EXHIBIT (8)(k)
PARTICIPATION AGREEMENT BETWEEN MENTOR VARIABLE INVESTMENT
PORTFOLIOS AND PFL LIFE INSURANCE COMPANY
PARTICIPATION AGREEMENT
between
MENTOR VARIABLE INVESTMENT PORTFOLIOS,
and
PFL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 28th day of April, 1999, by and
between PFL LIFE INSURANCE COMPANY, (hereinafter the "Company"), an Iowa
corporation, on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), and MENTOR
VARIABLE INVESTMENT PORTFOLIOS , a business trust organized under the laws of
the Commonwealth of Massachusetts (hereinafter the "Trust")
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be issued
by PFL Life Insurance Company; and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and its shares
are registered under the Securities Act of 1933, as amended (the "1933 Act");
and
WHEREAS, MENTOR INVESTMENT ADVISERS, LLC (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 (the "Advisers Act") and any applicable state securities law; and
WHEREAS, the Trust expects to obtain an order from the Securities and
Exchange Commission granting participating insurance companies and their
separate accounts exemptions from the provisions of section 9(a), 13(a), 15(a),
and 15(b) of the 1940 Act and rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and nonaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Exemptive Order"); and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the underwriter of the Trust's shares, MENTOR DISTRIBUTORS,
LLC, (the "Underwriter") is registered as a broker dealer with the Securities
and Exchange Commission ("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 on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Trust is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
and the Trust agree as follows:
ARTICLE I. Sale of Trust Shares
1.1. The Trust agrees to cause the Underwriter to sell to the Company
those shares of the Trust which each Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of the order for the shares of the Trust. For purposes of this
Section 1.1, the Company shall be the designee of the Trust for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Trust; provided that the Trust receives notice of such order by 9:00 a.m.
central time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Trust calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.2. The Trust agrees to make its shares of the Portfolios listed on
Schedule A available for purchase at the applicable net asset value per share by
the Company and its Accounts on those days on which the Trust calculates such
net asset value pursuant to rules of the Securities and Exchange Commission and
the Trust shall use reasonable efforts to calculate such net asset value on each
day which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (hereinafter the "Board") may
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board acting in good faith and in light of their fiduciary duties under federal
and any applicable state laws, in the best interests of the shareholders of such
Portfolio.
1.3. The Trust agrees that shares of the Trust will be sold only to the
Company and its separate accounts or (subject to the other terms of this
Agreement and the Shared Trust Exemptive Order) to other life insurance
companies that offer variable annuity and/or variable life insurance contracts
to the public and which have entered into an agreement with the Trust. No shares
of any Portfolio will be sold to the general public.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of such
request for redemption by 9:00 am Central Time on the next following Business
Day. The Trust may suspend redemptions of, or delay payments for, such shares as
and to the extent consistent with applicable law.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, as such Schedule A may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Trust, in such other Trusts advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Trust if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Trust;
or (b) the Company gives the Trust 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Trust prior to their signing this Agreement (a list of such funds
appearing on Schedule B to this Agreement); or (d) the Trust consents to the use
of such other investment company.
1.6. The Company shall pay for Trust shares on the next Business
Day after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
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transmitted by wire. For purpose of Section 2.10 and 2.11, upon receipt by the
Trust of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Trust.
1.7. Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Trust shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Trust's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 5:30
p.m. central time) and shall use its best efforts to make such net asset value
per share available by 5:00 p.m. central time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 508A.1 of the Iowa Insurance Code and has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with all applicable federal and state securities
laws and that the Trust is and shall remain registered under the 1940 Act. The
Trust shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make all reasonable efforts to 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.
2.4. The Company represents that the Contracts are currently treated as
endowment or annuity insurance contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Trust immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.5. The Trust 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 Trust
undertakes to comply with the applicable provisions of Rule 12b-1.
2.6. The Trust represents that it is duly organized and validly
existing under the laws of Commonwealth of Massachusetts and that it does and
will comply in all material respects with the 1940 Act.
