FUND PARTICIPATION AGREEMENT
The Prudential Series Fund, Inc.
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 ...........................12
ARTICLE V. Fees and Expenses ........................................14
ARTICLE VI~ Diversification and Qualification ........................16
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order ................19
ARTICLE VIII. Indemnification ..........................................21
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 C Administrative Services ..................................43
SCHEDULE D Reports per Section 6.6 ..................................45
SCHEDULE F Expenses .................................................48
PARTICIPATION AGREEMENT
Among
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
THE PRUDENTIAL SERIES FUND. INC..
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
and
XXXXXXX XXXXXX & CO., INC.
THIS AGREEMENT, made and entered into as of this 1st day of May, 1999 by
and among GREAT-WEST LIFE & ANNNITY INSURANCE COMPANY (hereinafter "GWL&A"), a
Colorado life insurance company, on its own behalf and on behalf of its Separate
Account Variable Annuity-1 Series Account (the "Account"); THE PRUDENTIAL SERIES
FUND, INC., an open-end management investment company organized under the laws
of Maryland (hereinafter the "Fund"); THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA (hereinafter the "Adviser"), a New Jersey mutual insurance company;
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC (hereinafter the "Distributor"), a
Delaware limited liability company; and XXXXXXX XXXXXX & CO., INC., a California
corporation (hereinafter "Schwab").
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and/or variable annuity
contracts (collectively, the "Variable Insurance Products") to be offered by
insurance companies, including GWL&A, which have entered into participation
agreements similar to this Agreement (hereinafter "Participating Insurance
Companies"); and
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 5, 1999 (File No. IC-23728),
granting Participating Insurance Companies and variable annuitv and variable
life insurance separate accounts exemptions from the provisions of sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
life insurance companies that may or may not be affiliated with one another and
qualified pension and retirement plans ("Qualified Plans") (hereinafter the
"Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolio(s) are registered under
the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, the Distributor is duly registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended, (the "1934 Act") and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, GWL&A has registered certain variable annuity contracts supported
wholly or partially by the Account (the "Contracts") under the 1933 Act and said
Contracts are listed in Schedule A attached hereto and incorporated herein by
reference, as such Schedule may be amended from time to time bv mutual written
agreement; and
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WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of GWL&A on July
24, 1995, under the insurance laws of the State of Colorado, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, GWL&A has registered the Account as a unit investment trust under
the 1940 Act and has registered the securities deemed to be issued by the
Account under the 1933 Act; and
WHEREAS, to the extent permitted b~ applicable insurance laws and
regulations, GWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached hereto and incorporated herein by reference, as such
Schedule may be amended from time to time by mutual written agreement (the
"Designated Portfolio(s)"), on behalf of the Account to fund the Contracts, and
the Fund is authorized to sell such shares to unit investment trusts such as the
Account at net asset value; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other open-end
investment companies or series thereof not affiliated with the Fund (the
"Unaffiliated Funds") on behalf of the Account to fund the Contracts; and
WHEREAS, Schwab will perform certain services for the Fund in connection
with the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, GWL&A, Schwab,
the Fund, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares.
1.1. The Fund agrees to sell to GWL&A those shares of the Designated
Portfolio(s) which the Account orders, executing such orders on each Business
Day at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated
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Portfolios. For purposes of this Section 1 1, GWL&A shall be the designee of the
Fund for receipt of such orders and receipt by such designee shall constitute
receipt by the Fund, provided that the Fund receives notice of any such order by
9:30 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 Designated Portfolio calculates its net asset value pursuant to the
rules of the SEC.
.2. The Fund agrees to make shares of the Designated Portfolio(s) available
for purchase at the applicable net asset value per share by GWL&A and the
Account on those days on which the Fund calculates its Designated Portfolio(s)
net asset value pursuant to rules of the SEC, and the Fund shall calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Board") may refuse to sell shares of any Designated Portfolio
to any person, or suspend or terminate the offering of shares of any Designated
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 Designated
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 the substance of which are the same as Sections 2.1
(except with respect to Colorado law), 3.5, 3.6, 3.7, and Article VII of this
Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on GWL&A's request, any full or
fractional shares of the Fund held by GWL&A, executing such requests on each
Business Day at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. Requests for redemption identified
by GWL&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, GWL&A
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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 9:30 A.M. Eastern
time on the next following Business Day.
I 5. The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
Participating Insurance Companies (subject to Section 1.3 and Article VI hereof)
and the cash value of the Contracts may be invested in other investment
companies.
1.6. GWL&A shall pay for Fund shares by 3:00 p.m. Eastern time on the next
Business Day after an order to purchase Fund shares is made in accordance with
the provisions of Section 1.1 hereof Payment shall be in federal funds
transmitted by wire and/or by a credit for any shares redeemed the same day as
the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions of Fund
shares by 3:00 P.Nt 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 GWL&A or the Account. Shares ordered
from the Fund will be recorded in an appropriate title for the Account or the
appropriate sub-account of the Account.
