Exhibit 3(g)
FUND PARTICIPATION AGREEMENT
THE OHIO NATIONAL LIFE INSURANCE COMPANY,
THE PRUDENTIAL SERIES FUND,
PRUDENTIAL INVESTMENTS LLC,
AND
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
JANUARY 1, 2006
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares......................................................................4
ARTICLE II. Representations and Warranties...........................................................8
ARTICLE III. Prospectuses and Proxy Statements; Voting...............................................12
ARTICLE IV. Sales Material and Information..........................................................14
ARTICLE V. Fees and Expenses.......................................................................16
ARTICLE VI. Diversification and Qualification.......................................................17
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order ...............................................19
ARTICLE VIII. Indemnification ........................................................................22
ARTICLE IX. Applicable Law..........................................................................27
ARTICLE X. Termination.............................................................................28
ARTICLE XI. Notices.................................................................................30
ARTICLE XII. Miscellaneous...........................................................................31
SCHEDULE A Contracts...............................................................................35
SCHEDULE B Designated Portfolios...................................................................36
SCHEDULE C Expenses................................................................................37
SCHEDULE D Diversification Compliance Report and Certification.....................................40
PARTICIPATION AGREEMENT
Among
THE OHIO NATIONAL LIFE INSURANCE COMPANY,
THE PRUDENTIAL SERIES FUND,
PRUDENTIAL INVESTMENTS LLC,
and
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
THIS AGREEMENT, made and entered into as of this 1st day of January,
2006, by and among THE OHIO NATIONAL LIFE INSURANCE COMPANY (the "Company"), an
Ohio life insurance company, on its own behalf and on behalf of its separate
accounts (the "Accounts"); THE PRUDENTIAL SERIES FUND, an open-end management
investment company organized under the laws of
Delaware (the "Fund"); PRUDENTIAL
INVESTMENTS LLC (the "Adviser"), a New York limited liability company; and
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC (the "Distributor"), a
Delaware
limited liability company.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and/or
variable annuity contracts (collectively, the "Variable Insurance Products") to
be offered by insurance companies (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
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WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated March 5, 1999 (File No. IC-23728) (the
"Mixed and Shared Funding Exemptive Order"), granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another and qualified pension and retirement
plans ("Qualified Plans"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolio(s) are registered under
the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Distributor is duly registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended, (the "1934 Act") and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, the Company has issued and plans to continue to issue certain
variable life insurance policies and/or variable annuity contracts supported
wholly or partially by the Accounts (the "Contracts"); and such Contracts are
listed in Schedule A attached hereto and incorporated herein by reference, as
such schedule may be amended from time to time by mutual written agreement of
the parties; 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 August 1, 1969 under the
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insurance laws of the State of Ohio, to set aside and invest assets attributable
to the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to continue to purchase shares in the
Portfolios listed on Schedule B attached hereto and incorporated herein by
reference, as such schedule may be amended from time to time by mutual written
agreement of the parties (the "Portfolios"), on behalf of the Accounts to fund
the Contracts, and the Fund is authorized to sell such shares to unit investment
trusts such as the Accounts at net asset value; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company also intends to continue to purchase shares in other
open-end investment companies or series thereof not affiliated with the Fund
(the "Unaffiliated Funds") on behalf of the Accounts to fund the Contracts.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the
Portfolios which the Account orders, executing such orders on each Business Day
at the net asset value next computed after receipt by the Fund or its designee
of the order for the shares of the Portfolios. For purposes of this Section 1.1,
the Company shall be the designee of the Fund for receipt of such orders and
receipt by such designee shall constitute receipt by the Fund, provided that the
Fund receives notice of any such order by 10:00 a.m. Eastern time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange (the "NYSE") is open for trading and on which the Portfolio
calculates its net asset value pursuant to the rules of the SEC as described in
the then-current registration statement of the Fund on Form N-1A.
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"Valuation Time" shall mean the time as of which the Fund calculates net asset
value for the shares of the Portfolios on the relevant Business Day.
1.2. The Fund agrees to make shares of the Portfolios available for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Fund calculates its Portfolios' net asset
value pursuant to rules of the SEC, and the Fund shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Fund 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 Fund acting in good faith, necessary or appropriate in
the best interests of the shareholders of such Portfolio. All orders accepted by
the Company shall be subject to the terms of the then current prospectus of the
Fund. The Company shall use its best efforts, and shall reasonably cooperate
with, the Fund to enforce stated prospectus policies regarding transactions in
Portfolio shares. The Company acknowledges that orders for Portfolio shares
accepted by it in violation of the stated policies of the Fund as set forth in
the Fund's then-current prospectus may be subsequently revoked or cancelled by
the Fund and that the Fund shall not be responsible for any losses incurred by
the Company or the Contract owner as a result of such cancellation. In addition,
the Company acknowledges that the Fund has the right to refuse any purchase
order for any reason, particularly if the Fund determines that a Portfolio would
be unable to invest the money effectively in accordance with its investment
policies or would otherwise be adversely affected due to the size of the
transaction, frequency of trading, or other factors.
