FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT is made and entered into as of _________,
1997 by and among THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "Company"),
AMERICAN CENTURY INVESTMENT SERVICES, INC. "Distributor"), and AMERICAN CENTURY
INVESTMENT MANAGEMENT, INC. ("Manager").
WHEREAS, the Company offers to the public certain group variable annuity
contracts and group variable life insurance contracts (the "Contracts") and
WHEREAS, the Company wishes to offer as investment options under the
Contracts, the funds identified in EXHIBIT A attached hereto, (the "Funds"),
each of which is a series of mutual fund shares registered under the Investment
Company Act of 1940, as amended, (the Investment Company Act"), and
WHEREAS, on the terms and conditions hereinafter set forth, Distributor and
Manager desire to make shares of the Funds available as investment options under
the Contracts and to retain the Company to perform certain administrative
services on behalf of the Funds,
NOW, THEREFORE, the Company, Manager and Distributor agree as follows:
1. TRANSACTIONS IN THE FUNDS. Subject to the terms and conditions of this
Agreement, Distributor will make shares of the Funds available to be purchased,
exchanged, or redeemed, by the Company on behalf of the Contract owners through
the Accounts (defined in Section 6(a) below) through a single account per Fund
at the net asset value applicable to each order. The Funds' shares shall be
purchased and redeemed on a net basis in such quantity and at such time as
determined by the Company to satisfy the requirements of the Contracts for which
the Funds serve as underlying investment media. Dividends and capital gains
distributions will be automatically reinvested in full and fractional shares of
the Funds.
2. ADMINISTRATIVE SERVICES. The Company shall be solely responsible for
providing all administrative services for the Contracts owners. The Company
agrees that it will maintain and preserve all records as required by law to be
maintained and preserved, and will otherwise comply with all laws, rules and
regulations applicable to the marketing of the Contracts and the provision of
administrative services to the Contract owners.
3. PROCESSING AND TIMING OF TRANSACTIONS.
(a) Distributor hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares from the
Contract owners. On each day the New York Stock Exchange (the "Exchange") is
open for business (each, a "Business Day"), the Company may receive instructions
from the Contract owners for the purchase or redemption of shares of the Funds
("Orders"). Orders received and accepted by the Company prior to the close of
regular trading on the Exchange (the "Close of Trading") on any given Business
Day (currently, 3:00 p.m. Central time) and transmitted to the Fund's transfer
agent by 9:00 a.m. Central time on the next following Business Day will be
executed at the net asset value determined as of the Close of Trading on the
previous Business Day ("Day 1"). Any Orders received by the Company after the
Close of Trading, and all Orders that are transmitted by the Company after 9:00
a.m. Central time on the next following Business Day, will be executed at the
net asset value next determined following receipt of such Order. The day as of
which an Order is executed pursuant to the provisions set forth above is
referred to herein as the "Effective Trade Date".
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(b) By 5:30 p.m. Central time on each Business Day, Distributor will
provide to the Company, via facsimile or other electronic transmission
acceptable to the Company, the Funds' net asset value, dividend and capital gain
information and, in the case of income funds, the daily accrual for interest
rate factor (mil rate), determined at the Close of Trading. If Distributor
provides the Company with materially incorrect share net asset value information
through no fault of the Company, the Company on behalf of the separate accounts
shall be entitled to an adjustment to the number of shares purchased or redeemed
to reflect the correct share net asset value. Any material error in the
calculation of net asset value per share, dividend or capital gain information
shall be reported to the Company promptly upon discovery.
(c) By 9:00 a.m. Central time on each Business Day, the Company will
provide to Distributor via facsimile or other electronic transmission acceptable
to Distributor a report stating whether the Orders received by the Company from
Contract owners by the Close of Trading on the preceding Business Day resulted
in the Accounts being a net purchaser or net seller of shares of the Funds. As
used in this Agreement, the phrase "other electronic transmission acceptable to
Distributor" includes the use of remote computer terminals located at the
premises of the Company, its agents or affiliates, which terminals may be linked
electronically to the computer system of Distributor, its agents or affiliates
(hereinafter, "Remote Computer Terminals").
(d) Upon the timely receipt from the Company of the report described in (c)
above, Distributor will execute the purchase or redemption transactions (as the
case may be) at the net asset value computed as of the Close of Trading on Day
1. Payment for net purchase transactions shall be made by wire transfer to the
custodial account designated by the Funds on the Business Day next following the
Effective Trade Date. Such wire transfers shall be initiated by the Company's
bank prior to 3:00 p.m. Central time and received by the Funds prior to 5:00
p.m. Central time on the Business Day next following the Effective Trade Date.
If payments for a purchase Order is not timely received, such Order will be
executed at the net asset value next computed following receipt of payment.
Payments for net redemption transactions shall be made by wire transfer by the
Funds to the account designated by the appropriate receiving party within the
time period set forth in the applicable Fund's then-current prospectus:
provided, however, Distributor will use all reasonable efforts to settle all
redemptions on the Business Day following the Effective Trade Date. On any
Business Day when the Federal Reserve Wire Transfer System is closed, all
communication and processing rules will be suspended for the settlement of
Orders. Orders will be settled on the next Business Day on which the Federal
Reserve Wire Transfer System is open and the Effective Trade Date will apply.
