Exhibit 8(h)
PARTICIPATION AGREEMENT
THIS AGREEMENT, is made as of March 31, 1997, by and among Providian
Life and Health Insurance Company ("Company"), on its own behalf and on behalf
of Providian Life and Health Insurance Company Separate Account V, a segregated
asset account of the Company ("Account"), Strong Variable Insurance Funds, Inc.
(the "Fund"), the Fund's investment adviser and transfer agent, Strong Capital
Management, Inc. ("Adviser") and Strong Funds Distributors, Inc.
("Distributors") (each, a "Party" and collectively, the "Parties").
PRELIMINARY STATEMENTS
A. Beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios", reference in this Agreement to
the "Fund" includes reference to each Portfolio to the extent the context
requires).
B. To the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios named in Exhibit A,
hereto (the "Designated Portfolios"), as such Exhibit may be amended from time
to time, on behalf of the Account to fund the variable annuity contracts that
use the Designated Portfolios as an underlying investment medium (the
"Contracts").
C. The Company, Adviser and Distributors desire to facilitate the purchase
and redemption of shares of the Designated Portfolios by the Company for the
Account through one account in each Designated Portfolio (each an "Omnibus
Account") to be maintained of record by the Adviser for the Company, subject to
the terms and conditions of this Agreement.
D. The Company desires to provide administrative services and functions
(the "Services") for purchasers of contracts ("Owners") who are beneficial
owners of shares of the Designated Portfolios on the terms and conditions set
forth in this Agreement.
AGREEMENTS
The parties agree as follows:
1. Performance of Services. Company agrees to perform the administrative
functions and services specified in Exhibit B attached hereto with respect to
the shares of the Designated Portfolios beneficially owned by the Owners and
included in the Account.
2. The Omnibus Accounts.
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2.1 Each Omnibus Account will be opened based upon the information
contained in Exhibit C hereto. In connection with each Omnibus Account, Company
represents and warrants that it is authorized to act on behalf of each purchaser
of Contracts ("Owner") effecting transactions in the Omnibus Account and that
the information specified on Exhibit C hereto is correct.
2.2 The Fund shall designate each Omnibus Account with an account number.
Account numbers will be the means of identification when the parties are
transacting in the Omnibus Accounts. The assets in the Accounts are segregated
from the Company's own assets. The Adviser agrees to cause the Omnibus Accounts
to be kept open on the Designated Portfolio's books regardless of a lack of
activity or small position size except to the extent the Company takes specific
action to close an Omnibus Account or to the extent the Fund's prospectus
reserves the right to close accounts which are inactive or of a small position
size. In the latter two cases, the Adviser will give prior notice to the
Company before closing an Omnibus Account.
2.3 The Company agrees to provide Adviser such information as Adviser or
Distributors may reasonably request concerning Owners as may be necessary or
advisable to enable Company and Distributors to comply with applicable laws,
including state "Blue Sky" laws relating to the sales of Fund shares to the
Accounts.
3. Transactions in Fund Shares. Designated Portfolio shares shall be sold on
behalf of the Fund by Distributors and purchased by Company for the Account and,
indirectly for the appropriate subaccount thereof at the net asset value next
computed after receipt by Distributors of each order of the Account or its
designee, in accordance with the provisions of this Agreement, the then current
prospectuses of the Designated Portfolio, and the Contracts. Company may
purchase Designated Portfolio shares for its own account subject to (a) receipt
of prior written approval by Distributors; and (b) such purchases being in
accordance with the then current prospectuses of the Portfolio and the
Contracts. The Board of Directors of the Fund ("Directors") may refuse to sell
shares of Fund to any person, or suspend or terminate the offering of shares of
the Fund if such action is required by law or by regulatory authorities having
jurisdiction. Company agrees to purchase and redeem the shares of the Fund in
accordance with the provisions of this Agreement, of the Contracts and of the
then current prospectuses for the Contracts and Designated Portfolio. Except as
necessary to implement transactions initiated by Owners, or as otherwise
permitted by state and/or federal laws or regulations, Company shall not redeem
Fund shares attributable to the Contracts.
3.1 Purchase and Redemption Orders. On each day that the Fund is open for
business (a "Business Day"), the Company shall aggregate and calculate the net
purchase or redemption order it receives for the Account from the Owners for
shares of the Fund that it received prior to the close of trading on the New
York Stock Exchange (the "NYSE") (i.e. 4:00 p.m., Eastern time, unless the NYSE
closes at an earlier time in which case such earlier time shall apply) and
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communicate to Distributors, by telephone or facsimile (or by such other means
as the parties hereto may agree to in writing), the net aggregate purchase or
redemption order (if any) for the Omnibus Account for such Business Day (such
Business Day is sometimes referred to in this Agreement as the "Trade Date").
The Company will communicate such orders to Distributors prior to 9:00 a.m.,
Eastern time, on the next Business Day following the Trade Date. All trades
communicated to Distributors by the foregoing deadline shall be treated by
Distributors as if they were received by Distributors prior to the close of
trading on the Trade Date.
