PARTICIPATION AGREEMENT
Among
TOMORROW FUNDS RETIREMENT TRUST,
XXXXX, XXXX & XXXXX, L.L.C.
And
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
Table of Contents
Section Description Page
------- ----------- ----
1 Sales of Fund Shares 1
2 Proxy Solicitations and Voting 3
3 Representations and Warranties 4
4 Sales Material and Information 7
5 Fees and Expenses 10
6 Indemnification 12
7 Potential Conflicts 17
8 Term and Termination 20
9 Notices 23
10 Miscellaneous 24
THIS AGREEMENT, made and entered into this 11th day of September, 1995, by
and among Providian Life and Health Insurance Company ("Company"), on its own
behalf and on behalf of Providian Life and Health Insurance Company Separate
Account V, a segregated asset account of the Company ("Account"); Tomorrow Funds
Retirement Trust ("Fund"), on its own behalf and on behalf of each of its series
listed on Schedule A hereto, as amended from time to time ("Portfolios"); and
the Fund's investment adviser, Xxxxx, Xxxx & Xxxxx, L.L.C.
("Adviser")(collectively, "Parties").
Company, Fund and Adviser intending to be legally bound, hereby agree as
follows:
1. Sales of Fund Shares
1.1 Fund shares shall be sold by the respective Portfolios and purchased
by Company for the appropriate subaccount of the Account at the net asset value
next computed after receipt by Fund or its designee of each order of the Account
or its designee, in accordance with the provisions of this Agreement and the
then current prospectuses of the Fund and the variable annuity contract that
uses the Fund as an underlying investment medium (the "Contracts"). Company may
purchase Fund shares for its own account subject to (a) receipt of prior written
approval by Adviser, (b) such purchases being in accordance with the then
current prospectuses of the Fund and the Contracts and (c) shall be in addition
to purchases for the Account. For purposes of this Section 1.1, Company shall be
the designee of Fund for receipt of orders from the Account and receipt by such
designee shall constitute receipt by Fund; provided that Company receives the
order by 4:00 p.m. Louisville (Eastern) time and Fund receives notice from
Company by telephone or facsimile (or by such other means as Fund and Company
may agree in writing) of such order no later than 10:00 a.m. Louisville
(Eastern) time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission (the "SEC"). Wire orders for payment for shares purchased
will be sent to Fund prior to 3:00 p.m. Louisville (Eastern) time on the same
Business Day that
Company communicates the orders to Fund in accordance with instructions provided
by Fund to Company.
1.2 Fund will redeem the shares when requested on behalf of Company or the
corresponding subaccount of the Account at the net asset value next computed
after receipt by Fund or its designee of each request for redemption, in
accordance with the provisions of this Agreement and the then current
prospectuses of the Fund and the Contracts. For purposes of this Section 1.2,
Company shall be the designee of Fund for receipt of requests for redemption
from Account and receipt by such designee shall constitute receipt by Fund;
provided that Company receives the request for redemption by 4:00 p.m.
Louisville (Eastern) time and Fund receives notice from Company by telephone or
facsimile (or by such other means as Fund and Company may agree in writing) of
such request for redemption no later than 10:00 a.m. Louisville (Eastern) time.
Fund will use its best efforts to transmit to Company the proceeds of all
redemption orders placed by Company by 3:00 p.m. Louisville (Eastern) time on
the same Business Day that Company communicates the requests to Fund by wire
transfer in accordance with written instructions provided by Company to Fund. In
no event shall payment be delayed for a greater period than permitted by the
Investment Company Act of 1940 or the rules, orders or regulations thereunder
(the "1940 Act"). The Board of Trustees of Fund (the "Board") may refuse to sell
shares of Fund or any Portfolio to any person, or suspend or terminate the
offering of shares of or liquidate any particular Portfolio or Fund if such
action is required by law or by regulatory authorities having jurisdiction or is
in the sole discretion of the Board, acting in good faith and in light of its
fiduciary duties under federal and applicable state laws, deemed necessary and
in the best interests of the shareholders of the Fund or Portfolio.