1.3. The Fund will not sell shares of the Portfolios to any other
Participating Insurance Company separate account unless an agreement containing
provisions the substance of which are the same as Sections 2.1, 2.2 (except with
respect to Ohio law), 3.5, 3.6, 3.7, and Article VII of this Agreement is in
effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on each Business
5
Day at the net asset value next computed after receipt by the Fund or its
designee of the request for redemption. For purposes of this Section 1.4, the
Company shall be the designee of the Fund for receipt of requests for redemption
and receipt by such designee shall constitute receipt by the Fund, provided that
the Fund receives notice of any such request for redemption by 10:00 a.m.
Eastern time on the next following Business Day.
1.5. The parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Fund's shares may be sold to other
Participating Insurance Companies (subject to Section 1.3) and the cash value of
the Contracts may be invested in other investment companies.
1.6. The Company shall pay for Fund shares by 3:00 p.m. Eastern time on
the next Business Day after an order to purchase Fund shares is received in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire and/or by a credit for any shares redeemed the
same day as the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions of
Fund shares by 11:00 a.m. Eastern Time on the next Business Day after a
redemption order is received in accordance with Section 1.4 hereof; provided,
however, that the Fund may delay payment in extraordinary circumstances to the
extent permitted under Section 22(e) of the 1940 Act. Payment shall be in
federal funds transmitted by wire and/or a credit for any shares purchased the
same day as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Accounts.
Shares purchased from the Fund will be recorded in an appropriate title for the
relevant Account or the relevant sub-account of an Account.
1.9. The Fund shall furnish same day notice (by electronic
communication or telephone, followed by electronic confirmation) to the Company
of any income, dividends or
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capital gain distributions payable on a Portfolio's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on a Portfolio's 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 Fund shall notify
the Company by the end of the next following Business Day of the number of
shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on each Business Day as soon as reasonably
practicable after the net asset value per share is calculated and shall use its
best efforts to make the net asset value per share for each Portfolio available
by 6:00 p.m. Eastern time. In the event of an error in the computation of a
Portfolio's net asset value per share ("NAV") or any dividend or capital gain
distribution (each, a "pricing error"), the Adviser or the Fund shall notify the
Company as soon as reasonably possible after discovery of the error. Such
notification may be verbal, but shall be confirmed promptly in writing. A
pricing error shall be corrected as follows: (a) if the pricing error results in
a difference between the erroneous NAV and the correct NAV of less than $0.01
per share, then no corrective action need be taken; (b) if the pricing error
results in a difference between the erroneous NAV and the correct NAV equal to
or greater than $0.01 per share, but less than 1/2 of 1% of the Portfolio's NAV
at the time of the error, then the Adviser shall reimburse the Portfolio for any
loss, after taking into consideration any positive effect of such error;
however, no adjustments to Contract owner accounts need be made; and (c) if the
pricing error results in a difference between the erroneous NAV and the correct
NAV equal to or greater than 1/2 of 1% of the Portfolio's NAV at the time of the
error, then the Adviser shall reimburse the Portfolio for any loss (without
taking into consideration any positive effect of such error) and shall reimburse
the Company for the costs of adjustments made to correct Contract owner accounts
in accordance with the provisions of Schedule C. If an adjustment is necessary
to correct a material error (as described below) which has caused Contract
owners to receive less than the amount to which they are entitled, the number of
shares of the applicable sub-account of such Contract owners will be adjusted
and the amount of any underpayments shall be credited by the Adviser to the
Company for crediting of such amounts to the applicable sub-accounts of such
Contract owners.
7
Upon notification by the Adviser of any overpayment due to a material error, the
Company shall promptly remit to the Adviser any overpayment that has not been
paid to Contract owners. In no event shall the Company be liable to Contract
owners for any such adjustments or underpayment amounts. A pricing error within
categories (b) or (c) above shall be deemed to be "materially incorrect" or
constitute a "material error" for purposes of this Agreement. The standards set
forth in this Section 1.10 are based on the parties' understanding of the views
expressed by the staff of the SEC as of the date of this Agreement. In the event
the views of the SEC staff are later modified or superseded by SEC or judicial
interpretation, the parties shall amend the foregoing provisions of this
Agreement to comport with the then-currently acceptable standards, on terms
mutually satisfactory to all parties.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that: (a) the securities
deemed to be issued by the Accounts under the Contracts are or will be
registered under the 1933 Act, or are not so registered in proper reliance upon
an exemption from such registration requirements; (b) the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws; and (c) the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements.
2.2. The Company represents and warrants that: (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it has
legally and validly established each Account prior to any issuance or sale of
units thereof as a segregated asset account under Ohio law; and (c) it has
registered 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, and will maintain such registration for so long as any Contracts are
outstanding as required by applicable law or, alternatively, the Company has not
registered one or more Accounts in proper reliance upon an exclusion from such
registration requirements.
8
2.3. The Fund represents and warrants that: (a) the Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act; (b) the Fund
shares sold pursuant to this Agreement shall be duly authorized for issuance and
sold in compliance with all applicable federal securities laws including,
without limitation, the 1933 Act, the 1934 Act, and the 1940 Act; (c) the Fund
is and shall remain a registered investment company under the 1940 Act; and (d)
the Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
2.4. The Fund represents and warrants that it has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act for its Class II shares. The parties
acknowledge that the Fund reserves the right to modify its existing plan or to
adopt additional plans pursuant to Rule 12b-1 under the 1940 Act (including with
respect to its Class I shares) and to impose an asset-based or other charge to
finance distribution expenses as permitted by applicable law and regulation. The
Fund, the Distributor and the Adviser agree to comply with applicable provisions
and SEC interpretation of the 1940 Act with respect to any distribution plan.
