EXHIBIT 1.A.(3)(d)(i)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
PRUCO LIFE INSURANCE COMPANY
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
PRUCO SECURITIES CORPORATION
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TABLE OF CONTENTS
DESCRIPTION PAGE
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Section 1. Available Funds .................................................................................. 2
1.1 Availability .............................................................................. 2
1.2 Addition, Deletion or Modification of Funds ............................................... 2
1.3 No Sales to the General Public ............................................................ 2
Section 2. Processing Transactions .......................................................................... 3
2.1 Timely Pricing and Orders ................................................................. 3
2.2 Timely Payments ........................................................................... 3
2.3 Applicable Price .......................................................................... 4
2.4 Dividends and Distributions ............................................................... 4
2.5 Book Entry ................................................................................ 4
Section 3. Costs and Expenses ............................................................................... 4
3.1 General ................................................................................... 4
3.2 Registration .............................................................................. 4
3.3 Other (Non-Sales-Related) ................................................................. 5
3.4 Other (Sales-Related) ..................................................................... 5
3.5 Parties To Cooperate ...................................................................... 5
Section 4. Legal Compliance ................................................................................. 6
4.1 Tax Laws .................................................................................. 6
4.2 Insurance and Certain Other Laws .......................................................... 8
4.3 Securities Laws ........................................................................... 8
4.4 Notice of Certain Proceedings and Other Circumstances ..................................... 9
4.5 Prudential and the Underwriter To Provide Documents: Information About AVIF ............... 10
4.6 AVIF or AIM To Provide Documents: Information About Prudential and the Underwriter ........ 11
Section 5. Mixed and Shared Funding ......................................................................... 12
5.1 General ................................................................................... 12
5.2 Disinterested Directors ................................................................... 12
5.3 Monitoring for Material Irreconcilable Conflicts .......................................... 13
5.4 Conflict Remedies ......................................................................... 13
5.5 Notice to Prudential ...................................................................... 15
5.6 Information Requested by Board of Directors ............................................... 15
5.7 Compliance with SEC Rules ................................................................. 15
5.8 Other Requirements ........................................................................ 15
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DESCRIPTION PAGE
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Section 6. Termination ...................................................................................... 15
6.1 Events of Termination ..................................................................... 15
6.2 Notice Requirement for Termination ........................................................ 17
6.3 Funds To Remain Available ................................................................. 17
6.4 Survival of Warranties and Indemnifications ............................................... 17
6.5 Continuance of Agreement for Certain Purposes ............................................. 18
Section 7. Parties To Cooperate Respecting Termination ..................................................... 18
Section 8. Assignment ...................................................................................... 18
Section 9. Notices ......................................................................................... 18
Section 10. Voting Procedures ............................................................................... 19
Section 11. Foreign Tax Credits ............................................................................. 20
Section 12. Indemnification ................................................................................. 20
12.1 Of AVIF and AIM by Prudential and the Underwriter ......................................... 20
12.2 Of Prudential and the Underwriter by AVIF and AIM ......................................... 22
12.3 Effect of Notice .......................................................................... 24
12.4 Successors ................................................................................ 25
Section 13. Applicable Law ................................................................................ 25
Section 14. Execution in Counterparts ..................................................................... 25
Section 15. Severability .................................................................................. 25
Section 16. Rights Cumulative ............................................................................. 25
Section 17. Headings ...................................................................................... 25
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ______ day of ____________,
1996 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM");
Pruco Life Insurance Company ("Prudential"), an Arizona life insurance company,
on behalf of itself and each of its segregated asset accounts listed in Schedule
A hereto, as the parties hereto may amend from time to time (each, an "Account,"
and collectively, the "Accounts"); and Pruco Securities Corporation, a New
Jersey corporation and the principal underwriter of the Contracts and Policies
referred to below ("Underwriter") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts;
and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, AIM is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 (the "1934 Act") and a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, AIM currently serves as the distributor for the Shares; and
WHEREAS, Prudential will be the issuer of certain variable annuity
contracts ("Contracts") and/or variable life insurance policies ("Policies") as
set forth on Schedule A hereto, as the Parties hereto may amend from time to
time, which Contracts and Policies (hereinafter collectively, the "Policies"),
if required by applicable law, will be registered under the 1933 Act; and
WHEREAS, Prudential will fund the Policies through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
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WHEREAS, Prudential will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Policies will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Prudential intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Policies; and
WHEREAS, the Underwriter is a broker-dealer registered with the SEC under
the 1934 Act and a member in good standing of the NASD;
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to Prudential for purchase and
redemption at net asset value and with no sales charges, subject to the terms
and conditions of this Agreement. The Board of Directors of AVIF may refuse to
sell Shares of any Fund to any person, or suspend or terminate the offering of
Shares of any Fund if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Directors
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, such action is deemed in the best interests of the
shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that Shares of each Fund have been and will be
sold only to those entities listed under Section 817(h)(4) of the Code and the
regulations thereunder, as such Code Section and the regulations may be amended
from time to time.
