1
ITEM 23(h)(11)
FUND PARTICIPATION AGREEMENT
EFFECTIVE AS OF AUGUST 2, 1999
AMONG ONE GROUP INVESTMENT TRUST,
BANC ONE INVESTMENT ADVISORS CORPORATION,
NATIONWIDE ADVISORY SERVICES, INC.,
NATIONWIDE INVESTORS SERVICES, INC., AND
PFL LIFE INSURANCE COMPANY
2
FUND PARTICIPATION AGREEMENT
Among
ONE GROUP(R)INVESTMENT TRUST, BANC ONE INVESTMENT ADVISORS CORPORATION
NATIONWIDE ADVISORY SERVICES, INC., NATIONWIDE INVESTORS SERVICES, INC.
and
PFL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into effective as of the second day of
August 1999, by and among PFL LIFE INSURANCE COMPANY, (hereinafter the
"Company"), an Iowa corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"; collectively, the "Accounts"), ONE GROUP INVESTMENT TRUST, a business
trust organized under the laws of Massachusetts (hereinafter the "Trust"), BANC
ONE INVESTMENT ADVISORS CORPORATION, an Ohio corporation (hereinafter the
"Adviser"), NATIONWIDE ADVISORY SERVICES, INC., an Ohio corporation (hereinafter
the "Administrator") and NATIONWIDE INVESTORS SERVICES, INC., an Ohio
corporation (hereinafter the "Transfer Agent").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Trust as an
investment vehicle under their Variable Insurance Products are required to enter
into participation agreements with the Trust and the Administrator (hereinafter
the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available for Variable Insurance Products of Participating Insurance Companies;
and
WHEREAS, the Trust intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Account(s); and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, granting the Trust 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 Trust to be sold to
and held by Variable Insurance Product separate accounts of both affiliated and
unaffiliated insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and its shares
are registered under the Securities Act of 1933, as amended (the "1933 Act");
and
WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940 (the "Advisers Act") and any
applicable state securities law; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Trust; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts ("Contracts") under the 1933 Act;
and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
1
3
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Trust is authorized to sell such shares to unit investment trusts such as
each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust, the Adviser, the Administrator, and the Transfer Agent agree as
follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to make available for purchase by the Company
shares of the Portfolio and shall execute orders placed for each Account on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of such order. For purposes of this Section 1.1, the Company shall
be the designee of the Trust for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Transfer Agent receives notice of such order by 10:00 a.m. Eastern Time on
the next following Business Day ("Trade Date plus 1"). Notwithstanding the
following, the Company shall use its best efforts to provide the Transfer Agent
with notice of such orders by 9:30 a.m. Eastern Time on Trade Date plus 1. The
Administrator shall fax a confirmation of each trade by 1:00 Eastern Time on
Trade Date plus 1. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission, as set
forth in the Trust's prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Trust (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.
1.2. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies for their Variable Insurance Products and, in
the Trust's discretion, to qualified pension and retirement plans. No shares of
any Portfolio will be sold to the general public.
1.3. The Trust and the Transfer Agent agree to redeem for cash, on the
Company's request, any full or fractional shares of the Trust held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 1.3, the Company shall be the designee
of the Trust for receipt of requests for redemption from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Trust receives notice of such request for redemption on Trade Date plus 1 in
accordance with the timing rules described in Section 1.1.
1.4. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the Contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, shall be invested in the Trust, in such
other Trusts advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, or in the Company's general account, provided that such
amounts may also be invested in an investment company other than the Trust if
(a) such other investment company, or series thereof, has investment objectives
or policies that are substantially different from the investment objectives and
policies of all the Portfolios of the Trust; or (b) the Company gives the Trust
45 days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Trust prior to their signing
this Agreement (a list of such funds appearing on Schedule C to this Agreement);
or (d) the Trust consents to the use of such other investment company.
2
4
1.5. The Company will place orders to purchase or redeem shares
separately for each Portfolio. Each order shall describe the net amount of
shares and dollar amount of each Portfolio to be purchased or redeemed. In the
event of net purchases, the Company shall pay for Portfolio shares on Trade Date
plus 1. Payment shall be in federal funds transmitted by wire which will be sent
or received no later than 2:00 p.m. Eastern Time. For purposes of Section 2.10
and 2.11, upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust. In the event of net redemptions, the Portfolio
shall pay the redemption proceeds in federal funds transmitted by wire on the
next Business Day after an order to redeem Portfolio shares is made in
accordance with the provisions of Section 1.3 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day would
require the Portfolio to dispose of Portfolio securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds shall
be wired to the Company within seven (7) days and the Portfolio shall notify in
writing the person designated by the Company as the recipient for such notice of
such delay by 3:00 p.m. Eastern Time on Trade Date plus 1.