1.3 Company agrees to purchase and redeem the shares of each Portfolio in
accordance with the provisions of this Agreement, of the Contracts and of the
then current prospectuses for the Contracts and Fund. Except as necessary to
implement transactions
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initiated by Contract owners, or as otherwise permitted by state and/or federal
laws or regulations, Company shall not redeem Fund shares attributable to the
Contracts.
1.4 Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Shares ordered
from Fund will be recorded in appropriate book entry titles for the Account.
1.5 Fund shall furnish prompt notice followed by written confirmation to
Company or its delegates of any income, dividends or capital gain distributions
payable on the Fund's shares. Company hereby elects to receive all such
dividends and distributions as are payable on shares of a Portfolio in
additional shares of that Portfolio. Fund shall notify Company or its delegates
of the number of shares so issued as payment of such dividends and
distributions.
1.6 Fund shall use its best efforts to make the net asset value per share
for each Portfolio available to Company or its delegates by 6:00 p.m. Louisville
(Eastern) time on each business day of Fund.
1.7 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive. Fund's shares may be sold to other insurance
companies (subject to Section 7 hereof) and the cash value of the Contracts may
be invested in other investment companies.
2. Proxy Solicitations and Voting
2.1 Subject to Section 1.2 above, Adviser and Fund agree that the terms on
which shares of the Fund are offered to the Account will not be materially
altered without the prior written consent of Company, which consent will not be
unreasonably withheld, during any period in which Fund shares are held by the
Account.
2.2 If and to the extent required by law the Company shall:
(i) solicit voting instructions from purchasers of the Contracts
("Owners");
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(ii) vote the Fund shares in accordance with instructions received
from Owners;
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Portfolio for
which instructions have been received; and
(iv) vote Fund shares held by the Company on its own behalf or on
behalf of the Account that are not attributable to Owners in the
same proportion as Fund shares of such Portfolio for which
instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for various contract owners The Company
shall be responsible for assuring that voting privileges for the Account are
calculated in a manner consistent with the Exemptive Order (hereafter defined).
The obligation to calculate voting privileges in a manner consistent with the
Exemptive Order will be a contractual obligation of all Participating Insurance
Companies (hereafter defined) under agreements governing participation in the
Fund.
2.3 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 or comply with Section 16(c) of the 1940 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 trustees and with whatever rules the SEC
may promulgate with respect thereto.
3. Representations and Warranties
3.1 Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account
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under Section 376.309 of the Missouri Insurance Code and that it has and will
maintain the capacity to issue all Contracts that may be sold.
3.2 Company represents and warrants that the Contracts are or will be
registered under the Securities Act of 1933 (the "1933 Act") and that Providian
Securities Corporation, the principal underwriter for the Contracts, is
registered as a broker-dealer under the Securities Exchange Act of 1934 (the
"1934 Act").
3.3 Company represents and warrants that it has or will have registered
the 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.
3.4 Company represents that the Contracts are currently treated as annuity
contracts, under applicable provisions of the Internal Revenue Code of 1986, as
amended ("Code"), and that it will maintain such treatment and that it will
notify Adviser and Fund promptly 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.
3.5 Fund represents and warrants that it is lawfully established and
validly existing under the laws of the State of Delaware.
3.6 Fund represents and warrants that Fund shares sold pursuant to this
Agreement are registered under the 1933 Act and duly authorized for issuance;
that 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; that Fund will sell such shares in compliance
with all applicable federal and state laws; and that, subject to Section 1.2
above, Fund is and will remain registered under and complies and will comply in
all material respects with the 1940 Act. 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 Fund.
3.7 Fund represents and warrants that it will comply with Section 817(h)
of the Code as amended from time to time and with all applicable regulations
promulgated
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thereunder. Fund will notify the Company immediately upon having a reasonable
basis for believing any Portfolio has ceased to comply or might not so comply
and will immediately take all reasonable steps to adequately diversify the
Portfolio to achieve compliance with Section 817(h) within the grace period
afforded under Treasury Regulation (S)1.817-5.
