FUND PARTICIPATION AGREEMENT
THE PRUDENTIAL SERIES FUND, INC.
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares..........................................4
ARTICLE II. Representations and Warranties...............................8
ARTICLE III. Prospectuses and Proxy Statements; Voting...................11
ARTICLE IV. Sales Material and Information..............................13
ARTICLE V. Fees and Expenses...........................................16
ARTICLE VI. Diversification and Qualification...........................16
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order ...................19
ARTICLE VIII. Indemnification ............................................22
ARTICLE IX. Applicable Law..............................................31
ARTICLE X. Termination.................................................32
ARTICLE XI. Notices.....................................................35
ARTICLE XII. Miscellaneous...............................................36
SCHEDULE A Contracts...................................................39
SCHEDULE B Designated Portfolios.......................................40
SCHEDULE C Reports per Section 6.6.....................................41
SCHEDULE D Expenses....................................................43
PARTICIPATION AGREEMENT
Among
THE OHIO NATIONAL LIFE INSURANCE COMPANY,
THE PRUDENTIAL SERIES FUND, INC.,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
and
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
THIS AGREEMENT, made and entered into as of this 3rd day of January, 2000,
by and among THE OHIO NATIONAL LIFE INSURANCE COMPANY (hereinafter "Ohio
National"), an Ohio life insurance company, on its own behalf and on behalf of
its Ohio National Variable Account A (the "Account"); THE PRUDENTIAL SERIES
FUND, INC., an open-end management investment company organized under the laws
of Maryland (hereinafter the "Fund"); THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA (hereinafter the "Adviser"), a New Jersey mutual insurance company; and
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC (hereinafter the "Distributor"), a
Delaware limited liability company.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and/or variable annuity
contracts (collectively, the "Variable Insurance Products") to be offered by
insurance companies, including Ohio National, which have entered into
participation agreements similar to this Agreement (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
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WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter the "SEC"), dated March 5, 1999 (File No.
IC-23728), granting Participating Insurance Companies and variable annuity and
variable life insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as
amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
life insurance companies that may or may not be affiliated with one another and
qualified pension and retirement plans ("Qualified Plans") (hereinafter the
"Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolio(s) are registered under
the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, the Distributor is duly registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended, (the "1934 Act") and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, Ohio National has registered certain variable annuity contracts
supported wholly or partially by the Account (the "Contracts") under the 1933
Act and said Contracts are listed in Schedule A attached hereto and incorporated
herein by reference, as such Schedule may be amended from time to time by mutual
written agreement; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of Ohio National on
August 1, 1969, under the insurance laws of the State of Ohio, to set aside and
invest assets attributable to the Contracts; and
3
WHEREAS, Ohio National has registered the Account as a unit investment
trust under the 1940 Act and has registered the securities deemed to be issued
by the Account under the 1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Ohio National intends to purchase shares in the Portfolio(s) listed
in Schedule B attached hereto and incorporated herein by reference, as such
Schedule may be amended from time to time by mutual written agreement (the
"Designated Portfolio(s)"), on behalf of the Account to fund the Contracts, and
the Fund is authorized to sell such shares to unit investment trusts such as the
Account at net asset value; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other open-end
investment companies or series thereof not affiliated with the Fund (the
"Unaffiliated Funds") on behalf of the Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, Ohio
National, the Fund, the Distributor and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares.
1.1. The Fund agrees to sell to Ohio National those shares of the
Designated Portfolio(s) which the Account orders, executing such orders on each
Business Day at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Designated Portfolios. For
purposes of this Section 1.1, Ohio National shall be the designee of the Fund
for receipt of such orders and receipt by such designee shall constitute receipt
by the Fund, provided that the Fund receives notice of any such order by 9:00
a.m. 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
the Designated Portfolio calculates its net asset value pursuant to the rules of
the SEC.
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1.2. The Fund agrees to make shares of the Designated Portfolio(s)
available for purchase at the applicable net asset value per share by Ohio
National and the Account on those days on which the Fund calculates its
Designated Portfolio(s)' net asset value pursuant to rules of the SEC, and the
Fund shall calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Board") may refuse to sell shares of any
Designated Portfolio to any person, or suspend or terminate the offering of
shares of any Designated Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board acting in good faith and in light of its fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the
shareholders of such Designated Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s) to any
other Participating Insurance Company separate account unless an agreement
containing provisions the substance of which are the same as Sections 2.1
(except with respect to New Jersey law), 3.5, 3.6, 3.7, and Article VII of this
Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on Ohio National's request, any
full or fractional shares of the Fund held by Ohio National, executing such
requests on each Business Day at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. Requests for
redemption identified by Ohio National, or its agent, as being in connection
with surrenders, annuitizations, or death benefits under the Contracts, upon
prior written notice, may be executed within seven (7) calendar days after
receipt by the Fund or its designee of the requests for redemption. This Section
1.4 may be amended, in writing, by the parties consistent with the requirements
of the 1940 Act and interpretations thereof. For purposes of this Section 1.4,
Ohio National shall be the designee of the Fund for receipt of requests for
redemption and receipt by such designee shall constitute receipt by the Fund,
provided that the Fund receives notice of any such request for redemption by
9:00 a.m. Eastern time on the next following Business Day.
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1.5. The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
Participating Insurance Companies (subject to Section 1.3) and the cash value of
the Contracts may be invested in other investment companies.