1.6. Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.7. The Administrator shall furnish same day notice by 5:00 p.m. in
its local time zone (by wire or telephone, followed by written confirmation) to
the Company of any income, dividends or capital gain distributions payable on
the Trust's shares. Such dividends shall be declared and paid in accordance with
policies established by the Board of Trustees as amended from time to time. The
Administrator shall notify the Company of any amendment to the Trust's dividend
policy within a reasonable time after such amendment. The Company 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. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8. The Administrator shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern Time) and shall use its best efforts to make such net asset value
per share available by 5:30 p.m. Eastern Time. In the event that the
Administrator is unable to meet the 6:30 Eastern Timestated immediately above,
then the Administrator shall provide the Company with additional time to notify
the Administrator of purchase or redemption orders pursuant to Sections 1.1 and
1.3, respectively, above. Such additional time shall be equal to the additional
time that the Administrator takes to make the net asset values available to the
Company; provided, however, that notification must be made by 11:00 a.m.Eastern
Time on the Business Day such order is to be executed, regardless of when net
asset value is made available.
1.9. If the Administrator provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Trust shares purchased or redeemed to
reflect the correct net asset value per share as subsequently determined by the
Administrator. The determination of the materiality of any net asset value
pricing error shall be based on the Trust's policy for correction of pricing
errors (the "Pricing Policy"). The Company shall correct such error in its
records and in the records prepared by it for Contract owners in accordance with
information provided by the Administrator. Any material error in the calculation
or reporting of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that 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. The Company 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 each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 508A.1 of the Iowa Insurance Code and has registered or, prior to
any issuance or sale of the Contracts, will register and will maintain the
registration of each Account as a
3
5
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts. The Company shall amend
its registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance in accordance with any applicable laws of the state of Massachusetts
and sold in compliance with all applicable federal and state securities laws and
that the Trust is and shall remain registered under the 1940 Act. The Trust
shall amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
2.3. The Trust, the Administrator and the Adviser represent that each
Portfolio is currently qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") and
that each will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that each will notify
the Company immediately upon having a reasonable basis for believing that the
Trust has ceased to so qualify or that the Trust might not so qualify in the
future.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Trust 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. The Company further represents that the Account(s) are
eligible to purchase shares of the Trust.
2.5. The Trust represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust
undertakes to have a board of trustees, a majority of whom are not interested
persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Trust represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply in all
material respects with the 1940 Act.
2.8. The Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that the Adviser shall perform its obligations for the Trust
in compliance in all material respects with any applicable state and federal
securities laws.
2.9. The Administrator and the Transfer Agent each represents and
warrants that each complies with all applicable federal and state laws and
regulations and that each will perform its obligations for the Trust and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.10. The Trust represents and warrants that it is and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Trust in an amount no less than the minimal coverage as
required currently by Rule 17g-(1) of the 1940 Act or related provisions as may
be promulgated from time to time. Such bond shall include coverage for larceny
and embezzlement and shall be issued by a relevant bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are covered by a blanket fidelity
bond or similar coverage for the benefit of the Trust, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Trust in the
event that such coverage no longer applies.
4
6
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Trust shall provide the Company with as many printed copies of
the Trust's current prospectus and Statement of Additional Information as the
Company may reasonably request. If requested by the Company in lieu thereof, the
Trust shall provide camera-ready film containing the Trust's prospectus and
Statement of Additional Information, and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus and/or Statement of Additional Information for the Trust is amended
during the year) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document. The Company may print the Trust's
prospectus and/or its Statement of Additional Information in combination with
other fund companies' prospectuses and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2, all expenses
of printing and distributing Trust prospectuses and Statements of Additional
Information shall be the expense of the Company. For prospectuses and Statements
of Additional Information provided by the Company to its existing owners of
Contracts in order to update disclosure annually as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Trust. If the
Company chooses to receive camera-ready film in lieu of receiving printed copies
of the Trust's prospectus, the Trust will reimburse the Company in an amount
equal to the product of A and B where A is the number of such prospectuses
distributed to owners of the Contracts, and B is the Trust's per unit cost of
typesetting and printing the Trust's prospectus. The same procedures shall be
followed with respect to the Trust's Statement of Additional Information. The
Trust shall not pay any costs of typesetting, printing and distributing the
Trust's prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Trust, at the Company's expense, shall provide the Company
with copies of Annual and Semi-Annual Reports (the "Reports") in such quantity
as the Company shall reasonably require for distributing to Contract owners. The
Trust, at its expense, shall provide the Contract owners designated by the
Company with copies of its proxy statements and other communications to
shareholders (except for prospectuses and statements of additional information,
and which are covered in Section 3.2(a) above, and Reports). The Trust shall not
pay any costs of distributing Reports and other communications to prospective
Contract owners.
