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EXHIBIT 8(h)
PARTICIPATION AGREEMENT
By and Among
QUEST FOR VALUE ACCUMULATION TRUST
And
PROVIDENT/MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
And
QUEST FOR VALUE DISTRIBUTORS
THIS AGREEMENT, made and entered into this 30th day of September 1993
by and among PROVIDENT/MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA, a
Pennsylvania Corporation (hereinafter the "Company"), on its own behalf and on
behalf of PROVIDENT/MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT (hereinafter, the
"Account"), a segregated asset account of the Company, the QUEST FOR VALUE
ACCUMULATION TRUST, an open-end diversified management investment company
organized under the laws of the State of Massachusetts (hereinafter the "Fund")
and QUEST FOR VALUE DISTRIBUTORS, a Delaware general partnership (hereinafter
the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies which have
entered into participation agreements substantially identical to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in
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a particular managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated September 30, 1993 (File No. 812-8470),
granting Participating Insurance Companies and variable annuity and variable
life insurance separate accounts exemptions from the provisions of sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of Pennsylvania, to set aside and invest assets
attributable to the Contracts; and
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WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Account to fund the Contracts and the Underwriter is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Account, executing such orders on
a daily basis at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the order for the shares of the Fund. For purposes
of this Section 1.1 , the Company shall be the designee of the Fund for receipt
of such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such order by
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10:00 a.m. 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 Fund
calculates its net asset value pursuant to the rules of the SEC.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Trustees of the Fund (hereinafter the "Directors") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Directors,
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of any Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement is in
effect to govern such sales. The Fund shall make available upon written request
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from the Company (i) a list of all other Participating Insurance Companies and
(ii) a copy of the Participation Agreement executed by any other Participating
Insurance Company.
1.5. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.5, the Company shall be the designee of the Fund for receipt
of requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided the Fund receives notice of request for
redemption on the next following Business Day. Payment shall be in federal funds
transmitted by wire to the Company's account as designated by the Company in
writing from time to time, on the same Business Day the Fund receives the
redemption order from the Company.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus. The Company agrees that all net amounts
available under the Contracts shall be invested in the Fund, or in the Company's
general account; provided that such amounts may also be invested in an
investment company other than the Fund if (a) such other investment company, or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of all the Portfolios of
the Fund; or (b)
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the Company gives the Fund and the Underwriter 45 days written notice of its
intention to make such other investment company available as a funding vehicle
for the Contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement; or (d) the Fund or Underwriter consents to the use of such other
investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after that it places an order to purchase Fund shares in accordance with Section
1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such dividends and
distributions in cash. The Fund shall notify the
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Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 5:30 p.m.,
Eastern Time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act and that the Contracts will be issued and sold
in compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by
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applicable law. The Company shall register and qualify the Contracts for sale in
accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts under
applicable provisions of the Internal Revenue Code of 1986, and that it will
make every effort to maintain such treatment and that it will notify the Fund
and the Underwriter immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.4. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, and
that it will make every
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effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. To the extent feasible and consistent with market conditions, the Fund
will adjust its investments to comply with requirements of the Company's
domiciliary state upon written notice from the Company of such requirements and
proposed adjustments, it being agreed and understood that in any such case the
Fund shall be allowed a reasonable period of time under the circumstances after
receipt of such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have its board of trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents
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that it will sell and distribute the Fund shares in accordance with all
applicable federal and state securities laws, including without limitation the
1933 Act, the 1934 Act, and the 0000 Xxx.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 0000 Xxx.
2.9. The Underwriter represents and warrants that its affiliated
company, Quest For Value Advisors (the "Advisor") is and will remain duly
registered under all applicable federal and state securities laws and that the
Advisor will perform its obligations to the Fund in accordance with the laws of
Massachusetts and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
trustees, officers, employees, investment advisers, and other individuals/
entities having access to the funds and/or securities of the Fund are and
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
coverage as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond includes
coverage for larceny and embezzlement and is issued by a reputable bonding
company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or
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securities of the Fund are covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund, in an amount not less $5 million. The
aforesaid includes coverage for larceny and embezzlement and is issued by a
reputable bonding company. The Company agrees to make all reasonable efforts to
see that this bond or another bond containing these provisions is always in
effect, and agrees to notify the Fund and the Underwriter in the event that such
coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective Contract owners and applicants. The
Underwriter shall print and distribute, at the Fund's or Underwriter's expense,
as many copies of said prospectus as necessary for distribution to existing
Contract owners or participants. If requested by the Company in lieu thereof,
the Fund shall provide such documentation including a final copy of a current
prospectus set in type at the Fund's expense and other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the new
prospectus for the Contracts and the Fund's new prospectus printed together in
one document, in such case the Fund shall bear its share of expenses as
described above.
