EXHIBIT 10.K
PARTICIPATION AGREEMENT
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Among
XXXXXXXXXXX VARIABLE ACCOUNT FUNDS,
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OPPENHEIMERFUNDS, INC.,
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PROVIDENT MUTUAL LIFE INSURANCE COMPANY
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and
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
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THIS AGREEMENT (the "Agreement"), made and entered into as of
the first day of May 2002, by and among Provident Mutual Life Insurance Company
("PMLIC") and Providentmutual Life and Annuity Company of America ("PLACA")
(hereinafter, each a "Company," and collectively the "Companies"), each on its
own behalf and on behalf of each separate account of the Company named in
Schedule 1 to this Agreement, as may be amended from time to time by mutual
consent (hereinafter collectively the "Accounts"), Xxxxxxxxxxx Variable Account
Funds (hereinafter the "Fund"), and OppenheimerFunds, Inc. (hereinafter the
"Adviser").
WHEREAS, the Fund is an open-end management investment company
and is available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies, variable annuity contracts and other tax-deferred products
(collectively, the "Variable Insurance Products") offered by insurance companies
(hereinafter "Participating Insurance Companies");
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WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio", and each representing
the interests in a particular managed pool of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (the "SEC"), dated July 16, 1986 (File No. 812-6324)
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
both affiliated and unaffiliated life insurance companies (hereinafter the
"Mixed and Shared Funding Exemptive Order")
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act");
WHEREAS, the Adviser is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940;
WHEREAS, each Company has registered or will register certain
variable annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be duly organized, validly
existing segregated asset accounts, established by resolution of the Board of
Directors of each Company, to set aside and invest assets attributable to the
aforesaid variable contracts (the Separate Account(s) covered by the
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Agreement are specified in Schedule 1 attached hereto, as may be modified by
mutual consent from time to time);
WHEREAS, each Company has registered or will register the
Accounts as unit investment trusts under the 1940 Act (unless an exemption from
registration is available);
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, each Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 2 attached hereto
as may be modified by mutual consent from time to time), 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
NOW, THEREFORE, in consideration of their mutual promises, the
Fund, the Adviser and each of the Companies agree as follows:
ARTICLE I. Purchase and Redemption of Fund Shares
1.1. The Fund agrees to sell to each Company those shares of
the Fund which the Company orders on behalf of the Accounts, executing such
orders on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the order for the shares of the Fund. For purposes
of this Section 1.1, each Company shall be the designee of the Fund for receipt
of such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives written (or facsimile)
notice of such order by 9:30 a.m. New York time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading, on which the Companies are open for business, and on which the
Fund calculates its net asset value pursuant to the rules of the SEC.
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1.2. Each Company shall pay for Fund shares by 2:00 P.M. New
York time on the next Business Day after it places an order to purchase Fund
shares in accordance with Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire or by a credit for any shares redeemed.
1.3. The Fund agrees to make Fund shares available for
purchase by the Companies for their separate Accounts listed in Schedule 1 on
those days on which the Fund calculates its net asset value pursuant to rules of
the SEC; provided, however, that the Board of Trustees of the Fund (hereinafter
the "Trustees") 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 Trustees, 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 any Portfolio (including without limitation
purchase orders that individually or together with other contemporaneous orders
represent large transactions in shares of any Portfolio held for a relatively
brief period of time). Such shares shall be purchased at the applicable net
asset value per share, increased by any initial sales charge, if the Fund's
prospectus then in effect imposes such a charge on such purchases.
1.4. The Fund agrees to redeem, upon each Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption, reduced by any
redemption fee or deferred sales charge, if the Fund's prospectus in effect as
of the date of such redemption imposes such a fee or charge on such redemptions.
For purposes of this Section 1.4, each 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
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written (or facsimile) notice of such request for redemption by 9:30 a.m. New
York time on the next following Business Day; however each Company undertakes to
use its best efforts to provide such notice to the Fund by no later than 9:00
A.M. New York time on the next following Business Day. Payment shall be made
within the time period specified in the Fund's prospectus or statement of
additional information, provided, however, that if the Fund does not pay for the
Fund shares that are redeemed on the next Business Day after a request to redeem
shares is made, then the Fund shall apply any such delay in redemptions
uniformly to all holders of shares of that Portfolio. Payment shall be in
federal funds transmitted by wire to a Company's bank accounts as designated by
the Company in writing from time to time.