3.2 Settlement of Transactions.
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(a) Purchases. Company will use its best efforts to wire, or arrange
for the wire of, the purchase price of each purchase order to the custodian
for the Fund in accordance with written instructions provided by
Distributors to the Company so that either (1) such funds are received by
the custodian for the Fund prior to 1:00 p.m., Eastern time, on the next
Business Day following the Trade Date, or (2) Distributors is provided with
a Federal Funds wire system reference number prior to such 1:00 p.m.
deadline evidencing the entry of the wire transfer of the purchase price to
the applicable custodian into the Federal Funds wire system prior to such
time. Company agrees that if it fails to provide funds to the Fund's
custodian by the close of business on the next Business Day following the
Trade Date, then, at the option of Distributors, (i) the transaction may be
canceled, or (ii) the transaction may be processed at the next-determined
net asset value for the applicable Fund after purchase order funds are
received. In such event, the Company shall indemnify and hold harmless
Distributors, Adviser and/or the Fund from any liabilities, costs and
damages either may suffer as a result of such failure.
(b) Redemptions. The Adviser will use its best efforts to cause to be
transmitted to such custodial account as Company shall direct in writing,
the proceeds of all redemption orders placed by Company by 9:00 a.m.,
Eastern time, on the Business Day immediately following the Trade Date, by
wire transfer on that Business Day. Should Company need to extend the
settlement on a trade, it will contact Adviser to discuss the extension.
For purposes of determining the length of settlement, Adviser agrees to
treat the Account no less favorably than other shareholders of the
Designated Portfolio. Each wire transfer of redemption proceeds shall
indicate, on the Federal Funds wire system, the amount thereof attributable
to each Portfolio; provided, however, that if the number of entries would
be too great to be transmitted through the Federal Funds wire system, the
Adviser shall, on the day the wire is sent, fax such entries to Company or
if possible, send via direct or indirect systems access until otherwise
directed by the Company in writing.
(c) Authorized Persons. Company shall provide Adviser and Distributors
with a written list of persons who are each duly authorized to act on
behalf of the Company under this Agreement. The Funds, Adviser and
Distributors are entitled to
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conclusively rely on verbal or written instructions that Adviser or
Distributors reasonably believes were originated by any one of these
persons. The Company shall inform Adviser and Distributors of additions to
or subtractions from the list of authorized persons pursuant to Section 13
of this Agreement.
3.3 Book Entry Only. Issuance and transfer of Fund shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Account. Shares of the Fund ordered from Distributors will be recorded in the
appropriate book entry title for the Account.
3.4 Distribution Information. The Adviser or Distributors shall provide
the Company with all distribution announcement information as soon as it is
announced by the Fund. The distribution information shall set forth, as
applicable, ex-dates, record date, payable date, distribution rate per share,
record date share balances, cash and reinvested payment amounts and all other
information reasonably requested by the Company. Where possible, the Adviser or
Distributors shall provide the Company with direct or indirect systems access to
the Adviser's systems for obtaining such distribution information.
3.5 Reinvestment. All dividends and capital gains distributions will be
automatically reinvested on the payable date in additional shares of the
Designated Portfolio at net asset value in accordance with each Portfolio's then
current prospectus.
3.6 Pricing Information. Distributors shall use its best efforts to
furnish to the Company prior to 7:00 p.m., Eastern time, on each Business Day
the Designated Portfolio's closing net asset value for that day, and for those
Funds for which such information is calculated, the daily accrual for interest
rate factor (mil rate). Such information shall be communicated via fax, or
indirect or direct systems access acceptable to the Company.
3.7 Price Errors.
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(a) Notification. If an adjustment is required in accordance with a
Fund's then current policies on reimbursement ("Fund Reimbursement Policies") to
correct any error in the computation of the net asset value of Fund shares
("Price Error"), Adviser or Distributors shall notify Company as soon as
practicable after discovering the Price Error. Notice may be made via facsimile
or via direct or indirect systems access and shall state the incorrect price,
the correct price and, to the extent communicated to the Fund's shareholders,
the reason for the price change.
(b) Underpayments. If a Price Error causes an Omnibus Account to
receive less than the amount to which it otherwise would have been entitled,
Adviser shall make all necessary adjustments (subject to the Fund Reimbursement
Policies) so that the Omnibus Account receives the amount to which it would have
been entitled
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(c) Overpayments. If a Price Error causes an Omnibus Account to
receive more than the amount to which it otherwise would have been entitled,
Company, when requested by Adviser (in accordance with the Fund Reimbursement
Policies), will use its best efforts to collect such excess amounts from the
applicable customers; provided, however, Company shall not be required under
this section 3.7(c) to collect any such amounts if and to the extent such
collection would be in violation of applicable law or regulation.
(d) Fund Reimbursement Policies. Adviser agrees to treat Company's
customers no less favorably than Adviser treats its retail shareholders in
applying the provisions of paragraphs 3.7(b) and 3.7(c).
(e) Expenses. Adviser shall reimburse Company for all reasonable and
necessary out-of-pocket expenses incurred by Company for payroll overtime,
stationery and postage in adjusting customer accounts affected by a Price Error
described in paragraphs 3.7(b) and 3.7(c). Company shall use its best efforts to
mitigate all expenses which may be reimbursable under this section 3.7(e) and
agrees that payroll overtime shall not include any time spent programming
computers or otherwise customizing Company's recordkeeping system. Upon
requesting reimbursement, Company shall present an itemized xxxx to Adviser
detailing the costs for which it seeks reimbursement.