4. PROSPECTUS AND PROXY MATERIALS.
(a) Distributor shall provide to the shareholder of record copies of the
Funds' proxy materials, periodic fund reports to shareholders and other
materials that are required by law to be sent to the Funds' shareholders. In
addition, Distributor shall provide the Company with a sufficient quantity of
prospectuses of the Funds to be used in conjunction with the transactions
contemplated by this Agreement, together with such additional copies of the
Funds' prospectuses as may be reasonably requested by Company. If requested by
the Company in lieu thereof, Distributor or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set in
type or, at the request of the Company, as a diskette in the form sent to the
Funds' printer) and other assistance as is reasonably necessary in order for the
parties hereto once each year (or more frequently if the prospectus for the
Shares is supplemented or amended) to have the prospectus for the Contracts,
prospectuses for other mutual funds in which the Contracts may be invested, and
the Funds' new prospectus printed together in one document. If the Company
provides for pass-through voting by the Contract owners, Distributor will
provide the Company with a sufficient quantity of proxy materials for each
Contract owner.
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(b) The cost of preparing, printing and shipping of the prospectuses, proxy
materials, periodic fund reports and other materials of the Funds to the Company
shall be paid by Distributor or its agents or affiliates, provided, however,
that if at any time Distributor or its agent reasonably deems the usage by the
Company of such items to be excessive, it may, prior to the delivery of any
quantity of materials in excess of what is deemed reasonable, request that the
Company demonstrate the reasonableness of such usage. If the Distributor
believes the reasonableness of such usage has not been adequately demonstrated,
it may request that the Company pay the cost of printing (including press time)
and delivery of any excess copies of such materials. Unless the Company agrees
to make such payments, Distributor may refuse to supply such additional
materials and this section shall not be interpreted as requiring delivery by
Distributor of any copies in excess of the number of copies to be provided to
existing Contract owners.
(c) The cost of distribution, if any, of any prospectuses, proxy materials,
periodic fund reports and other materials of the Funds to the Contract owners
shall be paid by the Company and shall not be the responsibility of Distributor,
Manager or the Funds.
5. COMPENSATION AND EXPENSES.
(a) The Accounts shall be the sole shareholder of Fund shares purchased for
the Contract owners pursuant to this Agreement (the "Record Owners"). The
Company and the Record Owners shall properly complete any applications or other
forms required by Distributor or the Funds' transfer agent from time to time.
(b) Distributor acknowledges that it will derive a substantial savings in
administrative expenses, such as a reduction in expenses related to postage,
shareholder communications and recordkeeping, by virtue of having a single
shareholder account per Fund for the Accounts rather than having each Contract
owner as a shareholder. In consideration of performance by the Company of the
administrative services and performance of all other obligations under this
Agreement by the Company, Distributor will pay the Company a fee (the
"Administrative Services fee") equal to 20 basis points (0.20%) per annum of the
average aggregate amount invested by the Company under this Agreement,
commencing with the month in which the average aggregate market value of
investments by the Company (on behalf of the Contract owners) in the Funds
exceeds $10 million. No payment obligation shall arise until the Company's
average aggregate investment in the Funds reaches $10 million, and such payment
obligation, once commenced, shall be suspended with respect to any month during
which the Company's average aggregate investment in the Funds drops below $10
million.
(c) The parties understand that Distributor customarily pays, out of its
management fee, another affiliated corporation for the type of administrative
services to be provided by the Company to the Contract owners. The parties agree
that the payments by Distributor to the Company, like Distributor's payments to
its affiliated corporation, are for administrative services only and do not
constitute payment in any manner for investment advisory services or for costs
of distribution.
(d) For the purposes of computing the payment to the Company contemplated
by this Section 5, the average aggregate amount invested by the Accounts in the
Funds over a one month period shall be computed by totaling the Company's
aggregate investment (share net asset value multiplied by total number of shares
of the Funds held by the Company) on each Business Day during the month and
dividing by the total number of Business Days during such month.
(e) Distributor will calculate the amount of the payment to be made
pursuant to this SECTION 5 at the end of each calendar quarter and will make
such payment to the Company within 30 days thereafter. The check for such
payment will be accompanied by a statement showing the
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calculation of the amounts being paid by Distributor for the relevant months and
such other supporting data as may be reasonably requested by the Company and
shall be mailed to:
The Prudential Insurance Company of America
____________________________________________
____________________________________________
Attention: ________________________________
6. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants that: (i) this Agreement has been
duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms; (ii) it has established the
accounts set forth on Exhibit B hereto (the "Accounts"), each of which is a
separate account under New Jersey Insurance law, and has to the extent required
by law registered each Account as a unit investment trust under the Investment
Company Act to serve as an investment vehicle for the Contracts: (iii) each
Contract provides for the allocation of net amounts received by the Company to
an Account for investment in the shares of one of more specified investment
companies selected among those companies available through the Account to act as
underlying investment media: (iv) selection of a particular investment company
is made by the Contract owner under a particular Contract, who may change such
selection from time to time in accordance with the terms of the applicable
Contract: and (v) the activities of the Company contemplated by this Agreement
comply with all provisions of federal and state insurance, securities, and tax
laws applicable to such activities.
(b) Distributor and Manager represent that: (i) this Agreement has been
duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of
Distributor and Manager, enforceable in accordance with its terms: and (ii) the
investments of the Funds will at all times be adequately diversified within the
meaning of Section 817(h) of the Internal Revenue Service Code of 1986, as
amended (the "Code"), and the regulations thereunder, and that at all times
while this Agreement is in effect, all beneficial interests in each of the Funds
will be owned by one or more insurance companies or by any other party permitted
under Section 1.817-5(f)(3) of the Regulations promulgated under the Code. In
the event of a breach of this Section 6 (b)(ii) by any Fund. Distributor or
Manager will take all reasonable steps (A) to notify the Company of such breach
and (B) to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Treasury Regulation 1.817-5.
