value Adjustment on amounts taken
from Fixed Sub-Accounts for a Certificate Maintenance Charge.
VARIABLE ACCOUNT PROVISIONS
How is the Variable Account Value determined?
VARIABLE ACCOUNT VALUE
The Variable Account Value for the Owner on any date during the
Accumulation Period will be the sum of the values of the Variable
Sub-Accounts.
The value of the Owner's interest in a Variable Sub-Account will be
determined by multiplying the number of the Owner's Accumulation
Units by the accumulation unit value for that Variable Sub-Account.
J434 NY Page 8
J434 4/3/97 Page 8
J418 Page 4
J434 Page 7<PAGE>
Account Value and Market Value Adjustment Provisions (continued)
ACCUMULATION UNITS
For each Contribution, the number of Accumulation Units credited
for the Owner to a Variable Sub-Account will be determined by
dividing the amount of the Contribution, less Premium Tax, if any,
by the accumulation unit value for that Variable Sub-Account on the
applicable Transaction Date.
ACCUMULATION UNIT VALUE
The initial accumulation unit value of each Variable Sub-Account
was established at $10. The accumulation unit value of a Variable
Sub-Account on a Valuation Date is calculated by multiplying the
accumulation unit value as of the immediately preceding Valuation
Date by the net investment factor as described in the Net
Investment Factor provision below.
The dollar value of an Accumulation Unit will vary in amount
depending on the investment experience of the Eligible Fund and
charges taken from the Sub-Account.
NET INVESTMENT FACTOR
The net investment factor for any Variable Sub-Account for any
Valuation Period is determined by dividing (a) by (b), and
subtracting (c) from the result where:
(a) is the net result of:
(i) the net asset value per share of the Eligible Fund shares
held in the Variable Sub-Account determined as of the end of the
current Valuation Period; plus
(ii) the per share amount of any dividend (or, if applicable,
capital gain distributions) made by the applicable Eligible Fund on
shares held in the Variable Sub-Account if the "ex-dividend" date
occurs during the current Valuation Period; minus or plus
(iii) a per unit charge or credit for any taxes incurred
by or reserved for in the Variable Sub-Account, which is determined
by the Company to have resulted from the investment operations of
the Variable Sub-Account.
(b) is the net result of:
(i) the net asset value per share of the Eligible Fund shares
held in the Variable Sub-Account determined as of the end of the
immediately preceding Valuation Period; minus or plus
(ii) the per unit charge or credit for any taxes incurred by
or reserved for in the Variable Sub-Account for the immediately
preceding Valuation Period.
(c) is an amount representing the risk charge deducted from each
Variable Sub-Account on a daily basis, equal to an annual rate as
shown in the table below as a percentage of the daily net asset
value of each Variable Sub-Account. This charge will not exceed:
Mortality: Expense: Total:
.68% maximum .17% maximum .85% maximum
The net investment factor may be greater than, less than, or equal
to one. Therefore, the accumulation unit value may increase,
decrease or remain unchanged.
The per share amount of any dividend referred to in paragraph
(a)(ii) includes a deduction for an investment advisory fee. This
fee compensates the investment adviser for services provided to the
Eligible Fund. The fee may differ between Eligible Funds and may
be renegotiated each year.
RISK CHARGE
The risk charge compensates the Company for its assumption of
certain mortality and expense risks. This charge is set forth
above in the Net Investment Factor provision.
FIXED ACCOUNT PROVISIONS
How is the Fixed Account Value determined?
GUARANTEE PERIOD FUND
The Guarantee Period Fund is a type of Fixed Sub-Account. The
Owner, by Request, may allocate all or a portion of a Contribution
to any of the several Guarantee Periods then offered by the
Company. The sum of the values of the Owner's Guarantee Periods is
the value of the Owner's interest in the Guarantee Period Fund.
J418 Page 4
J434 NY Page 9<PAGE>
Account Value and Market Value Adjustment Provisions
(continued)
What is the value of each Guarantee Period?
VALUE OF GUARANTEE PERIOD
All Contributions allocated to a Guarantee Period will earn an
annual effective rate of interest equal to the rate stated by the
Company for the applicable Guarantee Period from the Transaction
Date to the end of the Guarantee Period. The account will be
credited daily with interest earned.
If the Owner does not break a Guarantee Period, the annual
effective rate will be at least the Contractual Guarantee of a
Minimum Rate of Interest. If the Owner breaks a Guarantee Period,
a Market Value Adjustment may apply. The Market Value Adjustment
is applied to the amount of Transfer or withdrawal Requested and a
negative adjustment may cause the amount Transferred or withdrawn
to be less than the amount Requested.
Each Guarantee Period has its own value, which is calculated as
follows:
* the Owner's Contributions, less Premium Tax, if any, in that
Guarantee Period; plus
* interest earned; less
* amounts Transferred, distributed, surrendered (in whole or in
part), or applied to an annuitization option; less
* periodic withdrawals; less
* Certificate Maintenance Charges.
ALLOCATION AT GUARANTEE PERIOD
MATURITY DATE
At any time prior to the Guarantee Period Maturity Date, the Owner
may Request to allocate the maturity value of that Guarantee Period
among any of the Variable and Fixed Sub-Accounts then offered by
the Company under this Certificate. The election is effective on
its Guarantee Period Maturity Date.
If the election is not received at the Schwab Annuity Service
Center prior to the Guarantee Period Maturity Date, the value of
the matured Guarantee Period will be allocated to a new Guarantee
Period with the same Guarantee Period as the matured Guarantee
Period.
If the new Guarantee Period would mature later than the Payment
Commencement Date, the value will be allocated to the Guarantee
Period that matures closest to the Payment Commencement Date.
If the Company is not then offering the same Guarantee Period under
the Certificate, the value of the matured Guarantee Period will be
allocated to a new Guarantee Period with the closest shorter
Guarantee Period then available.
If none of the above is available, the value of the matured
Guarantee Period will be allocated to the Money Market Sub-Account.
If held to maturity, amounts from a matured Guarantee Period
allocated to a new Guarantee Period or other Fixed Sub-Account will
earn the annual effective rate applicable to that Guarantee Period
or Fixed Sub-Account. This annual effective rate may differ from
the annual effective rate applicable to the matured Guarantee
Period.
What if the Guarantee Period is broken prior to maturity?
BREAKING A GUARANTEE PERIOD
Any Transfer, surrender (in whole or in part), distribution due to
death, or the selection of an annuity option prior to the Guarantee
Period Maturity Date will be known as breaking a Guarantee Period.
When a Request to break a Guarantee Period is received, the
Guarantee Period that is closest to the Guarantee Period Maturity
Date will be broken first.
If a Guarantee Period is broken, a Market Value Adjustment may be
assessed. The Market Value Adjustment may increase or decrease the
value of the amount being Transferred or withdrawn from the
Guarantee Period. The Market Value Adjustment is described below.
J434 NY Page 10
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Account Value and Market Value Adjustment Provisions
(continued)
MARKET VALUE ADJUSTMENT
Distributions from the amounts allocated to a Guarantee Period due
to a full surrender or partial withdrawal, Transfer, application of
amounts to the Periodic Withdrawal Option or to purchase an
annuity. Guarantee Period Maturity Date will be subject to a
Market Value Adjustment ("MVA"). An MVA may increase or decrease
the amount payable on one of the above described distributions.
The Amount Available for a full surrender, partial withdrawal, or
Transfer is the Amount Requested plus the MVA.
Amount Available = Amount Requested + MVA
The MVA is calculated by multiplying the amount Requested by the
Market Value Adjustment Factor ("MVAF"). The formula used to
determine the MVA is:
MVA = (Amount Requested) X (MVAF)
The Market Value Adjustment Factor (MVAF) is:
- -1
where:
* i is the U.S. Treasury Strip ask side yield as published in The
Wall Street Journal on the last business day of the week prior to
the date the stated rate of interest was established for the
Guarantee Period. The term of i is measured in years and equals
the term of the Guarantee Period; and
* j is the U.S. Treasury Strip ask side yield as published in The
Wall Street Journal on the last business day of the week prior to
the week the Guarantee Period is broken. The term of j equals the
remaining term to maturity of the Guarantee Period, rounded up to
the higher number of years; and
*
N is the number of complete months remaining until maturity.
The Market Value Adjustment will equal 0 if N is less than 6.
If The Wall Street Journal ceases to publish the U.S. Treasury
Strip ask side yield, an alternate source for the same index will
be used. If the Treasury Strip ask side yield is not published
anywhere, an appropriate substitute index of publicly traded
obligations will be chosen.
The Market Value Adjustment will apply to any Guarantee Period
broken six or more months prior to the Guarantee Period Maturity
Date in each of the following situations:
* Transfers to another Guarantee Period, Fixed Sub-Account or to an
Investment Division offered under this Certificate; or
* Surrenders, partial withdrawals, annuitization or periodic
withdrawals.
The Market Value Adjustment will not apply to any Guarantee Period
having fewer than 6 months prior to the Guarantee Period Maturity
Date in each of the following situations:
* Transfer to another Guarantee Period, Fixed Sub-Account or to a
Variable Sub-Account offered under this Certificate; or
* Surrenders, partial withdrawals, annuitization or periodic
withdrawals.
Transfer Provisions
Can Transfers be made between the Fixed and Variable Sub-Accounts?
TRANSFERS
The Owner may make Transfers by Request. The following provisions
apply:
(a) At any time prior to the date annuity payments begin, the
Owner, by Request, may Transfer all or a portion of the Annuity
Account Value among the Variable and Fixed Sub-Accounts currently
offered by the Company. No Transfers are permitted after the
election of a fixed annuity payment option; however, if a variable
annuity payment option is elected, Transfers may be made from one
Variable Sub-Account to another.
(b) A Transfer will be effective upon the Transaction Date.
(c) A Transfer from Fixed Sub-Accounts will be subject to the
terms of the Fixed Account Provisions and the attached Fixed
Sub-Account Rider(s), if any. The Annuity Account Value may be
Transferred prior to the Guarantee Period Maturity Date. The
Market Value Adjustment will be assessed except in the situations
described in the Market Value Adjustment Provision.
(d) There is no administrative charge for the first twelve
Transfers made in a calendar year. There is a $10 administrative
fee for each subsequent Transfer. All Transfers made on a single
Transaction Date will be aggregated to count as only one Transfer
toward the twelve free Transfers; however, if a one time
rebalancing Transfer also occurs on the Transaction Date, it will
be counted as a separate and additional Transfer.
J418 Page 4
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Transfer Provisions (continued)
Is Dollar Cost Averaging offered?
DOLLAR COST AVERAGING
By Request, the Owner may elect Dollar Cost Averaging in order to
purchase units of the Variable Sub-Accounts over a period of time.
The Owner may Request to automatically Transfer a predetermined
dollar amount, subject to the Company's minimum, at regular
intervals from any one or more designated Variable Sub-Accounts to
one or more of the remaining, then available, Variable
Sub-Accounts. The unit value will be determined on the dates of
the Transfers. The Owner must specify the percentage to be
Transferred into each designated Variable Sub-Account. Transfers
may be set up on any one of the following frequency periods:
monthly, quarterly, semiannually, or annually. The Transfer will
be initiated on the Transaction Date one frequency period following
the date of the Request. The Company will provide a list of
Variable Sub-Accounts eligible for Dollar Cost Averaging which may
be modified from time to time. Amounts Transferred through Dollar
Cost Averaging are not counted against the twelve free Transfers
allowed in a calendar year.
The Owner may terminate Dollar Cost Averaging at any time by
Request. Dollar Cost Averaging will terminate automatically upon
the annuity commencement date.
Participation in Dollar Cost Averaging and the Rebalancer Option at
the same time is not allowed. Participation in Dollar Cost
Averaging does not assure a greater profit, or any profit, nor will
it prevent or necessarily alleviate losses in a declining market.
The Company reserves the right to modify, suspend, or terminate
Dollar Cost Averaging at any time.
Is rebalancing available?
THE REBALANCER OPTION
By Request, the Owner may elect the Rebalancer Option in order to
automatically Transfer among the Variable Sub-Accounts on a
periodic basis. This type of automatic Transfer program
automatically reallocates the Variable Account Value to maintain a
particular percentage allocation among Variable Sub-Accounts
selected by the Owner. The amount allocated to each Variable
Sub-Account will grow or decline at different rates depending on
the investment experience of the Variable Sub-Account.
The Owner may Request that rebalancing occur one time only, in
which case the Transfer will take place on the Transaction Date of
the Request. This Transfer will count as one Transfer towards the
twelve free Transfers allowed in a calendar year.
Rebalancing may also be set up on a quarterly, semiannual, or
annual basis, in which case the first Transfer will be initiated on
the Transaction Date one frequency period following the date of the
Request. On the Transaction Date for the specified Request, assets
will be automatically reallocated to the selected funds.
Rebalancing will continue on the same Transaction Date for
subsequent periods. In order to participate in the Rebalancer
Option, the entire Variable Account Value must be included.
Transfers set up with these frequencies will not count against the
twelve free Transfers allowed in a calendar year.
The Owner must specify the percentage of Variable Account Value to
be allocated to each Variable Sub-Account and the frequency of
rebalancing. The Owner may terminate the Rebalancer Option at any
time by Request. The Rebalancer Option will terminate
automatically upon the annuity commencement date.
Participation in the Rebalancer Option and Dollar Cost Averaging at
the same time is not allowed. Participation in the Rebalancer
Option does not assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company
reserves the right to modify, suspend, or terminate the Rebalancer
Option at any time.
J434 NY Page 12
J434 4/3/97 Page 11<PAGE>
Death Benefit Provisions
How is the death benefit paid?
PAYMENT OF DEATH BENEFIT
Upon the death of an Owner or the Annuitant, the death benefit will
become payable in accordance with these death benefit provisions
following the Company's receipt of a Request, while this
Certificate is in force.
The amount of the death benefit will be as follows:
If the Owner or Annuitant dies after the date annuity payments
commence and before the entire interest has been distributed, the
remaining annuity payments, if any, will be paid to the Beneficiary
under the payment option applicable on the date of death. The
Beneficiary will not be allowed to change the method of
distribution in effect on the date of the Owner's or Annuitant's
death or to elect a new payment option; or
If the Owner or Annuitant dies before the date annuity payments
commence, the Company will pay proceeds to the Beneficiary the
greater of A and B below:
A. ( the Fixed Account Value as of the date the Request for
payment is received, less Premium Tax, if any; plus
( the Variable Account Value as of the date the Request for
payment is received, less Premium Tax, if any;
B. the sum of Contributions paid, less partial surrenders and
Periodic Withdrawals, less Premium Tax, if any.
When an Owner or the Annuitant dies before the annuity commencement
date and a death benefit is payable to a Beneficiary, the death
benefit proceeds will remain invested in accordance with the
allocation instructions given by the Owner until new allocation
instructions are Requested by the Beneficiary or until the death
benefit is actually paid to the Beneficiary. The death benefit
will be determined as of the date payments commence; however, on
the date a payment option is processed, amounts in the Variable
Sub-Account will be Transferred to the Money Market Investment
Division unless the Beneficiary otherwise elects by Request.
Distribution of the death benefit may be Requested to be made as
follows (subject to the distribution rules set forth below):
A. Proceeds from the Variable Sub-Account(s)
1. payment in a single sum; or
2. payment under any of the variable annuity options provided
under the Certificate.
B. Proceeds from the Fixed Sub-Account(s)
1. payment in a single sum; or
2. payment under any of the annuity options provided under this
Certificate.
DISTRIBUTION RULES
If Annuitant Dies Before Annuity Commencement Date
Upon the death of the Annuitant while the Owner is living, and
before the annuity commencement date, the death benefit provided
under the Certificate will be paid to the Beneficiary unless there
is a surviving Contingent Annuitant.
If a Contingent Annuitant was named by the Owner prior to the
Annuitant's death, and the Annuitant dies before the annuity
commencement date, while the Owner and Contingent Annuitant are
living, no death benefit will be payable by reason of the
Annuitant's death and the Contingent Annuitant will become the
Annuitant.
If a corporation or other non-individual is an Owner, or if the
deceased Annuitant is an Owner, the death of the Annuitant will be
treated as the death of an Owner and the Certificate will be
subject to the death of an Owner provisions described below.
If an Owner Dies Before Annuity Commencement Date
If an Owner dies before the annuity commencement date, and such
Owner was the Annuitant, the following provisions shall apply:
(1) If there is a Joint Owner (who is the surviving spouse of the
deceased Owner) and a Contingent Annuitant, the Joint Owner will
become the Owner and the Beneficiary, the Contingent Annuitant will
become the Annuitant, and the Certificate will continue in force;
(2) If there is a Joint Owner who is the surviving spouse of the
deceased Owner but no Contingent Annuitant, the Joint Owner will
become the Owner, the Annuitant and the Beneficiary, and may take
the death benefit or elect to continue this Certificate in force;
(3) In all other cases, the Company will pay the death benefit to
the Beneficiary even if a former spouse Joint Owner, the Annuitant
and/or the Contingent Annuitant are alive at the time of an Owner's
death, unless the sole Beneficiary is the deceased Owner's
surviving spouse and the Beneficiary Requests to become the Owner
and the Annuitant, and to continue the Certificate in force.
If an Owner dies before the annuity commencement date, and such
Owner was not the Annuitant, the following provisions shall apply:
(1) If there is a Joint Owner who is the surviving spouse of the
deceased Owner, the Joint Owner will become the Owner and
Beneficiary and may take the death benefit or elect to continue
this Certificate in force.
(2) In all other cases, the Company will pay the death
benefit to the Beneficiary even if a former spouse Joint Owner, the
Annuitant and/or the Contingent Annuitant are alive at the time of
the Owner's death, unless the sole Beneficiary is the
J434 NY Page 13<PAGE>
Death Benefit Provisions (continued)
deceased Owner's surviving spouse and such Beneficiary
Requests to become the Owner and the Annuitant and to continue the
Certificate in force.
To whom and when is the death benefit payable?
Any death benefit payable to the Beneficiary upon an Owner's death
will be distributed as follows:
(1) If the Owner's surviving spouse is the person entitled to
receive benefits upon the Owner's death, the surviving spouse will
be treated as the Owner and will be allowed to take the death
benefit or continue the Certificate in force.
(2) If a non-spouse individual is the person entitled to receive
benefits upon the Owner's death, such individual may elect, not
later than one year after the Owner's date of death, to receive the
death benefit in either a single sum or payment under any of the
variable or fixed annuity options available under the Certificate,
provided that: (a) such annuity is distributed in substantially
equal installments over the life or life expectancy of such
Beneficiary; and (b) such distributions begin not later than one
year after the Owner's date of death. If no election is received
by the Company from an individual non-spouse Beneficiary such that
substantially equal installments have begun no later than one year
after the Owner's date of death, then the entire amount must be
distributed within five years of the Owner's date of death; or
(3) If a corporation or other non-individual entity is entitled to
receive benefits upon the Owner's death, the
death benefit must be completely distributed within five years of
the Owner's date of death.
The death benefit will be determined as of the date the payments
commence.
If Annuitant Dies After Annuity Commencement Date
Upon the death of the Annuitant (or any Owner/Annuitant) after the
annuity commencement date, any benefit payable must be distributed
to the Beneficiary in accordance with and at least as rapidly as
under the annuity option then in effect.
If an Owner Dies After Annuity Commencement Date and While the
Annuitant is Living
Upon the death of an Owner after the annuity commencement date and
while the Annuitant is living, any benefit payable will continue to
be distributed to the Annuitant at least as rapidly as under the
annuity option then in effect. All of the Owner's rights granted
under the Certificate or allowed by the Company will pass to any
surviving Joint Owner and, if none, to the Annuitant.
COMPLIANCE WITH CODE SECTION 72(s)
In any event, no payment of benefits provided under the Certificate
will be allowed that does not satisfy the requirements of Code
Section 72(s), as amended from time to time, and any other
applicable federal or state law, rules or regulations. These death
benefit provisions will be interpreted and administered in
accordance with such requirements.
Surrenders And Partial Withdrawals
Can withdrawals be made from this Certificate?
SURRENDER BENEFIT
At any time prior to the date annuity payments commence and subject
to the provisions of this Certificate, the Owner may surrender this
Certificate for the Surrender Value which will be computed as of
the Transaction Date. The Company will make the distribution, paid
in a single sum, as soon as practical after receipt of the Request.
PARTIAL WITHDRAWALS
The Owner may make a partial withdrawal from the Annuity Account
Value at any time, by Request, prior to the date annuity payments
commence and subject to the terms of this Certificate. A Market
Value Adjustment may apply. The minimum partial withdrawal amount
is $500. After any partial withdrawal, if the remaining Annuity
Account Value is less than $2,000, then a full surrender may be
required.
By Request, the Owner must elect the Variable or Fixed
Sub-Account(s), or a combination of them, from which a partial
withdrawal is to be made and the amount to be withdrawn from each
sub-account.
The Annuity Account Value will be reduced by the partial withdrawal
amount. The partial withdrawal proceeds may be greater than or
less than the amount requested, depending on the effect of the
Market Value Adjustment.
The following terms apply:
(a) No partial withdrawals are permitted after the date annuity
payments commence.
(b) If a partial withdrawal is made within 30 days of the date
annuity payments are scheduled to commence, the Company may delay
the Payment Commencement Date by 30 days.
(c) A partial withdrawal will be effective upon the Transaction
Date.
(d) A partial withdrawal from a Fixed Sub-Account may be subject
to the Market Value Adjustment Provisions, the Fixed Account
Provisions of this Certificate, and the terms of the attached Fixed
Sub-Account Rider(s), if any.
J434 NY Page 14
J434 4/3/97 Page 12
J434 Page 15
J434 4/3/97 Page 12<PAGE>
Surrenders And Partial Withdrawals (continued)
POSTPONEMENT
In accordance with state law, if the Company receives a Request for
surrender or partial withdrawal, the Company may postpone any cash
payment as follows:
* from the Fixed Account Value, for no more than 6 months (30 days
in West Virginia); and
* from the Variable Account Value, for no more than 7 business
days.
During the postponement period:
* the Fixed Sub-Account(s) will continue to earn interest at the
annual effective rate applicable to the Guarantee Period (or at the
rate applicable to the attached Fixed Sub-Account Riders, if any)
that was in effect at the time the Request for surrender or partial
withdrawal was made; and
* the Variable Account Value will continue to be subject to the
investment experience (gains or losses) of the underlying Eligible
Fund(s) and all applicable charges.
Payment Options
How are annuity payment options and the Periodic Withdrawal Option
elected?
HOW TO ELECT
The Request of the Owner is required to elect, or change the
election of, a payment option and must be received by the Company
at least 30 days prior to the Payment Commencement Date.
At any time prior to the Payment Commencement Date, the Owner may
Transfer between Fixed and Variable Sub-Account options, subject to
the Transfer provisions of this Certificate.
However, on the Payment Commencement Date, the following
restrictions apply:
* the Variable Account Value may be applied only to any of the
variable annuity payment options available; and
* the Fixed Account Value may be applied only to any of the fixed
annuity payment options available.
If an option has not been elected within 30 days of the Payment
Commencement Date, the Variable Account Value will be applied under
Variable Annuity Payment Option 1 to provide payments for life with
a guaranteed period of 20 years. The Fixed Account Value will be
applied under Fixed Annuity Payment Option 3 to provide payments
for life with a guaranteed period of 20 years.
What guidelines apply to annuity payment options?
SELECTION OF PAYMENT OPTIONS
(a) A single sum payment may be elected. If so, the amount to be
paid is the Surrender Value.
(b) If a fixed annuity payment option is elected, the amount to be
applied is the Fixed Account Value, as of the Payment Commencement
Date, plus a Market Value Adjustment, if applicable, less Premium
Tax, if any.
(c) If a variable annuity payment option is elected, the amount to
be applied is the Variable Account Value, as of the Payment
Commencement Date, less Premium Tax, if any.
(d) The minimum amount that may be withdrawn from the Annuity
Account Value to purchase an annuity payment option is $2,000. If
the amount is less than $2,000, the Company may pay the amount in
a single sum subject to the Partial Withdrawals Provision.
Payments may be elected to be received on any of the following
frequency periods: monthly, quarterly, semiannually, or annually.
(e) Payments to be made under the annuity payment option selected
must be at least $50. The Company reserves the right to make the
payments using the most frequent payment interval which produces a
payment of not less than $50.
(f) The maximum amount that may be applied under any annuity
payment option is $1,000,000, unless prior approval is obtained
from the Company.
(g) For information on electing periodic withdrawals, refer to the
Periodic Withdrawal Option section on Page 17.
What variable annuity payment options are
available?
VARIABLE ANNUITY PAYMENT OPTIONS
The guaranteed annuity table is based on mortality from the 1983
Table (a) for Individual Annuity Valuation and a guaranteed
interest rate of 5% per year. The Company may offer a better rate
than the guaranteed rate shown.
The following variable annuity payment options are available:
(a) Option 1: Variable Life Annuity with Guaranteed
Period
Payments for the guaranteed Annuity Payment Period elected or
the lifetime of the Annuitant whichever is longer. The guaranteed
Annuity Payment Period elected may be 5, 10, 15, or 20 years. Upon
death of the Annuitant, the Beneficiary will begin to receive the
remaining payments at the same interval elected by the Owner. See
Table A.
J434 NY Page 15<PAGE>
Payment Options (continued)
(b) Option 2: Variable Life Annuity
Payments for the Annuitant's lifetime, without a guaranteed
period. See Table A. Upon death of the Annuitant, all payments
cease and no amounts are payable to the Beneficiary.
(c) Option 3: Any Other Form
Any other form of variable annuity which is acceptable to the
Company.
These variable annuity payment options are subject to the following
provisions:
(1) Amount of First Payment
The first payment under a variable annuity payment option will
be based on the value of each Variable Sub-Account on the 5th
Valuation Date preceding the date annuity payments commence. It
will be determined by applying the appropriate rate from Table A to
the amount applied under the payment option.
(2) Annuity Units
The number of Annuity Units paid to the Annuitant for each
Variable Sub-Account is determined by dividing the amount of the
first payment by the sub-account's annuity unit value on the 5th
Valuation Date preceding the date the first payment is due. The
number of Annuity Units used to calculate each payment for a
Variable Sub-Account remains fixed during the Annuity Payment
Period.
(3) Amount of Payments after the First
Payments after the first will vary depending upon the
investment experience of the Variable Sub-Accounts. The subsequent
amount paid from each sub-account is determined by multiplying (a)
by (b) where (a) is the number of sub-account Annuity Units to be
paid and (b) is the sub-account annuity unit value on the 5th
Valuation Date preceding the date the annuity payment is due. The
total amount of each variable annuity payment will be the sum of
the variable annuity payments for each Variable Sub-Account. The
Company guarantees that the dollar amount of each payment after the
first will not be affected by variations in expenses or mortality
experience.
(4) Transfers After the Payment Commencement Date
Once variable annuity payments have begun, the Owner may
Transfer all or part of the Variable Account Value from one
Variable Sub-Account to another. Transfers after the Payment
Commencement Date will be made by converting the number of Annuity
Units being Transferred to the number of Annuity Units of the
sub-account to which the Transfer is made. The result will be that
the next annuity payment, if it were made at that time, would be
the same amount that it would have been without the Transfer.
Thereafter, annuity payments will reflect changes in the
value of the
new Annuity Units. Once annuity payments have begun, no Transfers
may be made from a fixed annuity payment option to a variable
annuity payment option, or from a variable annuity payment option
to a fixed annuity payment option. The Certificate's Transfer
provisions will apply.
What fixed annuity payment options are available?
FIXED ANNUITY PAYMENT OPTIONS
The guaranteed annuity table is based on mortality from the 1983
Table (a) for Individual Annuity Valuation and a guaranteed
interest rate of 2 1/2% per year. The Company may offer a better
rate than the guaranteed rate shown. The rate offered is not less
than the single consideration immediate annuity contract rate
offered to the same class of Annuitants.
The following fixed annuity payment options are available:
(a) Option 1: Income of Specified Amount
An annuity payment at 12-, 6-, 3-, or 1-month intervals, of an
amount elected by the Owner for an Annuity Payment Period of not
more than 240 months. Upon death of the Annuitant, the Beneficiary
will begin to receive the remaining payments at the same interval
that was elected by the Owner. See Table C.
(b) Option 2: Income for a Specified Period
An annuity payment at 12-, 6-, 3-, or 1-month intervals, for
the number of months elected, for an Annuity Payment Period of not
more than 240 months. Upon death of the Annuitant, the Beneficiary
will begin to receive the remaining payments at the same interval
that was elected by the Owner. See Table C.
(c) Option 3: Fixed Life Annuity with Guaranteed Period
Payments for the guaranteed Annuity Payment Period elected
which may be 5, 10, 15, or 20 years or the lifetime of the
Annuitant whichever is longer. Upon death of the Annuitant, any
amounts remaining payable under this payment option will be paid to
the Beneficiary. See Table B.
(d) Option 4: Fixed Life Annuity
Monthly payments for the Annuitant's lifetime, without a
guaranteed period. See Table B. Upon death of the Annuitant, all
payments cease and no amounts are payable to the Beneficiary.
(e) Option 5: Any Other Form
Any other form of annuity which is acceptable to the Company.
J434 NY Page 16
J434 4/3/97 Page 13<PAGE>
Payment Options (continued)
What guidelines apply to periodic withdrawals?
PERIODIC WITHDRAWAL OPTION
The Owner must Request that all or part of the Annuity Account
Value be applied to a Periodic Withdrawal Option. Premium Tax, if
applicable, will be deducted before applying the amount Requested.
While periodic withdrawals are being received:
* a Market Value Adjustment applies to periodic withdrawals from
Guarantee Periods 6 or more months prior to maturity;
* the Owner may keep the same Fixed and Variable Sub-Accounts as
were in force before periodic withdrawals began;
* Charges and fees under this Certificate continue to apply;
( the Owner may continue to exercise all contractual rights that
are available prior to electing a payment option, except that no
Contributions may be made;
( if a partial withdrawal is made from a Fixed Sub-Account, the
Market Value Adjustment, if applicable, will be applied;
* Guarantee Periods renew into the shortest Guarantee Period then
available.
HOW TO ELECT PERIODIC WITHDRAWALS
The Request of the Owner is required to elect, or change the
election of, the Periodic Withdrawal Option. The Owner must
Request:
the withdrawal frequency of either 12-, 6-, 3-, or 1-month
intervals;
a withdrawal amount; a minimum of $100 is required;
the calendar month, day, and year on which withdrawals are to
begin;
one Periodic Withdrawal Option; and
the allocation of withdrawals from the Variable and/or Fixed
Sub-Account(s) as follows:
1) Prorate the amount to be paid across all Variable and
Fixed Sub-Accounts in proportion to the assets in each sub-account;
or
2) Select the Variable and/or Fixed Sub-Account(s) from
which withdrawals will be made. Once the Variable and/or Fixed
Sub-Accounts(s) have been depleted, the Company will automatically
prorate the remaining withdrawals against all remaining available
Sub-Accounts, unless the Owner Requests the selection of another
Variable Sub-Account.
The Owner may elect to change the withdrawal option and/or
frequency once each calendar year.
Periodic Withdrawals will cease on the earlier of the date:
* the amount elected to be paid under the option selected has been
reduced to zero;
* the Annuity Account Value is zero;
* the Owner Requests that withdrawals stop;
* the Owner purchases an annuity option; or
* of death of an Owner or the Annuitant.
PERIODIC WITHDRAWAL OPTIONS
AVAILABLE
The Owner must elect one of these 5 withdrawal options:
1) Income for a Specified Period for at least thirty-six (36)
months - The Owner elects the duration over which withdrawals will
be made. The amount paid will vary based on the duration; or
2) Income of a Specified Amount for at least thirty-six (36)
months - The Owner elects the dollar amount of the withdrawals.
Based on the amount elected, the duration may vary; or
3) Interest Only - The withdrawals will be based on the amount of
interest credited to the Fixed Sub-Account(s) between each
withdrawal. Available only if 100% of the account value is
invested in the Fixed Sub-Account; or
4) Minimum Distribution - If this is an IRA Certificate, the
Owner may Request minimum distributions as specified under Internal
Revenue Code 401(a)(9); or
5) Any Other Form for a period of at least thirty-six (36) months
- - Any other form of periodic withdrawal which is acceptable to the
Company.
J418 Page 4
J434 NY Page 17<PAGE>
TABLE A - Variable Life Annuity
FEMALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 4.29 4.29 4.29 4.29 4.29
21 4.31 4.31 4.30 4.30 4.30
22 4.32 4.32 4.32 4.31 4.31
23 4.33 4.33 4.33 4.32 4.32
24 4.34 4.34 4.34 4.34 4.33
25 4.36 4.36 4.35 4.35 4.35
26 4.37 4.37 4.37 4.37 4.36
27 4.39 4.39 4.38 4.38 4.38
28 4.40 4.40 4.40 4.40 4.39
29 4.42 4.42 4.42 4.41 4.41
30 4.44 4.44 4.44 4.43 4.42
31 4.46 4.46 4.45 4.45 4.44
32 4.48 4.48 4.47 4.47 4.46
33 4.50 4.50 4.49 4.49 4.48
34 4.52 4.52 4.52 4.51 4.50
35 4.55 4.54 4.54 4.53 4.52
36 4.57 4.57 4.56 4.56 4.55
37 4.60 4.60 4.59 4.58 4.57
38 4.63 4.62 4.62 4.61 4.59
39 4.65 4.65 4.65 4.64 4.62
40 4.69 4.68 4.68 4.67 4.65
41 4.72 4.72 4.71 4.70 4.68
42 4.75 4.75 4.74 4.73 4.71
43 4.79 4.79 4.78 4.76 4.74
44 4.83 4.83 4.82 4.80 4.77
45 4.87 4.87 4.86 4.84 4.81
46 4.91 4.91 4.90 4.88 4.85
47 4.96 4.96 4.94 4.92 4.88
48 5.01 5.00 4.99 4.96 4.92
49 5.06 5.06 5.04 5.01 4.97
50 5.12 5.11 5.08 5.06 5.01
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 5.17 5.17 5.14 5.11 5.05
52 5.23 5.23 5.20 5.16 5.10
53 5.30 5.29 5.26 5.22 5.15
54 5.37 5.36 5.33 5.27 5.20
55 5.44 5.43 5.40 5.34 5.25
56 5.52 5.51 5.47 5.40 5.31
57 5.60 5.59 5.54 5.47 5.37
58 5.69 5.68 5.62 5.54 5.43
59 5.79 5.77 5.71 5.62 5.49
60 5.89 5.87 5.80 5.69 5.55
61 6.00 5.97 5.90 5.78 5.61
62 6.11 6.08 6.00 5.86 5.67
63 6.24 6.20 6.11 5.95 5.74
64 6.37 6.33 6.22 6.04 5.80
65 6.51 6.47 6.34 6.14 5.87
66 6.66 6.61 6.47 6.24 5.93
67 6.82 6.77 6.60 6.34 5.99
68 7.00 6.93 6.74 6.44 6.05
69 7.19 7.11 6.89 6.54 6.11
70 7.39 7.31 7.05 6.65 6.16
71 7.62 7.51 7.21 6.75 6.21
72 7.86 7.74 7.38 6.85 6.26
73 8.12 7.98 7.56 6.96 6.30
74 8.41 8.23 7.74 7.05 6.34
75 8.72 8.51 7.93 7.15 6.37
76 9.06 8.80 8.12 7.24 6.40
77 9.42 9.11 8.31 7.32 6.42
78 9.81 9.44 8.51 7.39 6.44
79 10.24 9.80 8.70 7.46 6.46
80 10.71 10.16 8.88 7.52 6.47
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly payment shall
be determined by the Company on the actuarial basis used in
determining the above amounts.
J434 NY Page 18
J434 Page 18
J401 Page 14
J401 Page 13<PAGE>
TABLE A - Variable Life Annuity
MALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 4.38 4.38 4.37 4.37 4.36
21 4.39 4.39 4.39 4.38 4.38
22 4.41 4.41 4.40 4.40 4.39
23 4.43 4.42 4.42 4.42 4.41
24 4.44 4.44 4.44 4.43 4.42
25 4.46 4.46 4.46 4.45 4.44
26 4.48 4.48 4.48 4.47 4.46
27 4.50 4.50 4.50 4.49 4.48
28 4.52 4.52 4.52 4.51 4.50
29 4.55 4.55 4.54 4.53 4.52
30 4.57 4.57 4.56 4.55 4.54
31 4.60 4.59 4.59 4.58 4.57
32 4.62 4.62 4.62 4.60 4.59
33 4.65 4.65 4.64 4.63 4.61
34 4.68 4.68 4.67 4.66 4.64
35 4.72 4.71 4.70 4.69 4.67
36 4.75 4.75 4.74 4.72 4.70
37 4.79 4.78 4.77 4.75 4.73
38 4.82 4.82 4.81 4.79 4.76
39 4.86 4.86 4.85 4.82 4.79
40 4.91 4.90 4.89 4.86 4.82
41 4.95 4.95 4.93 4.90 4.86
42 5.00 4.99 4.97 4.94 4.90
43 5.05 5.04 5.02 4.98 4.93
44 5.10 5.09 5.07 5.03 4.97
45 5.16 5.15 5.12 5.07 5.02
46 5.21 5.20 5.17 5.12 5.06
47 5.28 5.26 5.23 5.17 5.10
48 5.34 5.33 5.29 5.23 5.15
49 5.41 5.39 5.35 5.28 5.20
50 5.48 5.46 5.41 5.34 5.24
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 5.55 5.53 5.48 5.40 5.29
52 5.63 5.61 5.55 5.46 5.35
53 5.71 5.69 5.63 5.53 5.40
54 5.80 5.77 5.70 5.60 5.45
55 5.89 5.87 5.79 5.67 5.51
56 5.99 5.96 5.88 5.74 5.57
57 6.10 6.06 5.97 5.82 5.62
58 6.21 6.17 6.07 5.90 5.68
59 6.33 6.29 6.17 5.98 5.74
60 6.46 6.42 6.28 6.07 5.80
61 6.60 6.55 6.40 6.16 5.86
62 6.75 6.69 6.52 6.26 5.91
63 6.91 6.84 6.64 6.34 5.97
64 7.09 7.01 6.78 6.43 6.02
65 7.27 7.18 6.91 6.52 6.07
66 7.47 7.36 7.06 6.62 6.12
67 7.68 7.56 7.21 6.71 6.17
68 7.91 7.76 7.36 6.80 6.21
69 8.15 7.98 7.52 6.90 6.26
70 8.42 8.21 7.68 6.98 6.29
71 8.69 8.46 7.84 7.07 6.33
72 8.99 8.71 8.01 7.15 6.36
73 9.31 8.98 8.18 7.23 6.38
74 9.65 9.27 8.35 7.30 6.41
75 10.02 9.57 8.52 7.37 6.43
76 10.41 9.88 8.68 7.43 6.44
77 10.84 10.21 8.84 7.49 6.46
78 11.29 10.55 9.00 7.54 6.47
79 11.78 10.93 9.15 7.59 6.48
80 12.29 11.27 9.30 7.63 6.49
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly payment shall
be determined by the Company on the actuarial basis used in
determining the above amounts.