1.6. Ohio National shall pay for Fund shares by 3:00 p.m. Eastern time on
the next Business Day after an order to purchase Fund shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire and/or by a credit for any shares redeemed the
same day as the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions of Fund
shares by 11:00 a.m. Eastern Time on the next Business Day after a redemption
order is received in accordance with Section 1.4 hereof. Payment shall be in
federal funds transmitted by wire and/or a credit for any shares purchased the
same day as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to Ohio National or the Account. Shares
purchased from the Fund will be recorded in an appropriate title for the Account
or the appropriate sub-account of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to Ohio National of any income, dividends or capital
gain distributions payable on the Designated Portfolio(s)' shares. Ohio National
hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Designated Portfolio shares in additional
shares of that Designated Portfolio. Ohio National reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash. The Fund shall notify Ohio National by the end of the
next following Business Day of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Designated
Portfolio available to Ohio National on each Business Day as soon as reasonably
practical after the net
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asset value per share is calculated and shall use its best efforts to make such
net asset value per share available by 6:00 p.m. Eastern time. In the event of
an error in the computation of a Designated Portfolio's net asset value per
share ("NAV") or any dividend or capital gain distribution (each, a "pricing
error"), the Adviser or the Fund shall immediately notify Ohio National as soon
as possible after discovery of the error. Such notification may be verbal, but
shall be confirmed promptly in writing in accordance with Article XI of this
Agreement. A pricing error shall be corrected as follows: (a) if the pricing
error results in a difference between the erroneous NAV and the correct NAV of
less than $0.01 per share, then no corrective action need be taken; (b) if the
pricing error results in a difference between the erroneous NAV and the correct
NAV equal to or greater than $0.01 per share, but less than 1/2 of 1% of the
Designated Portfolio's NAV at the time of the error, then the Adviser shall
reimburse the Designated Portfolio for any loss, after taking into consideration
any positive effect of such error; however, no adjustments to Contractowner
accounts need be made; and (c) if the pricing error results in a difference
between the erroneous NAV and the correct NAV equal to or greater than 1/2 of 1%
of the Designated Portfolio's NAV at the time of the error, then the Adviser
shall reimburse the Designated Portfolio for any loss (without taking into
consideration any positive effect of such error) and shall reimburse Ohio
National for the costs of adjustments made to correct Contractowner accounts in
accordance with the provisions of Schedule D. If an adjustment is necessary to
correct a material error which has caused Contractowners to receive less than
the amount to which they are entitled, the number of shares of the applicable
sub-account of such Contractowners will be adjusted and the amount of any
underpayments shall be credited by the Adviser to Ohio National for crediting of
such amounts to the applicable Contractowners accounts. Upon notification by the
Adviser of any overpayment due to a material error, Ohio National shall promptly
remit to Adviser any overpayment that has not been paid to Contractowners. In no
event shall Ohio National be liable to Contractowners for any such adjustments
or underpayment amounts. A pricing error within categories (b) or (c) above
shall be deemed to be "materially incorrect" or constitute a "material error"
for purposes of this Agreement.
The standards set forth in this Section 1.10 are based on the Parties'
understanding of the views expressed by the staff of the SEC as of the date of
this Agreement. In the event the views of the SEC staff are later modified or
superseded by SEC or judicial interpretation, the parties
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shall amend the foregoing provisions of this Agreement to comport with the
appropriate applicable standards, on terms mutually satisfactory to all Parties.
ARTICLE II. Representations and Warranties
2.1. Ohio National represents and warrants that the Contracts and the
securities deemed to be issued by the Account under the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. Ohio National further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale of units thereof as a segregated asset account
under Section 3907.15, Ohio Revised Code, and has 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 and that it will maintain
such registration for so long as any Contracts are outstanding as required by
applicable law.
2.2. The Fund represents and warrants that Designated Portfolio(s) shares
sold pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with all applicable federal
securities laws including without limitation the 1933 Act, the 1934 Act, and the
1940 Act and that the Fund is and shall remain registered under the 0000 Xxx.
The Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule 12b-1
under the 1940 Act and to impose an asset-based or other charge to finance
distribution expenses as permitted by applicable law and regulation. In any
event, the Fund and Adviser agree to comply with applicable provisions and SEC
staff interpretations of the 1940 Act to assure that the investment advisory or
management fees paid to the Adviser by the Fund are in accordance with the
requirements of the 1940 Act. To the extent that the Fund decides to finance
distribution
8
expenses pursuant to Rule 12b-1, the Fund undertakes to have its Board, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
expenses.
2.4. The Fund represents and warrants that it will make every effort to
ensure that the investment policies, fees and expenses of the Designated
Portfolio(s) are and shall at all times remain in compliance with the insurance
and other applicable laws of the State of Ohio and any other applicable state to
the extent required to perform this Agreement. The Fund further represents and
warrants that it will make every effort to ensure that Designated Portfolio(s)
shares will be sold in compliance with the insurance laws of the State of Ohio
and all applicable state insurance and securities laws. The Fund shall register
and qualify the shares for sale in accordance with the laws of the various
states if and to the extent required by applicable law. Ohio National and the
Fund will endeavor to mutually cooperate with respect to the implementation of
any modifications necessitated by any change in state insurance laws,
regulations or interpretations of the foregoing that affect the Designated
Portfolio(s) (a "Law Change"), and to keep each other informed of any Law Change
that becomes known to either party. In the event of a Law Change, the Fund
agrees that, except in those circumstances where the Fund has advised Ohio
National that its Board of Directors has determined that implementation of a
particular Law Change is not in the best interest of all of the Fund's
shareholders with an explanation regarding why such action is lawful, any action
required by a Law Change will be taken.
2.5. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Maryland and that it does and
will comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall remain duly
registered under all applicable federal and state securities laws and that it
shall perform its obligations for the Fund in compliance in all material
respects with any applicable state and federal securities laws.
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2.7. The Distributor represents and warrants that it is and shall remain
duly registered under all applicable federal and state securities laws and that
it shall perform its obligations for the Fund in compliance in all material
respects with the laws of any applicable state and federal securities laws.
2.8. The Fund and the Adviser represent and warrant that all of their
respective officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are, and shall
continue to be at all times, covered by one or more blanket fidelity bonds or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage required by Rule 17g-1 under the 1940 Act or related provisions
as may be promulgated from time to time. The aforesaid bonds shall include
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company.