3.8 Fund represents and warrants that it shall qualify as a Regulated
Investment Company under Subchapter M of the Code, and that it will maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will promptly notify Company upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
3.9 Fund represents and warrants that Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with applicable state
insurance laws of which it is aware, provided Fund shall have no obligation to
conduct an independent investigation, or of which Company has made it aware. If
Fund, acting reasonably and in good faith, determines that such compliance is
not in the best interests of contract owners of all separate accounts investing
in the Fund, Fund shall so inform the Company, and Fund and the Company shall
discuss alternative accommodations. If Fund and the Company cannot reasonably
agree on alternative accommodations, Fund, subject to Section 8.10, may
terminate this Agreement upon thirty (30) days' prior written notice to the
Company. Fund further represents that its operations are and shall at all times
remain in material compliance with the laws of the State of Delaware to the
extent required to perform this Agreement.
3.10 Adviser represents and warrants that it is and will be a member in
good standing of the National Association of Securities Dealers, Inc., ("NASD")
and is and will be registered as a broker-dealer with the SEC. Adviser further
represents that it will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations, including without limitation
the 1933 Act, the 1934 Act and the 1940 Act. Adviser represents that its
operations are and shall at all times remain in material compliance with the
laws of the State of Delaware to the extent required to perform this Agreement.
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3.11 Adviser represents and warrants that it is and will remain duly
registered and licensed in all material respects under all applicable federal
and state securities laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and federal laws.
3.12 All parties hereto represent and warrant to each other that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of Fund in an amount not less than the amount required
by the applicable rules of the NASD and the federal securities laws. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. All parties hereto agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and each agrees to notify promptly the other
parties hereto in the event that such coverage no longer applies.
4. Sales Material and Information
4.1 The Company will furnish, or will cause to be furnished, to the Fund
and Adviser, each piece of sales literature or other promotional material in
which the Fund or Adviser is named, as soon as available prior to its intended
use; provided that with respect to sales literature or other promotional
material required to be filed with the SEC or other regulatory authorities, the
Company shall provide (a) drafts of such material as soon as available prior to
filing with the SEC or other regulatory authorities, (b) material revisions that
affect the Fund or the Adviser as soon as available and (c) final copies when
filed with the SEC or other regulatory authorities. The Fund and the Adviser
will promptly notify the Company in writing of any objections.
4.2 Fund and Adviser will furnish, or will cause to be furnished, to the
Company, each piece of sales literature or other promotional material in which
the Company or the Account is named, as soon as available prior to its intended
use; provided that with respect
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to sales literature or other promotional material required to be filed with the
SEC or other regulatory authorities, Fund shall provide (a) drafts of such
material as soon as available prior to filing with the SEC or other regulatory
authorities, (b) material revisions that affect the Company, the Account or the
Contracts as soon as available and (c) final copies when filed with the SEC or
other regulatory authorities. The Company will promptly notify the Fund and the
Adviser in writing of any objections.
4.3 Fund, the Adviser and their affiliates and agents shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Account or the Contracts, other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports of the Account or
reports prepared by Company for distribution to Owners, or in sales literature
or other promotional material approved by the Company or its designee, except
with the written permission of the Company. Fund and the Adviser shall promptly
provide the Company with copies of correspondence and reports of inquiries
concerning regulation of the Contracts and Owner complaints respecting the
Contracts.
4.4 The Company and its affiliates and agents shall not give any
information or make any representations on behalf of the Fund or concerning Fund
other than the information or representations contained in a registration
statement or prospectus for the Fund, as such registration statement and
prospectus may be amended or supplemented from tie to time, or in sales
literature or other promotional material approved by the Fund or its designee,
except with the written permission of the Fund.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
advertisements (such as materials published, or designed for use, in a
newspaper, magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures or other
public media), sales literature (such as any written
8
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, or reprints or excerpts of any other advertisements,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, registration statements, prospectuses, statements of
additional information, shareholder reports and proxy materials, and any other
material constituting sales literature or advertising under NASD rules, the 1940
Act or the 0000 Xxx.
4.6 No Party shall use any other Party's names, logos, trademarks or
service marks, whether registered or unregistered, without the prior consent of
such Party.
4.7 Fund will promptly provide to Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to Fund or its shares, in final form as filed with the SEC, NASD and
other regulatory authorities. Fund agrees to notify Company of material changes
in the management of the Fund within a reasonable time prior to any such change
becoming effective.