J434 Page 19
J434 NY Page 19
J401 Page 14
J401 Page 14<PAGE>
TABLE B - Life Annuity
FEMALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 2.61 2.61 2.61 2.61 2.61
21 2.63 2.63 2.63 2.63 2.63
22 2.65 2.65 2.65 2.64 2.64
23 2.67 2.67 2.66 2.66 2.66
24 2.69 2.69 2.68 2.68 2.68
25 2.71 2.71 2.70 2.70 2.70
26 2.73 2.73 2.72 2.72 2.72
27 2.75 2.75 2.75 2.74 2.74
28 2.77 2.77 2.77 2.77 2.76
29 2.79 2.79 2.79 2.79 2.79
30 2.82 2.82 2.82 2.81 2.81
31 2.84 2.84 2.84 2.84 2.83
32 2.87 2.87 2.87 2.86 2.86
33 2.90 2.90 2.89 2.89 2.89
34 2.93 2.93 2.92 2.92 2.91
35 2.96 2.96 2.95 2.95 2.94
36 2.99 2.96 2.98 2.98 2.97
37 3.02 3.02 3.02 3.01 3.00
38 3.05 3.05 3.05 3.04 3.04
39 3.09 3.09 3.09 3.08 3.07
40 3.13 3.13 3.12 3.12 3.10
41 3.17 3.16 3.16 3.15 3.14
42 3.21 3.21 3.20 3.19 3.18
43 3.25 3.25 3.24 3.23 3.22
44 3.30 3.29 3.29 3.28 3.26
45 3.34 3.34 3.33 3.32 3.30
46 3.39 3.39 3.38 3.37 3.35
47 3.44 3.44 3.43 3.42 3.39
48 3.50 3.50 3.49 3.47 3.44
49 3.56 3.55 3.54 3.52 3.49
50 3.62 3.61 3.60 3.58 3.54
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 3.68 3.68 3.66 3.64 3.59
52 3.75 3.74 3.73 3.70 3.65
53 3.82 3.81 3.79 3.76 3.71
54 3.89 3.88 3.86 3.83 3.77
55 3.97 3.96 3.94 3.90 3.83
56 4.05 4.04 4.02 3.97 3.89
57 4.14 4.13 4.10 4.05 3.96
58 4.23 4.22 4.19 4.13 4.03
59 4.33 4.32 4.28 4.21 4.10
60 4.44 4.42 4.38 4.30 4.17
61 4.55 4.53 4.48 4.39 4.24
62 4.67 4.65 4.59 4.48 4.31
63 4.79 4.77 4.70 4.58 4.39
64 4.93 4.90 4.82 4.68 4.46
65 5.07 5.04 4.95 4.78 4.53
66 5.23 5.19 5.09 4.89 4.61
67 5.39 5.35 5.23 5.00 4.68
68 5.57 5.52 5.38 5.11 4.74
69 5.76 5.71 5.53 5.23 4.81
70 5.96 5.90 5.70 5.34 4.87
71 6.19 6.11 5.87 5.46 4.93
72 6.43 6.34 6.05 5.57 4.98
73 6.69 6.58 6.24 5.68 5.03
74 6.97 6.84 6.43 5.79 5.07
75 7.28 7.12 6.63 5.90 5.11
76 7.61 7.41 6.83 5.99 5.14
77 7.97 7.73 7.04 6.09 5.17
78 8.36 8.06 7.24 6.17 5.19
79 8.78 8.42 7.44 6.24 5.21
80 9.24 8.79 7.64 6.31 5.22
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly payment shall
be determined by the Company on the actuarial basis used in
determining the above amounts.
J434 NY Page 20
J401 Page 16
J401 Page 16
J401 Page 16<PAGE>
TABLE B - Life Annuity
MALE
Monthly Payment for Each $1,000
of Annuity Account Value
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
20 2.72 2.72 2.72 2.72 2.71
21 2.74 2.74 2.74 2.74 2.73
22 2.76 2.76 2.76 2.76 2.75
23 2.79 2.78 2.78 2.78 2.78
24 2.81 2.81 2.81 2.80 2.80
25 2.83 2.83 2.83 2.83 2.82
26 2.86 2.86 2.86 2.85 2.85
27 2.89 2.88 2.88 2.88 2.87
28 2.91 2.91 2.91 2.91 2.90
29 2.94 2.94 2.94 2.93 2.93
30 2.97 2.97 2.97 2.96 2.95
31 3.00 3.00 3.00 2.99 2.98
32 3.04 3.03 3.03 3.03 3.01
33 3.07 3.07 3.07 3.06 3.05
34 3.11 3.10 3.10 3.09 3.08
35 3.14 3.14 3.14 3.13 3.11
36 3.18 3.18 3.18 3.17 3.15
37 3.22 3.22 3.22 3.21 3.19
38 3.27 3.28 3.26 3.25 3.23
39 3.31 3.31 3.30 3.29 3.27
40 3.36 3.36 3.35 3.33 3.31
41 3.41 3.41 3.40 3.38 3.35
42 3.46 3.46 3.45 3.43 3.39
43 3.52 3.51 3.50 3.48 3.44
44 3.57 3.57 3.56 3.53 3.49
45 3.63 3.63 3.61 3.58 3.54
46 3.70 3.69 3.67 3.64 3.59
47 3.76 3.75 3.73 3.69 3.64
48 3.83 3.82 3.80 3.76 3.69
49 3.90 3.89 3.87 3.82 3.75
50 3.98 3.97 3.94 3.88 3.81
Without With Guaranteed Period
Age of Guaranteed 5 10 15 20
Annuitant Period Years Years Years Years
51 4.05 4.04 4.01 3.95 3.86
52 4.14 4.12 4.09 4.02 3.93
53 4.22 4.21 4.17 4.10 3.99
54 4.32 4.30 4.25 4.17 4.05
55 4.41 4.39 4.34 4.25 4.11
56 4.51 4.50 4.44 4.33 4.18
57 4.62 4.60 4.54 4.42 4.25
58 4.74 4.72 4.64 4.51 4.31
59 4.86 4.84 4.75 4.60 4.38
60 5.00 4.96 4.87 4.69 4.45
61 5.14 5.10 4.99 4.79 4.51
62 5.29 5.25 5.12 4.89 4.58
63 5.45 5.40 5.25 4.99 4.65
64 5.62 5.57 5.39 5.09 4.71
65 5.81 5.74 5.54 5.20 4.77
66 6.00 5.93 5.69 5.30 4.83
67 6.21 6.12 5.85 5.41 4.88
68 6.44 6.33 6.01 5.51 4.93
69 6.68 6.55 6.18 5.61 4.98
70 6.94 6.79 6.35 5.71 5.02
71 7.21 7.03 6.52 5.80 5.06
72 7.51 7.29 6.70 5.90 5.09
73 7.82 7.57 6.88 5.98 5.12
74 8.16 7.86 7.06 6.08 5.15
75 8.52 8.16 7.24 6.14 5.17
76 8.90 8.48 7.42 6.21 5.19
77 9.32 8.81 7.59 6.27 5.21
78 9.77 9.16 7.76 6.33 5.22
79 10.24 9.52 7.93 6.38 5.24
80 10.75 9.90 8.09 6.43 5.24
If payments commence on any other date than the exact age of the
Annuitant as shown above, the amount of the monthly payment shall
be determined by the Company on the actuarial basis used in
determining the above amounts.
J401 Page 17
J434 NY Page 21
J401 Page 17
J401 Page 17<PAGE>
TABLE C - Income of Specified Amount
- Income for a Specified Period
Payment for Each $1,000
of Annuity Account Value
Years Monthly Quarterly Semiannually Annually
1 84.28 252.32 503.09 1,000.00
2 42.66 127.72 254.65 506.17
3 28.79 86.19 171.85 341.60
4 21.86 65.44 130.47 259.33
5 17.70 52.99 105.65 210.00
6 14.93 44.69 89.11 177.12
7 12.95 38.77 77.30 153.65
8 11.47 34.33 68.45 136.07
9 10.32 30.88 61.58 122.40
10 9.39 28.13 56.08 111.47
11 8.64 25.87 51.59 102.54
12 8.02 24.00 47.85 95.11
13 7.49 22.41 44.69 88.83
14 7.03 21.06 41.98 83.45
15 6.64 19.88 39.64 78.80
16 6.30 18.86 37.60 74.73
17 6.00 17.95 35.79 71.15
18 5.73 17.15 34.20 67.97
19 5.49 16.43 32.77 65.13
20 5.27 15.79 31.48 62.58
If payments are for an amount or duration different than that
outlined above, the Company will determine the proper amount or
duration using the actuarial basis used to determine the above
amounts.
J434 NY Page 22
J434 Page 22
EXHIBIT 5
Underwritten by:
First Great-West Life & Annuity Insurance Company
The Schwab Variable Annuity TM
Distributed by:
Charles Schwab & Co., Inc.
PO Box 7666
San Francisco, CA 94120-7666
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY APPLICATION
Please complete and sign this application and return it in
the enclosed postage paid envelope. Please take a
moment to review the application to make sure all
sections are completed and you have signed where indicated.
Thank You!
Have Questions?
Call Us!
Schwab Annuity Service Center
1-800-838-0650
6:30am - 4:00 pm, Monday-Friday Pacific Time
J434app NY1 2602(9/96) ( 1996 Charles Schwab &
Co., Inc. Member NYSE/SIPC All Rights Reserved<PAGE>
Underwritten by:
First Great-West Life & Annuity Insurance Company
The Schwab Variable Annuity TM
Distributed by:
Charles Schwab & Co., Inc.
PO Box 7666
San Francisco, CA 94120-7666<PAGE>
1. Who will own the annuity? The Owner is the
person entitled to
all rights under the annuity. If the Owner is a Trust, additional
forms may be required and certain restrictions may apply. Call the
Schwab Annuity Service Center at 1-800-838-0650 for assistance.
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
( ) ( )
Daytime Telephone Number Evening Telephone Number
2. Who will be the Joint Owner? This is optional, and only a
spouse may be a Joint Owner of this annuity. If this is an IRA, a
Joint Owner cannot be named.
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
( ) ( )
Daytime Telephone Number Evening Telephone Number
3. Primary Annuitant. The Annuitant is the person on whose life
the annuity payments are based. The Annuitant must be age 90 or
younger. If the Annuitant and the Owner are the same, check the
appropriate box below and skip to question #5.
( Same as Owner or ( The person listed below
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
( ) ( )
Daytime Telephone Number Evening Telephone Number
4. Contingent Annuitant. This is optional. The Contingent
Annuitant is the person who will become the Annuitant upon the
death of the Primary Annuitant. The Contingent Annuitant must be
age 90 or younger. If the Contingent Annuitant and the Owner are
the same, check the appropriate box below and skip to question #5.
( Same as Owner or ( The person listed below
Name (First/Middle/Last)
Home Address
City State Zip
Birth Date Male/Female
Social Security/Tax I.D. Number
( ) ( )
Daytime Telephone Number Evening Telephone Number
J434app NY1 2602(9/96) ( 1996 Charles Schwab & Co., Inc.
Member NYSE/SIPC All Rights Reserved Page 1
(Continued on Next Page)<PAGE>
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY
APPLICATION
(continued)
5. Beneficiary(ies). Who would you like to receive the benefits
payable upon the death of the Owner or Annuitant (as applicable)?
You may name a person, a trust, a charity, or other entity as
Beneficiary. You may name one or more Beneficiaries, indicating
the percentage for each (whole percentages only). If you need
additional space, please use a separate sheet.
Name (First/Middle/Last) Social Security No.
Birth Date Percentage
Name (First/Middle/Last) Social Security No.
Birth Date Percentage
Name (First/Middle/Last) Social Security No.
Birth Date Percentage
Must = 100%
6. Citizenship Status. Is each individual named on this
application a citizen of the United States?
( YES ( NO If "No" give details below.
Name(s) Country of Legal
Residence Country of Citizenship
7. Will this annuity replace a life insurance policy or annuity
that you currently own? State law requires that you provide this
information when you replace a life insurance or annuity contract
with another.
( YES, this will replace the life insurance policy or annuity
listed below. ( NO, this will NOT replace another life
insurance policy or annuity.
Name of Insurance Company Being Replaced Policy Number
8. When would you like periodic withdrawals or annuity payments to
begin? If you want payments to begin on a certain date, indicate
the month and year. If no date is indicated, annuity payments will
begin on the first day of the month of the Annuitant's 91st
birthday.
I would like the payments to begin on (month)
(year) . ( Periodic Withdrawals OR
( Annuity Payments
9. Are you currently a Schwab customer?
( YES, My account number is . ( NO, I am not
currently a Schwab customer.
10. How will you pay for this annuity? Minimum initial
contribution is $5,000, $2,000 if an IRA, or $1,000 if paid through
an Automatic Contribution Plan. Subsequent minimum contributions
are $500, $100 if paid through an Automatic Contribution Plan. To
establish an Automatic Contribution Plan, please call the Schwab
Annuity Service Center for appropriate forms.
For non-IRA's:
( Check is attached. (Make check payable to First
Great-West Life & Annuity Insurance Company)
( Transfer $ from my Schwab brokerage account as
listed in #9 above.
( Transfer the entire balance from my existing annuity or
life insurance policy. (Complete enclosed Absolute
Assignment/Replacement forms.)
For IRA's:
( Check is attached for a new IRA for tax year(s): .
(Make check payable to First Great-West Life & Annuity
Insurance Company.)
( Transfer funds from my existing IRA annuity or other
qualified plan. (Complete enclosed IRA rollover/transfer form.)
11. Compliance Information. The Securities Exchange Act of 1934
requires that we have reasonable grounds to believe, based upon the
information provided by you, that your investment selections are
suitable given your objectives and financial situation. Please
answer the following questions relating to the suitability of your
investment choices.
Overall Investment Objective
( Capital Preservation
( Income
( Growth
( Speculation
Federal Income Tax Bracket
( 15%
( 28%
( 31% or more
Annual Income
( Under $15,000
( $15,000 to $24,999
( $25,000 to $49,999
( $50,000 to $99,999
( $100,000 or more
Liquid Net Worth
( Under $15,000
( $15,000 to $49,999
( $50,000 to $99,999
( $100,000 or more
J434app NY1 2602(9/96) ( 1996 Charles Schwab & Co., Inc.
Member NYSE/SIPC All Rights Reserved Page 2
(Continued on Next Page)<PAGE>
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY
APPLICATION
(continued)
12. How would you like to allocate your payment? You may either
choose one investment option from the enclosed list or combine your
payment among several. Please write the name of each investment
option you choose and indicate the whole percentage of your
contribution for each investment option you select. This section
must be completed for your application to be processed.
Name of Investment Option Allocation %
%
%
%
%
%
%
%
%
%
%
%
%
TOTAL =100 %
13. Signatures ( Please send me a copy of the Statement of
Additional Information to the prospectus.
I understand that I am applying for a Flexible Premium
Variable and Fixed Deferred Annuity, Contract Form J434 NY, issued
by First Great-West Life & Annuity Insurance Company. I declare
that all statements made on this application are true to the best
of my knowledge and belief. I acknowledge receipt of the
prospectus for the variable and fixed annuity contract. I believe
the contract is suitable for my retirement and insurance needs. I
understand that amounts allocated to a Variable Sub-Account are
variable and are not guaranteed as to dollar amount. I further
understand that amounts allocated to a Fixed Sub-Account may be
subject to a Market Value Adjustment which may result in positive
or negative adjustments to amounts payable under the contract.
I hereby direct that my instructions to the Schwab Annuity Service
Center be honored for transactions unless otherwise notified by me
in writing. I understand that telephone calls may be recorded to
monitor the quality of service I receive and to verify contract
transaction information. If a transfer from my Schwab brokerage
account is indicated in Section 10, I authorize Schwab to transfer
the amount specified. I certify under penalty of perjury that the
taxpayer identification numbers listed on this application are
correct. The Internal Revenue Service does not require your
consent to any provision of this document other than the
certifications required to avoid backup withholding.
Owner's Signature Date
Joint Owner's Signature (if applicable) Date
For Internal Use Only
Do you have reason to believe the annuity applied for will replace
any insurance or annuity with us or any other company?
( yes ( no
Signature (if required)
Rep Code Source Code Date
J434app NY1 2602(9/96) ( 1996 Charles Schwab & Co., Inc.
Member NYSE/SIPC All Rights Reserved Page 3
(Continued on Next Page)<PAGE>
FLEXIBLE PREMIUM FIXED AND VARIABLE DEFERRED ANNUITY
APPLICATION
(continued)
Here is a list of the investment options available. You may either
choose one investment option from the following list or combine
your payment among several. Please write on the previous page the
name of each investment option you choose and specify the whole
percentage of your contribution for each investment option you
select. Section 12 must be completed for your application to be
processed.
VARIABLE SUB-ACCOUNTS
Investment Objective Eligible Investment Options
Aggressive Growth Janus Aspen Aggressive Growth
Portfolio
SteinRoe Capital Appreciation
Fund
Strong Discovery Fund II
Alger American Small
Capitalization Portfolio
Growth Janus Aspen Growth Portfolio
Alger American Growth Fund
TCI Growth Portfolio
Montgomery Variable Series:
Growth Fund
Schwab Asset Director - High
Growth Portfolio
Growth & Income Federated American Leaders Fund
II
Equity Income INVESCO VIF - Industrial Income
Portfolio
Balanced/Asset Allocation INVESCO VIF - Total Return
Portfolio
Index Schwab S & P 500 Portfolio
Gold/Natural Resources Van Eck Gold and Natural
Resources Fund
International
Aggressive Growth Lexington Emerging Markets Fund
Montgomery Variable Series:
International Small Cap
Fund
Growth Janus Aspen Worldwide Growth
Portfolio
TCI International Portfolio
High Yield Bond INVESCO VIF - High Yield
Portfolio
Government Bond Federated Fund for U.S.
Government Securities II
Money Market Schwab Money Market Portfolio
Fixed Sub-Accounts
Investment Objective
Fixed Sub-Account chosen for specified time intervals, subject to
Market Value Adjustment
Eligible Guarantee Periods
Guarantee Period Fund - 1 Year
Guarantee Period Fund - 2 Years
Guarantee Period Fund - 3 Years
Guarantee Period Fund - 4 Years
Guarantee Period Fund - 5 Years
Guarantee Period Fund - 6 Years
Guarantee Period Fund - 7 Years
Guarantee Period Fund - 8 Years
Guarantee Period Fund - 9 Years
Guarantee Period Fund - 10 Years
J434app NY1 2664(9/96) ( 1996 Charles Schwab & Co.,
Inc. Member NYSE/SIPC All Rights Reserved
Page 4
EXHIBIT 6(a)
DECLARATION OF INTENTION
AND
CHARTER
OF
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
We, the undersigned, all being natural persons of full
age, and at least a majority of us citizens and residents of the
United States, and at least three of us residents of the State of
New York, do hereby declare our intention to form a stock insurance
corporation for the purpose of transacting the kinds of insurance
authorized by paragraphs 1, 2 and 3 of subsection (a) of Section
1113 of the Insurance Law of the State of New York, and for that
purpose do adopt the following Charter:
CHARTER
OF
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
FIRST: The name of the corporation shall be "First
Great-West Life & Annuity Insurance Company" (hereinafter referred
to as the "Corporation").
SECOND: The principal office of the Corporation shall be
located in Albany County, State of New York.
THIRD: The kinds of insurance to be transacted by the
Corporation are those specified in Paragraphs "1," "2," and "3" of
Section 1113(a) of the Insurance Law of the State of New York, as
described below:
(1) "Life insurance," means every insurance upon the
lives of human beings, and every insurance appertaining
thereto,including the granting of endowment benefits,
additional benefits in the event of death by accident,
additional benefits to safeguard the contract from lapse,
accelerated payments of part or all of the death benefit
or a special surrender value upon diagnosis (A) of
terminal illness defined as a life expectancy of twelve
months or less, or (B) of a medical condition requiring
extraordinary medical care or treatment regardless of
life expectancy, or provide a special surrender value,
upon total and permanent disability of the insured, and
optional modes of settlement of proceeds. "Life
insurance" also includes additional benefits to safeguard
the contract against lapse in the event of unemployment
of the insured. Amounts paid the insurer for life
insurance and proceeds applied under optional modes of
settlement or under dividend options may be allocated by
the insurer to one or more separate accounts pursuant to
section four thousand two hundred forty of this chapter.
(2) "Annuities," means all agreements to make periodical
payments for a period certain or where the making or continuance of
all or some of a series of such payments, or the amount of any such
payment, depends upon the continuance of human life, except
payments made under the authority of paragraph one hereof. Amounts
paid to the insurer to provide annuities and proceeds applied under
optional modes of settlement or under dividend options may be
allocated by the insurer to one or more separate accounts pursuant
to section four thousand two hundred forty of this chapter.
(3) "Accident and health insurance," means (i) insurance
against death or personal injury by accident or by any specified
kind or kinds of accident and insurance against sickness, ailment
or bodily injury, including insurance providing disability benefits
pursuant to article nine of the workers' compensation law, except
as specified in item (ii) hereof; and (ii) non-cancellable
disability insurance, meaning insurance against disability
resulting from sickness, ailment or bodily injury (but excluding
insurance solely against accidental injury) under any contract
which does not give the insurer the option to cancel or otherwise
terminate the contract at or after one year from the effective date
or renewal date.
The Corporation shall also have full power and authority
to effect reinsurance of the kinds of insurance business which it
is licensed to do in New York and may engage in any other kind or
kinds of business to the extent necessarily or properly incidental
to the kind or kinds of business which it is or may hereafter be
authorized to do in the State of New York.
FOURTH: The corporate powers of the Corporation shall be
exercised through a Board of Directors and through such committees
thereof, and by such officers, employees and agents as the Board of
Directors shall empower.
FIFTH: The Board of Directors of the Corporation shall
consist of not more than twenty-one directors nor less than nine
directors of which at least four shall not be officers or employees
of the Corporation or any entity controlling, controlled by, or
under common control with the Corporation and who are not
beneficial owners of a controlling interest in the voting stock of
the Corporation or any such entity. The exact number of directors
shall be determined from time to time in accordance with the
provisions of the By-Laws. In the event that the admitted assets
of the Corporation exceed five hundred million dollars, the number
of directors shall be increased to not less than thirteen within
one year following the end of the calendar year in which the
admitted assets of the Corporation exceeded five hundred million
dollars, of which number not less than one-third shall not be
officers or employees of the Corporation or any entity controlling,
controlled by, or under common control with the Corporation and who
are not beneficial owners of a controlling interest in the voting
stock of the Corporation or any such entity. Directors shall be
elected at each annual meeting of stockholders, which meeting shall
be held on the fourth Thursday in the month of June. Each director
so elected shall hold office until the next annual meeting of
stockholders when his or her successor is elected and qualifies.
In the event that the number of directors duly elected and serving
shall be less than the required minimum, the Corporation shall not
for that reason be dissolved, but the vacancy or vacancies shall be
filled as provided in paragraph Sixth.
SIXTH: (a) Each director shall be at least eighteen
years of age. At all times a majority of the directors shall be
citizens and residents of the United States and not less than three
thereof shall be residents of the State of New York. The directors
need not be stockholders of the Corporation.
(b) If any vacancies shall occur in the Board of
Directors by death or resignation or removal or otherwise, the
stockholders or by a majority of the remaining members of the Board
shall, as provided in the By-Laws, elect a director or directors to
fill the vacancy or vacancies occasioned and each director so
elected shall hold office until the next annual meeting of
stockholders.
(c) Notice of any election of a director or directors
under the provisions of this section shall be given to the
Superintendent of Insurance of the State of New York in the manner
and to the extent required by law.
(d) No director shall be personally liable to the
Corporation or any of its shareholders for damages for breach of
duty as a director; provided, however, that the foregoing shall not
eliminate or limit the liability of a director if a judgment or
other final adjudication adverse to him or her establishes that his
or her acts or omissions were in bad faith or involved intentional
misconduct or any violation of the Insurance Law or any knowing
violation of any other law or that he or she personally gained in
fact a financial profit or other advantage to which he or she was
not legally entitled.
SEVENTH: The names and post office addresses of the
directors who shall serve until the first annual meeting of
stockholders of the Corporation are as follows:
Name Address
Marcia D. Alazraki 7 Aspen Heights
Slingerlands, New York 12159
Glen R. Derback 7340 Brixham Circle
Castle Rock, Colorado 80104
Gail H. Klapper 177 Humboldt Street
Denver, Colorado 80218
Dennis Low 3862 Christy Ridge Road
Sedalia, Colorado 80135
Jim L. McCallen 7283 South Niagra Circle
Englewood, Colorado 80112
Robert K. Shaw 5484 South Nucla Court
Aurora, Colorado 80015
Paul T. Shultz 3 Peter Cooper Road
Apartment 9G
New York, New York 10010
Donald A. Stern 2 Terrace Drive
Great Neck, New York 11021
Douglas L. Wooden 5 Huntwick Lane
Englewood, Colorado 80110
EIGHTH: The duration of the corporate existence of the
Corporation shall be perpetual.
NINTH: The amount of authorized paid-in capital of the
Corporation shall be $2,000,000 and shall consist of 2,000 shares,
par value $1,000 per share.
TENTH: No stockholder of the Corporation shall have a
preemptive right as such to have first or at any time offered to
him any part of any of the presently authorized stock of the
Corporation hereinafter optioned, issued or sold, or any part of
any securities of the Corporation presently authorized, whether or
not issued.
ELEVENTH: The Board of Directors shall adopt By-Laws for
its own regulation and that of the conduct of the business of the
Corporation, which By-Laws shall not be inconsistent with this
charter or the laws of the State of New York.
TWELFTH: The Board of Directors shall devise and adopt
a corporate seal of and for the Corporation, and shall have power
to change and alter the same at its pleasure.
THIRTEENTH: This charter may be amended in accordance
with the laws of the State of New York. No amendment shall be
effective until it shall have been approved in writing by the
Superintendent of Insurance of the State of New York as provided by
law.
IN WITNESS WHEREOF, the undersigned have hereunto
subscribed their name as of this 19th day of March ,
1996.
/s/ Marcia D. Alazraki
Marcia D. Alazraki
/s/ Glen R. Derback
Glen R. Derback
/s/ Gail H. Klapper
Gail H. Klapper
/s/ Dennis Low
Dennis Low
/s/ Jim L. McCallen
Jim L. McCallen
/s/ Robert K. Shaw
Robert K. Shaw
/s/ Paul T. Schultz
Paul T. Shultz
/s/ Donald A. Stern
Donald A. Stern
/s/ Douglas L. Wooden
Douglas L. Wooden
EXHIBIT 6(b)
BYLAWS OF
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
ARTICLE I
SHAREHOLDERS' MEETING
SECTION 1. Annual Meeting. The Annual Meeting of the Shareholders
for the election
of the Directors and for the transaction of any other business
pertaining to the corporation
(whether or not stated in the notice of the meeting) shall be held
on the fourth Thursday
in the month of June at such time, and place as the Board of
Directors, by resolution, shall
determine.
SECTION 2. Special Meetings. Special Meetings of the Shareholders
shall be called
whenever ordered by the Chairman of the Board, the President, a
quorum of the Board of
Directors, or the holders of at least one-quarter (1/4) of the
total amount of stock issued and
outstanding. Notice of the meeting may be waived and neither the
business to be transacted
at, nor the purpose of the meeting, need be specified in the waiver
of notice. In the absence
of waiver of notice, the purposes for which the meeting is called
shall be stated in the notice
and no other corporate action shall be taken without the consent of
all Shareholders entitled
to vote.
SECTION 3. Place of Meetings. All meetings of the Shareholders
shall be held at the
principal office of the corporation or at such other place or
places, within or without the
State of New York, as shall from time to time be designated by the
Board of Directors.
SECTION 4. Notice of Meetings. Notice of all meetings, regular or
special, shall be given
by mailing to each Shareholder entitled to vote thereat, directed
to his or her address as it
appears on the records of the corporation, at least ten days and
not more than fifty days
before such meeting, a written or printed notice of the time,
place, and purpose or purposes
thereof.
SECTION 5. Quorum. The holders of a majority of the outstanding
stock of the
corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum
for all purposes. In the absence of a quorum, the Shareholders
entitled to vote thereat,
represented in person or by proxy, may adjourn the meeting to a day
certain.
SECTION 6. Voting. At all meetings of Shareholders each share of
stock held by a
Shareholder, represented in person or by proxy, shall be entitled
to one vote. Proxies shall
be in writing and shall be signed by the Shareholder or the
Shareholder's attorney-in-fact.
Two inspectors of election shall be appointed by the Chairman of
the meeting at any
Shareholders' Meeting at which inspectors are required. The
Directors shall be elected by
ballot, and each fully-paid share of stock shall be entitled to one
vote. Shares may be voted
by proxy, signed by the person legally entitled to vote the same.
Each Shareholder shall
have the right to cast as many votes in the aggregate as shall
equal the number of shares of
stock held by him, multiplied by the number of Directors to be
elected.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number and Authority. The business and property of
this corporation shall
be conducted and managed by a Board of Directors consisting of not
more than 21 Directors
and not less than 9 Directors, the exact number thereof to be fixed
and determined by action
taken from time to time by the Board of Directors. No decrease in
the number of directors
shall shorten the term of any incumbent director. All directors
shall be at least 18 years of
age, a majority shall be citizens and residents of the United
States and not less than three
directors shall be residents of the State of New York. Further,
persons who are not officers
or salaried employees of the corporation or of any entity
controlling, controlled by or under
common control with it and who are not beneficial owners of a
controlling interest in the
voting stock of the corporation or any such entity (hereinafter
referred to as "Independent
Directors") shall constitute at least one-third of the Directors
and at least one-third of the
membership of each Committee of the Board of Directors.
SECTION 2. Election. At each annual meeting of Shareholders, the
Shareholders shall
elect Directors to hold office until the next succeeding annual
meeting. Each Director shall
hold office for the term for which he or she is elected and until
his or her successor has
been elected and qualified, subject to removal as hereinafter
provided. No election of a
Director pursuant to this Section shall be valid unless a notice of
election shall have been
filed with the Superintendent of Insurance of the State of New York
(the "Superintendent
of Insurance") at least 10 days prior to the election date.
SECTION 3. Removal and Vacancies. Any or all Directors may be
removed at any time,
with or without cause, by a majority vote of the Shareholders, who
shall thereupon elect a
successor Director or Directors to fill the vacancy or vacancies at
a Special Meeting of
Shareholders called for such purpose. A vacancy in the Board of
Directors, other than one
occurring by reason of removal by Shareholders, shall be filled by
the Board of Directors to
serve until the next annual meeting of the Shareholders. Where the
number of Directors
is increased, additional Directors may be elected by the Board of
Directors to serve until the
next annual meeting of the Shareholders. No successor Directors
shall take office until 10
days after a notice of election shall have been filed with the
Superintendent of Insurance.
SECTION 4. Annual Meeting. The Annual Meeting of the Board of
Directors shall be held
at the meeting next following the Annual Meeting of the
Shareholders.
SECTION 5. Other Meetings. Other Meetings of the Board of
Directors may be called by
order of the Chairman of the Board, the President, or the Secretary
or by a majority of the
Board of Directors. There shall be at least three such meetings
held during each year.
SECTION 6. Place of Meetings. Meetings of the Board of Directors
shall be held at the
principal office of the corporation or at such other place within
or without the State of New
York as may be designated in the notice thereof.
SECTION 7. Notice of Meetings. Notice of meetings of the Board of
Directors shall be
given by mailing to each member at least three days before such
meeting, a written or
printed notice of the time and place thereof. Such notice may also
be given by telefax sent
at least one day before such meeting.
SECTION 8. Business Transacted at Meetings. Any business may be
transacted and any
corporate action taken at any meeting of the Board of Directors
whether stated in the notice
of such meeting or not, except as otherwise expressly required by
law. One or more
members of the Board or any Committee thereof may participate in
any meeting of the
Board or of any such Committee by means of a conference telephone
or any similar
communications equipment allowing all persons participating in the
meeting to hear each
other at the same time. Participation by such means shall
constitute presence in person at
the meeting. Any action required or permitted to be taken at a
meeting of the Board of
Directors or any Committee thereof may be taken without a meeting
if all members of the
Board or such Committee, as the case may be, consent thereto in
writing and that such
writing or writings are filed with the minutes of proceedings of
the Board or such
Committee.
SECTION 9. Quorum. A majority of the number of Directors fixed by
Section 1 shall
constitute a quorum for the transaction of business at any meeting
of the Board of Directors,
provided that at least one Independent Director is present. If a
quorum is not present at
a meeting, a majority of the Directors present may adjourn the
meeting from time to time
without further notice, for a period not to exceed 60 days at any
one adjournment.
SECTION 10. Interest of Directors. Consistent with the
requirements of Section 713 of the
New York Business Corporation Law, any Director may vote or act on
behalf of the
corporation in contracting with any other company although he may
be a Shareholder,
Director, or Officer of such other company.
SECTION 11. Indemnification of Directors. The corporation may, by
resolution of the
Board of Directors, indemnify and save harmless out of the funds of
the corporation to the
extent permitted by applicable law, any Director, Officer, or
employee of the corporation
or any member or officer of any Committee, and his or her heirs,
executors, and
administrators, from and against all claims, liabilities, costs,
charges, and expenses
whatsoever that any such Director, Officer, employee, or any such
member or officer
sustains or incurs in or about any action, suit, or proceeding that
is brought, commenced, or
prosecuted against him or her for or in respect of any act, deed,
matter, or thing whatsoever,
made, done, or permitted by him or her in or about the execution of
the duties of his or her
office or employment with the corporation, in or about the
execution of his or her duties as
a Director or Officer of another company which he or she so serves
at the request and on
behalf of the corporation, or in or about the execution of his or
her duties as a member or
officer of any such Committee, and all other claims, liabilities,
costs, charges, and expenses
that he or she sustains or incurs, in or about or in relation to
any such duties or the affairs
of the corporation, the affairs of such other company which he or
she so serves or the affairs
of such Committee, except such claims, liabilities, costs, charges,
or expenses as are
occasioned by acts or omissions which were in bad faith, involved
intentional misconduct, a
violation of the New York Insurance Law or a knowing violation of
any other law or which
resulted in such person personally gaining in fact a financial
profit or other advantage to
which he or she was not entitled. The corporation may, by
resolution of the Board of
Directors, indemnify and save harmless out of the funds of the
corporation to the extent
permitted by applicable law, any Director, Officer, or employee of
any subsidiary
corporation of the corporation on the same basis and within the
same constraints as
described in the preceding sentence. No payment of indemnification
shall be made unless
notice has been filed with the Superintendent of Insurance pursuant
to Section 1216 of the
New York Insurance Law.
ARTICLE III
COMMITTEES
SECTION 1. Appointment. The Board of Directors shall have the
power to appoint
Committees and to grant them powers and duties not inconsistent
with the laws of the State
of New York, its Charter and these Bylaws. All Committees shall
consist of not less than
three members, provided that where the minimum required number of
Directors is increased
to thirteen pursuant to the provisions of the Charter, such
Committees shall consist of at
least five members.
SECTION 2. Independent Director Committees. The Board of
Directors shall establish
one or more Committees composed solely of Independent Directors.
Such Committee or
Committees shall have the responsibility for recommending the
selection of independent
certified public accountants, reviewing the corporation's financial
condition, the scope and
results of the independent audit and any internal audit, nominating
candidates for director
for election by Shareholders, evaluating performance of officers of
the corporation deemed
to be principal officers and recommending to the Board of Directors
their selection and
compensation and recommending any plan to issue options to officers
and employees for the
purchase of shares of its stock.
SECTION 3. Other Committees. All other Committees established
by the Board of
Directors shall have at least one member who is an Independent
Director.
SECTION 4. Quorum. All of the members of any Committee
consisting of three Directors
shall constitute a quorum for the transaction of business. In the
case of Committees
consisting of more than three members, a majority shall constitute
a quorum.
ARTICLE IV
OFFICERS
SECTION 1. Duties in General. All Officers of the corporation, in
addition to the duties
prescribed by the Bylaws, shall perform such duties in the conduct
and management of the
business and property of the corporation as may be determined by
the Board of Directors.
In the case of more than one person holding an office of the same
title, any one of them may perform the duties of the office except
insofar as the Board of
Directors, or the President may otherwise direct.
SECTION 2. Number and Designation. The Officers of the
corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents,
one or more Secretaries,
one or more Treasurers, one or more Assistant Secretaries, one or
more Assistant
Treasurers, and such other Officers and Committees as the Board of
Directors may from
time to time deem advisable. It shall be permissible for the same
person to hold more than
one office, except that the offices of President and Secretary
shall not be held by the same
person.
SECTION 3. Election and Term of Office. The Board of Directors
shall elect from their
number a President and shall appoint a Secretary, Treasurer, and
such other Officers as shall
be prescribed in the Bylaws, and shall fill any vacancy that may
occur. Such persons shall
hold office until the meeting of the Board of Directors following
the next annual meeting
of the Shareholders. Any officer may be removed by the Board of
Directors, with or without
cause.
SECTION 4. Chairman of the Board. The Chairman of the Board of
Directors shall
preside at all meetings of the Shareholders and at all meetings of
the Board and shall
perform such other duties as the Board of Directors may from time
to time prescribe.
SECTION 5. President. The President, in the absence of the
Chairman of the Board, shall
preside at all meetings of the Shareholders and of the Board of
Directors. He shall have
the powers and perform the duties usually pertaining to the Office
of President.
SECTION 6. Vice Presidents. The Vice Presidents shall have such
powers and perform
such duties as may be assigned to them from time to time by the
Board of Directors or by
the President. The Board of Directors or the President may from
time to time determine
the order of priority as between two or more Vice Presidents.
SECTION 7. Secretary. The Secretary shall keep the minutes of the
meetings of the
Shareholders, of the Board of Directors, and of the Executive and
Investment Committees;
shall issue notices of meetings; shall have custody of the
corporation's seal and corporate
books and records; shall have charge of the issuance, transfer, and
cancellation of stock
certificates; shall have authority to attest and affix the
corporate seal of any instruments
executed on behalf of the corporation; and shall perform such other
duties as are incident
to his or her office and as are required by the Board of Directors
or the President.
SECTION 8. Assistant Secretaries. The Assistant Secretaries in
order of their priority shall,
in the absence or disability of the Secretary, perform the duties
and exercise the powers of
the
Secretary, and shall have such other powers and perform such other
duties as may be
assigned to them from time to time by the Board of Directors or the
President.
SECTION 9. Treasurer. The Treasurer shall have custody of the
funds and securities of
the corporation and shall deposit the same in such banks or
depositories as the Board of
Directors or the President may direct. The Treasurer may, under
the direction of the Board
of Directors, disburse all monies and sign checks or other
instruments drawn on or payable
out of the funds of the corporation, which, however, shall be
countersigned by the President,
a Vice President, the Secretary, or an Assistant Secretary, or an
Assistant Treasurer. He
shall also make such transfers of the securities of the corporation
as may be ordered by the
Board of Directors or the President. In general, the Treasurer
shall perform all of the duties
incident to his or her office and such other duties as are required
of him by the Board of
Directors or the President.
SECTION 10. Assistant Treasurers. The Assistant Treasurers in
order of their priority
shall, in the absence or disability of the Treasurer, perform the
duties and exercise the
powers of the Treasurer, and shall have such other powers and
perform such other duties
as may be assigned to them from time to time by the Board of
Directors or the President.
SECTION 11. Other Officers. Other Officers who may from time to
time be elected by the
Board of Directors shall have such powers and perform such duties
as may be assigned to
them by the Board of Directors or the President.
SECTION 12. Compensation. The compensation of the Officers shall
be fixed by the
Board.
ARTICLE V
CAPITAL STOCK
SECTION 1. Certificates. Every Shareholder shall be entitled at
his or her request to a
certificate signed by the President or a Vice President, and also
by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and
under the seal of the
corporation, certifying the number of shares to which he is
entitled.
SECTION 2. Transfers. Transfers of stock may be made on the books
of the corporation
only by the holder thereof in person or by his or her attorney duly
authorized thereto in
writing and upon surrender and cancellation of the certificate
therefor duly assigned or
accompanied by a duly executed stock power.
SECTION 3. Lost or Destroyed Certificates. The Board of Directors
may order a new
certificate to be issued in place of a certificate lost or
destroyed upon proof of such loss or
destruction and upon tender to the corporation by the Shareholder
of a bond in such
amount and in such form and with or without surety as may be
ordered, indemnifying the
corporation against any liability, claim, loss, cost, or damage by
reason of such loss or
destruction and the issuance of a new certificate.
SECTION 4. Dividends. Dividends may be declared from the legally
available surplus of
the corporation at such times and in such amounts as the Board of
Directors may determine.
Such dividends on the capital stock of the corporation may not be
declared by a Committee
of the Board. Notice of intention to declare a dividend shall be
filed with the
Superintendent of Insurance not less than 30 days in advance of the
proposed declaration.
ARTICLE VI
CORPORATE FUNDS
SECTION 1. Deposits. Checks, drafts, bills, notes, negotiable
instruments or any other
orders for the payment of money or evidence of indebtedness payable
to and received by
the corporation may be endorsed for deposit to the credit of the
corporation by such
Officers or agents of the corporation as the Board of Directors may
determine and may be
endorsed for deposit to the credit of agents of the corporation in
such manner as the Board
of Directors may direct.