1.9. The Fund shall furnish same day notice (1,y wire or telephone,
followed by written confirmation) to GWL&A of any income, dividends or capital
gain distributions payable on the Designated Portfolio(s) shares. GWL&A hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Designated Portfolio shares in additional shares of that
Designated Portfolio. GWL&A reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify GWL&A by the end of the next following Business Day of the
number of shares so issued as payment of such dividends and distributions.
5
1 10. The Fund shall make the net asset value per share for each Designated
Portfolio available to GWL&A on each Business Day as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7:00 p.m.
Eastern time. In the event of an error in the computation of a Designated
Portfolio's net asset value per share ("NAV") or any dividend or capital gain
distribution (each, a "pricing error"), the Adviser or the Fund shall
immediately notify GWL&A as soon as possible after discovery of the error. Such
notification may be verbal, but shall be confirmed promptly in writing in
accordance with Article M 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; ~) 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 GW~~A for the costs of adjustments made to correct
Contractowner accounts in accordance with the provisions of Schedule E. if an
adjustment is necessary to correct a material error which has caused
Contractowners to receive less than the amount to which they are entitled, the
number of shares of the applicable sub~account of such Contractowners will be
adjusted and the amount of any underpayments shall be credited by the Adviser to
GWL&A for crediting of such amounts to the applicable Contractowners accounts.
Upon notification by the Adviser of any overpayment due to a material error,
GWI~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 GVVL&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
GWI~~A be liable to Contractowners for any such adjustments or underpayment
amounts. A pricing error within
6
categories (b) or (c) above shall be deemed to be "materially incorrectt1 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. GWL&A represents and warrants that the Contracts and the securities
deemed to be issued by the Account under the Contracts are or will be registered
under the 1933 Act; that the Contracts will be issued and sold in compliance in
all material respects with all applicable federal and state laws and that the
sale of the Contracts shall comply in all material respects with state insurance
suitability requirements. GWL&A further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established the Account prior to any issuance or
sale of units thereof as a segregated asset account under Section 10-7-401, et.
seq. of the Colorado Insurance Law and has registered the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts and that it will maintain such
registration for so long as any Contracts are outstanding as required by
applicable law.
2.2. The Fund represents and warrants that Designated Portfolio(s) shares
sold pursuant to this Agreement shall be 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 0000 Xxx.
The Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
7
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 I 2b-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 I 2b-1 under the 1940 Act to finance
distribution expenses.
2.4. The Fund represents and warrants that it will make every effort to
ensure that the investment policies, fees and expenses of the Designated
Portfolio(s) are and shall at all times remain in compliance with the insurance
and other applicable laws of the State of Colorado and any other applicable
state to the extent required to perform this Agreement. The Fund further
represents and warrants that it will make every effort to ensure that Designated
Portfolio(s) shares will be sold in compliance with the insurance laws of the
State of Colorado and all applicable state insurance and securities laws. The
Fund shall register and qualify the shares for sale in accordance with the laws
of the various states if and to the extent required by applicable law. GWL&A and
the Fund will endeavor to mutually cooperate with respect to the implementation
of any modifications necessitated by any change in state insurance laws,
regulations or interpretations of the foregoing that affect the Designated
Portfolio(s) (a "Law Change"), and to keep each other informed of any Law Change
that becomes known to either party. In the event of a Law Change, the Fund
agrees that, except in those circumstances where the Fund has advised OWL&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.
8
2.6. The Adviser represents and warrants that it is and shall remain duly
registered under all applicable federal and state securities laws and that it
shall perform its obligations for the Fund in compliance in all material
respects with any applicable state and federal securities laws.
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 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 1 7g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bonds shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9. Schwab represents and warrants that it has completed, obtained and
performed, in all material respects, all registrations, filings, approvals, and
authorizations, consents and examinations required by any government or
governmental authority as may be necessary to perform this Agreement. Schwab
does and will comply, in all material respects, with all applicable laws, rules
and regulations in the performance of its obligations under this Agreement.
2.10. The Fund will provide GWL&A with as much advance notice as is
reasonably practicable of any material change affecting the Designated
Portfolio(s) (including, but not limited to, any material change in the
registration statement or prospectus affecting the Designated Portfolio(s)) and
any proxy solicitation affecting the Designated Portfolio(s) and consult with
GWL&A in order to implement any such change in an orderly manner, recognizing
the expenses of changes and attempting to minimize such expenses by implementing
them in conjunction with regular annual updates of the prospectus for the
Contracts. The Fund agrees to share equitably in expenses incurred by GWL&A as a
result of actions taken by the Fund, consistent with the
9
allocation of expenses contained in Schedule E attached hereto and incorporated
herein by reference.