4.8 Company will promptly provide to Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters and all amendments to any of the above, that relate to the Fund and the
Contracts, in final form as filed with the SEC, NASD and other regulatory
authorities. Company agrees to notify Fund of material changes in the management
of the Contracts within a reasonable time prior to any such changes becoming
effective.
4.9 To the extent required by applicable law, including the administrative
requirements of regulatory authorities, or as mutually agreed between Company
and
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Adviser, Company reserves the right to modify any of the Contracts in any
respect whatsoever. Company reserves the right in its sole discretion to suspend
the sale of any of the Contracts, in whole or in part, or to accept or reject
any application for the sale of a Contract. Company agrees to notify the other
Parties promptly upon the occurrence of any event Company believes might
necessitate a material modification or suspension.
4.10 The Parties agree to review the Contracts and the Fund during the
last calendar quarter of each year for possible changes and will make their
personnel reasonably available for this purpose.
5. Fees and Expenses
5.1 Fund or Adviser shall bear the cost of registration and qualification
of Fund's shares; preparation, and filing of Fund's prospectus and registration
statement, proxy materials and reports including postage; preparation of all
other statements and notices relating to Fund or Adviser required by any federal
or state law; payment of all applicable fees, including, without limitation, all
fees due under Rule 24f-2 relating to Fund; all taxes on the issuance or
transfer of Fund's shares. At least annually, the Fund or its designee shall
provide the Company, free of charge, with as many copies of the current
prospectus for the Fund's shares as the Company may reasonably request for
distribution to existing Owners whose Contracts are funded by such shares. The
Fund or its designee shall provide the Company, at the Company's expense, with
as many copies of the current prospectus for the Fund's shares as the Company
may reasonably request for distribution to prospective purchasers of Contracts.
If requested by the Company in lieu, thereof, the Fund or its designee shall
provide such documentation (including a 8-1/2 x 11 "camera ready" copy of the
new prospectus as set in type or, at the request of the Company, as a diskette
in the form sent to the financial printer) and other assistance as is reasonably
necessary in order for the parties hereto once a year (or more frequently if the
prospectus for the Fund's shares or the Contracts is supplemented or amended) to
have the prospectus for the Contracts and the prospectus for the Fund's shares
printed together in one document. The Fund will bear the
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cost of printing the Fund's shares' prospectus portion of such document for
distribution to Owners of existing Contracts and will not bear the expense of
printing the portion of such document relating to the Account or any portion of
such document where used for distribution to prospective purchasers of the
Contracts. In the event that the Company requests that the Fund or its designee
provide the Fund's prospectus in a "camera ready" or diskette format, the Fund
shall be responsible for providing the prospectus in the format in which it is
accustomed to formatting prospectuses and shall bear the expense of providing
the prospectus in such format (e.g. typesetting expenses), and the Company shall
bear the expense of adjusting or changing the format to conform with any of its
prospectuses.
5.2 Company shall see to it that the Contracts are registered under the
1933 Act, and that the Account is registered as a unit investment trust in
accordance with the 1940 Act. Company shall bear the expenses for the costs of
preparation, filing, printing and mailing of Company's prospectus and
registration statement with respect to the Contracts; preparation of all other
statements and notices relating to the Account or the Contracts required by any
federal or state law; expenses for the solicitation and sale of the Contracts,
including all costs of printing and distributing all copies of advertisements,
prospectuses, Statements of Additional Information, proxy materials, and reports
to potential purchasers of the Contracts as required by applicable state and
federal law; payment of all applicable fees, including, without limitation, all
fees due under Rule 24f-2 relating to the Contracts; all costs of drafting,
filing and obtaining approvals of the Contracts in the various states under
applicable insurance laws; filing of annual reports on form N-SAR, and all other
costs associated with ongoing compliance with all such laws and its obligations
hereunder.