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SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
Prudential with the net asset value per Share for each Fund by 5:30 p.m. Central
Time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading, and (ii) AVIF
calculates the Fund's net asset value.
(b) Prudential will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. Prudential will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to Prudential in the event that AVIF is unable to
meet the 5:30 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to Prudential.
(c) Each order to purchase or redeem Shares will separately describe the
amount of Shares of each Fund to be purchased, redeemed or exchanged and will
not be netted; provided, however, with respect to payment of the purchase price
by Prudential and of redemption proceeds by AVIF, Prudential and AVIF shall net
purchase and redemption orders with respect to each Fund and shall transmit one
(1) net payment per Fund in accordance with Section 2.2, below. Each order to
purchase or redeem Shares shall also specify whether the order results from
purchase payments, surrenders, partial withdrawals, routine withdrawals of
charges, or requests for other transactions under Policies (collectively,
"Policy transactions").
(d) If AVIF provides materially incorrect Share net asset value
information, Prudential shall be entitled to an adjustment to the number of
Shares purchased or redeemed to reflect the correct net asset value per Share.
Any material error in the calculation or reporting of net asset value per Share,
dividend or capital gain information shall be reported promptly upon discovery
to Prudential.
2.2 TIMELY PAYMENTS.
Prudential will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by Prudential by 1:00 p.m. Central Time on
the same day as the Order is placed, to the extent practicable, but in any event
within five (5) calendar days after the date the order is placed in order to
enable Prudential to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
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2.3 APPLICABLE PRICE.
(a) Share purchase and redemption orders that result from Policy
transactions and that Prudential receives prior to the close of regular trading
on the New York Stock Exchange on a Business Day will be executed at the net
asset values of the appropriate Funds next computed after receipt by AVIF or its
designated agent of the orders. For purposes of this Section 2.3(a), the
Underwriter shall be the designated agent of AVIF for receipt of orders relating
to Policy transactions on each Business Day and receipt by such designated agent
shall constitute receipt by AVIF; provided, that AVIF receives notice of such
orders by 9:00 a.m. Central Time on the next following Business Day or such
later time as computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by Prudential will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice promptly to Prudential of any income dividends or
capital gain distributions payable on the Shares of any Fund. Prudential hereby
elects to reinvest all dividends and capital gains distributions in additional
Shares of the corresponding Fund at the ex-dividend date net asset values until
Prudential otherwise notifies AVIF in writing, it being agreed by the Parties
that the ex-dividend date and the payment date with respect to any dividend or
distribution will be the same Business Day. Prudential reserves the right to
revoke this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to Prudential. Shares ordered from AVIF will be
recorded in an appropriate title for Prudential, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) AVIF will bear the cost of its registering as a management investment
company under the 1940 Act and registering its Shares under the 1933 Act, and
keeping such registrations
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current and effective; including, without limitation, the preparation of and
filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with respect to AVIF
and its Shares and payment of all applicable registration or filing fees with
respect to any of the foregoing.