2.9. The Fund will provide Ohio National with as much advance notice as is
reasonably practicable of any material change affecting the Designated
Portfolio(s) (including, but not limited to, any material change in the
registration statement or prospectus affecting the Designated Portfolio(s)) and
any proxy solicitation affecting the Designated Portfolio(s) and consult with
Ohio National in order to implement any such change in an orderly manner,
recognizing the expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the prospectus
for the Contracts. The Fund agrees to share equitably in expenses incurred by
Ohio National as a result of actions taken by the Fund, consistent with the
allocation of expenses contained in Schedule D attached hereto and incorporated
herein by reference.
2.10. Ohio National represents and warrants, for purposes other than
diversification under Section 817 of the Internal Revenue Code of 1986 as
amended ("the Code"), that the Contracts are currently and at the time of
issuance will be treated as annuity contracts under applicable provisions of the
Code, and that it will make every effort to maintain such treatment and that it
will notify the Fund, the Distributor and the Adviser immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future. In addition, Ohio National
represents and warrants that the
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Account is a "segregated asset account" and that interests in the Account are
offered exclusively through the purchase of or transfer into a "variable
contract" within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. Ohio National will use every effort to continue to meet
such definitional requirements, and it will notify the Fund, the Distributor and
the Adviser immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
Ohio National 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.
ARTICLE III. Prospectuses and Proxy Statements; Voting.
3.1. At least annually, the Adviser or Distributor shall provide Ohio
National with as many copies of the Fund's current prospectus for the Designated
Portfolio(s) as Ohio National may reasonably request for marketing purposes
(including distribution to Contractowners with respect to new sales of a
Contract), with expenses to be borne in accordance with Schedule D hereof. If
requested by Ohio National in lieu thereof, the Adviser, Distributor or Fund
shall provide such documentation (including a camera-ready copy and computer
diskette of the current prospectus for the Designated Portfolio(s)) and other
assistance as is reasonably necessary in order for Ohio National once each year
(or more frequently if the prospectuses for the Designated Portfolio(s) are
amended) to have the prospectus for the Contracts and the Fund's prospectus for
the Designated Portfolio(s) printed together in one document. The Fund and
Adviser agree that the prospectus (and semi-annual and annual reports) for the
Designated Portfolio(s) will describe only the Designated Portfolio(s) and will
not name or describe any other portfolios or series that may be in the Fund
unless required by law.
3.2. If applicable state or federal laws or regulations require that the
Statement of Additional Information ("SAI") for the Fund be distributed to all
Contractowners, then the Fund, Distributor and/or the Adviser shall provide Ohio
National with copies of the Fund's SAI or documentation thereof for the
Designated Portfolio(s) in such quantities, with expenses to be borne in
accordance with Schedule D hereof, as Ohio National may reasonably require to
permit
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timely distribution thereof to Contractowners. The Adviser, Distributor and/or
the Fund shall also provide SAIs to any Contractowner or prospective owner who
requests such SAI from the Fund (although it is anticipated that such requests
will be made to Ohio National).
3.3. The Fund, Distributor and/or Adviser shall provide Ohio National with
copies of the Fund's proxy material, reports to stockholders and other
communications to stockholders for the Designated Portfolio(s) in such quantity,
with expenses to be borne in accordance with Schedule D hereof, as Ohio National
may reasonably require to permit timely distribution thereof to Contractowners.
3.4. It is understood and agreed that, except with respect to information
regarding Ohio National provided in writing by that party, Ohio National shall
not be responsible for the content of the prospectus or SAI for the Designated
Portfolio(s). It is also understood and agreed that, except with respect to
information regarding the Fund, the Distributor, the Adviser or the Designated
Portfolio(s) provided in writing by the Fund, the Distributor or the Adviser,
neither the Fund, the Distributor nor Adviser are responsible for the content of
the prospectus or SAI for the Contracts.
3.5. If and to the extent required by law Ohio National shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares held in the Account in
accordance with instructions received from Contractowners: and
(iii) vote Designated Portfolio shares held in the Account for which
no instructions have been received in the same proportion as
Designated Portfolio(s) shares for which instructions have been
received from Contractowners, 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. Ohio
National reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent
permitted by law.
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3.6. Ohio National shall be responsible for assuring that each of its
separate accounts holding shares of a Designated Portfolio calculates voting
privileges as directed by the Fund and agreed to by Ohio National and the Fund.
The Fund agrees to promptly notify Ohio National of any changes of
interpretations or amendments of the Mixed and Shared Funding Exemptive Order.
3.7. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends, comply with
Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors or trustees and with whatever rules the SEC may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information.
4.1. Ohio National shall furnish, or shall cause to be furnished, to the
Fund or its designee, a copy of each piece of sales literature or other
promotional material that Ohio National develops or proposes to use and in which
the Fund (or a Portfolio thereof), its Adviser or one of its sub-advisers or the
Distributor is named in connection with the Contracts, at least ten (10)
Business Days prior to its use. No such material shall be used if the Fund
objects to such use within five (5) Business Days after receipt of such
material.
4.2. Ohio National shall not give any information or make any
representations or statements on behalf of the Fund in connection with the sale
of the Contracts other than the information or representations contained in the
registration statement, including the prospectus or SAI for the Fund shares, as
the same may be amended or supplemented from time to time, or in sales
literature or other promotional material approved by the Fund, Distributor or
Adviser, except with the permission of the Fund, Distributor or Adviser.
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4.3. The Fund or the Adviser shall furnish, or shall cause to be furnished,
to Ohio National, a copy of each piece of sales literature or other promotional
material in which Ohio National and/or its separate account(s) is named at least
ten (10) Business Days prior to its use. No such material shall be used if Ohio
National objects to such use within five (5) Business Days after receipt of such
material.
4.4. The Fund, the Distributor and the Adviser shall not give any
information or make any representations on behalf of Ohio National or concerning
Ohio National, the Account, or the Contracts other than the information or
representations contained in a registration statement, including the prospectus
or SAI for the Contracts, as the same may be amended or supplemented from time
to time, or in sales literature or other promotional material approved by Ohio
National or its designee, except with the permission of Ohio National.