6. Indemnification
6.1 Indemnification By Company
6.1(a) Company agrees to indemnify and hold harmless Fund and Adviser and
each of their directors and officers, and each person, if any, who controls any
of them within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for
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purposes of this Section 6.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the Contracts
or contained in 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 paragraph 6.1(a) 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
Company by or on behalf of Fund for use in the registration statement or
prospectus for the Contracts or in the Contracts (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of 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, or sales literature covering 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
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to make the statements therein not misleading, if such a statement or
omission was made in reliance upon and in conformity with information
furnished to Fund by or on behalf of Company for inclusion therein; or
(iv) arise out of, or as a result of, any failure by Company or
persons under its control to provide substantially the services and
furnish the materials contemplated 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 Company or persons under its
control in this Agreement or arise out of or result from any other
material breach of this Agreement by Company or persons under its
control;
as limited by and in accordance with the provisions of sections 6.1(b) and
6.1(c) hereof.
6.1(b) 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 such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to Fund,
whichever is applicable, or to the extent of such Indemnified Party's
negligence.
6.1(c) 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 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 Company of any such claim shall not
relieve Company from any liability which it may have to the Indemnified Party
otherwise than on
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account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, Company shall be entitled to participate, at
its own expense, in the defense of such action. Company also shall be entitled
to assume and to control the defense thereof with counsel reasonably
satisfactory to the Party named in the action. After notice from Company to such
Party of 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
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.
6.1(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of Fund shares or the Contracts or the operation of Fund.
6.2 Indemnification by Adviser
6.2(a) Adviser agrees to indemnify and hold harmless Company and each of
its directors and officers and each person, if any, who controls Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 6.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Adviser) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, 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 sales literature of 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, provided that this section
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6.2(a) 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 Fund by or on behalf of
Company for use in the registration statement or prospectus for Fund or
in 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 or wrongful conduct of Adviser or Fund 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, 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 statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with information
furnished to Company by or on behalf of Fund for inclusion therein; or
(iv) arise out of, or as a result of, any failure by Adviser, Fund
or persons under their control to provide substantially the services and
furnish the materials contemplated 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 Adviser, Fund or persons under
their control in this Agreement or arise out of or result from
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any other material breach of this Agreement by Adviser, Fund or persons
under their control;
as limited by and in accordance with the provisions of Sections 6.2(b) and
6.2(c) hereof.
6.2(b) 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 or to Company
or the Account, whichever is applicable, or to the extent of such Indemnified
Party's negligence.
6.2(c) 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 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 Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Adviser of any such claim shall not
relieve Adviser from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, Adviser will be entitled to
participate, at its own expense, in the defense thereof. Adviser also shall be
entitled to assume and to control the defense thereof with counsel reasonably
satisfactory to the Party named in the action. After notice from Adviser to such
Party of 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
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.
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6.2(d) The Indemnified Parties will promptly notify Adviser of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Contracts or the operation of the Account.
7. Potential Conflicts
7.1 The Parties acknowledge that the Fund has filed an application with
the SEC to request an order (the "Exemptive Order") granting relief from various
provisions of the 1940 Act and the rules thereunder to the extent necessary to
permit Fund shares to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and to plans that qualify to purchase share of the Fund
under Section 817(h) of the Code ("Qualified Plans"). It is anticipated that the
Exemptive Order, when and if issued, shall require the Fund and each
Participating Insurance Company to comply with conditions and undertakings
substantially as provided in this Section 7. If the Exemptive Order imposes
conditions on the Company materially different from those provided for in this
Section 7, and the Company elects not to comply with such materially different
conditions the Fund shall have the right to require the Company to redeem the
Account's investment in the Fund. Otherwise, the conditions and undertakings
imposed by the Exemptive Order shall govern this Agreement and the Parties agree
to amend this Agreement consistent therewith. The Fund will not enter into a
participation agreement with any other Participating Insurance Company unless it
imposes the same conditions and undertakings as are imposed on the Company under
Section 2.2 and Section 7. For purposes of this Agreement, a "Participating
Insurance Company" is any insurance company investing in the Fund on its behalf
or on behalf of a separate account including the Company.
7.2 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
17
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling 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
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; (f) a decision by
a Participating Insurance Company to disregard the voting instructions of
contract owners; or (g) if applicable, a decision by a Qualified Plan to
disregard the voting instructions of plan participants. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.3 The Company will report any potential or existing conflicts to the
Board. The Company will assist the Board in carrying out its duties in this
regard 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 Owner voting instructions
are disregarded by the Company. These responsibilities will be carried out with
a view only to the interests of the Owners.