2.1 1. GWL&A represents and warrants, for purposes other than
diversification under Section 817 of the Internal Revenue Code of 1986 as
amended (t1the 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, GWL&A
represents and warrants that the Account is a "segregated asset account" and
that interests in the Account are offered exclusively through the purchase of or
transfer into a "variable contract" within the meaning of such terms under
Section 817 of the Code and the regulations thereunder. GWL&A will use every
effort to continue to meet such definitional requirements, and it will notify
Schwab, the Fund, the Distributor and the Adviser immediately upon having a
reasonable basis for believing that such requirements have ceased to be met or
that they might not be met in the future. GWL&A represents and warrants that it
will not purchase Fund shares with assets derived from tax-qualified retirement
plans except, indirectly, through Contracts purchased in connection with such
plans.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Adviser or Distributor shall provide GWL&A and
Schwab with as many copies of the Fund's current prospectus for the Designated
Portfolio(s) as GWL&A and Schwab may reasonably request for marketing purposes
(including distribution to Contractowners with respect to new sales of a
Contract), with expenses to be borne in accordance with Schedule B hereof. If
requested by GWL&A in lieu thereof, the Adviser, Distributor or Fund shall
provide such documentation (including a camera-ready copy and computer diskette
of the current prospectus for the Designated Portfolio(s)) and other assistance
as is reasonably necessary in order for GWL&A once each year (or more frequently
if the prospectuses for the Designated Portfolio(s) are amended) to have the
prospectus for the Contracts and the Fund's prospectus for the Designated
Portfolio(s) printed together in one document. The Fund and Adviser agree that
the
10
prospectus (and semi-annual and annual reports) for the Designated Portfolio(s)
will describe only the Designated Portfolio(s) arid will not name or describe
any other portfolios or series that may be in the Fund unless required by law.
3.2. If applicable state or federal laws or regulations require that the
Statement of Additional Information ("SAI") for the Fund be distributed to all
Contractowners, then the Fund, Distributor and/or the Adviser shall provide
GWL&A with copies of the Fund's SAI or documentation thereof for the Designated
Portfolio(s) in such quantities, with expenses to be borne in accordance with
Schedule E hereof as GWL&A may reasonably require to permit timely distribution
thereof to Contractowners. The Adviser, Distributor and/or the Fund shall also
provide SAIs to any Contractowner or prospective owner who requests such SAI
from the Fund (although it is anticipated that such requests will be made to
GWL&A or Schwab).
3.3. The Fund, Distributor and/or Adviser shall provide GWL&A and Schwab
with copies of the Fund's proxy material, reports to 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 GWL&A may
reasonably require to permit timely distribution thereof to Contractowners.
3.4. It is understood and agreed that, except with respect to information
regarding GWL&A or Schwab provided in writing by that party, neither GWL&A nor
Schwab are responsible for the content of the prospectus or SAI for the
Designated Portfolio(s). It is also understood and agreed that, except with
respect to information regarding the Fund, the Distributor, the Adviser or the
Designated Portfolio(s) provided in writing by the Fund, the Distributor or the
Adviser, neither the Fund, the Distributor nor Adviser are responsible for the
content of the prospectus or XXx for the Contracts.
3.5. If and to the extent required by law (GWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares held in the Account in
accordance with instructions received from Contractowners: and
11
(iii) vote Designated Portfolio shares held in the Account for which
no instructions have been received in the same proportion as
Designated Portfolio(s) shares for which instructions have been
received from Contractowners, so long as and to the extent that
the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners.
GWL&A reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent
permitted by law.
3.6. GWL&A shall be responsible for assuring that each of its separate
accounts holding shares of a Designated Portfolio calculates voting privileges
as directed by the Fund and agreed to by GWL&A and the Fund. The Fund agrees to
promptly notify GWL&A of any changes of interpretations or amendments of the
Mixed and Shared Funding Exemptive Order.
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 SEC may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information.
4.1. GWL&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 GWL&A or Schwab, respectively, develops or proposes to
use and in which the Fund (or a Portfolio thereof), its Adviser or one of its
sub-advisers or the Distributor is named in connection with the Contracts, at
least ten (10) Business Days prior to its use. No such material shall be used if
the Fund objects to such use within five (5) Business Days after receipt of such
material.
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4.2. GWL&A and Schwab shall not give any information or make any
representations or statements on behalf of the Fund in connection with the sale
of the Contracts other than the information or representations contained in the
registration statement, including the prospectus or SM 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 GWL&A and Schwab, a copy of each piece of sales literature or other
promotional material in which GWL&A and/or its separate account(s), or Schwab is
named at least ten (10) Business Days prior to its use. No such material shall
be used if OWL&A or Schwab objects to such use within five (5) Business Days
after receipt of such material.
4.4. The Fund, the Distributor and the Adviser shall not give any
information or make any representations on behalf of GWL&A or concerning GWL&A,
the Account, or the Contracts other than the information or representations
contained in a registration statement, including the prospectus or SM 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 GWL&A or its
designee, except with the permission of GWL&A.
4.5. GWL&A, the Fund, the Distributor and the Adviser shall not give any
information or make any representations on behalf of or concerning Schwab, or
use Xxxxxx'x name except with the permission of Schwab.
4.6. The Fund will provide to GWL&A and Schwab at least one 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) within a reasonable period of time following the filing of such
document(s) with the SEC or NASD or other regulatory authorities.
13
4.7. GWL&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 material11 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; ~, 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 0000 Xxx.