3.2(c). The Company agrees to provide the Trust or its designee with
such information as may be reasonably requested by the Trust to assure that the
Trust's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2(d). The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Trust may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Trust in writing.
3.2(e) All expenses, including expenses to be borne by the Trust
pursuant to Section 3.2 hereof, incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares.
3.3. If and to the extent required by law, the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions
received from Contract owners; and
(iii) vote Trust shares for which no instructions have been
received in a particular Account in the same proportion as Trust
shares of such portfolio for which instructions have been received in
that separate account, so long as and to the extent that the
Securities and Exchange Commission continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract
owners. The
5
7
Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
3.4. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust 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 Trust will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust, the Adviser, the Administrator or their designee, drafts of the Account
prospectuses and statements of additional information and each piece of sales
literature or other promotional material in which the Trust, the Adviser or the
Administrator is described, at least fifteen Business Days prior to its use. No
such material shall be used if the Trust, the Adviser, the Administrator or
their designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company and its designees shall not give any information or
make any representations or statements on behalf of the Trust or concerning the
Trust in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Trust,
or in sales literature or other promotional material approved by the Trust or
its designee, except with the permission of the Trust or its designee
4.3. The Adviser or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its Account(s), is named
at least fifteen Business Days prior to its use. No such material shall be used
if the Company or its designee reasonably objects to such use within fifteen
Business Days after receipt of such material.
4.4. Neither The Trust, the Administrator, the Transfer Agent nor the
Adviser shall give any information or make any representations on behalf of the
Company or concerning the Company, each 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 published reports for each
Account which are in the public domain or approved by the Company for
distribution to Contract owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Trust or its shares, promptly
after the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Trust: advertisements (such as material published,
or designed for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), and educational or training materials or
other communications distributed or made generally available to some or all
agents or employees.
6
8
ARTICLE V. DIVERSIFICATION
5.1. The Trust will at all times comply with Section 817(h) of the Code
and Treasury Regulation 1.817-5, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any amendments
or other modifications to such Section or Regulations. In the event the Trust
ceases to so qualify, it will take all reasonable steps (a) to notify Company of
such event and (b) to adequately diversify the Trust so as to achieve compliance
within the grace period afforded by Regulation 1.817-5.
ARTICLE VI. POTENTIAL CONFLICTS
6.1. The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. 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 owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of contract owners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
6.2. The Company will report in writing any potential or existing
material irreconcilable conflict of which it is aware to the Administrator. Upon
receipt of such report, the Administrator shall report the potential or existing
material irreconcilable conflict to the Board. The Administrator shall also
report to the Board on a quarterly basis whether the Company has reported any
potential or existing material irreconcilable conflicts during the previous
calendar quarter. The Company 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 the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
6.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested 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 Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, 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 policy
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. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
6.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account (at the Company's expense); 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. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
7
9
6.5. For purposes of Sections 6.3 through 6.4 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 Trust be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 8.3 through 8.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict.
6.6. 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 the Trust 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.
6.7. Each of the Company and the Adviser shall at least annually submit
to the Board such reports, materials or data as the Board may reasonably request
so that the Board may fully carry out the obligations imposed upon them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. Without limiting the generality of the foregoing or the Company's
obligations under Section 6.2, the Company shall provide to the Administrator a
written report to the Board in writing no later than January 15th of each year
indicating whether any material irreconcilable conflicts have arisen during the
prior fiscal year of the Trust. All reports received by the Board of potential
or existing conflicts, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board or other
appropriate records, and such minutes or other records shall be made available
to the Securities and Exchange Commission upon request.
ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE COMPANY
7.1 (a). The Company agrees to indemnify and hold harmless the Trust,
the Administrator, the Transfer Agent, the Adviser, and each member of their
respective Boards and officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust'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 for 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 necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Trust 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 Trust 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 or sales literature of the Trust
not supplied by the Company, or persons under its control and other
than statements or representations authorized by the Trust) or
unlawful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares;
or
8
10
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature of the Trust
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 to the Trust by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company 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 Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company; as limited by and in accordance with the
provisions of Section 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
7.1(c). The Company 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 Company 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 Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at as own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
Indemnified Party named in the action. After notice from the Company to such
Indemnified Party of the Company'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 Company shall not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
7.2. INDEMNIFICATION BY ADMINISTRATOR
7.2(a). The Administrator agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Administrator) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 of the Trust
(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
9
11
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust or the Administrator by or on
behalf of the Company, the Adviser, the Transfer Agent, Counsel for
the Trust, the independent public accountant to the Trust, or any
person or entity that is not acting as agent for or controlled by the
Administrator for use in the registration statement or prospectus for
the Trust or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Administrator; or
(iii) arise as a result of any failure by the Administrator to
provide the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Administrator in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Administrator; as limited by and in accordance
with the provisions of Section 7.2(b) and 7.2(c) hereof.
7.2(b). The Administrator shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
7.2(c). The Administrator 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 Administrator 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 Administrator
of any such claim shall not relieve the Administrator from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Administrator will be
entitled to participate, at its own expense, in the defense thereof. The
Administrator also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from the
Administrator to such Indemnified Party of the Administrator'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 Administrator will
not be liable to such Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.2(d). The Company agrees promptly to notify the Administrator 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 each Account in which the Portfolios are made available.
7.3. INDEMNIFICATION BY THE ADVISER
7.3(a). The Adviser agrees to indemnify and hold harmless the Company
and its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 7.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Adviser)
or litigation (including legal and other expenses) to which the Indemnified
Parties may become
10
12
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 of the Trust
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Adviser or the Trust by or on behalf of the Company, the
Administrator, the Transfer Agent, Counsel for the Trust, the
independent public accountant to the Trust, or any person or entity
that is not acting as agent for or controlled by the Adviser for use
in the registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Adviser; or
(iii) arise as a result of any failure by the Adviser to provide
the services and furnish the materials under the terms of this
Agreement; or
(iv) 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 Section 7.3(b) and 7.3(c) hereof.
7.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
7.3(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. 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 Indemnified Party
named in the action. After notice from the Adviser to such Indemnified 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 Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
7.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
11
13
7.4. INDEMNIFICATION BY THE TRUST
7.4(a). The Trust agrees to indemnify and hold harmless the Company and
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 7.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(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 of the Trust
(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 the
Trust by or on behalf of the Adviser, the Company, the Transfer Agent,
or the Administrator for use in the registration statement or
prospectus for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Trust; or
(iii) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Trust; as limited by and in accordance with the
provisions of Section 7.4(b) and 7.4(c) hereof.
7.4(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
7.4(c). The Trust 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 Trust 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 Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust'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
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
12
14
7.4(d). The Company agrees to promptly notify the Trust of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
7.5. INDEMNIFICATION BY TRANSFER AGENT
7.5(a). The Transfer Agent agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.5)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Transfer Agent) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 of the Trust
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Trust or the Transfer Agent by or on behalf of the Company, the
Adviser, the Administrator, Counsel for the Trust, the independent
public accountant to the Trust, or any person or entity that is not
acting as agent for or controlled by the Transfer Agent for use in the
registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Transfer Agent; or
(iii) arise as a result of any failure by the Transfer Agent to
provide the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Transfer Agent in this
Agreement or arise out of or result from any other material breach of
his Agreement by the Transfer Agent; as limited by and in accordance
with the provisions of Section 7.5(b) and 7.5(c) hereof.
7.5(b). The Transfer Agent shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
7.5(c). The Transfer Agent 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 Transfer Agent 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 Transfer Agent
of any such claim shall not relieve the Transfer Agent from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Transfer Agent will be
entitled to participate, at its own expense, in the defense thereof.
13
15
The Transfer Agent also shall be entitled to assume the defense thereof, with
counsel satisfactory to the Indemnified Party named in the action. After notice
from the Transfer Agent to such Indemnified Party of the Transfer Agent'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 Transfer
Agent will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.5(d). The Company agrees promptly to notify the Transfer Agent 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 each Account in which the Portfolios are made available.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Massachusetts.