1.5. Each Company agrees to purchase and redeem the shares of
the Portfolios named in Schedule 2 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information. Each
Company shall not permit any person other than a Contract owner to give
instructions to the Company which would require the Company to redeem or
exchange shares of the Fund.
ARTICLE II. Representations and Warranties
2.1. Each Company represents and warrants that the securities
deemed to be issued by the Accounts under the Contracts are or will be
registered under the 1933 Act (unless an exemption from registration is
available) and, that the Contracts will be issued, offered and sold in
compliance in all material respects with all applicable federal and state laws
and regulations, including without limitation state insurance suitability
requirements and National Association of Securities Dealers, Inc. ("NASD")
conduct rules. Each Company further represents and warrants that
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it is an insurance company duly organized and in good standing under applicable
state law and that it has legally and validly established the Accounts prior to
the issuance or sale of units thereof as a segregated asset account and has
registered the Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act (unless an exemption from registration is available)
to serve as segregated investment accounts for the Contracts, and that the
Company will maintain such registration for so long as any Contracts are
outstanding or until registration is no longer required under federal and state
securities laws. Each Company shall amend the registration statement under the
1933 Act for the Contracts and the registration statement under the 1940 Act for
the Accounts from time to time as required in order to effect the continuous
offering of the Contracts or as may otherwise be required by applicable law.
Each Company shall register and qualify the Contracts for sale in accordance
with the securities laws of the various states only if and to the extent deemed
necessary by the Company.
2.2. Each 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 life insurance or annuity contracts under applicable
provisions of the Code and the regulations issued thereunder, and that it will
make every effort to maintain such treatment and that it will notify the Fund
and the Adviser immediately upon having a reasonable basis for believing that
the Contracts have ceased to be so treated or that they might not be so treated
in the future. In addition, each Company represents and warrants that the
Accounts are a "segregated asset accounts" and that interests in the Accounts
are offered exclusively through the purchase of or transfer into a "variable
contract" within the meaning of such terms under Section 817 of the Code and the
regulations issued thereunder (and any
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amendments or other modifications to such section or such regulations (and any
revenue rulings, revenue procedures, notices and other published announcements
of the Internal Revenue Service interpreting these provisions). Each Company
shall continue to meet such definitional requirements, and will notify the Fund
and the Adviser immediately upon having a reasonable basis for believing that
such requirements have ceased to be met or that might not be met in the future.
Each 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.
2.3. Subject to Section 2.5 hereof, each Company represents
and warrants that the Contracts are currently and at the time of issuance will
be treated as life insurance or annuity contracts under applicable provisions of
the Code and that the Company will make every effort to maintain such treatment
and that the Company will notify the Fund and the Adviser immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that the Contracts might not be so treated in the future.
2.4. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance and sold in accordance with applicable state and federal
law and that the Fund is and shall remain registered under the 1940 Act for as
long as the Fund shares are sold. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund.
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2.5. The Fund will at all times invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund represents and warrants that each
Portfolio of the Fund will 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 (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal Revenue
Service interpreting these provisions). In the event the Fund should fail to so
qualify, it will take all reasonable steps (a) to notify the Company of such
breach and (b) to resume compliance with such diversification requirement within
the grace period afforded by Treasury Regulation 1.817.5. The Fund and Adviser
represent that each Portfolio is qualified as a Regulated Investment Company
under Subchapter M of the Code and that the Fund will maintain such
qualification (under Subchapter M or any successor provision), and that the Fund
and the Adviser will notify the Company immediately upon having a reasonable
basis for believing that any Portfolio has ceased to so qualify or that any
Portfolio might not so qualify in the future.
2.6. If the Contracts purchase shares of a series and class of
the Fund that have adopted a plan under Rule 12b-1 under the 1940 Act to finance
distribution expenses (a "12b-1 Plan"), the Company agrees to provide the
Trustees any information as may be reasonably necessary for the Trustees to
review the Fund's 12b-1 Plan or Plans.
2.7. The Fund represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply with applicable provisions of the 1940 Act.
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2.8. The Adviser represents and warrants that it is and will
remain duly registered under all applicable federal and state securities laws
and that it shall perform its obligations for the Fund in compliance with any
applicable state and federal securities laws.