4.9. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested in connection with
compliance and regulatory requirements related to this Agreement or any party's
obligations under this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Adviser shall pay no fee or other compensation to
GWL&A under this Agreement, and GWL&A shall pay no fee or other compensation to
the Fund or Adviser under
14
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 o~ers of Contracts offered by GWL&A, in
accordance with Schedule E.
5.4. The Fund, the Distributor and the Adviser acknowledge that a principal
feature of the Contracts is the Contractowner's ability to choose from a number
of unaffiliated mutual funds (and portfolios or series thereof), including the
Designated Portfolio(s) and the Unaffiliated Funds, and to transfer the
Contract's cash value between funds and Designated Portfolios. The Fund, the
Distributor and the Adviser agree to cooperate with GWL&A and Schwab in
facilitating the operation of the Account and the Contracts as described in the
prospectus for the Contracts, including but not limited to cooperation in
facilitating transfers between Unaffiliated Funds.
5.5. Schwab agrees to provide certain administrative services, specified in
Schedule C attached hereto and incorporated herein by reference, in connection
with the arrangements contemplated by this Agreement. The parties acknowledge
and agree that the services referred to in this Section 5.5 are recordkeeping,
shareholder communication, and other transaction facilitation and processing,
and related administrative services only and are not the services of an
underwriter or a principal underwriter of the Fund, and that Schwab is not an
underwriter for the shares of the Designated Portfolio(s), within the meaning of
the 1933 Act or the 0000 Xxx.
5.6. As compensation for the services specified in Schedule C hereto, the
Adviser agrees to pay Schwab a monthly Administrative Service Fee based on the
percentage per annum on
15
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 ss.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 GWL&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.
16
6.5. Without in any way limiting the effect of Sections 8.3, 8.4 and 8.5
hereof and without in any way limiting or restricting any other remedies
available to GWL&A or Schwab, the Adviser or Distributor will pay all costs
associated with or arising out of any failure, 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, reasonable
fees and expenses of legal counsel and other advisors to GWL&A and any federal
income taxes or tax penalties and interest thereon (or "toll charges" or
exactments or amounts paid in settlement) incurred by GWL&A with respect to
itself or owners of its Contracts in connection with any such failure or
anticipated or reasonably foreseeable failure.
6.6. The Fund at the Fund's expense shall provide GWL&A or its designee
with reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the times
provided for and substantially in the form attached hereto as Schedule D and
incorporated herein by reference; provided, however, that providing such reports
does not relieve the Fund of its responsibility for such compliance or of its
liability for any non-compliance.
6.7. GWL&A agrees that if the Internal Revenue Service ("IRS") asserts in
writing in connection with any governmental audit or review of GWL&A or, to
GWL&A's knowledge, or any Contractowner that any Designated Portfolio has failed
to comply with the diversification requirements of Section 817(h) of the Code or
GWL&A otherwise becomes aware of any facts that could give rise to any claim
against the Fund, Distributor or Adviser as a result of such a failure or
alleged failure:
(a) GWL&A shall promptly notify the Fund, the Distributor and the Adviser
of such assertion or potential claim;
17
(b) GWL&A shall consult with the Fund, the Distributor and the Adviser as
to how to minimize any liability that may arise as a result of such failure
or alleged failure;
(c) GWL&A shall use its best efforts to minimize any liability of the Fund,
the Distributor and the Adviser resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury Regulations,
Section 1 .817-5(a)(2), to the commissioner of the IRS that such failure
was inadvertent;
(d) any written materials to be submitted by GWL&A to the IRS, any
Contractowner or any other claimant in connection with any of the foregoing
proceedings or contests (including, without limitation, any such materials
to be submitted to the IRS pursuant to Treasury Regulations, Section 1
.817-5(a)(2)) shall be provided by GWL&A to the Fund, the Distributor and
the Adviser (together with any supporting information or analysis) within
at least two (2) business days prior to submission;
(e) GWL&A shall provide the Fund, the Distributor and the Adviser with such
cooperation as the Fund, the Distributor and the Adviser shall reasonably
request (including, without limitation, by permitting the Fund, the
Distributor and the Adviser to review the relevant books and records of
GWL&A) in order to facilitate review by the Fund, the Distributor and the
Adviser of any written submissions provided to it or its assessment of the
validity or amount of any claim against it arising from such failure or
alleged failure;
(f) GWL&A shall not with respect to any claim of the IRS or any
Contractowner that would give rise to a claim against the Fund, the
Distributor and the Adviser (i) compromise or settle any claim, (ii) accept
any adjustment on audit, or (iii) forego any allowable administrative or
judicial appeals, without the express written consent of the Fund. the
Distributor and the Adviser, which shall not be unreasonably withheld;
provided that, GWL&A shall not be required to appeal any adverse judicial
decision unless the Fund and the Adviser shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists for taking
such appeal; and further provided that the Fund, the
18
Distributor and the Adviser shall bear the costs and expenses, including
reasonable attorney's fees, incurred by GWL&A in complying with this clause
(f).