SECTION 2. Withdrawals. All disbursements of the funds of the
corporation shall be made
by check, draft, or other order signed by such Officers or other
persons as the Board of
Directors may from time to time authorize to sign the same.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. Voting Stock of Other Corporations. The President, any
Vice President, or
any other Officer designated by the Board of Directors may execute
in the name of the
corporation and attach the corporate seal to any proxy or power of
attorney authorizing the
proxy or proxies or attorney or attorneys named therein to vote the
stock of any corporation
held in this corporation on any matter on which such stock may be
voted. If any stock
owned by this corporation is held in any name other than the name
of this corporation,
instructions as to the manner in which such stock is to be voted on
behalf of this corporation
may be given to the holder of record by the President, any Vice
President, or any other
Officer designated by the Board of Directors.
SECTION 2. Notices. Any notice under these Bylaws may be given by
mail by depositing
the same in a post office or postal letter box or postal mail chute
in a sealed postpaid
wrapper addressed to the person entitled thereto at his or her
address as the same appears
upon the books or records of the corporation or at such other
address as may be designated
by such person except that notice which may be given by telegram
may be telegraphed to
such person at such address; and such notice shall be deemed to be
given at the time such
notice is mailed or telegraphed.
SECTION 3. Waiver of Notice. Any Shareholder, Director, or member
of the Executive
or Investment Committees may at any time waive any notice required
to be given under
these Bylaws in accordance with the provisions of the New York
Business Corporation Law,
including written waiver executed before, at, or after the meeting
or by presence at the
meeting.
ARTICLE VIII
AMENDMENTS
The Bylaws may be amended in whole or in part by the Board of
Directors. Any such
amendment shall not be effective until approved by the
Superintendent of Insurance
pursuant to Section 1210 of the New York Insurance Law.
**************************
EXHIBIT 8.1
FUND PARTICIPATION AGREEMENT
TCI Portfolios, Inc.
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares 3
ARTICLE II. Representations and Warranties 8
ARTICLE III. Prospectuses and Proxy Statements; Voting 11
ARTICLE IV. Sales Material and Information 13
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 20
ARTICLE VIII. Indemnification 24
ARTICLE IX. Applicable Law 34
ARTICLE X. Termination 34
ARTICLE XI. Notices 38
ARTICLE XII. Miscellaneous 39
SCHEDULE A Contracts 42
SCHEDULE B Designated Portfolios 43
SCHEDULE C Administrative Services 44
SCHEDULE D Reports per Section 6.6 45
SCHEDULE E Expenses 48
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
TCI PORTFOLIOS, INC.,
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.,
AMERICAN CENTURY INVESTMENT SERVICES, INC.
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance company, on its own behalf and on behalf of its Separate
Account Variable Annuity-1 Series Account (the "Account"); TCI
PORTFOLIOS, INC., a corporation organized under the laws of
Maryland (hereinafter the "Fund"); AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC. (hereinafter the "Adviser"), a Delaware
corporation; AMERICAN CENTURY INVESTMENT SERVICES, INC.
(hereinafter the "Distributor"), a Missouri corporation; and
CHARLES SCHWAB & CO., INC., a California corporation (hereinafter
"Schwab").
WHEREAS, the Fund engages in business as an open-end
management investment company and makes shares of its Portfolios
(defined below) 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 FirstGWL&A, which have entered into participation
agreements similar to this Agreement (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of
securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (hereinafter the "SEC"), dated March 22,
1988 (File No. 812-6937), 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 (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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of FirstGWL&A on January 15, 1997, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit investment trust under the 1940 Act and has
registered or will register 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, FirstGWL&A intends to purchase shares in the
Portfolio(s) listed in Schedule B attached hereto and incorporated
herein by reference, as it 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,
FirstGWL&A, Schwab, the Fund, the Distributor and the Adviser agree
as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund and Distributor agree to sell to FirstGWL&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 Distributor or its
designee of the order for the shares of the Portfolios. For
purposes of this Section 1.1, FirstGWL&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 Distributor
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 and the Distributor agrees to make shares of the
Designated Portfolio(s) available for purchase by FirstGWL&A and
the Account at the applicable net asset value per share on each
Business Day. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such
Portfolio.
1.3. The Distributor represents that Fund shares will only be
sold to insurance company separate accounts funding variable
annuities and variable life insurance products unless and until it
obtains an order for an amendment to the Mixed and Shared Funding
Exemptive Order granting exemptions from the provisions of sections
9(a), 13(a), 15(a), and 15(b) of 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 Designated Portfolio(s) to be sold to and held by
certain plans established under Sections 401(a), 403(a) and (b),
408(a), (b) and (k), 414(d), 457(b) or 501(c)(18) of the Internal
Revenue Code ("Qualified Plans") and the Distributor will not sell
shares of the Designated Portfolio(s) to any other Participating
Insurance Company, separate account or any Qualified Plan unless an
agreement containing provisions in all material respects
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 FirstGWL&A's
request, any full or fractional shares of the Fund held by
FirstGWL&A, executing such requests on each Business Day at the net
asset value next computed after receipt by the Fund or its designee
of the request for redemption. For purposes of this Section 1.4,
FirstGWL&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 Distributor
receives notice of any such request for redemption by 10:00 A.M.
Eastern time on the next following Business Day. The Adviser will
cause the Designated Portfolio(s) to pay and transmit the proceeds
of redemptions of Fund shares as follows: (i) on the next Business
Day after the redemption order is received by FirstGWL&A if the
Distributor receives notice of the redemption prior to 9:00 a.m.
Eastern time on such Business Day; and (ii) on the second Business
Day after the redemption order is received by FirstGWL&A if the
Distributor receives notice of the redemption after 9:00 a.m.
Eastern time but before 10:00 a.m. Eastern time; provided the Fund
provides the net asset value per share to FirstGWL&A as required in
Section 1.9 of this Agreement. Notwithstanding the foregoing, the
Advisor may elect in good faith to effect redemptions over a longer
period of time to the extent permitted under the 1940 Act without
liability hereunder on the part of the Fund, the Adviser or the
Distributor. Payment shall be in federal funds transmitted by wire
and/or a credit for any shares purchased the same day as the
redemption.
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. FirstGWL&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. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to
FirstGWL&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.
1.8. The Distributor shall cause the Fund to furnish same day
notice (by wire or telephone, followed by written confirmation) to
FirstGWL&A of any income, dividends or capital gain distributions
payable on the Designated Portfolio(s)' shares (rate and reinvest
price). FirstGWL&A hereby elects to receive all such income
dividends and capital gain distributions as are payable on the
Designated Portfolio(s) shares in additional shares of that
Designated Portfolio. FirstGWL&A reserves the right to revoke this
election and to receive all such income dividends and capital gain
distributions in cash. The Distributor shall cause the Fund to
notify FirstGWL&A by the end of the next following Business Day of
the number of shares so issued as payment of such dividends and
distributions.
1.9. The Adviser shall make the net asset value ("NAV") per
share for each Designated Portfolio available to FirstGWL&A on each
Business Day as soon as reasonably practical after the NAV per
share is calculated and shall use all reasonable efforts to make
such NAV per share available by 7:00 p.m. Eastern time. In the
event of a material error in the computation of a Designated
Portfolio's NAV per share or any dividend or capital gain
distribution (each a "pricing error"), the Adviser shall
immediately notify FirstGWL&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. For the purposes of this section 1.9, a "material
error" shall mean a pricing error that gives rise to the need to
take retroactive corrective action under the Fund's then current
pricing error correction policy (the "Policy"). Adviser represents
that the Board of Directors of the Fund has adopted a Policy which
governs the actions to be taken by the Fund and the Adviser in the
event of a pricing error. The terms of that Policy provide that a
pricing error is to 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 (a "full penny," not as a
result of a rounding error), then non-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 (again, a "full penny"), but less than one half of one
percent of the Designated Portfolio's NAV at the time of the error,
then the Adviser is required to make the Fund "whole"; however, no
adjustments need be made to shareholder transactions (including
Contractowners); and (c) 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 and greater than one half of one
percent of the Designated Portfolio's NAV at the time of the error,
then the Adviser is required to reimburse the Designated Portfolio
for any loss and shareholder transactions may be reprocessed. If
any such reprocessing causes FirstGWL&A to correct Contractowner
accounts, Adviser shall reimburse FirstGWL&A for its reasonable
out-of-pocket cost for adjustments made in connection with making
corrections to Contractowner accounts in accordance with the
provisions of Schedule E. If Contractowners have received amounts
of $500 or more in excess of the amounts to which they otherwise
would have been entitled prior to an adjustment for an error,
FirstGWL&A and Schwab, when requested by the Adviser of the Fund,
will make a good faith attempt to collect such excess amounts from
the Contractowners. Any overpayments that have not yet been paid
to Contractowners will be remitted by FirstGWL&A or Schwab upon
notification by the Adviser of such overpayment. In no event shall
Schwab or FirstGWL&A be liable to Contractowners for any such
adjustments or underpayment amounts.
The Parties acknowledge that the standards set forth in
Section 1.9 are consistent with 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 the
SEC or judicial interpretation, or if the Board of Directors
determines in good faith that another practice is permissible, the
Board of Directors may amend such Policy (or adopt another policy)
without prior approval of any party to this Agreement. The Adviser
agrees to respond to any due diligence inquiry by Schwab or
FirstGWL&A regarding whether or not there have been any changes to
the Fund's pricing error Policy.
ARTICLE II. Representations and Warranties
2.1. FirstGWL&A represents and warrants that 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 state insurance suitability
requirements. FirstGWL&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 4240 of the New York
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.
2.2. The Distributor and Adviser each represent and warrant
that Designated Portfolio(s) shares sold pursuant to this Agreement
shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. The Adviser cause the Fund's
registration statement to be amended 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 Adviser agrees to cause the
Fund to comply with applicable provisions and SEC staff
interpretations of the 1940 Act to assure that the investment
advisory or management fees paid 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 Adviser represents and warrants that it will
cooperate with FirstGWL&A to make every reasonable effort to cause
that the investment policies, fees and expenses of the Designated
Portfolio(s) to be in compliance with the requirements under
insurance and other applicable laws of the State of New York to the
extent FirstGWL&A notifies the Adviser of any such requirements.
The Adviser shall register and qualify the shares of the Fund for
sale in accordance with the laws of the various states if and to
the extent required by applicable law.
2.5. The Adviser represents and warrants that the Fund is
lawfully organized and validly existing under the laws of the State
of Maryland and that it does and will comply in all material
respects with the 1940 Act.
2.6. 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 any applicable
state and federal securities laws.
2.7. The Adviser represents and warrants that it is and shall
remain duly registered under all applicable federal and state
securities laws and that it shall perform its obligations for the
Fund in compliance in all material respects with any applicable
state and federal securities laws.
2.8. The Adviser represents and warrants that all of its
officers, employees, and other individuals or entities dealing with
the money and/or securities of the Designated Portfolio(s) are, and
shall continue to be at all times, covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount
not less than the minimal coverage required by Rule 17g-1 under the
1940 Act or related provisions as may be promulgated from time to
time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.9. 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 Adviser will provide FirstGWL&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 FirstGWL&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 Adviser agrees to
share equitably in expenses incurred by FirstGWL&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. FirstGWL&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 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, and the
Adviser immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might
not be so treated in the future. In addition, FirstGWL&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. FirstGWL&A will use every effort to
continue to meet such definitional requirements, and it will notify
Schwab 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.
2.11 FirstGWL&A covenants and agrees that all orders
transmitted by it hereunder on any Business Day will be based upon
instructions that it received from Contractowners in proper form
prior to the close of trading on the new York Stock Exchange on the
previous Business Day. FirstGWL&A shall time stamp all order or
otherwise maintain records that will enable FirstGWL&A to
demonstrate compliance with this section.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Distributor shall provide
FirstGWL&A and Schwab with as many copies of the Fund's current
prospectus for the Designated Portfolio(s) as FirstGWL&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 FirstGWL&A in lieu thereof, the
Distributor 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 FirstGWL&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 Distributor agrees that the prospectuses (but
not the SAI) (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 Distributor
shall provide FirstGWL&A with copies of the Fund's SAI or
documentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to be borne in accordance with Schedule
E hereof, as FirstGWL&A may reasonably require to permit timely
distribution thereof to Contractowners. The Distributor 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 FirstGWL&A or Schwab).
3.3. The Distributor shall provide FirstGWL&A and Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&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 FirstGWL&A or Schwab provided in writing by
that party, neither FirstGWL&A nor Schwab is responsible for the
content of the prospectus or SAI for the Designated Portfolio(s).
(All references hereinafter to "prospectus" whether in respect of
Contracts or Fund shares, shall be deemed to include the related
SAI, unless otherwise specifically noted.) 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 Adviser,
neither the Fund, the Distributor nor Adviser is responsible for
the content of the prospectus or SAI for the Contracts.
3.5. If and to the extent required by law FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions received from Contractowners: and
(iii) vote Designated Portfolio shares 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. FirstGWL&A
reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law.
3.6. FirstGWL&A shall be responsible for assuring that each of
its separate accounts holding shares of a Designated Portfolio
calculates voting privileges in a manner consistent with all other
separate accounts investing in the Designated Portfolio(s). The
Adviser agrees to promptly notify FirstGWL&A of any changes of
interpretations or amendments 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.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the Distributor or its designee, a copy of each
piece of sales literature or other promotional material that
FirstGWL&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.
All such materials shall be directed to Dina Tantra, Distributor's
advertising compliance manager (or such other person as Distributor
may designate in writing) by mail at 4500 Main Street, Kansas City,
Missouri 64111, or by fax at (816) 340-4074. Such materials shall
be accompanied by a request for approval or comments within a
reasonable amount of time, which shall not be less than 10 business
days from the dated delivered to the Distributor or such shorter
period as the parties may agree from time to time. FirstGWL&A or
Schwab agrees to use reasonable efforts to notify Distributor's
advertising compliance manager of the delivery of such materials
(which includes leaving a voice mail message). If the Distributor
fails to respond within the time period set forth in the request
for review, FirstGWL&A or Schwab may use such material as submitted
without further approval by Distributor. If subsequent to approval
by Distributor (or the expiration of the time period set forth in
the request for approval), Distributor reasonably determines any
such material is or has become inaccurate, misleading or otherwise
inappropriate, it may request that the FirstGWL&A or Schwab modify
such advertising and sales literature, which FirstGWL&A or Schwab
will do at the next reprinting of any such materials. If
Distributor determines that such material should be modified
immediately, Distributor shall notify FirstGWL&A or Schwab of such
fact and FirstGWL&A or Schwab shall accommodate Distributor's
reasonable requests. In such instances, Distributor shall pay
FirstGWL&A or Schwab's reasonable out-of-pocket expenses in
reprinting any such advertising and sales materials.
Notwithstanding anything contained herein, FirstGWL&A or Schwab
shall be responsible for the compliance of all advertising and
sales literature prepared by FirstGWL&A or Schwab with all
applicable federal, state and NASD requirements.
4.2. FirstGWL&A and Schwab shall not give any information or
make any representations or statements on behalf of or concerning
the Fund or the Designated Portfolio(s) 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 sales literature
or other promotional material approved by the Distributor, except
with the permission of the Distributor.
4.3. The Distributor shall furnish, or shall cause to be
furnished, to FirstGWL&A and Schwab, a copy of each piece of sales
literature or other promotional material in which FirstGWL&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
FirstGWL&A or Schwab objects to such use within five (5) Business
Days after receipt of such material.
4.4. Neither the Distributor nor the Adviser shall give any
information or make any representations on behalf of FirstGWL&A or
concerning FirstGWL&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 sales literature or other promotional material
approved by FirstGWL&A or its designee, except with the permission
of FirstGWL&A.
4.5. FirstGWL&A, the Distributor and the Adviser shall not
give any information or make any representations on behalf of or
concerning Schwab, or use Schwab's name except with the permission
of Schwab.
4.6. The Distributor will provide to FirstGWL&A and Schwab at
least one complete copy of all registration statements,
prospectuses, 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) and that are relevant to this Agreement,
contemporaneously with or as promptly as practical after the filing
of such document(s) with the SEC or NASD or other regulatory
authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete copy of all registration statements, prospectuses and
all amendments to any of the above, that relate to the Contracts or
the Account and that are relevant to this Agreement,
contemporaneously with or as promptly as practical after 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/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 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
prospectuses, SAIs, shareholder reports, and proxy materials and
any other material constituting sales literature or advertising
under the NASD rules, the 1933 Act or the 1940 Act.
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 Adviser and the Distributor shall pay no
fee or other compensation to FirstGWL&A under this Agreement, and
FirstGWL&A shall pay no fee or other compensation to the Fund, the
Adviser, or the Distributor 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
Adviser 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 FirstGWL&A, in accordance
with Schedule E.
5.4. The Distributor acknowledges 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
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 1940 Act.
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
within thirty (30) days following the last day of the month to
which it relates.
ARTICLE VI. Diversification and Qualification
6.1. 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 Adviser represents and warrants that the Fund and each
Designated Portfolio thereof will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, as amended
from time to time, and any Treasury interpretations thereof,
relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments or other
modifications or successor provisions to such Section or
Regulations. The Distributor agrees that shares of the Designated
Portfolio(s) will be sold only to Participating Insurance Companies
and their separate accounts and certain Qualified Plans (to the
extent permitted under the Mixed and Shared Funding Exemptive
Order).
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general public.
6.3. The Adviser represents and warrants 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 Distributor or the Adviser will notify FirstGWL&A
immediately 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 anticipates that it will not so
comply in the future.
6.5. Without in any way limiting the effect of Sections 8.3
and 8.4 hereof and without in any way limiting or restricting any
other remedies available to FirstGWL&A or Schwab, the Adviser or
Distributor will pay all costs associated with or arising out of
any failure, or any anticipated or reasonably foreseeable 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
failure; 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 pursuant to the
mutual agreement of the Adviser, FirstGWL&A and Schwab, 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, reasonable fees and expenses of legal counsel and
other advisors to FirstGWL&A and any federal income taxes or tax
penalties and interest thereon (or "toll charges" or exactments or
amounts paid in settlement) incurred by FirstGWL&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 Adviser at its expense shall provide FirstGWL&A or
its designee with reports demonstrating the Designated Portfolios'
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 responsibility for
such compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in writing in connection with any governmental
audit or review of FirstGWL&A or, to FirstGWL&A's knowledge, or to
any Contractowner that any Designated Portfolio has failed to
comply with the diversification requirements of Section 817(h) of
the Code or FirstGWL&A otherwise becomes aware of any facts that
could give rise to any claim against the Fund or the Adviser as a
result of such a failure or alleged failure:
(a) FirstGWL&A shall promptly notify the Fund and the Adviser
of such assertion or potential claim;
(b) FirstGWL&A shall consult with the Fund and the Adviser as
to how to minimize any liability that may arise as a result of such
failure or alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&A to the Fund and the Adviser (together with any
supporting information or analysis) within at least two (2)
business days prior to submission;
(e) FirstGWL&A shall provide the Fund and the Adviser with
such cooperation as the Fund and the Adviser shall reasonably
request (including, without limitation, by permitting the Fund and
the Adviser to review the relevant books and records of FirstGWL&A)
in order to facilitate review by the Fund 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) FirstGWL&A shall not, with respect to any claim of the IRS
or any Contractowner that would give rise to a claim against the
Fund or 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 or the Adviser, which shall not be unreasonably
withheld; provided that, FirstGWL&A shall not be required to appeal
any adverse judicial decision unless the Fund or 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 or the Adviser shall bear the costs and
expenses, including reasonable attorney's fees, incurred by
FirstGWL&A in complying with this clause (f).
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. An
irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any
Designated 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
FirstGWL&A if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware to the Board. FirstGWL&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 FirstGWL&A to inform the Board whenever Contractowner
voting instructions are to be disregarded. Such responsibilities
shall be carried out by FirstGWL&A with a view only to the
interests of its Contractowners. From time to time, the
Distributor will identify in writing to FirstGWL&A any information
related to FirstGWL&A's Contractowners it requires from FirstGWL&A
in order for the Board to fulfill its responsibilities required by
the Mixed and Shared Funding Order. FirstGWL&A agrees to provide
such information within a reasonable time, as set forth in the
information request.
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 Adviser or any sub-adviser to any of the Designated
Portfolios (the "Independent Directors"), that a material
irreconcilable conflict exists, FirstGWL&A and other Participating
Insurance Companies 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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by FirstGWL&A to disregard contract owner voting
instructions and that decision represents a minority position or
would preclude a majority vote, FirstGWL&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 Distributor and the Fund
shall continue to accept and implement orders by FirstGWL&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
FirstGWL&A conflicts with the majority of other state regulators,
then FirstGWL&A will withdraw the Account's investment in the Fund
and terminate this Agreement within six months after the Board
informs FirstGWL&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 of the foregoing six month period or
the completion of the termination and withdrawal of the Account's
investment in the Designated Portfolio(s), whichever occurs first,
the Distributor and the Fund shall continue to accept and implement
orders by FirstGWL&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 Independent Directors 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. FirstGWL&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 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 FirstGWL&A will withdraw the Account's
investment in the Fund and terminate this Agreement within six (6)
months after the Board informs FirstGWL&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.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund, the Distributor and the Adviser and each of
their respective directors, officers, employees and affiliates and
each person, if any, who controls the Fund, the Distributor or the
Adviser within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the written
consent of FirstGWL&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, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related
to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus 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: (1) 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
FirstGWL&A or Schwab by or on behalf of the Adviser, Distributor or
Fund for use in the registration statement or prospectus for the
Contracts or in the Contracts or sales literature or other
promotional material (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or (2) to the extent that such liability arises as a
result of the conduct of any indemnified party; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the registration statement, prospectus or sales literature or
other promotional material of the Fund not supplied by FirstGWL&A
or persons under its control) or wrongful conduct of FirstGWL&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, 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 and in conformity with information furnished in
writing to the Fund by or on behalf of FirstGWL&A for the purpose
of inclusion in such registration statement, prospectus, or sales
literature or other promotional material; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement
or arise out of or result from any other material breach of this
Agreement by FirstGWL&A, including without limitation Section 2.10
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). FirstGWL&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). FirstGWL&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
FirstGWL&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 FirstGWL&A of any
such claim shall not relieve FirstGWL&A from any liability which it
may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give notice. In case any such action is brought
against the Indemnified Parties, FirstGWL&A shall be entitled to
participate, at its own expense, in the defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from FirstGWL&A to such party of FirstGWL&A's election to
assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
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
respective directors, officers, employees and affiliates and each
person, if any, who controls the Fund, the 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 Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund that is both (A) materially incorrect and (B)
that was neither contained in the Fund's registration statement,
prospectus or sales literature or other promotional material of the
Fund prepared by the Distributor or Adviser on behalf of the Fund
nor provided in writing to Schwab, or approved in writing, by or on
behalf of the Fund, the Distributor or the 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 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: (1) 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
FirstGWL&A or Schwab by or on behalf of the Adviser, the
Distributor or the Fund or to Schwab by FirstGWL&A for use in the
registration statement or prospectus for the Contracts or in the
Contracts or sales literature or other promotional material (or any
amendment or supplement thereto) or otherwise for use in connection
with the sale of the Contracts, or (2) to the extent such liability
arises as a result of the conduct of any Indemnified Party; or
(iii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the registration statement, prospectus 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
(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,
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.
8.2(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
otherwise than on account of this indemnification provision, except
to the extent that Schwab has been prejudiced by such failure to
give notice. 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. After notice from
Schwab to such party of Schwab's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of
any additional 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 FirstGWL&A and Schwab and each of their respective
directors, officers, employees and affiliates and each person, if
any, who controls FirstGWL&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 or acquisition of
the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature or other
promotional material of the Fund prepared by the Distributor or the
Adviser on behalf of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party: (1) 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 FirstGWL&A or Schwab for use in the registration statement or
prospectus for the Fund or in sales literature or other promotional
material (or any amendment or supplement thereto) or otherwise for
use in connection with the sale of the Contracts or the Fund
shares, or (2) or to the extent such liability arises as a result
of the conduct of any Indemnified Party; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the registration statement, prospectus, 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
Fund or the Adviser or persons under their control, with respect to
the sale or distribution of Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, 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 and in conformity
with information furnished in writing to FirstGWL&A or Schwab by or
on behalf of the Adviser or the Fund for the purpose of inclusion
in such registration statement, prospectus, or sales literature or
other promotional material; or
(iv) arise as a result of any failure by the Fund or 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 Distributor or the
Adviser in this Agreement or arise out of or result from any other
material breach of this Agreement by the Adviser, the Distributor
or the Fund; or
(vi) arise out of or result from the incorrect 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
8.3(b) and 8.3(c) 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 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 otherwise than on account of this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give notice. In case any such action
is brought against the Indemnified Parties, the Adviser will be
entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with
the issuance or sale of the Contracts or the operation of the
Account.
8.4. Indemnification by the Distributor
8.4(a). The Distributor agrees to indemnify and hold
harmless FirstGWL&A and Schwab and each of their respective
directors, officers, employees and affiliates and each person, if
any, who controls FirstGWL&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 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 or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature or other
promotional material of the Fund prepared by the Adviser or
Distributor on behalf of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party: (1) 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
FirstGWL&A or Schwab for use in the registration statement or
prospectus for the Fund or in sales literature or other promotional
material (or any amendment or supplement thereto) or otherwise for
use in connection with the sale of the Contracts or Fund shares, or
(2) or to the extent such liability arises as a result of the
conduct of any Indemnified Party; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the registration statement, prospectus, sales literature or
other promotional material for the Contracts not supplied by the
Distributor or persons under its control) or wrongful conduct of
the Fund, the Distributor or Adviser or persons under their
control, with respect to the sale or distribution of Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, 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 and in conformity with information
furnished in writing to FirstGWL&A or Schwab by or on behalf of the
Adviser, the Distributor or Fund for the purpose of inclusion in
such registration statement, prospectus, or sales literature or
other promotional material; or
(iv) arise as a result of any failure by the Fund or 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 Adviser or Distributor in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Fund, Adviser or Distributor; or
(vi) arise out of or result from the incorrect 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 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.
8.4(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 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 otherwise than on account of
this indemnification provision, except to the extent that the
Distributor has been prejudiced by such failure to give notice. 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. After notice from the
Distributor to such party of the Distributor's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the
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.
8.4(d) FirstGWL&A and Schwab agree to promptly notify the
Distributor of the commencement of any litigation or proceedings
against it or any of its 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 New York, without regard to the New York 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.
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 FirstGWL&A or Schwab by written
notice to the other parties with respect to any Portfolio based
upon FirstGWL&A's or Schwab's determination that shares of such
Portfolio are not reasonably available to meet the requirements of
the Contracts; or
(c) at the option of FirstGWL&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
FirstGWL&A; or
(d) at the option of the Fund, Distributor or Adviser in
the event that formal administrative proceedings are instituted
against FirstGWL&A or Schwab by the NASD, the SEC, the Insurance
Commissioner or like official of any state or any other regulatory
body regarding FirstGWL&A's or Schwab's duties under this Agreement
or related to the sale of the Contracts, the operation of any
Account, or the purchase of the Fund shares, if, in each case, the
Fund, Distributor or Adviser 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
FirstGWL&A or Schwab to perform its obligations under this
Agreement; or
(e) at the option of FirstGWL&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 FirstGWL&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 FirstGWL&A by written notice to the
Fund, the Distributor or the Adviser with respect to any Designated
Portfolio if FirstGWL&A reasonably believes that the Designated
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 determines, in
its sole judgment reasonably exercised in good faith, that either
FirstGWL&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 FirstGWL&A's or Schwab's
ability to perform its obligations under this Agreement, (ii) the
Fund, the Distributor or the Adviser notifies FirstGWL&A or Schwab,
as appropriate, of that determination and its intent to terminate
this Agreement, and (iii) after considering the actions taken by
FirstGWL&A or Schwab and any other changes in circumstances since
the giving of such a notice, the determination of the Fund, the
Distributor or the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or Schwab, respectively, shall determine, in its sole
judgment reasonably exercised in good faith, that either the Fund,
the Distributor or the 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, the
Distributor's or the Adviser's ability to perform its obligations
under this Agreement, (ii) FirstGWL&A or Schwab notifies the
Adviser of that determination and its intent to terminate this
Agreement, and (iii) after considering the actions taken by the
Fund, the Distributor or the Adviser and any other changes in
circumstances since the giving of such a notice, the determination
of FirstGWL&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 FirstGWL&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 Schwab'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 FirstGWL&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 FirstGWL&A by the
NASD, the Securities and Exchange Commission, or any state
securities or insurance department or any other regulatory body
regarding FirstGWL&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 FirstGWL&A to perform
its obligations related to the Contracts; or
(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 FirstGWL&A to meet Section 817(h) of the Code
diversification requirements, the Fund, and the Distributor shall,
at the option of FirstGWL&A or Schwab, continue to cause the Fund
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 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, provided, however, that Adviser's obligation to make the
administrative services fee payment under Section 5.6 hereof shall
continue only if (i) Schwab continues to provide the administrative
services contemplated by Section 5.5 and; (i) the Adviser or an
affiliate of Adviser continues to serve as the investment adviser
to a Designated Portfolio.
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:
TCI Portfolios, Inc.
P.O. Box 419385
Kansas City, MO 64141-6385
Attention: General Counsel
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention: Assistant Vice President, Savings Products
If to the Adviser:
American Century Investment Management, Inc.
4500 Main Street
Kansas City, MO 64111
Attention: General Counsel
If to the Distributor:
American Century Investment Services, Inc.
4500 Main Street
Kansas City, MO 64111
Attention: General Counsel
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York Insurance
Commissioner with any information or reports in connection with
services provided under this Agreement which such Commissioner may
reasonably request in order to ascertain whether the variable
annuity operations of FirstGWL&A are being conducted in a manner
consistent with the New York 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, may be settled by arbitration
if mutually agreed to by the relevant parties 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.
12.9. No provision of this Agreement may be deemed or
construed to modify or supersede any contractual rights, duties, or
indemnifications, as between the Adviser, the Distributor and the
Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development Date: April 1, 1997
TCI PORTFOLIOS, INC.
By its authorized officer,
By:/s/ Patrick A. Looby
Title: Vice President
Date: March 21, 1997
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
By its authorized officer,
By:/s/ Patrick A. Looby
Title: Vice President
Date: March 21, 1997
AMERICAN CENTURY INVESTMENT SERVICES, INC.
By its authorized officer,
By:/s/ Patrick A. Looby
Title: Vice President
Date: March 21, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title: Vice President, Annuities & Life
Insurance
Date: March 31, 1997
Schwab Variable Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
SCHEDULE B
Designated Portfolios
TCI Growth
TCI International
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 0.00% per
annum applied to the average daily value of the shares of the fund
held by Schwab's customers, payable by the Adviser directly to
Schwab, such payments being due and payable within 30 (thirty) days
after the last day of the month to which such payment relates.
C. The Distributor will calculate and Schwab will confirm on a
daily basis for each Designated Portfolio the number of shares and
the asset balance on which the fee is to be paid pursuant to this
agreement. Also provided will be a monthly summary of the reports,
expressed in both shares and dollar amounts.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it receives from its customers to FirstGWL&A who will
retransmit them to the Fund.
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 Adviser shall provide within twenty
(20) Business Days of the close of the calendar quarter a report to
FirstGWL&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).
FORM D1
CERTIFICATE OF COMPLIANCE
American Century Investment Management, Inc., the investment
adviser for TCI Growth and TCI International (the "Funds"), hereby
notifies you that, based on internal compliance testing performed
as of the end of the calendar quarter ended , 19 , the
Funds were 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 First Great-West Life & Annuity Insurance Company,
Charles Schwab & Co., Inc. and American Century Investment
Management, Inc., other than the exceptions discussed below:
Exceptions Remedial Action
If no exception to report, please indicate "None."
Signed this day of
, .
American Century Investment
Management, Inc.
(Signature)
By:
(Type or Print Name and
Title/Position)
SCHEDULE E
EXPENSES
The Distributor and/or Adviser, FirstGWL&A and Schwab will
coordinate the functions and pay the costs of the completing these
functions based upon an allocation of costs in the tables below.
With respect to documents that contain materials related to the
Designated Portfolio(s) and portfolios of other issuers and for
which Adviser is indicated as the party responsible for the
expense, costs shall be allocated to the Adviser according to the
number of pages of the Fund's portion of such documents as compared
to the total number of pages of the document.
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Mutual Fund Prospectus
Printing of combined prospectuses
FirstGWL&A
Adviser
Distributor shall supply FirstGWL&A with such numbers of the
Designated Portfolio(s) prospectus(es) as FirstGWL&A shall
reasonably request
FirstGWL&A
Distributor
Distribution to New and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective Clients
FirstGWL&A
Schwab
Distribution to New and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to Prospective Clients
Schwab
Schwab
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Mutual Fund Prospectus Update & Distribution
If Required by Fund or Distributor
Distributor and FirstGWL&A
Distributor
If Required by FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus Update & Distribution
If Required by Fund or Distributor
FirstGWL&A
Distributor
If Required by FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing (one copy to be provided)
Distributor
Distributor
Distribution and copying
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Proxy Material for Mutual Fund:
Printing if proxy required by Law
Adviser
Adviser
Distribution (including labor) if proxy required by Law
FirstGWL&A
Adviser
Printing & distribution if required by FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Mutual Fund Annual & Semi-Annual Report
Printing of combined reports
FirstGWL&A
Distributor
Distribution
FirstGWL&A
FirstGWL&A and Schwab
Other communication to New and Prospective clients
If Required by the Fund or Distributor
Schwab
Distributor
If Required by FirstGWL&A
Schwab
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Other communication to inforce
Distribution (including labor) if required by the Fund or
Distributor
FirstGWL&A
Distributor
If Required by FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Errors in Share Price calculation pursuant to Section 1.10
Cost of error to participants
FirstGWL&A
Adviser
Cost of administrative work to correct error
FirstGWL&A
Adviser
Operations of the Fund
All operations and related expenses, including the cost of
registration and qualification of shares, taxes on the issuance or
transfer of shares, cost of management of the business affairs of
the Fund, and expenses paid or assumed by the fund pursuant to any
Rule 12b-1 plan
Fund or Distributor
Fund or Adviser
Operations of the Account
Federal registration of units of separate account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.2
FUND PARTICIPATION AGREEMENT
The Alger American Fund
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares 4
ARTICLE II. Representations and Warranties 8
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 18
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order 21
ARTICLE VIII. Indemnification 24
ARTICLE IX. Applicable Law 35
ARTICLE X. Termination 36
ARTICLE XI. Notices 40
ARTICLE XII. Miscellaneous 41
SCHEDULE A Contracts 45
SCHEDULE B Designated Portfolios 46
SCHEDULE C Administrative Services 47
SCHEDULE D Reports per Section 6.6 48
SCHEDULE E Expenses 51
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
THE ALGER AMERICAN FUND,
FRED ALGER MANAGEMENT, INC.,
FRED ALGER & COMPANY, INCORPORATED
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance company, on its own behalf and on behalf of its Separate
Account Variable Annuity-1 Series Account (the "Account"); THE
ALGER AMERICAN FUND, a business trust organized under the laws of
the Commonwealth of Massachusetts (hereinafter the "Fund"); FRED
ALGER MANAGEMENT, INC. (hereinafter the "Adviser"), a New York
corporation; FRED ALGER & COMPANY, INCORPORATED (the
"Distributor"), a Delaware corporation; and CHARLES SCHWAB & 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 FirstGWL&A, which have entered into
participation agreements similar to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of
securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (hereinafter the "SEC"), dated February 17,
1989 (File No. 812-7076), and amended September 14, 1995, 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, as contemplated by paragraph (f)(3) of Treasury
Regulation 1.817-5, qualified and 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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of FirstGWL&A on January 15, 1997, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit investment trust under the 1940 Act and has
registered or will register 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, FirstGWL&A intends to purchase shares in the
Portfolio(s) listed in Schedule B attached hereto and incorporated
herein by reference, as it 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,
FirstGWL&A, Schwab, the Fund, the Distributor and the Adviser agree
as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for purchase at the applicable net asset
value per share by FirstGWL&A on behalf of 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 their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of
such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other Participating Insurance Company or
separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.5, 3.6, and Article VII
of this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on FirstGWL&A's
request, any full or fractional shares of the Fund held by
FirstGWL&A, executing such requests on each Business Day at the net
asset value next computed after receipt by the Fund or its designee
of the request for redemption, except that the Fund reserves the
right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any applicable rules thereunder.
Requests for redemption identified by FirstGWL&A, or its agent, as
being in connection with surrenders, annuitizations, or death
benefits under the Contracts, upon prior written notice, may be
executed within seven (7) calendar days after receipt by the Fund
or its designee of the requests for redemption. 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, FirstGWL&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. FirstGWL&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, except that payment may be delayed if, for
example, the Fund's cash position so requires or if extraordinary
market conditions exist, but in no event shall payment be delayed
for a greater period than is permitted by the 1940 Act. Payment
shall be in federal funds transmitted by wire and/or a credit for
any shares purchased the same day as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to
FirstGWL&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
telephone, followed by written confirmation) to FirstGWL&A of any
income, dividends or capital gain distributions payable on the
Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&A reserves the right to revoke this election
in writing and to receive all such income dividends and capital
gain distributions in cash. The Fund shall notify FirstGWL&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
("NAV") for each Designated Portfolio available to FirstGWL&A on
each Business Day as soon as reasonably practical after the NAV 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 a material error in the computation of a Designated
Portfolio's NAV or any dividend or capital gain distribution (each,
a "pricing error"), which results in adjustments to Contractowner's
accounts, the Adviser or the Fund shall immediately notify
FirstGWL&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 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 either reimburse the Designated Portfolio for any
loss, after taking into consideration any positive effect of such
error and no adjustments to Contractowner accounts need be made,
or, in the Adviser's discretion, the procedures described in item
(b) shall be followed; and (b) 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 Designated Portfolio's NAV at the
time of the error, then the Adviser shall reimburse the Designated
Portfolio for any unrecovered excess redemption proceeds (as
defined below) and shall reimburse FirstGWL&A for its reasonable
costs of adjustments made to correct Contractowner accounts in
accordance with the provisions of Schedule E. If an adjustment is
necessary to correct an error of category (b) above which has
caused Contractowners to receive less than the amount of shares or
redemption proceeds to which they are entitled, or is elected by
the Adviser in connection with an error of category (a), the number
of shares of the applicable account of each such Contractowner will
be adjusted and the amount of any underpayments on redemption
transactions not corrected by such adjustment shall be credited by
the Fund to FirstGWL&A for crediting of such amounts to the
applicable Contractowners' accounts. In the event an NAV pricing
error results in a Contractowner's receiving redemption proceeds in
an amount which is $500 or more in excess of the amount that such
Contractowner would have received with the correct NAV (such amount
being the "excess redemption proceeds"), then the effect of such
overpayment shall be corrected, to the extent possible, by an
adjustment to the number of shares in the Contractowner's account
and, FirstGWL&A and Schwab agree that they will make a good faith
attempt to collect such excess proceeds not accounted for by such
adjustment. Any overpayments that have not yet been paid to
Contractowners will be remitted to the Fund by FirstGWL&A or Schwab
upon notification by the Adviser of such overpayment. In no event
shall Schwab or FirstGWL&A be liable to Contractowners for any such
adjustments or underpayment amounts, other than amounts paid by the
Fund or Adviser for crediting to Contractowner Accounts as set
forth above. No provision in this section 1.10 shall require the
adjustment of a Contractowner's account if the adjustment required
for that account is less than $25. A pricing error within
categories (a) or (b) 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. FirstGWL&A represents and warrants that the securities
deemed to be issued by the Account under the Contracts are or,
prior to issuance, will be registered under the 1933 Act; that the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the
sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. FirstGWL&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 4240 of the New York Insurance Law and has registered the
Account as a unit investment trust i
n accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold pursuant to this Agreement shall be
registered under the 1933 Act, duly authorized for issuance and
sold in compliance with all applicable federal 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
1940 Act. The Fund shall amend the registration statement for its
shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of shares of
the Designated Portfolios.
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 New York and any other applicable state to the extent
required to perform this Agreement. The Fund further 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 New York 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. FirstGWL&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, and to the
extent consistent with Article VII, the Fund agrees that, except in
those circumstances where the Fund has advised FirstGWL&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, 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 Commonwealth
of Massachusetts and that it does and will comply in all material
respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered under all applicable federal and state
securities laws and that it shall perform its obligations for the
Fund in compliance in all material respects with the laws of the
State of New York 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 Delaware and any applicable state and federal securities
laws.