2.7. The Trust represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust in an amount not less than
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the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.8. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are covered by a blanket fidelity
bond or similar coverage for the benefit of the Trust, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Trust in the
event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Trust shall provide the Company with as many printed copies of
the Trust's current prospectus and Statement of Additional Information as the
Company may reasonably request. If requested by the Company in lieu thereof, the
Trust shall provide camera-ready film containing the Trust's prospectus and
Statement of Additional Information, and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus and/or Statement of Additional Information for the Trust is amended
during the year) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document, and to have the Statement of
Additional Information for the Trust and the Statement of Additional Information
for the Contracts printed together in one document. Alternatively, the Company
may print the Trust's prospectus and/or its Statement of Additional Information
in combination with other fund companies' prospectuses and statements of
additional information. The Trust shall provide such material within a
reasonable time to allow for printing and delivery, and in no event less that
five business days prior to the regulatory required delivery date to
policyholders. Except as provided in the following three sentences, all expenses
of printing and distributing Trust prospectuses and Statements of Additional
Information shall be the expense of the Company. For prospectuses and Statements
of Additional Information provided by the Company to its existing owners of
Contracts in order to update disclosure annually as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Trust. If the
Company chooses to receive camera-ready film in lieu of receiving printed copies
of the Trust's prospectus, the Trust will reimburse the Company in an amount
equal to the product of A and B where A is the number of such prospectuses
distributed to owners of the Contracts, and B is the Trust's per unit cost of
typesetting and printing the Trust's prospectus. The same procedures shall be
followed with respect to the Trust's Statement of Additional Information.
The Company agrees to provide the Trust or its designee with such
information as may be reasonably requested by the Trust to assure that the
Trust's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2. The Trust's prospectus shall state that the Statement of
Additional Information for the Trust is available from the Trust or the Company
(or in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust).
3.3. The Trust, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions received
from Contract owners; and
(iii) vote Trust shares for which no instructions have been received
in a particular separate account in the same proportion as
Trust shares of such portfolio for which instructions have
been received in that separate account, so long as and to the
extent that the Securities and Exchange Commission continues
to interpret the 1940 Act to require pass-through voting
privileges for variable contract
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owners. The Company and its agents will in no way recommend
or oppose or interfere with the solicitation of proxies for
the Trust shares held by policy owners without the prior
written consent of the Trust. The Trust shall require all
participating insurance companies to calculate voting
percentages in the same manner and the Company shall be
responsible for assuring the Accounts calculate voting
privileges in the manner established by the Trust. The Company
reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by
law. The Company shall be responsible for assuring that each
of its separate accounts participating in the Trust calculates
voting privileges in the same manner.
3.5. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
3.6. The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish or shall cause to be furnished, to the
Trust or its designee a copy of each prospectus or statement of additional
information in which the Trust or the Adviser is named at least fifteen Business
Days prior to the filing of such document with the Securities and Exchange
Commission. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or the Adviser or the Underwriter is named, at least
ten Business Days prior to its use. No such material shall be used if the Trust
or its designee reasonably objects 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 Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Trust,
or in sales literature or other promotional material approved by the Trust or
its designee, except with the permission of the Trust or its designee.
4.3. The Trust, or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s),
is named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4. The Trust shall not, and the Trust shall cause the Adviser and the
Underwriter to 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 Contract owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Trust or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to
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any of the above, that relate to the Contracts or each Account,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Trust or any affiliate of the Trust: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust shall pay no fee or other compensation to the Company
under this agreement, except that if the Trust or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company for the Contracts if and in
amounts agreed to by the Underwriter in writing and such payments will be made
out of existing fees otherwise payable to the Underwriter, past profits of the
Underwriter or other resources available to the Underwriter. No such payments
shall be made directly by the Trust.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares, preparation and filing of the Trust's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
6.1. The Trust represents that it intends at all times to invest money
from the Contracts in such a manner as to ensure that the Contracts will be
treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Trust represents
that it intends at all times to comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulations. In the event of a failure by
the Trust to maintain adequate diversification , it will take all reasonable
steps (a) to notify Company of such failure and (b) to adequately diversify the
Trust so as to achieve compliance within the grace period afforded by Regulation
1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Trust, if it determines to offer its shares to any other
insurance company, separate account or to a qualified plan shall furnish the
Company with a copy of its application for an order of the Securities and
Exchange Commission under Section 6(c) of the 1940 Act for mixed and shared
funding relief, and the notice of such application and order when issued by the
SEC. In the event of any inconsistency between the terms of any such application
or order and the terms of this Agreement (including without limitation this
Article VII) the parties shall act in accordance with the terms of such
application and order and the provisions of this Agreement shall be deemed to be
amended to that extent. The Company agrees to comply with the conditions on
which such
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order is issued, including reporting any potential or existing conflicts
promptly to the Board of Directors of the Trust ("Board"), and in particular
whenever contract owner voting instructions are disregarded, to the extent such
conditions are not materially different from the conditions of the mixed and
shared funding relief that the Company has agreed to be bound by in similar
participation agreements with other fund providers, and recognizes that it shall
be responsible for assisting the Board in carrying out is responsibilities in
connection with such order. The Company agrees to carry out such
responsibilities with a view to the interests of existing contract owners.