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3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or, in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund) shall provide such Statement, at its
expense, to the Company and to any owner of or participant under a Contract who
requests such Statement or, at the Company's expense, to any prospective
Contract owner and applicant who requests such statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing Contract owners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners or
participants;
(ii) vote the Fund shares held in the Account in
accordance with instructions received from Contract
owners or participants; and
(iii) vote Fund shares held in the Account for which no
timely instructions have been received, in the same
proportion as Fund shares of such Portfolio for which
instructions have been received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contract owners. The Company
reserves the right to vote
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Fund shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular as required, the Fund will either
provide for annual meetings or 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 interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Underwriter is named, at least fifteen
business days prior to its use. No such material shall be used if the Fund or
the Underwriter reasonably objects to such use within fifteen business days
after receipt of such material.
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4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account(s) is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects to such use within fifteen business
days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are
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in the public domain or approved by the Company for distribution to Contract
owners or participants, or in sales literature or other promotional material
approved by the Company, except with the written permission of the Company. The
Company agrees to respond to any request for approval on a prompt and timely
basis.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical,
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radio, television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales literature (i.e., any
written communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under NASD rules, the 1940
Act or the 1933 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted
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by law. All Fund shares will be duly authorized for issuance and registered in
accordance with applicable federal law and to the extent deemed advisable by the
Fund, in accordance with applicable state law, prior to sale. The Fund shall
bear the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting in type, printing and
distributing the prospectuses, the proxy materials and reports to existing
shareholders and Contract owners, the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Fund's shares, and any expenses permitted to be paid or assumed by the Fund
pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulations. In the event of a breach of
this Article VI by the Fund, it will take all reasonable steps (a) to notify
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the Company of such breach and (b) to adequately diversify the Fund so as to
achieve compliance with the grace period afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board of Trustees of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Board shall consist of persons who are
not "interested" persons of the Fund.
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7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Board. The Company agrees to assist the Board in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever contract owner voting instructions
are disregarded. The Board shall record in its minutes or other appropriate
records, all reports received by it and all action with regard to a conflict.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested 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 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
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vote of all affected contract owners and, as appropriate, segregating the assets
of any appropriate group (i.e., variable annuity contract owners or variable
life insurance contract owners, of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
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 the Company's disregard of voting instructions could conflict
with the majority of Contract owner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company is permitted to withdraw the Account's investment in the Fund. The
Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that it is withdrawing the
Account's investment in the Fund pursuant to this Section 7.4.
7.5. If a particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company is permitted to withdraw the Account's investment in the Fund.
The Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that
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it is withdrawing the Account's investment in the Fund pursuant to this Section
7.5.
7.6. For purposes of Section 7.3 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. The
Company shall not be required by Section 7.3 to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote of a majority
of Contract owners materially adversely affected by the irreconcilable material
conflict.
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
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 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.
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ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund,
the Underwriter, and each of the Fund's or the Underwriter's directors,
officers, employees or agents and each person, if any, who controls or is
associated with the Fund or the Underwriter within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
indemnified parties may become subject under any statute, 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 and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Contracts
or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
agreement to indemnify shall not apply as to any indemnified
party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of
the Fund for use in the registration statement or prospectus
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for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
by or on behalf of the Company (other than statements or
representations contained in the Contract or Fund registration
statement, the Contract or Fund prospectus or sales literature
for the Contracts or the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company
or persons under its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were
made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials or to make any payments
under the terms of this Agreement; or
(v) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of
or result from any other material breach by the Company of
this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
- 23 -
24
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Fund.
8.1(c). The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2. Indemnification By the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees or agents and each
person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the indemnified parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares and:
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25
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which
they were made; provided that this agreement to indemnify
shall not apply as to any indemnified party if such statement
or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
the Underwriter or Fund by or on behalf of the Company for use
in the registration statement or prospectus for the Fund or in
sales literature for the Fund (or any amendment or supplement
thereto) 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
Contracts or in the Contract or Fund registration statement,
the Contract or Fund prospectus or sales literature for the
Contracts or the Fund not supplied by the Underwriter or
persons under its control) or wrongful conduct of the
Underwriter or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts (or any
amendment thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Underwriter; or
- 25 -
26
(iv) 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
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 Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter.
except to the extent provided in Sections 8.2(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations and duties
under this Agreement or to the Company or the Account.
8.2(c). The Company agrees promptly to notify the Underwriter 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.