4.5. The Fund will provide to Ohio National at least one complete copy of
all registration statements, prospectuses, SAIs, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Designated
Portfolio(s) within a reasonable period of time following the filing of such
document(s) with the SEC or NASD or other regulatory authorities.
4.6. Ohio National will provide to the Fund at least one complete copy of
all registration statements, prospectuses, SAIs, 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 Contracts or the Account,
contemporaneously with the filing of such document(s) with the SEC, NASD, or
other regulatory authority.
4.7. For purposes of Articles IV and VIII, the phrase "sales literature and
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media; e.g.,
on-line networks such as the Internet or other electronic media), sales
literature (i.e., any
14
written communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and shareholder reports, and proxy materials (including
solicitations for voting instructions) and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act or the 0000 Xxx.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested in connection with
compliance and regulatory requirements related to this Agreement or any party's
obligations under this Agreement.
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ARTICLE V. Fees and Expenses
5.1. The Fund and the Adviser shall pay no fee or other compensation to
Ohio National under this Agreement, and Ohio National shall pay no fee or other
compensation to the Fund or Adviser under this Agreement, although the parties
hereto will bear certain expenses in accordance with Schedule D, Articles III,
V, and other provisions of this Agreement.
5.2. All expenses incident to performance by the Fund, the Distributor and
the Adviser under this Agreement shall be paid by the appropriate party, as
further provided in Schedule D. The Fund shall see to it that all shares of the
Designated Portfolio(s) are registered and authorized for issuance in accordance
with applicable federal law and, if and to the extent required, in accordance
with applicable state laws prior to their sale.
5.3. The parties shall bear the expenses of routine annual distribution
(mailing costs) of the Fund's prospectus and distribution (mailing costs) of the
Fund's proxy materials and reports to owners of Contracts offered by Ohio
National, in accordance with Schedule D.
ARTICLE VI. Diversification and Qualification.
6.1. The Fund, the Distributor and the Adviser represent and warrant that
the Fund will at all times sell its shares and invest its assets in such a
manner as to ensure that the Contracts will be treated as annuity contracts
under the Code, and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund, Distributor and Adviser represent and warrant
that the Fund and each Designated Portfolio thereof will at all times comply
with Section 817(h) of the Code and Treasury Regulation ss.1.817-5, as amended
from time to time, and any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications or successor provisions to
such Section or Regulations. The Fund, the Distributor and the Adviser agree
that shares of the Designated Portfolio(s) will be sold only to Participating
Insurance Companies and their separate accounts and to Qualified Plans.
16
6.2. No shares of any Designated Portfolio of the Fund will be sold to the
general public.
6.3. The Fund, the Distributor and the Adviser represent and warrant that
the Fund and each Designated Portfolio is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that each Designated
Portfolio will maintain such qualification (under Subchapter M or any successor
or similar provisions) as long as this Agreement is in effect.
6.4. The Fund, Distributor or Adviser will notify Ohio National immediately
upon having a reasonable basis for believing that the Fund or any Designated
Portfolio has ceased to comply with the aforesaid Section 817(h) diversification
or Subchapter M qualification requirements or might not so comply in the future.
6.5. Without in any way limiting the effect of Sections 8.2, 8.3 and 8.4
hereof and without in any way limiting or restricting any other remedies
available to Ohio National, the Adviser or Distributor will pay all costs
associated with or arising out of any failure, or any anticipated or reasonably
foreseeable failure, of the Fund or any Designated Portfolio to comply with
Sections 6.1, 6.2, or 6.3 hereof, including all costs associated with reasonable
and appropriate corrections or responses to any such failure; such costs may
include, but are not limited to, the costs involved in creating, organizing, and
registering a new investment company as a funding medium for the Contracts
and/or the costs of obtaining whatever regulatory authorizations are required to
substitute shares of another investment company for those of the failed
Portfolio (including but not limited to an order pursuant to Section 26(b) of
the 1940 Act).
6.6. The Fund at the Fund's expense shall provide Ohio National or its
designee with reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the times
provided for and substantially in the form attached hereto as Schedule C and
incorporated herein by reference; provided, however, that providing such reports
does not relieve the Fund of its responsibility for such compliance or of its
liability for any non-compliance.
17
6.7. Ohio National agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of Ohio
National or, to Ohio National's knowledge, of any Contractowner that any
Designated Portfolio has failed to comply with the diversification requirements
of Section 817(h) of the Code or Ohio National otherwise becomes aware of any
facts that could give rise to any claim against the Fund, Distributor or Adviser
as a result of such a failure or alleged failure:
(a) Ohio National shall promptly notify the Fund, the Distributor and
the Adviser of such assertion or potential claim;
(b) Ohio National shall consult with the Fund, the Distributor and the
Adviser as to how to minimize any liability that may arise as a result
of such failure or alleged failure;
(c) Ohio National shall use its best efforts to minimize any liability
of the Fund, the Distributor and the Adviser resulting from such
failure, including, without limitation, demonstrating, pursuant to
Treasury Regulations, Section 1.817-5(a)(2), to the commissioner of
the IRS that such failure was inadvertent;
(d) any written materials to be submitted by Ohio National to the IRS,
any Contractowner or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation, any
such materials to be submitted to the IRS pursuant to Treasury
Regulations, Section 1.817-5(a)(2)) shall be provided by Ohio National
to the Fund, the Distributor and the Adviser (together with any
supporting information or analysis) within at least two (2) business
days prior to submission;
(e) Ohio National shall provide the Fund, the Distributor and the
Adviser with such cooperation as the Fund, the Distributor and the
Adviser shall reasonably request (including, without limitation, by
permitting the Fund, the Distributor and the Adviser to review the
relevant books and records of Ohio National) in order to facilitate
review by the Fund, the Distributor and the Adviser of any written
submissions provided to it or its
18
assessment of the validity or amount of any claim against it arising
from such failure or alleged failure;
(f) Ohio National shall not with respect to any claim of the IRS or
any Contractowner that would give rise to a claim against the Fund,
the Distributor and the Adviser (i) compromise or settle any claim,
(ii) accept any adjustment on audit, or (iii) forego any allowable
administrative or judicial appeals, without the express written
consent of the Fund, the Distributor and the Adviser, which shall not
be unreasonably withheld; provided that, Ohio National shall not be
required to appeal any adverse judicial decision unless the Fund and
the Adviser shall have provided an opinion of independent counsel to
the effect that a reasonable basis exists for taking such appeal; and
further provided that the Fund, the Distributor and the Adviser shall
bear the costs and expenses, including reasonable attorney's fees,
incurred by Ohio National in complying with this clause (f).