3.8 Agency. Distributors hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption instructions from the
Owners for the purchase and redemption of shares of the Fund by the Company on
behalf of Account.
3.9 Quarterly Reports. Adviser agrees to provide Company a statement of
Designated Portfolio assets as soon as practicable and in any event within 30
days after the end of each calendar quarter, and a statement certifying the
Designated Portfolio's compliance during that fiscal quarter with the
diversification requirements and qualification as a regulated investment
company. In the event of a breach of Section 6.4(a), Adviser will take all
reasonable steps (a) to notify Company of such breach and (b) to adequately
diversify the Portfolio so as to achieve compliance within the grace period
afforded by Treasury Regulation 1.817-5.
4. Proxy Solicitations and Voting. The Company shall, at its expense,
distribute or arrange for the distribution of all proxy materials furnished by
the Fund to the Account and shall: (i) solicit voting instructions from Owners;
(ii) vote the Portfolio shares in accordance with instructions received from
Owners; and (iii) vote Portfolio shares for which no instructions have been
received, as well as shares attributable to it, in the same proportion as
Portfolio shares for which instructions have been received from Owners, so long
as and to the extent that the Securities and Exchange Commission (the "SEC")
continues to interpret the Investment Company Act of 1940, as amended (the "1940
Act"), to require pass-through voting privileges for various contract owners.
The Company and its agents will not recommend action in connection with, or
oppose or interfere with, the solicitation of proxies for the Portfolio shares
held for Owners.
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5. Customer Communications.
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5.1 Prospectuses. The Adviser or Distributors, at its expense, will
provide the Company with as many copies of the current prospectus for the
Designated Portfolios as the Company may reasonably request for distribution, at
the Company's expense, to existing or prospective Owners.
5.2 Shareholder Materials. The Adviser and Distributors shall, as
applicable, provide in bulk to the Company or its authorized representative, at
a single address and at no expense to the Company, the following shareholder
communications materials prepared for circulation to Owners in quantities
requested by the Company which are sufficient to allow mailing thereof by the
Company and, to the extent required by applicable law, to all Owners: proxy or
information statements, annual reports, semi-annual reports, and all initial and
updated prospectuses, supplements and amendments thereof. Neither the Fund, the
Adviser nor Distributors shall be responsible for the cost of distributing such
materials to Owners.
6. Representations and Warranties.
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6.1 The Company represents and warrants that:
(a) It is an insurance company duly organized and in good standing
under the laws of the State of Missouri and that it has legally and validly
established the Account prior to any issuance or sale thereof as a
segregated asset account and that the Company has and will maintain the
capacity to issue all Contracts that may be sold; and that it is and will
remain duly registered, licensed, qualified and in good standing to sell
the Contracts in all the jurisdictions in which such Contracts are to be
offered or sold;
(b) It is and will remain duly registered and licensed in all material
respects under all applicable federal and state securities and insurance
laws and shall perform its obligations hereunder in compliance in all
material respects with any applicable state and federal laws;
(c) The Contracts are and will be registered under the Securities Act
of 1933, as amended (the "1933 Act"), and are and will be registered and
qualified for sale in the states where so required; and the Account is and
will be registered as a unit investment trust in accordance with the 1940
Act and shall be a segregated investment account for the Contracts;
(d) The Contracts are currently treated as annuity contracts, under
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Company will maintain such treatment and will notify
Adviser, Distributors and Fund
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promptly upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future;
(e) It is registered as a transfer agent pursuant to Section 17A of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), or is not
required to be registered as such;
(f) The a rrangements provided for in this Agreement will be disclosed
to the Owners if, and to the extent, required by applicable law; and
(g) It is registered as a broker-dealer under the 1934 Act and any
applicable state securities laws, including as a result of entering into
and performing the Services set forth in this Agreement, or is not required
to be registered as such.
6.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement are and will be registered under the 1933 Act and the Fund
is and will be registered as a registered investment company under the
Investment Company Act of 1940, in each case, except to the extent the
Company is so notified in writing;
6.3 Distributors represents and warrants that:
(a) It is and will be a member in good standing of the NASD and is and
will be registered as a broker-dealer with the SEC;
(b) It will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations; and
6.4 Adviser represents and warrants that:
(a) It will cause Fund to invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable annuity
contracts under the Code and the regulations issued thereunder, and that
Fund will comply with Section 817(h) of the Code as amended from time to
time and with all applicable regulations promulgated thereunder;
(b) It is and will remain duly registered and licensed in all material
respects under all applicable federal and state securities and insurance
laws and shall perform its obligations hereunder in compliance in all
material respects with any applicable state and federal laws; and
(c) As applicable and within its authority, it will cause the Fund to
conduct its operations in compliance with any Exemptive Order applicable to
the Fund.