2.9. The Fund and Adviser each represent and warrant that all
of its respective directors, trustees, officers, employees, investment advisers,
and transfer agent of the Fund are and shall continue to be at all times covered
by a blanket fidelity bond (which may, at the Fund's election, be in the form of
a joint insured bond) or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Section 17(g)
and 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 insurance company. The Adviser
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
Company in the event that such coverage no longer applies.
2.10. Each Company represents and warrants that all of its
directors, officers, employees, agents, investment advisers, and other
individuals and entities dealing with the money and/or securities of the Fund
are covered by a blanket fidelity bond or similar coverage in an amount not less
than the equivalent of U.S. $10 million. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable
insurance company. Each Company agrees that any amount received under such bond
in connection with claims that derive from arrangements described in this
Agreement will be paid by the Company for the benefit of the Fund. Each Company
agrees to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the Fund
and the Adviser in the event that such coverage no longer applies.
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2.11. The Fund and the Adviser represent that they will make a
good faith effort to (a) materially comply with any applicable state insurance
law restrictions with which the Fund must comply to perform its obligations
under this Agreement, provided, however, that each Company provide specific
notification of such restrictions to the Fund and the Adviser in advance and in
writing; and (b) furnish information to each Company about the Fund not
otherwise available to the Company which is required by state insurance law to
enable each Company to obtain the authority needed to issue the Contracts in any
applicable state.
ARTICLE III. Sales Material, Prospectuses and Other Reports
3.1. Each Company shall furnish, or shall cause to be
furnished, to the Fund or its designee, each piece of sales literature or other
promotional material in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund or
its designee reasonably object to such use within ten Business Days after
receipt of such material. "Business Day" shall mean any day in which the New
York Stock Exchange is open for trading, in which the Companies are open for
business, and in which the Fund calculates its net asset value pursuant to the
rules of the Securities and Exchange Commission.
3.2. Neither Company shall give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sale literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund, which permission shall not be
unreasonably withheld.
3.3. For purposes of this Article III, the phrase "sales
literature or other promotional material" means advertisements (such as material
published, or designed for use in, a
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newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboard or electronic media), and sales
literature (such as brochures, circulars, market letters and form letters),
distributed or made generally available to customers or the public.
3.3a The Fund shall provide each Company with such quarterly
information reasonably necessary for completion of sales literature or other
promotional material (such as fund investment objectives, Top 10 Holdings,
sector weightings, etc.) no later than 20 days after the end of each quarter.
3.4. The Fund shall provide a copy of its current prospectus
within a reasonable period of the Fund prospectus' filing date, and provide
other assistance as is reasonably necessary in order for the Company once each
year (or more frequently if the prospectus for the Fund is supplemented or
amended) to have the prospectus for the Contracts and the Fund's prospectus
printed together in one document. The Adviser shall be permitted to review and
approve the typeset form of the Fund's Prospectus prior to such printing.
3.5. The Fund or the Adviser shall provide the Companies with
either: (i) a copy of the Fund's proxy material, reports to shareholders, other
information relating to the Fund necessary to prepare financial reports, and
other communications to shareholders for printing and distribution to Contract
owners, or (ii) camera ready and/or printed copies, if appropriate, of such
material for distribution to Contract owners, within a reasonable period of the
filing date for definitive copies of such material. The Adviser shall be
permitted to review and approve the typeset form of such proxy material,
shareholder reports and communications prior to such printing.
3.6. In the event a meeting of shareholders of the Fund (or
any Portfolio) is called by the Trustees, the Company shall:
(i) solicit voting instructions from Contract
owners;
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(ii) vote the Portfolio(s) shares held in the
Account in accordance with instructions
received from Contract owners;
(iii) vote Portfolio shares held in the Account
for which no instructions have been
received, as well as Portfolio shares held
by the Company, in the same proportion as
Portfolio(s) 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
(iv) take responsibility for assuring that the
Accounts calculate voting privileges in a
manner consistent with other Participating
Insurance Companies. The Fund and Adviser
agree to assist the Company and the other
Participating Insurance Companies in
carrying out this responsibility.