(b) Prudential will bear the cost of registering, to the extent required,
each Account as a unit investment trust under the 1940 Act and registering units
of interest under the Policies under the 1933 Act and keeping such registrations
current and effective; including, without limitation, the preparation and filing
with the SEC of Forms N-SAR and Rule 24f-2 Notices with respect to each Account
and its units of interest and payment of all applicable registration or filing
fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) AVIF will bear, or arrange for others to bear, the costs of preparing,
filing with the SEC and setting for printing AVIF's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "AVIF Prospectus"), periodic reports to shareholders, AVIF proxy material
and other shareholder communications.
(b) Prudential will bear the costs of preparing, filing with the SEC and
setting for printing each Account's prospectus, statement of additional
information and any amendments or supplements thereto (collectively, the
"Account Prospectus"), any periodic reports to Policy owners, annuitants or
participants under the Policies (collectively, "Participants"), voting
instruction solicitation material, and other Participant communications.
(c) Prudential or the Underwriter will print in quantity and deliver to
existing Participants the documents described in Section 3.3(b) above and the
documents provided by AVIF in camera ready or computer diskette form pursuant to
Section 4.6(b) hereof. The costs of printing in quantity and delivering to
existing Participants such documents will be borne by Prudential.
3.4 OTHER (SALES-RELATED).
The Underwriter will bear the expenses of distributing Fund Shares and the
Policies. These expenses would include by way of illustration, but are not
limited to, the costs of printing and distributing to offerees the AVIF
Prospectus and periodic reports of AVIF. These costs would also include the
costs of preparing, printing, and distributing sales literature and advertising
relating to the Funds, as well as filing such materials with, and obtaining
approval from, the SEC, NASD, any state insurance regulatory authority, and any
other appropriate regulatory authority, to the extent required.
3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
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SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and represents that it will qualify and
maintain qualification of each Fund as a RIC. AVIF will notify Prudential
immediately upon having a reasonable basis for believing that a Fund has ceased
to so qualify or that it might not so qualify in the future.
(b) AVIF represents that it will comply and maintain each Fund's compliance
with the diversification requirements set forth in Section 817(h) of the Code
and Section 1.817-5(b) of the regulations under the Code. AVIF will notify
Prudential immediately upon having a reasonable basis for believing that a Fund
has ceased to so comply or that a Fund might not so comply in the future.
(c) Prudential agrees that if the Internal Revenue Service ("IRS") asserts
in writing in connection with any governmental audit or review of Prudential or,
to Prudential's knowledge, of any Participant, that any Fund has failed to
comply with the diversification requirements of Section 817(h) of the Code or
Prudential otherwise becomes aware of any facts that could give rise to any
claim against AVIF or its affiliates as a result of such a failure or alleged
failure:
(i) Prudential shall promptly notify AVIF of such assertion or
potential claim;
(ii) Prudential shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged failure;
(iii) Prudential shall use its best efforts to minimize any liability
of AVIF or its affiliates 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;
(iv) Prudential shall permit AVIF, its affiliates and their legal and
accounting advisors to participate in any conferences, settlement
discussions or other administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS, any Participant or any
other claimant regarding any claims that could give rise to liability to
AVIF or its affiliates as a result of such a failure or alleged failure;
(v) any written materials to be submitted by Prudential to the IRS,
any Participant 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)), (a) shall be provided by Prudential to AVIF
(together with any supporting information or analysis) at least
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ten (10) business days' prior to the day on which such proposed materials
are to be submitted, and (b) shall not be submitted by Prudential to any
such person without the express written consent of AVIF which shall not be
unreasonably withheld;
(vi) Prudential shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF shall
reasonably request (including, without limitation, by permitting AVIF and
its accounting and legal advisors to review the relevant books and records
of Prudential) in order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the preceding clause or its
assessment of the validity or amount of any claim against its arising from
such a failure or alleged failure;
(vii) Prudential shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against AVIF or its affiliates
(a) compromise or settle any claim, (b) accept any adjustment on audit, or
(c) forego any allowable administrative or judicial appeals, without the
express written consent of AVIF or its affiliates, which shall not be
unreasonably withheld, provided that Prudential shall not be required,
after exhausting all administrative penalties, to appeal any adverse
judicial decision unless AVIF or its affiliates shall have provided an
opinion of independent counsel to the effect that a reasonable basis exists
for taking such appeal; and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if Prudential fails to comply with any of
the foregoing clauses (i) through (vii), and such failure could be shown to
have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, Prudential
may, in its discretion, authorize AVIF or its affiliates to act in the name of
Prudential in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided that in no event shall Prudential have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) Prudential represents and warrants that the Policies currently are and
will be treated as annuity, endowment, or life insurance contracts under
applicable provisions of the Code and that it will maintain such treatment;
Prudential will notify AVIF immediately upon having a reasonable basis for
believing that any of the Policies have ceased to be so treated or that they
might not be so treated in the future.