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6.5 Each of the parties hereto represents and warrants to the others that:
(a) It has full power and authority under applicable law, and has
taken all action necessary, to enter into and perform this Agreement and
the person executing this Agreement on its behalf is duly authorized and
empowered to execute and deliver this Agreement;
(b) This Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms and it
shall comply in all material respects with all laws, rules and regulations
applicable to it by virtue of entering into this Agreement;
(c) No consent or authorization of, filing with, or other act by or in
respect of any governmental authority, is required in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement;
(d) The execution, performance and delivery of this Agreement will not
result in it violating any applicable law or breaching or otherwise
impairing any of its contractual obligations;
(e) Each Party hereto is entitled to rely on any written records or
instructions provided to it by another Party; and
(f) Its directors, officers, employees, and investment advisers, and
other individuals/entities dealing with the money and/or securities of Fund
are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less
than the amount required by the applicable rules of the National
Association of Securities Dealers, Inc. ("NASD") and the federal securities
laws, which bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company;
7. Sales Material and Information
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7.1 NASD Filings. The Company shall promptly inform Distributors as to
the status of all sales literature filings pertaining to the Designated
Portfolios and shall promptly notify Distributors of all approvals or
disapprovals of sales literature filings with the NASD. For purposes of this
Section 7, the phrase "sales literature or other promotional material" shall be
construed in accordance with all applicable securities laws and regulations.
7.2 Company Representations. The Company shall not make any material
representations concerning the Adviser, the Distributors, or the Fund other than
the information or representations contained in: (a) a registration statement of
the Fund or prospectus of a Designated Portfolio, as amended or supplemented
from time to time; (b) published reports or
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statements of the Fund which are in the public domain or are approved by
Distributors and/or the Fund; or (c) sales literature or other promotional
material of the Fund.
7.3 Adviser, Distributors and Fund Representations. Neither Adviser,
Distributors nor the Fund shall make any material representations concerning the
Company other than the information or representations contained in: (a) a
registration statement or prospectus for the Contracts, as amended or
supplemented from time to time; (b) published reports or statements of the
Contracts or the Account which are in the public domain or are approved by the
Company; or (c) sales literature or other promotional material of the Company.
7.4 Trademarks. Except to the extent required by applicable law, no Party
shall use any other Party's names, logos, trademarks or service marks, whether
registered or unregistered, without the prior consent of such Party.
7.5 Information From Distributors and Adviser. Upon request, Distributors
and/or Adviser will provide to Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, solicitations for voting instructions, applications
for exemptions, requests for no action letters, and all amendments to any of the
above, that relate to the Designated Portfolios, in final form as filed with the
SEC, NASD and other regulatory authorities.
7.6 Information From Company. Company will provide to Distributors at
least one complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, solicitations for voting instructions, major
sales literature and other significant promotional materials, applications for
exemptions, requests for no action letters and all amendments to any of the
above, that relate to the Fund and the Contracts, in final form as filed with
the SEC, NASD and other regulatory authorities.
7.7 Review of Marketing Materials. If so requested by Company, the
Adviser or Distributors will use its best efforts to review major sales
literature and other significant marketing materials prepared by Company which
relate to the Funds, the Adviser or Distributors for factual accuracy as to such
entities, provided that the Adviser or Distributors is provided at least five
(5) Business Days to review such materials. Neither the Adviser nor
Distributors will review such materials for compliance with applicable laws.
Company shall provide the Adviser with copies of all major sales literature and
other significant marketing materials which refer to the Funds, the Company or
Distributors within five (5) Business Days after their first use, regardless of
whether the Adviser or Distributors has previously reviewed such materials. If
so requested by the Adviser or Distributors, Company shall cease to use any
sales literature or marketing materials which refer to the Funds, the Adviser or
Distributors that the Adviser or Distributors determines to be inaccurate,
misleading or otherwise reasonably determined to be unacceptable.
8. Fees and Expenses.
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8.1 Fund Registration Expenses. Fund or Distributors shall bear the cost
of registration and qualification of Fund shares; preparation and filing of Fund
prospectuses and registration statements, proxy materials and reports;
preparation of all other statements and notices relating to Fund or Distributors
required by any federal or state law; payment of all applicable fees, including,
without limitation, all fees due under Rule 24f-2 of the 1940 Act, relating to
Fund; and all taxes on the issuance or transfer of Fund's shares on the Fund's
records.
8.2 Contract Registration Expenses. The Company shall bear the expenses
for the costs of preparation and filing of the Company's prospectus and
registration statement with respect to the Contracts; preparation of all other
statements and notices relating to the Account or the Contracts required by any
federal or state law; expenses for the solicitation and sale of the Contracts
including all costs of printing and distributing all copies of advertisements,
prospectuses, Statements of Additional Information, proxy materials, and reports
to Owners or potential purchasers of the Contracts as required by applicable
state and federal law; payment of all applicable fees relating to the Contracts;
all costs of drafting, filing and obtaining approvals of the Contracts in the
various states under applicable insurance laws; filing of annual reports on form
N-SAR, and all other costs associated with ongoing compliance with all such laws
and its obligations hereunder.