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
GWL&A if it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. GWL&A will report any potential or existing conflicts of which it is
aware to the Board. GWL&A will assist the Board in carrying out its
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obliga-
tion by GWL&A to inform the Board whenever contract owner voting instructions
are to be disregarded. Such responsibilities shall be carried out by GWL&A with
a view only to the interests of its Contractowners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Fund, the Distributor, the
Adviser or any sub-adviser to any of the Designated Portfolios (the "Independent
Directors"), that a material irreconcilable conflict exists, GWL&A and 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
19
steps are necessary to remedy or eliminate the irreconcilable material conflict,
up to and including: (I) 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
GWL&A to disregard Contractowner voting instructions and that decision
represents a minority position or would preclude a majority vote, GWL&A may be
required, at the Fund's election, to withdraw the Account's investment in the
Fund and terminate this Agreement; provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Independent
Directors. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the end of that six month period the Adviser, the
Distributor and the Fund shall continue to accept and implement orders by GWL&A
for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to (GWL&A conflicts with the
majority of other state regulators, then GWL&A will withdraw the Account's
investment in the Fund and terminate this Agreement within six months after the
Board informs GWL&A in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Fund shall continue to accept and implement orders by GWL&A for the
purchase (and redemption) of shares of the Fund.
20
7.6. For purposes of Sections 7~3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
GWL&A shall not be required by Section 7.3 to establish a new funding medium for
the Contracts if an offer to do so has been declined by vote of a majority of
Contractowners affected by the irreconcilable material conflict. In the event
that the Board determines that any proposed action does not adequately remedy
any irreconcilable material conflict, then GWL&A will withdraw the Account's
investment in the Fund and terminate this Agreement within six (6) months after
the Board informs GWL&A in writing of the foregoing determination; provided,
however, that such withdrawal and termination shall be limited to the extent
required by any such material irreconcilable conflict as determined by a
majority of the Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable: and (b) Sections 3.5, 3.6, 3.7, 7.1, 7.2,
7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent
that terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By GWL&A
8.1(a). GWL&A agrees to indemnify and hold harmless the Fund, the
Distributor and the Adviser and each of their 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,
21
claims, expenses, damages and liabilities (including amounts paid in settlement
with the written consent of GWL&A) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, expenses, damages 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 prospectus or XXx 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 OWL&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 to any of the foregoing) 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 or sales literature or other promotional
material of the Fund not supplied by OWL&A or persons under its
control) or wrongful conduct of GWL&A or persons under its control,
with respect to the sale or distribution of the Contracts or Fund
Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, SAI,
or sales literature or other promotional material of the Fund, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon information
furnished in writing to the Fund by or on behalf of GWL&A; or
(iv) arise as a result of any failure by GWL&A to provide the services and
furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by GWL&A in this Agreement or arise out of or
result from any other material breach of this Agreement by GWL&A,
including without limitation Section 2.11 and Section 6.7 hereof,
22
as limited by and in accordance with the provisions of Sections 8.1 (b) and
8.1(c) hereof.
8.1(b). GWL&A shall not be liable under this indemnification provision with
respect to any losses claims, expenses, damages, liabilities or litigation to
which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party1s willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
any of the Indemnified Parties.
8.1(c). GWL&A shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Xxxxx shall have notified GW&A in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify GWL&A of any such claim shall not relieve GWL&A
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision,
except to the extent that GWL&A has been prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified Parties,
GWL&A shall be entitled to participate, at its own expense, in the defense of
such action. GWL&A also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from GWL&A
to such party of GWL&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 GWL&A will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify GWL&A of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
23
8.2. Indernnification 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 acquisition of the
Fund's shares or the Contracts and:
(i) arise out of Xxxxxx'x dissemination of information regarding the Fund
that is both (A) materially incorrect and (B) that was neither
contained in the Fund's registration statement nor in the Fund's sales
literature 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 GWL&A or Schwab by or on behalf of
the Adviser, Distributor or the Fund or to Schwab by (3WL&A for use in
the registration statement, prospectus or SAI for the Contracts or in
the Contracts or sales literature or other promotional material (or
any amendment or supplement 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
24
(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 Xxxxxx'x 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.
25
8.2(d). The Indemnified Parties will promptly notify Schwab of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.3. Indemnification by the Adviser.