(c) Distributor and Manager represent that the Funds are currently
qualified as Regulated Investment Companies under Subchapter M of the Internal
Revenue Code, and that they will maintain such qualification (under Subchapter M
or any successor or similar provision), and that Distributor or Manager will
notify the Company immediately upon having a reasonable basis for believing that
any Fund has ceased to so qualify or that it might not qualify in the future.
7. ADDITIONAL COVENANTS AND AGREEMENTS.
(a) Each party shall comply with all provisions of federal and state laws
applicable to its respective activities under this Agreement.
(b) Each party shall promptly notify the other parties in the event that it
is, for any reason, unable to perform any of its obligations under this
Agreement.
(c) The Company covenants and agrees that all Orders accepted and
transmitted by it hereunder with respect to each Account on any Business Day
will be based upon instructions that it
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received from the Contract owners in proper form prior to the Close of Trading
of the Exchange on that Business Day.
(d) The Company covenants and agrees that all Orders transmitted to the
Funds' transfer agent, whether by telephone, telecopy, or other electronic
transmission acceptable to Distributor, shall be sent by or under the authority
and direction of a person designated by the Company as being duly authorized to
act on behalf of the owner of the Accounts. Absent actual knowledge to the
contrary, Distributor shall be entitled to rely on the existence of such
authority and to assume that any person transmitting Orders for the purchase,
redemption or transfer of Fund shares on behalf of the Company is "an
appropriate person" as used in Sections 8-107 and 8401 of the Uniform Commercial
Code with respect to the transmission of instructions regarding Fund shares on
behalf of the owner of such Fund shares. The Company shall maintain the
confidentiality of all passwords and security procedures issued, installed or
otherwise put in place with respect to the use of Remote Computer Terminals and
assumes full responsibility for the security therefor. The Company further
agrees to be solely responsible for the accuracy, propriety and consequences of
all data transmitted to Distributor by the Company by telephone, telecopy or
other electronic transmission acceptable to Distributor.
(e) The Company shall furnish, or shall cause to be furnished, to
Distributor, each piece of sales literature or other promotional material in
which a Fund, Manager or Distributor is named, at least ten business days prior
to its use. No such material shall be used if the Fund, Manager or Distributor
reasonably objects in writing to such use within ten business days after receipt
of such material.
(f) The Company shall not give any information or make any representations
or statements on behalf of a Fund or concerning a Fund 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 a Fund, or in sales literature or other promotional material
approved by Distributor, except with the permission of Distributor. Distributor
agrees to respond to any request for approval on a prompt and timely basis.
(g) Distributor 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 the Account is named, at least ten business
days prior to its use. No such material shall be used if the Company reasonably
objects in writing to such use within ten business days after receipt of such
material.
(h) Neither Distributor nor Manager shall 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 in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company, except with
the permission of the Company. The Company agrees to respond to any request for
approval on a prompt and timely basis.
(i) Distributor 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, and
all amendments to any of the above, that relate to any Fund or its shares, upon
the Company's request.
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(j) The Company will provide to Distributor or Manager 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, and all amendments to any of the
above, that relate to the Contracts or each Account, upon Distributor's or
Manager's request.
(k) For purposes of this Section 7, 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 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, 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, prospectuses, statements of additional information, shareholder
reports, and proxy materials and any other material constituting sales
literature or advertising under NASD rules, the Investment Company Act or the
Securities Act of 1933 (the "l993 Act").
8. USE OF NAMES. Except as otherwise expressly provided for in this
Agreement, neither Distributor, Manager nor the Funds shall use any trademark,
trade name, service ▇▇▇▇ or logo of the Company, or any variation of any such
trademark, trade name, service ▇▇▇▇ or logo, without the Company's prior written
consent, the granting of which shall be at the Company's sole option. Except as
otherwise expressly provided for in this Agreement, the Company shall not use
any trademark, trade name, service ▇▇▇▇ or logo of Manager, Distributor or a
Fund, or any variation of any such trademarks, trade names, service marks, or
logos, without the prior written consent of either Manager, Distributor or that
Fund, as appropriate, the granting of which shall be at the sole option of
Distributor, Manager or such Fund.
9. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the Investment Company
Act as requiring such privileges. It shall be the responsibility of the Company
to assure that it and the separate accounts of the other Participating Companies
(as defined in SECTION 11(A) below) participating in any Fund calculate voting
privileges in a consistent manner.
(b) The Company will distribute to Contract owners all proxy material
furnished by Distributor and will vote shares in accordance with instructions
received from such Contract owners. The Company shall vote Fund shares for which
no instructions have been received in the same proportion as shares for which
such instructions have been received. The Company and its agents shall not
oppose or interfere with the solicitation of proxies for Fund shares held for
such Contract owners.
10. INDEMNITY.
(a) Distributor and Manager agree to indemnify and hold harmless the
Company and its officers, directors, employees, agents, affiliates and each
person, if any, who controls the Company within the meaning of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this SECTION 10(a))
against any losses, claims, expenses, damages or liabilities (including amounts
paid in settlement thereof) or litigation expenses (including legal and other
expenses) (collectively, "Losses"), to which the Indemnified Parties may become
subject, insofar as such Losses result from a breach by Distributor or Manager
of a material provision of this Agreement, or (ii) arise out or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement or prospectus of the Funds or arise out of or are
based upon the omission or alleged omission to state
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therein a material fact required to be stated therein or necessary to make the
statement there in not misleading. Distributor or Manager will reimburse any
legal or other expenses reasonably incurred by the Indemnified Parties in
connection with investigating or defending any such Losses. Distributor shall
not be liable for indemnification hereunder if such Losses are attributable to
the negligence or misconduct of the Company in performing its obligations under
this Agreement.
