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As filed with the Securities and Exchange Commission on February , 12 1999
Registration No. 33-78944
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 9 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 11
OCC ACCUMULATION TRUST
(Exact Name of Registrant as Specified in Charter)
ONE WORLD FINANCIAL CENTER, NEW YORK, NY 10281
(Address of Principal Executive Offices)
(212) 374-1600
(Registrant's Telephone Number)
Thomas E. Duggan, Esq.
Oppenheimer Capital
One World Financial Center
New York, NY 10281
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to [ ] on May 1, 1998 pursuant to
paragraph (b) paragraph (b)
[ ] On October 15, 1997 pursuant to [ ] pursuant to paragraph (a)(1)
paragraph (a)(1)
[ ] 75 days after filing pursuant to [X] on May 1, 1999 pursuant to
paragraph (a)(2) paragraph (a)(2) of Rule 485
Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940 and has filed its report pursuant to that Rule for the year
ended December 31, 1997 on March 30, 1998.
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CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A
Item
Part A Caption Prospectus
<S> <C> <C>
1. (a) Front Cover Page Front Cover Page
(b) Back Cover Page Back Cover Page
2. Risk/Return Summary: Risk/Return Summary
Investments, Risks and Principal Investment
Performance Strategies and Related Risks
3. Risk/Return Summary: Fee Risk/Return Summary
Table
4. Investment Objectives, Principal Investment Strategies and
Principal Investment Related Risks
Strategies, and Related
Risks
5. Management's Discussion N/A
of Fund Performance
6. Management, Organization, Fund Management; Distributions and
and Capital Structure Taxes
7. Shareholder Information Shareholder Information
8. Distribution Arrangements N/A
9. Financial Highlights Financial Highlights
Information
Part B Caption Statement of Additional Information
10. Cover Page and Table of Cover Page; Table of Contents
Contents
11. Fund History Additional Information--Description
of the Fund
12. Description of the Fund Investment of the Fund's Assets;
and Its Investments Investment Restrictions
and Risks
<PAGE>
13. Management of the Fund Investment Management and Other
Services
14. Control Persons and Trustees and Officers; Control
Principal Holders of Persons
Securities
15. Investment Advisory and Investment Management and Other
Other Services Services
16. Brokerage Allocation and Investment Management and Other
Other Purchases Services - Portfolio Transactions
17. Capital Stock and Other Determination of Net Asset Value;
Securities Capital Stock; Additional
Information-Possible Additional
Series
18. Purchase, Redemption and Determination of Net Asset Value
Pricing of Securities
19. Taxation of the Fund Dividends, Distributions and Taxes
20. Underwriters Investment Management and Other
Services
21. Calculations of Performance Data
Performance Data
22. Financial Statements N/A
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
PROSPECTUS MAY 1, 1999
OCC ACCUMULATION TRUST is an open-end investment company with the following
investment portfolios.
EQUITY PORTFOLIO
MID CAP PORTFOLIO
SMALL CAP PORTFOLIO
GLOBAL EQUITY PORTFOLIO
MANAGED PORTFOLIO
BALANCED PORTFOLIO
U.S. GOVERNMENT INCOME PORTFOLIO
Shares of the Portfolios are sold only to variable accounts of certain life
insurance companies as an investment vehicle for their variable annuity and
variable life insurance contracts and to qualified pension and retirement plans.
The Securities and Exchange Commission has not approved any Portfolio's
shares as an investment or determined whether this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a crime.
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Risk/Return Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Investment Strategies. . . . . . . . . . . . . . . . . . . . . .
Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fund Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
1
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RISK/RETURN SUMMARY
INVESTMENT GOALS Equity Portfolio . . . . . . .Long term capital appreciation
Mid Cap Portfolio. . . . . . .Long term capital appreciation
Small Cap Portfolio. . . . . .Capital appreciation
Global Equity Portfolio. . . .Long term capital appreciation
Managed Portfolio. . . . . . .Growth of capital over time
Balanced Portfolio . . . . . .Growth of capital and
investment income
U.S. Gov't Income Portfolio. .High current income and
protection of capital
PRINCIPAL INVESTMENT
STRATEGIES - The Equity Portfolio invests primarily in equity
securities listed on the New York Stock Exchange.
- The Mid Cap Portfolio invests primarily in equity
securities of companies with market
capitalizations between $500 million and $5
billion.
- The Small Cap Portfolio invests primarily in
equity securities of companies with market
capitalizations under $1 billion.
- The Global Equity Portfolio invests primarily in
equity securities on a worldwide basis and may
invest up to a lesser extent in U.S. or foreign
fixed income securities.
- The Managed Portfolio invests in common stocks,
bonds and cash equivalents, based on the Adviser's
judgment.
- The Balanced Portfolio invests in common stocks,
preferred stocks, securities convertible into
common stock and debt securities.
- The U.S. Government Income Portfolio invests
solely in debt obligations including
mortgage-backed securities issued or guaranteed by
the U.S. government, its agencies or
instrumentalities.
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VALUE INVESTING OpCap Advisors, the Portfolios' investment adviser,
applies the principles of value investing to select
securities. When selecting equity securities, OpCap
Advisors believes there are two major components of
value.
- A company's ability to generate earnings that
contribute to shareholder value. OpCap Advisors
considers discretionary cash flow--cash that
remains after a company spends what is needed to
sustain its industrial position--as a primary
determinant of a company's potential to add
economic value:
- Price - OpCap Advisors looks for market
undervaluation great enough to offer the potential
for upside reward with what it believes is modest
downward risk.
In selecting debt securities, OpCap Advisors analyzes
yield relationships between different sectors and
among securities along the yield curve. OpCap Advisors
seeks to take advantage of maturities and individual
issues that are inexpensive and have the potential to
provide superior returns. In evaluating high yield
debt securities, OpCap Advisors supplements its
traditional credit analysis with an evaluation of an
issuer's asset values.
PRINCIPAL RISKS You could lose money on your investment in the Equity
Portfolio, Mid Cap Portfolio, Small Cap Portfolio,
Global Equity Portfolio, Managed Portfolio or the
Balanced Portfolio or these Portfolios could
underperform other investments if any of the following
happens:
- The stock market goes down.
- Value stocks fall out of favor with the stock
market.
- The market undervalues the stocks held by the
Portfolios for longer than expected.
- The stocks held by the Portfolios turn out not to
be undervalued
- Small cap, mid cap or foreign securities which
generally are more volatile than large cap
securities or than U.S. securities decline in
volume more steeply or become less liquid than
expected.
- Foreign securities lose value because currency
exchange rates fluctuate.
You could lose money on your investment in the U.S.
Government Income Portfolio or the Managed, Balanced or
the Global Equity Portfolios (to the extent that the
Managed, Balanced or the Global Equity Portfolios hold
fixed income securities) or those Portfolios
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could underperform other investments if any of the
following happens:
- Interest rates rise and the bond market goes down.
- Issuers of debt instruments cannot meet their
obligations.
- Bond issuers' call bonds selling at a premium to
their call price before the maturity date.
- Loans securing mortgage-backed obligations prepay
principal more rapidly than expected. The
Portfolios then would have to reinvest these
prepayments at lower rates.
The U.S. Government Income Portfolio principally buys
fixed income securities that are issued or guaranteed
by the U.S. Government or its agencies or
instrumentalities so credit risk should be low.
BAR CHART AND
PERFORMANCE TABLE The bar charts show changes in the performance of each
Portfolio's shares from year to year for the life of
each Portfolio and the highest and lowest quarterly
return during the life of each Portfolio.
The Portfolios' past performance does not necessarily
indicate how each Portfolio will perform in the future.
[GRAPH]
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[TO BE COMPLETED IN POST-EFFECTIVE AMENDMENT #10]
</TABLE>
During the period from the inception of the Equity
Portfolio through December 31, 1998, the highest
quarterly return was ___% (for the quarter ended ___
__, ____) and the lowest quarterly return was ___% (for
the quarter ended _____ __, ____).*
4
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[GRAPH]
MID CAP PORTFOLIO
<TABLE>
<CAPTION>
1998
- ----
<S><C>
[TO BE COMPLETED IN POST-EFFECTIVE AMENDMENT #10]
</TABLE>
During the period from the inception of the Mid Cap
Portfolio through December 31, 1998, the highest
quarterly return was ___% (for the quarter ended _____
__, ____) and the lowest quarterly return was ____%
(for the quarter ended _____ __, ___).
[GRAPH]
GLOBAL EQUITY
<TABLE>
<CAPTION>
1995 1996 1997 1998
- ---- ---- ---- ----
<S> <C> <C> <C>
[TO BE COMPLETED IN POST-EFFECTIVE AMENDMENT #10]
</TABLE>
During the period from the inception of the Global
Equity Portfolio through December 31, 1998, the highest
quarterly return was __% (for the quarter ended ______
__, ____) and the lowest quarterly return was ____%
(for the quarter ended ______ __, ____).
[GRAPH]
SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[TO BE COMPLETED IN POST-EFFECTIVE AMENDMENT #10]
</TABLE>
During the period from the inception of the Small Cap
Portfolio through December 31, 1998, the highest
quarterly return was __% (for the quarter
5
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ended ______ __, ____) and the lowest quarterly return
was ____% (for the quarter ended ______ __, ____).*
[GRAPH]
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[TO BE COMPLETED IN POST-EFFECTIVE AMENDMENT #10]
</TABLE>
During the period from the inception of the Managed
Portfolio through December 31, 1998, the highest
quarterly return was __% (for the quarter ended ______
__, ____) and the lowest quarterly return was ____%
(for the quarter ended ______ __, ____).*
[GRAPH]
U.S. GOVERNMENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
1995 1996 1997 1998
- ---- ---- ---- ----
<S> <C> <C> <C>
[TO BE COMPLETED IN POST-EFFECTIVE AMENDMENT #10]
</TABLE>
During the period from the inception of the U.S.
Government Income Portfolio through December 31, 1998,
the highest quarterly return was __% (for the quarter
ended ______ __, ____) and the lowest quarterly return
was ____% (for the quarter ended ______ __, ____).
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*On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Fund, at which time the Fund commenced operations.
The total net assets for each of the Equity, Small Cap and Managed Portfolios
immediately after the transaction were $86,789,755, $139,812,573 and
$682,601,380, respectively, with respect to the Old Trust and for each of the
Equity, Small Cap and Managed Portfolios, $3,764,598, $8,129,274 and
$51,345,102, respectively, with respect to the Fund. For the period prior to
September 16, 1994, the performance figures above for each of the Equity, Small
Cap and Managed Portfolios reflect the performance of the corresponding
Portfolios of the Old Trust. The Old Trust commenced operations on August 1,
1988.