8.3(a). The Adviser agrees to indemnify and hold harmless GWL&A and Schwab
and each of their directors and officers and each person, if any, who controls
GWL&A or Schwab within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses. claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale 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, the Distributor 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 reliance upon and in conformity with information furnished
in writing to the Adviser, the Distributor or the Fund by or on behalf
of GWL&A or Schwab for use in the registration statement, prospectus
or SM for the Fund or in 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 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 OF persons
under its control) or wrongful conduct of the Fund, the Distributor or
the Adviser or persons under their control, with respect to the sale
or distribution of the Contracts or Fund shares; or
26
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, SAI,
or sales literature or other promotional material covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished in writing to GWL&A or Schwab by
or on behalf of the Adviser, the Distributor or the Fund; or
(iv) arise as a result of any failure by the Fund, the Distributor 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 Fund, 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 or untimely calculation or
reporting by the Fund, the Distributor or the Adviser of the daily net
asset value per share (subject to Section 1.10 of this Agreement) 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
27
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 xxxxx 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). GWL&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 GWL&A and Schwab and
each of their respective directors and officers and each person, if any, who
controls GWL&A or Schwab within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.4)
against any and all losses, claims, expenses, damages and 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
28
unintentional or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified in
Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund:
or
(iii) arise out of or result from the incorrect or untimely calculation or
reporting of the daily net asset value per share (subject to Section
1.10 of this Agreement) 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
29
by such xxxxx independently in connection with the defense thereof other than
reasonable costs of investigation.
8.4(d). GWL&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 GWL&A and
Schwab and each of their respective directors and officers and each person. if
any, who controls GWL&A or Schwab within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Partiest1 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, 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
GWL&A or Schwab for use in the registration statement or SAI or
prospectus for the Fund or in sales literature or other promotional
material (or any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the Contracts o~ 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
30
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 GWL&A or Schwab by
or on behalf of the Adviser, the Distributor or Fund; or
(iv) arise as a result of any failure by the 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 (subject to Section
1.10 of this Agreement) 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.
31
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) GWL&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 Colorado,
without regard to the Colorado Conflict of Laws provisions.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared
32
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 xxxxx, with or without cause, with respect to
some or all Designated Portfolios, upon six (6) months advance written
notice delivered to the other parties; provided, however, that such
notice shall not be given earlier than six ~6) months following the
date of this Agreement; or
(b) at the option of GWL&A or Schwab by written notice to the other
parties with respect to any Designated Portfolio based upon GWL&A's or
Xxxxxx'x determination that shares of such Designated Portfolio are
not reasonably available to meet the requirements of the Contracts; or
(c) at the option of GWL&A or Schwab by written notice to the other
parties with respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered, issued or sold
in accordance with applicable state andi 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 OWL&A; or
(d) at the option of the Fund, Distributor or Adviser in the event
that formal administrative proceedings are instituted against GWL&A or
Schwab by the NASD, the SEC, the Insurance Commissioner or like
official of any state or any other regulatory body regarding GWL&A's
or Xxxxxx'x duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of the Fund
shares, if, in each case, the Fund, 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 GWL&A or Schwab to perform
its obligations under this Agreement; or
(e) at the option of GWL&A or Schwab in the event that formal
administrative proceedings are instituted against the Fund, the
Distributor or the Adviser by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body, if
Schwab or GWL&A reasonably determines in its sole judgment exercised
in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Fund, the Distributor
or the Adviser to perform their obligations under this Agreement; or
(f) at the option of GWL&A by written notice to the Fund with respect
to any Designated Portfolio if GWL&A reasonably believes that the
Designated Portfolio
33
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
GWL&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 GWL&A's or Xxxxxx'x ability to perform its
obligations under this Agreement, (ii) the Fund, Distributor or
Adviser notifies GWL&A or Schwab, as appropriate, of that
determination and its intent to terminate this Agreement, and (iii)
after considering the actions taken by GWL&A or Schwab and any other
changes in circumstances since the giving of such a notice, the
determination of the Fund, Distributor or Adviser shall continue to
apply on the sixtieth (60th) day following the giving of that notice,
which sixtieth day shall be the effective date of termination; or
(h) at the option of either QWL&A or Schwab, if (i) GWL&A or Schwab,
respectively, shall determine, in its sole judgment reasonably
exercised in good faith, that the Fund, Distributor or Adviser has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and that
material adverse change or publicity will have a material adverse
impact on the Fund's, Distributor's or Adviser's ability to perform
its obligations under this Agreement, (ii) GWL&A or Schwab notifies
the Fund, Distributor or Adviser, as appropriate, of that
determination and its intent to terminate this Agreement, and (iii)
after considering the actions taken by the Fund, Distributor or
Adviser and any other changes in circumstances since the giving of
such a notice, the determination of OWL&A or Schwab shall continue to
apply on the sixtieth (60th) day following the giving of that notice,
which sixtieth day shall be the effective date of termination; or
(i) at the option of GWL&A in the event that formal administrative
proceedings are instituted against Schwab by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body
regarding Xxxxxx'x duties under this Agreement or related to the sale
of the Fund's shares or the Contracts, the operation of any Account,
or the purchase of the Fund shares, provided, however, that GWL&A
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon
the ability of Schwab to perform its obligations related to the
Contracts; or
(j) at the option of Schwab in the event that formal administrative
proceedings are instituted against GWL&A by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body
regarding GWL&A's duties under this Agreement or related to the sale
of the Fund's shares or the Contracts, the operation of any Account,
or the purchase of the Fund shares, provided, however, that Schwab
determines in its sole judgment exercised in good faith, that any such
34
administrative proceedings will have a material adverse effect upon
the ability of GWL&A to perform its obligations related to the
Contracts; or
(k) at the option of any non-defaulting xxxxx hereto in the event of a
material breach of this Agreement by any xxxxx 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; or
(I) at any time upon written agreement of all parties to this
Agreement.