2.8. The Fund, the Distributor and the Adviser represent and
warrant that all of their respective officers, employees,
investment advisers, and other individuals or entities dealing with
the money and/or securities of the Fund are, and shall continue to
be at all times, covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the
minimal coverage required by Rule 17g-1 under the 1940 Act or
related provisions as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company.
2.9. 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 FirstGWL&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 FirstGWL&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 FirstGWL&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. FirstGWL&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 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 not be so treated in the future. In
addition, FirstGWL&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. FirstGWL&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.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Distributor or Fund shall provide
a camera-ready copy and/or computer diskette of the current
prospectus for the Designated Portfolio(s)) and other assistance as
is reasonably necessary in order for FirstGWL&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 prospectuses
(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 and/or
the Distributor shall provide FirstGWL&A with copies of the Fund's
SAI or documentation thereof for the Designated Portfolio(s) in
such quantities, with expenses to be borne in accordance with
Schedule E hereof, as FirstGWL&A may reasonably require to permit
timely distribution thereof to Contractowners. The 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 FirstGWL&A or
Schwab).
3.3. The Fund and/or the Distributor shall provide FirstGWL&A
and Schwab with copies of the Fund's proxy material, reports to
stockholders 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 FirstGWL&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 FirstGWL&A or Schwab provided in writing by
that party, neither FirstGWL&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, Adviser or the
Designated Portfolio(s) provided in writing by the Fund, the
Distributor or Adviser, neither the Fund, the 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions received from Contractowners: and
(iii) vote Designated Portfolio shares 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. FirstGWL&A
reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law and the
Mixed and Shared Funding Exemptive Order.
3.6. FirstGWL&A shall be responsible for assuring that each of
its separate accounts holding shares of a Designated Portfolio
calculates voting privileges, and the Fund shall provide FirstGWL&A
with appropriate assistance in fulfilling such responsibility. The
Fund agrees to promptly notify FirstGWL&A of any changes of
interpretations or amendments 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 in
the future with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the Fund or its designee, a copy of each piece of
sales literature or other promotional material that FirstGWL&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 objects to such use within
five (5) Business Days after receipt of such material. If sales
literature or promotional material goes beyond naming the Fund, a
Designated Portfolio, the Adviser, a sub-adviser, or the
Distributor, FirstGWL&A or Schwab shall obtain from the Fund or its
designee affirmative written approval to use such material.
4.2. FirstGWL&A and Schwab shall not give any information or
make any representations or statements on behalf of or concerning
the Fund, the Adviser or the Distributor 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, the Adviser or the
Distributor, except with the permission of the Fund or the
Distributor.
4.3. The Fund shall furnish, or shall cause to be furnished,
to FirstGWL&A and Schwab, a copy of each piece of sales literature
or other promotional material in which it names FirstGWL&A and/or
its separate account(s), or Schwab in connection with the
transactions contemplated by this Agreement at least ten (10)
Business Days prior to its use. No such material shall be used if
FirstGWL&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 FirstGWL&A
or concerning FirstGWL&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 promotional material approved by FirstGWL&A or its designee,
except with the permission of FirstGWL&A.
4.5. In connection with the Transactions contemplated by this
Agreement, FirstGWL&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 Schwab's name except with
the permission of Schwab, or except which merely names Schwab as
administrator or the Fund's participation in a Schwab sponsored
program.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete copy of all registration statements, prospectuses,
SAIs, reports, proxy statements, sales literature and other
promotional materials which refer to FirstGWL&A or Schwab,
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. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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 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,
and proxy materials and any other material constituting sales
literature or advertising under the NASD rules, 1933 Act or the
1940 Act.
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 shall pay no fee or other compensation to
FirstGWL&A or Schwab under this Agreement, and FirstGWL&A shall pay
no fee or other compensation to the Fund or Adviser under this
Agreement, although the parties hereto will bear certain expenses
in accordance with Schedule E, Articles III, V, and other
provisions of this Agreement.
5.2. Except as otherwise specifically provided herein or in
Schedule E, each party will bear all expenses incident its
performance under this Agreement. 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 and pay all expenses related
thereto.
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 FirstGWL&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 Funds, and to transfer the
Contract's cash value between funds and portfolios. The Fund, the
Distributor and the Adviser agree to not interfere with FirstGWL&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 not interfering with
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 1940 Act.
5.6. As compensation for the services rendered, as 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, Distributor and Adviser represent and warrant
that they will make every effort to enable each Designated
Portfolio to at all times comply with Section 817(h) of the Code
and Treasury Regulation 1.817-5, as amended from time to time, and
any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or
life insurance contracts and any amendments or other modifications
or successor provisions to such Section or Regulations. The Fund
and the Distributor agree that shares of the Designated
Portfolio(s) will be sold only to Participating Insurance Companies
and their separate accounts and certain Qualified Plans.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general public.
6.3. The Fund and the Adviser represent and warrant that 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, the Distributor or the Adviser will notify
FirstGWL&A immediately upon having a reasonable basis for believing
that 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 FirstGWL&A or Schwab, the Adviser
or the 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 failure; 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 FirstGWL&A and any federal income taxes or
tax penalties and interest thereon (or "toll charges" or exactments
or amounts paid in settlement) incurred by FirstGWL&A with respect
to itself or owners of its Contracts in connection with any such
failure.
6.6. The Fund at the Fund's expense shall provide FirstGWL&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 responsibility for
such compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in writing in connection with any governmental
audit or review of FirstGWL&A or, to FirstGWL&A's knowledge, of any
Contractowner that any Designated Portfolio has failed to comply
with the diversification requirements of Section 817(h) of the Code
or FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against the Fund, the Adviser or the Distributor
as a result of such a failure or alleged failure:
(a) FirstGWL&A shall promptly notify the Fund, the Adviser
and the Distributor of such assertion or potential claim;
(b) FirstGWL&A shall consult with the Fund, the Adviser and
the Distributor as to how to minimize any liability that may arise
as a result of such failure or alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund, the Adviser and the Distributor 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&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) FirstGWL&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 FirstGWL&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) FirstGWL&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, FirstGWL&A shall
not be required to appeal any adverse judicial decision unless the
Fund, the Distributor 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
FirstGWL&A in complying with this clause (f).
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
determine what action, if any, should be taken in response to such
conflicts. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal
or state insurance, tax, or securities laws or regulations, or a
public ruling, private letter ruling, no-action or interpretative
letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision
in any relevant proceeding; (d) the manner in which the investments
of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life
insurance contract owners or 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
FirstGWL&A if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware to the Board. FirstGWL&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 FirstGWL&A to inform the Board whenever contract
owner voting instructions are to be disregarded.
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, FirstGWL&A and other
Participating Insurance Companies 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 conflict,
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.
7.4. If a material irreconcilable conflict arises because of
a decision by FirstGWL&A to disregard contract owner voting
instructions and that decision represents a minority position or
would preclude a majority vote, FirstGWL&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 Distributor and the Fund
shall continue to accept and implement orders by FirstGWL&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
FirstGWL&A conflicts with the majority of other state regulators,
then FirstGWL&A will withdraw the Account's investment in the Fund
and this Agreement shall terminate within six months after the
Board informs FirstGWL&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 of the foregoing
six month period, the Fund shall continue to accept and implement
orders by FirstGWL&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 Independent Directors 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. FirstGWL&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 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 FirstGWL&A will withdraw the Account's
investment in the Fund and this Agreement shall terminate within
six (6) months after the Board informs FirstGWL&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 be deemed modified to the extent necessary also to
comply with the terms and conditions contained in such Rule(s) as
so amended or adopted.
7.8. FirstGWL&A shall at least annually submit to the Board of
Trustees of the Fund such reports, materials or data as the
Trustees may reasonably request so that the Trustees may fully
carry out the obligations imposed upon them by the Mixed and Shared
Funding Exemptive Order, and said reports, materials and data shall
be submitted more frequently if deemed appropriate by the Board of
Trustees.
7.9. FirstGWL&A agrees that any remedial action taken by it in
resolving any irreconcilable conflict will be carried out at its
expense and with a view only to the interests of its
Contractowners.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund, the Distributor and the Adviser and each of
their officers and directors or trustees 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 FirstGWL&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 or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI covering the Contracts
or contained in the Contracts or sales literature and 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 FirstGWL&A or Schwab by or on behalf of the Adviser,
Distributor or Fund for use in the registration statement or
prospectus or SAI for the Contracts or in the Contracts or sales
literature and other promotional material (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the registration statement, prospectus, SAI or sales literature
and other promotional material of the Fund not supplied by
FirstGWL&A or persons under its control) or wrongful conduct of
FirstGWL&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 and 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 statement or
statements therein not misleading, if such a statement or omission
was made in reliance upon information furnished in writing to the
Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement
or arise out of or result from any other material breach of this
Agreement by FirstGWL&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). FirstGWL&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 to any of the Indemnified Parties.
8.1(c). FirstGWL&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
FirstGWL&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 FirstGWL&A of any
such claim shall not relieve FirstGWL&A from any liability which it
may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give notice. In case any such action is brought
against the Indemnified Parties, FirstGWL&A shall be entitled to
participate, at its own expense, in the defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from FirstGWL&A to such party of FirstGWL&A's election to
assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
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 and directors or trustees 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
Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of
the Fund's shares or the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund, the Adviser or the Distributor that is both (A)
materially incorrect and (B) that was neither contained in the
Fund's registration statement or sales literature and other
promotional material of the Fund prepared by the Fund or provided
in writing by the Fund to Schwab, or approved in writing, by or on
behalf of the Fund, the Distributor or the Adviser; or
(ii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in sales
literature or other promotional material prepared 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 FirstGWL&A or
Schwab by the Adviser, the Distributor or Fund for use in the
registration statement or prospectus for the Contracts or in the
Contracts or sales literature and other promotional material (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
representations (other than statements or representations contained
in the registration statement, prospectus or sales literature 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
(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 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
otherwise than on account of this indemnification provision, except
to the extent that Schwab has been prejudiced by such failure to
give notice. 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. After notice from
Schwab to such party of Schwab's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of
any additional 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 FirstGWL&A and Schwab and each of their directors and
officers and each person, if any, who controls FirstGWL&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 or acquisition of
the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature or
other promotional material of the Fund prepared by the Fund,
Adviser or 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 the Fund by or on behalf of FirstGWL&A or Schwab
for use in the registration statement or prospectus or SAI for the
Fund or in sales literature and 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
representations (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
Fund, the Distributor or Adviser or persons under their control,
with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, SAI, or sales literature and 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 and in conformity
with information furnished in writing to FirstGWL&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 Fund, the Adviser
or the Distributor to provide the services and furnish the
materials under the terms of this Agreement (including a failure to
comply with the diversification and other qualification
requirements of 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 Fund, the Adviser or the
Distributor in this Agreement or arise out of or result from any
other material breach of this Agreement by the Adviser, the Fund or
the Distributor; or
(vi) arise out of or result from the materially 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
8.3(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 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 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 otherwise than on account of this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give notice. In case any such action
is brought against the Indemnified Parties, the Adviser will be
entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Indemnified Parties will promptly notify the
Adviser of the commencement of any litigation or proceedings
against them.
8.4. Indemnification By the Fund
8.4(a). The Fund agrees to indemnify and hold harmless
FirstGWL&A and Schwab and each of their directors and officers and
each person, if any, who controls FirstGWL&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, liabilities or expenses (or actions in
respect thereof) or settlements, are related to the operations of
the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
and other qualification requirements of Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
8.4(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 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 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
otherwise than on account of this indemnification provision, except
to the extent that the Fund has been prejudiced by such failure to
give notice. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund shall also be
entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Fund to
such party of the Fund's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of
investigation.
8.4(d). The Indemnified Parties will promptly notify the
Fund of the commencement of any litigation or proceeding against
them.
8.4(e). It is understood and agreed that no liability of
the Fund Pursuant to this section 8.4 shall extend to the assets of
any portfolio of the Fund other than the Designated Portfolios, or
where the failure or breach giving rise to such liability relates
to a single Designated Portfolio, to the assets of any other
Designated Portfolio.
8.5. Indemnification by the Distributor
8.5(a). The Distributor agrees to indemnify and hold
harmless FirstGWL&A and Schwab and each of their directors and
officers and each person, if any, who controls FirstGWL&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
or acquisition of the Fund's shares or the contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature or
other promotional material of the Fund prepared by the Fund,
Adviser or 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 FirstGWL&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
(ii) arise out of or as a result of statements or
representations (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
Fund, Adviser or Distributor or persons under their control) or
wrongful conduct of the Fund, the Distributor or Adviser or persons
under their control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, SAI, 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 and in conformity
with information furnished in writing to FirstGWL&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 Fund, Adviser or
Distributor to provide the services and furnish the materials under
the terms of this Agreement (including a failure to comply with the
diversification and other qualification requirements of 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 Fund, Adviser or
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 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 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 otherwise than on account of
this indemnification provision, except to the extent that the
Distributor has been prejudiced by such failure to give notice. 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. After notice from the
Distributor to such party of the Distributor's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the
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) The Indemnified Parties will promptly notify the
Distributor of the commencement of any litigation or proceedings
against them.
ARTICLE IX. Applicable Law
9.1. Except as provided in Section 9.2, this Agreement shall
be construed and the provisions hereof interpreted under and in
accordance with the laws of the State of New York, without regard
to the New York 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.
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 FirstGWL&A or Schwab by written
notice to the other parties with respect to any Portfolio based
upon FirstGWL&A's or Schwab's reasonable determination in their
respective sole judgment exercised in good faith that shares of
such Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) at the option of FirstGWL&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
FirstGWL&A; or
(d) at the option of the Fund, the Adviser or
Distributor in the event that formal administrative proceedings are
instituted against FirstGWL&A or Schwab by the NASD, the SEC, the
Insurance Commissioner or like official of any state or any other
regulatory body, if, in each case, the terminating party 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 FirstGWL&A or Schwab to perform its obligations
under this Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal administrative proceedings are instituted against the
Fund, the Distributor or Adviser by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body, if
Schwab or FirstGWL&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 Adviser to perform their obligations under this
Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect to any Portfolio if FirstGWL&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 the Fund, the Distributor or the
Adviser, if (i) the Fund, the Distributor, or the Adviser,
respectively, shall determine, in its sole judgment reasonably
exercised in good faith, that either FirstGWL&A or Schwab 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 FirstGWL&A's or Schwab's ability to perform its
obligations under this Agreement, (ii) the Fund, the Distributor or
Adviser notifies FirstGWL&A or Schwab, as appropriate, of that
determination and its intent to terminate this Agreement, and (iii)
after considering the actions taken by FirstGWL&A or Schwab and any
other changes in circumstances since the giving of such a notice,
the determination of the Fund, the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or Schwab, respectively, shall determine, in its sole
judgment reasonably exercised in good faith, that either the Fund,
the Distributor or the 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, the
Distributor's or Adviser's ability to perform its obligations under
this Agreement, (ii) FirstGWL&A or Schwab notifies in writing the
Fund, the 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, the Distributor or
Adviser and any other changes in circumstances since the giving of
such a notice, the determination of FirstGWL&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 FirstGWL&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 Schwab'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 FirstGWL&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 FirstGWL&A by the
NASD, the Securities and Exchange Commission, or any state
securities or insurance department or any other regulatory body
regarding FirstGWL&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 FirstGWL&A to perform
its obligations related to the Contracts; or
(k) at the option of the Fund, the Adviser or the
Distributor by written notice to FirstGWL&A, in the event that the
terminating party reasonably believes that the Contracts will cease
to qualify as annuity contracts under the Code or that a
definitional requirement referred to in Section 2.11 will not be
met, or if the Contracts are not registered, issued or sold in
accordance with applicable state and/or federal law; or
(l) 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)-(k); 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), 10.1(f) or 10.1(k), the prior written
notice shall be given in advance of the effective date of
termination.
10.3. Effect of Termination. Notwithstanding any
termination of this Agreement, other than as a result of a failure
by either the Fund or FirstGWL&A to meet Section 817(h) of the Code
diversification requirements, the Fund, the Adviser and the
Distributor shall, at the option of FirstGWL&A or Schwab, continue
to make available additional shares of the Designated Portfolios
pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the
Designated Portfolios, redeem investments in the Designated
Portfolios and/or invest in the Designated Portfolios 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, to the
extent necessary to give effect to Section 10.3 hereof, 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 a 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 parties.
If to the Fund:
The Alger American Fund
75 Maiden Lane
New York, New York 10038
Attention: Gregory S. Duch
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention: Assistant Vice President, Savings Products
If to the Adviser:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Attention: Gregory S. Duch
If to the Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Attention: Gregory S. Duch
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York Insurance
Commissioner with any information or reports in connection with
services provided under this Agreement which such Commissioner may
reasonably request in order to ascertain whether the variable
annuity operations of FirstGWL&A are being conducted in a manner
consistent with the New York 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.
12.9. The Fund is a business trust organized under the
laws of the Commonwealth of Massachusetts and under a Declaration
of Trust, to which reference is hereby made, a copy of which is on
file at the office of the Secretary of State of the Commonwealth of
Massachusetts, and to any and all amendments thereto so filed or
hereafter filed. The obligations of the Fund entered into
hereunder in the name of the Fund or on behalf thereof by any of
its trustees, officers, employees or agents are undertaken not
individually but in such capacities, and are not binding upon any
of the trustees, officers, employees or shareholders of the Fund
personally, but bind only the assets of the Fund or of the
Designated Portfolio.
12.10. Schwab and FirstGWL&A agree that the obligations
assumed by the Distributor and the Adviser pursuant to this
Agreement shall be limited in any case to the Distributor and
Adviser and their respective assets and neither Schwab nor
FirstGWL&A shall seek satisfaction of any such obligation from the
shareholders of the Distributor or the Adviser, the Directors,
officers, employees or agents of the Distributor or Adviser, or any
of them, except to the extent permitted under this Agreement.
12.11. The Fund, Adviser and Distributor agree that the
obligations assumed by FirstGWL&A and Schwab pursuant to this
Agreement shall be limited in any case to FirstGWL&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 FirstGWL&A or Schwab, the directors, officers,
employees or agents of the FirstGWL&A or Schwab, or any of them,
except to the extent permitted under this Agreement.
12.12. No provision of this Agreement may be deemed or
construed to modify or supersede any contractual rights, duties, or
indemnifications, as between the Distributor and the Fund, and as
between the Adviser and the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development Date: April 1, 1997
THE ALGER AMERICAN FUND:
By its authorized officer,
By:/s/ Gregory S. Duch
Title: Treasurer
Date: March 12, 1997
FRED ALGER MANAGEMENT, INC.:
By its authorized officer,
By:/s/ Gregory S. Duch
Title: Executive Vice President
Date: March 12, 1997
FRED ALGER & COMPANY, INCORPORATED:
By its authorized officer,
By:/s/ Gregory S. Duch
Title: Executive Vice President
Date: March 12, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title: Vice President, Annuities & Life
Insurance
Date: March 31, 1997
Schwab Variable Annuity
SCHEDULE A
ContractsForm Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
SCHEDULE B
Designated Portfolios
Alger American Growth Portfolio
Alger American Small Capitalization Portfolio
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's 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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it receives from its customers to FirstGWL&A who will
retransmit them to each fund.
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
FirstGWL&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).
FORM D1
CERTIFICATE OF COMPLIANCE
I, , a duly authorized officer,
director or agent of Fund hereby certify 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 First Great-West Life & Annuity
Insurance Company, Charles Schwab & 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 Distributor and/or Adviser, and FirstGWL&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 Coordination
Party Responsible for Expense
Mutual Fund Prospectus
Printing of combined prospectuses
FirstGWL&A
Fund or Distributor, as applicable
Distributor shall supply FirstGWL&A with such numbers of the
Designated Portfolio(s) prospectus(es) as FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or Distributor, as applicable
Distribution to New and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective Clients
FirstGWL&A
Schwab
Distribution to New and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to Prospective Clients
Schwab
Schwab
Mutual Fund Prospectus Update & Distribution
If Required by Fund or Distributor
Fund or Distributor
Fund or Distributor
If Required by FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus Update & Distribution
If Required by Fund or Distributor
FirstGWL&A
Fund or Distributor
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
If Required by First GWL&A
FirstGWL&A
First GWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Distributor
Fund or Distributor
Distribution
First GWL&A
First GWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
First GWL&A
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Proxy Material for Mutual Fund:
Printing if proxy required by Law
Fund or Distributor
Fund or Distributor
Distribution (including labor) if proxy required by Law
FirstGWL&A
Fund or Distributor
Printing & distribution if required by FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Mutual Fund Annual & Semi-Annual Report
Printing of combined reports
FirstGWL&A
Fund or Distributor
Distribution
FirstGWL&A
FirstGWL&A and Schwab
Other communication to New and Prospective clients
If Required by the Fund or Distributor
Schwab
Fund or Distributor
If Required by FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible for Expense
If Required by Schwab
Schwab
Schwab
Other communication to inforce
Distribution (including labor) if required by the Fund or
Distributor
FirstGWL&A
Fund or Distributor
If Required by FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for Coordination
Party Responsible for Expense
Errors in Share Price calculation pursuant to Section 1.10
Cost of error to participants
FirstGWL&A
Fund or Adviser
Cost of administrative work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and related expenses, including the cost of
registration and qualification of shares, taxes on the issuance or
transfer of shares, cost of management of the business affairs of
the Fund, and expenses paid or assumed by the fund pursuant to any
Rule 12b-1 plan
Fund or Distributor
Fund or Adviser
Operations of the Account
Federal registration of units of separate account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.3
FUND PARTICIPATION AGREEMENT
Berger Institutional Products Trust<PAGE>
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
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
BERGER INSTITUTIONAL PRODUCTS TRUST,
BERGER ASSOCIATES, INC.,
BERGER DISTRIBUTORS, INC.
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); BERGER INSTITUTIONAL PRODUCTS TRUST, a
Delaware
Business Trust (hereinafter the "Fund"); BERGER ASSOCIATES, INC.
(hereinafter the
"Adviser"), a corporation organized under the laws of Delaware;
BERGER
DISTRIBUTORS, INC., a corporation organized under the laws of
Colorado (hereinafter
the "Distributor"); and CHARLES SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (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, FirstGWL&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
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, under the insurance laws of the State of New York, to set
aside and invest assets
attributable to the Contracts; and
WHEREAS, FirstGWL&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,
FirstGWL&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,
FirstGWL&A,
Schwab, the Fund, the Distributor and the Adviser agree as follows:
<PAGE>
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net 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 FirstGWL&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,
FirstGWL&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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&A for crediting of such amounts
to the applicable
Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a
material error, FirstGWL&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 FirstGWL&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
FirstGWL&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. FirstGWL&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 state insurance suitability
requirements. FirstGWL&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 4240 of the
New York 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 registered 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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement. The
Fund further 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 New York 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. FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&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 FirstGWL&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.FirstGWL&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 not be so treated in the future.
In addition, FirstGWL&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. FirstGWL&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.
FirstGWL&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 FirstGWL&A and
Schwab with as many copies of the Fund's current prospectus for the
Designated Portfolio(s)
as FirstGWL&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
FirstGWL&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 FirstGWL&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 FirstGWL&A with
copies of the Fund's
SAI or documentation thereof for the Designated Portfolio(s) in
such quantities, with
expenses to be borne in accordance with Schedule E hereof, as
FirstGWL&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 FirstGWL&A or Schwab).
3.3. The Fund, Distributor and/or Adviser shall provide
FirstGWL&A and Schwab
with copies of the Fund's proxy material, reports to stockholders
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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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 FirstGWL&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. FirstGWL&A reserves the
right to vote
Fund shares held in any segregated asset account in
its own right, to
the extent permitted by law.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments of the
Mixed and Shared
Funding Exemptive Order. FirstGWL&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.
<PAGE>
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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. FirstGWL&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 Con-
tracts 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
FirstGWL&A and Schwab, a copy of each piece of sales literature or
other promotional
material in which FirstGWL&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 FirstGWL&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 FirstGWL&A or concerning
FirstGWL&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 promotional material
approved by FirstGWL&A or
its designee, except with the permission of FirstGWL&A.
4.5. FirstGWL&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
Schwab's name except with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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, and proxy
materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or
the 1940 Act.
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 compen-
sation to FirstGWL&A under this Agreement, and FirstGWL&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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund, the Distributor and the Adviser acknowledge
that a principal fea-
ture 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund, the Distributor and the Adviser agree to cooperate with
FirstGWL&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 1940 Act.
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
1.817-5, as amended from
time to time, and any Treasury interpretations thereof, relating to
the diversification
requirements for variable annuity, endowment, or life insurance
contracts and any
amendments or other modifications or successor provisions to such
Section or Regulations.
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 FirstGWL&A
immediately 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 FirstGWL&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 failure; 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 FirstGWL&A and any federal income taxes or tax
penalties and interest thereon
(or "toll charges" or exactments or amounts paid in settlement)
incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&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) FirstGWL&A shall promptly notify the Fund, the
Distributor and the Adviser of
such assertion or potential claim;
(b) FirstGWL&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) FirstGWL&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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&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) FirstGWL&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 FirstGWL&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) FirstGWL&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, FirstGWL&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
FirstGWL&A in complying with this clause (f).
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
irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action
by any state insurance regulatory authority; (b) a change in
applicable federal or state insur-
ance, 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 author-
ities; (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 in-
structions 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 FirstGWL&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 FirstGWL&A.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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, FirstGWL&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 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
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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. FirstGWL&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
FirstGWL&A will withdraw the Account's investment in the Fund and
terminate this
Agreement within six (6) months after the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&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 FirstGWL&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 pro-
spectus 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 FirstGWL&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
representations (other than
statements or representations contained in the
registration statement, pro-
spectus, SAI or sales literature or other promotional
material of the Fund not
supplied by FirstGWL&A or persons under its control) or
wrongful conduct
of FirstGWL&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 furnished in writing to the
Fund, Adviser or
Distributor by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&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). FirstGWL&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). FirstGWL&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 FirstGWL&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 FirstGWL&A
of any such claim shall
not relieve FirstGWL&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 FirstGWL&A has been prejudiced by such failure to
give notice. In addition,
any failure by the Indemnified Party to notify FirstGWL&A of any
such claim shall not
relieve FirstGWL&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,
FirstGWL&A shall be
entitled to participate, at its own expense, in the defense of such
action. FirstGWL&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 FirstGWL&A, FirstGWL&A shall not have the
right to assume said
defense, but shall pay the costs and expenses thereof (except that
in no event shall
FirstGWL&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 FirstGWL&A to such party of FirstGWL&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 FirstGWL&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 FirstGWL&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.
<PAGE>
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 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 Schwab's 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
FirstGWL&A or Schwab
by or on behalf of the Adviser, Distributor or the Fund
or to Schwab by
FirstGWL&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
representations (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
(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 Schwab, Schwab
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 Schwab'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 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
FirstGWL&A and
Schwab and each of their directors, officers, employees or agents,
and each person, if any,
who controls FirstGWL&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 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 reli-
ance upon and in conformity with information furnished in
writing to the
Adviser, the Distributor or the Fund by or on behalf of
FirstGWL&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
representations (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 FirstGWL&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 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 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). FirstGWL&A and Schwab agree to promptly notify the
Adviser of the
commencement of any litigation or proceedings against FirstGWL&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
FirstGWL&A and Schwab
and each of their directors, officers, employees or agents and each
person, if any, who
controls FirstGWL&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, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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
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.
8.4(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 by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree to promptly notify
the Fund of the
commencement of any litigation or proceeding against FirstGWL&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
FirstGWL&A and
Schwab and each of their directors, officers, employees or agents
and each person, if any,
who controls FirstGWL&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 reli-
ance upon and in conformity with information furnished in
writing to the
Adviser, the Distributor or Fund by or on behalf of
FirstGWL&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 supple-
ment) or otherwise for use in connection with the sale of
the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus, SAI, 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
FirstGWL&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 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)FirstGWL&A and Schwab agree to promptly notify the
Distributor of the
commencement of any litigation or proceedings against FirstGWL&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.
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 New York, without
regard to the New York
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.
<PAGE>
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund or the Adviser in the
event that formal
administrative proceedings are instituted against
FirstGWL&A or Schwab by
the NASD, the SEC, the Insurance Commissioner or like
official of any state
or any other regulatory body regarding FirstGWL&A's or
Schwab's duties
under this Agreement or related to the sale of the
Contracts, the operation
of any Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&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
FirstGWL&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 FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 reasonably exercised in good faith, that either
FirstGWL&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
FirstGWL&A's or Schwab's ability to perform its
obligations under this
Agreement, (ii) the Fund, Distributor or Adviser notifies
FirstGWL&A or
Schwab, as appropriate, of that determination and its
intent to terminate this
Agreement, and (iii) after considering the actions taken
by FirstGWL&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 FirstGWL&A or Schwab, if (i)
FirstGWL&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)
FirstGWL&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
FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund, the
Distributor and the Adviser
shall, at the option of FirstGWL&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 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 par-
ties; 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.
<PAGE>
If to the Fund:
Berger Institutional Products Trust
210 University Boulevard, Suite 900
Denver, CO 80206
Attention: Kevin Fay
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
Berger Associates, Inc.
210 University Boulevard, Suite 900
Denver, CO 80206
Attention:Kevin Fay
If to the Distributor:
Berger Distributors, Inc.
210 University Boulevard, Suite 900
Denver, CO 80206
Attention: Craig D. Cloyed
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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.
12.9.Schwab and FirstGWL&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
FirstGWL&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 FirstGWL&A and Schwab pursuant to this Agreement shall be
limited in any case to
FirstGWL&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
FirstGWL&A or Schwab, the directors, officers, employees or agents
of the FirstGWL&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.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
BERGER INSTITUTIONAL PRODUCTS TRUST
By its authorized officer,
By:/s/ Gerard M. Lavin
Title: Gerard M. Lavin, President
Date: March 25, 1997
BERGER ASSOCIATES, INC.
By its authorized officer,
By:/s/ Gerard M. Lavin
Title: Gerard M. Lavin, President
Date: March 25, 1997
BERGER DISTRIBUTORS, INC.
By its authorized officer,
By:/s/ Craig D. Cloyed
Title: Craig D. Cloyed, President
Date: March 24, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Berger IPT-Small Company Growth Fund<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company,
Charles Schwab
& 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or the Distributor and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund, Distributor
or Adviser, as
applicable
Fund, Distributor or
Adviser shall supply
FirstGWL&A with
such numbers of the
Designated Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund, Distributor
or Adviser, as
applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus Update &
Distribution
If Required by Fund,
Distributor or Adviser
Fund, Distributor or
Adviser
Fund, Distributor
or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund,
Distributor or Adviser
FirstGWL&A
Fund, Distributor
or Adviser
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund, Distributor or
Adviser
Fund, Distributor
or Adviser
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund, Distributor or
Adviser
Fund, Distributor
or Adviser
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund, Distributor
or Adviser
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund, Distributor
or Adviser
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund, Distributor or
Adviser
Schwab
Fund, Distributor
or Adviser
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund, Distributor
or Adviser
FirstGWL&A
Fund, Distributor
or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund, Distributor or
Adviser
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.4
FUND PARTICIPATION AGREEMENT
Federated Insurance Series<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 11
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
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 . . . . 20
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 23
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 35
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 35
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 40
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 44
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 45
SCHEDULE C Administrative Services . . . . . . . . . . . . . 46
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 47
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 50
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
FEDERATED INSURANCE SERIES,
FEDERATED ADVISERS,
FEDERATED SECURITIES CORP.
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); FEDERATED INSURANCE SERIES,a business
trust organized
under the laws of Massachusetts (hereinafter the "Fund"); FEDERATED
ADVISERS
(hereinafter the "Adviser"), a Delaware business trust; FEDERATED
SECURITIES CORP.
(the "Distributor"), a Pennsylvania corporation; and CHARLES SCHWAB
& 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated December 29, 1993 (File
No. 812-8620), 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 (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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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,
FirstGWL&A,
Schwab, the Fund, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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
agent of the order for the
shares of the Portfolios. For purposes of this Section 1.1,
FirstGWL&A shall be the agent
of the Fund for receipt of such orders and receipt by such agent
shall constitute receipt by
the Fund, provided that the Fund receives notice of any such order
by 9:00 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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 their fiduciary
duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other
Participating Insurance Company, separate account or any Qualified
Plan unless an
agreement containing provisions substantially the same as Sections
2.1, 3.5, 3.6, and Article
VII of this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its agent of
the request for redemption. Requests for redemption identified by
FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its agent of the requests for redemption.
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,
FirstGWL&A shall be the agent of
the Fund for receipt of requests for redemption and receipt by such
agent 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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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 11:00 a.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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&A for crediting of such amounts
to the applicable
Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a
material error, FirstGWL&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 FirstGWL&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
FirstGWL&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. FirstGWL&A represents and warrants that 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 state insurance suitability requirements. FirstGWL&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 4240 of
the New York 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.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement. The
Fund further 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 New York 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. FirstGWL&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 it will implement the change, except in those
circumstances where the Fund has
advised FirstGWL&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.
2.5. The Fund represents and warrants that it is lawfully
organized and validly
existing under the laws of the Commonwealth of Massachusetts and
that it does and will
comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered
under all applicable federal and state securities laws and that it
shall perform its obligations
for the Fund in compliance in all material respects with the laws
of the Commonwealth of
Pennsylvania 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
Commonwealth of Pennsylvania and any applicable state and federal
securities laws.
2.8. The Fund, the Distributor and the Adviser represent and
warrant that all of
their respective officers, employees, investment advisers, and
other individuals or entities
dealing with the money and/or securities of the Fund are, and shall
continue to be at all
times, covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in
an amount not less than the minimal coverage required by Rule 17g-1
under the 1940 Act
or related provisions as may be promulgated from time to time. The
aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued
by a reputable bonding
company.
2.9. 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 FirstGWL&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 FirstGWL&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 FirstGWL&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.FirstGWL&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 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 not be so
treated in the future. In addition, FirstGWL&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.
FirstGWL&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.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Distributor shall provide
FirstGWL&A and Schwab with
as many copies of the Fund's current prospectus for the Designated
Portfolio(s) as
FirstGWL&A and Schwab may reasonably request for marketing purposes
(including
distribution to Contractowners with respect to new sales of a
Contract). If requested by
FirstGWL&A in lieu thereof, the 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
FirstGWL&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 prospectuses (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 and/or the Distributor shall provide FirstGWL&A with copies of
the Fund's SAI or
documentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to
be borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require
to permit timely distribution thereof to Contractowners. The
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 FirstGWL&A
or Schwab).
3.3. The Fund and/or the Distributor shall provide FirstGWL&A
and Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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, Adviser or the Designated Portfolio(s) provided in
writing by the Fund, the
Distributor or Adviser, neither the Fund, the 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments 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.
3.8. To the extent allowed under applicable federal and state
law, neither
FirstGWL&A nor Schwab shall in any way recommend or oppose or
interfere with the
solicitation of proxies for Fund shares held by the Account on
behalf of Contractowners
without the prior written consent of the Fund, which consent may be
withheld in the Fund's
sole discretion. Neither FirstGWL&A nor Schwab will initiate or
solicit Contractowners to
initiate any proxy solicitation except to the extent that the
failure by FirstGWL&A or
Schwab to so initiate or solicit would, under the circumstances, be
in contravention with
applicable federal or state law.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 objects in writing to such
use within five (5) Business
Days after receipt of such material.
4.2. FirstGWL&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 Con-
tracts other than the information or representations contained in
the registration statement
or prospectus for the Fund shares, as such registration statement
and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the
Fund, or in sales literature or other promotional material approved
by the Fund or by the
Distributor, except with the permission of the Fund or the
Distributor.
4.3. The Fund shall furnish, or shall cause to be furnished,
to FirstGWL&A and
Schwab, a copy of each piece of sales literature or other
promotional material in which
FirstGWL&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
FirstGWL&A or Schwab objects in
writing 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 FirstGWL&A or concerning
FirstGWL&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 promotional material
approved by FirstGWL&A or
its designee, except with the permission of FirstGWL&A.
4.5. FirstGWL&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
Schwab's name except with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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, and proxy
materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or
the 1940 Act.
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 shall pay no fee or other compensation to
FirstGWL&A under this
Agreement, and FirstGWL&A shall pay no fee or other compensation to
the Fund or
Adviser under this Agreement, although the parties hereto will bear
certain expenses in
accordance with Schedule E, Articles III, V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund, the
Adviser and the
Distributor 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund, the Distributor and the Adviser acknowledge
that a principal fea-
ture 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund, the Distributor and the Adviser agree to cooperate with
FirstGWL&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 1940 Act.
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 Adviser and the Distributor 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
1.817-5, as amended from
time to time, and any Treasury interpretations thereof, relating to
the diversification
requirements for variable annuity, endowment, or life insurance
contracts and any
amendments or other modifications or successor provisions to such
Section or Regulations.
The Fund and the Distributor agree that shares of the Designated
Portfolio(s) will be sold
only to Participating Insurance Companies and their separate
accounts and certain 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, the Distributor or the Adviser will notify
FirstGWL&A immediately
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 FirstGWL&A or
Schwab, the Adviser or the Distributor will pay all costs
associated with or arising out of any
failure, or any anticipated or reasonably foreseeable 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
failure; 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 FirstGWL&A
and any federal
income taxes or tax penalties and interest thereon (or "toll
charges" or exactments or
amounts paid in settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund, the Adviser or the Distributor as a result of such a
failure or alleged failure:
(a) FirstGWL&A shall promptly notify the Fund, the Adviser
and the Distributor of
such assertion or potential claim;
(b) FirstGWL&A shall consult with the Fund, the Adviser and
the Distributor as to
how to minimize any liability that may arise as a result of
such failure or alleged
failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund, the
Adviser and the Distributor 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&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) FirstGWL&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 FirstGWL&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) FirstGWL&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, FirstGWL&A shall not be required to
appeal any adverse
judicial decision unless the Fund, the Distributor 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 FirstGWL&A in complying with this clause (f).
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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, FirstGWL&A and other Participating Insurance
Companies 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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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, and subject to section
1.2, the Distributor and
the Fund shall continue to accept and implement orders by
FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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
Independent Directors. Until the end of the foregoing six month
period or the completion
of the termination and withdrawal of the Account's investment in
the Fund, whichever first
occurs, and subject to section 1.2, the Fund shall continue to
accept and implement orders
by FirstGWL&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
Independent Trustees shall determine whether any proposed action
adequately remedies any
irreconcilable material conflict, but in no event will the Fund,
the Distributor or the Adviser
be required to establish a new funding medium for the Contracts.