The tables show how the average annual returns for one, five and for the life of
the Equity and Managed Portfolios compare to those of the Standard & Poor's
composite Index of 500 Stocks, how the average annual returns for the Mid Cap
Portfolio compare to those of the Wilshire 750 Mid Cap Index, how the average
annual returns for the Small Cap Portfolio compare to the Russell 2000, how the
average annual returns for the Global Equity Portfolio compare to the Morgan
Stanley World Index and how the returns for the U.S. Government Income Portfolio
compare to the Lehman Intermediate Government Bond Index. The Balanced
Portfolio is a new portfolio and does not have a track record yet.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1998
PAST YEAR PAST 5 YEARS SINCE INCEPTION
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<S> <C> <C> <C>
Equity Portfolio % % %
Mid Cap Portfolio % N/A %
Small Cap Portfolio % % %
Global Equity Portfolio % N/A %
Managed Portfolio % % %
U.S. Government Income % N/A %
Portfolio
S&P 500 Index % % %
Morgan Stanley World Index % % %
Russell 2000 % % %
Wilshire 750 Mid Cap Index % N/A %
Lehman Intermediate
Government Bond Index % % %
U.S. GOVERNMENT INCOME PORTFOLIO YIELD FOR THE 30-DAY PERIOD ENDED DECEMBER 31, 1998
_____ %
</TABLE>
7
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PRINCIPAL INVESTMENT STRATEGIES
EQUITY PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation through investment in a diversified
portfolio of equity securities selected on the basis of a value approach to
investing.
Q What is the Portfolio's investment program?
A The Equity Portfolio invests primarily in equity securities of companies
that OpCap Advisors believes are undervalued in the marketplace. When we
use the term "equity securities," we mean common and preferred stocks,
convertible debt, warrants and equity options. Under normal conditions,
the Equity Portfolio will invest at least 65% of its total assets in equity
securities listed on the New York Stock Exchange. The Equity Portfolio
also may purchase securities listed on other U.S. or foreign securities
exchanges or traded in the U.S. or foreign over the counter markets.
Q How does OpCap Advisors select securities for the Portfolio?
A OpCap Advisors uses fundamental company analysis to select companies that
it believes are undervalued by the marketplace and have one or more of the
following characteristics:
- substantial and growing discretionary cash flow
- strong shareholder value-oriented management
- valuable consumer or commercial franchises
- high returns on capital
- favorable price to intrinsic value relationship
- undervalued assets
Q What are the potential rewards of investing in the Portfolio?
A Common stocks offer a way to invest for long term growth of capital.
Equity investors should have a long term investment horizon and should be
prepared for the ups and downs of the stock markets.
MID CAP PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation.
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Q What is the Portfolio's investment program?
- A The Portfolio invests primarily in equity securities of
companies with market capitalizations between $500 million and $5
billion at the time of purchase which OpCap Advisors believes are
undervalued. When we use the term "equity securities," we mean
common and preferred stocks, convertible debt, warrants and
equity options. The majority of the stocks purchased by the
Portfolio will be listed on a domestic stock exchange or traded
in the U.S. over the counter market. The Portfolio may purchase
foreign securities that are listed on a U.S. or foreign exchange
or traded in the U.S. or foreign over the counter markets. The
Portfolio also may purchase securities in initial public
offerings or shortly after those offerings have been completed.
Q How does OpCap Advisors select stocks for the Portfolio?
A OpCap Advisors uses fundamental company analysis to find companies that it
believes have one or more of the following:
- substantial and growing discretionary cash flow
- strong shareholder value-oriented management
- valuable consumer or commercial franchises
- favorable price to intrinsic value relationship.
- undervalued assets
Q What are the potential rewards of investing in the Portfolio?
A Common stocks offer a way to invest for long term growth of capital. Mid
cap companies generally are studied by fewer analysts than are large cap
companies. Institutional investors may not want to hold large positions in
mid cap companies. Opportunities for value creation for mid cap companies
could result from regional or product line expansion or sale of the
company.
SMALL CAP PORTFOLIO
Q What is the Portfolio's investment objective?
A Capital appreciation through a diversified portfolio consisting primarily
of securities of companies with market capitalizations of under $1 billion
at time of purchase.
Q What is the Portfolio's investment program?
A The Small Cap Portfolio invests primarily in equity securities of companies
with market capitalizations under $1 billion at the time of purchase that
OpCap Advisors believes are
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undervalued in the marketplace. When we use the term "equity securities,"
we mean common and preferred stocks, convertible debt, warrants and equity
options. The Small Cap Portfolio may purchase securities listed on U.S. or
foreign securities exchanges or traded in the U.S. or foreign over the
counter markets. The Portfolio also may purchase securities in initial
public offerings or shortly after those offerings have been completed.
Q How does OpCap Advisors select securities for the Portfolio?
A OpCap Advisors uses fundamental company analysis to select stocks that it
believes are undervalued by the marketplace and have one or more of the
following characteristics:
- substantial and growing discretionary cash flow
- high returns on capital
- strong shareholder value-oriented management
- valuable consumer or commercial franchises
- undervalued assets
Q What are the potential rewards of investing in the Portfolio?
A Common stocks offer a way to invest for long term growth of capital.
Opportunities for value creation for small cap companies could result from
product expansion or product improvement, industry transition, new
management or sale of the company. Small cap companies are followed by
fewer analysts than are large and mid cap companies. So as additional
analysts follow a small cap stock, the stock can be revalued more
efficiently.
GLOBAL EQUITY PORTFOLIO
Q What is the Portfolio's investment objective?
A Long term capital appreciation through pursuit of a global investment
strategy primarily involving equity securities.
Q What is the Portfolio's investment program?
A The Portfolio invests primarily in equity securities of companies located
anywhere in the world. The Portfolio may invest up to 35% of its total
assets in fixed income securities which may be lower than investment grade.
Q How does OpCap Advisors select stocks for the Portfolio?
A OpCap Advisors uses fundamental company analysis to find companies that it
believes have one or more of the following:
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- undervalued assets
- valuable consumer or commercial franchises
- strong shareholder-oriented management
- substantial and growing discretionary cash flow
- favorable price to intrinsic value relationship.
Q What are the potential rewards of investing in the Portfolio?
A U.S. stocks represent less than half of the world's stock market
capitalization. Foreign securities provide additional opportunities and
diversification.
MANAGED PORTFOLIO
Q What is the Portfolio's investment objective?
A Growth of capital over time through investment in a portfolio consisting of
common stocks, bonds and cash equivalents, the percentages of which will
vary based on OpCap Advisors' assessments of the relative outlook for such
investments.
Q What is the Portfolio's investment program?
A The Managed Portfolio invests in common stocks, bonds and cash equivalents
in varying percentages based on OpCap Advisors view of relative values.
The Managed Portfolio may purchase securities listed on U.S. or foreign
securities exchanges or traded in the U.S. or foreign over the counter
markets. The Portfolio also may purchase investment grade U.S. government
and corporate bonds and high quality money market securities.
Q How does OpCap Advisors select securities for the Portfolio?
A OpCap Advisors uses fundamental company analysis to select stocks that it
believes are undervalued by the marketplace and have one or more of the
following characteristics:
- substantial and growing discretionary cash flow
- strong shareholder value-oriented management
- valuable consumer or commercial franchises
- favorable price to intrinsic value relationship
- undervalued assets
Q What are the potential rewards of investing in the Portfolio?
A The Portfolio normally invests mainly in equity securities. Common stocks
offer a way to
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invest for long term growth of capital. The Portfolio can invest up to
100% of its assets in debt securities but will only do so if equity
securities are not an attractive investment.
BALANCED PORTFOLIO
Q What is the Portfolio's investment objective?
A Growth of capital and investment income.
Q What is the Portfolio's investment program?
A The Balanced Portfolio invests in equity securities (with an emphasis on
dividend-paying stocks) and debt securities that OpCap Advisors believes
are undervalued. Generally, the Portfolio will invest at least 25% of its
total assets in equity securities and at least 25% of its total assets in
debt securities. Convertible debt securities may be classified as equity
securities or as debt securities depending on the value of the conversion
feature as compared to the debt feature. The Balanced Portfolio may
purchase securities listed on U.S. or foreign securities exchanges or
traded in U.S. or foreign over the counter markets. The Portfolio may
invest up to 25% of its total assets in debt securities rated below
investment grade.
Q How does OpCap Advisors select securities for the Portfolio?
A OpCap Advisors seeks to achieve the Portfolio's objective of growth of
capital and investment income by purchasing.
- Equity securities of companies that it believes are undervalued
- Convertible securities that have the potential for investment
income prior to conversion and capital growth
- Quality companies that experience short term problems
- Companies that are out of favor where the stock prices represent
distress valuations
- Debt securities that offer investment income and the potential
for capital appreciation of interest rates decline or the
issuer's credit improves.
Q What are the potential rewards of investing in the Portfolio?
A The Portfolio's mix of equity securities, convertible securities and debt
securities may result in the Portfolio's being less volatile than the
market.
U.S. GOVERNMENT INCOME PORTFOLIO
Q What is the Portfolio's investment objective?
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A High level of current income together with protection of capital by
investing exclusively in debt obligations, including mortgage-backed
securities issued or guaranteed by the United States government, its
agencies or instrumentalities.
Q What is the Portfolio's investment program?
A The U.S. Government Portfolio invests in debt obligations issued or
guaranteed by the United States government, its agencies or
instrumentalities. These securities are referred to as "U.S. Government
Securities." The Portfolio also may purchase mortgage-backed securities.'
Q How does OpCap Advisors select securities for the Portfolio?
A OpCap Advisors observes current and historical yield relationships between
maturities and sectors to seek the best relative values. The Portfolio
maintains an average maturity between five and ten years. The Portfolio
invests principally in U.S. treasury and U.S. Government agency securities.
The Portfolio invests in mortgage backed securities during periods of
stable interest rates. OpCap Advisors does not attempt to forecast
interest rates in managing the Portfolio.
Q What are the potential rewards of investing in the Portfolio?
A The Portfolio consists of the highest quality debt instruments. Since the
average maturity of the Portfolio's investments are between five and ten
years, the Portfolio should be less volatile than a longer term bond fund.
RISKS
Q What are the risks of investing in the Portfolios?
A The Equity, Mid Cap, Small Cap, Global Equity, Managed and Balanced
Portfolios invest principally in equity securities which may be affected by
the following:
STOCK MARKET VOLATILITY - The stock market in general may fluctuate in
response to political, market and economic developments.
ISSUER CHANGES - Changes in the financial condition of an issuer or changes
in economic conditions that affect a particular type of issuer can affect
the value or credit quality of an issuer's securities.
SMALL CAP AND MID CAP VOLATILITY - Mid cap stocks are more volatile and
have less trading volume than large cap stocks. Small cap stocks are more
volatile and have less trading volume than both large cap and mid cap
stocks.
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FOREIGN EXPOSURE - When selecting foreign securities for the Portfolios,
OpCap Advisors uses approximately the same standards that it sets for U.S.
issuers. Foreign securities, foreign currencies and securities issued by
U.S. entities with substantial foreign operations may have additional risks
than U.S. securities.
- Political risk - Foreign governments can take over the assets or
operations of a company or may impose taxes or limits on the
removal of the Portfolio's assets from that country.
- Currency risk - The value of securities held in foreign
currencies will be affected by changes in the value of that
currency.
- Liquidity - Some foreign markets are less liquid and more
volatile than the U.S. stock market.
- Limited information - There may be less public information about
foreign issuers than there is about U.S. issuers.
- Settlement and Clearance - Some foreign markets experience delays
in settlement. These delays could cause the Portfolio to miss
investment opportunities or to be unable to sell a security.
- Euro - The effect of the Euro on international markets has not
yet been determined.