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(11) 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 10.1k\) of this Agreement, the prior written
notice shall be given at least sixty (60) days before the effective date of
termination; and
(c) in the event any termination is based upon the provisions of Section
10.1(b), 10.1(c) or 10.1(f), the prior written notice shall be given in
advance of the effective date of termination, which date shall be
determined by the party sending the notice.
10.3. Effect of Termination.
Notwithstanding any termination of this Agreement, other than as a result of a
failure by either the Fund or GWL&A to meet Section 817(h) of the Code
diversification requirements, the Fund, the Distributor and the Adviser shall,
at the option of GWL&A or Schwab, continue to make
35
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 anv termination of this Agreement.
In addition. with respect to Existing Contracts, all provisions of this
Agreement shall also survive and not be affected by any termination of this
Agreement.
10.5. Survival of Agreement.
A termination by Schwab shall terminate this Agreement only as to Schwab, and
this Agreement shall remain in effect as to the other parties; provided,
however, that in the event of a termination by Schwab the other parties shall
have the option to terminate this Agreement upon 60 (sixty) days notice, rather
than the six (6) months specified in Section 10.1(a).
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party' at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other parties.
If to the Fund:
The Prudential Series Fund, Inc.
Gateway Center Three
000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Secretary
36
If to the Adviser:
The Prudential Insurance Company of America
000 Xxxxx Xxxxxx, 00 Xxxxx
Xxxxxx, XX 00000
Attention: Secretary
If to the Distributor:
Prudential Investment Management Services LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Secretary
If to GWL&A:
Great-West Life & Annuity Insurance Company
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Assistant Vice President, Savings Products
If to Schwab:
Xxxxxxx Xxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party has designated as proprietary.
37
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 SBC, 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 finish the Colorado Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of GWL&A are being conducted in a manner consistent with the Colorado
Variable Annuity Regulations and any other applicable law or regulations.
12.6. Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration in a forum jointly
selected by the relevant parties (but if applicable law requires some other
forum, then such other forum) in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
38
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 GWL&A agree that the obligations assumed by the Fund,
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 GWL&A shall seek satisfaction of any such obligation from the
shareholders of the Fund, 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 GWL&A and Schwab pursuant to this Agreement shall be limited in any
case to GWL&A and Schwab and their respective assets and neither the Fund,
Distributor nor Adviser shall seek satisfaction of any such obligation from the
shareholders of GWL&A or Schwab, the directors, officers, employees or agents of
the GWL&A or Schwab, or any of them, except to the extent permitted under this
Agreement.
12.11. No provision of this Agreement may be deemed or construed to modify
or supersede any contractual rights, duties, or indemnifications, as between the
Adviser and the Fund, and the Distributor and the Fund.
39
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:
Title: Vice President
Date: 5/l/99
THE PRUDENTIAL SERIES FUND, INC.
By its authorized officer,
By:
Title: Secretary
Date: 4/28/99
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By its authorized officer,
By: Xxxx X. XxXxxxxxx
Title: Senior VP
Date: 5/3/99
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
By its authorized officer,
By:
Title: President
Date: 4/29/99
XXXXXXX XXXXXX & CO., INC.
By its authorized officer,
By:
Title: Executive V.P.
Date: 4/16/99
40
Schwab Variable Annuity
SCHEDULE A
Contracts Form Numbers
Great-West Life & Annuity Insurance Company
Group Variable/Fixed Annuity Contract J434
Individual Variable/Fixed Annuity Contract J43 4IND
41
SCHEDULE B
Designated Portfolios
Prudential Series Fund Equity
42
SCHEDULE C
Administrative Services
To be performed by Xxxxxxx Xxxxxx & Co., Inc.
X. Xxxxxx will provide the properly registered and licensed personnel and
systems needed for all customer servicing and support - for both Fund and
Contract information and questions - including the following:
* respond to Contractowner inquiries
* mail fund and Contract prospectuses
* entry of initial and subsequent orders
* transfer of cash to GWL&A and/or Fund
* explanations of Designated Portfolio 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 received from
Contractowners to GWL&A which will transmit orders to Funds
* train call center representatives to explain Fund objectives, Momingstar
categories, Fund selection data and differences between publicly traded
funds and the Funds
* provide performance data and Fund prices
* shareholder services including researching trades, resolving trade
disputes, etc.
* coordinate the writing, printing and distribution of semi-annual and annual
reports to Contract owners investing in the Designated Portfolios
* create and update Designated Portfolio profiles and other shareholder
communications
* establish scheduled account rebalances
* Web trading and account servicing
* touch-tone telephone trading and account servicing
* establish dollar cost averaging
* communications to Contractowners related to product changes, including but
not limited to changes in the available Designated Portfolios
B. For the foregoing services, Schwab shall receive a monthly fee equal to
0.25% per annum of the average daily value of the shares of the Designated
Portfolios listed on Schedule B attributable to Contractowners, 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.