9. Indemnification.
9.1 Indemnification By Company.
(a) Company agrees to indemnify and hold harmless Fund, Adviser and
Distributors and each of their directors, officers, employees and agents,
and each person, if any, who controls any of them within the meaning of
Section 15 of the 1933 Act (each, an "Indemnified Party" and collectively,
the "Indemnified Parties" for purposes of this Section 9.1) from and
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of Company), and expenses
(including reasonable legal fees and expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise (collectively, "Losses"), insofar as such Losses:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the
Contracts or contained in the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
paragraph 9.1(a) shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with written
information
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furnished to Company by or on behalf of Fund, Distributors or Adviser
for use in the registration statement or prospectus for the Contracts
or in the Contracts (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or its agents, with
respect to the sale or distribution of the Contracts or Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Fund or any amendment
thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, if such a
statement or omission was made in reliance upon written information
furnished to Fund, Adviser or Distributors by or on behalf of Company;
or
(iv) arise out of, or as a result of, any failure by Company or
persons under its control to provide the Services and furnish the
materials contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material breach of any
representation and/or warranty made by Company or persons under its
control in this Agreement or arise out of or result from any other
material breach of this Agreement by Company or persons under its
control; as limited by and in accordance with the provisions of
Sections 9.1(b) and 9.1(c) hereof; or
(vi) arise out of, or as a result of, adherence by Adviser or
Distributors to instructions that it reasonably believes were
originated by persons specified in Section 3.2(c), hereof.
This indemnification provision is in addition to any liability which
the Company may otherwise have.
(b) Company shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
(c) Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified Company in writing within a
reasonable time after the summons or
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other first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Company of any such claim shall
not relieve Company from any liability which it may have to the Indemnified
Party otherwise than on account of this indemnification provision. In case
any such action is brought against any Indemnified Party, and it notified
the indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, assume the defense thereof, with counsel satisfactory to such
Indemnified Party. After notice from the indemnifying party of its
intention to assume the defense of an action, the Indemnified Party shall
bear the expenses of any additional counsel obtained by it, and the
indemnifying party shall not be liable to such Indemnified Party under this
Section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation. The Indemnified Party may not settle any
action without the written consent of the indemnifying party. The
indemnifying party may not settle any action without the written consent of
the Indemnified Party unless such settlement completely and finally
releases the Indemnified Party from any and all liability. In either event,
consent shall not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of Designated Portfolio shares or the Contracts
or the operation of Fund.
9.2 Indemnification by Adviser and Distributors.
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(a) Adviser and Distributors agrees to indemnify and hold harmless
Company and each of its directors, officers, employees and agents and each
person, if any, who controls Company within the meaning of Section 15 of
the 1933 Act (each, and "Indemnified Party" and collectively, the
"Indemnified Parties" for purposes of this Section 9.2) against any and all
Losses to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such Losses:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of Fund (or
any amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this Section
9.2(a) shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with written information furnished to Fund,
Adviser or Distributors by or on behalf of Company for use in the
registration statement or prospectus for Fund or in sales
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literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Adviser or Distributors or
persons under its control, with respect to the sale or distribution of
Fund shares;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading,
if such statement or omission was made in reliance upon written
information furnished to Company by or on behalf of Adviser or
Distributors; or
(iv) arise out of, or as a result of, any failure by Adviser or
Distributors or persons under its control to provide the services and
furnish the materials contemplated under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Adviser or Distributors or
persons under its control in this Agreement or arise out of or result
from any other material breach of this Agreement by Adviser or
Distributors or persons under its control; as limited by and in
accordance with the provisions of Sections 9.2(b) and 9.2(c) hereof.
This indemnification provision is in addition to any liability which
Adviser and Distributors may otherwise have.
(b) Distributors shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to
Company.
(c) Adviser and Distributors shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified Adviser
and Distributors in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Adviser and Distributors of any
such claim shall not relieve Adviser and Distributors from any liability
which it may have to the Indemnified Party otherwise
13
than on account of this indemnification provision. In case any such action
is brought against any Indemnified Party, and it notified the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party. After
notice from the indemnifying party of its intention to assume the defense
of an action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the indemnifying party shall not be
liable to such Indemnified Party under this Section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation. The
Indemnified Party may not settle any action without the written consent of
the indemnifying party. The indemnifying party may not settle any action
without the written consent of the Indemnified Party unless such settlement
completely and finally releases the Indemnified Party from any and all
liability. In either event, consent shall not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Adviser and
Distributors of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Contracts or the
operation of the Account.
10. Potential Conflicts.
--------------------
10.1 Monitoring by Directors for Conflicts of Interest. The Directors
will monitor the Fund for any potential or existing material irreconcilable
conflict of interest between the interests of the contract owners of all
separate accounts investing in the Fund, including such conflict of interest
with any other separate account of any other insurance company 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
interpretive 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 the Fund are
being managed; (e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or by contract
owners of different life insurance companies utilizing the Fund; or (f) a
decision by Company to disregard the voting instructions of Owners. The
Directors shall promptly inform the Company, in writing, if they determine that
an irreconcilable material conflict exists and the implications thereof.