- Emerging Markets - There are greater risks of unstable
governments and economics and restriction on foreign ownership in
these countries. The Portfolios presently intend to limit
investment in emerging markets to no more than 5% of their total
assets.
To the extent that the Managed, Global Equity, Balanced and U.S. Government
Income Portfolio invest in debt securities, the Portfolios are exposed to
these risks:
- Interest rate risk - The risk that changes in interest rates will
affect the value of fixed income securities in the Portfolio.
- Prepayment risk - The risk that the holder of a mortgage
underlying a mortgage backed security will prepay principal.
- Credit risk - The risk that an issuer of a fixed income security
will be unable to pay principal and interest payments when they
are due.
To the extent that the Global Equity Portfolio or the Balanced Portfolio
invests in lower grade debt securities, you should know that lower grade
debt may have the following additional risks:
- more volatility
- less liquidity
- greater risk of issuer default or insolvency.
INVESTMENT POLICIES
Q Can a Portfolio change its investment objective and investment policies?
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A Fundamental policies of a Portfolio cannot be changed without the approval
of a majority of the outstanding voting shares of the Portfolio. A
Portfolio's investment objective is a fundamental policy. Investment
restrictions that are fundamental policies are listed in the Statement of
Additional Information. Investment policies are not fundamental and can be
changed by the Fund's Board of Trustees.
Q Can the Portfolios use derivative instruments?
A The Equity, Mid Cap, Small Cap, Global Equity, Managed and Balanced
Portfolios have the authority to use the following derivative instruments:
- futures contracts
- options on futures contracts
- forward foreign currency contracts
- covered calls written on individual securities
- uncovered calls and puts
- options on stock indices
The Portfolios do not use derivative instruments significantly and do not
need to use derivative instruments to seek their investment goals.
Derivative instruments may be used for the following purposes:
- Manage exposure to declines in prices of securities
- Establish a position in the securities market as a temporary
substitute for purchasing individual securities
- Manage exposure to changing interest rates
- Manage foreign currency risks
- Provide cash for liquidity purposes
Q What are the risks of derivative instruments?
A Derivative instruments can reduce the return of a Portfolio if
- OpCap Advisors uses a derivative instrument at the wrong time
- The prices of a Portfolio's futures or options positions are not
correlated with its other investments.
- A Portfolio cannot close out a position because of an illiquid market.
Q Do the Portfolios expect to engage in short-term trading?
A The Portfolios do not expect to engage in frequent short term trading. The
Financial Highlights table in this prospectus shows the Portfolios'
portfolio turnover rates during prior fiscal years.
Q Can the Portfolios vary from their investment goals?
15
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A When OpCap Advisors thinks market or economic conditions are adverse, the
Portfolios may invest up to 100% of their assets in defensive investments
such as U.S. Government securities and money market instruments. To the
extent that a Portfolio takes a defensive position, it will not be pursuing
its investment objective.
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FUND MANAGEMENT
The Board of Trustees of the Fund has hired OpCap Advisors to serve as
manager of the Fund.
OpCap Advisors is a subsidiary of Oppenheimer Capital, an investment
advisory firm with approximately $63 billion of assets under management as of
December 31, 1998. The mailing address is One World Financial Center, New York,
New York 10281.
OpCap Advisors has been in business as an investment adviser since 1987 and
Oppenheimer Capital has been in business as an investment adviser since 1969.
OpCap Advisors manages the investments of the Portfolio (and places
brokerage orders) and its business affairs. Employees of Oppenheimer Capital as
well as employees of OpCap Advisors perform these services.
The Portfolios of the Fund paid OpCap Advisors the following fees as a
percentage of average daily net assets during the fiscal year ended December 31,
1998:
<TABLE>
<S> <C>
Equity Portfolio. . . . . . . . . .%
Mid Cap Portfolio . . . . . . . . .%
Small Cap Portfolio . . . . . . . .%
Global Equity Portfolio . . . . . .%
Managed Portfolio . . . . . . . . .%
U.S. Government Income Portfolio. .%
</TABLE>
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PORTFOLIO MANAGERS
[PHOTO] Eileen Rominger, Managing Director of Oppenheimer Capital,
has managed the Equity Portfolio from its inception. she
has worked with us as an analyst and portfolio manager since
1981. She holds a BA Cum Laude from Fairfield University
and a MBA in Finance from the Wharton Graduate School of
Business.
[PHOTOS] Eileen Rominger, Alan Gutmann and Louis Goldstein have been
the portfolio managers of the Mid Cap Portfolio since its
inception. Alan Gutmann and Louis Goldstein are both Senior
Vice Presidents of Oppenheimer Capital. Mr. Gutmann has
been with us since 1991. He was graduated from the Wharton
School, Magna Cum Laude and carried an MA with honors from
the Heiden Institute in Jerusalem. Mr. Goldstein joined us
in 1991. He earned a BS Summa Cum Laude and a MBA in
Finance with honors from the Wharton School of Business.
[PHOTOS] Timothy McCormack has been a portfolio manager of the Small
Cap Portfolio since May 1996 and Gavin Albert has been a
portfolio manager of the Small Cap Portfolio since January
1997. Mr., McCormack, Senior Vice President of Oppenheimer
Capital, joined us in 1994. Before that, he worked as a
security analyst with U.S. Trust Company from March 1993 to
July 1994 and as a security analyst with Gabelli and
Company. He has an MBA from the Wharton School. Gavin
Albert, Vice President of Oppenheimer Capital, has worked
for us since September 1994. Before joining us, he was a
management consultant for EDS Energy Management and a
financial analyst in the Corporate Finance Department of
Texaco, Inc. He has a MBA in finance and management from
Vanderbilt University Business School.
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[PHOTO] James Sheldon became portfolio manager of the foreign
portion of the Global Equity Portfolio on September 9, 1998.
Richard Glasebrook, Managing Director of Oppenheimer
Capital, has managed the domestic portion of the Global
Equity Portfolio since its inception. Mr. Sheldon joined us
in February 1998 as a Senior Vice President. Before joining
us, he was General Partner at Omega Advisors, a hedge fund,
from September 1996 to February 1998 and Senior Vice
President and International portfolio manager of Lazard
Freres Asset Management from December 1992 to August 1996.
Mr. Glasebrook joined us in 1991. He has a BA from Kenyan
College and a MBA from the Harvard School of Business
Administration.
[PHOTO] Richard Glasebrook has been the portfolio manager of the
Managed Portfolio since its inception.
[PHOTO] Colin Glinsman, Managing Director of Oppenheimer Capital, is
the portfolio manager of the Balanced Portfolio. He joined
Oppenheimer Capital in 1989 as a securities analyst. He has
a BA from Yale University and a MS from New York University.
[PHOTO] Vikki Hanges, Senior Vice President of Oppenheimer Capital,
has been the portfolio manager of the U.S. Government Income
Portfolio since its inception. She joined us in 1982. Ms.
Hanges has a BS from Cornell University.
19
<PAGE>
SHARE PRICE
We calculate each Portfolio's share price, called its net asset value, on
each business day that the New York Stock Exchange is open after the close of
regular trading (generally 4:00 p.m. Eastern Standard Time). Net asset value
per share is computed by adding up the total value of a Portfolio's investments
and other assets, subtracting its liabilities and then dividing by the number of
shares outstanding.
TOTAL PORTFOLIO ASSETS - LIABILITIES
NET ASSET VALUE = -----------------------------------------
NUMBER OF PORTFOLIO SHARES OUTSTANDING
We use the market prices of securities to value a Portfolio's investments
unless securities do not have market quotations or are short-term debt
securities. When we use fair value to price a security, we review the pricing
method with the Fund's Board. We price short-term investments that mature in
less than 60 days using amortized cost or amortized value. Foreign securities
trade on days when the Portfolios do not price their shares so the net asset
value of a Portfolio's shares may change on days when shareholders will not be
able to buy or sell shares of the Portfolio. If an event occurs after the close
of the New York Stock Exchange that we believe changes the value of a security,
then we will value the security at fair value.
DISTRIBUTIONS AND TAXES
This discussion is about distributions to the Portfolio's shareholders,
which are variable accounts of insurance companies and qualified pension and
retirement plans. You should read the prospectus for the variable account for
information about distributions and federal tax treatment for contractowners of
variable products.
Each Portfolio pays dividends from its net investment income and
distributes any net capital gains that it has realized at least once a year.
The U.S. Government Income Portfolio pays dividends from its net investment
income once a month.
YEAR 2000 ISSUES
Many computer systems use only two digits to describe years, such as 98 for
1998. A program written this way will not recognize the year 2000. The Advisor
and the Fund's Transfer Agent have been actively working on changes to their own
computer systems to deal with the Year 2000 and expect that their systems will
be ready for the Year 2000. The Advisor cannot be sure that it will be
successful or that other computer systems that interact with the Fund will be in
compliance.
20
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Portfolios' financial performance. Certain information reflects financial
results for a single Portfolio share. The total returns in the table represent
the rate that an investor would have earned (or lost) on an investment in a
Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Portfolios' financial statements, are
included in the Fund's SAI, which is available upon request.
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<PAGE>
For investors who want more information about the Portfolios, the following
documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Portfolios'
investments is available in the Portfolios' annual and semi-annual reports to
shareholders. In each Portfolio's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Portfolios and in incorporated into this prospectus by
reference.
The SAI and the Portfolios' annual and semi-annual reports are available without
charge upon request to your broker or by calling the Portfolios at 1-800-700-
8258.
You can review the Portfolios' reports and SAIs at the Public Reference Room of
the Securities and Exchange Commission. You can get text-only copies:
For a fee, by writing to or calling the Public Reference Room of the Commission,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
Free from the Commission's Internet website at http://www.sec.gov.
OCC ACCUMULATION TRUST
Equity Portfolio
Mid Cap Portfolio
Small Cap Portfolio
Global Equity Portfolio
Managed Portfolio
Balanced Portfolio
U.S. Government Income Portfolio
(Investment Company Act file no. 811-8512)
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Statement of Additional Information
OCC ACCUMULATION TRUST
One World Financial Center
New York, NY 10281
This Statement of Additional Information (the "Additional Statement") is
not a Prospectus. Investors should understand that this Additional Statement
should be read in conjunction with the Prospectus dated May 1, 1999, (the
"Prospectus") of OCC Accumulation Trust (the "Fund"). Contractowners can obtain
copies of the Fund Prospectus by written request to the life insurance company
who issued the Contract at the address delineated in the Variable Account
Prospectus or by calling the life insurance company who issued the Contract at
the telephone number listed in the Variable Account Prospectus.
THE DATE OF THIS ADDITIONAL STATEMENT IS MAY 1, 1999.
<PAGE>
TABLE OF CONTENTS
Page
----
Investment of Assets.............................................3
Investment Restrictions.........................................15
Trustees and Officers...........................................17
Control Persons.................................................21
Investment Management and Other Services........................23
Determination of Net Asset Value................................27
Dividends, Distribution and Taxes...............................29
Portfolio Yield and Total Return Information....................30
Additional Information..........................................33
Financial Statements...........................................A-1
2
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INVESTMENT OF ASSETS
The investment objective and policies of each Portfolio of the Fund are
described in the Prospectus. A further description of the investments and
investment methods applicable to certain Portfolios appears below.
OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES OR
INSTRUMENTALITIES. Some obligations issued or guaranteed by U.S. government
agencies or instrumentalities, such as securities issued by the Federal Home
Loan Bank, are backed by the right of the agency or instrumentality to borrow
from the Treasury. Others, such as securities issued by the Federal National
Mortgage Association ("Fannie Mae"), are supported only by the credit of the
instrumentality and not by the Treasury. If the securities are not backed by
the full faith and credit of the United States, the owner of the securities must
look principally to the agency issuing the obligation for repayment and may not
be able to assert a claim against the United States in the event that the agency
or instrumentality does not meet its commitment.
COLLATERALIZED MORTGAGE OBLIGATIONS. In addition to securities issued by
the Government National Mortgage Association ("Ginnie Mae"), Fannie Mae and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), another type of
mortgage-backed security is the "collateralized mortgage obligation", which is
secured by groups of individual mortgages but is similar to a conventional bond
where the investor looks only to the issuer for payment of principal and
interest. Although the obligations are recourse obligations to the issuer, the
issuer typically has no significant assets, other than assets pledged as
collateral for the obligations, and the market value of the collateral, which is
sensitive to interest rate movements, may affect the market value of the
obligations. A public market for a particular collateralized mortgage
obligation may or may not develop and thus, there can be no guarantee of
liquidity of an investment in such obligations. Investments will only be made
in collateralized mortgage obligations which are of high quality, as determined
by the Board of Trustees.
INFORMATION ON TIME DEPOSITS AND VARIABLE RATE NOTES. The Portfolios may
invest in fixed time deposits, whether or not subject to withdrawal penalties;
however, investment in such deposits which are subject to withdrawal penalties,
other than overnight deposits, are subject to the 15% limit on illiquid
investments set forth in the Prospectus.
The commercial paper obligations which the Portfolios may buy are unsecured
and may include variable rate notes. The nature and terms of a variable rate
note (i.e., a "Master Note") permit a Portfolio to invest fluctuating amounts at
varying rates of interest pursuant to a direct arrangement between the Portfolio
as lender, and the issuer, as borrower. It permits daily changes in the amounts
borrowed. The Portfolio has the right at any time to increase, up to the full
amount stated in the note agreement, or to decrease the amount outstanding under
the note. The issuer may prepay at any time and without penalty any part of or
the full amount of the note. The note may or may not be backed by one or more
bank letters of credit. Because these notes are direct lending arrangements
between the Portfolio and the issuer, it is not generally contemplated that they
will be traded; moreover, there is currently no secondary market for them. The
Portfolios have no limitations on the type of issuer from whom these notes will
be purchased; however, in connection with such purchase and on an ongoing basis,
OpCap Advisors (the "Manager") will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
made demand simultaneously. The Portfolios will not invest more than 5% of
their total assets in variable rate notes. Variable rate notes are subject to
the Portfolios' investment restrictions on illiquid securities unless such notes
can be put back to the issuer on demand within seven days.
INSURED BANK OBLIGATIONS. The Federal Deposit Insurance Corporation
("FDIC") insures the deposits of federally insured banks and savings and loan
associations (collectively referred to as "banks") up to $100,000.
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<PAGE>
The Portfolio may, within the limits set forth in the Prospectus, purchase bank
obligations which are fully insured as to principal by the FDIC. Currently, to
remain fully insured as to principal, these investments must be limited to
$100,000 per bank; if the principal amount and accrued interest together exceed
$100,000, the excess principal amount and accrued interest will not be insured.
Insured bank obligations may have limited marketability. Unless the Board of
Trustees determines that a readily available market exists for such obligations,
a Portfolio will treat such obligations as subject to the 15% limit for illiquid
investments set forth in the Prospectus for each Portfolio unless such
obligations are payable at principal amount plus accrued interest on demand or
within seven days after demand.
LOWER RATED BONDS. Each Portfolio may invest up to 5% of its assets in
bonds rated below Baa3 by Moody's Investors Service, Inc. ("Moody's") or BBB- by
Standard & Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch")
or Duff & Phelps, Inc. ("Duff"). These securities are commonly known as "junk
bonds." The Balanced Portfolio may invest up to 25% of its assets in junk
bonds. Securities rated less than Baa by Moody's or BBB- by S&P are classified
as non-investment grade securities and are considered speculative by those
rating agencies. It is the Fund's policy not to rely exclusively on ratings
issued by credit rating agencies but to supplement such ratings with the
Manager's own independent and ongoing review of credit quality. Junk bonds may
be issued as a consequence of corporate restructurings, such as leveraged
buyouts, mergers, acquisitions, debt recapitalizations, or similar events or by
smaller or highly leveraged companies. Although the growth of the high yield
securities market in the 1980s had paralleled a long economic expansion,
recently many issuers have been affected by adverse economic and market
conditions. It should be recognized that an economic downturn or increase in
interest rates is likely to have a negative effect on (i) the high yield bond
market, (ii) the value of high yield securities and (iii) the ability of the
securities' issuers to service their principal and interest payment obligations,
to meet their projected business goals or to obtain additional financing. The
market for junk bonds may be less liquid than the market for investment grade
bonds. In periods of reduced market liquidity, junk bond prices may become more
volatile and may experience sudden and substantial price declines. Also, there
may be significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, a Portfolio may find it difficult to value its
junk bonds accurately. Under such conditions, a Portfolio may have to use
subjective rather than objective criteria to value its junk bond investments
accurately and rely more heavily on the judgment of the Fund's Board of
Trustees. Prices for junk bonds also may be affected by legislative and
regulatory developments. For example, new federal rules require that savings
and loans gradually reduce their holdings of high-yield securities. Also, from
time to time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers, mergers or leveraged buyouts. Such
legislation, if enacted, may depress the prices of outstanding junk bonds.
DOLLAR ROLLS. The U.S. Government Income Portfolio may enter into dollar
rolls in which the Portfolio sells securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type and
coupon) securities on a specified future date. During the roll period, the
Portfolio forgoes principal and interest paid on the securities. The Portfolio
is compensated by the difference between the current sale price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as interest earned on the cash proceeds of the initial sale.
The Portfolio will establish a segregated account with the Fund's custodian
bank in which the Portfolio will maintain cash, U.S. Government securities or
other liquid high grade debt obligations equal in value to its obligations in
respect of dollar rolls. Dollar rolls involve the risk that the market value of
the securities the Portfolio is obligated to repurchase may decline below the
repurchase price. In the event the buyer of securities under a dollar roll
files for bankruptcy or becomes insolvent, the Portfolio's use of the proceeds
of the transaction may be restricted pending a determination by the other party,
or its trustee or receiver, whether to enforce the
4
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Portfolio's obligation to repurchase the securities.
Dollar rolls are considered borrowings by the Portfolio. Under the
requirements of the Investment Company Act of 1940, as amended (the "1940 Act"),
the Portfolio is required to maintain an asset coverage (including the proceeds
of borrowings) of at least 300% of all borrowings.
HEDGING. As stated in the Prospectus, the Global Equity, Managed,
Balanced, Mid Cap, Small Cap and Equity Portfolios may engage in options and
futures. Information about the options and futures transactions these
Portfolios may enter into is set forth below.
FINANCIAL FUTURES. No price is paid or received upon the purchase of a
financial future. Upon entering into a futures transaction, a portfolio will be
required to deposit an initial margin payment equal to a specified percentage of
the contract value. Initial margin payments will be deposited with the Fund's
custodian bank in an account registered in the futures commission merchant's
name; however the futures commission merchant can gain access to that account
only under specified conditions. As the future is marked to market to reflect
changes in its market value, subsequent payments, called variation margin, will
be made to or from the futures commission merchant on a daily basis. Prior to
expiration of the future, if a portfolio elects to close out its position by
taking an opposite position, a final determination of variation margin is made,
additional cash is required to be paid by or released to the portfolio, and any
loss or gain is realized for tax purposes. Although financial futures by their
terms call for the actual delivery or acquisition of the specified security, in
most cases the obligation is fulfilled by closing out the position. All futures
transactions are effected through a clearing house associated with the exchange
on which the contracts are traded. The Global Equity Portfolio may purchase and
sell futures contracts that are currently traded, or may in the future be
traded, on U.S. and foreign commodity exchanges on common stocks, such
underlying fixed-income securities as U.S. Treasury bonds, notes, and bills
and/or any foreign government fixed-income security ("interest rate" futures),
on various currencies ("currency" futures) and on such indices of U.S. or
foreign equity and fixed-income securities as may exist or come into being, such
as the Standard & Poor's ("S&P") 500 Index or the Financial Times Equity Index
("index" futures). At present, no Portfolio intends to enter into financial
futures and options on such futures if after any such purchase, the sum of
initial margin deposits on futures and premiums paid on futures options would
exceed 5% of the Portfolio's total assets. This limitation is not a fundamental
policy.
INFORMATION ON PUTS AND CALLS. The Mid Cap, Balanced, Managed, Small Cap
and Equity Portfolios may write calls on individual securities. The Mid Cap,
Managed, Balanced and Global Equity Portfolios are authorized to write covered
put and call options and purchase put and call options on the securities in
which they may invest. When a portfolio writes a call, it receives a premium
and agrees to sell the callable securities to a purchaser of a corresponding
call during the call period (usually not more than 9 months) at a fixed exercise
price (which may differ from the market price of the underlying securities)
regardless of market price changes during the call period. If the call is
exercised, the portfolio forgoes any possible profit from an increase in market
price over the exercise price. A portfolio may, in the case of listed options,
purchase calls in "closing purchase transactions" to terminate a call
obligation. A profit or loss will be realized, depending upon whether the net of
the amount of option transaction costs and the premium received on the call
written is more or less than the price of the call subsequently purchased. A
profit may be realized if the call lapses unexercised, because the portfolio
retains the underlying security and the premium received. If, due to a lack of a
market, a portfolio could not effect a closing purchase transaction, it would
have to hold the callable securities until the call lapsed or was exercised. The
Fund's Custodian, or a securities depository acting for the Custodian, will act
as the portfolio's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC") in connection with listed calls, as to the securities on
which the portfolio has written calls, or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC will
release the securities on the expiration of the calls or
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<PAGE>
upon the portfolio's entering into a closing purchase transaction.
When a portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period (or on a certain date for OTC options) at a fixed exercise
price. A portfolio benefits only if the call is sold at a profit or if, during
the call period, the market price of the underlying investment is above the call
price plus the transaction costs and the premium paid for the call and the call
is exercised. If a call is not exercised or sold (whether or not at a profit),
it will become worthless at its expiration date and the portfolio will lose its
premium payment and the right to purchase the underlying investment.
With OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between the portfolio and the transacting dealer,
without the intermediation of a third party such as the OCC. If a transacting
dealer fails to make delivery on the securities underlying an option it has
written, in accordance with the terms of that option as written, a portfolio
could lose the premium paid for the option as well as any anticipated benefit of
the transaction. The Portfolios will engage in OTC option transactions only
with primary U.S. Government securities dealers recognized by the Federal
Reserve Bank of New York. In the event that any OTC option transaction is not
subject to a forward price at which the portfolio has the absolute right to
repurchase the OTC option which it has sold, the value of the OTC option
purchased and of the portfolio assets used to "cover" the OTC option will be
considered "illiquid securities" and will be subject to the 15% limit on
illiquid securities. The "formula" on which the forward price will be based may
vary among contracts with different primary dealers, but it will be based on a
multiple of the premium received by the portfolio for writing the option plus
the amount, if any, of the option's intrinsic value, i.e., current market value
of the underlying securities minus the option's strike price.