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(e) Prudential represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817 of the Code and the regulations
thereunder. Prudential will continue to meet such definitional requirements, and
it will notify AVIF immediately upon having a reasonable basis for believing
that such requirements have ceased to be met or that they might not be met in
the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF and AIM will use their best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by Prudential.
(b) Prudential represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of Arizona and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under the Arizona Insurance Code and the
regulations thereunder, and (iii) the Policies comply in all material respects
with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a Delaware corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority and right to execute, deliver and
perform its duties and comply with the its obligations under this Agreement.
(e) The Underwriter represents and warrants that it is a New Jersey
corporation duly organized, validity existing, and in good standing under the
laws of the State of New Jersey and has full power, authority, and legal right
to execute, deliver, and perform its duties and comply with its obligations
under this Agreement.
4.3 SECURITIES LAWS.
(a) Prudential and the Underwriter represent and warrant that (i) interests
in each Account pursuant to the Policies will be registered under the 1933 Act
to the extent required by the 1933 Act, (ii) the Policies will be duly
authorized for issuance and sold in compliance with all applicable federal and
state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940
Act and Arizona law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's
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1933 Act registration statement relating to the Policies, together with any
amendments thereto, will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder, (vi) Prudential will
amend the registration statement for its Policies under the 1933 Act and for its
Accounts under the 1940 Act from time to time as required in order to effect the
continuous offering of its Policies or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF and AIM represent and warrant that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will register and qualify its Shares for sale in accordance with
the laws of any state or other jurisdiction if and to the extent reasonably
deemed advisable by AVIF.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF and/or AIM will immediately notify Prudential of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to AVIF's registration statement under the 1933
Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF's Prospectus, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of AVIF's Shares, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of Shares of any Fund in
any state or jurisdiction, including, without limitation, any circumstances in
which (a) such Shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law, or (b) such law
precludes the use of such Shares as an underlying investment medium of the
Policies issued or to be issued by Prudential. AVIF will make every reasonable
effort to prevent the issuance, with respect to any Fund, of any such stop
order, cease and desist order or similar order and, if any such order is issued,
to obtain the lifting thereof at the earliest possible time.
(b) Prudential and the Underwriter will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Policies or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus, (iii) the initiation of any proceedings for
that purpose or for any
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other purpose relating to the registration or offering of each Account's
interests pursuant to the Policies, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. Prudential will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 PRUDENTIAL AND THE UNDERWRITER TO PROVIDE DOCUMENTS; INFORMATION ABOUT
AVIF.
(a) Prudential or the Underwriter will provide to AVIF or its designated
agent at least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Policies,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) The Underwriter will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
business days' prior to its use or such shorter period as the Parties hereto
may, from time to time, agree upon. No such material shall be used if AVIF or
its designated agent objects to such use within five (5) business days after
receipt of such material or such shorter period as the Parties hereto may, from
time to time, agree upon. AVIF hereby designates its investment adviser as the
entity to receive such sales literature or other promotional material, until
such time as AVIF appoints another designated agent by giving notice to
Prudential in the manner required by Section 9 hereof.
(c) Neither Prudential, the Underwriter, nor any of their respective
affiliates will give any information or make any representations or statements
on behalf of or concerning AVIF or its affiliates in connection with the sale of
the Policies other than (i) the information or representations contained in the
registration statement, including the AVIF Prospectus contained therein,
relating to Shares, as such registration statement and AVIF Prospectus may be
amended from time to time; or (ii) in reports or proxy materials for AVIF; or
(ii) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) Prudential and the Underwriter shall adopt and implement procedures
reasonably designed to ensure that information concerning AVIF and its
affiliates that is intended for use only by brokers or agents selling the
Policies (i.e., information that is not intended for distribution to
Participants or offerees) ("broker only materials") is so used, and neither AVIF
nor any of its affiliates shall be liable for any losses, damages or expense
relating to the improper use of such broker only materials.