7.4 If a majority of the Board or a majority of its disinterested trustees
determines that a material irreconcilable conflict exists, affecting the
Company, the Company shall, at its expense and to the extent reasonably
practicable (as determined by a majority of the Board's disinterested
trustees), will take any steps necessary to remedy or eliminate the
irreconcilable material conflict, including: (a) withdrawing the assets
allocable to the Account from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, which may include another Portfolio of
the Fund, or another investment company; (b) submitting the question whether
such segregation should be implemented to a vote of all affected Owners and, as
appropriate, segregating the assets of any appropriate group (i.e. variable
annuity or variable life insurance contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected Owners the option of making such a change; and (c) establishing a
18
new registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Company's decision to
disregard Owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, the Company may be required, at the
election of the Fund, to withdraw the Account's investment in such Fund, and no
charge or penalty will be imposed as a result of such withdrawal. The
responsibility to take such remedial action shall be carried out with a view
only to the interests of the Owners.
For purposes of this Section 7.4, 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 or the Adviser
(or any other investment adviser of the Fund) be required to establish a new
funding medium for any Contract. Further, the Company shall not be required by
this Section 7.4 to establish a new funding medium for the Contracts if an offer
to do so has been declined by vote of a majority of Owners materially adversely
affected by the irreconcilable material conflict.
7.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to the Company.
7.6 No less than annually, the Company shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out its obligations. Such reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board.
7.7 If and to the extent 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 and shared funding on
terms and conditions materially different from those contained in the Exemptive
Order, the Fund and the Participating Insurance Companies, as appropriate, shall
take 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.
19
8. Term and Termination
8.1 The initial term of this Agreement shall be from the effective date of
the Fund's registration statement through the second anniversary of such date.
Unless terminated upon thirty (30) days' prior written notice to the other
Party, this Agreement shall thereafter automatically renew from year to year,
provided that any Party may terminate this Agreement without cause following the
initial term upon six (6) months' advance written notice to the other.
8.2 Notwithstanding any other provision of this Agreement, Adviser or the
Fund may terminate this Agreement for cause on not less than thirty (30) days'
prior written notice to the Company, unless Company has cured such cause within
thirty (30) days of receiving such notice, for any material breach by Company of
any representation, warranty, covenant or obligation hereunder.
8.3 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement for cause on not less than thirty (30) days' prior
written notice to Adviser and Fund unless Adviser or Fund has cured such cause
within thirty (30) days of receiving such notice, for any material breach by
Adviser or Fund of any representation, warranty, covenant or obligation
hereunder.
8.4 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Adviser 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.
8.5 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Adviser with
respect to any Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company.
20
8.6 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Adviser with
respect to any Portfolio in the event that such Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Fund may fail to so qualify.
8.7 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Adviser with
respect to any Portfolio in the event that such Portfolio fails to meet the
diversification requirements specified in Paragraph 3.7.
8.8 Notwithstanding any other provision of this Agreement, Fund or Adviser
may terminate this Agreement by written notice to the Company, if either one or
both shall determine, in their sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or is the
subject of material adverse publicity, or if formal proceedings against Company
have been instituted by the NASD, SEC or any state securities or insurance
department or any other regulatory body regarding Company's duties under this
Agreement or related to the sale of the Contracts, the operation of the Account
or the purchase of Fund shares; provided, however, that the Fund determines in
its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of Company to
perform its obligations under this Agreement.
8.9 Notwithstanding any other provision of this Agreement, Company may
terminate this Agreement by written notice to the Fund and the Adviser, if the
Company shall determine, 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, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity, or if formal
proceedings against Fund or Adviser have been instituted by the
00
XXXX, XXX or any state securities or insurance department or any other
regulatory body; provided, however, that Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of Fund or Adviser to perform its
obligations under this Agreement.