A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period (or on a certain date for OTC options). The investment
characteristics of writing a put covered by segregated liquid assets equal to
the exercise price of the put are similar to those of writing a covered call.
The premium received on a put written by a portfolio represents a profit, as
long as the price of the underlying investment remains above the exercise price.
However, a portfolio has also assumed the obligation during the option period to
buy the underlying investment from the buyer of the put at the exercise price,
even though the value of the investment may fall below the exercise price. If
the put expires unexercised, the portfolio (as writer) realizes a gain in the
amount of the premium. If the put is exercised, the portfolio must fulfill its
obligation to purchase the underlying investment at the exercise price, which
will usually exceed the market value of the investment at that time. In that
case, the portfolio may incur a loss upon disposition, equal to the sum of the
sale price of the underlying investment and the premium received minus the sum
of the exercise price and any transaction costs incurred.
When writing put options, to secure its obligation to pay for the
underlying security, the Fund, on behalf of a portfolio, will maintain in a
segregated account at its Custodian liquid assets with a value equal to at least
the exercise price of the option. As a result, the portfolio forgoes the
opportunity of trading the segregated assets or writing calls against those
assets. As long as the portfolio's obligation as a put writer continues, the
portfolio may be assigned an exercise notice by the broker-dealer through whom
such option was sold, requiring the portfolio to purchase the underlying
security at the exercise price. A portfolio has no control over when it may be
required to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its obligation as the
writer of the put. This obligation terminates upon the earlier of the
expiration of the put, or the consummation by the portfolio of a closing
purchase transaction by purchasing a put of the same series as that previously
sold. Once a portfolio has been assigned an exercise notice, it is thereafter
not allowed to effect a closing purchase transaction.
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A portfolio may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying security
from being put to it. Furthermore, effecting such a closing purchase
transaction will permit the portfolio to write another put option to the extent
that the exercise price thereof is secured by the deposited assets, or to
utilize the proceeds from the sale of such assets for other investments by the
portfolio. The portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the option.
When a portfolio purchases a put, it pays a premium and has the right to
sell the underlying investment at a fixed exercise price to a seller of a
corresponding put on the same investment during the put period if it is a listed
option (or on a certain date if it is an OTC option). Buying a put on
securities or futures held by it permits a portfolio to attempt to protect
itself during the put period against a decline in the value of the underlying
investment below the exercise price. In the event of a decline in the market,
the portfolio could exercise, or sell the put option at a profit that would
offset some or all of its loss on the portfolio securities. If the market price
of the underlying investment is above the exercise price and as a result, the
put is not exercised, the put will become worthless at its expiration date and
the purchasing portfolio will lose the premium paid and the right to sell the
underlying securities; the put may, however, be sold prior to expiration
(whether or not at a profit). Purchasing a put on futures or securities not
held by it permits a portfolio to protect its securities holdings against a
decline in the market to the extent that the prices of the future or securities
underlying the put move in a similar pattern to the prices of a portfolio's
securities.
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. A portfolio's
option activities may affect its turnover rate and brokerage commissions. The
exercise of calls written by a portfolio may cause the portfolio to sell its
securities to cover the call, thus increasing its turnover rate in a manner
beyond the portfolio's control. The exercise of puts on securities or futures
will increase portfolio turnover. Although such exercise is within the
portfolio's control, holding a put might cause a portfolio to sell the
underlying investment for reasons which would not exist in the absence of the
put. A portfolio will pay a brokerage commission every time it purchases or
sells a put or a call or purchases or sells a related investment in connection
with the exercise of a put or a call.
OPTIONS ON FUTURES. The Global Equity, Balanced, Managed, Mid Cap, Small
Cap and Equity Portfolios may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position. An option on a
futures contract gives the purchaser the right (in return for the premium paid)
to assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put) at a specified exercise price
at any time during the term of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to the holder of
the option is accompanied by delivery of the accumulated balance in the writer's
futures margin account, which represents the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
The Portfolios may purchase and write options on futures contracts for
hedging purposes. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price
of the futures contract upon which it is based or the price of the underlying
securities, it may or may not be less risky than ownership of the futures
contract or underlying securities. As with the purchase of futures contracts,
when a Portfolio is not fully invested it may purchase a call option on a
futures contract to hedge against an anticipated increase in securities
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prices.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the exercise price, the Portfolio will retain the full amount of
the option premium which provides a partial hedge against any decline that may
have occurred in the Portfolio's securities holdings. The writing of a put
option on a futures contract constitutes a partial hedge against increasing
prices of the security which is deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is higher than the
exercise price, the Portfolio will retain the full amount of the option premium
which provides a partial hedge against any increase in the price of securities
which the Portfolio intends to purchase. If a put or call option the Portfolio
has written is exercised, the Portfolio will incur a loss which will be reduced
by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and changes
in the value of its futures positions, the Portfolio's losses from existing
options may to some extent be reduced or increased by changes in the value of
its securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on securities. For example,
a Portfolio may purchase a put option on a futures contract to hedge the
Portfolio's holdings against the risk of a decline in securities prices.
The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
STOCK INDEX FUTURES AND RELATED OPTIONS. Unlike when the Portfolio
purchases or sells a security, no price is paid or received by the Portfolio
upon the purchase or sale of a futures contract. Instead, the Portfolio will be
required to deposit with its broker an amount of cash or U.S. Treasury bills
equal to approximately 5% of the contract amount. This is known as initial
margin. Such initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Portfolio upon
termination of the futures contract assuming all contractual obligations have
been satisfied. In addition, because under current futures industry practice
daily variations in gains and losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Portfolio may be
required to make additional payments during the term of the contract to its
broker. Such payments would be required where during the term of a stock index
futures contract purchased by the Portfolio, the price of the underlying stock
index declined, thereby making the Portfolio's position less valuable. In all
instances involving the purchase of stock index futures contracts by the
Portfolio resulting in a net long position, an amount of cash and cash
equivalents equal to the market value of the futures contracts will be deposited
in a segregated account with the Fund's custodian, for the benefit of the
Portfolio, to collateralize the position and thereby insure that the use of such
futures is unleveraged. At any time prior to the expiration of the futures
contract, the Portfolio may elect to close the position by taking an opposite
position which will operate to terminate the Portfolio's position in the futures
contract.
There are several risks in connection with the use of stock index futures
in the Portfolio as a hedging device. One risk arises because of the imperfect
correlation between the price of the stock index future and the price of the
securities which are the subject of the hedge. This risk of imperfect
correlation increases as the composition of the Portfolio's holdings diverges
from the securities included in the applicable stock index. The price of the
stock index future may move more than or less than the price of the securities
being hedged. If the price of the stock index future moves less than the price
of the securities which are the subject of the hedge, the hedge will not be
fully effective, but, if the price of the securities being hedged has moved in
an unfavorable
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direction, the Portfolio would be in a better position than if it had not hedged
at all. If the price of the securities being hedged has moved in a favorable
direction this advantage will be partially offset by the future. If the price
of the futures moves more than the price of the stock the Portfolio will
experience a loss or a gain on the future which will not be completely offset by
movement in the price of the securities which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index futures, the
Portfolio may buy or sell stock index futures in a greater dollar amount than
the dollar amount of the securities being hedged if the historical volatility of
the prices of such securities has been greater than the historical volatility of
the index. Conversely, the Portfolio may buy or sell fewer stock index futures
contracts if the historical volatility of the price of the securities being
hedged is less than the historical volatility of the stock index. It is
possible that where the Portfolio has sold futures to hedge its portfolio
against a decline in the market, the market may advance and the Portfolio's
securities may deline. If this occurred, the Portfolio would lose money on the
futures and also experience a decline in the value of its securities. While
this should occur, if at all, for a very brief period or to a very small degree,
the Manager believes that over time the value of a diversified portfolio will
tend to move in the same direction as the market indices upon which the futures
are based. It is also possible that if the Portfolio hedges against the
possibility of a decline in the market adversely affecting stocks it holds and
stock prices increase instead, the Portfolio will lose part or all of the
benefit of the increased value of its stock which it had hedged because it will
have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. The Portfolio may also have to sell securities at a
time when it may be disadvantageous to do so.
Where futures are purchased to hedge against a possible increase in the
price of stocks before the Portfolio is able to invest its cash (or cash
equivalents) in stock (or options) in an orderly fashion, it is possible the
market may decline instead. If the Portfolio then concluded to not invest in
stock or options at the time because of concern as to possible further market
decline or for other reasons, the Portfolio will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the stock index future and the
portion of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movements in the stock index due to certain market
distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the index and
futures markets. Moreover, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market and may therefore
cause increased participation by speculators in the market. Such increased
participation may also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the stock index and movements in the
price of stock index futures, the value of stock index futures contracts as a
hedging device may be reduced.
Currently, stock index futures contracts can be purchased or sold with
respect to several different stock indices, each based on a different measure of
market performance. Positions in stock index futures may be closed out only on
an exchange or board of trade which provides a secondary market for such
futures. Although the Portfolios intend to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active secondary
market, as with stock options, there is no assurance that a liquid secondary
market or an exchange or board of trade will exist for any particular contract
or at any particular time. In such event it may not be possible to close a
futures position and in the event of adverse price movements, the Portfolios
would continue to be required to make daily cash payments of variation margin.
However, in the event futures
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contracts have been used to hedge a portfolio's securities, such securities will
not be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if any, may partially
or completely offset losses on the futures contract. However, as described
above, there is no guarantee that the price of securities will, in fact,
correlate with the price movements in the futures contract and thus provide an
offset to losses on a futures contract.
In addition, if the Portfolios have insufficient cash they may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it is disadvantageous to do so.
REGULATORY ASPECTS OF HEDGING INSTRUMENTS. Transactions in options by a
portfolio are subject to limitations established (and changed from time to time)
by each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
different exchanges or through one or more brokers. Thus, the number of options
which a portfolio may write or hold may be affected by options written or held
by other investment companies and discretionary accounts of the Manager,
including other investment companies having the same or an affiliated investment
adviser. An exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions.
Due to requirements under the 1940 Act, when a portfolio sells a future,
the Fund, on behalf of the portfolio, will maintain in a segregated account or
accounts with its custodian bank, cash or readily marketable short-term
(maturing in one year or less) debt instruments in an amount equal to the market
value of such future, less the margin deposit applicable to it.
The Fund and each Portfolio must operate within certain restrictions as to
its positions in futures and options thereon under a rule ("CFTC Rule") adopted
by the Commodity Futures Trading Commission ("CFTC") under the Commodity
Exchange Act (the "CEA"), which excludes the Fund and each Portfolio from
registration with the CFTC as a "commodity pool operator" (as defined under the
CEA). Under those restrictions, a portfolio may not enter into any financial
futures or options contract unless such transactions are for bona fide hedging
purposes, or for other purposes only if the aggregate initial margins and
premiums required to establish such non-hedging positions would not exceed 5% of
the liquidation value of its assets. Each Portfolio may use futures and options
thereon for bona fide hedging or for other purposes within the meaning and
intent of the applicable provisions of the CEA.