10.2 Monitoring by the Company for Conflicts of Interest. The Company
will promptly notify the Directors, in writing, of any potential or existing
material irreconcilable conflicts of interest, as described in Section 10.1
above, of which it is aware. The Company will assist the Directors in carrying
out their responsibilities under any applicable provisions of the federal
securities laws and/or any exemptive orders granted by the SEC ("Exemptive
Order"), by providing the Directors, in a timely manner, with all information
reasonably necessary for the
14
Directors to consider any issues raised. This includes, but is not limited to,
an obligation by the Company to inform the Directors whenever Owner voting
instructions are disregarded.
10.3 Remedies. If it is determined by a majority of the Directors, or a
majority of disinterested Directors, that a material irreconcilable conflict
exists, as described in Section 10.1 above, the Company shall, at its own
expense take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including, but not limited to: (a),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund and reinvesting such assets in a different investment medium, including
(but not limited to) another fund managed by the Adviser, or submitting the
question whether such segregation should be implemented to a vote of all
affected Owners and, as appropriate, segregating the assets of any particular
group that votes in favor of such segregation, or offering to the affected
owners the option of making such a change; and (b), establishing a new
registered management investment company or managed separate account.
10.4 Causes of Conflicts of Interest.
--------------------------------
(a) State Insurance Regulators. If a material irreconcilable conflict
arises because a particular state insurance regulator's decision applicable
to the Company conflicts with the majority of other state regulators, then
the Company will withdraw the affected Account's investment in the Fund and
terminate this Agreement with respect to such Account within the period of
time permitted by such decision, but in no event later than six months
after the Directors inform the Company in writing that it has determined
that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Directors. Until the end of
the foregoing period, the Distributors and Fund shall continue to accept
and implement orders by the Company for the purchase (and redemption) of
shares of the Fund to the extent such actions do not violate applicable
law.
(b) Disregard of Owner Voting. If a material irreconcilable conflict
arises because of Company's decision to disregard Owner voting instructions
and that decision represents a minority position or would preclude a
majority vote, Company may be required, at the Fund's election, to withdraw
the Account's investment in the Fund. No charge or penalty will be imposed
against the Account as a result of such withdrawal.
10.5 Limitations on Consequences. For purposes of Sections 10.3 through
10.5 of this Agreement, a majority of the disinterested Directors shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict. In no event will the Fund, the Adviser or the Distributors
be required to establish a new funding medium for any of the Contracts. The
Company shall not be required by Section 10.3 to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote of a majority
of owners affected by the irreconcilable material conflict. In the event that
the Directors determine that any proposed
15
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement as quickly as may be required to comply with applicable law, but in no
event later than six (6) months after the Directors inform the Company in
writing of the foregoing determination, provided, however, that such withdrawal
and termination shall be limited to the extent required by any such material
irreconcilable conflict.
10.6 Changes in Laws. If and to the extent that Rule 6e-2 and Rule 6e3(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 Fund's Exemptive Order) on terms and
conditions materially different from those contained in the Fund's Exemptive
Order, then (a) the Fund and/or the Company, 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
10.1, 10.2, 10.3 and 10.4 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.
11. Maintenance of Records.
-----------------------
(a) Recordkeeping and other administrative services to Owners shall be
the responsibility of the Company and shall not be the responsibility of
the Fund, Adviser or Distributors. Neither the Fund, the Adviser nor
Distributors shall maintain separate accounts or records for Owners.
Company shall maintain and preserve all records as required by law to be
maintained and preserved in connection with providing the Services and in
making shares of the Fund available to the Account.
(b) Upon the request of the Adviser or Distributors, the Company shall
provide copies of all the historical records relating to transactions
between the Fund and the Account, written communications regarding the Fund
to or from the Account and other materials, in each case (1) as are
maintained by the Company in the ordinary course of its business, and (2)
as may reasonably be requested to enable the Adviser and Distributors, or
its representatives, including without limitation its auditors or legal
counsel, to (A) monitor and review the Services, (B) comply with any
request of a governmental body or self-regulatory organization or the
Owners, (C) verify compliance by the Company with the terms of this
Agreement, (D) make required regulatory reports, or (E) perform general
customer supervision. The Company agrees that it will permit the Adviser
and Distributors or such representatives of either to have reasonable
access to its personnel and records in order to facilitate the monitoring
of the quality of the Services.
(c) Upon the request of the Company, the Adviser and Distributors
shall provide copies of all the historical records relating to transactions
between the Fund and the Account, written communications regarding the Fund
to or from the Account and other materials, in each case (1) as are
maintained by the Adviser and Distributors, as the
16
case may be, in the ordinary course of its business and in compliance with
applicable law, and (2) as may reasonably be requested to enable the
Company, or its representatives, including without limitation its auditors
or legal counsel, to (A) comply with any request of a governmental body or
self-regulatory organization or the Owners, (B) verify compliance by the
Adviser and Distributors with the terms of this Agreement, (C) make
required regulatory reports, or (D) perform general customer supervision.
(d) The parties agree to cooperate in good faith in providing records
to one another pursuant to this Section 11.
12. Term and Termination.
---------------------
12.1 Term and Termination Without Cause. The initial term of this
Agreement shall be for a period of two years from the date hereof. Unless
terminated upon not less than thirty (30) days prior written notice to the other
Party, this Agreement shall thereafter automatically renew from year to year,
subject to termination at the next applicable renewal date upon not less than 30
days prior written notice. Either Party may terminate this Agreement following
the initial term upon six (6) months advance written notice to the other.