2.5. The Fund represents and warrants that it shall register and
qualify the shares for sale in accordance with the laws of the various states if
and to the extent required by applicable law.
2.6. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of
Delaware and that it does and
will comply in all material respects with the 1940 Act.
2.7. The Adviser represents and warrants that it is and shall remain
duly registered as an investment adviser under all applicable federal and state
securities laws and that it shall perform its obligations for the Fund in
compliance in all material respects with any applicable state and federal
securities laws.
9
2.8. The Distributor represents and warrants that it is and shall
remain duly registered under all applicable federal and state securities laws
and that it shall perform its obligations for the Fund in compliance in all
material respects with the laws of any applicable state and federal securities
laws.
2.9. The Fund and the Adviser represent and warrant that all of their
respective officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are, and shall
continue to be at all times, covered by one or more blanket fidelity bonds or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage required by Rule 17g-1 under the 1940 Act or related provisions
as may be promulgated from time to time. The aforesaid bonds shall include
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company.
2.10. The Fund and the Adviser represent and warrant that they will
provide the Company with as much advance notice as is reasonably practicable of
any material change affecting the Portfolios (including, but not limited to, any
material change in the registration statement or prospectus affecting the
Portfolios) and any proxy solicitation affecting the Portfolios and consult with
the Company in order to implement any such change in an orderly manner,
recognizing the expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the prospectus
for the Contracts.
2.11 The Company represents and warrants, for purposes other than
diversification under Section 817 of the Internal Revenue Code of 1986, as
amended (the "Code"), that the Contracts are currently and at the time of
issuance will be treated as annuity contracts or life insurance policies under
applicable provisions of the Code, and that it will make every effort to
maintain such treatment and that it will notify the Fund, the Distributor and
the Adviser immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they may not be so treated in the
future. In addition, the Company represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are
10
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. The Company will use best efforts to continue to meet
such definitional requirements, and it will notify the Fund, the Distributor and
the Adviser immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they may not be met in the future.
The Company represents and warrants that it will not purchase Fund shares with
assets derived from tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.12 The Company represents and warrants that it is currently in
compliance, and will remain in compliance, with all applicable anti-money
laundering laws, regulations, and requirements. In addition, the Company
represents and warrants that it has adopted and implemented policies and
procedures reasonably designed to achieve compliance with the applicable
requirements administered by the Office of Foreign Assets Control ("OFAC") of
the U.S. Department of the Treasury.
2.13 The Company represents and warrants that it is currently in
compliance, and will remain in compliance, with all applicable laws, rules and
regulations relating to consumer privacy, including, but not limited to,
Regulation S-P.
2.14 The Company represents and warrants that it has adopted, and will
at all times during the term of this Agreement maintain, reasonable and
appropriate procedures ("Late Trading Procedures") designed to ensure that any
and all orders relating to the purchase, sale or exchange of Fund shares
communicated to the Fund are treated in accordance with Article I of this
Agreement as having been received on a Business Day have been received by the
Valuation Time on such Business Day and were not modified after the Valuation
Time, and that all orders received from Contract owners but not rescinded by the
Valuation Time were communicated to the Fund or its agent as received for that
Business Day. Each transmission of orders by the Company shall constitute a
representation by the Company that such orders are accurate and complete and
relate to orders received by the Company by the Valuation Time on the Business
11
Day for which the order is to be priced and that such transmission includes all
orders relating to Fund shares received from Contract owners but not rescinded
by the Valuation Time. The Company agrees to provide the Fund or its designee
with a copy of the Late Trading Procedures and such certifications and
representations regarding the Late Trading Procedures as the Fund or its
designee may reasonably request. The Company will promptly notify the Fund in
writing of any material change to the Late Trading Procedures.
2.15. The Company represents and warrants that it has adopted, and will
at all times during the term of this Agreement maintain, reasonable and
appropriate procedures ("Market Timing Procedures") designed to minimize any
adverse impact on other Fund investors due to excessive trading. The Company
agrees to provide the Fund or its designee with a copy of the Market Timing
Procedures and such certifications and representations regarding the Market
Timing Procedures as the Fund or its designee may reasonably request. The
Company will promptly notify the Fund in writing of any material change to the
Market Timing Procedures. The parties agree to cooperate in light of any
conflict between the Market Timing Procedures and actions taken or policies
adopted by the Fund designed to minimize any adverse impact on other Fund
investors due to excessive trading.
2.16 The Fund, the Adviser and the Distributor make no representation
as to whether any aspect of the Fund's operations (including, but not limited
to, fees and expenses and investment policies) complies with the insurance laws
or regulations of the various states.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Adviser or Distributor shall provide the
Company with as many copies of the Fund's current prospectus as the Company may
reasonably request, with expenses to be borne in accordance with Schedule C
hereof. If requested by the Company in lieu thereof, the Adviser, Distributor or
Fund shall provide such documentation (including an electronic version of the
current prospectus) and other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus for the Fund is
12
amended) to have the prospectus for the Contracts and the prospectus for the
Fund printed together in one document.