7.2 The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trust shall promptly inform the Company if
the Board determines that an irreconcilable material conflict exists and the
implications thereof.
7.3. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever contract
owner voting instructions are disregarded.
7.4. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of the Company) that
votes in favor of such segregation, or offering to the affected contract owners
the option of making such a change; and (2), establishing a new registered
management investment company or managed separate account.
7.5. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Trust
gives written notice that this provision is being implemented, and until the end
of that six month period Trust shall, subject to the other provisions of this
Agreement, continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Trust.
7.6. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Trust shall, subject to the
other provisions of this Agreement, continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Trust.
7.7. For purposes of Sections 7.4 through 7.7 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict,
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but in no event will the Trust be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 7.4 to establish a
new funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Trust
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Trust and
each trustee of the Board and officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 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 legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished in writing to the Company by
or on behalf of the Trust for use in the Registration Statement or prospectus
for the Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Trust not supplied
by the Company, or persons under its control) or wrongful conduct of the Company
or persons under common control with the Company, with respect to the sale or
distribution of the Contracts or Trust Shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Trust or any amendment thereof
or supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in reliance upon
information furnished to the Trust by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Trust, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in
8
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust Shares or the Contracts or the operation of
the Trust.
8.2 Indemnification By the Trust
8.2(a). The Trust agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this Agreement;or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by the Trust;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from any
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Trust, or each Account, whichever is applicable.
8.2(c). The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Trust to such party of the Trust's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Trust will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
9
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Trust.
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 Delaware.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by ninety (90)
days advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust
with respect to any Portfolio based upon the Company's determination that shares
of such Portfolio are not reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the Trust
with respect to any Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Trust
with respect to any Portfolio in the event that such Portfolio ceases to qualify
as a Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(e) termination by the Company by written notice to the Trust
with respect to any Portfolio in the event that such Portfolio fails to meet the
diversification requirements specified in Article VI hereof; or
(f) termination by the Trust by written notice to the Company,
if (1) the Trust shall determine, in its sole judgment reasonably exercised in
good faith, that the Company has suffered a material adverse change in its
business or financial condition or is the subject of material adverse publicity
and such material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of the Trust , (2) the
Trust shall notify the Company in writing of such determination and its intent
to terminate this Agreement, and (3) after considering the actions taken by the
Company and any other changes in circumstances since the giving of such notice,
such determination of the Trust shall continue to apply on the sixtieth (60th)
day following the giving of such notice, which sixtieth day shall be the
effective date of termination; or
(g) termination by the Company by written notice to the Trust,
if (1) the Company shall determine, in its sole judgment reasonably exercised in
good faith, that the Trust has suffered a material adverse change in its
business or financial condition or is the subject of material adverse publicity
and such material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of the Company, (2) the
Company shall notify the Trust in writing of such determination and its intent
to terminate the Agreement, and (3) after considering the actions taken by the
Trust and any other changes in circumstances since the giving of such notice,
such determination shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth day shall be the effective date of
termination; or
(h) termination by the Trust by written notice to the Company,
if the Company gives the Trust the written notice specified in Section 1.5(b)
hereof and at the time such notice was given there was no notice of
10
termination outstanding under any other provision of this Agreement; provided,
however any termination under this Section 10.1(h) shall be effective forty five
(45) days after the notice specified in Section 1.5(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust shall at the option of the Company, continue to make
available additional shares of the Trust pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts"), provided
the Company continues to comply with its remaining obligations under this
Agreement with respect to the Existing Contracts as if it had not been
terminated. Specifically, without limitation and subject to the proviso in the
preceding sentence, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.2 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust the opinion of counsel
for the Company (which counsel shall be reasonably satisfactory to the Trust) to
the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Trust 90 days notice of its intention to do
so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail or by overnight courier 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, which notice shall be effective upon
delivery.
If to the Trust:
Mentor Variable Investment Portfolios
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: President
If to the Company:
PFL Life Insurance Company
0000 Xxxxxxxx Xxxx, X X
Xxxxx Xxxxxx, Xxxx 00000-0000
Attention: Financial Markets Division, Legal Department
ARTICLE XII. Miscellaneous
12.1 All parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent, or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
11
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 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish any Insurance Commissioner with proper jurisdiction in the
matter with any information or reports in connection with services provided
under this Agreement which such Commissioner may request in order to ascertain
whether the insurance operations of the Company are being conducted in a manner
consistent with applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto. The Company shall promptly notify the Trust and the Underwriter of any
change in control of the Company.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon as practical and in any event
within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP,
if any), as soon as practical and in any event within 45 days after the end of
each quarterly period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as soon as practical
after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical after the
filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special audit made by them
of the books of the Company, as soon as practical after the receipt thereof.