(b) The Company agrees to indemnify and hold harmless Distributor, Manager
and the Funds and their respective officers, directors, employees, agents,
affiliates and each person, if any, who controls the Funds, Manager or
Distributor within the meaning of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this SECTION 10(B)) against any Losses to which the
Indemnified Parties may become subject, insofar as such Losses (i) result from a
breach by the Company of a material provision of this Agreement, or (ii) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement or prospectus of the
Company regarding the Contracts, if any, or arise out of or are based upon 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, or
(iii) result from the use by any person of a Remote Computer Terminal. The
Company will reimburse any legal or other expenses reasonably incurred by the
Indemnified Parties in connection with investigating or defending any such
Losses. The Company shall not be liable for indemnification hereunder if such
Losses are attributable to the negligence or misconduct of Distributor, Manager
or the Funds in performing their obligations under this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party of the commencement thereof, but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party otherwise than under this SECTION 10. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnified party will not be liable
to such indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
(d) If the indemnifying party assumes the defense of any such action, the
indemnifying party shall not, without the prior written consent of the
indemnified parties in such action, settle or compromise the liability of the
indemnified parties in such action, or permit a default or consent to the entry
of any judgment in respect thereof, unless in connection with such settlement,
compromise or consent, each indemnified party receives from such claimant an
unconditional release from all liability in respect of such claim.
11. POTENTIAL CONFLICTS.
(a) The Company has received a copy of an application for exemptive relief,
as amended, filed by Distributor on December 21, 1987, with the SEC and the
order issued by the SEC in response thereto (the "Shared Funding Exemptive
Order"). The Company has reviewed the conditions to the requested relief set
forth in such application for exemptive relief As set forth in such application,
the Board of Directors of the Funds (the "Board") will monitor the Funds for the
existence of any material irreconcilable conflict between the interests of the
contract owners of all separate accounts ("Participating Companies") investing
in the Funds. An irreconcilable material conflict may arise for a variety of
reasons, including: (i) an action by any state insurance regulatory authority;
(ii) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private
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letter ruling, no-action or interpretative letter, or any similar actions by
insurance, tax or securities regulatory authorities; (iii) an administrative or
judicial decision in any relevant proceeding; (iv) the manner in which the
investments of any portfolio are being managed; (v) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (vi) 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.
(b) The Company will report any potential or existing conflicts of which it
is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the 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.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists with regard
to contract owner investments in a Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that the Company is
responsible for causing or creating said conflict, the Company shall at its sole
cost and expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Board members), take such action as is necessary
to remedy or eliminate the irreconcilable material conflict. Such necessary
action may include but shall not be limited to:
(i) withdrawing the assets allocable to the Accounts from the Fund and
reinvesting such assets in a different investment medium or submitting
the question of whether such segregation should be implemented to a
vote of all affected contract owners and as appropriate, segregating
the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or
more Participating Companies) that votes in favor of such segregation,
or offering to the affected contract owners the option of making such
a change; and/or
(ii) establishing a new registered management investment company or managed
separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contract owner voting instructions and said
decision represents a minority position or would preclude a majority vote by all
of its contract owners having an interest in the Funds, the Company at its sole
cost, may be required, at the Board's election, to withdraw an Account's
investment in the Funds and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
(e) For the purpose of this SECTION 11, a majority of the disinterested
Board members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the Funds be
required to establish a new funding medium for any Contract. The Company shall
not be required by this SECTION 11 to establish a new funding medium for any
Contract if an offer to do so has been declined by vote of a majority of the
Contract owners materially adversely affected by the irreconcilable material
conflict.
12. TERMINATION. This agreement shall terminate as to the sale and issuance
of new Contracts:
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(a) at the option of either the Company, Distributor or the Manager upon
six months' advance written notice to the other;
(b) at the option of the Company if the Funds' shares are not available for
any reason to meet the requirement of Contracts as determined by the Company.
Reasonable advance notice of election to terminate shall be furnished by
Company;
(c) at the option of either the Company, Distributor or the Manager, upon
institution of formal proceedings against the broker-dealer or broker-dealers
marketing the Contracts, the Accounts, the Company, Distributor, or the Funds by
the National Association of Securities Dealers, Inc. (the "NASD"), the SEC or
any other regulatory body;
(d) upon termination of the Management Agreement between the Funds and
Manager. Notice of such termination shall be promptly furnished to the Company.
This SUBSECTION (D) shall not be deemed to apply if contemporaneously with such
termination a new contract of substantially similar terms is entered into
between the Funds and Manager;
(e) upon the requisite vote of Contract owners having an interest in the
Funds to substitute for the Funds' shares the shares of another investment
company in accordance with the terms of Contracts for which the Funds' shares
had been selected to serve as the underlying investment medium The Company will
give 60 days' written notice to the Funds and Distributor of any proposed vote
to replace the Funds' shares;
(f) upon assignment of this Agreement unless made with the written consent
of all other parties hereto;
(g) if the Funds' shares are not registered, issued or sold in conformance
with Federal law or such law precludes the use of Fund shares as an underlying
investment medium of Contracts issued or to be issued by the Company. Prompt
notice shall be given by either party should such situation occur;
(h) at the option of the Distributor or Manager, if Distributor or Manager
reasonably determines in good faith that the Company is not offering shares of
the Fund in conformity with the terms of this Agreement or applicable law;
(i) at the option of any party hereto upon a determination that continuing
to perform under this Agreement would, in the reasonable opinion of the
terminating party's counsel violate any applicable federal or state law, rule,
regulation or judicial order;
(j) At the option of the Company if a Fund fails to meet the
diversification requirements specified in Section 6(i) hereof; or
(k) At the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement.