TAX ASPECTS OF HEDGING INSTRUMENTS. Each Portfolio in the Fund intends to
qualify as a "regulated investment company" under the Internal Revenue Code.
One of the tests for such qualification is that at least 90% of its gross income
must be derived from dividends, interest and gains from the sale or other
disposition of securities. In connection with the 90% test, amendments to the
Internal Revenue Code specify that income from options, futures and other gains
derived from investments in securities is qualifying income under the 90% test.
Regulated futures contracts, options on broad-based stock indices, options
on stock index futures, certain other futures contracts and options thereon
(collectively, "Section 1256 contracts") held by a portfolio at the end of each
taxable year may be required to be "marked to market" for federal income tax
purposes (that is, treated as having been sold at that time at market value).
Any unrealized gain or loss taxed pursuant to this rule will be added to
realized gains or losses recognized on Section 1256 contracts sold by a
portfolio during the year, and the resulting gain or loss will be deemed to
consist of 60% long-term capital gain or loss and 40% short-term capital gain or
loss. A portfolio may elect to exclude certain transactions from the
mark-to-market rule although doing so may have the effect of increasing the
relative proportion of short-term capital gain
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(taxable as ordinary income) and/or increasing the amount of dividends that must
be distributed annually to meet income distribution requirements, currently at
98%, to avoid payment of federal excise tax.
It should also be noted that under certain circumstances, the acquisition
of positions in hedging instruments may result in the elimination or suspension
of the holding period for tax purposes of other assets held by a portfolio with
the result that the relative proportion of short-term capital gains (taxable as
ordinary income) could increase.
POSSIBLE RISK FACTORS IN HEDGING. In addition to the risks with respect to
futures and options discussed in the Prospectus and above, there is a risk in
selling futures that the prices of futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of a portfolio's securities.
The ordinary spreads between prices in the cash and futures markets are subject
to distortions due to differences in the natures of those markets. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close out futures contracts through offsetting transactions which
could distort the normal relationship between the cash and futures markets.
Second, the liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced, thus producing distortion. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary price
distortions. Moreover, if the Manager's investment judgment about the general
direction of securities prices is incorrect, a Portfolio's overall performance
would be poorer than if it had not entered into a Hedging Transaction.
Also, when a portfolio uses appropriate Hedging Instruments to establish a
position in the market as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures or on a
particular security, it is possible that the market may decline. If the
portfolio then concludes not to invest in such securities at that time because
of concerns as to possible further market decline or for other reasons, it will
realize a loss on the Hedging Instruments that is not offset by a reduction in
the price of the securities purchased.
INVESTMENT IN FOREIGN SECURITIES. As described in the Prospectus, the
Global Equity Portfolio will, and the Equity, Balanced, Mid Cap, Small Cap and
Managed Portfolios may purchase foreign securities provided that they are listed
on a domestic or foreign securities exchange or represented by American
depository receipts listed on a domestic securities exchange or traded in a
domestic or foreign over-the-counter market. There is no limit on the amount of
such foreign securities that the Portfolios might acquire. These Portfolios
will hold foreign currency in connection with the purchase or sale of securities
on a foreign securities exchange. To the extent that foreign currency is so
held, there may be a risk due to foreign currency exchange rate fluctuations.
Such foreign currency and foreign securities will be held by the Fund's
custodian bank, or by a foreign branch of a U.S. bank, acting as subcustodian,
on behalf of the Portfolio. The custodian bank will hold such foreign
securities pursuant to such arrangements as are permitted by applicable foreign
and domestic law and custom.
Investments in foreign companies involve certain considerations which are
not typically associated with investing in domestic companies. An investment
may be affected by changes in currency rates and in exchange control regulations
(e.g. currency blockage). The Portfolios may bear a transaction charge in
connection with the exchange of currency. There may be less publicly available
information about a foreign company than about a domestic company. Foreign
companies are generally not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. Most foreign stock markets have
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substantially less volume than the New York Stock Exchange and securities of
some foreign companies are less liquid and more volatile than securities of
comparable domestic companies. There is generally less government regulation of
foreign stock exchanges, brokers, and listed companies than there is in the
United States. In addition, with respect to certain foreign countries, there is
a possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could adversely affect investment
in securities of issuers located in those countries. Individual foreign
economies may differ favorable or unfavorably from the United States economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. If it
should become necessary, the Portfolios would normally encounter greater
difficulties in commencing a lawsuit against the issuer of a foreign security
than it would against a United States issuer.
INVESTMENTS IN EMERGING MARKETS. Emerging and developing markets abroad
may offer special opportunities for investing but have greater risks than more
developed foreign markets, such as those in Europe, Canada, Australia, New
Zealand and Japan. There may be even less liquidity in their securities
markets, and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those counties may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. OpCap Advisors will consider these
factors when evaluating securities in these markets.
FOREIGN CURRENCY TRANSACTIONS. The Global Equity, Balanced, Equity, Mid
Cap, Small Cap and Managed Portfolios do not intend to speculate in foreign
currency. When a Portfolio agrees to purchase or sell a security in a foreign
market it will generally be obligated to pay or entitled to receive a specified
amount of foreign currency and will then generally convert dollars to that
currency in the case of a purchase or that currency to dollars in the case of a
sale. The Global Equity, Balanced, Mid Cap, Equity, Small Cap and Managed
Portfolios intend to conduct their foreign currency exchange transactions on a
spot basis (i.e., cash) at the spot rate prevailing in the foreign currency
exchange market or through entering into forward foreign currency contracts
("forward contracts") to purchase or sell foreign currencies. Such Portfolios
may enter into forward contracts in order to lock in the U.S. dollar amount they
must pay or expect to receive for a security they have agreed to buy or sell or
with respect to their positions when the Portfolios believe that a particular
currency may change unfavorably compared to the U.S. dollar. A forward contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large, commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades.
The Fund's custodian bank will place cash, U.S. Government securities or
debt securities in separate accounts of the Portfolios in an amount equal to the
value of the Portfolios' total assets committed to the consummation of any such
contract in such account and if the value of the securities placed in the
separate accounts decline, additional cash or securities will be placed in the
accounts on a daily basis so that the value of the accounts will equal the
amount of the Portfolios' commitments with respect to such forward contracts.
If, rather than cash, portfolio securities are used to secure such a forward
contract, on the settlement of the forward contract for delivery by the
Portfolios of a foreign currency, the Portfolios may either sell the portfolio
security and make delivery of the foreign currency, or they may retain the
security and terminate their contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating them to purchase, on
the same settlement date, the same amount of foreign currency.
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The Global Equity Portfolio may effect currency hedging transactions in
foreign currency futures contracts, exchange-listed and over-the-counter call
and put options on foreign currency futures contracts and on foreign currencies.
The use of forward futures or options contracts will not eliminate fluctuations
in the underlying prices of the securities which the Global Equity Portfolio
owns or intends to purchase or sell. They simply establish a rate of exchange
for a future point in time. Additionally, while these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
their use tends to limit any potential gain which might result from the increase
in value of such currency. In addition, such transactions involve costs and may
result in losses.
Although each Portfolio values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will, however, do so from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the spread between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
Under Internal Revenue Code Section 988, special rules are provided for
certain transactions in a currency other than the taxpayer's functional currency
(i.e., unless certain special rules apply, currencies other than the U.S.
dollar). In general, foreign currency gains or losses from forward contracts,
futures contracts that are not "regulated futures contracts," and from unlisted
options will be treated as ordinary income or loss under Internal Revenue Code
Section 988. Also, certain foreign exchange gains or losses derived with
respect to fixed-income securities are also subject to Section 988 treatment.
In general, therefore, Internal Revenue Code Section 988 gains or losses will
increase or decrease the amount of the Portfolio's investment company taxable
income available to be distributed to shareholders as ordinary income, rather
than increasing or decreasing the amount of the Portfolio's net capital gain.
Additionally, if Internal Revenue Code Section 988 losses exceed other
investment company taxable income during a taxable year, the Portfolio would not
be able to make any ordinary income distributions.
FOREIGN CUSTODY. Rules adopted under the 1940 Act permit the Portfolios to
maintain their securities and cash in the custody of certain eligible banks and
securities depositories. The Portfolios' holdings of securities of issuers
located outside of the U.S. will be held by the Fund's sub-custodians who will
be approved by the trustees or by the trustees' delegate in accordance with such
Rules. The trustees or their delegate will determine that the Portfolios' assets
will be subject to reasonable care, based on standards applicable to custodians
in the relevant market, after considering all factors relevant to the
safekeeping of such assets including but not limited to, the custodian's
practices, procedures and internal controls; the custodian's general reputation;
and whether the Portfolios will have jurisdiction against the custodian.
However, no assurances can be given that the trustees' or their delegates'
appraisal of the risks in connection with foreign custodial arrangements will
always be correct or that expropriation, nationalization, freezes (including
currency blockage), confiscations or any other loss of assets that would affect
assets of the Portfolio will not occur, and shareholders bear the risk of losses
arising from those or other similar events.
CONVERTIBLE SECURITIES. As specified in the Prospectus, certain of the
Portfolios may invest in fixed-income securities which are convertible into
common stock. Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, entail less risk than the
corporation's common stock. The value of a convertible security is a function
of its "investment value" (its value as if it did not have a conversion
privilege), and its "conversion value" (the security's worth if it were to be
exchanged for the underlying security, at market value, pursuant to its
conversion privilege).
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To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, the convertible security will sell at some premium over
its conversion value. (This premium represents the price investors are willing
to pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly with
the price of the underlying equity security. Convertible securities may be
purchased by the Portfolios at varying price levels above their investment
values and/or their conversion values in keeping with the Portfolios'
objectives.
FOREIGN AND DOMESTIC SECURITY SELECTION PROCESS. The allocation of assets
between U.S. and foreign markets for the Global Equity Portfolio in particular,
as well as all other Portfolios which invest in foreign securities in general,
will vary from time to time as deemed appropriate by the Manager. It is a
dynamic process based on an on-going analysis of economic and political
conditions, the growth potential of the securities markets throughout the world,
currency exchange considerations and the availability of attractively priced
securities within the respective markets. In all markets, security selection is
designed to reduce risk through a value oriented approach in which emphasis is
placed on identifying well-managed companies which, in the case of the Global
Equity Portfolio, represent exceptional values in terms of such factors as
assets, earnings and growth potential.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Portfolio also may purchase
shares of investment companies or trusts which invest principally in securities
in which the Portfolio is authorized to invest. The return on a Portfolio's
investments in investment companies will be reduced by the operating expenses,
including investment advisory and administrative fees, of such companies. A
Portfolio's investment in an investment company may require the payment of a
premium above the net asset value of the investment company's shares, and the
market price of the investment company thereafter may decline without any change
in the value of the investment company's assets. The Portfolio will invest in
an investment company only if it is believed that the potential benefits of such
investment are sufficient to warrant the payment of any such premium. Under the
1940 Act, the Portfolios cannot invest more than 10% of their assets,
respectively, in investment companies or more than 5% of their total assets,
respectively, in the securities of any one investment company, nor may they own
more than 3% of the outstanding voting securities of any such company,
respectively, except that these limits do not apply if a portfolio is acquiring
securities of an investment company in the same group of investment companies,
the portfolio only invests in securities of other investment companies that are
part of the same group, government securities and short-term paper; sales or
distribution charges are charged only at one of the acquired or acquiring
investment companies and the acquired company has a policy restricting it from
investing in securities of other investment companies under these exceptions.