ARTICLE IV. Fees and Expenses
4.1. The Fund and 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 or Adviser, except as provided herein.
4.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. The Fund
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 advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law.
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4.3. The Fund or the Advisor shall bear the expenses of
typesetting and printing the documents identified in Paragraph 3.5 for owners of
Contracts issued by the Company prior to distribution.
4.4 The Companies shall bear the expenses of distributing the
Fund's prospectus, annual and semi-annual reports to owners of Contracts issued
by the Company.
4.5 The Fund shall bear the expenses of distributing the
Fund's proxy materials and reports to owners of Contracts issued by the Company
prior to distribution.
4.6. In the event the Fund adds one or more additional
Portfolios and the parties desire to make such Portfolios available to the
respective Contract owners as an underlying investment medium, a new Schedule 2
or an amendment to this Agreement shall be executed by the parties authorizing
the issuance of shares of the new Portfolios to the particular Accounts. The
amendment may also provide for the sharing of expenses for the establishment of
new Portfolios among Participating Insurance Companies desiring to invest in
such Portfolios and the provision of funds as the initial investment in the new
Portfolios.
ARTICLE V. Potential Conflicts
5.1. The Board of Trustees of the Fund (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
are being managed; (e) a difference in voting instructions given by
participating insurance companies or by variable annuity contract and variable
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life insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of Contract owners. The Board shall promptly inform the
Companies if the Board determines that an irreconcilable material conflict
exists and the implications thereof.
5.2. Each Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. Each Company agrees to be bound by the
responsibilities of a participating insurance company as set forth in the Mixed
and Shared Funding Exemptive Order, including without limitation the requirement
that the Company report any potential or existing conflicts of which it is aware
to the Board. Each Company will assist the Board in carrying out the Board's
responsibilities in monitoring such conflicts under the Mixed and Shared Funding
Exemptive Order, by providing the Board in a timely manner 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 and by confirming in writing,
at the Fund's request, that the Company are unaware of any such potential or
existing material irreconcilable conflicts.
5.3. If it is determined by a majority of the Board, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists, each Company shall, at the Fund's expense and to the extent reasonably
practicable, take whatever reasonable steps are necessary to remedy or eliminate
the irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected 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
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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 managed separate account. Each Company's obligations
under this Section 5.3 shall not depend on whether other affected participating
insurance companies fulfill a similar obligation.
5.4. If a material irreconcilable conflict arises because of a
decision by a Company to disregard Contract owner voting instructions and that
decision could conflict with the majority of Contract owner instructions, the
Company may be required, at the Fund's election, to withdraw the Accounts'
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
disinterested members of the Board. 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 the six month period the
Fund shall continue to accept and implement orders by that Company for the
purchase and redemption of shares of the Fund.
5.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to a Company
conflicts with the majority of other state regulators, then the Company will
withdraw the Accounts' investment in the Fund and terminate this Agreement
within six months after the Board informs the Company in writing that the Board
has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by that Company for the purchase and redemption of shares of
the Fund, subject to applicable regulatory limitation.
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5.6. For purposes of Sections 5.3 through 5.6 of this
Agreement, a majority of the disinterested members of the Board shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. Neither Company shall be required by Section 5.3 to
establish a new funding medium for 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 particular Accounts' investment in
the Fund 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 VI. Applicable Law
6.1 This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
6.2. This Agreement shall be subject to the provisions of the
1933 Act, the Securities Exchange Act of 1934 and the 1940 Act, and the rules
and regulations and rulings thereunder, including such exemption from those
statutes, rules and regulations as the Securities and Exchange Commission 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, provided however that the term "Registration Statement or Prospectus
for the Variable Contracts" and terms of similar import shall include (i) any
offering circular or similar document and sales literature or other promotional
materials used to offer and/or sell the variable Contracts in compliance with
the private offering exemption in the 1933 Act and applicable federal and state
laws
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and regulations, and (ii) the term "Registration Statement" and "Prospectus" as
defined in the 1933 Act.