13. CONTINUATION OF AGREEMENT. Termination as the result of any cause
listed in SECTION 12 shall not affect Distributor's obligation to cause the
Funds to continue to furnish their shares under the terms of this Agreement to
Contracts then in force for which their shares serve or may serve as the
underlying medium (unless such further sale of Fund shares is proscribed by law
or the SEC or other regulatory body). Following termination, Distributor shall
not have any Administrative Services payment obligation to the Company (except
for payment obligations accrued but not yet paid as of the termination date).
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14. NON-EXCLUSIVITY. Each of the parties acknowledges and agrees that this
Agreement and the arrangement described herein are intended to be non-exclusive
and that each of the parties is free to enter into similar agreements and
arrangements with other entities.
15. SURVIVAL. The provisions of SECTION 8 (use of names) and SECTION 10
(indemnity) of this Agreement shall survive termination of this Agreement.
16. AMENDMENT. Neither this Agreement, nor any provision hereof, may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by all of the parties hereto.
17. NOTICES. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
To the Company:
The Prudential Insurance Company of America
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(▇▇▇)▇▇▇-▇▇▇▇ (office number)
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopy number)
To the Issuer or Distributor:
American Century Investments
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
(▇▇▇)▇▇▇-▇▇▇▇ (office number)
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopy number)
Any notice, demand or other communication given in a manner prescribed in this
SECTION 17 shall be deemed to have been delivered on receipt.
18. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without the
written consent of all parties to the Agreement at the time of such assignment.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
20. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
II-18
21. ENTIRE AGREEMENT. This Agreement, including the Attachments hereto,
constitutes the entire agreement between the parties with respect to the matters
dealt with herein, and supersedes all previous agreements, written or oral, with
respect to such matters.
22. CONFIDENTIALITY. Subject to applicable law and regulatory authority,
each party hereto shall treat as confidential all information reasonably
identified as such in writing by any other parry 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 expressed prior written consent of the affected party.
23. COOPERATION. 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 each other and
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.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
AMERICAN CENTURY INVESTMENT THE PRUDENTIAL INSURANCE
SERVICES, INC. COMPANY OF AMERICA
By: __________________________________ By:_________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ______________________
Executive Vice President Title: _____________________
AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
By:____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President
II-19
EXHIBIT A
FUNDS AVAILABLE
================================================================================
ISSUER | NAME OF FUND
================================================================================
TCI Portfolios, Inc. | TCI Balanced
|------------------------------------------------
| TCI Growth
|------------------------------------------------
| TCI International
|------------------------------------------------
| TCI Value
================================================================================
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JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this l5th day of April , 1997, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), JANUS CAPITAL CORPORATION, a Colorado corporation
(the "Adviser"), and PRUDENTIAL INSURANCE COMPANY OF AMERICA, a life insurance
company organized under the laws of the State of New Jersey (the "Company"), on
its own behalf and on behalf of each segregated asset account of the Company set
forth on Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of 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 Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) certain variable life insurance policies
and/or variable annuity contracts under the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register (unless registration
is not required under applicable law) each Account as a unit investment trust
under the 1940 Act; and
II-21
WHEREAS, the Company desires to utilize shares of one or more Portfolios as
an investment vehicle of the Accounts; and
WHEREAS, the Adviser is registered as an investment adviser under the 1940
Act and serves as investment adviser to the Trust;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust shall make shares of its Portfolios available to the Accounts
at the net asset value next computed after receipt of such purchase order by the
Trust (or its agent), as established in accordance with the provisions of the
then current prospectus of the Trust. Shares of a particular Portfolio of the
Trust shall be ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts. The Trustees
of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset value
next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the ▇▇▇▇ ▇▇▇.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the
Company as its agent for the limited purpose of receiving and accepting purchase
and redemption orders resulting from investment in and payments under the
Contracts. Receipt by the Company shall constitute receipt by the Trust provided
that i) such orders are received by the Company in good order prior to the time
the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
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1.4 Purchase orders that are transmitted to the Trust in accordance with
Section 1.3 shall be paid for no later than 12:00 noon New York time on the same
Business Day that the Trust receives notice of the order. Payments shall be made
in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Shares
ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7 The Trust 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 6 p.m. New York time. If the
Trust provides the Company with materially incorrect share net asset value
information through no fault of the Company, the Company on behalf of the
separate accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported to the Company promptly upon discovery.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans as provided under Section 817(h)(4) of the Internal Revenue
Code of 1986, as amended, and the regulations thereunder ("Code"), to the extent
permitted by the Exemptive Order. No shares of any Portfolio will be sold
directly to the general public. The Company agrees that Trust shares will be
used only for the purposes of funding the Contracts and Accounts listed in
Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.8 and Article IV of
this Agreement.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports,
II-23
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional information
of the Trust. The Trust shall bear the costs of registration and qualification
of its shares, preparation and filing of the documents listed in this Section
2.1 and all taxes to which an issuer is subject on the issuance and transfer of
its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the
Company (at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 The Company agrees and acknowledges that the Adviser is the sole owner
of the name and ▇▇▇▇ "▇▇▇▇▇" and that all use of any designation comprised in
whole or part of Janus (a "▇▇▇▇▇ ▇▇▇▇") under this Agreement shall inure to the
benefit of the Adviser. Except as provided in Section 2.5, the Company shall not
use any ▇▇▇▇▇ ▇▇▇▇ on its own behalf or on behalf of the Accounts or Contracts
in any registration statement, advertisement, sales literature or other
materials relating to the Accounts or Contracts without the prior written
consent of the Adviser. Upon termination of this Agreement for any reason, the
Company shall cease all use of any ▇▇▇▇▇ ▇▇▇▇(s) as soon as reasonably
practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust or
its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or the Adviser is named prior to the filing of
such document with the Securities and Exchange Commission. The Company shall
furnish, or shall cause to be furnished, to the Trust or its designee, each
piece of sales literature or other promotional material in which the Trust or
the Adviser is named, at least ten Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to such
use within ten Business Days after receipt of such material.