To the extent a Portfolio invests in securities in bearer form it may be more
difficult to recover securities in the event such securities are lost or stolen.
PASSIVE FOREIGN INVESTMENT COMPANY INCOME. If a Portfolio invests in an
entity which is classified as a "passive foreign investment company" ("PFIC")
for U.S. tax purposes, the application of certain technical tax provisions
applying to such companies could result in the imposition of federal income tax
with respect to such investments at the Portfolio level which could not be
eliminated by distributions to shareholders. Under the Taxpayer Relief Act of
1997, a mark-to-market regime was established that allows a regulated investment
company ("RIC") to avoid most, if not all, of the difficulties posed by the
PFIC rules. In any event, it is not anticipated that any taxes on a Portfolio
with respect to investments in PFIC's would be significant.
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INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted by the Fund as
fundamental policies which cannot be changed without the vote of a majority of
the outstanding voting securities of that Portfolio. Such a majority is defined
as the lesser of (a) 67% or more of the shares of the Portfolio present at the
meeting of shareholders of the Fund, if the holders of more than 50% of the
outstanding shares of the Portfolio are present or represented by proxy or (b)
more than 50% of the outstanding shares of the Portfolio. For the purposes of
the following restrictions and those contained in the Prospectus: (i) all
percentage limitations apply immediately after a purchase or initial investment,
unless specifically stated otherwise; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in the
amount of total assets does not require elimination of any security from the
Portfolio. The restrictions in 1, 2,, and 3 do not apply to U.S. Government
securities.
ADDITIONAL RESTRICTIONS APPLICABLE TO ALL PORTFOLIOS. Each Portfolio of
the Fund may not:
1. Invest more than 5 percent of the value of its total assets in the
securities of any one issuer, or purchase more than 10 percent of the voting
securities, or more than 10 percent of any class of security, of any issuer (for
this purpose all outstanding debt securities of an issuer are considered as one
class and all preferred stock of an issuer are considered as one class).
2. Concentrate its investments in any particular industry, but if deemed
appropriate for attaining its investment objective, a Portfolio may invest up to
25 percent of its total assets (valued at the time of investment) in any one
industry classification used by that Portfolio for investment purposes.
3. Invest more than 5 percent of the value of its total assets in
securities of issuers having a record, together with predecessors, of less than
three years of continuous operation.
4. Borrow money in excess of 10 percent of the value of its total assets.
It may borrow only as a temporary measure for extraordinary or emergency
purposes and will make no additional investments while such borrowings exceed 5
percent of the total assets. Such prohibition against borrowing does not
prohibit escrow or other collateral or making arrangements in connection with
the hedging instruments which a Portfolio is permitted to use by any of its
other fundamental policies.
5. Invest more than 15 percent of its assets in illiquid securities
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days.
6. Make loans of money or securities, except (a) by the purchase of debt
obligations in which the Portfolio may invest consistent with its investment
objectives and policies; (b) by investing in repurchase agreements; or (c) by
lending its portfolio securities, not in excess of 33% of the value of a
Portfolio's total assets, made in accordance with guidelines adopted by the
Fund's Board of Trustees, including maintaining collateral from the borrower
equal at all times to the current market value of the securities loaned.
7. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or trustee of the Fund or any officer or director of the Manager
owns more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding voting securities of such issuer.
8. Pledge its assets or assign or otherwise encumber them in excess of
10% of its net assets (taken at market value at the time of pledging) and then
only to secure borrowings effected within the limitations set forth in the
Prospectus.
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9. Purchase or sell real estate; however, the Portfolios may purchase
marketable securities of issuers which engage in real estate operations or which
invest in real estate or interests therein, and securities which are secured by
real estate or interests therein.
10. Purchase securities on margin (except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities) or sell
securities short except "against the box." (Collateral arrangements in
connection with transactions in options and futures are not deemed to be margin
transactions.)
11. Invest in oil, gas or mineral exploration or developmental programs,
except that a Portfolio may invest in the securities of companies which operate,
invest in, or sponsor such programs.
12. Engage in the underwriting of securities except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security.
13. Invest for the purposes of exercising control or management of another
company.
14. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a) entering
into any repurchase agreement; (b) borrowing money in accordance with
restrictions described above; or (c) lending portfolio securities.
15. All percentage limitations apply immediately after a purchase or
initial investment and any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in the amount of total
assets does not require elimination of any security from a Portfolio.
RESTRICTIONS APPLICABLE TO THE EQUITY, MID CAP, MANAGED, GLOBAL EQUITY,
BALANCED AND SMALL CAP PORTFOLIOS ONLY. Each of the above Portfolios may not:
1. Invest more than 5% of the value of its total assets in warrants not
listed on either the New York or American Stock Exchange. However, the
acquisition of warrants attached to other securities is not subject to this
restriction.
2. Invest more than 5% of its total assets in securities which are
restricted as to disposition under the federal securities laws or otherwise.
This restriction shall not apply to securities received as a result of a
corporate reorganization or similar transaction affecting readily marketable
securities already held by the Equity, Mid Cap, Managed, Global Equity, Balanced
and/or Small Cap Portfolios; however, each Portfolio will attempt to dispose in
an orderly fashion of any securities received under these circumstances to the
extent that such securities, together with other unmarketable securities, exceed
15% of that Portfolio's total assets.
TRUSTEES AND OFFICERS
The trustees and officers of the Fund, and their principal occupations
during the past five years, are set forth below. Trustees who are "interested
persons", as defined in the 1940 Act, are denoted by an asterisk. The address
of each is One World Financial Center, New York, New York 10281, except as
noted. As of March 31,, 1999, the trustees and officers of the Fund as a group
owned none of its outstanding shares.
JOSEPH M. LA MOTTA, CHAIRMAN OF THE BOARD OF TRUSTEES AND PRESIDENT*
Age: 66
16
<PAGE>
Chairman Emeritus of Oppenheimer Capital, a registered investment adviser;
Chairman of the Board and President of OCC Cash Reserves, Inc., an open-end
investment company; Chairman of the Board of Oppenheimer Capital Trust Company,
a New York trust company.
PAUL Y. CLINTON, TRUSTEE
39 Blossom Avenue
Osterville, Massachusetts 02655
Age: 67
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; formerly Director, External Affairs, Kravco Corporation, a
national real estate owner and property management corporation; Trustee of
Capital Cash Management Trust, a money-market fund and Director of Narragansett
Tax-Free Fund, a tax-exempt bond fund; Director of Oppenheimer Quest Value Fund,
Inc., Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest Capital Value
Fund, Inc., Rochester Fund Municipals, Rochester Portfolio Series Limited Term
New York Municipals and Bond Fund Series, Oppenheimer Convertible Securities
Fund, Oppenheimer Mid Cap Fund, and OCC Cash Reserves, Inc.; Trustee of OCC
Accumulation Trust and Oppenheimer Quest for Value Funds, each of which is an
open-end investment company.
THOMAS W. COURTNEY, C.F.A., TRUSTEE
833 Wyndemere Way
Naples, Florida 34105
Age: 65
Principal of Courtney Associates, Inc., a venture capital business; former
General Partner of Trivest Venture Fund; former President of Federated
Investment Counseling, Inc.; Director of Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest Capital Value Fund,
Inc., Rochester Fund Municipals, Rochester Portfolio Series Limited Term New
York Municipals and Bond Fund Series, Oppenheimer Convertible Securities Fund,
Oppenheimer Mid Cap Fund, OCC Cash Reserves, Inc., and Trustee of Oppenheimer
Quest for Value Funds, Cash Assets Trust, Hawaiian Tax-Free Trust and Tax Free
Trust of Arizona, each of which is an open-end investment company;; former
Director of The Financial Analysts Federation,.
LACY B. HERRMANN, TRUSTEE
380 Madison Avenue, Suite 2300
New York, New York 10017
Age: 69
Chairman of the Board and Chief Executive Officer of Aquila Management
Corporation (since 1984) and Chairman of the Board of Trustees and President of
seven single state tax exempt bond funds, five money market funds and two equity
funds in the Aquila fund complex; Vice President, Director, Secretary, and
formerly Treasurer of Aquila Distributors, Inc. (since 1981), distributor of the
funds in the Aquila fund complex; Director, Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest Capital Value Fund,
Inc., Rochester Fund Municipals, Rochester Portfolio Series Limited Term New
York Municipals and Bond Fund Series, Oppenheimer Convertible Securities Fund,
Oppenheimer Mid Cap Fund, OCC Cash Reserves, Inc., Trustee of Oppenheimer Quest
for Value Funds, each of which is an open-end investment company; Trustee of
Brown University since 1990.
17
<PAGE>
GEORGE LOFT, TRUSTEE
51 Herrick Road
Sharon, Connecticut 06069
Age: 84
Private Investor; Director of OCC Cash Reserves, Inc., Oppenheimer Quest Value
Fund, Inc., Oppenheimer Quest Capital Value Fund, Inc., Rochester Fund
Municipals, Rochester Portfolio Series Limited Term New York Municipals and Bond
Fund Series, Oppenheimer Convertible Securities Fund, Oppenheimer Mid Cap Fund,
Oppenheimer Quest Global Value Fund, Inc., Trustee of Oppenheimer Quest for
Value Funds, all of which are open-end investment companies.
GAVIN ALBERT, VICE PRESIDENT AND PORTFOLIO MANAGER
Age: 30
Vice President of Oppenheimer Capital since December 1996 and securities analyst
with Oppenheimer Capital since 1994; management consultant with EDS Energy
Management in 1994; attended Vanderbilt University Business School from
September 1992 to May 1994 (Masters of Business Administration degree in finance
and management).
ROBERT BRAULT, ASSISTANT TREASURER
Age: 33
Vice President of Oppenheimer Capital since 1997; joined Oppenheimer Capital in
1989; Assistant Treasurer of OCC Cash Reserves, Inc., an open-end investment
company and Assistant Treasurer of the Central European Value Fund, Inc. and
Municipal Advantage Fund Inc., closed-end investment companies.
BERNARD H. GARIL, VICE PRESIDENT
Age: 58
President of OpCap Advisors and a Managing Director of Oppenheimer Capital; Vice
President of OCC Cash Reserves, Inc., an open-end investment company and
President of The Central European Value Fund, Inc. and Municipal Advantage Fund
Inc., closed-end investment companies.
RICHARD GLASEBROOK, VICE PRESIDENT AND PORTFOLIO MANAGER
Age: 50
Managing Director, Oppenheimer Capital; formerly Partner and Portfolio Manager
of Delafield Asset Management.
LOUIS GOLDSTEIN, VICE PRESIDENT AND PORTFOLIO MANAGER
Age: 38
Senior Vice President, Oppenheimer Capital since 1998, joined Oppenheimer
Capital as Vice President and security analyst in 1991.
ALAN GUTMANN, VICE PRESIDENT AND PORTFOLIO MANAGER
Age: 38
Senior Vice President and Equity Portfolio Manager, Oppenheimer Capital; joined
Oppenheimer Capital in 1991 as a Security Analyst.