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4.6 AVIF OR AIM TO PROVIDE DOCUMENTS; INFORMATION ABOUT PRUDENTIAL AND THE
UNDERWRITER.
(a) AVIF will provide to Prudential at least one (1) complete copy of all
SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to Prudential or the Underwriter camera ready or
computer diskette copies of all AVIF Prospectuses, proxy materials, periodic
reports to shareholders and other materials required by law to be sent to
Participants who have allocated any Policy value to a Fund. AVIF will provide
such copies to Prudential or the Underwriter in a timely manner so as to enable
Prudential or the Underwriter, as the case may be, to print and distribute such
materials within the time required by law to be furnished to Participants.
(c) AIM will provide to Prudential or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which Prudential, the Underwriter or any of their respective affiliates is
named, or that refers to the Policies, at least five (5) business days' prior to
its use or such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if Prudential or its designated agent
objects to such use within five (5) business days alter receipt of such material
or such shorter period as the Parties hereto may, from time to time, agree upon.
Prudential shall receive all such sales literature or other promotional
material, until such time as it appoints a designated agent by giving notice to
AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning Prudential,
the Underwriter, each Account, or the Policies other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Policies, as such registration
statement and Account Prospectus may be amended from time to time; or (ii) in
reports or voting instruction materials for each Account; or (ii) in sales
literature or other promotional material approved by Prudential or its
affiliates, except with the express written permission of Prudential.
(e) AIM shall adopt and implement procedures reasonably designed to ensure
that information concerning Prudential, the Underwriter, and their respective
affiliates that is intended for use only by brokers or agents selling the
Policies (i.e., information that is not intended for distribution to
Participants or offerees) ("broker only materials") is so used, and neither
Prudential, the Underwriter, nor any of their respective affiliates shall be
liable for any losses, damages or expense relating to the improper use of such
broker only materials.
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4.7 DEFINITION OF SALES LITERATURE OR OTHER PROMOTIONAL MATERIAL.
For purposes of this Section 4.7, 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, video tape 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, circular, research reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published articles), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other material
constituting sales literature of advertising under NASD Rules, the 1940 Act or
the 1933 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
AVIF has received an order from the SEC exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable life insurance contracts, separate accounts
of insurance companies unaffiliated with Prudential, and trustees of qualified
pension and retirement plans (collectively, "Mixed and Shared Funding"). The
Parties recognize that the SEC has imposed terms and conditions for such orders
that are substantially identical to many of the provisions of this Section 5.
Sections 5.2 through 5.8 below shall apply, if and only if AVIF continues to
implement Mixed and Shared Funding, pursuant to such an exemptive order or
otherwise. AVIF hereby notifies Prudential that it may be appropriate to include
in the prospectus pursuant to which a Policy is offered disclosure regarding the
potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board, (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies, or (c) for
such longer period as the SEC may prescribe by order upon application.
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5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). Prudential agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting
instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions
of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, Prudential will assist the Board
of Directors in carrying out its responsibilities by providing the Board of
Directors with all information reasonably necessary for the Board of Directors
to consider any issue raised, including information as to a decision by
Prudential to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Prudential will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority
13
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of the Disinterested Directors), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps may include, but are
not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different investment
medium, including another Fund of AVIF, or submitting the question whether
such segregation should be implemented to a vote of all affected
Participants and, as appropriate, segregating the assets of any particular
group (e.g., annuity Participants, life insurance Participants or all
Participants) that votes in favor of such segregation, or offering to the
affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of Prudential's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, Prudential
may be required, at AVIF's election, to withdraw each Account's investment in
AVIF or any Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six (6) months after AVIF
gives notice to Prudential that this provision is being implemented, and until
such withdrawal AVIF shall continue to accept and implement orders by Prudential
for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to Prudential conflicts with the
majority of other state regulators, then Prudential will withdraw each Account's
investment in AVIF within six (6) months after AVIF's Board of Directors informs
Prudential that it has determined that such decision has created a material
irreconcilable conflict, and until such withdrawal AVIF shall continue to accept
and implement orders by Prudential for the purchase and redemption of Shares of
AVIF.