ARTICLE VII. Termination
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7.1 This Agreement shall terminate:
(a) at the option of any party upon six month's
advance written notice to the other parties;
(b) at the option of a Company to the extent that
shares of Portfolios are not reasonably available to meet the requirements of
its Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt notice of the
election to terminate for such cause and an explanation of such cause shall be
furnished by the Company;
(c) as provided in Article V;
(d) at the option of the Fund or the Adviser upon
institution of formal proceedings against a Company (or its parent) by the NASD,
the SEC, the insurance commission of any state or any other regulatory body
having jurisdiction over that party, which would have a material adverse effect
on the Company's ability to perform its obligations under this Agreement;
(e) at the option of a Company upon institution of
formal proceedings against the Fund or the Adviser (or its parent) by the NASD,
the SEC, or any state securities or insurance department or any other regulatory
body having jurisdiction over that party, which would have a material adverse
effect on the Adviser's or the Fund's ability to perform its obligations under
this Agreement;
(f) at the option of a Company or the Fund upon
receipt of any necessary regulatory approvals or the vote of the Contract owners
having an interest in the Account (or any subaccount) to substitute the shares
of another investment company for the corresponding Portfolio shares of the Fund
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in accordance with the terms of the Contracts for which those Portfolio shares
have been selected to serve as the underlying investment media. A Company will
give 45 days prior written notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares;
(g) at the option of a Company or the Fund upon a
determination by a majority of the Board, or a majority of the disinterested
Board members, that an irreconcilable material conflict exists among the
interests of (i) all Contract owners of variable insurance products of all
separate accounts or (ii) the interests of the Participating Insurance Companies
investing in the Fund as delineated in Article VII of this Agreement;
(h) at the option of a Company if the Fund 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 Fund may fail to so qualify;
(i) at the option of a Company if the Fund fails to
meet the diversification requirements specified in section 2.5 hereof or if the
Company reasonably believes that the Fund will fail to meet such requirements;
(j) at the option of any party to this Agreement,
upon another party's failure to cure a material breach of any provision of this
Agreement within thirty days after written notice thereof;
(k) at the option of a Company, if the Company
determines in its sole judgment exercised in good faith, that either the Fund or
the Adviser has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company;
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(l) at the option of the Fund or the Adviser, if the
Fund or Adviser respectively, shall determine in its sole judgment exercised in
good faith, that the Company has suffered a material adverse change in its
business, operations or financial condition since the date of this Agreement or
is the subject of material adverse publicity which is likely to have a material
adverse impact upon the business and operations of the Fund or the Adviser; or
(m) subject to the Fund's compliance with Section 2.5
hereof, at the option of the Fund in the event any of the Contracts are not
issued or sold in accordance with applicable requirements of federal and/or
state law.
7.2. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 7.1(a) may be exercised
for cause or for no cause.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Companies
(a). Each Company agrees to indemnify and hold
harmless the Fund and the Adviser, each member of their Board of Trustees or
Board of Directors, each of their officers and each person, if any, who controls
the Fund 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 reasonable legal
and other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements 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, prospectus or statement of
additional information for the Contracts or
contained in sales literature or other
promotional material for the
-19-
Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or
are based upon the omission or the alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statements therein not
misleading in light of the circumstances
which they were made; provided that this
agreement to indemnify shall not apply as to
any Indemnified Party if such statement or
omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to the
Company by or on behalf of the Fund or the
Adviser for use in the registration
statement, prospectus or statement of
additional information for the Contracts or
sales literature (or any amendment or
supplement) or otherwise for use in
connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the
Company (other than statements or
representations contained in the Fund
registration statement, Fund prospectus 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, provided any such statement or
representation or such wrongful conduct was
not made in reliance upon and in conformity
with information furnished in writing, via
fax or via electronic means, to the Company
by or on behalf of the Advisor or the Fund;
or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in the Fund registration
statement, Fund prospectus, statement of
additional information or sales literature
or other promotional material of the Fund or
any amendment thereof or supplement thereto
or the omission or alleged omission to state
therein a material fact required to be
stated therein or necessary to make the
statements therein not misleading in light
of the circumstances in which they were
made, if such statement or omission was made
in reliance upon information furnished in
writing, via fax or via electronic means, to
the Fund or the Adviser by or on behalf of
the Company or persons under its control; or
(iv) arise out of or result from any material
breach of this Agreement by the Company.
-20-
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of 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.