FirstGWL&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
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 FirstGWL&A
will withdraw the Account's investment in the Fund and terminate
this Agreement within six
(6) months after the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund,
the Distributor and the Adviser and each of their officers and
directors or trustees 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 FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser,
Distributor or Fund
for use in the registration statement or prospectus for
the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
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 and
directors or trustees 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 Indemnified Parties may become
subject under any statute
or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are
related to the sale or acqu-
isition of the Fund's shares or the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund that is
both (A) materially incorrect and (B) that was neither
contained in the Fund's
registration statement or sales literature nor other
promotional material of the
Fund prepared by the Fund or provided in writing to
Schwab, or approved
in writing, by or on behalf of the Fund, the Distributor
or the 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 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
FirstGWL&A or Schwab
by or on behalf of the Adviser, the Distributor or Fund
or to Schwab by
FirstGWL&A for use in the registration statement or
prospectus for the
Contracts or in the Contracts or sales literature (or any
amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts;
or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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 FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or the
Fund by or on behalf
of FirstGWL&A or Schwab for use in the registration
statement or prospectus
for the Fund or in sales literature (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
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or
the omission or alleged omission to state therein a
material fact required to
be stated therein or necessary to make the statement or
statements therein
not misleading, if such statement or omission was made in
reliance upon
information furnished in writing to FirstGWL&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 Fund, the Adviser
or 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 Fund, the Adviser or the Distributor
in this Agreement
or arise out of or result from any other material breach
of this Agreement by
the Adviser, the Fund or the Distributor; or
(vi) 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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
FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares
or the contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or Fund
by or on behalf of
FirstGWL&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
(ii) arise out of or as a result of statements or
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, 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
FirstGWL&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 Fund, Adviser or
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 Fund, Adviser or Distributor in this
Agreement or arise
out of or result from any other material breach of this
Agreement by the
Fund, Adviser or Distributor; or
(vi) 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
8.5(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Distributor has been
prejudiced by such failure to
give notice. 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. After notice from the Distributor
to such party of the
Distributor's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
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)FirstGWL&A and Schwab agree to promptly notify the
Distributor of the
commencement of any litigation or proceedings against it or any of
its 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 New York, without
regard to the New York
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.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal
administrative
proceedings are instituted against FirstGWL&A or Schwab
by the NASD, the
SEC, the Insurance Commissioner or like official of any
state or any other
regulatory body regarding FirstGWL&A's or Schwab's duties
under this
Agreement or related to the sale of the Contracts, the
operation of any
Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund, the Distributor or
Adviser by the NASD, the SEC, or any state securities or
insurance
department or any other regulatory body, if Schwab or
FirstGWL&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 Adviser to
perform their obligations
under this Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or Adviser, respectively, shall determine, in their
sole judgment
reasonably exercised in good faith, that either
FirstGWL&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
FirstGWL&A's or
Schwab's ability to perform its obligations under this
Agreement, (ii) the Fund,
the Distributor or Adviser notifies FirstGWL&A or Schwab,
as appropriate,
of that determination and its intent to terminate this
Agreement, and (iii) after
considering the actions taken by FirstGWL&A or Schwab and
any other
changes in circumstances since the giving of such a
notice, the determination
of the Fund, the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund, the Distributor or
the 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, the Distributor's
or Adviser's ability to perform its obligations under
this Agreement, (ii)
FirstGWL&A or Schwab notifies the Fund, the 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, the Distributor or
Adviser and any other changes in circumstances since the
giving of such a
notice, the determination of FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund, the
Adviser and the Distributor
shall, at the option of FirstGWL&A or Schwab, continue to make
available additional shares
of the Designated Portfolios pursuant to the terms and conditions
of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in
the Designated Portfolios,
redeem investments in the Designated Portfolios and/or invest in
the Designated Portfolios
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 par-
ties; 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:
Federated Insurance Series
Federated Investors Towers
Pittsburgh, PA 15222-3779
Attention: John W. McGonigle, Esq.
<PAGE>
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
Federated Advisers
Federated Investors Towers
Pittsburgh, PA 15222-3779
Attention: John W. McGonigle, Esq.
If to the Distributor:
Federated Securities Corp.
Federated Investors Towers
Pittsburgh, PA 15222-3779
Attention: John W. McGonigle, Esq.
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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, may 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Declarations of Trust of the Fund
and the Adviser and agree
that the obligations assumed by the Fund and the Adviser pursuant
to this Agreement shall
be limited in any case to the Fund and Adviser and their respective
assets and neither
Schwab nor FirstGWL&A shall seek satisfaction of any such
obligation from the
shareholders of the Fund or the Adviser, the Trustees, 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, Adviser and Distributor agree that the
obligations assumed by
FirstGWL&A and Schwab pursuant to this Agreement shall be limited
in any case to
FirstGWL&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
FirstGWL&A or Schwab, the directors, officers, employees or agents
of the FirstGWL&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 Distributor and
the Fund, and as between the Adviser and the Fund.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
FEDERATED INSURANCE SERIES
By its authorized officer,
By:/s/ John W. McGonigle
Title: Executive Vice President
Date: March 24, 1997
FEDERATED ADVISERS
By its authorized officer,
By:/s/ Stephen A. Keen
Title: Vice President
Date: March 24, 1997
FEDERATED SECURITIES CORP.
By its authorized officer,
By:/s/ Byron F. Bowman
Title: Vice President
Date: March 24, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Federated American Leaders Fund II
Federated Fund for U.S. Government Securities II
Federated Utility Fund II<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Distributor and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or
Distributor, as
applicable
Distributor shall supply
FirstGWL&A with
such numbers of the
Designated Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or
Distributor, as
applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
SchwabMutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Distributor
Fund or Distributor
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by SchwabSchwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Distributor
FirstGWL&A
Fund or
Distributor
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Distributor
Fund or
Distributor
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Distributor
Fund or
Distributor
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or
Distributor
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible for Expense
Mutual Fund Annual & Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or
Distributor
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Distributor
Schwab
Fund orDistributor
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
SchwabOther communication
to inforce
Distribution (including
labor) if required by
the Fund or Distributor
FirstGWL&A
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Distributor
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.5
FUND PARTICIPATION AGREEMENT
INVESCO Variable Investment Funds, Inc.<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 10
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
ARTICLE V. Fees and Expenses . . . . . . . . . . . . . . . . 15
ARTICLE VI. Diversification and Qualification . . . . . . . . 16
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order . . . . 20
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 23
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 31
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 32
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 36
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 40
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 41
SCHEDULE C Administrative Services . . . . . . . . . . . . . 42
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 43
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); INVESCO VARIABLE INVESTMENT FUNDS, INC.,
a
corporation organized under the laws of Maryland (hereinafter the
"Fund"); INVESCO
FUNDS GROUP, INC. (hereinafter the "Adviser"), a Delaware
corporation; and CHARLES
SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated December 29, 1993, File
No. 812-8590, 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 (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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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,
FirstGWL&A,
Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 Directors of the Fund (hereinafter the "Board") may refuse to
sell shares of any Portfolio
to any person, or suspend or terminate the offering of shares of
any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion
of the Board acting in good faith and in light of their fiduciary
duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other
Participating Insurance Company or 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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
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,
FirstGWL&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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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 11:00 a.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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&A for crediting of such amounts
to the applicable
Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a
material error, FirstGWL&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 FirstGWL&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
FirstGWL&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. FirstGWL&A represents and warrants that 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 state insurance suitability requirements. FirstGWL&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 4240 of
the New York 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.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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. 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 New
York and any other applicable state to the extent required to
perform this Agreement. The
Fund further represents and warrants that it will make every effort
to ensure that
Designated Portfolio(s) shares will be sold in compliance with all
state and federal securities
laws and all state insurance laws specifically designated by
FirstGWL&A, in writing. 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. FirstGWL&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
FirstGWL&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 Maryland 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 New York
and any applicable state and federal securities laws.
2.7. 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
money and/or securities of the Fund are, and shall continue to be
at all times, covered by
a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less
than the minimal coverage required by Rule 17g-1 under the 1940 Act
or related provisions
as may be promulgated from time to time. The aforesaid bond shall
include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.8. 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.
2.9. The Fund will provide FirstGWL&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 FirstGWL&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 FirstGWL&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.
2.10.FirstGWL&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 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 and the Adviser immediately upon having a reasonable basis
for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
In addition, FirstGWL&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. FirstGWL&A will use every
effort to continue to
meet such definitional requirements, and it will notify Schwab, the
Fund, and the Adviser
immediately upon having a reasonable basis for believing that such
requirements have
ceased to be met or that they might not be met in the future.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Adviser shall provide FirstGWL&A
and Schwab with as
many copies of the Fund's current prospectus for the Designated
Portfolio(s) as
FirstGWL&A and Schwab may reasonably request for marketing purposes
(including
distribution to Contractowners with respect to new sales of a
Contract). If requested by
FirstGWL&A in lieu thereof, the Adviser 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
FirstGWL&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 prospectuses (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, in the reasonable
judgment of the Fund's counsel, such disclosure is 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 and/or the Adviser shall provide FirstGWL&A with copies of the
Fund's SAI or docu-
mentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to be
borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require to
permit timely distribution thereof to Contractowners. The SAIs may
name or describe
portfolios or series other than the Designated Portfolio(s) that
may be in the Fund. The
Adviser 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 FirstGWL&A or Schwab).
3.3. The Fund and/or the Adviser shall provide FirstGWL&A and
Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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 Adviser or the Designated Portfolio(s) provided in writing by
the Fund or the Adviser,
neither the Fund 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
FirstGWL&A reserves the right to vote Fund shares
held in any
segregated asset account in its own right, to the
extent permitted by
law.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments 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.
<PAGE>
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 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 objects to such use within five (5) Business
Days after receipt of such
material.
4.2. FirstGWL&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 Con-
tracts other than the information or representations contained in
the registration statement
or prospectus for the Fund shares, as such registration statement
and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the
Fund, or in sales literature or other promotional material approved
by the Fund or by the
Adviser, except with the permission of the Fund or the Adviser.
4.3. The Fund shall furnish, or shall cause to be furnished,
to FirstGWL&A and
Schwab, a copy of each piece of sales literature or other
promotional material in which
FirstGWL&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
FirstGWL&A or Schwab objects to
such use within five (5) Business Days after receipt of such
material.
4.4. The Fund and the Adviser shall not give any information
or make any
representations on behalf of FirstGWL&A or concerning FirstGWL&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 promotional material approved by FirstGWL&A or
its designee, except
with the permission of FirstGWL&A.
4.5. FirstGWL&A, the Fund and the Adviser shall not give any
information or
make any representations on behalf of or concerning Schwab, or use
Schwab's name except
with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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, and proxy
materials and any other
material constituting sales literature or advertising under the
NASD rules, 1933 Act or the
1940 Act.
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 shall pay no fee or other compensation to
FirstGWL&A under this
Agreement, and FirstGWL&A shall pay no fee or other compensation to
the Fund or
Adviser under this Agreement, although the parties hereto will bear
certain expenses in
accordance with Schedule E, Articles III, V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund and the Adviser agree to cooperate with FirstGWL&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 within a
Contract(s).
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 1940 Act.
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 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 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 1.817-5, as amended
from time to time, and
any Treasury interpretations thereof, relating to the
diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments
or other modifications
or successor provisions to such Section or Regulations. The Fund
and the Adviser agree
that shares of the Designated Portfolio(s) will be sold only to
Participating Insurance
Companies and their separate accounts.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general
public.
6.3. The Fund 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 or the Adviser will notify FirstGWL&A
immediately 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
and 8.4 hereof and with-
out in any way limiting or restricting any other remedies available
to FirstGWL&A or
Schwab, the Adviser will pay all costs associated with or arising
out of any failure, or any
anticipated or reasonably foreseeable 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 failure; 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 FirstGWL&A and any federal
income taxes or tax
penalties and interest thereon (or "toll charges" or exactments or
amounts paid in
settlement) incurred by FirstGWL&A with respect to itself or owners
of its Contracts in
connection with any such failure.
6.6. The Fund at the Fund's expense shall provide FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund or the Adviser as a result of such a failure or alleged
failure:
(a) FirstGWL&A shall promptly notify the Fund and the Adviser
of such assertion
or potential claim;
(b) FirstGWL&A shall consult with the Fund and the Adviser as
to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&A to the Fund and the Adviser
(together with any
supporting information or analysis) within at least two (2)
business days prior to
submission;
(e) FirstGWL&A shall provide the Fund and the Adviser with
such cooperation as
the Fund and the Adviser shall reasonably request (including,
without limitation, by
permitting the Fund and the Adviser to review the relevant
books and records of
FirstGWL&A) in order to facilitate review by the Fund 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) FirstGWL&A shall not with respect to any claim of the IRS
or any Contractowner
that would give rise to a claim against the Fund 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
and the Adviser, which shall not be unreasonably withheld;
provided that,
FirstGWL&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 and the Adviser shall bear the costs and expenses,
including reasonable
attorney's fees, incurred by FirstGWL&A in pursuing such
judicial appeals.
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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 Adviser or any
sub-adviser to any of the
Designated Portfolios (the "Independent Directors"), that a
material irreconcilable conflict
exists, FirstGWL&A and other Participating Insurance Companies
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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Adviser and the Fund
shall continue to accept
and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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
Independent Directors 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund
and the Adviser and each of their officers and directors or
trustees and each person, if any,
who controls the Fund or the Adviser within the meaning of Section
15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the
written consent of FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser or
Fund for use in the
registration statement or prospectus for the Contracts or
in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in
connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&A, including
without limitation Section 2.10 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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
8.2. Indemnification by Schwab
8.2(a). Schwab agrees to indemnify and hold harmless
the Fund and the
Adviser and each of their officers and directors or trustees and
each person, if any, who
controls the Fund 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 Indemnified Parties may become subject under any statute or
regulation, at common law
or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in
respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund that is
both (A) materially incorrect and (B) that was neither
contained in the Fund's
registration statement or sales literature nor other
promotional material of the
Fund prepared by the Fund or provided in writing to
Schwab, or approved
in writing, by or on behalf of the Fund or the 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 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
FirstGWL&A or Schwab
by or on behalf of the Adviser or the Fund or to Schwab
by FirstGWL&A for
use in the registration statement or prospectus for the
Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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 FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund or 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 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 reli-
ance upon and in conformity with information furnished in
writing to the
Adviser or the Fund by or on behalf of FirstGWL&A or
Schwab for use in the
registration statement or prospectus for the Fund or in
sales literature (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
representations (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 Fund or 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
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 FirstGWL&A or Schwab
by or on behalf
of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund or the
Adviser to provide the
services and furnish the materials under the terms of
this Agreement (in-
cluding a failure, whether unintentional or in good faith
or otherwise, to com-
ply 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 Fund or the Adviser in this
Agreement or arise out of
or result from any other material breach of this
Agreement by the Adviser or
the Fund; or
(vi) arise out of or result from the materially 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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;
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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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.
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 New York, without
regard to the New York
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.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
reasonable determination that shares of such Portfolio
are not reasonably
available to meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal
administrative
proceedings are instituted against FirstGWL&A or Schwab
by the NASD, the
SEC, the Insurance Commissioner or like official of any
state or any other
regulatory body regarding FirstGWL&A's or Schwab's duties
under this
Agreement or related to the sale of the Contracts, the
operation of any
Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement or related to the Contracts; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund or the Adviser by
the NASD, the SEC, or any state securities or insurance
department or any
other regulatory body, if Schwab or FirstGWL&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
or the Adviser to perform their obligations under this
Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or the Adviser, if
(i) the Fund or Adviser,
respectively, shall determine, in their sole judgment
reasonably exercised in
good faith, that either FirstGWL&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 FirstGWL&A's or
Schwab's ability to
perform its obligations under this Agreement, (ii) the
Fund or the Adviser
notifies FirstGWL&A or Schwab, as appropriate, of that
determination and
its intent to terminate this Agreement, and (iii) after
considering the actions
taken by FirstGWL&A or Schwab and any other changes in
circumstances
since the giving of such a notice, the determination of
the Fund or the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund or the 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 or the
Adviser's ability to
perform its obligations under this Agreement, (ii)
FirstGWL&A or Schwab
notifies the Fund or the Adviser, as appropriate, of that
determination and its
intent to terminate this Agreement, and (iii) after
considering the actions
taken by the Fund or the Adviser and any other changes in
circumstances
since the giving of such a notice, the determination of
FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund and the
Adviser shall, at the
option of FirstGWL&A or Schwab, continue to make available
additional shares of the
Designated Portfolios pursuant to the terms and conditions of this
Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in
the Designated Portfolios,
redeem investments in the Designated Portfolios and/or invest in
the Designated Portfolios
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 par-
ties; 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.
<PAGE>
If to the Fund:
INVESCO Variable Investment Funds, Inc.
7800 East Union Avenue, Suite 800
Denver, CO 80237
Attention: General Counsel
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
INVESCO Funds Group, Inc.
7800 East Union Avenue, Suite 800
Denver, CO 80237
Attention: General Counsel
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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, may 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,
or other arbitration rules as mutually agreed upon by the relevant
parties, 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Articles of Incorporation of the
Fund and the Adviser and
agree that the obligations assumed by the Fund and the Adviser
pursuant to this Agreement
shall be limited in any case to the Fund and Adviser and their
respective assets and neither
Schwab nor FirstGWL&A shall seek satisfaction of any such
obligation from the
shareholders of the Fund or the Adviser, the Trustees, 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 and the Adviser agree that the obligations
assumed by FirstGWL&A
and Schwab pursuant to this Agreement shall be limited in any case
to FirstGWL&A and
Schwab and their respective assets and neither the Fund nor the
Adviser shall seek
satisfaction of any such obligation from the shareholders of the
FirstGWL&A or Schwab,
the directors, officers, employees or agents of the FirstGWL&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.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By:/s/ Ronald Grooms
Title: Treasurer
Date: March 10, 1997
INVESCO FUNDS GROUP, INC.:
By its authorized officer,
By:/s/ Ronald Grooms
Title: Senior Vice President and Treasurer
Date: March 10, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or Adviser,
as applicable
Fund or Adviser shall
supply FirstGWL&A
with such numbers of
the Designated
Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or Adviser,
as applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
SchwabItem
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Adviser
Fund or Adviser
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Adviser
FirstGWL&A
Fund or Adviser
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Adviser
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Adviser
Fund or Adviser
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or Adviser
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
or Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Adviser
Schwab
Fund or Adviser
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Adviser
FirstGWL&A
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Adviser
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.6
FUND PARTICIPATION AGREEMENT
Janus Aspen Series<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 10
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
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 . . . . 20
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 23
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 32
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 33
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 37
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 41
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 42
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 43
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 45
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
JANUS ASPEN SERIES,
JANUS CAPITAL CORPORATION
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); JANUS ASPEN SERIES, a business trust
organized under the
laws of Delaware (hereinafter the "Fund"); JANUS CAPITAL
CORPORATION
(hereinafter the "Adviser"), a Colorado corporation; and CHARLES
SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies") and certain
qualified pension and
retirement plans; and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated March 12, 1994 (File No.
812-8408), 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 certain
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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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 pursuant to a separate Service Agreement;
NOW, THEREFORE, in consideration of their mutual promises,
FirstGWL&A,
Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 their fiduciary
duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other
Participating Insurance Company, separate account or any Qualified
Plan unless an
agreement containing provisions substantially the same as Sections
2.1, 3.6, 3.7, 3.8, and
Article VII of this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. To the extent permitted by the 1940
Act, requests for
redemption identified by FirstGWL&A, or its agent, as being in
connection with surrenders,
annuitizations, or death benefits under the Contracts, upon prior
written notice, may be
executed within seven (7) calendar days after receipt by the Fund
or its designee of the
requests for redemption. 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, FirstGWL&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 and Qualified Plans (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. FirstGWL&A shall pay for Fund shares by 11:00 a.m.
Eastern time on the
same Business Day that the Fund receives notice of the order 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 2:00 a.m. Eastern Time on the same Business Day 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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&A for crediting of such amounts
to the applicable
Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a
material error, FirstGWL&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 FirstGWL&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
FirstGWL&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. FirstGWL&A represents and warrants that 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 state insurance suitability requirements. FirstGWL&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 4240 of
the New York 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.
FirstGWL&A shall amend the Contracts' registration statement under
the 1933 Act and the
Account's registration statement under the 1940 Act from time to
time as required in order
to effect the continuous offering of the Contracts. FirstGWL&A
shall register and qualify
the Contracts for sale in accordance with the securities laws of
the various states if and to
the extent required by applicable law.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement, to
the extent FirstGWL&A notifies the Fund of such laws. The Fund
further 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 New York
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.
FirstGWL&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 FirstGWL&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 Colorado
and any applicable state and federal securities laws.
2.7. 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
money and/or securities of the Fund are, and shall continue to be
at all times, covered by
a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less
than the minimal coverage required by Rule 17g-1 under the 1940 Act
or related provisions
as may be promulgated from time to time. The aforesaid bond shall
include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.8. 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.
2.9. The Fund will provide FirstGWL&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 FirstGWL&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 FirstGWL&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.
2.10.FirstGWL&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 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 and the Adviser immediately upon having a reasonable basis
for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
In addition, FirstGWL&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. FirstGWL&A will use every
effort to continue to
meet such definitional requirements, and it will notify Schwab, the
Fund, and the Adviser
immediately upon having a reasonable basis for believing that such
requirements have
ceased to be met or that they might not be met in the future.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Adviser shall provide FirstGWL&A
and Schwab with as
many copies of the Fund's current prospectus for the Designated
Portfolio(s) as
FirstGWL&A and Schwab may reasonably request for marketing purposes
(including
distribution to Contractowners with respect to new sales of a
Contract). If requested by
FirstGWL&A in lieu thereof, the Adviser or Fund shall provide such
documentation
(including a camera-ready copy of the current prospectus for the
Designated Portfolio(s))
and other assistance as is reasonably necessary in order for
FirstGWL&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
prospectuses (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 and/or the Adviser shall provide FirstGWL&A with copies of the
Fund's SAI or docu-
mentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to be
borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require to
permit timely distribution thereof to Contractowners.
3.3. The Fund and/or the Adviser shall provide FirstGWL&A and
Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&A may reasonably
require to permit
timely distribution thereof to Contractowners.
3.4. FirstGWL&A and Schwab assume sole responsibility for
ensuring that the
materials provided by the Fund in accordance with Sections 3.1
through 3.3 are delivered
to Contractowners and prospective Contractowners in accordance with
applicable federal
and state securities laws and applicable insurance law.
3.5. It is understood and agreed that, except with respect to
information regarding
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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 Adviser or the Designated Portfolio(s) provided in writing by
the Fund or the Adviser,
neither the Fund nor Adviser are responsible for the content of the
prospectus or SAI for
the Contracts.
3.6. If and to the extent required by law FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
FirstGWL&A reserves the right to vote Fund shares
held in any
segregated asset account in its own right, to the
extent permitted by
law.
3.7. FirstGWL&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 the Fund and FirstGWL&A. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments of the
Mixed and Shared
Funding Exemptive Order.
3.8. 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.
3.9. FirstGWL&A and Schwab shall in no way recommend or oppose
or interfere
with the solicitation of proxies for Fund shares held by
Contractowners without the prior
written consent of the Fund, which consent may be withheld in the
Fund's sole discretion.
Neither FirstGWL&A nor Schwab will initiate or solicit
Contractowners to initiate any proxy
solicitation except to the extent that the failure by FirstGWL&A or
Schwab to so initiate or
solicit would under the circumstances, be in contravention with
applicable federal or state
law.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 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 objects to such use within five (5) Business
Days after receipt of such
material.
4.2. FirstGWL&A and Schwab shall not give any information or
make any
representations or statements on behalf of the Fund or Adviser in
connection with the sale
of the Contracts other than the information or representations
contained in the registration
statement or prospectus for the Fund shares, as such registration
statement and prospectus
may be amended or supplemented from time to time, or in reports or
proxy statements for
the Fund, or in sales literature or other promotional material
approved by the Fund or by
the Adviser, except with the permission of the Fund or the Adviser.
4.3. The Fund shall furnish, or shall cause to be furnished,
to FirstGWL&A and
Schwab, a copy of each piece of sales literature or other
promotional material in which
FirstGWL&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
FirstGWL&A or Schwab objects to
such use within five (5) Business Days after receipt of such
material.
4.4. The Fund and the Adviser shall not give any information
or make any
representations on behalf of FirstGWL&A or concerning FirstGWL&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 promotional material approved by FirstGWL&A or
its designee, except
with the permission of FirstGWL&A.
4.5. FirstGWL&A, the Fund and the Adviser shall not give any
information or
make any representations on behalf of or concerning Schwab, or use
Schwab's name except
as required by legal process or regulatory authorities or with the
permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
copy of all registration statements, prospectuses, SAIs, reports,
proxy statements, sales
literature and other promotional materials designed for use in
connection with the Contracts,
and all amendments to any of the above, that relate to the
Designated Portfolio(s), contem-
poraneously with the filing of such document(s) with the SEC or
NASD or other regulatory
authorities. The Fund will provide to FirstGWL&A and Schwab at
least one copy of any
exemptive application and requests for no-action letters at such
time as the SEC staff may
grant such application or request.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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, and proxy
materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or
the 1940 Act.
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.
4.10.FirstGWL&A and Schwab acknowledge and agree that the
Adviser is the sole
owner of the name and mark "Janus" and that all use of any
designation comprised in whole
or in part of Janus (a "Janus Mark") under this Agreement shall
inure to the benefit of the
Adviser. Except as provided in Sections 4.1 and 4.2, FirstGWL&A
and Schwab shall not
use any Janus Mark on its own behalf or on behalf of the Contracts
or the Account in any
registration statement, advertisement, sales literature or other
materials relating to the
Contracts or the Account without the prior written consent of the
Adviser. Upon
termination of this Agreement for any reason and except to the
extent necessary to
administer or service existing Contracts, FirstGWL&A and Schwab
shall cease all use of any
Janus Marks as soon as reasonably practical.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to
FirstGWL&A under this
Agreement, and FirstGWL&A shall pay no fee or other compensation to
the Fund or
Adviser under this Agreement, although the parties hereto will bear
certain expenses in
accordance with Schedule E, Articles III, V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund and the Adviser agree to cooperate with FirstGWL&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.
ARTICLE VI. Diversification and Qualification
6.1. The Fund 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 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 1.817-5, as amended
from time to time, and
any Treasury interpretations thereof, relating to the
diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments
or other modifications
or successor provisions to such Section or Regulations. The Fund
and the Adviser agree
that shares of the Designated Portfolio(s) will be sold only to
Participating Insurance
Companies and their separate accounts and certain Qualified Plans.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general
public.
6.3. The Fund 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 or the Adviser will notify FirstGWL&A
immediately 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
and 8.4 hereof and with-
out in any way limiting or restricting any other remedies available
to FirstGWL&A or
Schwab, the Adviser will pay all costs associated with or arising
out of any failure, or any
anticipated or reasonably foreseeable 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 failure; 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 FirstGWL&A and any federal
income taxes or tax
penalties and interest thereon (or "toll charges" or exactments or
amounts paid in
settlement) incurred by FirstGWL&A with respect to itself or owners
of its Contracts in
connection with any such failure or anticipated or reasonably
foreseeable failure. For
purposes of this section 6.5 and Sections 8.3 and 8.4, a failure to
comply with Section 817(h)
diversification or Subchapter M qualification requirements shall
not include any non-
compliance with such sections that is corrected within any grace
periods allowed under the
Code.
6.6. The Fund at the Fund's expense shall provide FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund or the Adviser as a result of such a failure or alleged
failure:
(a) FirstGWL&A shall promptly notify the Fund and the Adviser
of such assertion
or potential claim;
(b) FirstGWL&A shall consult with the Fund and the Adviser as
to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&A to the Fund and the Adviser
(together with any
supporting information or analysis) within at least two (2)
business days prior to
submission;
(e) FirstGWL&A shall provide the Fund and the Adviser with
such cooperation as
the Fund and the Adviser shall reasonably request (including,
without limitation, by
permitting the Fund and the Adviser to review the relevant
books and records of
FirstGWL&A) in order to facilitate review by the Fund 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) FirstGWL&A shall not with respect to any claim of the IRS
or any Contractowner
that would give rise to a claim against the Fund 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
and the Adviser, which shall not be unreasonably withheld;
provided that,
FirstGWL&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 and the Adviser shall bear the costs and expenses,
including reasonable
attorney's fees, incurred by FirstGWL&A in complying with this
clause (f).
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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 Adviser or any
sub-adviser to any of the
Designated Portfolios (the "Independent Directors"), that a
material irreconcilable conflict
exists, FirstGWL&A and other Participating Insurance Companies
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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Adviser and the Fund
shall continue to accept
and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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
Independent Directors 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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
3.6, 3.7, 3.8, 7.1, 7.2, 7.3,
7.4, 7.5 and 7.6 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.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund
and the Adviser and each of their officers and directors or
trustees and each person, if any,
who controls the Fund or the Adviser within the meaning of Section
15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the
written consent of FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser or
Fund for use in the
registration statement or prospectus for the Contracts or
in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in
connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&A, including
without limitation Section 2.10 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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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 for which
the Indemnified Parties intend to seek indemnification from
FirstGWL&A.
8.2. Indemnification by Schwab
8.2(a). Schwab agrees to indemnify and hold harmless
the Fund and the
Adviser and each of their officers and directors or trustees and
each person, if any, who
controls the Fund 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 Indemnified Parties may become subject under any statute or
regulation, at common law
or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in
respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund that is
both (A) materially incorrect and (B) that was neither
contained in the Fund's
registration statement or sales literature nor other
promotional material of the
Fund prepared by the Fund or provided in writing to
Schwab, or approved
in writing, by or on behalf of the Fund or the Adviser;
or
(ii) arise out of or are based upon any untrue statements or
alleged untrue
statements of any material fact contained in the
registration statement,
prospectus or SAI for the Contracts or in sales
literature or other promotional
material prepared 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 FirstGWL&A or Schwab by or on
behalf of the Adviser
or the Fund or to Schwab by FirstGWL&A for use in the
registration state-
ment or prospectus for the Contracts or in the Contracts
or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the
sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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 for which the
Indemnified Parties intend to seek indemnification from Schwab.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold
harmless FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund or 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 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 reli-
ance upon and in conformity with information furnished in
writing to the
Adviser or the Fund by or on behalf of FirstGWL&A or
Schwab for use in the
registration statement or prospectus for the Fund or in
sales literature (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
representations (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 Fund or 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
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 FirstGWL&A or Schwab
by or on behalf
of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund or the
Adviser to provide the
services and furnish the materials under the terms of
this Agreement (in-
cluding a failure, whether unintentional or in good faith
or otherwise, to com-
ply 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 Fund or the Adviser in this
Agreement or arise out of
or result from any other material breach of this
Agreement by the Adviser or
the Fund; or
(vi) to the extent set forth in Section 1.10, 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its officers or directors
in connection with the issuance or sale of the Contracts or the
operation of the Account for
which FirstGWL&A or Schwab intend to seek indemnification from the
Adviser.
8.4. Indemnification By the Fund
8.4(a). The Fund agrees to indemnify and hold harmless
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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 for which
FirstGWL&A or Schwab intend to seek indemnification from the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions
hereof interpreted under
and in accordance with the laws of the State of New York, without
regard to the New York
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.
<PAGE>
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund or Adviser in the event
that formal
administrative proceedings are instituted against
FirstGWL&A or Schwab by
the NASD, the SEC, the Insurance Commissioner or like
official of any state
or any other regulatory body regarding FirstGWL&A's or
Schwab's duties
under this Agreement or related to the sale of the
Contracts, the operation
of any Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund or the Adviser by
the NASD, the SEC, or any state securities or insurance
department or any
other regulatory body, if Schwab or FirstGWL&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
or the Adviser to perform their obligations under this
Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or the Adviser, if
(i) the Fund or Adviser,
respectively, shall determine, in their sole judgment
reasonably exercised in
good faith, that either FirstGWL&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 FirstGWL&A's or
Schwab's ability to
perform its obligations under this Agreement, (ii) the
Fund or the Adviser
notifies FirstGWL&A or Schwab, as appropriate, of that
determination and
its intent to terminate this Agreement, and (iii) after
considering the actions
taken by FirstGWL&A or Schwab and any other changes in
circumstances
since the giving of such a notice, the determination of
the Fund or the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund or the 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 or the
Adviser's ability to
perform its obligations under this Agreement, (ii)
FirstGWL&A or Schwab
notifies the Fund or the Adviser, as appropriate, of that
determination and its
intent to terminate this Agreement, and (iii) after
considering the actions
taken by the Fund or the Adviser and any other changes in
circumstances
since the giving of such a notice, the determination of
FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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), 10.1(h) or 10.1(k) 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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund and the
Adviser shall, at the
option of FirstGWL&A or Schwab, continue to make available
additional shares of the
Designated Portfolios pursuant to the terms and conditions of this
Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in
the Designated Portfolios,
redeem investments in the Designated Portfolios and/or invest in
the Designated Portfolios
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 par-
ties; 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:
Janus Aspen Series
100 Fillmore Street
Denver, CO 80206
Attention: General Counsel
<PAGE>
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
Janus Capital Corporation
100 Fillmore Street
Denver, CO 80206
Attention: General Counsel
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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, may, upon the agreement of all parties, 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Trust Instrument of the Fund and
agree that the obligations
assumed by the Fund pursuant to this Agreement shall be limited in
any case to the Fund
and its assets and neither Schwab nor FirstGWL&A shall seek
satisfaction of any such
obligation from the shareholders of the Fund or the Adviser, the
Trustees, officers,
employees or agents of the Fund, or any of them, except to the
extent permitted under this
Agreement.
12.10.Schwab and FirstGWL&A agree that the obligations assumed
by the Adviser
pursuant to this Agreement shall be limited in any case to the
Adviser and its assets and
neither Schwab nor FirstGWL&A shall seek satisfaction of any such
obligation from the
shareholders of the Adviser, the directors, officers, employees or
agents of the Adviser, or
any of them, except to the extent permitted under this Agreement.
12.11.The Fund and the Adviser agree that the obligations
assumed by FirstGWL&A
and Schwab pursuant to this Agreement shall be limited in any case
to FirstGWL&A and
Schwab and their respective assets and neither the Fund nor the
Adviser shall seek
satisfaction of any such obligation from the shareholders of the
FirstGWL&A or Schwab,
the directors, officers, employees or agents of the FirstGWL&A or
Schwab, or any of them,
except to the extent permitted under this Agreement.
12.12.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.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
JANUS ASPEN SERIES
By its authorized officer,
By:/s/ Bonnie Howe
Title: Assistant Vice President
Date: March 25, 1997
JANUS CAPITAL CORPORATION
By its authorized officer,
By:/s/ Stephen Stieneker
Title: Vice President of Compliance
Date: March 25, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio<PAGE>
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 (45 days for the
last quarter) a report
to FirstGWL&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 a year-end report within 45 days after the end of
the calendar year.
However, if a problem with regard to RIC status, as defined below,
is identified in any of
the quarterly reports, on a weekly basis thereafter, additional
interim reports will be
provided specifically addressing the problems identified in such
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) If, at the Fund's fiscal year end, less than ninety
percent of gross income is
derived from sources of income specified in Section 851(b)(2);
(b) If, at the end of the Fund's fiscal year end, thirty
percent or greater gross
income is derived from the sale or disposition of assets
specified in Section
851(b)(3);
(c) If, at the end of each fiscal quarter end, less than fifty
percent of the value of
the Fund's total assets consists of assets specified in
Section 851(b)(4)(A); and
(d) If, at the end of each fiscal quarter end, no more than
twenty-five percent of
the value of total assets of the Fund is invested in the
securities of one issuer, as
that requirement is set forth in Section 851(b)(4)(B).<PAGE>
FORM D1
CERTIFICATE OF COMPLIANCE
I, , a duly authorized officer,
director or agent of
Fund hereby certify 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 First
Great-West Life & Annuity Insurance Company, Charles Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or Adviser,
as applicable
Fund or Adviser shall
supply FirstGWL&A
film/disk or such
number of Designated
Portfolio(s)
prospectus(es) as
FirstGWL&A requires
for printing combined
prospectus
FirstGWL&A
Fund or Adviser,
as applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Mutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Adviser
Fund or Adviser
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Adviser
FirstGWL&A
Fund or Adviser
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Adviser
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Adviser
Fund or Adviser
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or Adviser
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Adviser
Schwab
Fund or Adviser
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Adviser
FirstGWL&A
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Adviser
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.7
FUND PARTICIPATION AGREEMENT
Lexington Emerging Markets Fund, Inc.<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 10
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
ARTICLE V. Fees and Expenses . . . . . . . . . . . . . . . . 15
ARTICLE VI. Diversification and Qualification . . . . . . . . 16
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order . . . . 20
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 23
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 32
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 32
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 36
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 40
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 41
SCHEDULE C Administrative Services . . . . . . . . . . . . . 42
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 43
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
LEXINGTON EMERGING MARKETS FUND, INC.
LEXINGTON MANAGEMENT CORPORATION
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); LEXINGTON EMERGING MARKETS FUND, INC., a
corporation organized under the laws of Maryland (hereinafter the
"Fund"); LEXINGTON
MANAGEMENT CORPORATION (hereinafter the "Adviser"), a Delaware
corporation;
and CHARLES SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated November 30, 1994 (File
No. 812-8910), 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 plans
established under Sections 401(a), 403(a) and (b), 408(a), (b) and
(k), 414(d) 457(b) or
501(c)(18) of the Internal Revenue Code ("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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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,
FirstGWL&A,
Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 Directors of the Fund (hereinafter the "Board") may refuse to
sell shares of any Portfolio
to any person, or suspend or terminate the offering of shares of
any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion
of the Board acting in good faith and in light of their fiduciary
duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other
Participating Insurance Company, separate account or any Qualified
Plan 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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
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,
FirstGWL&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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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 11:00 a.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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&A for crediting of such amounts
to the applicable
Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a
material error, FirstGWL&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 FirstGWL&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
FirstGWL&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. FirstGWL&A represents and warrants that 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 state insurance suitability requirements. FirstGWL&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 4240 of
the New York 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.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement. The
Fund further 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 New York 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. FirstGWL&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 FirstGWL&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 Maryland 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 New Jersey
and any applicable state and federal securities laws.
2.7. 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
money and/or securities of the Fund are, and shall continue to be
at all times, covered by
a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less
than the minimal coverage required by Rule 17g-1 under the 1940 Act
or related provisions
as may be promulgated from time to time. The aforesaid bond shall
include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.8. 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.
2.9. The Fund will provide FirstGWL&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 FirstGWL&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 FirstGWL&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.
2.10.FirstGWL&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 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 and the Adviser immediately upon having a reasonable basis
for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
In addition, FirstGWL&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. FirstGWL&A will use every
effort to continue to
meet such definitional requirements, and it will notify Schwab, the
Fund, and the Adviser
immediately upon having a reasonable basis for believing that such
requirements have
ceased to be met or that they might not be met in the future.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Adviser shall provide FirstGWL&A
and Schwab with as
many copies of the Fund's current prospectus for the Designated
Portfolio(s) as
FirstGWL&A and Schwab may reasonably request for marketing purposes
(including
distribution to Contractowners with respect to new sales of a
Contract). If requested by
FirstGWL&A in lieu thereof, the Adviser 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
FirstGWL&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 prospectuses (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 and/or the Adviser shall provide FirstGWL&A with copies of the
Fund's SAI or docu-
mentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to be
borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require to
permit timely distribution thereof to Contractowners. The Adviser
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 FirstGWL&A or
Schwab).
3.3. The Fund and/or the Adviser shall provide FirstGWL&A and
Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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 Adviser or the Designated Portfolio(s) provided in writing by
the Fund or the Adviser,
neither the Fund 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
FirstGWL&A reserves the right to vote Fund shares
held in any
segregated asset account in its own right, to the
extent permitted by
law.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments 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.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 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 objects to such use within five (5) Business
Days after receipt of such
material.
4.2. FirstGWL&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 Con-
tracts other than the information or representations contained in
the registration statement
or prospectus for the Fund shares, as such registration statement
and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the
Fund, or in sales literature or other promotional material approved
by the Fund or by the
Adviser, except with the permission of the Fund or the Adviser.
4.3. The Fund shall furnish, or shall cause to be furnished,
to FirstGWL&A and
Schwab, a copy of each piece of sales literature or other
promotional material in which
FirstGWL&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
FirstGWL&A or Schwab objects to
such use within five (5) Business Days after receipt of such
material.
4.4. The Fund and the Adviser shall not give any information
or make any
representations on behalf of FirstGWL&A or concerning FirstGWL&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 promotional material approved by FirstGWL&A or
its designee, except
with the permission of FirstGWL&A.
4.5. FirstGWL&A, the Fund and the Adviser shall not give any
information or
make any representations on behalf of or concerning Schwab, or use
Schwab's name except
with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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 and 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, and proxy
materials and any other material constituting sales literature or
advertising under the NASD
rules, the 1933 Act or the 1940 Act.
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 shall pay no fee or other compensation to
FirstGWL&A under this
Agreement, and FirstGWL&A shall pay no fee or other compensation to
the Fund or
Adviser under this Agreement, although the parties hereto will bear
certain expenses in
accordance with Schedule E, Articles III, V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund and the Adviser agree to cooperate with FirstGWL&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 1940 Act.
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 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 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 1.817-5, as amended
from time to time, and
any Treasury interpretations thereof, relating to the
diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments
or other modifications
or successor provisions to such Section or Regulations. The Fund
and the Adviser agree
that shares of the Designated Portfolio(s) will be sold only to
Participating Insurance
Companies and their separate accounts and certain Qualified Plans.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general
public.