(d) Prudential agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Policies.
Prudential will not be required by the terms hereof to establish a new funding
medium for any Policies if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
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5.5 NOTICE TO PRUDENTIAL.
AVIF will promptly make known in writing to Prudential the Board of
Directors, determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Prudential and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive application filed with the SEC to permit Mixed and Shared Funding, and
said reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of AVIF or Prudential upon the approval by (i) a majority
of the Disinterested Directors, or (ii) a majority vote of the Shares of the
affected Fund that are held in the
15
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corresponding Subaccount of an Account (pursuant to the procedures set forth in
Section 10 of this Agreement for voting Shares in accordance with Participant
instructions); provided, however, that the approvals described in clauses (i)
and (ii) above shall not be required if (1) the aggregate account value under
the Policies is less than one million dollars ($1,000,000,000) at the date the
notice of termination is delivered, and (2) thirty-six (36) full calendar months
have expired following the date the first Policy invested in any Fund; or
(b) at the option of AVIF or AIM upon institution of formal proceedings
against Prudential or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding Prudential's obligations under
this Agreement or related to the sale of the Policies, the operation of each
Account, or the purchase of Shares, if, in each case, AVIF or AIM reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of Prudential upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, Prudential
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Prudential, or the Subaccount corresponding to the Fund
with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Policies issued or to be issued
by Prudential; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of Prudential if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
Prudential reasonably believes that the Fund may fail to so qualify; or
(g) at the option of Prudential if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if Prudential
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF or AIM if the Policies issued by Prudential cease
to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account
16
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under the Policies are not registered, where required, and, in all material
respects, are not issued or sold in accordance with any applicable federal or
state law; or
(i) upon another Party's material breach of any provision of this
Agreement; or
(j) at the option of either party upon six (6) months' advance written
notice.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is required by law or is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is required by law or is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible after the terminating Party learns of
the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Except (a) as necessary to implement Participant-initiated transactions,
(b) as required by state insurance laws or regulations, (c) as required pursuant
to Section 5 of this Agreement, or (d) with respect to any Fund as to which this
Agreement has terminated pursuant to Section 6.1 hereof, Prudential shall not
(i) redeem AVIF Shares attributable to the Policies (as opposed to AVIF Shares
attributable to Prudential's assets held in each Account), or (ii) prevent
Participants from allocating payments to or transferring amounts from a Fund
that was otherwise available under the Policies, until six (6) months after
Prudential shall have notified AVIF of its intention to do so.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
17
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6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the date as of which an
Account owns no Shares of the affected Fund.
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Policies in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
PRUCO LIFE INSURANCE COMPANY
000 Xxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxxxxx, Esq.
18
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PRUCO SECURITIES CORPORATION
000 Xxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxxxxx, Esq.
AIM VARIABLE INSURANCE FUNDS, INC.
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
A I M DISTRIBUTORS, INC.
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Prudential will distribute all proxy material furnished by AVIF to Participants
to whom pass-through voting privileges are required to be extended and will
solicit voting instructions from Participants. Prudential will vote Shares in
accordance with timely instructions received from Participants. Prudential will
vote Shares that are (a) not attributable to Participants to whom pass-through
voting privileges are extended, or (b) attributable to Participants, but for
which no timely instructions have been received, in the same proportion as
Shares for which said instructions have been received from Participants, so long
as and to the extent that the SEC continues to interpret the 1940 Act to require
pass through voting privileges for Participants. Neither Prudential nor any of
its affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. Prudential reserves the right to vote shares held in any Account
in its own right, to the extent permitted by law. Prudential shall be
responsible for assuring that each of its Accounts holding Shares calculates
voting privileges in a manner consistent with that of other Participating
Insurance Companies or in the manner required by any Mixed and Shared Funding
exemptive order that AVIF may obtain in the future. AVIF will notify Prudential
of any changes of interpretations or amendments to any Mixed and Shared Funding
exemptive order it obtains in the future.