ARTICLE VII. Potential Conflicts and Compliance With Mixed and Shared Funding
Exemptive Order
7.1. 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 Designated Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners or by contract owners of different Participating Insurance
Companies; or (f) a decision by a Participating Insurance Company to disregard
the voting instructions of contract owners. The Board shall promptly inform Ohio
National if it determines that an irreconcilable material conflict exists and
the implications thereof.
19
7.2. Ohio National will report any potential or existing conflicts of which
it is aware to the Board. Ohio National will assist the Board in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by Ohio National to inform the Board whenever contract owner voting instructions
are to be disregarded. Such responsibilities shall be carried out by Ohio
National with a view only to the interests of its Contractowners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Fund, the Distributor, the
Adviser or any sub-adviser to any of the Designated Portfolios (the "Independent
Directors"), that a material irreconcilable conflict exists, Ohio National and
other Participating Insurance Companies shall, at their expense and to the
extent reasonably practicable (as determined by a majority of the Independent
Directors), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
Designated 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 Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
Ohio National to disregard Contractowner voting instructions and that decision
represents a minority position or would preclude a majority vote, Ohio National
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement; provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the Independent
Directors. Any such withdrawal and termination must take place within six (6)
months after the
20
Fund gives written notice that this provision is being implemented, and until
the end of that six month period the Adviser, the Distributor and the Fund shall
continue to accept and implement orders by Ohio National for the purchase (and
redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Ohio National conflicts with
the majority of other state regulators, then Ohio National will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board informs Ohio National in writing that it has determined that
such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by Ohio National for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 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.
Ohio National shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contractowners 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 Ohio National will withdraw
the Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs Ohio National 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 Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the
21
Mixed and Shared Funding Exemptive Order, then (a) the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable: and (b) Sections 3.5, 3.6,
3.7, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only
to the extent that terms and conditions substantially identical to such Sections
are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By Ohio National
8.1(a). Ohio National agrees to indemnify and hold harmless the Fund, the
Distributor and the Adviser and each of their respective officers and directors
or trustees and each person, if any, who controls the Fund, Distributor or
Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, expenses, damages and liabilities (including amounts paid in
settlement with the written consent of Ohio National) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, expenses, damages or liabilities (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus or SAI covering the
Contracts or contained in the Contracts or sales literature or
other promotional material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to Ohio National by or on behalf
of the Adviser, Distributor or Fund for use in the registration
statement or prospectus for the Contracts or in the Contracts or
sales literature or other promotional material (or any amendment
or supplement to any of the foregoing) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
22
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature or other
promotional material of the Fund not supplied by Ohio National or
persons under its control) or wrongful conduct of Ohio National
or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, SAI, or sales literature or other promotional
material of the Fund, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, if such a statement or
omission was made in reliance upon information furnished in
writing to the Fund by or on behalf of Ohio National; or
(iv) arise as a result of any failure by Ohio National to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Ohio National in this
Agreement or arise out of or result from any other material
breach of this Agreement by Ohio National, including without
limitation Section 2.10 and Section 6.7 hereof,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). Ohio National shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason of
such Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
any of the Indemnified Parties.
8.1(c). Ohio National 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 Ohio National 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 Ohio National of
any such claim shall not relieve Ohio National from any liability which it may
have to the Indemnified Party against whom such action
23
is brought otherwise than on account of this indemnification provision, except
to the extent that Ohio National has been prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified Parties, Ohio
National shall be entitled to participate, at its own expense, in the defense of
such action. Ohio National also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice from
Ohio National to such party of Ohio National's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and Ohio National will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify Ohio National of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by the Adviser.
8.2(a). The Adviser agrees to indemnify and hold harmless Ohio National and
its directors and officers and each person, if any, who controls Ohio National
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of the Adviser) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature
or other promotional material of the Fund prepared by the Fund,
the Distributor or the Adviser (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make
24
the statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to the Adviser, the Distributor
or the Fund by or on behalf of Ohio National for use in the
registration statement, prospectus or SAI for the Fund or in
sales literature or other promotional material (or any amendment
or supplement to any of the foregoing) or otherwise for use in
connection with the sale of the Contracts or the Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI or sales literature or
other promotional material for the Contracts not supplied by the
Adviser or persons under its control) or wrongful conduct of the
Fund, the Distributor or the Adviser or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, SAI, or sales literature or other promotional
material covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished in writing to Ohio National by or on
behalf of the Adviser, the Distributor or the Fund; or
(iv) arise as a result of any failure by the Fund, the Distributor or
the Adviser to provide the services and furnish the materials
under the terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund, the Distributor
or the Adviser in this Agreement or arise out of or result from
any other material breach of this Agreement by the Adviser, the
Distributor or the Fund; or
(vi) arise out of or result from the incorrect or untimely calculation
or reporting by the Fund, the Distributor or the Adviser of the
daily net asset value per share (subject to Section 1.10 of this
Agreement) or dividend or capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Adviser specified in Article VI hereof.
25
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason of
such Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
any of the Indemnified Parties.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision, except to the extent that the Adviser
has been prejudiced by such failure to give notice. In case any such action is
brought against the Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Adviser will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.2(d). Ohio National agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification By the Fund.