8.10 Notwithstanding the termination of its obligation to make shares
available to the Company but subject to the rights and duties of the Fund's
Board as described in Section 1.2 above, the Fund shall continue to make Fund
shares available to the extent necessary to permit Owners in effect on the
effective date of such termination (hereinafter referred to as "Existing
Contracts") 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. Existing Contracts shall not include Non-Complying
Contracts, if any. In the event that the Fund terminates this Agreement, the
Fund shall promptly notify the Company whether the Fund is electing to make Fund
shares available after termination for Non-Complying Contracts (or a class
thereof). In determining whether to make Fund shares available for such Non-
Complying Contracts (or a class thereof), the Trust shall act in good faith
giving due consideration to the interests of Owners of such Non-Complying
Contracts (or a class thereof). For purposes of this Section 8.10, "Non-
Complying Contracts" are those Contracts that are not registered, issued, sold
or administered in accordance with applicable federal and/or state law.
8.11 The Company may withdraw the Account's investment in the Fund or a
Portfolio only: (i) as necessary to facilitate Owner requests; (ii) upon a
determination by a majority of the Board, or a majority of disinterested
trustees, that an irreconcilable material conflict exists among the interests of
(x) owners of contracts of all separate accounts investing in the Fund or (y)
the interests of the Participating Insurance Companies; (iii) upon requisite
vote of the Owners having an interest in the affected Portfolio to substitute
the shares of another investment company for Fund shares in accordance with the
terms of the Contracts; (iv) as required by state and/or federal laws or
regulations or judicial or other
22
legal precedent of general application; or (v) as permitted by an order of the
SEC pursuant to Section 26(b) of the 1940 Act.
9. Notices
Any notice shall be deemed 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 party.
If to Fund or Advisor:
Xxx X. Xxxxx, Principal
Xxxxx, Xxxx & Xxxxx, L.L.C.
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Company:
Xxxxxxx Xxxx
Providian Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxx X. Xxxxxx
Chief Financial Officer
Providian Life and Health Insurance Company
Xxxxxx Xxxxx, Xxxxxxxxxxxx 00000
10. Miscellaneous
10.1 The captions in this Agreement are included for convenience of
reference only and in no way affect the construction or effect of any provisions
hereof.
10.2 If any portion 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.
10.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
23
10.4 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance and securities regulators) and shall permit such authorities and
each party reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement.
10.5 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.
10.6 Subject to the requirements of legal process and regulatory
authority, the Fund and Adviser shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by the Company 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 Company until such time as it may come into the public
domain.
10.7 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.
10.8 In any dispute arising hereunder, each party waives its right to
demand a trial by jury and hereby consents to a bench trial of all such
disputes.
10.9 The terms of this Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of New York; provided,
however, that all performances rendered hereunder shall be subject to compliance
with all applicable state and federal laws and regulations.
10.10 Sections 6 and 8.10 hereof shall survive termination of this
Agreement.
10.11 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the trustees or officers of the Fund
or any Portfolio shall be personally liable hereunder. No Portfolio shall be
liable for the liabilities of any other Portfolio. All persons dealing with the
Fund or a Portfolio must look solely to the property
24
of the Fund or that Portfolio, respectively, for enforcement of any claims
against the Fund or that Portfolio. It is also understood that each of the
Portfolios shall be deemed to be entering into a separate Agreement with the
Company so that it is as if each of the Portfolios had signed a separate
Agreement with the Company and that a single document is being signed simply to
facilitate the execution and administration of the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first set forth above.
Company:
PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY
/s/ Xxxxxxx X. Xxxx
By: _____________________________
Xxxxxxx X. Xxxx
Name: _____________________________
Vice President
Title: _____________________________
Fund:
TOMORROW FUNDS RETIREMENT TRUST, on behalf
of the Portfolios listed on Schedule A hereto,
severally and not jointly
/s/ Xxx X. Xxxxx
By: _____________________________
Xxx X. Xxxxx
Name: _____________________________
Executive Vice President
Title: _____________________________
Adviser:
XXXXX, XXXX & XXXXX, L.L.C.
/s/ Xxx X. Xxxxx
By: _____________________________
Xxx X. Xxxxx
Name: _____________________________
Principal
Title: _____________________________
25
SCHEDULE A
Core Large Cap Stock Fund
Core Small Cap Stock Fund