3.2. If applicable state or federal laws or regulations require that
the Statement of Additional Information ("SAI") for the Fund be distributed to
all Contract owners, then the Fund, Distributor and/or the Adviser shall provide
the Company with copies of the Fund's SAI in such quantities, with expenses to
be borne in accordance with Schedule C hereof, as the Company may reasonably
require to permit timely distribution thereof to Contract owners. The Adviser,
the Distributor and/or the Fund shall also provide an SAI to any Contract owner
or prospective owner who requests such SAI from the Fund.
3.3. The Fund, the Distributor and/or the Adviser shall provide the
Company with copies of the Fund's proxy material, reports to shareholders and
other communications to shareholders in such quantity, with expenses to be borne
in accordance with Schedule C hereof, as the Company may reasonably require to
permit timely distribution thereof to Contract owners.
3.4. It is understood and agreed that, except with respect to
information regarding the Company provided in writing by that party, the Company
shall not be responsible for the content of the prospectus or SAI for the Fund.
It is also understood and agreed that, except with respect to information
regarding the Fund, the Distributor, the Adviser or the Portfolios provided in
writing by the Fund, the Distributor or the Adviser, neither the Fund, the
Distributor nor Adviser are responsible for the content of the prospectus or SAI
for the Contracts.
3.5. If and to the extent required by law the Company shall:
(a) solicit voting instructions from Contract owners;
(b) vote the Portfolio shares held in the Accounts in
accordance with instructions received from Contract owners;
(c) vote Portfolio shares held in the Accounts for which
no instructions have been
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received in the same proportion as Portfolio shares for which instructions have
been received from Contract owners, so long as and to the extent that the SEC
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners; and
(d) vote Portfolio shares held in its general account or
otherwise in the same proportion as Portfolio shares for which instructions have
been received from Contract owners, so long as and to the extent that the SEC
continues to interpret the 1940 Act to require such voting by the insurance
company. The Company reserves the right to vote Fund shares in its own right, to
the extent permitted by law.
3.6. The Company shall be responsible for assuring that each of its
separate accounts holding shares of a Portfolio calculates voting privileges as
directed by the Fund and agreed to by the Company and the Fund. The Fund agrees
to promptly notify the Company of any changes of interpretations or amendments
of the Mixed and Shared Funding Exemptive Order.
3.7. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends, comply with
Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors or trustees and with whatever rules the SEC may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, a copy of each piece of sales literature or other
promotional material that the Company develops or proposes to use and in which
the Fund (or a Portfolio thereof), the Adviser or the Distributor is named in
connection with the Contracts, at least five (5) Business Days prior to its use.
No such material shall be used if the Fund or its designee objects to such use
within three (3) Business Days after receipt of such material.
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4.2. The Company shall not give any information or make any
representations or statements on behalf of or concerning the Fund, the
Portfolios, the Adviser or the Distributor in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement, including the prospectus or SAI for the Fund, as the
same may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by the Fund, the Distributor or the Adviser,
except with the permission of the Fund, the Distributor or the Adviser.
4.3. The Fund, the Adviser or the Distributor shall furnish, or shall
cause to be furnished, to the Company, a copy of each piece of sales literature
or other promotional material in which the Company and/or its separate
account(s) is named at least five (5) Business Days prior to its use. No such
material shall be used if the Company objects to such use within three (3)
Business Days after receipt of such material.
4.4. The Fund, the Distributor and the Adviser shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Accounts, or the Contracts other than the information or
representations contained in a registration statement, including the prospectus
or SAI for the Contracts, as the same may be amended or supplemented from time
to time, or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5. The Fund or its designees will provide to the Company at least one
complete copy of all registration statements, prospectuses, SAIs, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund within a reasonable period of time following the filing of
such document(s) with the SEC or NASD or other regulatory authorities.
4.6. The Company will provide to the Fund or its designees at least one
complete copy of all registration statements, prospectuses, SAIs, reports,
solicitations for voting instructions,
15
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Contracts or the Accounts, within a reasonable period of time
following the filing of such document(s) with the SEC, NASD, or other regulatory
authority.
4.7. For purposes of Articles IV and VIII, the phrase "sales literature
and other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media; e.g.,
on-line networks such as the Internet or other electronic media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and shareholder reports, and proxy
materials (including solicitations for voting instructions) and any other
material constituting sales literature or advertising under the NASD rules, the
1933 Act or the 0000 Xxx.
4.8. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representatives of the appropriate regulatory authorities, all records, data and
access to operating procedures that may be reasonably requested in connection
with compliance and regulatory requirements related to this Agreement or any
party's obligations under this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund, the Distributor and the Adviser shall pay no fee or
other compensation to the Company under this Agreement, and the Company shall
pay no fee or other compensation to the Fund, the Distributor or Adviser under
this Agreement; provided, however, (a) the parties will bear their own expenses
as reflected in Schedule C and other provisions of this Agreement,
16
and (b) the parties may enter into other agreements relating to the Company's
investment in the Fund, including services agreements.
ARTICLE VI. Diversification and Qualification
6.1. The Fund, the Distributor and the Adviser represent and warrant
that the Fund and each Portfolio thereof will at all times comply with Section
817(h) of the Code and Treasury Regulation Section 1.817-5, as amended from time
to time, and any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications or successor provisions to
such Section or Regulations. The Fund, the Distributor or the Adviser shall
provide to the Company a quarterly written diversification report, in the form
attached hereto as Schedule D, which shall show the results of the quarterly
Section 817(h) diversification test and include a certification as to whether
each Portfolio complies with the diversification requirements of Section 817(h)
of the Code.