8.2. Indemnification by Adviser and Fund
8.2(a)(1). The Adviser 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 Adviser) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements 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, prospectus, statement of
additional information or sales literature
of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or
are based upon the omission or the alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statements therein not
misleading in light of the circumstances in
which they were made; provided that this
agreement to indemnify shall not apply as to
any Indemnified Party if such statement or
omission or such alleged statement or
-21-
omission was made in reliance upon and in
conformity with information furnished in
writing, via fax or via electronic means, to
the Adviser or the Fund by or on behalf of
the Company for use in the Fund registration
statement, prospectus or statement of
additional information, or sales literature
or other promotional material for the
Contracts or of the Fund; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Fund
and/or the Adviser (other than statements or
representations contained in the Contracts
or in the Contract registration statement,
the Contract prospectus, statement of
additional information, or sales literature
or other promotional material for the
Contracts not supplied by the Adviser or the
Fund or persons under the control of the
Adviser or the Fund respectively) or
wrongful conduct of the Adviser or persons
under its control, with respect to the sale
or distribution of the Contracts, provided
any such statement or representation or such
wrongful conduct was not made in reliance
upon and in conformity with information
furnished in writing, via fax or via
electronic means, to the Adviser or the Fund
by or on behalf of the Company; or
(iii) arise out of any untrue statement or
allegedly untrue statement of a material
fact contained in a registration statement,
prospectus, statement of additional
information or sales literature covering the
Contracts (or any amendment thereof or
supplement thereto), or the omission or
alleged omission to state therein a material
fact required to be stated therein or
necessary to make the statement or
statements therein not misleading in light
of the circumstances in which they were
made, if such statement or omission was made
in reliance upon information furnished in
writing, via fax or via electronic means, to
the Company by or on behalf of the Fund or
persons under the control of the Adviser; or
(iv) arise out of or result from any material
breach of this Agreement by the Adviser;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Adviser may
otherwise have.
-22-
8.2(a)(2) The Fund agrees to indemnify and hold harmless the
Indemnified Parties [as defined in Section 8.2(a)(1)] against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the operations of the Fund or the sale or acquisition of the
Fund's shares and:
(i) arise out of or are based upon (a) any
untrue statement or alleged untrue statement
of any material fact or (b) the omission or
the alleged omission to state therein a
material fact required to be stated therein
or necessary to make the statements made
therein, in light of the circumstances in
which they were made, not misleading, if
such fact, statement or omission is
contained in the registration statement for
the Fund or the Contracts, or in the
prospectus or statement of additional
information for the Contracts or the Fund,
or in any amendment to any of the foregoing,
or in sales literature or other promotional
material for the Contracts or of the Fund,
provided, however, that this agreement to
indemnify shall not apply as to any
Indemnified Party if such statement, fact or
omission or such alleged statement, fact or
omission was made in reliance upon and in
conformity with information furnished in
writing, via fax or via electronic means, to
the Adviser or the Fund by or on behalf of
the Indemnified Party; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts
or in the Contract registration statement,
the Contract prospectus, statement of
additional information, or sales literature
or other promotional material for the
Contracts not supplied by the Adviser or the
Fund or persons under the control of the
Adviser or the Fund respectively) or
wrongful conduct of the Fund or persons
under its control with respect to the sale
or distribution of Contracts, provided any
such statement or representation or such
wrongful conduct was not made in reliance
upon and in conformity with information
furnished in writing, via fax or via
electronic means, to the Adviser or the Fund
by or on behalf of the Company; or
-23-
(iii) arise out of or result from any material
breach of this Agreement by the Fund
(including a failure to comply with the
diversification requirements specified in
Section 2.5 of this Agreement);
except to the extent provided in Section 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
(b). The Fund and Adviser shall not be liable under
this indemnification provision with respect to any losses, claims, 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
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.
8.3 Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("indemnifying party" for the purpose of this Section 8.3) shall
not be liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.3) unless
such indemnified party shall have notified the indemnifying party in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provisions of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party
-24-
will be entitled to participate, at its own expense, in the defense thereof. The
indemnifying party also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
indemnifying party to the indemnified party of the indemnifying party's election
to assume the defense thereof, the indemnified party shall bear the fees and
expenses of any additional counsel retained by it, and the indemnifying party
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. 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 to
the other party.