6.3. The Fund 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 or the Adviser will notify FirstGWL&A
immediately 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
and 8.4 hereof and with-
out in any way limiting or restricting any other remedies available
to FirstGWL&A or
Schwab, the Adviser will pay all costs associated with or arising
out of any failure, or any
anticipated or reasonably foreseeable 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 failure; 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 FirstGWL&A and any federal
income taxes or tax
penalties and interest thereon (or "toll charges" or exactments or
amounts paid in
settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund or the Adviser as a result of such a failure or alleged
failure:
(a) FirstGWL&A shall promptly notify the Fund and the Adviser
of such assertion
or potential claim;
(b) FirstGWL&A shall consult with the Fund and the Adviser as
to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&A to the Fund and the Adviser
(together with any
supporting information or analysis) within at least two (2)
business days prior to
submission;
(e) FirstGWL&A shall provide the Fund and the Adviser with
such cooperation as
the Fund and the Adviser shall reasonably request (including,
without limitation, by
permitting the Fund and the Adviser to review the relevant
books and records of
FirstGWL&A) in order to facilitate review by the Fund 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) FirstGWL&A shall not with respect to any claim of the IRS
or any Contractowner
that would give rise to a claim against the Fund 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
and the Adviser, which shall not be unreasonably withheld;
provided that,
FirstGWL&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 and the Adviser shall bear the costs and expenses,
including reasonable
attorney's fees, incurred by FirstGWL&A in complying with this
clause (f).
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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 Adviser or any
sub-adviser to any of the
Designated Portfolios (the "Independent Directors"), that a
material irreconcilable conflict
exists, FirstGWL&A and other Participating Insurance Companies
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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Adviser and the Fund
shall continue to accept
and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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
Independent Directors 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund
and the Adviser and each of their officers and directors or
trustees and each person, if any,
who controls the Fund or the Adviser within the meaning of Section
15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the
written consent of FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser or
Fund for use in the
registration statement or prospectus for the Contracts or
in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in
connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&A, including
without limitation Section 2.10 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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
8.2. Indemnification by Schwab
8.2(a). Schwab agrees to indemnify and hold harmless
the Fund and the
Adviser and each of their officers and directors or trustees and
each person, if any, who
controls the Fund 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 Indemnified Parties may become subject under any statute or
regulation, at common law
or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in
respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund that is
both (A) materially incorrect and (B) that was neither
contained in the Fund's
registration statement or sales literature nor other
promotional material of the
Fund prepared by the Fund or provided in writing to
Schwab, or approved
in writing, by or on behalf of the Fund or the 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 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
FirstGWL&A or Schwab
by or on behalf of the Adviser or the Fund or to Schwab
by FirstGWL&A for
use in the registration statement or prospectus for the
Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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 FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund or 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 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 reli-
ance upon and in conformity with information furnished in
writing to the
Adviser or the Fund by or on behalf of FirstGWL&A or
Schwab for use in the
registration statement or prospectus for the Fund or in
sales literature (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
representations (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 Fund or 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
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 FirstGWL&A or Schwab
by or on behalf
of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund or the
Adviser to provide the
services and furnish the materials under the terms of
this Agreement (in-
cluding a failure, whether unintentional or in good faith
or otherwise, to com-
ply 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 Fund or the Adviser in this
Agreement or arise out of
or result from any other material breach of this
Agreement by the Adviser or
the Fund; or
(vi) 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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.
<PAGE>
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 New York, without
regard to the New York
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.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal
administrative
proceedings are instituted against FirstGWL&A or Schwab
by the NASD, the
SEC, the Insurance Commissioner or like official of any
state or any other
regulatory body regarding FirstGWL&A's or Schwab's duties
under this
Agreement or related to the sale of the Contracts, the
operation of any
Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund or the Adviser by
the NASD, the SEC, or any state securities or insurance
department or any
other regulatory body, if Schwab or FirstGWL&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
or the Adviser to perform their obligations under this
Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or the Adviser, if
(i) the Fund or Adviser,
respectively, shall determine, in their sole judgment
reasonably exercised in
good faith, that either FirstGWL&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 FirstGWL&A's or
Schwab's ability to
perform its obligations under this Agreement, (ii) the
Fund or the Adviser
notifies FirstGWL&A or Schwab, as appropriate, of that
determination and
its intent to terminate this Agreement, and (iii) after
considering the actions
taken by FirstGWL&A or Schwab and any other changes in
circumstances
since the giving of such a notice, the determination of
the Fund or the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund or the 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 or the
Adviser's ability to
perform its obligations under this Agreement, (ii)
FirstGWL&A or Schwab
notifies the Fund or the Adviser, as appropriate, of that
determination and its
intent to terminate this Agreement, and (iii) after
considering the actions
taken by the Fund or the Adviser and any other changes in
circumstances
since the giving of such a notice, the determination of
FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund and the
Adviser shall, at the
option of FirstGWL&A or Schwab, continue to make available
additional shares of the
Designated Portfolios pursuant to the terms and conditions of this
Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in
the Designated Portfolios,
redeem investments in the Designated Portfolios and/or invest in
the Designated Portfolios
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 par-
ties; 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:
Lexington Emerging Markets Fund, Inc.
Park 80 West Plaza Two
Saddle Brook, NJ 07663
Attention: Lisa Curcio
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
Lexington Management Corporation
Park 80 West Plaza Two
Saddle Brook, NJ 07663
Attention: Lawrence Kantor
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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.
12.9.Schwab and FirstGWL&A agree that the obligations assumed
by the Fund and
the Adviser pursuant to this Agreement shall be limited to the Fund
and Adviser and their
respective assets and neither Schwab nor FirstGWL&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 and the Adviser agree that the obligations
assumed by FirstGWL&A
and Schwab pursuant to this Agreement shall be limited in any case
to FirstGWL&A and
Schwab and their respective assets and neither the Fund nor the
Adviser shall seek
satisfaction of any such obligation from the shareholders of the
FirstGWL&A or Schwab,
the directors, officers, employees or agents of the FirstGWL&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.
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
LEXINGTON EMERGING MARKETS FUND, INC.
By its authorized officer,
By:/s/ Lawrence Kantor
Title: Vice President
Date: March 12, 1997
LEXINGTON MANAGEMENT CORPORATION
By its authorized officer,
By:/s/ Lawrence Kantor
Title: Executive Vice President
Date: March 12, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Lexington Emerging Markets Fund<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or Adviser,
as applicable
Fund or Adviser shall
supply FirstGWL&A
with such numbers of
the Designated
Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or Adviser,
as applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
SchwabItem
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Adviser
Fund or Adviser
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Adviser
FirstGWL&A
Fund or Adviser
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Adviser
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Adviser
Fund or Adviser
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or Adviser
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Adviser
Schwab
Fund or Adviser
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Adviser
FirstGWL&A
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Adviser
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.8
FUND PARTICIPATION AGREEMENT
Montgomery Funds III<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 11
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
ARTICLE V. Fees and Expenses . . . . . . . . . . . . . . . . 15
ARTICLE VI. Diversification and Qualification . . . . . . . . 17
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order . . . . 20
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 23
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 32
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 32
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 37
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 41
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 42
SCHEDULE C Administrative Services . . . . . . . . . . . . . 43
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 44
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
MONTGOMERY FUNDS III,
MONTGOMERY ASSET MANAGEMENT, L.P.
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); MONTGOMERY FUNDS III, a business trust
organized under
the laws of Delaware (hereinafter the "Fund"); MONTGOMERY ASSET
MANAGEMENT,
L.P. (hereinafter the "Adviser"), a limited partnership organized
under the laws of California;
and CHARLES SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated May 11, 1995 (File No.
812-9272), 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, FirstGWL&A has registered or will register 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
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, under the insurance laws of the State of New York, to set
aside and invest assets
attributable to the Contracts; and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&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,
FirstGWL&A,
Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
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,
FirstGWL&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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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 11:00 a.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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&A for crediting of such amounts
to the applicable
Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a
material error, FirstGWL&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 FirstGWL&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
FirstGWL&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. FirstGWL&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 state insurance suitability
requirements. FirstGWL&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 4240 of the
New York 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 registered 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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement. The
Fund further 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 New York 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. FirstGWL&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 FirstGWL&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 California
and any applicable state and federal securities laws.
2.7. 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
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.
2.8. 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.
2.9. The Fund will provide FirstGWL&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 FirstGWL&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 FirstGWL&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.
2.10.FirstGWL&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 and the Adviser
immediately upon having
a reasonable basis for believing that the Contracts have ceased to
be so treated or that they
might not be so treated in the future. In addition, FirstGWL&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. FirstGWL&A
will use every effort to continue to meet such definitional
requirements, and it will notify
Schwab, the Fund, and the Adviser immediately upon having a
reasonable basis for believing
that such requirements have ceased to be met or that they might not
be met in the future.
FirstGWL&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.
<PAGE>
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Adviser shall provide FirstGWL&A
and Schwab with as
many copies of the Fund's current prospectus for the Designated
Portfolio(s) as
FirstGWL&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
FirstGWL&A in lieu thereof,
the Adviser 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 FirstGWL&A once
each year (or more fre-
quently 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 and/or the Adviser shall provide FirstGWL&A with copies of the
Fund's SAI or docu-
mentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to be
borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require to
permit timely distribution thereof to Contractowners. The Adviser
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 FirstGWL&A or
Schwab).
3.3. The Fund and/or the Adviser shall provide FirstGWL&A and
Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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 Adviser or the Designated Portfolio(s) provided in writing by
the Fund or the Adviser,
neither the Fund 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 FirstGWL&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. FirstGWL&A reserves the
right to vote
Fund shares held in any segregated asset account in
its own right, to
the extent permitted by law.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments 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.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 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 objects to such use within five (5) Business
Days after receipt of such
material.
4.2. FirstGWL&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 Con-
tracts other than the information or representations contained in
the registration statement
or prospectus for the Fund shares, as such registration statement
and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the
Fund, or in sales literature or other promotional material approved
by the Fund or by the
Adviser, except with the permission of the Fund or the Adviser.
4.3. The Fund or the Adviser shall furnish, or shall cause to
be furnished, to
FirstGWL&A and Schwab, a copy of each piece of sales literature or
other promotional
material in which FirstGWL&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 FirstGWL&A or
Schwab objects to such use within five (5) Business Days after
receipt of such material.
4.4. The Fund and the Adviser shall not give any information
or make any
representations on behalf of FirstGWL&A or concerning FirstGWL&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 promotional material approved by FirstGWL&A or
its designee, except
with the permission of FirstGWL&A.
4.5. FirstGWL&A, the Fund and the Adviser shall not give any
information or
make any representations on behalf of or concerning Schwab, or use
Schwab's name except
with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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
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, SAIs, shareholder reports, proxy
materials and any other material
constituting sales literature or advertising under the NASD rules,
the 1933 Act of the 1940
Act.
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 and the Adviser shall pay no fee or other
compensation to
FirstGWL&A under this Agreement, and FirstGWL&A shall pay no fee or
other
compensation to the Fund or Adviser under this Agreement, although
the parties hereto will
bear certain expenses in accordance with Schedule E, Articles III,
V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund and the Adviser agree to cooperate with FirstGWL&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 1940 Act.
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 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 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 1.817-5, as amended
from time to time, and
any Treasury interpretations thereof, relating to the
diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments
or other modifications
or successor provisions to such Section or Regulations. The Fund
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 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 or the Adviser will notify FirstGWL&A
immediately 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
and 8.4 hereof and with-
out in any way limiting or restricting any other remedies available
to FirstGWL&A or
Schwab, the Adviser will pay all costs associated with or arising
out of any failure, or any
anticipated or reasonably foreseeable 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 failure; 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 FirstGWL&A and any federal
income taxes or tax
penalties and interest thereon (or "toll charges" or exactments or
amounts paid in
settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&A's knowledge, of any Contractowner that any Designated
Portfolio has failed
to comply with the diversification requirements of Section 817(h)
of the Code or
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund or the Adviser as a result of such a failure or alleged
failure:
(a) FirstGWL&A shall promptly notify the Fund and the Adviser
of such assertion
or potential claim;
(b) FirstGWL&A shall consult with the Fund and the Adviser as
to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&A to the Fund and the Adviser
(together with any
supporting information or analysis) within at least two (2)
business days prior to
submission;
(e) FirstGWL&A shall provide the Fund and the Adviser with
such cooperation as
the Fund and the Adviser shall reasonably request (including,
without limitation, by
permitting the Fund and the Adviser to review the relevant
books and records of
FirstGWL&A) in order to facilitate review by the Fund 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) FirstGWL&A shall not with respect to any claim of the IRS
or any Contractowner
that would give rise to a claim against the Fund 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
and the Adviser, which shall not be unreasonably withheld;
provided that,
FirstGWL&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 and the Adviser shall bear the costs and expenses,
including reasonable
attorney's fees, incurred by FirstGWL&A in complying with this
clause (f).
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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 Adviser or any
sub-adviser to any of the
Designated Portfolios (the "Independent Directors"), that a
material irreconcilable conflict
exists, FirstGWL&A and other Participating Insurance Companies
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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Adviser and the Fund
shall continue to accept
and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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
Independent Directors 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund
and the Adviser and each of their officers and directors or
trustees and each person, if any,
who controls the Fund or the Adviser within the meaning of Section
15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the
written consent of FirstGWL&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
or acquisition 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 pro-
spectus 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 FirstGWL&A or Schwab by or on
behalf of the Adviser
or Fund for use in the registration statement or
prospectus for the Contracts
or in the Contracts or sales literature (or any amendment
or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&A, including
without limitation Section 2.10 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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
8.2. Indemnification by Schwab
8.2(a). Schwab agrees to indemnify and hold harmless
the Fund and the
Adviser and each of their officers and directors or trustees and
each person, if any, who
controls the Fund 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 Indemnified Parties may become subject under any statute or
regulation, at common law
or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in
respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of Schwab's 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
and other promotional
material or provided in writing to Schwab, or approved in
writing, by or on
behalf of the Fund or the 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
FirstGWL&A or Schwab
by or on behalf of the Adviser or the Fund or to Schwab
by FirstGWL&A for
use in the registration statement or prospectus for the
Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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.
<PAGE>
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold
harmless FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund or 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 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 reli-
ance upon and in conformity with information furnished in
writing to the
Adviser or the Fund by or on behalf of FirstGWL&A or
Schwab for use in the
registration statement or prospectus for the Fund or in
sales literature (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
representations (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 Fund or 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
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 FirstGWL&A or Schwab
by or on behalf
of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund or the
Adviser to provide the
services and furnish the materials under the terms of
this Agreement (in-
cluding a failure, whether unintentional or in good faith
or otherwise, to com-
ply 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 Fund or the Adviser in this
Agreement or arise out of
or result from any other material breach of this
Agreement by the Adviser or
the Fund; or
(vi) arise out of or result from the incorrect or untimely
calculation or reporting
by the Fund or the Adviser 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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.
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 New York, without
regard to the New York
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.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal
administrative
proceedings are instituted against FirstGWL&A or Schwab
by the NASD, the
SEC, the Insurance Commissioner or like official of any
state or any other
regulatory body regarding FirstGWL&A's or Schwab's duties
under this
Agreement or related to the sale of the Contracts, the
operation of any
Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund or the Adviser by
the NASD, the SEC, or any state securities or insurance
department or any
other regulatory body, if Schwab or FirstGWL&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
or the Adviser to perform their obligations under this
Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or the Adviser, if
(i) the Fund or Adviser,
respectively, shall determine, in their sole judgment
reasonably exercised in
good faith, that either FirstGWL&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 FirstGWL&A's or
Schwab's ability to
perform its obligations under this Agreement, (ii) the
Fund or the Adviser
notifies FirstGWL&A or Schwab, as appropriate, of that
determination and
its intent to terminate this Agreement, and (iii) after
considering the actions
taken by FirstGWL&A or Schwab and any other changes in
circumstances
since the giving of such a notice, the determination of
the Fund or the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund or the 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 or the
Adviser's ability to
perform its obligations under this Agreement, (ii)
FirstGWL&A or Schwab
notifies the Fund or the Adviser, as appropriate, of that
determination and its
intent to terminate this Agreement, and (iii) after
considering the actions
taken by the Fund or the Adviser and any other changes in
circumstances
since the giving of such a notice, the determination of
FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund and the
Adviser shall, at the
option of FirstGWL&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 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 par-
ties; 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:
Montgomery Funds III
101 California Street
San Francisco, CA 94111
Attention:John Story, Executive Vice President
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
Montgomery Asset Management, L.P.
101 California Street
San Francisco, CA 94111
Attention:John Story, Executive Vice President
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Declarations of Trust of the Fund
and agree that the
obligations assumed by the Fund and the Adviser pursuant to this
Agreement shall be
limited in any case to the Fund and Adviser and their respective
assets and neither Schwab
nor FirstGWL&A shall seek satisfaction of any such obligation from
the shareholders of the
Fund or the Adviser, the Trustees, officers, employees or agents of
the Fund or Adviser, or
any of them.
12.10.The Fund and the Adviser agree that the obligations
assumed by FirstGWL&A
and Schwab pursuant to this Agreement shall be limited in any case
to FirstGWL&A and
Schwab and their respective assets and neither the Fund nor the
Adviser shall seek
satisfaction of any such obligation from the shareholders of the
FirstGWL&A or Schwab,
the directors, officers, employees or agents of the FirstGWL&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.
12.12.It is understood that the name Montgomery or any
derivative thereof or logo
associated with that name is the valuable property of the Adviser
and its affiliates, and that
FirstGWL&A and Schwab have the right to use such name (or
derivative or logo) only so
long as this Agreement is in effect. Upon termination of this
Agreement, FirstGWL&A and
Schwab agree that they will cease to use such name (or derivative
or logo), except as
provided in Section 10.3.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
MONTGOMERY FUNDS III
By its authorized officer,
By:/s/ John Story
Title: Executive Vice President
Date: March 11, 1997
MONTGOMERY ASSET MANAGEMENT, L.P.
By its authorized officer,
By:/s/ John Story
Title: Executive Vice President
Date: March 11, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Montgomery Growth Fund
Montgomery International Small Cap Fund<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or Adviser,
as applicable
Fund or Adviser shall
supply FirstGWL&A
with such numbers of
the Designated
Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or Adviser,
as applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
SchwabItem
Function
Party Responsible for
Coordination
Party Responsiblefor Expense
Mutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Adviser
Fund or Adviser
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Adviser
FirstGWL&A
Fund or Adviser
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Adviser
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Adviser
Fund or Adviser
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or Adviser
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Adviser
Schwab
Fund or Adviser
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Adviser
FirstGWL&A
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Adviser
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.9
FUND PARTICIPATION AGREEMENT
SAFECO Resource Series Trust<PAGE>
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. . . . . . . . . . 13
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. . . . . . . . . . . . . . . . . . 35
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 35
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 40
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 44
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 45
SCHEDULE C Administrative Services . . . . . . . . . . . . . 46
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 47
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 50
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
SAFECO RESOURCE SERIES TRUST
SAFECO ASSET MANAGEMENT COMPANY
SAFECO SECURITIES, INC.,
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); SAFECO RESOURCE SERIES TRUST, a business
trust
organized under the laws of Delaware (hereinafter the "Fund");
SAFECO ASSET
MANAGEMENT COMPANY (hereinafter the "Adviser"), a corporation
organized under
the laws of Washington; SAFECO SECURITIES, INC., a corporation
organized under the
laws of Washington (hereinafter the "Distributor"); and CHARLES
SCHWAB & 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
FirstGWL&A, which have entered into participation agreements with
the Fund (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated January 17, 1996 (File
No. 812-9658), 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(a)(2), 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, FirstGWL&A has registered or will register 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
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, under the insurance laws of the State of New York, to set
aside and invest assets
attributable to the Contracts; and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&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,
FirstGWL&A,
Schwab, the Fund, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund and Distributor agree to sell to FirstGWL&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, FirstGWL&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 and Distributor agree to make shares of the
Designated Portfolio(s)
available for purchase at the applicable net asset value per share
by FirstGWL&A and the
Account on those days on which the Adviser calculates the
Designated Portfolio(s)' net asset
value pursuant to rules of the SEC, and the Adviser 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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
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,
FirstGWL&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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&A shall pay for Fund shares by 2:00 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 2:00 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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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 Adviser shall furnish same day notice (by wire or
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&A reserves the
right to revoke this election
and to receive all such income dividends and capital gain
distributions in cash. The Adviser
shall notify FirstGWL&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 FirstGWL&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 FirstGWL&A as soon as possible after discovery
of any material 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
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 FirstGWL&A for the reasonable 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 FirstGWL&A for
crediting of such
amounts to the applicable Contractowners accounts. Upon
notification by the Adviser of
any overpayment due to a material error, FirstGWL&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 FirstGWL&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
FirstGWL&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 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. FirstGWL&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 state insurance suitability
requirements. FirstGWL&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 4240 of the
New York 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 Adviser represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 written 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 New
York and any other applicable state to the extent the Fund is
notified of such applicable
insurance laws by FirstGWL&A and as required to perform this
Agreement. The
Distributor 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 New
York and all applicable state insurance laws, to the extent the
Distributor is notified of such
applicable insurance laws by FirstGWL&A, and applicable 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. FirstGWL&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 FirstGWL&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 Washington
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
Washington 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
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 FirstGWL&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 FirstGWL&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 FirstGWL&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.FirstGWL&A represents and warrants, for purposes other
than investment
diversification of the Fund 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, including revenue
rulings and regulations issued by the Department of Treasury and/or
the Internal Revenue
Service, 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 not be
so treated in the future. In addition, FirstGWL&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. FirstGWL&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. FirstGWL&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 FirstGWL&A and
Schwab with as many copies of the Fund's current prospectus for the
Designated Portfolio(s)
as FirstGWL&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
FirstGWL&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 FirstGWL&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 FirstGWL&A with
copies of the Fund's
SAI or documentation thereof for the Designated Portfolio(s) in
such quantities, with
expenses to be borne in accordance with Schedule E hereof, as
FirstGWL&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 FirstGWL&A or Schwab).
3.3. The Fund, Distributor and/or Adviser shall provide
FirstGWL&A and Schwab
with copies of the Fund's proxy material, reports to stockholders
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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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, the 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 FirstGWL&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. FirstGWL&A reserves the
right to vote
Fund shares held in any segregated asset account in
its own right, to
the extent permitted by law.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments 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. 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.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 objects to such use within
five (5) Business Days
after receipt of such material.
4.2. FirstGWL&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 Con-
tracts other than the information or representations contained in
the registration statement,
prospectus or SAI for the Fund shares, as the same may be amended
or supplemented from
time to time, 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
FirstGWL&A and Schwab, a copy of each piece of sales literature or
other promotional
material in which FirstGWL&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 FirstGWL&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 FirstGWL&A or concerning
FirstGWL&A, the
Account, or the Contracts other than the information or
representations contained in a
registration statement, prospectus or SAI for the Contracts, as the
same may be amended
or supplemented from time to time, or in sales literature or other
promotional material
approved by FirstGWL&A or its designee, except with the permission
of FirstGWL&A.
4.5. FirstGWL&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
Schwab's name except with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
copy of all registration statements, prospectuses, SAIs, 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)
(but excluding sales literature
and other promotional materials relating to other Participating
Insurance Companies) con-
temporaneously with the filing of such document(s) with the SEC or
NASD or other
regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete copy
of all registration statements, prospectuses, SAIs, 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
and include references to
the Fund, the Adviser, the Distributor or the Designated
Portfolios, 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 shareholder
reports, and proxy materials (including solicitations for voting
instructions) and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or
the 1940 Act.
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 and the Adviser shall pay no fee or other
compensation to
FirstGWL&A under this Agreement, and FirstGWL&A shall pay no fee or
other
compensation to the Fund or Adviser under this Agreement, although
the parties hereto will
bear certain expenses in accordance with 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund, the Distributor and the Adviser acknowledge
that a principal fea-
ture 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund, the Distributor and the Adviser agree to periodically
consult with FirstGWL&A
and Schwab as necessary or appropriate to facilitate the operation
of the Account and the
Contracts as described in the prospectus for the Contracts,
including but not limited to
facilitating transfers between the Fund and Unaffiliated Funds, and
further agree to take all
mutually agreeable steps necessary or appropriate to give effect to
the same.
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 1940 Act.
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
1.817-5, as amended from
time to time, and any Treasury interpretations thereof, relating to
the diversification
requirements for variable annuity, endowment, or life insurance
contracts and any
amendments or other modifications or successor provisions to such
Section or Regulations.
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 FirstGWL&A
immediately 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 FirstGWL&A or
Schwab, the Adviser or Distributor will pay all costs associated
with or arising out of any
failure, or any anticipated or reasonably foreseeable 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
failure; 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 FirstGWL&A
and any federal
income taxes or tax penalties and interest thereon (or "toll
charges" or exactments or
amounts paid in settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&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) FirstGWL&A shall promptly notify the Fund, the
Distributor and the Adviser of
such assertion or potential claim;
(b) FirstGWL&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) FirstGWL&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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&A to the Fund, the Distributor and the
Adviser (together
with any supporting information or analysis) at least five (5)
business days prior to
submission unless facts and circumstances do not reasonably
permit FirstGWL&A to
give such advance notice, in which case FirstGWL&A shall
endeavor to give as much
advance notice as is reasonably practicable;
(e) FirstGWL&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 FirstGWL&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) FirstGWL&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, FirstGWL&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
FirstGWL&A in complying with this clause (f).
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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 trustees who
are not interested persons of the Fund, the Distributor, the
Adviser or any sub-adviser to
any of the Designated Portfolios (the "Independent Trustees"), that
a material irreconcilable
conflict exists, FirstGWL&A and other Participating Insurance
Companies shall, at their
expense and to the extent reasonably practicable (as determined by
a majority of the
Independent Trustees), take whatever steps are necessary to remedy
or eliminate the
irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to
some or all of the separate accounts from the Fund or any
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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Trustees and no charge or penalty will be
imposed as a result of such
withdrawal. 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 Adviser, the Distributor and the
Fund shall continue to
accept and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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
Trustees.
7.7. If and to the extent the SEC amends Rule 6e-2 and Rule
6e-3(T) or adopts
Rule 6e-3, or takes any other action, 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 FirstGWL&A, 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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted, or are otherwise required by the SEC.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold harmless the
Fund, the
Distributor and the Adviser and each of their respective officers
and directors or trustees
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
and liabilities (including
amounts paid in settlement with the written consent of FirstGWL&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 or liabilities (or actions in respect thereof) or
settlements are related to
the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue
statements of any material fact contained in the
registration statement or pro-
spectus 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 FirstGWL&A or Schwab by or on
behalf of the
Adviser, Distributor or Fund for use in the registration
statement or
prospectus for the Contracts or in the Contracts or 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
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature or other promotional material
of the Fund not sup-
plied by FirstGWL&A or persons under its control) or
wrongful conduct of
FirstGWL&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 furnished in writing to the
Fund by or on behalf
of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&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). FirstGWL&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). FirstGWL&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 FirstGWL&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 FirstGWL&A
of any such claim shall
not relieve FirstGWL&A from any liability which it may have to the
Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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 FirstGWL&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.
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 respective officers and directors
or trustees 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 Indemnified Parties may become
subject under any statute
or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are
related to the sale or acqu-
isition of the Fund's shares or the Contracts and:
(i) arise out of Schwab's 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
and 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
FirstGWL&A or Schwab
by or on behalf of the Adviser, Distributor or the Fund
for use in the registra-
tion statement, prospectus or SAI for the Contracts or in
the Contracts or
sales literature or other promotional material (or any
amendment or
supplement to any of the foregoing) or otherwise for use
in connection with
the sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus, SAI, or sales literature 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
(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, 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.
8.2(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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
FirstGWL&A and
Schwab and each of their respective directors and officers and each
person, if any, who con-
trols FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement,
prospectus or SAI 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
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 fur-
nished in writing to the Adviser, the Distributor or the
Fund by or on behalf
of FirstGWL&A or Schwab for use in the registration
statement or prospectus
or SAI for the Fund (or any amendment or supplement to
any of the
foregoing) 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
representations (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 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 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 FirstGWL&A
or Schwab by or on behalf of the Adviser; 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; or
(vi) arise out of or result from the incorrect or untimely
calculation or reporting
by the Adviser 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
8.3(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 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 otherwise than on account of this
indemnification provision,
except to the extent that the Adviser has been prejudiced by such
failure to give notice. In
case any such action is brought against the Indemnified Parties,
the Adviser will be entitled
to participate, at its own expense, in the defense thereof. The
Adviser also shall be entitled
to assume the defense thereof, with counsel satisfactory to the
party named in the action.
After notice from the Adviser to such party of the Adviser's
election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel
retained by it, and the Adviser will not be liable to such party
under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with
the defense thereof other than reasonable costs of investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their respective directors and officers and each
person, if any, who controls
FirstGWL&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 and liabilities (including amounts paid in
settlement with the written con-
sent of the Fund) or litigation (including reasonable legal and
other expenses) to which the
Indemnified Parties may be required to pay or become subject under
any statute or
regulation, at common law or otherwise, insofar as such losses,
claims, expenses, damages,
liabilities or expenses (or actions in respect thereof) or
settlements, are related to the
operations of the Fund and:
(i) arise as a result of any 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 Agree-
ment); or
(ii) arise out of or result from any material breach of any
representation and/or
warranty made by the Fund in this Agreement or arise out
of or result from
any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
8.4(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
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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to notify
the Fund of the
commencement of any litigation or proceeding against itself or any
of its 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
FirstGWL&A and
Schwab and each of their respective directors and officers and each
person, if any, who
controls FirstGWL&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 and 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
or liabilities (or actions in respect thereof) or settlements are
related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the sales
literature or other
promotional material of the Fund prepared by the
Distributor (or any amend-
ment 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 FirstGWL&A or Schwab for use in the sales literature
or other promotional
material for the Fund or otherwise for use in connection
with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus, SAI, 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 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, sales literature or
other promotional material covering the Fund or 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 FirstGWL&A or Schwab by or on behalf of the
Distributor; 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;
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
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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Distributor has been
prejudiced by such failure to
give notice. 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. After notice from the Distributor
to such party of the
Distributor's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
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)FirstGWL&A and Schwab agree to promptly notify the
Distributor of the
commencement of any litigation or proceedings against it or any of
its 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 New York, without
regard to the New York
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 SEC 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.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund, Distributor or Adviser in
the event that formal
administrative proceedings are instituted against
FirstGWL&A or Schwab by
the NASD, the SEC, the Insurance Commissioner or like
official of any state
or any other regulatory body regarding FirstGWL&A's or
Schwab's duties
under this Agreement or related to the sale of the
Contracts, the operation
of any Account, or the purchase of the Fund shares, if,
in each case, the Fund,
Distributor or Adviser, as the case may be, 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
FirstGWL&A or Schwab to
perform its obligations under this Agreement; or
(e) at the option of FirstGWL&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
FirstGWL&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 FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 its sole judgment
reasonably exercised in good faith, that either
FirstGWL&A or Schwab 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
FirstGWL&A's or Schwab's
ability to perform its obligations under this Agreement,
(ii) the Fund,
Distributor or Adviser notifies FirstGWL&A or Schwab, as
appropriate, of
that determination and its intent to terminate this
Agreement, and (iii) after
considering the actions taken by FirstGWL&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 FirstGWL&A or Schwab, if (i)
FirstGWL&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)
FirstGWL&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
FirstGWL&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 FirstGWL&A in the event that formal
administrative
proceedings are instituted against Schwab by the NASD,
the SEC, or any state
securities or insurance department or any other
regulatory body regarding
Schwab'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 FirstGWL&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 FirstGWL&A by the
NASD, the SEC, or
any state securities or insurance department or any other
regulatory body
regarding FirstGWL&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
FirstGWL&A to perform its obligations related to the
Contracts; or
(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
FirstGWL&A to satisfy the
applicable provisions of Section 817 of the Code, the Fund, the
Distributor and the Adviser
shall, at the option of FirstGWL&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") unless such further sale of
shares of the Designated
Portfolios is proscribed by law or the SEC or any other regulatory
body. Specifically, without
limitation, the owners of the Existing Contracts shall be permitted
to 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 par-
ties; 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:
SAFECO Resource Series Trust
4333 Brooklyn Avenue, N.W.
Seattle, WA 98105
Attention: Neal A. Fuller, Vice President
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
SAFECO Asset Management Company
4333 Brooklyn Avenue, N.W.
Seattle, WA 98105
Attention:Leslie Eggerling, Vice President - Retirement
Services
If to the Distributor:
SAFECO Securities, Inc.
4333 Brooklyn Avenue, N.W.
Seattle, WA 98105
Attention: Keith Anderson, Compliance Officer
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Trust Instrument of the Fund and
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, Distributor and Adviser and their
respective assets and
neither Schwab nor FirstGWL&A shall seek satisfaction of any such
obligation from the
shareholders of the Fund, the Distributor or the Adviser, the
Trustees, officers, employees
or agents of the Fund, Distributor or Adviser, or any of them.
12.10.The Fund, the Distributor and the Adviser agree that the
obligations assumed
by FirstGWL&A and Schwab pursuant to this Agreement shall be
limited in any case to
FirstGWL&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 FirstGWL&A
or Schwab, the directors, officers, employees or agents of the
FirstGWL&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.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing and Product
Development
Date: April 8, 1997
SAFECO RESOURCE SERIES TRUST
By its authorized officer,
By:/s/ David F. Hill
Title:President
Date:April 4, 1997
SAFECO ASSET MANAGEMENT COMPANY
By its authorized officer,
By:/s/ Leslie Eggerling
Title:Vice President
Date:April 4, 1997
SAFECO SECURITIES, INC.
By its authorized officer,
By:/s/ Neal A. Fuller
Title: Vice President
Date: April 4, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title: Vice President, Annuities and Life Insurance
Date: April 7, 1997 <PAGE>
Schwab
Variable Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Equity Portfolio
<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab will provide the properly registered and licensed
personnel and systems
needed for all customer servicing and support - for both Fund and
Contract information
and questions - including:
respond to Contractowner inquiries;
delivery of prospectus - both Fund and Contract;
entry of initial and subsequent orders;
transfer of cash to insurance company and/or Fund;
explanations of Fund objectives and characteristics;
entry of transfers between Unaffiliated Funds, including the
Designated Portfolios;
Contract balance and allocation inquiries;
communicate all purchase, withdrawal, and exchange orders it
receives from its
customers to FirstGWL&A which will transmit them to each
Fund;
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 Schwab's
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 FirstGWL&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.
<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or the Distributor and/or Adviser, and FirstGWL&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 on a pro rata basis
according to the
number of pages of the Fund's respective portions of the documents.
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund, Distributor
or Adviser, as
applicable
Fund, Distributor or
Adviser shall supply
FirstGWL&A with
such numbers of the
Designated Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund, Distributor
or Adviser, as
applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus Update &
Distribution
If Required by Fund,
Distributor or Adviser
Fund, Distributor or
Adviser
Fund, Distributor
or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund,
Distributor or Adviser
FirstGWL&A
Fund, Distributor
or Adviser
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund, Distributor or
Adviser
Fund, Distributor
or Adviser
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund, Distributor or
Adviser
Fund, Distributor
or Adviser
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund, Distributor
or Adviser
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund, Distributor
or Adviser
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund, Distributor or
Adviser
Schwab
Fund, Distributor
or Adviser
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor and printing) if
required by the Fund,
Distributor or Adviser
FirstGWL&A
Fund, Distributor
or Adviser
Distribution (including
labor and printing) if
required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Distribution (including
labor and printing) if
required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants, if any
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error, if
any
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund, Distributor or
Adviser
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.10
FUND PARTICIPATION AGREEMENT
SCHWAB ANNUITY PORTFOLIOS<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 11
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
ARTICLE V. Fees and Expenses . . . . . . . . . . . . . . . . 15
ARTICLE VI. Diversification and Qualification . . . . . . . . 17
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order . . . . 20
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 23
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 36
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 36
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 41
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 45
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 46
SCHEDULE C Administrative Services . . . . . . . . . . . . . 47
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 48
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 51
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
SCHWAB ANNUITY PORTFOLIOS,
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); SCHWAB ANNUITY PORTFOLIOS a business trust
organized
under the laws of Massachusetts (hereinafter the "Fund"); CHARLES
SCHWAB
INVESTMENT MANAGEMENT, INC. (hereinafter the "Adviser"), a Delaware
corporation; and CHARLES SCHWAB & CO., INC., a California
corporation (hereinafter
"Schwab" or the "Distributor").
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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated September 25, 1996 (File
No. 812-10052),
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 plans
established under Sections 401(a), 403(a) and (b), 408(a), (b) and
(k), 414(d) 457(b) or
501(c)(18) of the Internal Revenue Code ("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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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,
FirstGWL&A,
Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 or any Qualified
Plan 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;
provided, however, that this
condition shall apply to Qualified Plans only to the extent
required by the Mixed and Shared
Funding Exemptive Order.
1.4. The Fund agrees to redeem for cash, on FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
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,
FirstGWL&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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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 11:00 a.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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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 FirstGWL&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
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 FirstGWL&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 FirstGWL&A for crediting of such amounts
to the applicable
Contractowners accounts. Upon notification by the Adviser of any
overpayment due to a
material error, FirstGWL&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 FirstGWL&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
FirstGWL&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. FirstGWL&A represents and warrants that 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 state insurance suitability requirements. FirstGWL&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 4240 of
the New York 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.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement. The
Fund further 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 New York 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. FirstGWL&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 FirstGWL&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 Massachusetts and that it
does and will comply in all
material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered
under all applicable federal and state securities laws and that it
shall perform its obligations
for the Fund in compliance in all material respects with 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
California 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
money and/or securities of the Fund are, and shall continue to be
at all times, covered by
a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less
than the minimal coverage required by Rule 17g-1 under the 1940 Act
or related provisions
as may be promulgated from time to time. The aforesaid bond shall
include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.9. 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 FirstGWL&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 FirstGWL&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 FirstGWL&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.FirstGWL&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 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 and the Adviser immediately upon having a reasonable basis
for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
In addition, FirstGWL&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. FirstGWL&A will use every
effort to continue to
meet such definitional requirements, and it will notify Schwab, the
Fund, and the Adviser
immediately upon having a reasonable basis for believing that such
requirements have
ceased to be met or that they might not be met in the future.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Distributor shall provide
FirstGWL&A with as many
copies of the Fund's current prospectus for the Designated
Portfolio(s) as FirstGWL&A and
Schwab may reasonably request for marketing purposes (including
distribution to
Contractowners with respect to new sales of a Contract). If
requested by FirstGWL&A in
lieu thereof, the 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
FirstGWL&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
prospectuses (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 and/or the Distributor shall provide FirstGWL&A with copies of
the Fund's SAI or
documentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to
be borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require
to permit timely distribution thereof to Contractowners. The
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 FirstGWL&A).
3.3. The Fund and/or the Distributor shall provide FirstGWL&A
with copies of the
Fund's proxy material, reports to stockholders 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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party and except
as provided in the
Distribution Agreement dated March 29, 1994 between Schwab and the
Fund, neither
FirstGWL&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, Adviser or the
Designated Portfolio(s)
provided in writing by the Fund, the Distributor or Adviser,
neither the Fund, the 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
FirstGWL&A reserves the right to vote Fund shares
held in any
segregated asset account in its own right, to the
extent permitted by
law.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments 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.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 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 objects to such use within five (5) Business
Days after receipt of such
material.
4.2. FirstGWL&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 Con-
tracts other than the information or representations contained in
the registration statement
or prospectus for the Fund shares, as such registration statement
and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the
Fund, or in sales literature or other promotional material approved
by the Fund or by the
Distributor, except with the permission of the Fund or the
Distributor.
4.3. The Fund shall furnish, or shall cause to be furnished,
to FirstGWL&A and
Schwab, a copy of each piece of sales literature or other
promotional material in which
FirstGWL&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
FirstGWL&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 FirstGWL&A or concerning
FirstGWL&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 promotional material
approved by FirstGWL&A or
its designee, except with the permission of FirstGWL&A.
4.5. FirstGWL&A, the Fund, and the Adviser shall not give any
information or
make any representations on behalf of or concerning Schwab, or use
Schwab's name except
with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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
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, and registration
statements, prospectuses, SAIs, shareholder reports, proxy
materials, and any other material
constituting sales literature or advertising under the NASD rules,
the 1933 Act or the 1940
Act.
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 and the Adviser shall pay no fee or other
compensation to
FirstGWL&A under this Agreement, and FirstGWL&A shall pay no fee or
other
compensation to the Fund or Adviser under this Agreement, although
the parties hereto will
bear certain expenses in accordance with Schedule E, Articles III,
V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund, the
Adviser and the
Distributor 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund, the Distributor and the Adviser acknowledge
that a principal fea-
ture 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund and the Adviser agree to cooperate with FirstGWL&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, 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.