6.2. The Fund, the Distributor and the Adviser agree that shares of the
Portfolios will be sold only to Participating Insurance Companies and their
separate accounts and to Qualified Plans. No shares of any Portfolio of the Fund
will be sold to the general public.
6.3. The Fund, the Distributor or the Adviser will notify the Company
immediately upon having a reasonable basis for believing that the Fund or any
Portfolio has ceased to comply with the aforesaid Section 817(h) diversification
requirements or might not so comply in the future.
6.4. Without in any way limiting the effect of Sections 8.2, 8.3 and
8.4 hereof and without in any way limiting or restricting any other remedies
available to the Company, the Adviser or Distributor will pay all costs
associated with or arising out of any failure, or any anticipated or reasonably
foreseeable failure, of the Fund or any Portfolio to comply with Sections 6.1 or
6.2 hereof, including all costs associated with reasonable and appropriate
17
corrections or responses to any such failure; such costs may include, but are
not limited to, the costs involved in creating, organizing, and registering a
new investment company as a funding medium for the Contracts and/or the costs of
obtaining whatever regulatory authorizations are required to substitute shares
of another investment company for those of the failed Portfolio (including, but
not limited to, an order pursuant to Section 26(c) of the 1940 Act).
6.5. The Company agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of the
Company (or, to the Company's knowledge, of any Contract owner) that any
Portfolio has failed to comply with the diversification requirements of Section
817(h) of the Code or the Company otherwise becomes aware of any facts that
could give rise to any claim against the Fund, the Distributor or the Adviser as
a result of such a failure or alleged failure:
(a) The Company shall promptly notify the Fund, the
Distributor and the Adviser of such assertion or potential claim;
(b) The Company shall consult with the Fund, the Distributor
and the Adviser as to how to minimize any liability that may arise as a result
of such failure or alleged failure;
(c) The Company shall use its best efforts to minimize
any liability of the Fund, the Distributor and the Adviser resulting from such
failure, including, without limitation, demonstrating, pursuant to Treasury
Regulations, Section 1.817-5(a)(2), to the commissioner of the IRS that such
failure was inadvertent;
(d) Any written materials to be submitted by the Company
to the IRS, any Contract owner or any other claimant in connection with any of
the foregoing proceedings or contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to Treasury Regulations, Section
1.817-5(a)(2)) shall be provided by the Company to the Fund, the Distributor and
the Adviser (together with any supporting information or analysis) within at
least two (2) business days prior to submission;
18
(e) The Company shall provide the Fund, the Distributor
and the Adviser with such cooperation as the Fund, the Distributor and the
Adviser shall reasonably request (including, without limitation, by permitting
the Fund, the Distributor and the Adviser to review the relevant books and
records of the Company) in order to facilitate the review by the Fund, the
Distributor and the Adviser of any written submissions provided to it or its
assessment of the validity or amount of any claim against it arising from such
failure or alleged failure;
(f) The Company shall not with respect to any claim of the
IRS or any Contract owner that would give rise to a claim against the Fund, the
Distributor and the Adviser (i) compromise or settle any claim, (ii) accept any
adjustment on audit, or (iii) forego any allowable administrative or judicial
appeals, without the express written consent of the Fund, the Distributor and
the Adviser, which shall not be unreasonably withheld; provided that, the
Company shall not be required to appeal any adverse judicial decision unless the
Fund, the Distributor, or the Adviser shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists for taking such
appeal; and further provided that the Fund, the Distributor and the Adviser
shall bear the costs and expenses, including reasonable attorney's fees,
incurred by the Company in complying with this clause (f).
ARTICLE VII. Potential Conflicts and Compliance With Mixed and Shared
Funding Exemptive Order
7.1. The Fund's Board of Trustees (the "Board") will monitor the Fund
for the existence of any material irreconcilable conflict between the interests
of the Contract owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio is being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance
19
contract owners or by contract owners of different Participating Insurance
Companies; or (f) a decision by a Participating Insurance Company to disregard
the voting instructions of Contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing material
conflicts of which it is aware to the Board. The Company will assist the Board
in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever Contract
owner voting instructions are to be disregarded. Such responsibilities shall be
carried out by the Company with a view only to the interests of its Contract
owners.