If to the Fund:
Xxxxxxxxxxx Variable Account Funds
-25-
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Secretary
If to the Adviser:
OppenheimerFunds, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
If to a Company:
Provident Mutual Life Insurance Company /
Providentmutual Life and Annuity Company of America
Attention: Law Department
0000 Xxxxxxxxxxxx Xxxxxxxxx, X0X
Xxxxxx, XX 00000-0000
ARTICLE X. Miscellaneous
10.1. Each Company represents and warrants that any Contracts
eligible to purchase shares of the Fund and offered and/or sold in private
placements will comply in all material respects with the exemptions from the
registration requirements of the 1933 Act and applicable federal and state laws
and regulations.
10.2. 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 (i) this Agreement and (ii) by Title V, Subtitle A of the
Xxxxx-Xxxxx-Xxxxxx Act and by regulations adopted thereunder by regulators
having jurisdiction over the parties hereto, shall not disclose, disseminate or
utilize such names and addresses and other confidential information without the
express written consent of the affected party.
10.3. 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.
-26-
10.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
10.5. 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.
10.6. Each party hereto shall cooperate with, and promptly
notify each other party and all appropriate governmental authorities (including
without limitation the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. 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.
10.7. 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.
10.8. It is understood by the parties that this Agreement is
not an exclusive arrangement in any respect.
10.9. Each Company and the Adviser each understand and agree
that the obligations of the Fund under this Agreement are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund with
respect to the Portfolio and the Portfolio's property; each Company and the
Adviser each represent that it has notice of the provisions of the Declaration
of Trust of the Fund disclaiming Trustee and shareholder liability for acts or
obligations of the Fund.
10.10. This Agreement shall not be assigned by any party
hereto without the prior written consent of all the parties, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing or anything to the
contrary set forth in this Agreement, the Adviser may transfer or assign its
rights, duties and obligations hereunder or interest herein to any entity owned,
directly or indirectly, by Xxxxxxxxxxx Acquisition Corp. (the Adviser's parent
corporation) or to a successor in
-27-
interest pursuant to a merger, reorganization, stock sale, asset sale or other
transaction, without the consent of the Company, as long as (i) that assignee
agrees to assume all the obligations imposed on the Adviser by this Agreement,
and (ii) the Fund consents to that assignment. This Agreement shall be binding
upon and inure to the benefit of all parties hereto and their respective
permitted successors and assigns.
10.11. This Agreement sets forth the entire agreement between
the parties and supercedes all prior communications, agreements and
understandings, oral or written, between the parties regarding the subject
matter hereof.
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 as of the date specified
below.
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx
Title: Exec. Vice Pres. & Chief Actuary
Date: May 1, 2002
----------------------------------
PROVIDENTMUTUAL LIFE AND
ANNUITY COMPANY OF AMERICA
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Xxxx X. Xxxxxx
Title: Vice President and Actuary
Date: May 1, 2002
----------------------------------
XXXXXXXXXXX VARIABLE ACCOUNT
FUNDS
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx
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Title: Secretary
Date: May 1, 2002
----------------------------------
OPPENHEIMERFUNDS, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx
Title: Senior Vice President
Date: May 1, 2002
-29-
SCHEDULE 1
Separate Accounts Products
Registration
Marketing Name Number
Provident Mutual Variable Life (Currently Marketed)
Separate Account (1940 Act OptionsPlus VLI 33-42133
Registration Number 811-4460) Options Premier VLI 333-71763
Survivor Options Elite VLI 333-82613
Survivor Options Premier VLI 333-84475
(Not Currently Marketed)
Survivor OptionsPlus VLI 33-55470
Special Product VLI 33-38463
Providentmutual Variable Life (Currently Marketed)
Separate Account (1940 Act Options VLI 33-83138
Registration Number 811-8722) Options Premier VLI 333-67775
Survivor Options Premier VLI 333-82611
(Not Currently Marketed)
Survivor Options VLI 333-10321
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SCHEDULE 2
Portfolios of Xxxxxxxxxxx Variable Account Funds shown below do not include
service class shares unless expressly indicated:
Xxxxxxxxxxx Global Securities Fund/VA Service Class Shares
Xxxxxxxxxxx Capital Appreciation Fund/VA Service Class Shares
Xxxxxxxxxxx Main Street Growth & Income Fund/VA Service Class Shares
-31-