2.6 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the Adviser in
connection with the
II-24
sale of the Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the Trust
shares (as such registration statement and prospectus may be amended or
supplemented from time to time), reports of the Trust, Trust-sponsored proxy
statements, or in sales literature or other promotional material approved by the
Trust or its designee, except as required by legal process or regulatory
authorities or with the written permission of the Trust or its designee.
2.7 Neither the Trust nor the Adviser shall give any information or make
any representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other promotional
materials, except as required by legal process or regulatory authorities or with
the written permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state insurance
laws that restrict the Portfolios' investments or otherwise affect the operation
of the Trust and shall notify the Trust of any changes in such laws.
2.10 For purposes of this Article, 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, radio, television, telephone or tape recording, video tape 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 articles,) educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of
II-25
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 III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of New Jersey
and that it has legally and validly established each Account as a segregated
asset account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the ▇▇▇▇ ▇▇▇.
3.3 The Company represents and warrants that the Contracts or interests
in the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws; and the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement 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 Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Code. In the event of a breach of this Article by a Portfolio, the
Portfolio will take all reasonable steps to notify the Company of such breach
and to adequately diversify the Portfolio so as to achieve compliance with the
grace period afforded by Treasury Regulation 1.817-5.
II-26
3.7 The Trust represents that it is currently qualified as a regulated
investment company under Subchapter M of the Code, that it will 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.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. 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
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 Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all 1of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
II-27
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; 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 Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 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 Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees 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 Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required 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. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees 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 as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonable request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust
II-28
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.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust, the Adviser, and each of their Trustees or Directors,
officers, employees and agents and each person, if any, who controls the Trust
or the Adviser within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Article V) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or expenses (including the reasonable costs
of investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts themselves or
in sales literature generated or approved by the Company on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Article V), 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
indemnity 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 was accurately derived from written information furnished to the
Company by or on behalf of the Trust or the Adviser for use in Company
Documents or otherwise for use in connection with the sale of the Contracts
or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in
Section 5.2(a) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information furnished to
the Trust or the Adviser by or on behalf of the Company; or
II-29
(d) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from 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 of this Agreement by
the Company.
5.2 Indemnification Bv the Trust and the Adviser. The Trust and Adviser
agree to indemnify and hold harmless the Company and each of its directors, the
Adviser, officers, employees and agents and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Article V) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or expenses (including the reasonable costs
of investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) 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 Trust (or any amendment or supplement
thereto), (collectively, "Trust Documents" for the purposes of this Article
V), 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 indemnity
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 was
accurately derived from written information furnished to the Trust by or on
behalf of the Company for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Company Documents) or wrongful conduct of the Trust or the Adviser or
persons under their control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of the Trust
or the Adviser; or
(d) arise out of or result from any failure by the Trust or the
Adviser to provide
II-30
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust or Adviser in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Trust or the Adviser.
5.3 None of the parties to this Agreement shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 None of the parties to this Agreement shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other parties in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
the action. After notice from the indemnifying party to the Indemnified Party of
an election to assume such defense, 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 the Indemnified 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.
5.6 The indemnifications provided by the parties hereunder are in addition
to any liability the parties may otherwise have.
ARTICLE VI
Termination
6.1 This Agreement may be terminated by any party for any reason by ninety
(90) days advance written notice delivered to the other parties.
6.2 Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares of the
Trust (or any Portfolio)
II-31
pursuant to the terms and conditions of this Agreement for all Contracts in
effect on the effective date of termination of this Agreement, provided that the
Company continues to pay the costs set forth in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
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 Trust or the Adviser:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Company:
Prudential Insurance Company of America
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
ARTICLE VIII
Miscellaneous
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 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.
II-32
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by any party without the prior written approval of the other parties.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by each
party.
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IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Marketing
JANUS ASPEN SERIES
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Assistant Vice President
JANUS CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President of Compliance
II-34
Schedule A
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
-------------------------------------- -------------------
Prudential Variable Contract Account GI-2 Group Variable Universal Life
ets. June 24, 1988 Insurance Contracts
II-35
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 11th day of April 1997, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), PRUDENTIAL INSURANCE COMPANY OF AMERICA, an insurance company
organized under the laws of the state of New Jersey (the "Company"), on its own
behalf and on behalf of each of the segregated asset accounts of the Company set
forth in Schedule A hereto, as may be amended from time to time (the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (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. (the "NASD");
II-36
WHEREAS, Prudential Investment Management Services, L.L.C. ("PIMS"), the
underwriter for the individual variable annuity and the variable life policies,
is registered as a broker-dealer with the SEC under the 1934 Act and is a member
in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light of
its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates in accordance with Section 817(h)(4) of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder. The
Trust and MFS will not sell Trust shares to any insurance company or
separate account unless an agreement containing provisions substantially
the same as Articles III and VII of this Agreement is in effect to
govern such sales. The Company will not resell the Shares except to the
Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy holders on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m. New
York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust
II-37
shall net purchase and redemption orders with respect to each Portfolio
and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemptions, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in
federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable on
a Portfolio's Shares in additional Shares of that Portfolio. The Trust
shall notify the Company of the number of Shares so issued as payment of
such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day 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 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the purchase
and redemption of Shares. Such additional time shall be equal to the
additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect
share net asset value information, the Trust shall make an adjustment to
the number of shares purchased or redeemed for the Accounts to reflect
the correct net asset value per share. Any material error in the
calculation or reporting of net asset value per share, dividend or
capital gains information shall be reported promptly upon discovery to
the Company.