7.3. If it is determined by a majority of the Board, or a majority of
its directors who are not interested persons of the Fund, the Distributor, the
Adviser or any subadviser to any of the Portfolios, as defined in Section
2(a)(19) of the 1940 Act (the "Independent Trustees"), that a material
irreconcilable conflict exists, the Company and other Participating Insurance
Companies shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the Independent 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 Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio,
or submitting the question whether such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating the assets
of any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
20
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the Independent
Trustees. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the end of that six-month period the Adviser, the
Distributor and the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
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 Independent Trustees. Until the end of the foregoing six-month
period, the Fund shall continue to accept and implement orders by the Company
for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the Independent Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Fund be required to establish a new funding medium for the Contracts. The
Company shall not be required by Section 7.3 to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote of a majority
of Contract owners 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 Fund and terminate this Agreement within six (6)
months after the Board informs the Company in writing
21
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the Independent Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 3.7, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) As limited by and in accordance with Section 8.1(b) and
8.1(c) hereof, the Company agrees to indemnify and hold harmless the Fund, the
Distributor and the Adviser and each of their respective officers and directors
or trustees and each person, if any, who controls the Fund, the Distributor or
the Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, expenses, damages and liabilities (including amounts paid in
settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, expenses, damages or liabilities (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
22
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the registration statement
or prospectus or SAI covering the Contracts or
contained in the Contracts or sales literature or
other promotional material for the Contracts (or any
amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that
this Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished in writing to the Company by or on behalf
of the Adviser, Distributor or Fund for use in the
registration statement or prospectus for the
Contracts or in the Contracts or sales literature or
other promotional material (or any amendment or
supplement to any of the foregoing) or otherwise for
use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature or other
promotional material of the Fund not supplied by the
Company or persons under its control) or wrongful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI, or sales
literature or other promotional material of the Fund,
or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such a statement or omission was made
in reliance upon information furnished in writing to
the Fund by or on behalf of 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, including without limitation Section
2.11 and Section 6.5 hereof.
(b) The Company shall not be liable under this
indemnification provision with respect to any losses, claims, expenses, damages,
liabilities or litigation to which an Indemnified
23
Party would otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to any of the Indemnified Parties.
(c) The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision, except to the extent that the Company
has been prejudiced by such failure to give notice. 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. The Company shall not be liable under this indemnification
provision with respect to any claim, action, suit, or preceding settled by an
Indemnified Party without the Company's written approval.
(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 Fund Shares or the Contracts or the operation
of the Fund.
8.2. Indemnification by the Adviser
24
(a) The Adviser agrees to indemnify and hold harmless the
Company and its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in the registration statement or
prospectus or SAI or sales literature or other
promotional material of the Fund prepared by the
Fund, the Distributor or the Adviser (or any
amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that
this Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished in writing to the Adviser, the Distributor
or the Fund by or on behalf of the Company for use in
the registration statement, prospectus or SAI for the
Fund or in sales literature or other promotional
material (or any amendment or supplement to any of
the foregoing) or otherwise for use in connection
with the sale of the Contracts or the Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, SAI or sales literature or
other promotional material for the Contracts not
supplied by the Adviser or persons under its control)
or wrongful conduct of the Fund, the Distributor or
the Adviser or persons under their control, with
respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI, or sales
literature or other promotional material covering the
Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged
25
omission to state therein a material fact required to
be stated therein or necessary to make the statement
or statements therein not misleading, if such
statement or omission was made in reliance upon
information furnished in writing to the Company by or
on behalf of the Adviser, the Distributor or the
Fund; or
(iv) arise as a result of any failure by the Fund,
the Distributor or the Adviser to provide the
services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to
comply with the diversification and other
qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Fund, the Distributor or the Adviser in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Adviser, the
Distributor or the Fund; or
(vi) arise out of or result from the incorrect or
untimely calculation or reporting by the Fund, the
Distributor or the Adviser of a Portfolio's daily NAV
per share (subject to Section 1.10 of this Agreement)
or dividend or capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Adviser specified in Article VI hereof.
(b) The Adviser shall not be liable under this
indemnification provision with respect to any losses, claims, expenses, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to any of the Indemnified Parties.
(c) The Adviser shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
26
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision, except to the extent that the Adviser
has been prejudiced by such failure to give notice. In case any such action is
brought against the Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Adviser will not be liable to such 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. The
Adviser shall not be liable under this indemnification provision with respect to
any claim, action, suit, or preceding settled by an Indemnified Party without
the Adviser's written approval.
(d) The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
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,
without regard to the
Delaware conflict of laws provisions.
9.2. This Agreement shall be subject to the provisions of the 1933 Act,
the 1934 Act and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and regulations
as the SEC may grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and construed
in accordance therewith.
27
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Portfolios, upon sixty (60) days' advance written notice
delivered to the other parties; or
(b) at the option of the Company by written notice to the
other parties 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) at the option of the Company by written notice to the
other parties 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 Portfolio as the
underlying investment option of the Contracts issued or to be issued by the
Company; or
(d) at the option of the Fund, the Distributor or the
Adviser in the event that formal administrative proceedings are instituted
against the Company by the NASD, the SEC, the insurance commissioner or
comparable official of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the Contracts,
the operation of any Account, or the purchase of the Fund shares, if, in each
case, the Fund, Distributor or Adviser, as the case may be, reasonably
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Company to perform its obligations under this Agreement; or
(e) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund, the Distributor or
the Adviser by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body, if the Company reasonably determines in
its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the Fund,
the Distributor or the Adviser to perform their obligations under this
Agreement; or
(f) at the option of the Company by written notice to the
Fund with respect to any Portfolio if the Company reasonably believes that the
Portfolio will fail to meet the diversification requirements of Section 817(h)
of the Code specified in Article VI hereof; or
(g) at the option of any non-defaulting party hereto in the
event of a material breach of this Agreement by any party hereto (the
"defaulting party") other than as described in Section 10.1(b)-(f); provided,
that the non-defaulting party gives written notice thereof to the defaulting
party, with copies of such notice to all other non-defaulting parties, and if
such breach shall not have been remedied within thirty (30) days after such
written notice is given, then the
28
non-defaulting party giving such written notice may terminate this Agreement by
giving thirty (30) days written notice of termination to the defaulting party;
or
(h) at any time upon written agreement of all parties to
this Agreement.