12
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
SEAL PFL LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/Xxxxxx X. Xxxxxxx
---------------------------
---------------------------
Title: Vice President and Actuary
---------------------------
Date: May 3, 1999
---------------------------
Trust:
SEAL MENTOR VARIABLE INVESTMENT PORTFOLIOS
By its authorized officer,
By: /s/ Xxxx X. Xxxxxxxx
---------------------------
Xxxx X Xxxxxxxx
Title: President
Date: May 3, 1999
---------------------------
13
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Date Policy Form Numbers of Contracts Portfolios Applicable to Policies
Established by Board of Directors Funded
Mentor VIP Capital Growth Portfolio
PFL Retirement Builder Variable PFL Life Insurance Company Policy
Annuity Account Form No. AV288-101-95-796 (including Mentor VIP Growth Portfolio
successor forms, addenda and
March 29, 1996 endorsements which may vary by Mentor VIP High Income Portfolio
states and under marketing names
"Retirement Income Builder Variable
Annuity" and Portfolio Select
Variable Annuity" and successor
marketing names
14
Schedule B
=========================================== =================================================== ========================
1998 1999 Changes
------------------------------------------- --------------------------------------------------- ------------------------
AIM Variable Insurance AIM Variable Insurance
Funds, Inc. Funds, Inc.
AIM V.I. Growth and Income Fund AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund AIM V.I. International Equity Fund
AIM V.I. Value Fund AIM V.I. Value Fund
------------------------------------------- --------------------------------------------------- ------------------------
Evergreen Variable Trust Evergreen Variable Trust
Evergreen VA Fund Evergreen VA Fund
Evergreen Foundation Fund Evergreen Foundation Fund
Evergreen Global Leaders Fund New Fund
Evergreen VA Growth and Income Fund Evergreen VA Growth and Income Fund
Evergreen VA International Growth Fund New Fund
------------------------------------------- --------------------------------------------------- ------------------------
Federated Insurance Series Federated Insurance Series
Federated High Income Bond Fund II Federated High Income Bond Fund II
------------------------------------------- --------------------------------------------------- ------------------------
Variable Insurance Products
Fund (VIP)
VIP High Income Portfolio - Service Class New Portfolio
------------------------------------------- --------------------------------------------------- ------------------------
Variable Insurance Products
Fund II (VIP II)
VIP II Index 500 Portfolio - Initial Class New Portfolio
VIP II Investment Grade Bond Portfolio - Initial New Portfolio
Class
------------------------------------------- --------------------------------------------------- ------------------------
Variable Insurance Products
Fund III (VIP III)
VIP III Growth Opportunities Portfolio - Service New Portfolio
Class
------------------------------------------- --------------------------------------------------- ------------------------
Mentor Variable
Investment Portfolios
Mentor VIP Capital Growth Portfolio New Portfolio
Mentor VIP Growth Portfolio New Portfolio
Mentor VIP High Income Portfolio New Portfolio by
Supplement--May 1999
------------------------------------------- --------------------------------------------------- ------------------------
MFS Variable Insurance Trust MFS Variable Insurance Trust
MFS Emerging Growth Series MFS Emerging Growth Series
MFS Research Series MFS Research Series
MFS Total Return Series MFS Total Return Series
MFS Utilities Series New Series
Xxxxxxxxxxx Variable Xxxxxxxxxxx Variable
Account Funds Account Funds
Xxxxxxxxxxx Growth Fund Xxxxxxxxxxx Capital Appreciation Fund/VA Name Change
Xxxxxxxxxxx Multiple Strategies Fund Xxxxxxxxxxx Multiple Strategies Fund/VA Name Change
Xxxxxxxxxxx Strategic Bond Fund Xxxxxxxxxxx Strategic Bond Fund/VA Name Change
------------------------------------------- --------------------------------------------------- ------------------------
Xxxxxx Variable Trust Xxxxxx Variable Trust
Xxxxxx VT Global Growth Fund Xxxxxx VT Global Growth Fund - Class IB Shares
Xxxxxx VT Money Market Fund Xxxxxx VT Money Market Fund - Class IB Shares
Xxxxxx VT New Value Fund Xxxxxx VT New Value Fund - Class IB Shares
------------------------------------------- --------------------------------------------------- ------------------------
Xxxxxxxxx Variable
Products Series Fund
Xxxxxxxxx Asset Allocation Fund - Class 2 New Fund
Xxxxxxxxx International Fund - Class 2 New Fund
Franklin Small Cap Investments Fund - Class 2 New Fund
=========================================== =================================================== ========================
15