ARTICLE II, CERTAIN REPRESENTATIONS. WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
1940 Act. 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 the Account as a
segregated asset account under applicable law and has registered or,
prior to any issuance or sale of the Policies, will register the
Accounts as unit investment trusts in accordance with the provisions of
the 1940 Act (unless exempt therefrom) to serve as segregated investment
accounts for the Policies, and that it will maintain such registration
for so long as any Policies are outstanding. The Company shall amend the
registration statements under the 1933 Act for the Policies and the
registration statements under the 1940 Act for the Accounts from time to
time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company
shall register and qualify the Policies for sales 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 and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment
or annuity contract under applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), that it will maintain such
treatment and that it will notify the Trust or MFS immediately upon
having a reasonable basis for believing that the Policies have ceased to
be so treated or that they might not be so treated in the future.
II-38
2.3. The Company represents and warrants that PIMS, the underwriter for
the individual variable annuity and the variable life policies, is a
member in good standing of the NASD and is a registered broker-dealer
with the SEC. The Company represents and warrants that the Company and
PIMS will sell and distribute such policies in accordance in all
material respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the ▇▇▇▇
▇▇▇.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust 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 Trust
shall register and qualify the Shares for sale in accordance with the
laws of the various states only if and to the extent deemed necessary by
the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter will
sell and distribute the Shares in accordance in all material respects
with all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the ▇▇▇▇ ▇▇▇.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS represents
and warrants that it is not subject to state securities laws other than
the securities laws of The Commonwealth of Massachusetts and that it is
exempt from registration as an investment adviser under the securities
laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request
so that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the
SEC has granted exemptive relief to permit mixed and shared funding (the
"Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS: VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares as
the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof, the
Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts. the Trust or its designee to bear
the cost of printing the Shares' prospectus
II-39
portion of such document for distribution to owners of existing Policies
funded by the Shares and the Company to bear the expenses of printing
the portion of such document relating to the Accounts; provided,
however, that the Company shall bear all printing expenses of such
combined documents where used for distribution to prospective purchasers
or to owners of existing Policies not funded by the Shares. In the event
that the Company requests that the Trust or its designee provides the
Trust's prospectus in a "camera ready" or diskette format, the Trust
shall be responsible for providing the prospectus in the format in which
it or MFS is accustomed to formatting prospectuses and shall bear the
expense of providing the prospectus in such format (i.e., typesetting
expenses), and the Company shall bear the expense of adjusting or
changing the formal to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or
prospectuses for distribution to prospective purchasers or to owners of
existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received
from Policy owners; and
(c) vote the Shares for which no instructions have been received
in the same proportion as the Shares of such Portfolio for
which instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable contract
owners. The Company will in no way recommend action in connection with
or oppose or interfere with the solicitation of proxies for the Shares
held for such Policy owners. The Company reserves the right to vote
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 holding
Shares calculates voting privileges in the manner required by the Mixed
and Shared Funding Exemptive Order. The Trust and MFS will notify the
Company of any changes of interpretations or amendments to the Mixed and
Shared Funding Exemptive Order.
II-40
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to such
use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy statements for the Trust, or
in sales literature or other promotional material approved by the Trust,
MFS or their respective designees, except with the permission of the
Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning the
Trust, MFS or any of their affiliates which is intended for use only by
brokers or agents selling the Policies (i.e., information that is not
intended for distribution to Policy holders or prospective Policy
holders) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials.
4.3. The Trust or its designee 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 and/or the
Accounts is named, at least three (3) Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably
objects to such use within three (3) Business Days after receipt of such
material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to respond
to any request for approval on a prompt and timely basis. The parties
hereto agree that this Section 4.4. is neither intended to designate nor
otherwise imply that MFS is an underwriter or distributor of the
Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other 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 Policies, or to the Trust or its Shares, prior to or
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. The Company and the Trust shall also each
promptly inform the other or the results of any examination by the SEC
(or other regulatory authorities) that relates to the Policies, the
Trust or its Shares, and the party that was the subject of the
examination shall provide the other party with a copy of relevant
portions of any "deficiency letter" or other correspondence or written
report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
II-41
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates for
such prospectuses.
4.7. For purpose of this Article IV and Article VIII, 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, radio, television, telephone
or tape recording, videotape display, signs or billboards, motion
pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or all
agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-I under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust in
writing. Each party, however, shall, in accordance with the allocation
of expenses specified in Articles III and V hereof, reimburse other
parties for expense initially paid by one party but allocated to another
party. In addition, nothing herein shall prevent the parties hereto from
otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Trust and/or to the
Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above); the
preparation of all statements and notices required of the Trust by any
federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded by
the Shares and any expenses permitted to be paid or assumed by the Trust
pursuant to a plan, if any, under Rule 12b-l under the ▇▇▇▇ ▇▇▇. The
Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports and proxy materials
to Policy owners. The Company shall bear all expenses associated with
the registration, qualification, and filing of the Policies under
applicable federal securities and state insurance laws; the cost of
preparing, printing and distributing the Policy prospectus and statement
of additional information; and the cost of preparing, printing and
distributing annual individual account statements for Policy owners as
required by state insurance laws.
