PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
PRUDENTIAL INSURANCE COMPANY OF AMERICA
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 1st day of____ 1997 by and among
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey Corporation (hereinafter
the "Company"), on its own behalf and on behalf of each separate account of the
Company named in Schedule 1 to this Agreement, as may be amended from time to
time (each account referred to as the "Account"), OCC ACCUMULATION TRUST, an
open-end diversified management investment company organized under the laws of
the State of Massachusetts (hereinafter the "Fund") and OCC DISTRIBUTORS, a
Delaware general partnership (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, beneficial interests in the Fund are divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"), dated
February 22, 1995 (File No.812-9290), granting Participating Insurance Companies
and variable annuity separate accounts and variable life insurance separate
accounts relief 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 separate
accounts and variable life insurance separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and qualified pension and
retirement 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 its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity Contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account established by resolution of the Board of Directors of the Company under
the insurance laws of the State of New Jersey, to set aside and invest assets
attributable to the Contracts; and
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WHEREAS, the Company has registered the Account as a unit investment trust
under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the Fund
which the Company orders on behalf of the Account, executing such orders on a
daily basis at the net asset value next computed after receipt and acceptance by
the Fund or its agent of the order for the shares of the Fund. For purposes of
this Section 1.1, the Company shall be the designee of the Fund for receipt of
such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such order by
10:00 a.m. Eastern Time on the next following Business Day. "Business Day" shall
mean any day on which
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the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day after
it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by Participating Insurance Companies
and their separate accounts on those days on which the Fund calculates its net
asset value pursuant to rules of the SEC; provided, however, that the Board of
Trustees of the Fund (hereinafter the "Directors") may refuse to sell shares of
any Portfolio to any person, or suspend or terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Directors, acting in
good faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the contracts. No
shares of any Portfolio will be sold to the general public.
1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as
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Articles I, III, V, and VII of this Agreement are in effect to govern such
sales. The Fund shall make available upon written request from the Company (i) a
list of all other Participating Insurance Companies and (ii) a copy of the
Participation Agreement executed by any other Participating Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, the Company shall be the designee of the Fund for receipt
of requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment shall be in federal funds transmitted by wire to the Company's account
as designated by the Company in writing from time to time, on the same Business
Day the Fund receives notice of the redemption order from the Company except
that the Fund reserves the right to delay payment of redemption proceeds, but in
no event may such payment be delayed longer than the period permitted under
Section 22(e) of the 1940 Act. Neither the Fund nor the Underwriter shall bear
any responsibility whatsoever for the proper disbursement or crediting of
redemption proceeds; the Company alone shall be responsible for such action. If
notification of redemption is received after 10:00 a.m. Eastern Time, payment
for redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the Portfolios
named in Schedule 2 offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus.
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1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Purchases
and redemption orders for Fund shares will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income, dividends or capital gain distributions payable on the
Fund's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this election
and to receive all such dividends and distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis 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 5:30 p.m., Eastern Time, each
business day. If the Fund provides the Company with materially incorrect share
net asset value information through no fault of the Company, the Company on
behalf of the Account shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported to the Company promptly upon discovery.
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ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold in
compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by applicable law. The Company shall register and qualify the Contracts for sale
in accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts under
applicable provisions of the Internal Revenue Code and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter 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.
2.3. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as
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long as the Fund shares are sold. 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. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.4. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will maintain such qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws and regulations of any state. The
Company alone shall be responsible for informing the Fund of any insurance
restrictions imposed by state insurance laws which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the aforementioned state insurance laws
upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
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2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have its Board of Trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the National Association of Securities Dealers, Inc., ("NASD") and
is registered as a broker-dealer with the SEC. The Underwriter further
represents that it will sell and distribute the Fund shares in accordance with
all applicable federal and state securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of Massachusetts and that it does and will comply with applicable
provisions of the 0000 Xxx.