- 26 -
27
8.3. Indemnification by the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors, officers, employees or agents and each person, if any,
who controls or is associated with the Company within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
the purpose of this Section 8.3) against any and all losses, claims, damages or
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which they or
any of them 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 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 for the Fund or sales
literature of the Fund (or any amendment or supplement
thereto), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which
they were made; provided that this agreement to indemnify
shall not apply if such statement or omission or alleged
statement or alleged omission was made in reliance upon and in
conformity with information furnished to the Fund by or on
behalf of the Company for use in the registration statement or
prospectus for the Fund or sales literature for the Fund (or
any amendment or supplement thereto) or otherwise for use in
connection with the sale or distribution of the Contracts or
Fund shares; or
- 27 -
28
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Contracts or the Contract or Fund registration statement or
the Contract or Fund prospectus or sales literature for the
Contract or the Fund not supplied by the Fund or persons under
its control) or wrongful conduct of the Fund or persons under
the Fund's 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 the registration statement or
prospectus or sales literature covering the Contracts (or any
amendment or supplement thereto), or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were
made, if such statement or omission was made in reliance upon
and in conformity with information furnished by or on behalf
of the Fund to the Company; or
(iv) 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
requirements specified in Article VI of this Agreement); or
(v) arise out of or 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.
except to the extent provided in Section 8.3(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would
- 28 -
29
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his or her duties or by reason of his or her
reckless disregard of obligations or duties under this Agreement or to the
Company or the Account.
8.3(c). The indemnified parties will promptly notify the Fund 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.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("indemnifying party" for the purpose of this Section 8.4) shall not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("indemnified party" for the purpose of this Section 8.4) unless such
indemnified party shall have notified the indemnifying party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this
- 29 -
30
Article VIII, except to the extent that the failure to notify results in the
failure of actual notice to the indemnifying party and such indemnifying party
is damaged solely as a result of failure to give such notice. In case any such
action is brought against the indemnified party, the indemnifying party will be
entitled to participate, at its own expense, in the defense thereof. The
indemnifying party also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
indemnifying party to the indemnified party of the indemnifying party's election
to assume the defense thereof, the indemnified party shall bear the fees and
expenses of any additional counsel retained by it, and the indemnifying party
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the
- 30 -
31
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. 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 York.
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
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.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written
notice to the other parties; or
(b) at the option of the Company if shares of all Portfolios
are not reasonably available to meet the requirements
- 31 -
32
of the Contracts as determined by the Company. Prompt notice of the election to
terminate for such cause shall be furnished by the Company; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the Pennsylvania Insurance
Commissioner or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the operation of the
Account, or the purchase of the Fund shares; or
(d) at the option of the Company upon institution of formal proceedings
against the Fund by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract owners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the Corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
30 day's prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by a
majority of the Directors of the Fund, or a majority of its disinterested
Directors, that an irreconcilable
- 32 -
33
material conflict exists among the interests of (i) all contract owners of
variable insurance products of all separate accounts or (ii) the interests of
the Participating Insurance Companies investing in the Fund; or
(g) at the option of the Company if the Company has withdrawn the
Account's investment in the Fund because the Company's disregard of voting
instructions could conflict with the majority of contract owner voting
instructions and if the Company's judgment represents a minority position or
would preclude a majority vote; or
(h) at the option of the Company if the Company has withdrawn the
Account's investment in the Fund because a particular state insurance
regulator's decision applicable to the Company conflicts with the majority of
other state insurance regulators;
(i) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(j) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(k) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement.
- 33 -
34
(l) at the option of the Company, if the Company determines in
its sole judgement exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is the subject of
material adverse publicity.
10.2. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.3. Notwithstanding any termination of this Agreement, the Fund and
the Underwriter shall at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.3 shall not apply to any
terminations under Article VII and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement.
10.4. Except as necessary to implement Contract owner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund
- 34 -
35
shares attributable to the Contracts (as opposed to Fund shares attributable to
the Company's assets held in the Account), and the Company shall not prevent
Contract owners from allocating payments to a Portfolio that was otherwise
available under the Contracts, until 90 days after the Company shall have
notified the Fund or Underwriter of its intention to do so.
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 party.
If to the Fund:
Xx. Xxxxxx X. Xx Xxxxx
President
Quest For Value Accumulation Trust
Quest For Value Advisors
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
If to the Company:
Xxxxxx X. Xxxxxx, Xx., Esq.
Counsel
Provident Mutual Life Insurance
Company of Philadelphia
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
If to the Underwriter:
Xx. Xxxxxx X. Xxxxxx
Secretary
Quest for Value Distributors
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
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36
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as it may come into the public domain without the express prior
written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
- 36 -
37
12.6. This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate action, as applicable, by such party
and when so executed and delivered this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
- 37 -
38
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
SEAL By: /s/ illegible
----------------------------
Date: September 30, 1993
----------------------------
Fund:
QUEST FOR VALUE ACCUMULATION TRUST
SEAL By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Date: 9/30/93
----------------------------
Underwriter:
QUEST FOR VALUE DISTRIBUTORS
SEAL By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Date: 9/30/93
----------------------------
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