26
8.3(a). The Fund agrees to indemnify and hold harmless Ohio National and
its directors and officers and each person, if any, who controls Ohio National
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses, claims,
expenses, damages and 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 be required to pay or become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, expenses, damages, liabilities or expenses (or actions in
respect thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund; or
(iii) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per share
(subject to Section 1.10 of this Agreement) or dividend or
capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, expenses, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
any of the Indemnified Parties.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving
27
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve it from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision, except to the extent that the Fund has been
prejudiced by such failure to give notice. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund shall also be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund'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 Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). Ohio National agrees promptly to notify the Fund of the
commencement of any litigation or proceeding against itself or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
28
8.4. Indemnification by the Distributor.
8.4(a). The Distributor agrees to indemnify and hold harmless Ohio National
and its directors and officers and each person, if any, who controls Ohio
National within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.4) against any and all
losses, claims, expenses, damages and liabilities (including amounts paid in
settlement with the written consent of the Distributor) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature
or other promotional material of the Fund prepared by the Fund,
Adviser or Distributor (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to the
Adviser, the Distributor or Fund by or on behalf of Ohio National
for use in the registration statement or SAI or prospectus for
the Fund or in sales literature or other promotional material (or
any amendment or supplement to any of the foregoing) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI, sales literature or
other promotional material for the Contracts not supplied by the
Distributor or persons under its control) or wrongful conduct of
the Fund, the Distributor or Adviser or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, SAI, sales literature or other promotional material
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, if such
statement or omission was made in reliance upon
29
information furnished in writing to Ohio National by or on behalf
of the Adviser, the Distributor or Fund; or
(iv) arise as a result of any failure by the Fund, Adviser or
Distributor to provide the services and furnish the materials
under the terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund, Adviser or
Distributor in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund, Adviser or
Distributor; or
(vi) arise out of or result from the incorrect or untimely calculation
or reporting of the daily net asset value per share (subject to
Section 1.10 of this Agreement) or dividend or capital gain
distribution rate;
as limited by and in accordance with the provisions of Sections 8.4(b) and
8.4(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Distributor specified in Article VI
hereof.
8.4(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason of
such Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
any of the Indemnified Parties.
8.4(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Distributor in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision, except to the
30
extent that the Distributor has been prejudiced by such failure to give notice.
In case any such action is brought against the Indemnified Parties, the
Distributor will be entitled to participate, at its own expense, in the defense
thereof. The Distributor also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice from
the Distributor to such party of the Distributor'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 Distributor will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.4(d) Ohio National agrees to promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
ARTICLE IX. Applicable Law.
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New Jersey,
without regard to the New Jersey Conflict of Laws provisions.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
31
ARTICLE X. Termination .
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with respect to
some or all Designated Portfolios, upon six (6) months advance written
notice delivered to the other parties; provided, however, that such
notice shall not be given earlier than six (6) months following the
date of this Agreement; or
(b) at the option of Ohio National by written notice to the other
parties with respect to any Designated Portfolio based upon Ohio
National's determination that shares of such Designated Portfolio are
not reasonably available to meet the requirements of the Contracts; or
(c) at the option of Ohio National by written notice to the other
parties with respect to any Designated Portfolio in the event any of
the Designated 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 Ohio National; or
(d) at the option of the Fund, Distributor or Adviser in the event
that formal administrative proceedings are instituted against Ohio
National by the NASD, the SEC, the Insurance Commissioner or like
official of any state or any other regulatory body regarding Ohio
National's duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of the Fund
shares, if, in each case, the Fund, Distributor or Adviser, as the
case may be, reasonably determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of Ohio National to perform
its obligations under this Agreement; or
(e) at the option of Ohio National in the event that formal
administrative proceedings are instituted against the Fund, the
Distributor or the Adviser by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body, if
Ohio National reasonably determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Fund, the Distributor
or the Adviser to perform their obligations under this Agreement; or
(f) at the option of Ohio National by written notice to the Fund with
respect to any Designated Portfolio if Ohio National reasonably
believes that the Designated Portfolio will fail to meet the Section
817(h) diversification requirements or Subchapter M qualifications
specified in Article VI hereof; or
(g) at the option of either the Fund, the Distributor or the Adviser,
if (i) the Fund, Distributor or Adviser, respectively, shall
determine, in its sole judgment
32
reasonably exercised in good faith, that Ohio National has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and that material adverse
change or publicity will have a material adverse impact on Ohio
National's ability to perform its obligations under this Agreement,
(ii) the Fund, Distributor or Adviser notifies Ohio National of that
determination and its intent to terminate this Agreement, and (iii)
after considering the actions taken by Ohio National and any other
changes in circumstances since the giving of such a notice, the
determination of the Fund, Distributor or Adviser shall continue to
apply on the sixtieth (60th) day following the giving of that notice,
which sixtieth day shall be the effective date of termination; or
(h) at the option of Ohio National, if (i) Ohio National shall
determine, in its sole judgment reasonably exercised in good faith,
that the Fund, Distributor or Adviser has suffered a material adverse
change in its business or financial condition or is the subject of
material adverse publicity and that material adverse change or
publicity will have a material adverse impact on the Fund's,
Distributor's or Adviser's ability to perform its obligations under
this Agreement, (ii) Ohio National notifies the Fund, Distributor or
Adviser, as appropriate, of that determination and its intent to
terminate this Agreement, and (iii) after considering the actions
taken by the Fund, Distributor or Adviser and any other changes in
circumstances since the giving of such a notice, the determination of
Ohio National shall continue to apply on the sixtieth (60th) day
following the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(i) at the option of any non-defaulting party hereto in the event of a
material breach of this Agreement by any party hereto (the "defaulting
party") other than as described in Section 10.1(a)-(j); provided, that
the non-defaulting party gives written notice thereof to the
defaulting party, with copies of such notice to all other
non-defaulting parties, and if such breach shall not have been
remedied within thirty (30) days after such written notice is given,
then the non-defaulting party giving such written notice may terminate
this Agreement by giving thirty (30) days written notice of
termination to the defaulting party; or
(j) at any time upon written agreement of all parties to this
Agreement.