43
C. The Fund will calculate and Schwab will verify with GWL&A the asset balance
for each day on which the fee is to be paid pursuant to this Agreement with
respect to each Designated Portfolio.
44
SCHEDULE D
Reports per Section 6.6
With regard to the reports relating to the quarterly testing of compliance
with the requirements of Section 817(h) and Subchapter M under the Internal
Revenue Code (the "Code") and the regulations thereunder, the Fund shall provide
within twenty (20) Business Days of the close of the calendar quarter a report
to GWL&A in the Form Dl 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
"RlC 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
45
(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).
46
FORM Dl
CERTIFICATE OF COMPLIANCE
For ~e quarter ended:
The Prudential Insurance Company of America (investment adviser) for The
Prudential Series Fund. Inc. hereby notifies you that, based on internal
compliance testing performed as of the end of the calendar quarter ended
_________, 19 , the Designated Portfolios were in compliance with all
requirements of Section 817(h) and Subchapter M of the Internal Revenue Code
(the "Code'1) and the regulations thereunder as required in the Fund
Participation Agreement among Great-West Life & Annuity Insurance Company,
Xxxxxxx Xxxxxx & Co., Inc. and_________ other than the exceptions discussed
below:
Exceptions Remedial Action
----------------------------- --------------------------------
----------------------------- ---------------------------------
----------------------------- ---------------------------------
If no exception to report, please indicate "None."
Signed this ____ day of , _____
(Signature)
By:
(Type or Print Name and Title/Position)
SCHEDULE E
EXPENSES
The Fund and/or the Distributor and/or Adviser, and GWL&A will coordinate the
functions and pay the costs of the completing these functions based upon an
allocation of costs in the tables below. Costs shall be allocated to reflect the
Fund's share of the total costs determined according to the number of pages of
the Fund's respective portions of the documents.
Item Function Party Responsible Party
for Coordination Responsible for
Expense
Mutual Fund Printing of combined GWL&A Fund Distributor
Prospectus prospectuses or Adviser, as
applicable
Fund, Distributor or GWL&A Fund, Distributor
Adviser shall supply or Adviser, as
GWL&A with such applicable
numbers of the
Designated
Portfolio(s)
47
Item Function Party Responsible Party
for Coordination Responsible for
Expense
prospectus(es) as
GWL&A shall
reasonably request
Distribution GWL&A GWL&A
(including postage)
to New and Inforce
Clients
Distribution Schwab Schwab
(including postage)
to Prospective
Clients
Product Prospectus Printing for Inforce GWL&A GWL&A
Clients
Printing for GWL&A Schwab
Prospective Clients
Distribution to New GWL&A GWL&A
and Inforce Clients
Distribution to Schwab Schwab
Prospective Clients
48
Item Function Party Responsible Party
for Coordination Responsible for
Expense
Mutual Fund If Required by Fund, Fund, Distributor or Fund Distributor
Prospectus Update & Distributor or Adviser or Adviser
Distribution Adviser
If Required by GWL&A GWL&A
;\", --------------------------------------------------------- ------------------------------------------------------------
GWL&A
If Required by Schwab Schwab
Schwab
\\ Product Prospectus If Required by Fund, GWL&A Fund, Distributor
Update & Distributor or or Adviser
Distribution Adviser
If Required by GWL&A GWL&A
GWL&A
~If Required by Schwab Schwab
Schwab
[Mutual Fund XXx Printing Fund, Distributor or Fund, Distributor
Adviser or Adviser
Distribution GWL&A GWL&A
(including postage)
Product XXx Printing GWL&A GWL&A
Distribution GWL&A GWL&A
Proxy Material for Printing if proxy Fund, Distributor or Fund, Distributor
Mutual Fund: required by Law Adviser or Adviser
Distribution GWL&A Fund, Distributor
(including labor) if or Adviser
proxy required by
Law
Printing & GWL&A GWL&A
distribution if
required by GWL&A
Printing & GWL&A Schwab
distribution if
required by Schwab
49
Mutual Fund Annual
& Semi-Annual
Report
Printing of combined GWL&A
reports
Fund, Distributor
or Adviser
Distribution GWL&A
Other communication If Required by the Schwab
to New and Fund, Distributor or
Prospective clients Adviser
GWL&A and
Schwab
Fund, Distributor
or Adviser
If Required by Schwab GWL&A
GWL&A
If Required by Schwab Schwab
Schwab
Other communication Distribution GWL&A Fund, Distributor
to inforce (including labor and or Adviser
printing) if required
by the Fund,
Distributor or
Adviser
Distribution GWL&A GWL&A
(including labor and
printing)if required
by GWL&A
Distribution GWL&A Schwab
(including labor and
printing if required
by Schwab
Errors in Share Price Cost of error to GWL&A Fund or Adviser
calculation pursuant participants
to Section l~lO
Cost of reasonable GWL&A Fund or Adviser
expenses related to
administrative work
to correct error
Fund or Adviser
Operations of the All operations and Fund, Distributor or
50