2.9. The Underwriter represents and warrants that the Fund's Adviser, OpCap
Advisors, is and shall remain duly registered under all applicable federal and
state securities laws and that the Adviser will perform its obligations to the
Fund in accordance with the laws of Massachusetts and any applicable state and
federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as
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required currently by Rule 17g-(1) of the 1940 Act or related provisions as may
be promulgated from time to time. The aforesaid Bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$5 million. The aforesaid includes coverage for larceny and embezzlement and is
issued by a reputable bonding company. The Company agrees to make all reasonable
efforts to see that this bond or another bond containing these provisions is
always in effect, and agrees to notify the Fund and the Underwriter in the event
that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's expense,
with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective contractowners and applicants. The
Underwriter shall print and distribute, at the Fund's or Underwriter's expense,
as many copies of said prospectus as necessary for distribution to existing
contractowners or participants. If requested by the Company in lieu thereof, the
Fund shall provide such documentation including a final copy of a current
prospectus set in type, or, at the request of the Company, as a diskette, at the
Fund's expense and other assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund prospectus is amended
more frequently) to have the new prospectus for the Contracts,
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prospectuses for other mutual funds in which the Contracts may be invested and
the Fund's new prospectus printed together in one document. In such case the
Fund shall bear its share of expenses as described above.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or alternatively from
the Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund), and the Underwriter (or the Fund) shall
provide such Statement, at its expense, to the Company and to any owner of or
participant under a Contract who requests such Statement or, at the Company's
expense, to any prospective contractowner and applicant who requests such
statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or participants;
(ii) vote the Fund shares held in the Account in accordance with
instructions received from contractowners or participants; and
(iii) vote Fund shares held in the Account for which no timely
instructions have been received, in the same proportion as Fund
shares of such Portfolio for which instructions have been
received from the Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass through voting privileges for variable contractowners. The
Company reserves the right to vote
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Fund shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular as required, the Fund will either
provide for annual meetings or 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 interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund
or the Underwriter, each piece of sales literature or other promotional material
in which the Fund or the Fund's adviser or the Underwriter is named, at least
ten business days prior to its use. No such material shall be used if the Fund
or the Underwriter reasonably objects in writing to such use within ten business
days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or
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supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least ten business days prior to its use. No such material shall be
used if the Company reasonably objects in writing to such use within ten
business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to contractowners or participants,
or in sales literature or other promotional material approved by the Company,
except with the permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares,
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contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(I.E., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under NASD
rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Portfolio adopts
and implements a
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plan pursuant to Rule 12b-l to finance distribution expenses, then, subject to
obtaining any required exemptive orders or other regulatory approvals, the
Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Under-writer in writing.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. All Fund shares will
be duly authorized for issuance and registered in accordance with applicable
federal law and to the extent deemed advisable by the Fund, in accordance with
applicable state law, prior to sale. The Fund shall bear the expenses for the
cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, Fund proxy materials
and reports, setting in type, printing and distributing the prospectuses, the
proxy materials and reports to existing shareholders and contractowners, the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares, and any expenses
permitted to be paid or assumed by the Fund pursuant to a plan, if any, under
Rule 12b-1 under the 1940 Act.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Internal Revenue Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Internal Revenue Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life
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insurance contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify the Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Treasury Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth
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therein. As set forth in the Mixed and Shared Funding Exemptive Order, the
Company will report any potential or existing conflicts of which it is aware to
the Fund Board. The Company agrees to assist the Fund Board in carrying out its
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Fund Board with all information reasonably necessary for the Fund
Board to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever contractowner voting
instructions are disregarded. The Fund Board shall record in its minutes or
other appropriate records, all reports received by it and all action with regard
to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Part-icipating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any 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 contractowners and, as appropriate, segregating the assets of
any appropriate group (I.E., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change, and (2) establishing a new registered
management investment company or managed separate account.
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7.4. If the Company's disregard of voting instructions could conflict with
the majority of contractowner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to such Account. Any such
withdrawal and termination must take place within 60 days after the Fund gives
written notice to the Company that this provision is being implemented. Until
the end of such 60 day period the Underwriter and Fund shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.5. If a particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state insurance regulators, then
the Company will withdraw the Account's investment in the Fund and terminate
this Agreement with respect to such Account. Any such withdrawal and termination
must take place within 60 days after the Fund gives written notice to the
Company that this provision is being implemented. Until the end of such 60 day
period the Underwriter and Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Fund Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund or OpCap Advisors be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of contractowners materially adversely affected
by the irreconcilable material conflict.