12.2 Termination by Fund, Distributors or Adviser for Cause. Adviser,
Fund or Distributors may terminate this Agreement by written notice to the
Company, if any of them shall determine, in its sole judgment exercised
reasonably and in good faith, that (a) the Company has suffered a material
adverse change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity; or (b) any of the Contracts are not registered, issued or sold in
accordance with applicable state and/or federal law or such law precludes the
use of Fund shares as the underlying investment media of the Contracts issued or
to be issued by the Company.
12.3 Termination by Company for Cause. Company may terminate this
Agreement by written notice to the Fund and the Distributors with respect to the
Fund in the event that (a) any of the Fund's shares are not registered, issued
or sold in accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; (b) the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Fund may fail to so qualify; or (c) the Fund fails to meet the diversification
requirements specified in Section 6.4(a).
12.4 Termination by any Party. This Agreement may be terminated by any
party at any time (A) by giving 30 days' written notice to the other parties in
the event of a material breach of this Agreement by the other party or parties
that is not cured during such 30-day period, and (B) (i) upon institution of
formal proceedings relating to the legality of the terms and conditions of this
Agreement against the Account, Company, Fund, Adviser or Distributors by the
NASD, the SEC or any other regulatory body provided that the terminating party
has a
17
reasonable belief that the institution of formal proceedings is not without
foundation and will have a material adverse impact on the terminating party,
(ii) by the non-assigning party upon the assignment of this Agreement in
contravention of the terms hereof, or (iii) as is required by law, order or
instruction by a court of competent jurisdiction or a regulatory body or self-
regulatory organization with jurisdiction over the terminating party.
12.5 Limit on Termination. Notwithstanding the termination of this
Agreement, for so long as any Contracts remain outstanding and invested in a
Designated Portfolio each Party hereto shall continue to perform such of its
duties hereunder as are necessary to ensure the continued tax deferred status
thereof and the payment of benefits thereunder, except to the extent proscribed
by law, the SEC or other regulatory body.
13. Notices.
--------
All notices hereunder shall be given in writing (and shall be deemed to
have been duly given upon receipt) by delivery in person, by facsimile, by
registered or certified mail or by overnight delivery (postage prepaid, return
receipt requested) to the respective parties as follows:
If to Fund:
Strong Variable Insurance Funds, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: 414/359-3948
18
If to Adviser:
Strong Capital Management, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Distributors:
Strong Funds Distributors, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Company:
Providian Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
14. Miscellaneous.
14.1. Captions. The captions in this Agreement are included for
convenience of reference only and in no way affect the construction or effect of
any provisions hereof.
14.2. Enforceability. If any portion of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
14.3. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which taken together shall constitute one and the
same instrument.
14.4. Remedies not Exclusive. 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.
14.5. Confidentiality. Subject to the requirements of legal process and
regulatory authority, the Fund and Distributors shall treat as confidential the
names and addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by
19
the Company hereto and, except as permitted by this Agreement, shall not
disclose, disseminate or utilize such names and addresses and other confidential
information without the express written consent of the Company until such time
as it may come into the public domain.
14.6. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Wisconsin applicable to
agreements fully executed and to be performed therein; exclusive of conflicts of
laws;
14.7. Survivability. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5 hereof
shall survive termination of this Agreement. In addition, Sections 7.1, 7.5, 7.6
and 10 shall survive termination of this Agreement in the event that any
Contracts are invested in a Designated Portfolio at the time the termination
becomes effective and shall survive for so long as such Contracts remain so
invested.
14.8. Amendment and Waiver. No modification of any provision of this
Agreement will be binding unless in writing and executed by the party to be
bound thereby. No waiver of any provision of this Agreement will be binding
unless in writing and executed by the party granting such waiver.
Notwithstanding anything in this Agreement to the contrary, the Company may
unilaterally amend Exhibit A hereto to add additional investment companies or
series thereof ("New Funds") as Funds by sending to the Company a written notice
of the New Funds Any valid waiver of a provision set forth in this Agreement
shall not constitute a waiver of any other provision of this Agreement. In
addition, any such waiver shall constitute a present waiver of such provision
and shall not constitute a permanent future waiver of such provision.
14.9. Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective successors and assigns;
provided, however, that neither this Agreement nor any rights, privileges,
duties or obligations of the parties may be assigned by either party without the
written consent of the other party or as expressly contemplated by this
Agreement.
14.10. Entire Agreement. This Agreement contains the full and complete
understanding between the parties with respect to the transactions covered and
contemplated hereunder, and supersedes all prior agreements and understandings
between the parties relating to the subject matter hereof, whether oral or
written, express or implied.
14.11. Relationship of Parties; No Joint Venture. Except for the limited
purpose provided in Section 2.9, it is understood and agreed that the Company
shall be acting as an independent contractor and not as an employee or agent of
the Adviser, Distributors or the Funds, and none of the parties shall hold
itself out as an agent of any other party with the authority to bind such party.
Neither the execution nor performance of this Agreement shall be deemed to
create a partnership or joint venture by and among any of the Company, Fund,
Adviser, or Distributors.