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 Adviser and the Distributor 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,
the Distributor and the
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 1.817-5, as
amended from time to time, and any Treasury interpretations
thereof, relating to the diversi-
fication 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 and the Distributor agree that shares of the Designated
Portfolio(s) will be sold
only to Participating Insurance Companies and their separate
accounts and certain Qualified
Plans.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general
public.
6.3. The Fund 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 and the Adviser will notify FirstGWL&A
immediately 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
and 8.4 hereof and with-
out in any way limiting or restricting any other remedies available
to FirstGWL&A or
Schwab, the Adviser will pay all costs associated with or arising
out of any failure, or any
anticipated or reasonably foreseeable 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 failure; 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 FirstGWL&A and any federal
income taxes or tax
penalties and interest thereon (or "toll charges" or exactments or
amounts paid in
settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund, the Adviser or the Distributor as a result of such a
failure or alleged failure:
(a) FirstGWL&A shall promptly notify the Fund, the Adviser
and the Distributor of
such assertion or potential claim;
(b) FirstGWL&A shall consult with the Fund, the Adviser and
the Distributor as to
how to minimize any liability that may arise as a result of
such failure or alleged
failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund, the
Adviser and the Distributor 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&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) FirstGWL&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, permitting the Fund, the
Distributor and the Adviser
to review the relevant books and records of FirstGWL&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) FirstGWL&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, FirstGWL&A shall not be required to
appeal any adverse
judicial decision unless the Fund, the Distributor 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 FirstGWL&A in complying with this clause (f).
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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, FirstGWL&A and other Participating Insurance
Companies 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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Distributor and the
Fund shall continue to
accept and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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
Independent Directors 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold harmless
the Fund, the
Distributor and the Adviser and each of their officers, directors
and trustees 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, damages, liabilities (including
amounts paid in settlement
with the written consent of FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser or
the Fund for use
in the registration statement or prospectus for the
Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to
give notice. In case any such action is brought against the
Indemnified Parties,
FirstGWL&A shall be entitled to participate, at its own expense, in
the defense of such
action. FirstGWL&A also shall be entitled to assume the defense
thereof, with counsel
satisfactory to the party named in the action. After notice from
FirstGWL&A to such party
of FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
<PAGE>
8.2. Indemnification by Schwab
8.2(a). Schwab agrees to indemnify and hold harmless the
Fund and the
Adviser and each of their officers, directors and trustees and each
person, if any, who
controls the Fund or the Adviser within the meaning of Section 15
of the 1933 Act (collec-
tively, 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 Indemnified Parties may become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund that is
both (A) materially incorrect and (B) that was neither
contained in the Fund's
registration statement or sales literature nor other
promotional material of the
Fund prepared by the Fund or provided in writing to
Schwab, or approved
in writing, by or on behalf of the Fund or the 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 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
FirstGWL&A or Schwab
by or on behalf of the Adviser or the Fund or to Schwab
by FirstGWL&A for
use in the registration statement or prospectus for the
Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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 FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or the
Fund by or on behalf
of FirstGWL&A or Schwab for use in the registration
statement or prospectus
for the Fund or in sales literature (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
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or
the omission or alleged omission to state therein a
material fact required to
be stated therein or necessary to make the statement or
statements therein
not misleading, if such statement or omission was made in
reliance upon
information furnished in writing to FirstGWL&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 Fund, the Adviser
or 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 Fund, the Adviser or the Distributor
in this Agreement
or arise out of or result from any other material breach
of this Agreement by
the Adviser, the Fund or the Distributor; or
(vi) 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). Notwithstanding any other provision contained
herein, in no event
shall the Adviser be liable to any individual or entity, including
without limitation,
FirstGWL&A, Schwab, or any Contractowner, 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 FirstGWL&A hereunder; (ii) the
failure by
FirstGWL&A to maintain its segregated asset account (which invests
in any Designated
Portfolio) 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 FirstGWL&A or
any Participating
Insurance Company to maintain its variable annuity and/or variable
life insurance contracts
(with respect to which any Designated Portfolio serves as an
underlying funding vehicle) as
life insurance, endowment or annuity contracts under applicable
provisions of the Code.
8.3(e). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i)arise as a result of any failure by the Fund to provide
the services and furnish
the materials under the terms 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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). Notwithstanding any other provision contained
herein, in no event
shall the Fund be liable to any individual or entity, including
without limitation,
FirstGWL&A, Schwab, or any Contractowner, with respect to any
losses, claims, damages,
liabilities or expenses that arise out of or result from (i) the
failure of the Fund or any
Designated Portfolio to qualify or maintain its qualification as a
regulated investment
company Subchapter M of the Code, or (ii) the failure by the Fund
or any Designated
Portfolio to comply with the diversification requirements 817(h) of
the Code.
8.4(e). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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
FirstGWL&A and
each of their directors and officers and each person, if any, who
controls FirstGWL&A
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, damages, liabilities or expenses (or
actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's
shares or the contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or Fund
by or on behalf of
FirstGWL&A 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
(ii) arise out of or as a result of statements or
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, 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
FirstGWL&A by or on
behalf of the Adviser, the Distributor or Fund; or
(iv) arise as a result of any failure by the Fund, Adviser or
Distributor 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 the Fund, Adviser or Distributor in this
Agreement or arise
out of or result from any other material breach of this
Agreement by the
Fund, Adviser or Distributor; or
(vi) 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
8.5(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Distributor has been
prejudiced by such failure to
give notice. 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. After notice from the Distributor
to such party of the
Distributor's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
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). Notwithstanding any other provision contained herein,
in no event shall the
Distributor be liable to any individual or entity, including
without limitation, FirstGWL&A,
Schwab, or any Contractowner, with respect to any losses, claims,
damages, liabilities or
expenses that arise out of or result from (i) the failure of the
Fund or any Designated
Portfolio to qualify or maintain its qualification as a regulated
investment company
Subchapter M of the Code, or (ii) the failure by the Fund or any
Designated Portfolio to
comply with the diversification requirements 817(h) of the Code.
8.5(e). FirstGWL&A agrees to promptly notify the Distributor
of the commencement
of any litigation or proceedings against it or any of its 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 New York,
without regard to the New
York 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.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal
administrative
proceedings are instituted against FirstGWL&A or Schwab
by the NASD, the
SEC, the Insurance Commissioner or like official of any
state or any other
regulatory body regarding FirstGWL&A's or Schwab's duties
under this
Agreement or related to the sale of the Contracts, the
operation of any
Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund, the Distributor or
Adviser by the NASD, the SEC, or any state securities or
insurance
department or any other regulatory body, if Schwab or
FirstGWL&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 Adviser to
perform their obligations
under this Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or the Adviser, if
(i) the Fund or Adviser,
respectively, shall determine, in their sole judgment
reasonably exercised in
good faith, that either FirstGWL&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 FirstGWL&A's or
Schwab's ability to
perform its obligations under this Agreement, (ii) the
Fund or the Adviser
notifies FirstGWL&A or Schwab, as appropriate, of that
determination and
its intent to terminate this Agreement, and (iii) after
considering the actions
taken by FirstGWL&A or Schwab and any other changes in
circumstances
since the giving of such a notice, the determination of
the Fund or the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund or the 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 or the
Adviser's ability to
perform its obligations under this Agreement, (ii)
FirstGWL&A or Schwab
notifies the Fund, or the Adviser, as appropriate, of
that determination and
its intent to terminate this Agreement, and (iii) after
considering the actions
taken by the Fund, the Distributor or Adviser and any
other changes in
circumstances since the giving of such a notice, the
determination of
FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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.(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund, the
Adviser and the Distributor
shall, at the option of FirstGWL&A or Schwab, continue to make
available additional shares
of the Designated Portfolios pursuant to the terms and conditions
of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in
the Designated Portfolios,
redeem investments in the Designated Portfolios and/or invest in
the Designated Portfolios
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 par-
ties; 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:
Schwab Annuity Portfolios
101 Montgomery Street
San Francisco, CA 94104
Attention:Secretary
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President,
Savings Products
If to the Adviser:
Charles Schwab Investment Management, Inc.
101 Montgomery Street
San Francisco, CA 94104
Attention:Secretary
<PAGE>
If to Schwab or the Distributor:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Declaration of Trust of the Fund
and the Articles of
Incorporation of the Adviser and agree that the obligations assumed
by the Fund and the
Adviser pursuant to this Agreement shall be limited in any case to
the Fund and Adviser and
their respective assets and neither Schwab nor FirstGWL&A shall
seek satisfaction of any
such obligation from the shareholders of the Fund or the Adviser,
the Trustees, officers,
employees or agents of the Fund or Adviser, or any of them, except
to the extent permitted
under this Agreement.
12.10.The names "Schwab Annuity Portfolios" and "Trustees of
Schwab" refer
respectively to the Trust created and the Trustees, as trustees but
not individually or
personally, acting from time to time under the Declaration of
Trust, to which reference is
hereby made and a copy of which is on file at the office of the
Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and
to any and all
amendments thereto so filed or hereafter filed. The obligations of
"Schwab Annuity
Portfolios" entered into in the name or on behalf thereof by any of
the Trustees,
representatives or agents are made not individually, but in such
capacities, and are not
binding upon any of the Trustees, interest holders or
representatives of the Trust personally,
but bind only on the assets of the Trust, and all persons dealing
with any series of units of
interest of the Trust must look solely to the assets of the Trust
belonging to such series for
the enforcement of any claims against the Trust.
12.11.The Fund, Adviser and Distributor agree that the
obligations assumed by
FirstGWL&A and Schwab pursuant to this Agreement shall be limited
in any case to
FirstGWL&A and Schwab and their respective assets and neither the
Fund nor Adviser shall
seek satisfaction of any such obligation from the shareholders of
the FirstGWL&A or
Schwab, the directors, officers, employees or agents of the
FirstGWL&A or Schwab, or any
of them, except to the extent permitted under this Agreement.
12.12.No provision of this Agreement may be deemed or
construed to modify or
supersede any contractual rights, duties, or indemnifications, as
between the Distributor and
the Fund, and as between the Adviser and the Fund.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
SCHWAB ANNUITY PORTFOLIOS
By its authorized officer,
By:/s/ Stephen B. Ward
Title: Sr. Vice President and Chief Investment
Officer
Date: March 31, 1997
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
By its authorized officer,
By:/s/ William J. Klipp
Title: President and Chief Operating Officer
Date: March 31, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Schwab Money Market Portfolio
Schwab S&P 500 Portfolio
Schwab Asset Director-High Growth Portfolio
<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 0.00% per
annum applied to the
average daily value of the shares of the fund held by Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
FORM D1
CERTIFICATE OF COMPLIANCE
I, , a duly authorized officer,
director or agent of
Fund hereby certify 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 First
Great-West Life & Annuity Insurance Company, Charles Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Distributor and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or
Distributor, as
applicable
Distributor shall supply
FirstGWL&A with
such numbers of the
Designated Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or
Distributor, as
applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
SchwabMutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Distributor
Fund or Distributor
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Distributor
FirstGWL&A
Fund or
Distributor
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Distributor
Fund or
Distributor
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Distributor
Fund or
Distributor
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or
Distributor
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or
Distributor
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Distributor
Schwab
Fund or
Distributor
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Distributor
FirstGWL&A
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Distributor
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.11
FUND PARTICIPATION AGREEMENT
SteinRoe Variable Investment Trust<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 10
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
ARTICLE V. Fees and Expenses . . . . . . . . . . . . . . . . 15
ARTICLE VI. Diversification and Qualification . . . . . . . . 17
ARTICLE VII. Potential Conflicts and Compliance With
Shared Funding Exemptive Order . . . . . . . . . 20
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 23
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 32
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 32
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 37
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 41
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 42
SCHEDULE C Administrative Services . . . . . . . . . . . . . 43
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 44
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STEINROE VARIABLE INVESTMENT TRUST,
STEIN ROE & FARNHAM INCORPORATED
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); STEINROE VARIABLE INVESTMENT TRUST, a
business trust
organized under the laws of Massachusetts (hereinafter the "Fund");
STEIN ROE &
FARNHAM INCORPORATED (hereinafter the "Adviser"), a Delaware
corporation; and
CHARLES SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated July 1, 1988 (File No.
812-7044), 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 (hereinafter the
"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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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 and
Adviser in
connection with the Contracts;
NOW, THEREFORE, in consideration of their mutual promises,
FirstGWL&A,
Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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 9:00 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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 their fiduciary
duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other
Participating Insurance Company, separate account or any Qualified
Plan 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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
If permitted by an order
of the SEC under Section 22(e) of the 1940 Act, the Fund shall be
permitted to delay
sending redemption proceeds to FirstGWL&A beyond the foregoing
deadlines; provided,
however, that the Account receives similar relief to defer paying
proceeds to
Contractowners, and further, that the Account is treated no less
favorably than the other
shareholders of the Designated Portfolio(s). 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, FirstGWL&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 9:00 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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&A shall pay for Fund shares by 11:00 a.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 11:00 a.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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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 or its designee shall furnish same day notice
(by wire or telephone,
followed by written confirmation) to FirstGWL&A of any income,
dividends or capital gain
distributions payable on the Designated Portfolio(s)' shares.
FirstGWL&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.
FirstGWL&A reserves the right to
revoke this election and to receive all such income dividends and
capital gain distributions
in cash. The Fund or its designee shall notify FirstGWL&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 FirstGWL&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 FirstGWL&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 is less than $0.01 per share, then no corrective
action need be taken; (b) if the
pricing error is 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 is equal to or greater 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 (without
taking into consideration any positive effect of such error) and
shall reimburse FirstGWL&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
FirstGWL&A for
crediting of such amounts to the applicable Contractowners
accounts. Upon notification by
the Adviser of any overpayment due to a material error, FirstGWL&A
or Schwab, as the
case may be, shall promptly remit to Fund any overpayment that has
not been paid to
Contractowners; however, Adviser acknowledges that Schwab and
FirstGWL&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 FirstGWL&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. FirstGWL&A represents and warrants that 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 state insurance suitability requirements. FirstGWL&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 4240 of
the New York 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.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement. The
Fund further 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 New York 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. FirstGWL&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 FirstGWL&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 Commonwealth of Massachusetts and
that it does and will
comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered
under all applicable federal and state securities laws and that it
shall perform its obligations
for the Fund in compliance in all material respects with the laws
of the State of Delaware
and any applicable state and federal securities laws.
2.7. 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
money and/or securities of the Fund are, and shall continue to be
at all times, covered by
a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less
than the minimal coverage required by Rule 17g-1 under the 1940 Act
or related provisions
as may be promulgated from time to time. The aforesaid bond shall
include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.8. 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.
2.9. The Fund will provide FirstGWL&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 FirstGWL&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 or Adviser agree to share equitably in
expenses incurred by
FirstGWL&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.
2.10.FirstGWL&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 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 and the Adviser immediately upon having a reasonable basis
for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
In addition, FirstGWL&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. FirstGWL&A will use every
effort to continue to
meet such definitional requirements, and it will notify Schwab, the
Fund, and the Adviser
immediately upon having a reasonable basis for believing that such
requirements have
ceased to be met or that they might not be met in the future.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Fund or the Adviser shall provide
FirstGWL&A and
Schwab with as many copies of the Fund's current prospectus for the
Designated Portfolio(s)
as FirstGWL&A and Schwab may reasonably request for marketing
purposes (including
distribution to Contractowners with respect to new sales of a
Contract). If requested by
FirstGWL&A in lieu thereof, the Adviser or Fund shall provide such
documentation
(including a camera-ready copy and/or computer diskette of the
current prospectus for the
Designated Portfolio(s)) and other assistance as is reasonably
necessary in order for
FirstGWL&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 prospectuses (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 and/or the Adviser shall provide FirstGWL&A with copies of the
Fund's SAI or docu-
mentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to be
borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require to
permit timely distribution thereof to Contractowners. The Adviser
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 FirstGWL&A or
Schwab).
3.3. The Fund and/or the Adviser shall provide FirstGWL&A and
Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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 Adviser or the Designated Portfolio(s) provided in writing by
the Fund or the Adviser,
neither the Fund 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
FirstGWL&A reserves the right to vote Fund shares
held in any
segregated asset account in its own right, to the
extent permitted by
law.
3.6. FirstGWL&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 FirstGWL&A and the Fund. The Fund agrees
to promptly notify
FirstGWL&A of any changes of interpretations or amendments of the
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. The Fund reserves the right, upon 45 days prior
written notice to
FirstGWL&A and Schwab, to take all actions including but not
limited to the dissolution,
merger, and sale of all assets of the Fund or any Designated
Portfolio upon the sole
authorization of the Board, acting in good faith and in light of
their fiduciary duties under
the 1940 Act and to the extent permitted by the laws of the
Commonwealth of
Massachusetts and the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 underwriter for
the Fund shares 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. FirstGWL&A and Schwab shall not give any information or
make any
representations or statements on behalf of or concerning the Fund
in connection with the
sale of the Contracts other than the information or representations
contained in the
registration statement or prospectus for the Fund shares, as such
registration statement and
prospectus may be amended or supplemented from time to time, or in
reports or proxy
statements for the Fund, or in sales literature or other
promotional material approved by
the Fund or its designee or by the Adviser, except with the
permission of the Fund or its
designee or the Adviser.
4.3. The Fund or Adviser shall furnish, or shall cause to be
furnished, to
FirstGWL&A and Schwab, a copy of each piece of sales literature or
other promotional
material in which FirstGWL&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 FirstGWL&A or
Schwab objects to such use within five (5) Business Days after
receipt of such material.
4.4. The Fund and the Adviser shall not give any information
or make any
representations on behalf of FirstGWL&A or concerning FirstGWL&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 promotional material approved by FirstGWL&A or
its designee, except
with the permission of FirstGWL&A.
4.5. FirstGWL&A, the Fund and the Adviser shall not give any
information or
make any representations on behalf of or concerning Schwab, or use
Schwab's name except
with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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, and proxy
materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or
the 1940 Act.
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 and the Adviser shall pay no fee or other
compensation to
FirstGWL&A under this Agreement, and FirstGWL&A shall pay no fee or
other
compensation to the Fund or Adviser under this Agreement, although
the parties hereto will
bear certain expenses in accordance with Schedule E, Articles III,
V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund and the Adviser agree to cooperate with FirstGWL&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 1940 Act.
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 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 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 1.817-5, as amended
from time to time, and
any Treasury interpretations thereof, relating to the
diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments
or other modifications
or successor provisions to such Section or Regulations. The Fund
and the Adviser agree
that shares of the Designated Portfolio(s) will be sold only to
Participating Insurance
Companies and their separate accounts.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general
public.
6.3. The Fund 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 or the Adviser will notify FirstGWL&A
immediately 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
and 8.4 hereof and with-
out in any way limiting or restricting any other remedies available
to FirstGWL&A or
Schwab, the Adviser will pay all costs associated with or arising
out of any failure, or any
anticipated or reasonably foreseeable 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 failure; 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 FirstGWL&A and any federal
income taxes or tax
penalties and interest thereon (or "toll charges" or exactments or
amounts paid in
settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund or the Adviser as a result of such a failure or alleged
failure:
(a) FirstGWL&A shall promptly notify the Fund and the Adviser
of such assertion
or potential claim;
(b) FirstGWL&A shall consult with the Fund and the Adviser as
to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&A to the Fund and the Adviser
(together with any
supporting information or analysis) within at least two (2)
business days prior to
submission;
(e) FirstGWL&A shall provide the Fund and the Adviser with
such cooperation as
the Fund and the Adviser shall reasonably request (including,
without limitation, by
permitting the Fund and the Adviser to review the relevant
books and records of
FirstGWL&A) in order to facilitate review by the Fund 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) FirstGWL&A shall not with respect to any claim of the IRS
or any Contractowner
that would give rise to a claim against the Fund 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
and the Adviser, which shall not be unreasonably withheld;
provided that,
FirstGWL&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 and the Adviser shall bear the costs and expenses,
including reasonable
attorney's fees, incurred by FirstGWL&A in complying with this
clause (f).
ARTICLE VII. Potential Conflicts and Compliance With
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Designated 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 FirstGWL&A
if it determines that an irreconcilable material conflict exists
and the implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&A will assist the Board in carrying out its
responsibilities under
the Shared Funding Exemptive Order, by providing the Board with all
information
reasonably necessary for the Board to consider any issues raised.
This includes, but is not
limited to, an obligation by FirstGWL&A to inform the Board
whenever contract owner
voting instructions are to be disregarded. Such responsibilities
(other than the duty to
report, which is unqualified) shall be carried out by FirstGWL&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 Adviser or any
sub-adviser to any of the
Designated Portfolios (the "Independent Directors"), that a
material irreconcilable conflict
exists, FirstGWL&A and other Participating Insurance Companies
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 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 Designated
Portfolio of the Fund, or submitting the question whether such
segregation should be imple-
mented to a vote of all affected contract owners and, as
appropriate, segregating the assets
of any appropriate group (i.e., annuity contract owners, life
insurance contract owners, or
variable contract owners of one or more Participating Insurance
Companies) that votes in
favor of such segregation, or offering to the affected contract
owners the option of making
such a change; and (2) establishing a new registered management
investment company or
managed separate account.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Adviser and the Fund
shall continue to accept
and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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
Independent Trustees 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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
Trustees.
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 Shared
Funding Exemptive Order) on terms and conditions materially
different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund
and/or the
Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary
to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the
extent such rules are applicable: and (b) Sections 3.5, 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.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund
and the Adviser and each of their officers and directors or
trustees and each person, if any,
who controls the Fund or the Adviser within the meaning of Section
15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the
written consent of FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser or
Fund for use in the
registration statement or prospectus for the Contracts or
in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in
connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or are based upon of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&A or persons
under its control, with respect to the sale or
distribution of the Contracts or
Fund Shares; or
(iii)arise out of or are based upon any untrue statement or
alleged untrue
statement of a material fact contained in a registration
statement, prospectus,
or sales literature of the Fund, or any amendment thereof
or supplement
thereto, or the omission or alleged omission to state
therein a material fact
required to be stated therein or necessary to make the
statements therein not
misleading, if such a statement or omission was made in
reliance upon
information furnished in writing to the Fund by or on
behalf of FirstGWL&A;
or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&A, including
without limitation Section 2.10 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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
8.2. Indemnification by Schwab
8.2(a). Schwab agrees to indemnify and hold harmless
the Fund and the
Adviser and each of their officers and directors or trustees and
each person, if any, who
controls the Fund 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 Indemnified Parties may become subject under any statute or
regulation, at common law
or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in
respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon Schwab's dissemination of
information
regarding the Fund that is both (A) materially incorrect
and (B) that was
neither contained in the Fund's registration statement or
sales literature nor
other promotional material of the Fund prepared by the
Fund or provided
in writing to Schwab, or approved in writing, by or on
behalf of the Fund or
the 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 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
FirstGWL&A or Schwab
by or on behalf of the Adviser or the Fund or to Schwab
by FirstGWL&A for
use in the registration statement or prospectus for the
Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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.
<PAGE>
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold
harmless FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund or 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 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 reli-
ance upon and in conformity with information furnished in
writing to the
Adviser or the Fund by or on behalf of FirstGWL&A or
Schwab for use in the
registration statement or prospectus for the Fund or in
sales literature (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 are based upon of statements or
representations (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 Fund or 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 or are based upon any untrue statement or
alleged untrue
statement of a material fact contained in a registration
statement, prospectus,
SAI, or sales literature covering the Contracts, or any
amendment thereof or
supplement thereto, or the omission or alleged omission
to state therein a
material fact required to be stated therein or necessary
to make the statement
or statements therein not misleading, if such statement
or omission was made
in reliance upon information furnished in writing to
FirstGWL&A or Schwab
by or on behalf of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund or the
Adviser to provide the
services and furnish the materials under the terms of
this Agreement (in-
cluding a failure, whether unintentional or in good faith
or otherwise, to com-
ply 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 Fund or the Adviser in this
Agreement or arise out of
or result from any other material breach of this
Agreement by the Adviser or
the Fund; or
(vi) 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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.
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 New York, without
regard to the New York
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 Shared Funding Exemptive Order)
and the terms hereof
shall be interpreted and construed in accordance therewith.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
reasonable and good faith determination that shares of
such Portfolio are not
reasonably available to meet the requirements of the
Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal
administrative
proceedings are instituted against FirstGWL&A or Schwab
by the NASD, the
SEC, the Insurance Commissioner or like official of any
state or any other
regulatory body regarding FirstGWL&A's or Schwab's duties
under this
Agreement or related to the sale of the Contracts, the
operation of any
Account, or the purchase of the Fund shares, or shares or
sponsor of any
Unaffiliated Fund, 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
FirstGWL&A or Schwab to
perform its obligations under this Agreement or would
have a material
adverse impact upon the Fund; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund or the Adviser by
the NASD, the SEC, or any state securities or insurance
department or any
other regulatory body, if Schwab or FirstGWL&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
or the Adviser to perform their obligations under this
Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund and the
Adviser with respect to any Portfolio if FirstGWL&A
reasonably and in good
faith 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 or the Adviser, if
(i) the Fund or Adviser,
respectively, shall determine, in their sole judgment
reasonably exercised in
good faith, that either FirstGWL&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 FirstGWL&A's or
Schwab's ability to
perform its obligations under this Agreement, (ii) the
Fund or the Adviser
notifies FirstGWL&A or Schwab, as appropriate, of that
determination and
its intent to terminate this Agreement, and (iii) after
considering the actions
taken by FirstGWL&A or Schwab and any other changes in
circumstances
since the giving of such a notice, the determination of
the Fund or the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund or the 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 or the
Adviser's ability to
perform its obligations under this Agreement, (ii)
FirstGWL&A or Schwab
notifies the Fund or the Adviser, as appropriate, of that
determination and its
intent to terminate this Agreement, and (iii) after
considering the actions
taken by the Fund or the Adviser and any other changes in
circumstances
since the giving of such a notice, the determination of
FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund and the
Adviser shall, at the
option of FirstGWL&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 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 par-
ties; 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:
SteinRoe Variable Investment Trust
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, MA 02210
Attention: Secretary
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
<PAGE>
If to the Adviser:
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, IL 60606
Attention: Secretary
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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, may 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,
or other arbitration rules as mutually agreed upon by the relevant
parties, 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Declarations of Trust of the Fund
and the Adviser and agree
that the obligations assumed by the Fund and the Adviser pursuant
to this Agreement shall
be limited in any case to the Fund and Adviser and their respective
assets and neither
Schwab nor FirstGWL&A shall seek satisfaction of any such
obligation from the
shareholders of the Fund or the Adviser, the Trustees, officers,
employees or agents of the
Fund or Adviser, or any of them.
12.10.The Fund and the Adviser agree that the obligations
assumed by FirstGWL&A
and Schwab pursuant to this Agreement shall be limited in any case
to FirstGWL&A and
Schwab and their respective assets and neither the Fund nor the
Adviser shall seek
satisfaction of any such obligation from the shareholders of the
FirstGWL&A or Schwab,
the directors, officers, employees or agents of the FirstGWL&A or
Schwab, or any of them.
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.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
STEINROE VARIABLE INVESTMENT TRUST
By its authorized officer,
By:/s/ Jilaine Bauer
Title: Vice President
Date: March 7, 1997
STEIN ROE & FARNHAM INCORPORATED
By its authorized officer,
By:/s/ Jilaine Bauer
Title: Senior Vice President, Secretary & General
Counsel
Date: March 7, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
SteinRoe Capital Appreciation Fund<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or Adviser,
as applicable
Fund or Adviser shall
supply FirstGWL&A
with such numbers of
the Designated
Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or Adviser,
as applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Mutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Adviser
Fund or Adviser
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Adviser
FirstGWL&A
Fund or Adviser
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Adviser
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Adviser
Fund or Adviser
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or Adviser
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or Adviser
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Adviser
Schwab
Fund or Adviser
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Adviser
FirstGWL&A
Fund or Adviser
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Adviser
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.12
FUND PARTICIPATION AGREEMENT
Strong Variable Insurance Funds, Inc.<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .4
ARTICLE II. Representations and Warranties. . . . . . . . . . .8
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 . . . . . . . . 18
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order . . . . 21
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 24
ARTICLE IX. Applicable Law. . . . . . . . . . . . . . . . . . 35
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 36
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 41
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 44
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 45
SCHEDULE C Administrative Services . . . . . . . . . . . . . 46
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 47
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 51
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STRONG VARIABLE INSURANCE FUNDS, INC.,
STRONG CAPITAL MANAGEMENT, INC.,
STRONG FUNDS DISTRIBUTORS
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); STRONG VARIABLE INSURANCE FUNDS, INC., a
corporation organized under the laws of Wisconsin (hereinafter the
"Fund"); STRONG
CAPITAL MANAGEMENT, INC. (hereinafter the "Adviser"), a Wisconsin
corporation;
STRONG FUNDS DISTRIBUTORS, INC. (the "Distributor"), a Wisconsin
corporation; and
CHARLES SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated July 1, 1992 (File No.
812-7863), 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 plans
established under Sections 401(a), 403(a) and (b), 408(a), (b) and
(k), 414(d) 457(b) or
501(c)(18) of the Internal Revenue Code ("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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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,
FirstGWL&A,
Schwab, the Fund, the Distributor and the Adviser agree as follows:
<PAGE>
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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 9:00 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 Distributor and the Fund agrees to make shares of the
Designated Port-
folio(s) available for purchase at the applicable net asset value
per share by FirstGWL&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 Directors of the Fund (hereinafter the
"Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any
Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in
light of their fiduciary duties
under federal and any applicable state laws, necessary in the best
interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other
Participating Insurance Company, separate account or any Qualified
Plan 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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
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,
FirstGWL&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 9:00 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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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. FirstGWL&A
agrees that if it fails to wire the purchase price to Distributor
before such 3:00 p.m. deadline,
or (ii) provide the Distributor with a Federal Funds wire system
reference number
evidencing the wire transfer of the purchase price to the
Distributor prior to such deadline,
then, at the option of Distributor, (a) the transaction may be
canceled, or (b) the transaction
may be processed at the next-determined net asset value for the
applicable Designated
Portfolio after purchase order funds are received. In such event
FirstGWL&A shall
indemnify and hold harmless Distributor, Adviser and/or Fund from
any liabilities, costs and
damages either may suffer as a result of such failure. If,
however, a failure by FirstGWL&A
to wire the purchase price to Distributor before the 3:00 p.m.
deadline is a result, directly
or indirectly, of circumstances beyond the control and without the
fault or negligence of
FirstGWL&A, Distributor and FirstGWL&A will mutually agree upon the
appropriate
procedure for processing the transaction and FirstGWL&A shall not
be subject to the hold
harmless or indemnification provisions of this Section 1.6.
1.7. The Fund shall use its best efforts to pay and transmit
the proceeds of
redemptions of Fund shares by 12:00 p.m. (noon) 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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&A or the Account.
Shares ordered from the
Fund will be recorded in an appropriate title for the Account.
1.9. The Distributor and/or the Adviser shall furnish same day
notice (by wire,
direct or indirect system access or telephone, followed by written
confirmation) to
FirstGWL&A of any income, dividends or capital gain distributions
payable on the
Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&A reserves the right to revoke
this election and to
receive all such income dividends and capital gain distributions in
cash. The Distributor
and/or the Adviser shall notify FirstGWL&A by the end of the next
following Business Day
by direct or indirect system access of the number of shares so
issued as payment of such
dividends and distributions.
1.10.The Adviser shall make the net asset value ("NAV") per
share for each
Designated Portfolio available to FirstGWL&A on each Business Day
as soon as reasonably
practical after the NAV 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 NAV on any day on which
Designated Portfolio
shares are purchased or redeemed or any dividend or capital gain
distribution (each, a
"pricing error"), the Adviser or the Fund shall immediately notify
FirstGWL&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: the Designated Portfolio shall be
reimbursed by the Adviser (or,
without limiting the Adviser's responsibility hereunder, the entity
responsible for the error,
provided such entity is willing to provide timely reimbursement) if
the difference between
the NAV at which the shares were purchased or redeemed (the
"Incorrect Price") and the
correct NAV as subsequently determined (the "Correct Price") equals
or exceeds one-half
of one percent (0.5%) of the Correct Price (a "Reimbursable
Error"). In the event of a
Reimbursable Error, the Designated Portfolio shall be reimbursed
the total difference
between the Incorrect Price and the Correct Price (the
"Reimbursement Amount"). The
Reimbursement Amount shall be calculated separately for each
shareholder of record of the
Designated Portfolio who suffered a loss. If the Reimbursement
Amount is greater than
$10.00, said shareholder's account will be adjusted accordingly and
if $10.00 or less, it shall
be paid directly to the Designated Portfolio, all in accordance
with the Designated Portfolio's
policies on Reimbursable Errors. In no event shall Schwab or
FirstGWL&A be liable to
Contractowners for any such adjustments or underpayment amounts.
The foregoing represents the policies and procedures of the
Fund with respect to
NAV pricing errors and are not the policies and procedures of
FirstGWL&A or Schwab.
The Fund believes that these policies and procedures are fair and
reasonable and are
consistent with applicable guidelines of the Securities and
Exchange Commission ("SEC")
and its staff relative to NAV pricing errors. In the event new
guidelines for handling NAV
pricing errors are disseminated by the SEC or its Staff or pursuant
to judicial or other
interpretation, the parties shall amend the foregoing provisions of
this Agreement to
comport with the appropriate applicable guidelines, on terms
mutually satisfactory to all
parties.
ARTICLE II. Representations and Warranties
2.1. FirstGWL&A represents and warrants that 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 state insurance suitability requirements. FirstGWL&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 4240 of
the New York 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.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 New
York and any other applicable state to the extent required to
perform this Agreement and
to the extent notified by FirstGWL&A in writing of such laws. The
Fund further 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 New
York and all applicable
state insurance and securities laws. With regard to state
insurance laws, the Fund and
Adviser shall be deemed to be on notice only of those laws and
regulations disclosed to the
Fund or the Adviser in writing by FirstGWL&A. 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. FirstGWL&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 FirstGWL&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 Wisconsin 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 Wisconsin
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
Wisconsin and any applicable state and federal securities laws.
2.8. The Fund, the Distributor and the Adviser represent and
warrant that all of
their respective officers, employees, investment advisers, and
other individuals or entities
dealing with the money and/or securities of the Fund are, and shall
continue to be at all
times, covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in
an amount not less than the minimal coverage required by Rule 17g-1
under the 1940 Act
or related provisions as may be promulgated from time to time. The
aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued
by a reputable bonding
company.
2.9. 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 Designated Portfolio(s) will provide FirstGWL&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 FirstGWL&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 FirstGWL&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.FirstGWL&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 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 not be so
treated in the future. In addition, FirstGWL&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.
FirstGWL&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.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Distributor shall provide
FirstGWL&A and Schwab with
as many copies of the Fund's current prospectus for the Designated
Portfolio(s) as
FirstGWL&A and Schwab may reasonably request for marketing purposes
(including
distribution to Contractowners with respect to new sales of a
Contract). If requested by
FirstGWL&A in lieu thereof, the 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
FirstGWL&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 prospectuses (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
existing and prospective
Contractowners, then the Fund and/or the Distributor shall provide
FirstGWL&A with
copies of the Fund's SAI or documentation thereof for the
Designated Portfolio(s) in such
quantities, with expenses to be borne in accordance with Schedule
E hereof, as
FirstGWL&A may reasonably require to permit timely distribution
thereof to said
Contractowners. The 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 FirstGWL&A or
Schwab).
3.3. The Fund and/or the Distributor shall provide FirstGWL&A
and Schwab with
copies of the Designated Portfolio's proxy material, reports to
stockholders 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
FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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, Adviser or the Designated Portfolio(s) provided in
writing by the Fund, the
Distributor or Adviser, neither the Fund, the 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
FirstGWL&A reserves the right to vote Fund shares
held in any
segregated asset account in its own right, to the
extent permitted by
law.
3.6. FirstGWL&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 as agreed to by FirstGWL&A and the Fund. The Fund
agrees to promptly
notify FirstGWL&A of any changes of interpretations or amendments
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.
<PAGE>
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Distributor or its designee, a copy of each piece of sales
literature or other promotional
material that FirstGWL&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 objects to
such use within five (5)
Business Days after receipt of such material.
4.2. FirstGWL&A and Schwab shall not give any information or
make any
representations or statements on behalf of or concerning the Fund,
any Designated Portfolio,
the Distributor or the Adviser 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 sup-
plemented from time to time, or in reports or proxy statements for
the Fund, or in sales
literature or other promotional material approved by the Fund or by
the Distributor, except
with the permission of the Fund or the Distributor.
4.3. The Fund or the Distributor shall furnish, or shall cause
to be furnished, to
FirstGWL&A and Schwab, a copy of each piece of sales literature or
other promotional
material in which FirstGWL&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 FirstGWL&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 FirstGWL&A or concerning
FirstGWL&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 promotional material
approved by FirstGWL&A or
its designee, except with the permission of FirstGWL&A.
4.5. FirstGWL&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
Schwab's name except with the permission of Schwab.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
copy of all registration statements, prospectuses, SAIs, reports,
proxy statements, 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. The Fund
will also provide at least
one complete copy of all sales literature and other promotional
materials which includes
discussion of Schwab and/or the Contracts and/or FirstGWL&A.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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, and proxy
materials and any other
material constituting sales literature or advertising under the
NASD rules, 1933 Act or the
1940 Act.
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, Distributor and Adviser shall pay no fee or
other compensation to
FirstGWL&A under this Agreement, and FirstGWL&A 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
Adviser and the
Distributor under this Agreement shall be paid by the appropriate
party, as further provided
in Schedule E. The Fund or Distributor 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund, the Distributor and the Adviser acknowledge
that a principal fea-
ture 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund, the Distributor and the Adviser agree to cooperate with
FirstGWL&A and
Schwab in facilitating the operation of the Account and the
Contracts as intended, 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 1940 Act.
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.
<PAGE>
ARTICLE VI. Diversification and Qualification
6.1. The Fund, the Adviser and the Distributor 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
1.817-5, as amended from
time to time, and any Treasury interpretations thereof, relating to
the diversification
requirements for variable annuity, endowment, or life insurance
contracts and any
amendments or other modifications or successor provisions to such
Section or Regulations.
The Fund and the Distributor agree that shares of the Designated
Portfolio(s) will be sold
only to Participating Insurance Companies and their separate
accounts.
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, the Distributor or the Adviser will notify
FirstGWL&A immediately
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 FirstGWL&A or
Schwab, the Adviser or the Distributor will pay all costs
associated with or arising out of any
failure, or any anticipated or reasonably foreseeable 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
failure; 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 FirstGWL&A
and any federal
income taxes or tax penalties and interest thereon (or "toll
charges" or exactments or
amounts paid in settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund, the Adviser or the Distributor as a result of such a
failure or alleged failure:
(a) FirstGWL&A shall promptly notify the Fund, the Adviser
and the Distributor of
such assertion or potential claim;
(b) FirstGWL&A shall consult with the Fund, the Adviser and
the Distributor as to
how to minimize any liability that may arise as a result of
such failure or alleged
failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund, the
Adviser and the Distributor 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&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) FirstGWL&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 FirstGWL&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) FirstGWL&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, FirstGWL&A shall not be required to
appeal any adverse
judicial decision unless the Fund, the Distributor 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 FirstGWL&A in complying with this clause (f).