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7.7. The Company shall at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so that the
Fund Board may fully carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said reports, materials and data
shall be submitted more frequently if deemed appropriate by the Fund Board.
7.8. 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 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, (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 3.4, 3.5, 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 III. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls or is associated with
the Fund or the Underwriter within the meaning of such terms under the federal
securities laws (collectively, the "indemnified parties" for
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purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including reasonable legal and other expenses), to
which the indemnified parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement, prospectus or statement of additional
information for 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 in light of the circumstances in which they were made;
provided that this agreement to indemnify shall not apply as to
any indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Fund for use in the registration statement,
prospectus or statement of additional information for the
Contracts or in the Contracts or sales literature or other
promotional material for the Contracts (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations by
or on behalf of the Company (other than statements or
representations contained in the Fund registration statement,
Fund prospectus, Fund statement of additional information or
sales literature or other promotional material of the Fund not
supplied by the Company or persons under its control) or wrongful
conduct of the Company 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 the Fund registration statement,
Fund prospectus, statement of additional information 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
20
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances in which they were made, if such a statement
or omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the Company
or persons under its control; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials or to make any payments under
the terms of this Agreement; or
(v) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or
result from any other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such loss, claim,
damage, liability or litigation is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter, on its own behalf and on behalf of the Fund, agrees to
indemnify and hold harmless the Company and each of its directors, officers,
employees or agents and each person, if any, who controls or is associated with
the Company within the meaning of such terms under the federal securities laws
(collectively, the "indemnified parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in
21
settlement with the written consent of the Underwriter) or litigation (including
reasonable legal and other expenses) to which the indemnified parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Fund or sales literature or other promotional
material of the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify shall not apply as to
any indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or Fund
by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information for
the Fund or in sales literature or other promotional material of
the Fund (or any amendment or supplement thereto) 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
Contracts or in the Contract or Fund registration statement, the
Contract or Fund prospectus, statement of additional information,
or sales literature or other promotional material for the
Contracts or of the Fund not supplied by the Underwriter or the
Fund or persons under the control of the Underwriter or the Fund
respectively) or wrongful conduct of the Underwriter or the Fund
or persons under the control of the Underwriter or the Fund
respectively, 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, statement of additional information 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
22
necessary to make the statement or statements therein not
misleading in light of the circumstances in which they were made,
if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Underwriter or the Fund or persons under the
control of the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements and procedures related thereto 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 Underwriter or the
Fund in this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such loss, claim,
damage, liability or litigation is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Underwriter of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this Article VIII
("indemnifying party" for the purpose of this Section 8.3) shall not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party
23
entitled to indemnification under this Article VIII ("indemnified party" for the
purpose of this Section 8.3) unless such indemnified party shall have notified
the indemnifying party 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 party shall have
received notice of such service on any designated agent), but failure to notify
the indemnifying party of any such claim shall not relieve the indemnifying
party from any liability which it may have to the indemnified party against whom
such action is brought under the indemnification provision of this Article VIII,
except to the extent that the failure to notify results in the failure of actual
notice to the indemnifying party and such indemnifying party is damaged solely
as a result of failure to give such notice. In case any such action is brought
against the indemnified party, the indemnifying party will be entitled to
participate, at its own expense, in the defense thereof. The indemnifying party
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the indemnifying party to
the indemnified party of the indemnifying party'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 indemnifying party 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, unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The indemnifying
party
24
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement and shall be in addition to any liability the
parties may otherwise have.