10.2. Notice Requirement
No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties of its intent to terminate, which notice shall set forth the basis for
the termination. Furthermore,
(a) in the event any termination is based upon the
provisions of Article VII, or the provisions of Section 10.1(a) of this
Agreement, the prior written notice shall be given in advance of the effective
date of termination as required by those provisions unless such notice period is
shortened by mutual written agreement of the parties;
(b) in the event any termination is based upon the
provisions of Section 10.1(d), 10.1(e) or 10.1(g) of this Agreement, the prior
written notice shall be given at least sixty (60) days before the effective date
of termination; and
(c) in the event any termination is based upon the
provisions of Section 10.1(b), 10.1(c) or 10.1(f), the prior written notice
shall be given in advance of the effective date of termination, which date shall
be determined by the party sending the notice.
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, other than as a
result of a failure by either the Fund or the Company to meet the
diversification requirements of Section 817(h) of the Code, the Fund, the
Distributor and the Adviser shall, at the option of the Company, continue to
make available additional shares of the Fund pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement
29
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.3 shall not apply to any
terminations under Article VII of this Agreement and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement.
10.4. Surviving Provisions
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII of this Agreement to indemnify other parties
shall survive and not be affected by any termination of this Agreement. In
addition, with respect to Existing Contracts, all provisions of this Agreement
shall also survive and not be affected by any termination of this Agreement.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other parties.
If to the Company:
The Ohio National Life Insurance Company
Xxx Xxxxxxxxx Xxx
Xxxxxxxxxx, Xxxx, 00000
Attention: Secretary
If to the Fund:
The Prudential Series Fund
Gateway Center Three
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Secretary
30
If to the Adviser:
Prudential Investments LLC
Gateway Center Three
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Secretary
If to the Distributor:
Prudential Investment Management Services LLC
Gateway Center Three
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Secretary
ARTICLE XII. Miscellaneous
12.1. Except as required by law, subpoena, court order or regulatory
order or request, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the affected party until such time as such information may
come into the public domain.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
31
12.5. 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.
12.6. Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration in a forum jointly
selected by the relevant parties (but if applicable law requires some other
forum, then such other forum) in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
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; provided, however, that a transaction that does not result in a change
of actual control or management of a party hereto shall not be deemed to be an
assignment of this Agreement for purposes of this Section 12.8. Any assignment
of this Agreement in violation of this Section 12.8 shall be void.
12.9. The Company agrees that the obligations assumed by the Fund,
Distributor and the Adviser pursuant to this Agreement shall be limited in any
case to the Fund, Distributor and Adviser and their respective assets and the
Company shall not seek satisfaction of any such obligation from the shareholders
of the Fund, Distributor or the Adviser, the Directors, officers, employees or
agents of the Fund, Distributor or Adviser, or any of them.
12.10. The Fund, the Distributor and the Adviser agree that the
obligations assumed by the Company pursuant to this Agreement shall be limited
in any case to the Company and its
32
assets and neither the Fund, Distributor nor Adviser shall seek satisfaction of
any such obligation from the shareholders of the Company, the directors,
officers, employees or agents of the Company, or any of them.
12.11. No provision of this Agreement may be deemed or construed to
modify or supersede any contractual rights, duties, or indemnifications, as
between the Adviser and the Fund, and the Distributor and the Fund.
12.12. This Agreement supersedes and replaces the Participation
Agreement among the Company, The Prudential Series Fund, Inc. and other entities
dated as of January 3, 2000.
33
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.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By its authorized officer,
By:
--------------------------------------------
Title:
THE PRUDENTIAL SERIES FUND
By its authorized officer,
By:
--------------------------------------------
Title: President
PRUDENTIAL INVESTMENTS LLC
By its authorized officer,
By:
--------------------------------------------
Title: President
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
By its authorized officer,
By:
--------------------------------------------
Title: President
34
SCHEDULE A
CONTRACTS
ONcore Flex variable annuity
ONcore Premier variable annuity
ONcore Value variable annuity
ONcore Xtra variable annuity
35
SCHEDULE B
DESIGNATED PORTFOLIOS
The Prudential Series Fund -- [Prudential Xxxxxxxx Portfolio]
The Prudential Series Fund -- Xxxxxxxx 20/20 Focus Portfolio
36
SCHEDULE C
EXPENSES
The Fund and/or the Distributor and/or Adviser, and the Company will coordinate
the functions and pay the costs of the completing these functions based upon an
allocation of costs in the tables below. Costs shall be allocated to reflect the
Fund's share of the total costs determined according to the number of pages of
the Fund's respective portions of the documents.