19
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SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Prudential concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY PRUDENTIAL AND THE UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
Prudential and the Underwriter each agree to indemnify and hold harmless AVIF,
its affiliates (including AIM), and each of their respective directors and
officers, and each person, if any, who controls AVIF or its affiliates
(including AIM) within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 12.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of Prudential) or actions in respect thereof (including, to
the extent reasonable, legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions are
related to the sale or acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, the Policies, or sales
literature or advertising for the Policies (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to Prudential or the Underwriter by or on behalf of AVIF for use
in any Account's 1933 Act registration statement, any Account Prospectus,
the Policies, or sales literature or advertising or otherwise for use in
connection with the sale of Policies or Shares (or any amendment or
supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in
AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature
or advertising of AVIF, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of Prudential or
the Underwriter and on which such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of Prudential, the Underwriter or
their respective affiliates or persons under their control (including,
without
20
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limitation, their employees and "Associated Persons," as that term is
defined in paragraph (m) of Article I of the NASD's By-Laws), in connection
with the sale or distribution of the Policies or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the foregoing, or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon and in
conformity with information furnished to AVIF or AIM by or on behalf of
Prudential, the Underwriter or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature
or advertising of AVIF, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by Prudential or the Underwriter
to perform the obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any material breach
of any representation and/or warranty made by Prudential or the Underwriter
in this Agreement or arise out of or result from any other material breach
of this Agreement by Prudential or the Underwriter; or
(v) arise as a result of failure by the Policies issued by Prudential
to qualify as life insurance, endowment, or annuity contracts under the
Code, otherwise than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither Prudential nor the Underwriter shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF or AIM.
(c) Neither Prudential nor the Underwriter shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified Prudential or the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify Prudential or
the Underwriter of any such action shall not relieve Prudential or the
Underwriter from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.1. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, Prudential or the Underwriter shall be entitled to
participate, at its own expense, in the defense of such action and also shall be
entitled to assume the defense thereof, with counsel approved by the Indemnified
21
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Party named in the action, which approval shall not be unreasonably withheld.
After notice from Prudential or the Underwriter to such Indemnified Party of its
election to assume the defense thereof, the Indemnified Party will cooperate
fully with Prudential and shall bear the fees and expenses of any additional
counsel retained by it, and Prudential will not be liable to such Indemnified
Party under this Agreement for any legal or other expenses subsequently incurred
by such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.2 OF PRUDENTIAL AND THE UNDERWRITER BV AVIF AND AIM.
(a) Except to the extent provided in Sections 4.1(c)(vii), 12.2(d), 12.2(e)
and 12.2(f), below, AVIF and AIM each agree to indemnify and hold harmless
Prudential, the Underwriter, their respective affiliates, and each of their
respective directors and officers, and each person, if any, who controls
Prudential, the Underwriter, or their respective affiliates within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
AVIF and AIM) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law, or otherwise,
insofar as such losses, claims, damages, liabilities or actions are related to
the sale or acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus or sales literature or advertising
of AVIF (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to AVIF or its affiliates by
or on behalf of Prudential or its affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, or in sales literature or
advertising (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in any
Account's 1933 Act registration statement, any Account Prospectus, sales
literature or advertising for the Policies, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on behalf of
AVIF or its affiliates and on which such persons have reasonably relied) or
the negligent, illegal or fraudulent conduct of AVIF, its affiliates or
persons under their control (including, without limitation, their employees
and "Associated Persons"), in connection with the sale or distribution of
AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's 1933 Act
registration
22
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statement, any Account Prospectus, sales literature or advertising covering
the Policies, or any amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance upon and in
conformity with information furnished to Prudential, the Underwriter, or
their respective affiliates by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Policies, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF or AIM to perform the
obligations, provide the services and furnish the materials required of it
under the terms of this Agreement, or any material breach of any
representation and/or warranty made by AVIF or AIM in this Agreement or
arise out of or result from any other material breach of this Agreement by
AVIF or AIM.