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
to the Board. FirstGWL&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 FirstGWL&A to inform the
Board whenever contract
owner voting instructions are to be disregarded. Such
responsibilities shall be carried out
by FirstGWL&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, FirstGWL&A and other Participating Insurance
Companies 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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Distributor and the
Fund shall continue to
accept and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund, Distributor and Adviser shall continue to accept and
implement orders by
FirstGWL&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
Independent Directors 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund,
the Distributor and the Adviser and each of their officers and
directors or trustees 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 FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser,
Distributor or Fund
for use in the registration statement or prospectus for
the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&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). FirstGWL&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) FirstGWL&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 FirstGWL&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 FirstGWL&A
of any such claim shall not relieve FirstGWL&A from any liability
which it may have to the
Indemnified Party against whom such action is brought otherwise
than on account of this
indemnification provision, except to the extent that FirstGWL&A has
been prejudiced by
such failure to give notice. In case any such action is brought
against the Indemnified
Parties, FirstGWL&A shall be entitled to participate, at its own
expense, in the defense of
such action. FirstGWL&A also shall be entitled to assume the
defense thereof, with counsel
satisfactory to the party named in the action. After notice from
FirstGWL&A to such party
of FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
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 and
directors or trustees 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 Indemnified Parties may become
subject under any statute
or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are
related to the sale or acqu-
isition of the Fund's shares or the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund, the
Adviser or the Distributor that is both (A) materially
incorrect and (B) that
was neither contained in the Fund's registration
statement or sales literature
nor other promotional material of the Fund prepared by
the Fund or
provided in writing to Schwab, or approved in writing, by
or on behalf of the
Fund, the Distributor or the 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 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
FirstGWL&A or Schwab
by or on behalf of the Adviser, the Distributor or Fund
for use in the registra-
tion statement or prospectus for the Contracts or in the
Contracts or sales
literature (or any amendment or supplement) or otherwise
for use in connec-
tion with the sale of the Contracts; or
(iii)arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this
indemnification provision, except
to the extent that Schwab has been prejudiced by such failure to
give notice. 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.
After notice from Schwab to such party of Schwab's election to
assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any
additional 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
FirstGWL&A and Schwab and each of their directors and officers and
each person, if any,
who controls FirstGWL&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
or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or the
Fund by or on behalf
of FirstGWL&A or Schwab for use in the registration
statement or prospectus
for the Fund or in sales literature (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
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or
the omission or alleged omission to state therein a
material fact required to
be stated therein or necessary to make the statement or
statements therein
not misleading, if such statement or omission was made in
reliance upon
information furnished in writing to FirstGWL&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 Fund or the
Adviser to provide the
services and furnish the materials under the terms of
this Agreement (in-
cluding a failure, whether unintentional or in good faith
or otherwise, to com-
ply 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 Fund, the Adviser or the Distributor
in this Agreement
or arise out of or result from any other material breach
of this Agreement by
the Adviser, the Fund or the Distributor; or
(vi) 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
8.3(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 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 otherwise
than on account of this
indemnification provision, except to the extent that the Adviser
has been prejudiced by such
failure to give notice. In case any such action is brought against
the Indemnified Parties, the
Adviser will be entitled to participate, at its own expense, in the
defense thereof. The
Adviser also shall be entitled to assume the defense thereof, with
counsel satisfactory to the
party named in the action. After notice from the Adviser to such
party of the Adviser's
election to assume the defense thereof, the Indemnified Party shall
bear the fees and
expenses of any additional counsel retained by it, and the Adviser
will not be liable to such
party under this Agreement for any legal or other expenses
subsequently incurred by such
party independently in connection with the defense thereof other
than reasonable costs of
investigation.
8.3(d).FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its officers or directors
in connection with the Agreement, the issuance or sale of the
Contracts or the operation of
the Account or the sale or acquisition of shares of the Designated
Portfolios.
8.4. Indemnification By the Fund
8.4(a).The Fund agrees to indemnify and hold harmless
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); or
(ii) arise out of or result from any material breach of any
representation and/or
warranty made by the Fund in this Agreement or arise out
of or result from
any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
8.4(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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the
extent that the Fund has been prejudiced by such failure to give
notice. In case any such
action is brought against the Indemnified Parties, the Fund will be
entitled to participate,
at its own expense, in the defense thereof. The Fund shall also be
entitled to assume the
defense thereof, with counsel satisfactory to the party named in
the action. After notice
from the Fund to such party of the Fund's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and the Fund will not be liable to such party under this Agreement
for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense
thereof other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the
Fund of the commencement of any litigation or proceeding against
itself or any of its
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
FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares
or the contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or Fund
by or on behalf of
FirstGWL&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
(ii) arise out of or as a result of statements or
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, 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
FirstGWL&A or Schwab
by or on behalf of the Distributor or Fund; or
(iv) arise as a result of any failure by the Fund or
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 Fund or Distributor in this
Agreement or arise out of
or result from any other material breach of this
Agreement by the Fund 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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Distributor has been
prejudiced by such failure to
give notice. 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. After notice from the Distributor
to such party of the
Distributor's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
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)FirstGWL&A and Schwab agree to promptly notify the
Distributor of the
commencement of any litigation or proceedings against it or any of
its 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 New York, without
regard to the New York
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.
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund, Adviser or Distributor in
the event that formal
administrative proceedings are instituted against
FirstGWL&A or Schwab by
the NASD, the SEC, the Insurance Commissioner or like
official of any state
or any other regulatory body regarding FirstGWL&A's or
Schwab's duties
under this Agreement or related to the sale of the
Contracts, the operation
of any Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund, the Distributor or
Adviser by the NASD, the SEC, or any state securities or
insurance
department or any other regulatory body, if Schwab or
FirstGWL&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 Adviser to
perform their obligations
under this Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or Adviser, respectively, shall determine, in their
sole judgment
reasonably exercised in good faith, that either
FirstGWL&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
FirstGWL&A's or
Schwab's ability to perform its obligations under this
Agreement, (ii) the Fund,
the Distributor or Adviser notifies FirstGWL&A or Schwab,
as appropriate,
of that determination and its intent to terminate this
Agreement, and (iii) after
considering the actions taken by FirstGWL&A or Schwab and
any other
changes in circumstances since the giving of such a
notice, the determination
of the Fund, the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund, the Distributor or
the 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, the Distributor's
or Adviser's ability to perform its obligations under
this Agreement, (ii)
FirstGWL&A or Schwab notifies the Fund, the 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, the Distributor or
Adviser and any other changes in circumstances since the
giving of such a
notice, the determination of FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund, the
Adviser and the Distributor
shall, at the option of FirstGWL&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") unless such further sale of
the Fund's shares is
proscribed by the SEC, the NASD or other regulatory body.
Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to
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, with the exception of Section 3.1;
provided, however, that
the Distributor will continue to provide the requisite number of
prospectuses, SAIs, annual
and semi-annual reports for purposes of Existing Contracts.
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 par-
ties; 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:
Strong Variable Insurance Funds, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53151
Attention: General Counsel
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention: Assistant Vice President, Savings Products
If to the Adviser:
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53151
Attention: General Counsel
If to the Distributor:
Strong Funds Distributors, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53151
Attention: General Counsel
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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 the parties mutually agree is 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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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.
12.9.Schwab and FirstGWL&A agree that the obligations assumed
by the Fund and
the Adviser pursuant to this Agreement shall be limited in any case
to the Fund and Adviser
and their respective assets and neither Schwab nor FirstGWL&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, Adviser and Distributor agree that the
obligations assumed by
FirstGWL&A and Schwab pursuant to this Agreement shall be limited
in any case to
FirstGWL&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
FirstGWL&A or Schwab, the directors, officers, employees or agents
of the FirstGWL&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 Distributor and
the Fund, and as between the Adviser and the Fund.
<PAGE>
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.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title:Vice President, Marketing & Product
Development
Date:April 1, 1997
STRONG VARIABLE INSURANCE FUNDS, INC.
By its authorized officer,
By:/s/ Stephen Shenkenberg
Title:Vice President
Date:March 17, 1997
STRONG CAPITAL MANAGEMENT, INC.
By its authorized officer,
By:/s/ Rochelle Lamm Wallach
Title:President, Strong Advisory Services
(a division of Strong Capital Management, Inc.
Date:March 17, 1997
STRONG FUNDS DISTRIBUTORS, INC.
By its authorized officer,
By:/s/ Stephen Shenkenberg
Title:Vice President
Date:March 17, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title: Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Strong Discovery Fund II<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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.
Adviser shall
calculate and pay said fee.
C. The Fund will calculate and Schwab will verify with
FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and
exchange orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.
E. Schwab agrees to provide Adviser, by the 15th day of each
month, with a
report which indicates the number of Contractowners that hold
through the Account
beneficial interest in each Designated Portfolio, as of the last
day of the prior month.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Distributor and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or
Distributor, as
applicable
Distributor shall supply
FirstGWL&A with
such numbers of the
Designated Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or
Distributor, as
applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
SchwabMutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Distributor
Fund or Distributor
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Distributor
FirstGWL&A
Fund or
Distributor
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing (one copy to
be provided by
Distributor)
Fund or Distributor
Fund or
Distributor
Distribution/Copying
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Distributor
Fund orDistributor
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or
Distributor
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports (for in-force
clients)
FirstGWL&A
Fund or
Distributor
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Distributor
Schwab
Fund or
Distributor
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Distributor
FirstGWL&A
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Distributor
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 8.13
FUND PARTICIPATION AGREEMENT
Van Eck Worldwide Insurance Trust<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares . . . . . . . . . . . . . . . .3
ARTICLE II. Representations and Warranties. . . . . . . . . . .7
ARTICLE III. Prospectuses and Proxy Statements; Voting . . . . 11
ARTICLE IV. Sales Material and Information. . . . . . . . . . 13
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. . . . . . . . . . . . . . . . . . 35
ARTICLE X. Termination . . . . . . . . . . . . . . . . . . . 36
ARTICLE XI. Notices . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XII. Miscellaneous . . . . . . . . . . . . . . . . . . 40
SCHEDULE A Contracts . . . . . . . . . . . . . . . . . . . . 44
SCHEDULE B Designated Portfolios . . . . . . . . . . . . . . 45
SCHEDULE C Administrative Services . . . . . . . . . . . . . 46
SCHEDULE D Reports per Section 6.6 . . . . . . . . . . . . . 47
SCHEDULE E Expenses. . . . . . . . . . . . . . . . . . . . . 50
<PAGE>
PARTICIPATION AGREEMENT
Among
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
VAN ECK WORLDWIDE INSURANCE TRUST
VAN ECK SECURITIES CORPORATION,
VAN ECK ASSOCIATES CORPORATION
and
CHARLES SCHWAB & CO., INC.
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY (hereinafter "FirstGWL&A"), a New York life
insurance
company, on its own behalf and on behalf of its Separate Account
Variable Annuity-1 Series
Account (the "Account"); VAN ECK WORLDWIDE INSURANCE, a business
trust
organized under the laws of Massachusetts (hereinafter the "Fund");
VAN ECK
ASSOCIATES CORPORATION (hereinafter the "Adviser"), a corporation
organized under
the laws of Delaware; VAN ECK SECURITIES CORPORATION (the
"Distributor"), a
corporation organized under the laws of Delaware; and CHARLES
SCHWAB & 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
FirstGWL&A, which have entered into participation agreements
similar to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares,
each designated a "Portfolio" and representing the interest in a
particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange
Commission (hereinafter the "SEC"), dated September 19, 1990 (File
No. 811-5083), 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 (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, FirstGWL&A has registered or will register 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 it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset
account, established by resolution of the Board of Directors of
FirstGWL&A on January 15,
1997, to set aside and invest assets attributable to the Contracts;
and
WHEREAS, FirstGWL&A has registered or will register the
Account as a unit
investment trust under the 1940 Act and has registered or will
register 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,
FirstGWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached
hereto and incorporated herein by reference, as it 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,
FirstGWL&A,
Schwab, the Fund, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to FirstGWL&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,
FirstGWL&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
Portfolio(s) available for
purchase at the applicable net asset value per share by FirstGWL&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 their fiduciary
duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated
Portfolio(s) to any other
Participating Insurance Company, separate account or any Qualified
Plan 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 FirstGWL&A's
request, any full or
fractional shares of the Fund held by FirstGWL&A, executing such
requests on each
Business Day at the net asset value next computed after receipt by
the Fund or its designee
of the request for redemption. Requests for redemption identified
by FirstGWL&A, or its
agent, as being in connection with surrenders, annuitizations, or
death benefits under the
Contracts, upon prior written notice, may be executed within seven
(7) calendar days after
receipt by the Fund or its designee of the requests for redemption.
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,
FirstGWL&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 Con-
tracts may be invested in other investment companies.
1.6. FirstGWL&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 11:00 a.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.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock
certificates will not be issued to FirstGWL&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
telephone, followed by
written confirmation) to FirstGWL&A of any income, dividends or
capital gain distributions
payable on the Designated Portfolio(s)' shares. FirstGWL&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. FirstGWL&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 FirstGWL&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 FirstGWL&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
promptly notify FirstGWL&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
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 FirstGWL&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 Fund or the Adviser to FirstGWL&A for crediting of
such amounts to the
applicable Contractowners accounts. Upon notification by the
Adviser of any overpayment
due to a material error, FirstGWL&A or Schwab, as the case may be,
shall promptly remit
to Adviser any overpayment that has not been paid by federal funds
wire transfer to
Contractowners; however, Adviser acknowledges that Schwab and
FirstGWL&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 FirstGWL&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. FirstGWL&A represents and warrants that 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 the terms of this
Agreement and all applicable federal and state laws and that the
sale of the Contracts shall
comply in all respects with state insurance suitability
requirements. FirstGWL&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 4240 of the
New York 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.
2.2. The Fund represents and warrants that Designated
Portfolio(s) shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for
issuance and sold in compliance with all applicable federal
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 1940 Act. 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 New
York and any other applicable state, as disclosed in writing to the
Fund by FirstGWL&A
or of which the Fund has actual knowledge, to the extent required
to perform this Agree-
ment. The Fund further represents and warrants that it will make
every effort to ensure that
Designated Portfolio(s) shares will be sold in compliance with all
state and federal securities
laws and all state insurance laws specifically designated by
FirstGWL&A in writing. 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. FirstGWL&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
FirstGWL&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 Commonwealth of Massachusetts and
that it does and will
comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered
under all applicable federal and state securities laws and that it
shall perform its obligations
for the Fund in compliance in all material respects with 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
Delaware and any applicable state and federal securities laws.
2.8. The Fund, the Distributor and the Adviser represent and
warrant that all of
their respective officers, employees, investment advisers, and
other individuals or entities
dealing with the money and/or securities of the Fund are, and shall
continue to be at all
times, covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in
an amount not less than the minimal coverage required by Rule 17g-1
under the 1940 Act
or related provisions as may be promulgated from time to time. The
aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued
by a reputable bonding
company.
2.9. 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 FirstGWL&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 FirstGWL&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 FirstGWL&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.FirstGWL&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 treated as annuity contracts under
applicable provisions of the Code,
and that it will 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 not
be so treated in the future.
In addition, FirstGWL&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. FirstGWL&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.
2.12 FirstGWL&A represents and warrants that it will not
purchase Fund shares with
assets derived from plans established under Sections 401(a), 403(a)
and (b), 408(a), (b) and
(k), 414(d), 457(b) or 501(c)(18) of the Internal Revenue Code
("Qualified Plans") except
indirectly through Contracts purchased in connection with such
plans.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Distributor shall provide
FirstGWL&A and Schwab with
as many copies of the Fund's current prospectus for the Designated
Portfolio(s) as
FirstGWL&A and Schwab may reasonably request for marketing purposes
(including
distribution to Contractowners with respect to new sales of a
Contract). If requested by
FirstGWL&A in lieu thereof, the 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
FirstGWL&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 prospectuses (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 and/or the Distributor shall provide FirstGWL&A with copies of
the Fund's SAI or
documentation thereof for the Designated Portfolio(s) in such
quantities, with expenses to
be borne in accordance with Schedule E hereof, as FirstGWL&A may
reasonably require
to permit timely distribution thereof to Contractowners. The
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 FirstGWL&A
or Schwab).
3.3. The Fund and/or the Distributor shall provide FirstGWL&A
and Schwab with
copies of the Fund's proxy material, reports to stockholders 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 FirstGWL&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
FirstGWL&A or Schwab provided in writing by that party, neither
FirstGWL&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, Adviser or the Designated Portfolio(s) provided in
writing by the Fund, the
Distributor or Adviser, neither the Fund, the 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 FirstGWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares in
accordance with instructions
received from Contractowners: and
(iii)vote Designated Portfolio shares 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.
FirstGWL&A reserves the right to vote Fund shares
held in any
segregated asset account in its own right, to the
extent permitted by
law.
3.6. FirstGWL&A shall be responsible for assuring that each of
its separate
accounts holding shares of a Designated Portfolio calculates voting
privileges as agreed to
by FirstGWL&A and the Fund. The Fund agrees to promptly notify
FirstGWL&A of any
changes of interpretations or amendments 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.
ARTICLE IV. Sales Material and Information
4.1. FirstGWL&A and Schwab shall furnish, or shall cause to be
furnished, to the
Fund or its designee, a copy of each piece of sales literature or
other promotional material
that FirstGWL&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 objects to such use within
five (5) Business Days
after receipt of such material. If sales literature or promotional
material goes beyond
naming the Fund, a Designated Portfolio, the Adviser, a
sub-adviser, or the Distributor,
FirstGWL&A shall obtain from the Fund or its designee affirmative
written approval to use
such material.
4.2. FirstGWL&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 Con-
tracts or Fund shares 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 to
shareholders or proxy statements for the Fund, or in sales
literature or other promotional
material approved by the Fund or by the Distributor, except with
the permission of the Fund
or the Distributor.
4.3. The Fund shall furnish, or shall cause to be furnished,
to FirstGWL&A and
Schwab, a copy of each piece of sales literature or other
promotional material in which
FirstGWL&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 without the
written permission of
FirstGWL&A or Schwab.
4.4. The Fund, the Distributor, and the Adviser shall not give
any information or
make any representations on behalf of FirstGWL&A or concerning
FirstGWL&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 promotional material
approved by FirstGWL&A or
its designee, except with the permission of FirstGWL&A.
4.5. FirstGWL&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
Schwab's name except with the permission of Schwab, or except which
merely names Schwab
as administrator or the Fund's participation in a Schwab sponsored
program.
4.6. The Fund will provide to FirstGWL&A and Schwab at least
one complete
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 Port-
folio(s), contemporaneously with the filing of such document(s)
with the SEC or NASD or
other regulatory authorities.
4.7. FirstGWL&A or Schwab will provide to the Fund at least
one complete 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, and proxy
materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or
the 1940 Act.
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 shall pay no fee or other compensation to
FirstGWL&A under this
Agreement, and FirstGWL&A shall pay no fee or other compensation to
the Fund or
Adviser under this Agreement, although the parties hereto will bear
certain expenses in
accordance with Schedule E, Articles III, V, and other provisions
of this Agreement.
5.2. All expenses incident to performance by the Fund, the
Adviser and the
Distributor 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 FirstGWL&A, in
accordance with Schedule
E.
5.4. The Fund, the Distributor and the Adviser acknowledge
that a principal fea-
ture 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 Funds, and to transfer the Contract's cash value
between funds and portfolios.
The Fund, the Distributor and the Adviser agree to cooperate with
FirstGWL&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 1940 Act.
5.6. Unless prohibited by law, rule or regulation, 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 Adviser and the Distributor represent and
warrant that the
Fund will at all times sell its shares to Participating Insurance
Companies 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 none of them will
take any action or fail to take any action which may cause the Fund
and each Designated
Portfolio thereof not to, at all times, comply with Section 817(h)
of the Code and Treasury
Regulation 1.817-5, as amended from time to time, and any
Treasury interpretations
thereof, relating to the diversification requirements for variable
annuity, endowment, or life
insurance contracts and any amendments or other modifications or
successor provisions to
such Section or Regulations. The Fund and the Distributor agree
that shares of the Desig-
nated Portfolio(s) will be sold only to Participating Insurance
Companies and their separate
accounts.
6.2. No shares of any Designated Portfolio of the Fund will be
sold to the general
public.
6.3. The Fund 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 or the Adviser will notify FirstGWL&A
immediately 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 FirstGWL&A or
Schwab, the Adviser or the Distributor will pay all costs
associated with or arising out of any
failure, or any anticipated or reasonably foreseeable 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
failure; 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 FirstGWL&A
and any federal
income taxes or tax penalties and interest thereon (or "toll
charges" or exactments or
amounts paid in settlement) incurred by FirstGWL&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 FirstGWL&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 responsibility for such
compliance or of its liability for any non-compliance.
6.7. FirstGWL&A agrees that if the Internal Revenue Service
("IRS") asserts in
writing in connection with any governmental audit or review of
FirstGWL&A or, to
FirstGWL&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
FirstGWL&A otherwise becomes aware of any facts that could give
rise to any claim against
the Fund, the Adviser or the Distributor as a result of such a
failure or alleged failure:
(a) FirstGWL&A shall promptly notify the Fund, the Adviser
and the Distributor of
such assertion or potential claim;
(b) FirstGWL&A shall consult with the Fund, the Adviser and
the Distributor as to
how to minimize any liability that may arise as a result of
such failure or alleged
failure;
(c) FirstGWL&A shall use its best efforts to minimize any
liability of the Fund, the
Adviser and the Distributor 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;
(d) any written materials to be submitted by FirstGWL&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 FirstGWL&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) FirstGWL&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 FirstGWL&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) FirstGWL&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, FirstGWL&A shall not be required to
appeal any adverse
judicial decision unless the Fund, the Distributor 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 FirstGWL&A in complying with this clause (f).
<PAGE>
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. An irreconcilable material conflict may
arise for a variety of reasons,
including: (a) an action by any state insurance regulatory
authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life
insurance contract owners or 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
FirstGWL&A if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. FirstGWL&A will report any potential or existing
conflicts of which it is aware
or reasonably should be aware to the Board. FirstGWL&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
FirstGWL&A to inform the
Board whenever any of the events listed in Section 7.1(a)-(f) occur
as they pertain to
FirstGWL&A (e.g., contract owner voting instructions are to be
disregarded). Such
responsibilities shall be carried out by FirstGWL&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, FirstGWL&A and other Participating Insurance
Companies 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 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.
7.4. If a material irreconcilable conflict arises because of
a decision by
FirstGWL&A to disregard contract owner voting instructions and that
decision represents
a minority position or would preclude a majority vote, FirstGWL&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 Distributor and the
Fund shall continue to
accept and implement orders by FirstGWL&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 FirstGWL&A conflicts with the
majority of other state
regulators, then FirstGWL&A will withdraw the Account's investment
in the Fund and
terminate this Agreement within six months after the Board informs
FirstGWL&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 of the foregoing
six month period, the
Fund shall continue to accept and implement orders by FirstGWL&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
Independent Directors 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. FirstGWL&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 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
FirstGWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement
within six (6) months after
the Board informs FirstGWL&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 con-
ditions substantially identical to such Sections are contained in
such Rule(s) as so amended
or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By FirstGWL&A
8.1(a). FirstGWL&A agrees to indemnify and hold
harmless the Fund,
the Distributor and the Adviser and each of their officers and
directors or trustees 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 FirstGWL&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
or acquisition 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 pro-
spectus or SAI covering the Contracts or contained in the
Contracts or sales
literature 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 nec-
essary 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
FirstGWL&A or Schwab by or on behalf of the Adviser,
Distributor or Fund
for use in the registration statement or prospectus for
the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise
for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than
statements or representations contained in the
registration statement, pro-
spectus or sales literature of the Fund not supplied by
FirstGWL&A or
persons under its control) or wrongful conduct of
FirstGWL&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,
or sales literature of the
Fund, or any amendment thereof or supplement thereto, or
the omission or
alleged omission to state therein a material fact
required to be stated therein
or necessary to make the statements therein not
misleading, if such a
statement or omission was made in reliance upon
information furnished in
writing to the Fund by or on behalf of FirstGWL&A; or
(iv) arise as a result of any failure by FirstGWL&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 FirstGWL&A in this Agreement or arise
out of or result
from any other material breach of this Agreement by
FirstGWL&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). FirstGWL&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). FirstGWL&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 FirstGWL&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
FirstGWL&A of any such claim
shall not relieve FirstGWL&A from any liability which it may have
to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification
provision, except to the extent that FirstGWL&A has been prejudiced
by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, FirstGWL&A
shall be entitled to participate, at its own expense, in the
defense of such action.
FirstGWL&A also shall be entitled to assume the defense thereof,
with counsel satisfactory
to the party named in the action. After notice from FirstGWL&A to
such party of
FirstGWL&A's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
FirstGWL&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
FirstGWL&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.
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 and
directors or trustees 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 Indemnified Parties may become
subject under any statute
or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are
related to the sale or acqu-
isition of the Fund's shares or the Contracts and:
(i) arise out of Schwab's dissemination of information
regarding the Fund that is
both (A) materially incorrect and (B) that was neither
contained in the Fund's
registration statement or sales literature nor other
promotional material of the
Fund prepared by the Fund or provided in writing to
Schwab, or approved
in writing, by or on behalf of the Fund, the Distributor
or the 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 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
Schwab by or on behalf of
the Adviser, the Distributor or Fund or to Schwab for use
in the registration
statement or prospectus for the Contracts or in the
Contracts or sales litera-
ture (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
representations (other than
statements or representations contained in the
registration statement,
prospectus or sales literature 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
(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 otherwise than on account of this indemnification
provision, except to the
extent that Schwab has been prejudiced by such failure to give
notice. 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. After notice
from Schwab to such party of Schwab's election to assume the
defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it,
and Schwab will not be liable to such party under this Agreement
for any legal or other ex-
penses 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 FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or the
Fund by or on behalf
of FirstGWL&A or Schwab for use in the registration
statement or prospectus
for the Fund or in sales literature (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
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or
the omission or alleged omission to state therein a
material fact required to
be stated therein or necessary to make the statement or
statements therein
not misleading, if such statement or omission was made in
reliance upon
information furnished in writing to FirstGWL&A or Schwab
by or on behalf
of the Adviser; 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 Fund, the Adviser or the Distributor
in this Agreement
or arise out of or result from any other material breach
of this Agreement by
the Adviser, the Fund or the Distributor; or
(vi) 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
8.3(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Adviser has been
prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified
Parties, the Adviser will
be entitled to participate, at its own expense, in the defense
thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in
the action. After notice from the Adviser to such party of the
Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional
counsel retained by it, and the Adviser will not be liable to such
party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). FirstGWL&A and Schwab agree promptly to notify the
Adviser of the
commencement of any litigation or proceedings against it or any of
its 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
FirstGWL&A and Schwab
and each of their directors and officers and each person, if any,
who controls FirstGWL&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 be required to pay or become subject under any statute
or regulation, at
common law or otherwise, insofar as such losses, claims, expenses,
damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the
Fund and:
(i) arise as a result of any 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 Agree-
ment); 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 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.
8.4(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 otherwise than on account of this indemnification
provision, except to the extent
that the Fund has been prejudiced by such failure to give notice.
In case any such action
is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own
expense, in the defense thereof. The Fund shall also be entitled
to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the
Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund
will not be liable to such party under this Agreement for any legal
or other expenses
subsequently incurred by such party independently in connection
with the defense thereof
other than reasonable costs of investigation.
8.4(d). FirstGWL&A and Schwab each agree promptly to
notify the Fund of
the commencement of any litigation or proceeding against itself or
any of its 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
FirstGWL&A and
Schwab and each of their directors and officers and each person, if
any, who controls
FirstGWL&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 or
acquisition of the Fund's shares
or the contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue
statement of any material fact contained in the
registration statement or
prospectus or SAI or sales literature or other
promotional material of the
Fund prepared by the Fund, Adviser or 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 fur-
nished in writing to the Adviser, the Distributor or Fund
by or on behalf of
FirstGWL&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
(ii) arise out of or as a result of statements or
representations (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 Fund, the Distributor or Adviser
or persons under
their control, with respect to the sale or distribution
of the Contracts or Fund
shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material
fact contained in a registration statement, prospectus,
SAI, 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
FirstGWL&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 Fund, Adviser or
Distributor 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 the Fund, Adviser or Distributor in this
Agreement or arise
out of or result from any other material breach of this
Agreement by the
Fund, Adviser or Distributor; or
(vi) 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
8.5(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 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 otherwise than on account of
this indemnification
provision, except to the extent that the Distributor has been
prejudiced by such failure to
give notice. 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. After notice from the Distributor
to such party of the
Distributor's election to assume the defense thereof, the
Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
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)FirstGWL&A and Schwab agree to promptly notify the
Distributor of the
commencement of any litigation or proceedings against it or any of
its 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 New York, without
regard to the New York
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.
<PAGE>
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 FirstGWL&A or Schwab by written
notice to the other
parties with respect to any Portfolio based upon
FirstGWL&A's or Schwab's
determination that shares of such Portfolio are not
reasonably available to
meet the requirements of the Contracts; or
(c) at the option of FirstGWL&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 FirstGWL&A; or
(d) at the option of the Fund in the event that formal
administrative
proceedings are instituted against FirstGWL&A or Schwab
by the NASD, the
SEC, the Insurance Commissioner or like official of any
state or any other
regulatory body regarding FirstGWL&A's or Schwab's duties
under this
Agreement or related to the sale of the Contracts, the
operation of any
Account, or the purchase of the Fund shares, 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 FirstGWL&A or Schwab to perform its
obligations under this
Agreement; or
(e) at the option of FirstGWL&A or Schwab in the event
that formal
administrative proceedings are instituted against the
Fund, the Distributor or
Adviser by the NASD, the SEC, or any state securities or
insurance
department or any other regulatory body, if Schwab or
FirstGWL&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 Adviser to
perform their obligations
under this Agreement; or
(f) at the option of FirstGWL&A by written notice to the
Fund with respect
to any Portfolio if FirstGWL&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 or Adviser, respectively, shall determine, in their
sole judgment
reasonably exercised in good faith, that either
FirstGWL&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
FirstGWL&A's or
Schwab's ability to perform its obligations under this
Agreement, (ii) the Fund,
the Distributor or Adviser notifies FirstGWL&A or Schwab,
as appropriate,
of that determination and its intent to terminate this
Agreement, and (iii) after
considering the actions taken by FirstGWL&A or Schwab and
any other
changes in circumstances since the giving of such a
notice, the determination
of the Fund, the 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 FirstGWL&A or Schwab, if (i)
FirstGWL&A or
Schwab, respectively, shall determine, in its sole
judgment reasonably exercised
in good faith, that either the Fund, the Distributor or
the 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, the Distributor's
or Adviser's ability to perform its obligations under
this Agreement, (ii)
FirstGWL&A or Schwab notifies the Fund, the 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, the Distributor or
Adviser and any other changes in circumstances since the
giving of such a
notice, the determination of FirstGWL&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 FirstGWL&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 Schwab'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
FirstGWL&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 FirstGWL&A by the
NASD, the Securities
and Exchange Commission, or any state securities or
insurance department or
any other regulatory body regarding FirstGWL&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 FirstGWL&A to perform its obligations
related to the
Contracts; or
(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
FirstGWL&A to meet Section
817(h) of the Code diversification requirements, the Fund, the
Adviser and the Distributor
shall, at the option of FirstGWL&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 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 I, section 1.2, or 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 in effect on the effective date of termination of this
Agreement, 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 par-
ties; 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.
<PAGE>
If to the Fund:
Van Eck Worldwide Insurance Trust
99 Park Avenue
New York, New York 10016
Attention: President with a copy to the General Counsel
If to FirstGWL&A:
First Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention:Assistant Vice President, Savings Products
If to the Adviser:
Van Eck Associates Corporation
99 Park Avenue
New York, New York 10016
Attention: President
If to the Distributor:
Van Eck Securities Corporation
99 Park Avenue
New York, New York 10016
Attention: President
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
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.
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 New York 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
FirstGWL&A are being conducted in a manner consistent with the New
York 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.
12.9.Schwab and FirstGWL&A are hereby expressly put on notice
of the limitation
of liability as set forth in the Master Trust Agreement of the Fund
and the Articles of
Incorporation of the Adviser and the Distributor and agree that the
obligations assumed by
the Fund and the Adviser pursuant to this Agreement shall be
limited in any case to the
Fund and Adviser and their respective assets and neither Schwab nor
FirstGWL&A shall
seek satisfaction of any such obligation from the shareholders of
the Fund or the Adviser
and Distributor, the Trustees, officers, directors, employees or
agents of the Fund or
Adviser, or any of them.
12.10.The Fund, Adviser and Distributor agree that the
obligations assumed by
FirstGWL&A and Schwab pursuant to this Agreement shall be limited
in any case to
FirstGWL&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
FirstGWL&A or Schwab, the directors, officers, employees or agents
of the FirstGWL&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 Distributor and
the Fund, and as between the Adviser and the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to
be executed in its name and on its behalf by its duly authorized
representative and its seal
to be hereunder affixed hereto as of the date specified below.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:/s/ Robert K. Shaw
Title: Vice President, Marketing & Product
Development
Date: April 1, 1997
VAN ECK WORLDWIDE INSURANCE TRUST:
By its authorized officer,
By:/s/ Thaddeus Leszczynski
Title: Secretary
Date: March 12, 1997
VAN ECK SECURITIES CORPORATION:
By its authorized officer,
By:/s/ Thaddeus Leszczynski
Title: Secretary
Date: March 12, 1997
VAN ECK ASSOCIATES CORPORATION:
By its authorized officer,
By:/s/ Thaddeus Leszczynski
Title: Secretary
Date: March 12, 1997
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By:/s/ Jeff Benton
Title:Vice President, Annuities & Life Insurance
Date:March 31, 1997 <PAGE>
Schwab Variable
Annuity
SCHEDULE A
Contracts Form Numbers
First Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434NY
<PAGE>
SCHEDULE B
Designated Portfolios
Van Eck Gold and Natural Resources Fund<PAGE>
SCHEDULE C
Administrative Services
To be performed by Charles Schwab & Co., Inc.
A. Schwab 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 Schwab's
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 FirstGWL&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.
D. Schwab will communicate all purchase, withdrawal, and exchange
orders it
receives from its customers to FirstGWL&A who will retransmit them
to each fund.<PAGE>
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
FirstGWL&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).<PAGE>
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 First Great-West Life & Annuity Insurance Company, Charles
Schwab & 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)
<PAGE>
SCHEDULE E
EXPENSES
The Fund and/or Distributor and/or Adviser, and FirstGWL&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
Coordination
Party Responsible
for Expense
Mutual Fund
Prospectus
Printing of combined
prospectuses
FirstGWL&A
Fund or
Distributor, as
applicable
Distributor shall supply
FirstGWL&A with
such numbers of the
Designated Portfolio(s)
prospectus(es) as
FirstGWL&A shall
reasonably request
FirstGWL&A
Fund or
Distributor, as
applicable
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
Schwab
Product Prospectus
Printing for Inforce
Clients
FirstGWL&A
FirstGWL&A
Printing for Prospective
Clients
FirstGWL&A
Schwab
Distribution to New
and Inforce Clients
FirstGWL&A
FirstGWL&A
Distribution to
Prospective Clients
Schwab
SchwabMutual Fund
Prospectus Update &
Distribution
If Required by Fund or
Distributor
Fund or Distributor
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Product Prospectus
Update & Distribution
If Required by Fund or
Distributor
FirstGWL&A
Fund or
Distributor
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
Schwab
Schwab
Mutual Fund SAI
Printing
Fund or Distributor
Fund or
Distributor
Distribution
FirstGWL&A
FirstGWL&A
Product SAI
Printing
FirstGWL&A
FirstGWL&A
Distribution
FirstGWL&A
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Proxy Material for
Mutual Fund:
Printing if proxy
required by Law
Fund or Distributor
Fund or
Distributor
Distribution (including
labor) if proxy required
by Law
FirstGWL&A
Fund or
Distributor
Printing & distribution
if required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
Printing & distribution
if required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Mutual Fund Annual &
Semi-Annual Report
Printing of combined
reports
FirstGWL&A
Fund or
Distributor
Distribution
FirstGWL&A
FirstGWL&A and
Schwab
Other communication
to New and Prospective
clients
If Required by the
Fund or Distributor
Schwab
Fund or
Distributor
If Required by
FirstGWL&A
Schwab
FirstGWL&A
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
If Required by Schwab
Schwab
Schwab
Other communication
to inforce
Distribution (including
labor) if required by
the Fund or Distributor
FirstGWL&A
Fund or
Distributor
If Required by
FirstGWL&A
FirstGWL&A
FirstGWL&A
If Required by Schwab
FirstGWL&A
Schwab
Item
Function
Party Responsible for
Coordination
Party Responsible
for Expense
Errors in Share Price
calculation pursuant to
Section 1.10
Cost of error to
participants
FirstGWL&A
Fund or Adviser
Cost of administrative
work to correct error
FirstGWL&A
Fund or Adviser
Operations of the Fund
All operations and
related expenses,
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses
paid or assumed by the
fund pursuant to any
Rule 12b-1 plan
Fund or Distributor
Fund or Adviser
Operations of the
Account
Federal registration of
units of separate
account (24f-2 fees)
FirstGWL&A
FirstGWL&A
EXHIBIT 10(a)
April 15, 1997
First Great-West Life & Annuity Insurance Company
125 Wolf Road
Albany, New York 12205
Re: Registration Statement
Dear Ladies and Gentlemen:
We have acted as counsel to First Great-West Life & Annuity
Insurance Company, a New York corporation, ("Registrant") regarding
federal securities laws applicable to the issuance and sale of the
Contract described therein. We hereby consent to the reference to
us under the heading "Legal Matters" in the prospectus.
Very Truly Yours,
/s/ Jorden Burt Berenson
& Johnson LLP
Jorden Burt Berenson & Johnson LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of First
Great-West Life & Annuity Insurance Company on Form N-4 of our
report dated April 14, 1997, appearing in the Prospectus, which is
a part of this Registration Statement.
We also consent to the reference to us under the heading "Experts"
in the Prospectus and Statement of Additional Information which are
a part of such Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
April 14, 1997
EXHIBIT 13
<PAGE>
YIELD AND EFFECTIVE YIELD CALCULATIONS
Money Market Investment Division
Yield for the Money Market Investment Division is calculated on a
seven day
period.
The current yield formula = base period return x (365/7)
The effective yield formula = [(1 + base period return)365/7] - 1
Base period return is calculated as follows:
Ending account value
-Beginning account value
-Expenses accrued for the period
Net change in account value
Net change in account value/Beginning account value = base period
return.
Following is an example of these calculations:
a= Value of one accumulation unit at beginning of period =
16.23525
b= Value of one accumulation unit at end of period = 16.24946
c= Annual maintenance charges accrued in period = $3.91
d= Average number of units outstanding in period = 1000.00
e= Base period return
Yield = (b-a-c/d)
a
= $16.24946 - 16.23535 - $3.91/ 1000.00
16.23535
e= 0.000635
f= Annualized yield
e x (365/7) = 3.31%
g= Effective yield
{[1 + (e)]365/7} - 1 = 3.36%<PAGE>
Other Investment Divisions
The yield calculation for all other investment divisions is based
on a 30-day
period.
FORMULA: Yield = 2{[(a-b)/ (cd) + 1]6 -1}
Where: a= net investment income earned during the period
attributable to
the Investment Division
b= expenses accrued for the period (net of
reimbursements)
c= average daily number of accumulation units
outstanding during
the period
d= maximum offering price per accumulation unit on the
last day
of the period
Following is an example of this yield calculation:
a= $6,000
b= $2,000
c= 50,000.00
d= $13.00
Yield= 2[($6,000.00 - 2,000.00 + 1)6 - 1]
50,000.00 x $13.00
= 7.50%<PAGE>
TOTAL RETURN CALCULATION
FORMULA: P(1+T)N = ERV
Where: T= Average annual total return
N= The number of years including portions of years
where
applicable for which the performance is being
measured
ERV= Ending redeemable value of a hypothetical $1,000
payment made
at the beginning of the applicable period
P= A hypothetical $1,000 initial payment made at the
inception of
the Investment Division
Assumed expenses = 0.85% mortality & expense risk charge and $25
contract
maintenance charge
The above formula can be restated to solve for T as follows:
T = [(ERV/P)1/N] - 1
Following are examples of this calculation on a 1 year, 5 year, 10
year and
since inception basis:
1 year total return:
ERV = 1,344.50
N= 1.00
P= 1,000.00
Therefore, 1 year total return is 34.55% .
5 year total return:
ERV = 1,792.44
N= 5.00
P= 1,000.00
Therefore, 5 year total return is 12.38% .
10 year total return:
ERV = 2,857.38
N= 10.00
P= 1,000.00
Therefore, 10 year total return is 11.07% .
Since inception total return:
ERV = 4,595.67
N= 13.50
P= 1,000.00
Therefore, since inception total return is 11.96% .
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> APR-04-1997
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 0
<CASH> 6,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 6,000
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,000
<OTHER-SE> 4,000
<TOTAL-LIABILITY-AND-EQUITY> 6,000
0
<INVESTMENT-INCOME> 0
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 0
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