5.4. MFS will quarterly reimburse the Company certain of the
administrative costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership by Policy owners of
shares of the Portfolios of the Trust, equal to 0.15% per annum of the
net assets of the Trust attributable to variable life or variable
annuity contracts offered by Company or its affiliates up to $100
million and 0.20% per
II-42
annum of the net assets of the Trust attributable to such contracts over
$100 million. In no event shall such fee be paid by the Trust, its
shareholders or by the Policy holders.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817(h)(1) of
the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these Sections), as if
those requirements applied directly to each such Portfolio. In the event
that any Portfolio is not so diversified at the end of any applicabIe
quarter, the Trust and MFS will make every effort to (a) adequately
diversify the Portfolio so as to achieve compliance within the grace
period afforded by Treas. Reg. 1.817-5 and (b) notify the Company.
6.2 The Trust and MFS represent that each Portfolio of the Trust will
elect to be qualified as a Regulated Investment Company under Subchapter
M of the Code and that every effort will be made to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that the Trust or its designee will notify the Company promptly upon
having a reasonable basis for believing that any Portfolio of the Trust
has ceased to so qualify or that any Portfolio might not so qualify in
the future.
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests
of the variable annuity contract owners and the variable life insurance
policy owners of the Company and/or affiliated companies ("contract
owners") investing in the Trust. The Board shall have the sole authority
to determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the
form of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice
of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC has
granted the Mixed and Shared Funding Exemptive Order by providing the
Board, as it may reasonably request, with all information necessary for
the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregard. The Company also agrees that, if a
material irreconcilable conflict arises, it will. at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable
to some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including (but
not limited to) another Portfolio of the Trust, or submitting to a vote
of all affected contract owners whether to withdraw assets from the
Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately remedies
any material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any
material irreconcilable conflict, the Company will
II-43
withdraw from investment in the Trust each of the Accounts designated by
the disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the disinterested
trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shares funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from those
contained in the Mixed Shared Funding Exemptive Order, then (a) the
Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules
are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 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.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust, MFS,
any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within
the meaning of Section 15 of the 1933 Act, and any agents or employees
of the foregoing (each an "Indemnified Party," or 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 expenses
(including reasonable counsel fees) to which an Indemnified Party 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 Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the commission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Company or its designee by or on behalf of the Trust or MFS for
use in the registration statement, prospectus or statement of
additional information for the Policies or in the Policies or
sales literature or other promotional material (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust not supplied by the Company or this designee, or
persons under its control and on which the Company has reasonably
relied) or wrongfull conduct of the Company or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
II-44
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Trust by or on behalf
of the Company; or
(d) arise out of or result from 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 of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; as limited by and in accordance with the provisions of
this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
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 Trust) or
expenses (including reasonable counsel fees) to which any Indemnified
Party may become subject under any statute, 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 Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust (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 statement therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust
or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS, the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements or a failure to qualify as a
II-45
registered investment company, each as specified in Article VI of
this Agreement) or arise out of or result from any other material
breach of this Agreement by the Trust; or
(d) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company under
an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset account
(which invests in any Portfolio) as a legally and validly established
segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the 1940 Act
(unless exempt therefrom); or (iii) the failure by the Company or any
Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Portfolio
serves as an underlying funding vehicle) as life insurance, endowment or
annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of commencement of action, such Indemnified Party will. if a claim
in respect thereof is to be made against the indemnifying party under
this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any Indemnified Party otherwise
than under this section. 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.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. 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 are in addition to any liability the parties may otherwise have.
II-46
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 Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as
the SEC may grant and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares
of Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing,
the Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the opt ion of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt
of any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30) days'
prior written notice to the Trust of the Date of any
proposed vote or other action taken to replace the Shares;
or
II-47
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations,
financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Trust
and MFS, if the Company shall determine, in its sole
judgment exercised in good faith, that the Trust or MFS has
suffered a material adverse change in this business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement;
or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and conditions
of this Agreement, for all Policies in effect on the effective date of
termination of this Agreement (the "Existing Policies"), except as
otherwise provided under Article VII of this Agreement. Specifically,
without limitation, the owners of the Existing Policies shall be
permitted to transfer or reallocate investment under the Policies.
redeem investments in any Portfolio and/or invest in the Trust upon the
making of additional purchase payments under the Existing Policies.
11.6. If this Agreement terminates, the parties agree that Article VIII,
and to the extent that all or a portion of the assets of the Accounts
continue to be invested in the Trust, Articles I, II, III, VI and VII,
will remain in effect after termination.
II-48
ARTICLE XII. 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 Trust:
MFS VARIABLE INSURANCE TRUST
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
If to the Company:
PRUDENTIAL INSURANCE COMPANY OF AMERICA
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Deputy Chief Legal Officer
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or utilize
such names and addresses and other confidential information without the
express written consent of the affected party until such time as it may
come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
II-49
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachuseus. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations
of each Portfolio hereunder shall be several and not joint, in
accordance with its proportionate interest hereunder, and the Company
agrees not to proceed against any Portfolio for the obligations of
another Portfolio.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
PRUDENTIAL INSURANCE COMPANY OF AMERICA
By its authorized officer,
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Marketing
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not individually
By: /s/ A. ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: A. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Executive Vice President
II-50
As of_______________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
==================================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
==================================================================================================
THE PRUDENTIAL VARIABLE GROUP VARIABLE UNIVERSAL MFS BOND SERIES
CONTRACT ACCOUNT GI-2 LIFE INSURANCE CONTRACT MFS EMERGING GROWTH SERIES
(EST. 6/24/88) SERIES #89759 MFS GROWTH AND INCOME SERIES
MFS HIGH INCOME SERIES
MFS LIMITED MATURITY SERIES
MFS MONEY MARKET SERIES
MFS RESEARCH SERIES
MFS TOTAL RETURN SERIES
MFS UTILITIES SERIES
MFS VALUE SERIES
MFS WORLD GOVERNMENTS SERIES
===================================================================================================
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