8.2. 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 and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by ninety (90) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent and the Administrator with respect to
any Portfolio based upon the Company's determination that shares of
such Portfolio are not reasonably available to meet the requirements
of the Contracts; or
(c) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent, and the Administrator 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
the Company; or
(d) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent, and the Administrator with respect to
any Portfolio in the event that such Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company reasonably
believes that the Trust may fail to so qualify; or
(e) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent, and the Administrator with respect to
any Portfolio in the event that such Portfolio fails to meet the
diversification requirements specified in Article V hereof; or
(f) termination by either the Trust, the Adviser, the Transfer
Agent or the Administrator by written notice to the Company, if either
one or more of the Trust, the Adviser, the Transfer Agent or the
Administrator respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its
business or financial condition or is the subject of material adverse,
provided that the Trust, the Adviser, the Transfer Agent or the
Administrator will give the Company sixty (60) days' advance written
notice of such determination of its intent to terminate this
Agreement, and provided further that after consideration of the
actions taken by the Company and any other changes in circumstances
since the giving of such notice, the determination of the Trust, the
Adviser, the Transfer Agent or the Administrator shall continue to
apply on the 60th day since giving of such notice, then such 60th day
shall be the effective date of termination; or
14
16
(g) termination by the Company by written notice to the Trust,
the Adviser, the Transfer Agent or the Administrator if the Company
shall determine, in its sole judgment reasonably exercised in good
faith, that either the Trust , the Adviser, the Transfer Agent or the
Administrator has suffered a material adverse change in its business
or financial condition or is the subject of material adverse publicity
and such material adverse change or material adverse publicity will
have a material adverse impact upon the business and operations of the
Company provided that the Company will give the Trust, the Adviser,
the Transfer Agent and the Administrator sixty (60) days' advance
written notice of such determination of its intent to terminate this
Agreement, and provided further that after consideration of the
actions taken by the Trust, the Adviser, the Transfer Agent or the
Administrator and any other changes in circumstances since the giving
of such notice, the determination of the Company shall continue to
apply on the 60th day since giving of such notice, then such 60th day
shall be the effective date of termination; or
(h) termination by the Trust , the Advisor, the Transfer Agent,
or the Administrator by written notice to the Company, if the Company
gives the Trust and the Underwriter the written notice specified in
Section 1.4(b) hereof and at the time such notice was given there was
no notice of termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section 9.1(h)
shall be effective forty five (45) days after the notice specified in
Section 1.4(b) was given.
9.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust shall at the option of the Company, continue to make
available additional shares of the Trust 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 Trust shares is proscribed by law, regulation or applicable
regulatory body, or unless the Trust determines that liquidation of the Trust
following termination of this Agreement is in the best interests of the Trust
and its sharesholders.. Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 9.2 shall not apply to any terminations under Article VI and
the effect of such Article VI terminations shall be governed by Article VI of
this Agreement.
9.3 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Adviser) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE X. 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 Trust:
One Group Investment Trust
Three Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxx, Xx.
15
17
If to the Administrator:
Nationwide Advisory Services, Inc.
Three Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Attn: Xxxxx Xxxxxxx, Director Strategic Development
If to the Transfer Agent:
Nationwide Investors Services, Inc.
Three Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Attn.: Xxxxx Xxxxxxx
If to the Adviser:
Banc One Investment Advisors Corporation
0000 Xxxxxxx Xxxxxxx, Xxxxx X0
Xxxxxxxx, Xxxx 00000-0000
Attn: Xxxx X. Xxxxxx
If to the Company:
PFL Life Insurance Company
0000 Xxxxxxxx Xxxx, X X
Xxxxx Xxxxxx, Xxxx 00000-0000
Attention: Financial Markets Division, Legal Department
ARTICLE XI MISCELLANEOUS
11.1 All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust.
11.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.6 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.
16
18
11.7 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.
11.8. 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; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement. The Company shall
promptly notify the Trust and the Adviser of any change in control of the
Company.
11.9. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under generally
accepted accounting principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days after the
end of each quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Company, as soon as practical after
the receipt thereof.
11.10 The names "One Group(R) Investment Trust" and `Trustees of One
Group(R) Investment Trust" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated June 7, 1993 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 `One
Group Investment Trust' 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, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares 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.