(b) Except to the extent provided in Sections 4.1(c)(vii), 12.2(d), 12.2(e)
and 12.2(f) hereof, AVIF and AIM each agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, except as set
forth in Section 12.2(c) below, the written consent of AVIF and AIM) or actions
in respect thereof (including, to the extent reasonable, legal and other
expenses) to which the Indemnified Parties may become subject directly or
indirectly under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or indirectly result
from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against Prudential or the Underwriter pursuant to the
Policies, the costs of any ruling and closing agreement or other settlement with
the IRS, and the cost of any substitution by Prudential of Shares of another
investment company or portfolio for those of any adversely affected Fund as a
funding medium for each Account that Prudential reasonably deems necessary or
appropriate as a result of the noncompliance.
(c) The written consent of AVIF and AIM referred to in Section 12.2(b)
above shall not be required with respect to amounts paid in connection with any
ruling and closing or other settlement with the IRS.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to Prudential, each
Account, the Underwriter or Participants.
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(e) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF or AIM in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF or AIM will be entitled to participate, at
its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF or AIM
to such Indemnified Party of its election to assume the defense thereof, the
Indemnified Party will cooperate fully with AVIF and shall bear the fees and
expenses of any additional counsel retained by it, and AVIF will not be liable
to such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
(f) In no event shall either AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any individual or
entity, including, without limitation, Prudential, the Underwriter, or any other
Participating Insurance Company or any Participant, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result from (i) a
breach of any representation, warranty, and/or covenant made by Prudential or
the Underwriter hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants, (ii) the failure by Prudential or any Participating Insurance Company
to maintain its segregated asset account (which invests in any Fund) as a
legally and validly established segregated asset account under applicable state
law and as a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom), or (iii) the failure by Prudential or any
Participating Insurance Company to maintain its variable annuity and/or variable
life insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as life insurance, endowment or annuity contracts under
applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(e) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
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12.4 SUCCESSORS.
This Agreement shall be binding on successors of any Party who shall be
entitled, among other things, to the benefits of the indemnification contained
in this Section 12.
12.5 ASSIGNMENTS.
This Agreement shall not be assigned by any party hereto without the prior
written consent of all the parties, which consent shall not be unreasonably
withheld.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
----------
25
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
By: /s/ XXXXXX X. XXXXXX
--------------------------------------
Title:
A I M DISTRIBUTORS, INC.
By: /s/ X. X. XXXXXXXXXX
--------------------------------------
Title: Senior Vice President
PRUCO LIFE INSURANCE COMPANY, on
behalf of itself and its separate accounts
By: /s/ XXXX XXXXX
--------------------------------------
Title: Vice President & Actuary
PRUCO SECURITIES CORPORATION
By: /s/ XXXXXXX X. XXXX
--------------------------------------
Title: President
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SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Pruco Life Flexible Premium Variable Annuity Account,
established June 16, 1995
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
Discovery Select Annuity Contract
27
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AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated September 21, 1996, by
and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, Pruco Life Insurance Company, an
Arizona life insurance company, and Pruco Securities Corporation, a New Jersey
corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
--------------------- --------------------------- ------------------------
AIM V.I. Growth and Pruco Life Flexible Premium Discovery Select Annuity
Income Fund Variable Annuity Account, Contract
AIM V.I. Value Fund established June 16, 1995
AIM V.I. Value Fund Pruco Life Variable Variable Universal Life
Appreciable Account, Insurance Policy"
established January 13, 1984
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: July 1, 1997
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ XXXXX X. XXXXXX By: /s/ XXXXXX X. XXXXXX
------------------------------ -------------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ XXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXX
------------------------------ -------------------------------
Assistant Secretary President
(SEAL)
II-41
PRUCO LIFE INSURANCE COMPANY
Attest: /s/ XXXXXX X. XXXXXXX By: /s/ XXXXXX X. XXXXXX
------------------------------ -------------------------------
Assistant Secretary President
(SEAL)
PRUCO SECURITIES CORPORATION
Attest: /s/ XXXXXX X. XXXXXXX By: /s/ XXXXXXX X. XXXX
------------------------------ -------------------------------
Assistant Secretary President
(SEAL)
-2-
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