10.2. Notice Requirement.
No termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties of
its intent to terminate, which notice shall set forth the basis for the
termination. Furthermore,
33
(a) in the event any termination is based upon the provisions of
Article VII, or the provisions of Section 10.1(a), 10.1(g) or 10.1(h)
of this Agreement, the prior written notice shall be given in advance
of the effective date of termination as required by those provisions
unless such notice period is shortened by mutual written agreement of
the parties; (b) in the event any termination is based upon the
provisions of Section 10.1(d), 10.1(e) or 10.1(i) of this Agreement,
the prior written notice shall be given at least sixty (60) days
before the effective date of termination; and (c) in the event any
termination is based upon the provisions of Section 10.1(b), 10.1(c)
or 10.1(f), the prior written notice shall be given in advance of the
effective date of termination, which date shall be determined by the
party sending the notice.
10.3. Effect of Termination.
Notwithstanding any termination of this Agreement, other than as a result of a
failure by either the Fund or Ohio National to meet Section 817(h) of the Code
diversification requirements, the Fund, the Distributor and the Adviser shall,
at the option of Ohio National, continue to make available additional shares of
the Designated Portfolio(s) pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Designated Portfolio(s), redeem investments in the
Designated Portfolio(s) and/or invest in the Designated Portfolio(s) upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.3 shall not apply to any terminations under Article
VII and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligations under Article VIII to indemnify other
parties shall survive and not be affected by any termination of this Agreement.
In addition, with respect to Existing Contracts, all
34
provisions of this Agreement shall also survive and not be affected by any
termination of this Agreement.
ARTICLE XI. Notices.
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other parties.
If to the Fund:
The Prudential Series Fund, Inc.
Gateway Center Three
000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000-0000 Attention: Secretary
If to the Adviser:
The Prudential Insurance Company of America
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Secretary
If to the Distributor:
Prudential Investment Management Services LLC
Gateway Center Three
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Secretary
If to Ohio National:
The Ohio National Life Insurance Company
Xxx Xxxxxxxxx Xxx
Xxxxxxxxxx, Xxxx 00000
Attention: Secretary
35
ARTICLE XII. Miscellaneous.
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party has designated as proprietary.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Ohio Superintendent of Insurance with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of Ohio National are being conducted in a manner consistent with the
Ohio Variable Annuity Regulations and any other applicable law or regulations.
36
12.6. Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration in a forum jointly
selected by the relevant parties (but if applicable law requires some other
forum, then such other forum) in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
12.9. Ohio National agrees that the obligations assumed by the Fund,
Distributor and the Adviser pursuant to this Agreement shall be limited in any
case to the Fund, Distributor and Adviser and their respective assets and Ohio
National shall not seek satisfaction of any such obligation from the
shareholders of the Fund, Distributor or the Adviser, the Directors, officers,
employees or agents of the Fund, Distributor or Adviser, or any of them.
12.10. The Fund, the Distributor and the Adviser agree that the obligations
assumed by Ohio National pursuant to this Agreement shall be limited in any case
to Ohio National and its assets and neither the Fund, Distributor nor Adviser
shall seek satisfaction of any such obligation from the shareholders of Ohio
National, the directors, officers, employees or agents of the Ohio National, or
any of them.
12.11. No provision of this Agreement may be deemed or construed to modify
or supersede any contractual rights, duties, or indemnifications, as between the
Adviser and the Fund, and the Distributor and the Fund.
37
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By its authorized officer,
By:______________________________
Title:
Date:
THE PRUDENTIAL SERIES FUND, INC.
By its authorized officer,
By:______________________________
Title:
Date:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By its authorized officer,
By:____________________________
Title:
Date:
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
By its authorized officer,
By:____________________________
Title:
Date:
38
SCHEDULE A
Contracts
ONcore Flex variable annuity
ONcore Premier variable annuity
ONcore Value variable annuity
ONcore Xtra variable annuity
39
SCHEDULE B
Designated Portfolios
Prudential Series Fund, Inc.--Prudential Xxxxxxxx Portfolio
Prudential Series Fund, Inc.--20/20 Focus Portfolio
40
SCHEDULE C
Reports per Section 6.6
With regard to the reports relating to the quarterly testing of compliance
with the requirements of Section 817(h) and Subchapter M under the Internal
Revenue Code (the "Code") and the regulations thereunder, the Fund shall provide
within twenty (20) Business Days of the close of the calendar quarter a report
to Ohio National in the Form attached hereto and incorporated herein by
reference, regarding the status under such sections of the Code of the
Designated Portfolio(s), and if necessary, identification of any remedial action
to be taken to remedy non-compliance.
With regard to the reports relating to the year-end testing of compliance
with the requirements of Subchapter M of the Code, referred to hereinafter as
"RIC status," the Fund will provide the reports on the following basis: (i) the
last quarter's quarterly reports can be supplied within the 20-day period, and
(ii) a year-end report will be provided 45 days after the end of the calendar
year.
A problem with regard to RIC status is defined as any violation of the
following standards, as referenced to the applicable sections of the Code:
(a) Less than ninety percent of gross income is derived from sources
of income specified in Section 851(b)(2);
(b) Thirty percent or greater gross income is derived from the sale or
disposition of assets specified in Section 851(b)(3);
(c) Less than fifty percent of the value of total assets consists of
assets specified in Section 851(b)(4)(A); and
(d) No more than twenty-five percent of the value of total assets is
invested in the securities of one issuer, as that requirement is set
forth in Section 851(b)(4)(B).