17
19
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.
PFL LIFE INSURANCE COMPANY
By: /s/ XXXXXX X. XXXXXXX
---------------------
Title: VICE PRESIDENT AND ACTUARY
--------------------------
ONE GROUP INVESTMENT TRUST
By: /s/ XXXXX X. XXXXXXX
--------------------
Title: VICE PRESIDENT AND ASST. TREASURER
----------------------------------
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ XXXX X. XXXXXX
------------------
Title: SENIOR MANAGING DIRECTOR
------------------------
NATIONWIDE ADVISORY SERVICES, INC.
By: /s/ XXXXX X. XXXXX, XX.
-----------------------
Title: VICE PRESIDENT GENERAL MANAGER
------------------------------
NATIONWIDE INVESTORS SERVICES, INC.
By: /s/ XXXXXXXXXXX X. XXXX
-----------------------
Title: TREASURER
---------
18
20
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
------------------------------------------------------------------------------------------------------------------
Name of Separate Account and Date Established by Board of Form Numbers
Directors Funded by Separate Account
------------------------------------------------------------------------------------------------------------------
CONTRACT FORM NOS:
------------------
PFL Retirement Builder Variable Annuity Account AV288-101-985-796 (may vary by state)
------------------------------------------------------------------------------------------------------------------
AVI200 1 998 (may vary by state)
March 29, 1996
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
19
21
SCHEDULE B
----------
PORTFOLIOS OF THE TRUST
One Group Investment Trust Bond Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Mid Cap Value Portfolio
20
22
SCHEDULE C
OTHER INVESTMENT COMPANIES AND FUNDS
Variable Insurance Products Fund (VIP)
VIP Money Market Portfolio
VIP High Income Portfolio
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP Overseas Portfolio
VIP High Income Portfolio (Service Class)
Variable Insurance Products Fund II (VIP II)
VIP II Investment Grade Bond Portfolio
VIP II Asset Manager Portfolio
VIP II Asset Manager: Growth Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
Variable Insurance Products Fund III (VIP III)
VIP III Balanced Portfolio
VIP III Growth Opportunities Portfolio
VIP III Growth & Income Portfolio
VIP III Mid Cap Portfolio
VIP III Growth Opportunities Portfolio
(Service Class)
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth & Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
Dreyfus Money Market Portfolio
Dreyfus Small Company Stock Portfolio
MFS Variable Insurance Trust
MFS Emerging Growth Series
MFS Foreign & Colonial Emerging
Markets Equity Series
MFS Research Series
MFS Total Return Series
MFS Utilities Series
Xxxxxxxxxxx Variable Account Funds
Xxxxxxxxxxx Global Securities Fund
Xxxxxxxxxxx Growth Fund
Xxxxxxxxxxx Growth & Income Fund
Xxxxxxxxxxx High Income Fund
Xxxxxxxxxxx Strategic Bond Fund
Xxxxxxxxxxx Multiple Strategies Fund
WRL Series Fund, Inc.
WRL VKAM Emerging Growth
WRL Janus Global
WRL Janus Growth
Evergreen Variable Trust
Evergreen VA Fund
Evergreen VA Foundation Fund
Evergreen VA Growth and Income Fund
Evergreen VA Global Leaders Fund
Evergreen VA International Growth Fund
Federated Insurance Series
Federated High Income Bond Fund II
Mentor Variable Investment Products
Mentor VIP Capital Growth
Mentor VIP Growth
Mentor VIP High Income
Xxxxxx Variable Trust
Xxxxxx VT Global Growth Fund
Xxxxxx VT Money Market Fund
Xxxxxx VT New Value Fund
Templeton Variable Product Series Fund
Templeton Asset Allocation Fund
Xxxxxxxxx International Fund
Franklin Small Cap Investments Fund
One Group(R)Investment Trust
One Group(R)Investment Trust Bond Portfolio
One Group(R)Investment Trust Government
Bond Portfolio
One Group(R)Investment Trust Balanced
Portfolio
One Group(R)Investment Trust Large Cap
Growth Portfolio
One Group(R)Investment Trust Equity
Index Portfolio
One Group(R)Investment Trust Diversified
Equity Portfolio
One Group(R)Investment Trust Mid Cap
Growth Portfolio
One Group(R)Investment Trust Diversified
Mid Cap Portfolio
One Group(R)Investment Trust Mid Cap
Value Portfolio
21