------------------------------ --------------------------- --------------------------- ---------------------------
ITEM FUNCTION PARTY RESPONSIBLE PARTY RESPONSIBLE
FOR COORDINATION FOR EXPENSE
------------------------------ --------------------------- --------------------------- ---------------------------
Mutual Fund Prospectus Printing of prospectuses Company Inforce - Fund
Prospective - Company
------------------------------ --------------------------- --------------------------- ---------------------------
Distribution (including Company Fund
postage) to Inforce
Clients
------------------------------ --------------------------- --------------------------- ---------------------------
Distribution (including Company Company
postage) to Prospective
Clients
------------------------------ --------------------------- --------------------------- ---------------------------
Product Prospectus Printing and Distribution Company Company
for Inforce and
Prospective Clients
------------------------------ --------------------------- --------------------------- ---------------------------
Mutual Fund Prospectus If Required by Fund, Fund, Distributor or Fund, Distributor or
Update & Distribution Distributor or Adviser Adviser Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
If Required by Company Company (Fund, Company
Distributor or Adviser to
provide Company with
document in PDF format)
------------------------------ --------------------------- --------------------------- ---------------------------
Product Prospectus Update & If Required by Fund, Company Fund, Distributor or
Distribution Distributor or Adviser Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
If Required by Company Company Company
------------------------------ --------------------------- --------------------------- ---------------------------
37
------------------------------ --------------------------- --------------------------- ---------------------------
ITEM FUNCTION PARTY RESPONSIBLE PARTY RESPONSIBLE
FOR COORDINATION FOR EXPENSE
------------------------------ --------------------------- --------------------------- ---------------------------
Mutual Fund SAI Printing Fund, Distributor or Fund, Distributor or
Adviser Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
Distribution (including Party who receives the Party who receives the
postage) request request
------------------------------ --------------------------- --------------------------- ---------------------------
Product SAI Printing Company Company
------------------------------ --------------------------- --------------------------- ---------------------------
Distribution Company Company
------------------------------ --------------------------- --------------------------- ---------------------------
Proxy Material for Mutual Printing if proxy Fund, Distributor or Fund, Distributor or
Fund required by Law Adviser Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
Distribution (including Company Fund, Distributor or
labor) if proxy required Adviser
by Law
------------------------------ --------------------------- --------------------------- ---------------------------
Printing & distribution Company Company
if required by Company
------------------------------ --------------------------- --------------------------- ---------------------------
Mutual Fund Annual & Printing of reports Fund, Distributor or Fund, Distributor or
Semi-Annual Report Adviser Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
Distribution Company Fund, Distributor or
Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
Other communication to New If Required by the Fund, Company Distributor or Adviser
and Prospective clients Distributor or Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
If Required by Company Company Company
------------------------------ --------------------------- --------------------------- ---------------------------
Other communication to Distribution (including Company Fund, Distributor or
inforce labor and printing) if Adviser
required by the Fund,
Distributor or Adviser
------------------------------ --------------------------- --------------------------- ---------------------------
Distribution (including Company Company
labor and printing) if
required by Company
------------------------------ --------------------------- --------------------------- ---------------------------
38
------------------------------ --------------------------- --------------------------- ---------------------------
ITEM FUNCTION PARTY RESPONSIBLE PARTY RESPONSIBLE FOR
FOR COORDINATION FOR EXPENSE
------------------------------ --------------------------- --------------------------- ---------------------------
Operations of the Fund All operations and Fund, Distributor or Fund or Adviser
related expenses, Adviser
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses paid
or assumed by the fund
pursuant to any Rule
12b-1 plan
------------------------------ --------------------------- --------------------------- ---------------------------
Operations of the Accounts Federal registration of Company Company
units of separate account
(24f-2 fees)
------------------------------ --------------------------- --------------------------- ---------------------------
39
SCHEDULE D
Diversification Compliance Report and Certification
Name of Portfolio:
Total Market Value as of
-------------------- ----------------------
------- ---------------------------- ---------------------- ----------------------- --------------------------
Four Largest
Investments Market Value as of Cumulative % of I.R.C. Limitations
Assets Greater than
------- ---------------------------- ---------------------- ----------------------- --------------------------
1
2
3
4
5
------- ---------------------------- ---------------------- ----------------------- --------------------------
Total Assets
-------------------------
--------------------------------------------------------------------------------
Note: For purposes of diversification testing, all securities of the same
issuer, all interests in the same real property project, and all interests in
the same commodity are each treated as a single investment. In the case of
government securities each government agency or instrumentality is treated as a
separate issuer. See Treas. Reg. 1.817-5 for additional information.
Special Test for Variable Life Insurance
Where the only contracts based on the account are life insurance contracts
(i.e., no annuity contracts), an account is adequately diversified to the extent
it is invested in Treasury securities. Treasury securities held through a
custodial arrangement that is treated as a grantor trust (e.g. CATs and TGRs)
will be treated as Treasury securities if substantially all of the assets of the
trust are represented by Treasury securities. Options on Treasury securities are
not considered Treasury securities. Where an account is invested in part in
Treasury securities, revise the above general diversification test percentage
limits by adding to them a product of .5 and the percentage of the value of the
total assets invested in Treasury securities. For example, if an account is 60%
invested in Treasury securities, the percentage limit would be increased by 30%
(0.5 x 60%) and would be applied to the assets of the account other than
Treasury securities.
CERTIFICATION
The undersigned certifies that this Report and Certification, and any related
attachments, have been prepared accurately and provide a true representation of
account assets as of the last day of the quarter indicated above, and that the
fund complies with IRC Section 817(h).
-------------------------------------------------- ---------------------
Signed by Date
--------------------------------------------------------------------------------
40