20
14.12. Expenses. All expenses incident to the performance by each party
of its respective duties under this Agreement shall be paid by that party.
14.13. Time of Essence. Time shall be of the essence in this Agreement.
14.14. Non-Exclusivity. Each of the parties acknowledges and agrees that
this Agreement and the arrangements described in this Agreement are intended to
be non-exclusive and that each of the parties is free to enter into similar
agreements and arrangements with other entities.
14.15. Operations of Fund. In no way shall the provisions of this
Agreement limit the authority of (a) the Fund, Adviser or Distributors to take
such action as it may deem appropriate or advisable in connection with all
matters relating to the operation of such Fund and the sale of its shares and
(b) Adviser to take such action as it may deem appropriate or advisable in
connection with all matters relating to the provision of Services or the shares
of funds other than the Fund offered to the Account; provided, however nothing
in this paragraph shall be construed to limit any remedy, except only specific
performance, that is otherwise available to any party for breach of this
Agreement.
15. Compliance with Laws. Company, Distributors, and Adviser each shall comply
with all laws, rules and regulations applicable to them in connection with the
performance of each of their obligations under this Agreement.
21
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
/s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
STRONG CAPITAL MANAGEMENT, INC.
/s/ Xxxxxxxx Xxxx Xxxxxxx
-------------------------
Xxxxxxxx Xxxx Xxxxxxx, President of Strong
Advisory Services, a division of Strong Capital
Management, Inc.
STRONG FUNDS DISTRIBUTORS, INC.
/s/ Xxxxxxx Xxxxxxxxxxx
-----------------------
Name: Xxxxxxx Xxxxxxxxxxx
Title: Vice President
STRONG VARIABLE INSURANCE FUNDS, INC.
/s/ Xxxxxxx Xxxxxxxxxxx
-----------------------
Name: Xxxxxxx Xxxxxxxxxxx
Title: Vice President
22
EXHIBIT A
The following is a list of all series of the Fund which are to be made available
for investment by the Contracts pursuant to this Agreement:
Strong International Stock Fund II
23
EXHIBIT B
The Services
Company shall perform the following services. Such services shall be the
responsibility of the Company and shall not be the responsibility of the Fund,
Adviser or Distributors.
1. Maintain separate records for each Account, which records shall
reflect Fund shares ("Shares") purchased and redeemed, including the date and
price for all transactions, Share balances, and the name and address of each
Owner, including zip codes and tax identification numbers.
2. Credit contributions to individual Owner accounts and invest such
contributions in shares of the Designated Portfolios to the extent so designated
by the Owner.
3. Disburse or credit to the Owners, and maintain records of, all
proceeds of redemptions of Designated Portfolio shares and all other
distributions not reinvested in shares.
4. Prepare and transmit to the Owners, periodic account statements.
5. Transmit to the Owners, as required by applicable law, prospectuses,
proxy materials, shareholder reports, and other information provided by the
Adviser, Distributors or Fund and required to be sent to shareholders under the
Federal securities laws.
6. Transmit to Distributors purchase orders and redemption requests
placed by the Account and arrange for the transmission of funds to and from the
Fund.
7. Transmit to Distributors such periodic reports as Distributors shall
reasonably conclude is necessary to enable the Fund to comply with applicable
Federal securities and state Blue Sky requirements.
8. Transmit to the each Account confirmations of purchase orders and
redemption requests placed by each Account.
9. Maintain all account balance information for the Account and daily and
monthly purchase summaries expressed in shares and dollar amounts.
10. Prepare, transmit and file any Federal, state and local government
reports and returns as required by law with respect to each account maintained
on behalf of the Account.
11. Respond to Owners' inquiries regarding, among other things, share
prices, account balances, dividend options, dividend amounts, and dividend
payment dates.
24
EXHIBIT C
Account Information
1. Entity in whose name each Account will be opened:
--------------------------
Mailing address: --------------------------
--------------------------
--------------------------
2. Employer ID number (For internal usage only): --------------------------
3. Authorized contact persons: The following persons are authorized on behalf
of the Company to effect transactions in each Account:
Name: Name:
---------------------------- -------------------------------
Phone: Phone:
---------------------------- -------------------------------
4. Will the Accounts have telephone exchange? ____ Yes ____ No
(This option lets Company redeem shares by telephone and apply the proceeds
for purchase in another identically registered Strong Funds account.)
5. Will the Accounts have telephone redemption? ____ Yes ____ No
(This option lets Company sell shares by telephone. The proceeds will be
wired to the bank account specified below.)
6. All dividends and capital gains will be reinvested automatically.
7. Instructions for all outgoing wire thransfers: --------------------------
--------------------------
--------------------------
--------------------------
8. If this Account Information Form contains changed information, the
undersigned authorized officer has executed this amended Account Information
Form as of the date set forth below and acknowledges the agreements and
representations set forth in the Participation Agreement between the Company,
the Fund, Adviser and Distributors.
9. Company represents under penalty of perjury that:
(i) The employer ID number on this form is correct; and
(ii) Company is not subject to backup withholding because (a) Company
is exempt from backup withholding, (b) Company has not been notified by the
IRS that it is subject to
25