8.4. CONTRIBUTION
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Article VIII is due in accordance
with its terms but for any reason is held to be unenforceable with respect to a
party entitled to indemnification ("indemnified party" for purposes of this
Section 8.4) pursuant to the terms of this Article VIII, then each party
obligated to indemnify pursuant to the terms of this Article VIII shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and litigations in such proportion
as is appropriate to reflect the relative benefits received by the parties to
this Agreement in connection with the offering of Fund shares to the Account and
the acquisition, holding or sale of Fund shares by the Account, or if such
allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
25
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to the Mixed and Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice to the
other parties unless otherwise agreed in a separate written agreement among the
parties; or
(b) at the option of the Company if shares of the Portfolios delineated in
Schedule 2 are not reasonably available to meet the requirements of the
Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the insurance commission of any state
or any other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the administration of the Contracts,
the operation of the Account, or the purchase of
26
the Fund shares, which would have a material adverse effect on the Company's
ability to perform its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal proceedings
against the Fund or the Underwriter by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body, which would
have a material adverse effect on the Fund's or the Underwriter's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any necessary
regulatory approvals and/or the vote of the contractowners having an interest in
the Account (or any subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in accordance with
the terms of the Contracts for which those Portfolio shares had been selected to
serve as the underlying investment media. The Company will give 30 days prior
written notice to the Fund of the date of any proposed vote or other action
taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by a
majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of
(i) all contractowners of variable insurance products of all separate accounts
or (ii) the interests of the Participating Insurance Companies investing in the
Fund as delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
27
(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines in its sole
judgment exercised in good faith, that either the Fund or the Underwriter has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company; or
(k) at the option of the Fund or Underwriter, if the Fund or Underwriter
respectively, shall determine in its sole judgment exercised in good faith, that
the Company has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Fund or Underwriter; or
(l) at the option of the Fund in the event any of the Contracts are not
issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without notice.
10.2. NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based upon the
provisions of Article VII, such prior written notice shall be given in advance
of the effective date of termination as required by such provisions.
28
(b) In the event that any termination of this Agreement is based upon the
provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written notice of
the election to terminate this Agreement for cause shall be furnished by the
party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the non-terminating
parties.
(c) In the event that any termination of this Agreement is based upon the
provisions of Sections 10.1(j) or 10.1(k), prior written notice of the election
to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-terminating parties. Such prior written
notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement and subject to
Section 1.3 of this Agreement, the Company may require the Fund and the
Underwriter to continue to make available additional shares of the Fund for so
long after the termination of this Agreement as the Company desires pursuant to
the terms and conditions of this Agreement as provided in paragraph (b) below,
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 Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.4 shall not apply to
29
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
(b) If shares of the Fund continue to be made available after termination
of this Agreement pursuant to this Section 10.4, the provisions of this
Agreement shall remain in effect except for Section 10.1(a) and thereafter the
Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other party,
such notice to be for a period that is reasonable under the circumstances but,
if given by the Fund or Underwriter, need not be for more than 90 days.
10.5. Except as necessary to implement contractowner initiated or approved
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Contracts (as opposed to Fund
shares attributable to the Company's assets held in the Account), and the
Company shall not prevent contractowners from allocating payments to a Portfolio
that was otherwise available under the Contracts, until 90 days after the
Company shall have notified the Fund or Underwriter of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt or by certified mail, return receipt requested, to the other
party at the address of such party set forth below or at such other address as
such party may from time to time specify in writing to the other party. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
30
Xx. Xxxxxxx X. Xxxxx
President
OpCap Advisors
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
If to the Company:
Prudential Insurance Company of America
Xxxxx X. Xxxxx, Esq.
00 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
If to the Underwriter:
Xx. Xxxxxx X. Xxxxxx
Secretary
OCC Distributors
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Directors, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as it may come into the public domain without the express prior
written consent of the affected party.
31
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto without the
prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit each other and 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.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.
32
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative as of
the date and year first written above.
COMPANY:
PRUDENTIAL INSURANCE COMPANY OF AMERICA
SEAL By:
-----------------------------------
FUND:
OCC ACCUMULATION TRUST
SEAL By:
-----------------------------------
UNDERWRITER:
OCC DISTRIBUTORS
By:
-----------------------------------
33
SCHEDULE 1
Participation Agreement
Among
OCC Accumulation Trust, Prudential Insurance Company of America
and
OCC Distributors
The following separate accounts of Prudential Insurance Company of America
are permitted in accordance with the provisions of this Agreement to invest in
Portfolios of the Fund shown in Schedule 2:
Prudential Discovery Select Group Variable Contract Account, established
February 11, 1997
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, Prudential Insurance Company of America
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of OCC Accumulation Trust:
Managed Portfolio
Small Cap Portfolio