41
CERTIFICATE OF COMPLIANCE
For the quarter ended: ____________________
The Prudential Insurance Company of America (investment adviser) for The
Prudential Series Fund, Inc. hereby notifies you that, based on internal
compliance testing performed as of the end of the calendar quarter ended
________, ____, the Designated Portfolios were in compliance with all
requirements of Section 817(h) and Subchapter M of the Internal Revenue Code
(the "Code") and the regulations thereunder as required in the Fund
Participation Agreement among The Ohio National Life Insurance Company, The
Prudential Series Fund, Inc., The Prudential Insurance Company of America and
Prudential Investment Management Services LLC, other than the exceptions
discussed below:
Exceptions Remedial Action
---------- ---------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
---------------------------------- ---------------------------------------
If no exception to report, please indicate "None."
Signed this ________________ day of ________, ________.
_________________________________________
(Signature)
By:______________________________________
(Type or Print Name and Title/Position)
SCHEDULE D
EXPENSES
The Fund and/or the Distributor and/or Adviser, and Ohio National will
coordinate the functions and pay the costs of the completing these functions
based upon an allocation of costs in the tables below. Costs shall be allocated
to reflect the Fund's share of the total costs determined according to the
number of pages of the Fund's respective portions of the documents.
-----------------------------------------------------------------------------------------------------------
PARTY RESPONSIBLE FOR PARTY RESPONSIBLE
ITEM FUNCTION COORDINATION FOR EXPENSE
-----------------------------------------------------------------------------------------------------------
Mutual Fund Prospectus Printing of combined Ohio National Ohio National
prospectuses
-----------------------------------------------------------------------------------------------------------
Fund, Distributor or Ohio National Fund, Distributor or
Adviser shall supply Ohio Adviser, as
National with such applicable
numbers of the Designated
Portfolio(s)
prospectus(es) as Ohio
National shall reasonably
request
-----------------------------------------------------------------------------------------------------------
Distribution (including Ohio National Ohio National
postage) to New and
Inforce Clients
-----------------------------------------------------------------------------------------------------------
Distribution (including Ohio National Ohio National
postage) to Prospective
Clients
--------------------------------------------------------- -------------------------------------------------
Product Prospectus Printing and Distribution Ohio National Ohio National
for Inforce and
Prospective Clients
43
------------------------------------------------------------------------------------------------------------
PARTY RESPONSIBLE FOR PARTY RESPONSIBLE
ITEM FUNCTION COORDINATION FOR EXPENSE
------------------------------------------------------------------------------------------------------------
Mutual Fund Prospectus If Required by Fund, Fund, Distributor or Fund, Distributor or
Update & Distribution Distributor or Adviser Adviser Adviser
------------------------------------------------------------------------------------------------------------
If Required by Ohio Ohio National Ohio National
National
------------------------------------------------------------------------------------------------------------
Product Prospectus Update & If Required by Fund, Ohio National Fund, Distributor or
Distribution Distributor or Adviser Adviser
------------------------------------------------------------------------------------------------------------
If Required by Ohio Ohio National Ohio National
National
------------------------------------------------------------------------------------------------------------
Mutual Fund SAI Printing Fund, Distributor or Fund, Distributor or
Adviser Adviser
------------------------------------------------------------------------------------------------------------
Distribution (including Ohio National Ohio National
postage)
------------------------------------------------------------------------------------------------------------
Product SAI Printing Ohio National Ohio National
------------------------------------------------------------------------------------------------------------
Distribution Ohio National Ohio National
------------------------------------------------------------------------------------------------------------
Proxy Material for Mutual Printing if proxy Fund, Distributor or Fund, Distributor or
Fund: required by Law Adviser Adviser
------------------------------------------------------------------------------------------------------------
Distribution (including Ohio National Fund, Distributor or
labor) if proxy required Adviser
by Law
------------------------------------------------------------------------------------------------------------
Printing & distribution Ohio National Ohio National
if required by Ohio
National
-----------------------------------------------------------------------------------------------------------
Mutual Fund Annual & Printing of combined Ohio National Fund, Distributor or
Semi-Annual Report reports Adviser
-----------------------------------------------------------------------------------------------------------
Distribution Ohio National Ohio National
-----------------------------------------------------------------------------------------------------------
44
------------------------------------------------------------------------------------------------------------
PARTY RESPONSIBLE FOR PARTY RESPONSIBLE
ITEM FUNCTION COORDINATION FOR EXPENSE
------------------------------------------------------------------------------------------------------------
Other communication to New If Required by the Fund, Ohio National Fund, Distributor or
and Prospective clients Distributor or Adviser Adviser
------------------------------------------------------------------------------------------------------------
If Required by Ohio Ohio National Ohio National
National
------------------------------------------------------------------------------------------------------------
Other communication to Distribution (including Ohio National Fund, Distributor or
inforce labor and printing) if Adviser
required by the Fund,
Distributor or Adviser
------------------------------------------------------------------------------------------------------------
Distribution (including Ohio National Ohio National
labor and printing)if
required by Ohio National
------------------------------------------------------------------------------------------------------------
Errors in Share Price Cost of error to Ohio National Fund or Adviser
calculation pursuant to participants
Section 1.10
------------------------------------------------------------------------------------------------------------
Cost of reasonable Ohio National Fund or Adviser
expenses related to
administrative work to
correct error
------------------------------------------------------------------------------------------------------------
Operations of the Fund All operations and Fund, Distributor or Fund or Adviser
related expenses, Adviser
including the cost of
registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost
of management of the
business affairs of the
Fund, and expenses paid
or assumed by the fund
pursuant to any Rule
12b-1 plan
------------------------------------------------------------------------------------------------------------
45
------------------------------------------------------------------------------------------------------------
PARTY RESPONSIBLE FOR PARTY RESPONSIBLE
ITEM FUNCTION COORDINATION FOR EXPENSE
------------------------------------------------------------------------------------------------------------
Operations of the Account Federal registration of Ohio National Ohio National
units of separate account
(24f-2 fees)
------------------------------------------------------------------------------------------------------------
46