18
<PAGE>
VIKKI HANGES, VICE PRESIDENT & PORTFOLIO MANAGER
Age: 39
Senior Vice President, Oppenheimer Capital since 1998; Vice President from 1992;
Assistant Vice President, 1987-1992.
DEBORAH KABACK, SECRETARY
Age: 47
Senior Vice President and Deputy General Counsel, Oppenheimer Capital; Secretary
of OCC Cash Reserves, Inc., an open-end investment company and Secretary of The
Central European Value Fund, Inc. and Municipal Advantage Fund Inc., closed-end
investment companies.
TIMOTHY MCCORMACK, VICE PRESIDENT & PORTFOLIO MANAGER
Age: 34
Senior Vice President, Oppenheimer Capital since 1998 and Vice President since
1995; joined Oppenheimer Capital in 1994.
RICHARD L. PETEKA, TREASURER
Age: 37
Vice President, Oppenheimer Capital; Treasurer of OCC Cash Reserves, Inc., an
open-end investment company and Treasurer of The Central European Value Fund,
Inc. and Municipal Advantage Fund Inc., closed-end investment companies.
EILEEN ROMINGER, VICE PRESIDENT AND PORTFOLIO MANAGER
Age: 44
Managing Director, Oppenheimer Capital.
JAMES SHELDON, VICE PRESIDENT AND PORTFOLIO MANAGER
Age: 35
Senior Vice President of Oppenheimer Capital since February 1998; General
Partner of Omega Advisers, a hedge fund, from September 1996 to February 1998
and Senior Vice President and International Portfolio Manager at Lazard Freres
Asset Management from December 1992 to August 1996.
REMUNERATION OF OFFICERS AND TRUSTEES. All officers of the Fund are
officers of Oppenheimer Capital and will receive no salary or fee from the Fund.
The following table sets forth the aggregate compensation paid by the Fund to
each of the Trustees during its fiscal year ended December 31, 1998 and the
aggregate compensation paid to each of the Trustees by OCC Cash Reserves, Inc.,
a fund managed by OpCap Advisors, and by six funds for which OpCap Advisors
serves as sub-adviser during each such fund's 1998 fiscal year.. The Managed,
Small Cap, Equity and Global Equity Portfolios of the Fund were the only
Portfolios of the Fund that paid fees to the Trustees.
19
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM THE FUND,
NAME OF TRUSTEE COMPENSATION BENEFITS ACCRUED BENEFITS UPON OCC CASH RESERVES AND
OF THE FUND FROM THE FUND AS PART OF FUND EXPENSES RETIREMENT SIX OPPENHEIMER QUEST FUNDS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul Clinton $ 0 0 $
Thomas Courtney $ 0 0 $
Lacy Herrmann $ 0 0 $
Joseph La Motta 0 0 0 0
George Loft $ 0 0 $
</TABLE>
*Includes compensation paid by six funds managed by OppenheimerFunds, Inc. for
which OpCap Advisors acts as sub-adviser. The amount of the aggregate
compensation paid by these funds to the Trustees was as follows: Mr. Clinton:
$_____; Mr. Courtney: $_____; Mr. Herrmann: $_____; and Mr. Loft: $_____.
On October 19, 1998 the Fund adopted a retirement plan (to become effective
January 1, 1999) that provides for payment to a retired Trustee of up to 80% of
the average compensation paid during that Trustee's five years of service in
which the highest compensation was received. A Trustee must serve in that
capacity for the Fund or OCC Cash Reserves, Inc. for at least 15 years to be
eligible for the maximum payment. Because each Trustee's retirement benefit
will depend on the amount of the Trustee's future compensation and length of
service, the amount of those benefits cannot be determined as of this time nor
can the Fund estimate the number of years of credited service that will be used
to determine those benefits.
20
<PAGE>
CONTROL PERSONS
As of March 31, 1999, shares of the Portfolios were held by Oppenheimer
Capital and the Variable Accounts of the following insurance companies, with the
figures beneath each Portfolio representing that company's holdings as a
percentage of each Portfolio's total outstanding shares.
21
<PAGE>
PORTFOLIO SHAREHOLDERS OF RECORD AS OF MARCH 31, 1999(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PORTFOLIOS
- ---------------------------------------------------------------------------------------------------
SHAREHOLDERS U.S. GOVT. GLOBAL EQUITY SMALL CAP MANAGED MID CAP
INCOME EQUITY
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Mutual Life Insurance
Company of New York (New
York, NY) & The MONY Life
Insurance Company of
America
(New York, NY)
- ---------------------------------------------------------------------------------------------------
Provident Mutual Life
Insurance Company
(Philadelphia, PA) &
Providentmutual Life and
Annuity Company of
America
(Newark, DE)
- ---------------------------------------------------------------------------------------------------
Connecticut General Life
Insurance Company & CIGNA
Life Insurance Company
(Hartford, CT)
- ---------------------------------------------------------------------------------------------------
Providian Life and Health
Insurance Company
(Frazer, PA)
- ---------------------------------------------------------------------------------------------------
American Enterprise Life
Insurance Company and
American Centurion Life
Insurance Company
(Indianapolis, IN)
- ---------------------------------------------------------------------------------------------------
Oppenheimer Capital
(New York, NY)
- ---------------------------------------------------------------------------------------------------
IL Annuity and Insurance
Company
(Indianapolis, IN)
- ---------------------------------------------------------------------------------------------------
PRUCO Life Insurance
Company of New Jersey
and PRUCO Life
- ---------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PORTFOLIOS
- ---------------------------------------------------------------------------------------------------
SHAREHOLDERS U.S. GOVT. GLOBAL EQUITY SMALL CAP MANAGED MID CAP
INCOME EQUITY
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Insurance Company
(Newark, NJ)
- ---------------------------------------------------------------------------------------------------
Transamerica
(Los Angeles, CA)
- ---------------------------------------------------------------------------------------------------
ReliaStar Life Insurance
Company
(Minneapolis, MN)
- ---------------------------------------------------------------------------------------------------
Sun Life of Canada (U.S.)
(Boston, MA)
- ---------------------------------------------------------------------------------------------------
Travelers Insurance
Company
- ---------------------------------------------------------------------------------------------------
Lincoln Life Insurance
Company
- ---------------------------------------------------------------------------------------------------
</TABLE>
- --Company does not offer shares of the Portfolios of the Fund.
23
<PAGE>
(1)This chart lists all Variable Account shareholders of record of the
Portfolios as of March 31, 1999 and all holdings of shares of the Portfolios by
Oppenheimer Capital, the parent of the Manager. To the best knowledge of the
Fund, no Contractowner held units equivalent to 5% or more of the shares of any
Portfolio of the Fund as of March 31, 1999.
Shares of the U.S. Government Income and the Mid Cap Portfolio were
acquired by Oppenheimer Capital to provide capital for the Portfolio so that the
Manager could commence a meaningful investment program for the Portfolios,
pending the acquisition of shares of the Portfolios by Variable Accounts. The
shares held by the Variable Accounts generally will be voted in accordance with
instructions of Contractowners. Under certain circumstances however, the
insurance companies, on behalf of their respective Variable Accounts, may
disregard voting instructions received from Contractowners. The shares held by
Oppenheimer Capital will be voted in the same proportions as those voted by the
insurance companies which are held in their respective Variable Accounts. Any
shareholder of record listed in the above chart beneficially owning more than
25% of a particular Portfolio's shares may be considered to be a "controlling
person" of that Portfolio by virtue of the definitions contained in the 1940
Act. The vote of such shareholder of record could have a more significant
effect on matters presented to shareholders for approval than the votes of the
Fund's other shareholders.
INVESTMENT MANAGEMENT AND OTHER SERVICES
THE INVESTMENT ADVISER. OpCap Advisors, the investment adviser to the Fund
(the "Manager"), is a majority owned subsidiary of Oppenheimer Capital, a
registered investment adviser whose employees perform all investment advisory
and management services provided to the Fund by the Advisor. Oppenheimer
Capital is an indirect wholly owned subsidiary of PIMCO Advisors L.P. ("PIMCO
Advisors"), a registered investment adviser. The general partners of PIMCO
Advisors are PIMCO Partners G.P. and PIMCO Advisors Holdings L.P.
THE ADVISORY AGREEMENT. OpCap Advisors provides investment advisory and
management services to the Fund pursuant to an Advisory Agreement dated November
5, 1997. The new Advisory Agreement was amended on February 1, 1998 to provide
that the Manager will limit total operating expenses of all Portfolios of the
Fund except the Global Equity Portfolio to 1.00% (net of any expense offsets) of
their respective average daily net assets and that the Manager will limit total
operating expenses of the Global Equity Portfolio to 1.25% (net of any expense
offsets) of its average daily net assets.
Under the Advisory Agreement, the Manager is required to: (i) regularly
provide investment advice and recommendations to each Portfolio of the Fund with
respect to its investments, investment policies and the purchase and sale of
securities; (ii) supervise continuously and determine the securities to be
purchased or sold by the Fund and the portion, if any, of the assets of each
Portfolio of the Fund to be held uninvested; and (iii) arrange for the purchase
of securities and other investments by each Portfolio of the Fund and the sale
of securities and other investments held by each Portfolio of the Fund.
The Advisory Agreement also requires the Manager to provide administrative
services for the Fund, including (1) coordination of the functions of
accountants, counsel and other parties performing services for
24
<PAGE>
the Fund and (2) preparation and filing of reports required by federal
securities and "blue sky" laws, shareholder reports and proxy materials.
Expenses not expressly assumed by the Manager under the Advisory Agreement
or by OCC Distributors (the "Distributor") are paid by the Fund. The Advisory
Agreement lists examples of expenses paid by the Fund, of which the major
categories relate to interest, taxes, fees to non-interested trustees, legal and
audit expenses, custodian and transfer agent expenses, stock issuance costs,
certain printing and registration costs, and non-recurring expenses, including
litigation.
For the fiscal year ended December 31, 1996, the total advisory fees
accrued or paid by the Equity, Managed, Small Cap, U.S. Government Income and
Global Equity Portfolios were $109,057, $972,381, $165,735, $14,797 and $71,811,
respectively, of which $18,150, $8,220, $17,823, $14,797 and $37,689, was waived
by the Manager. In addition, the Manager reimbursed operating expenses of
$19,305 for the U.S. Government Income Portfolio. For the fiscal year ended
December 31, 1997, the total advisory fees accrued or paid by the Equity,
Managed, Small Cap, U.S. Government Income and Global Equity Portfolios were
$199,896, $2,321,835, $498,382, $35,757 and $184,504, respectively, of which
$8,028 and $2,537 was waived by the Manager with respect to the U.S. Government
Income Portfolio, and the Global Equity Portfolio, respectively. For the fiscal
year ended December 31, 1998, the total advisory fees accrued or paid by the
Equity, Managed, Small Cap, U.S. Government Income, Global Equity and Mid Cap
Portfolios are $____, $_____, $_____, $_____, $_____ and $_____, respectively,
of which $_____, $_____, and $_____ was waived by the Manager with respect to
the U.S. Government Income Portfolio, the Global Equity Portfolio and the Mid
Cap Portfolio.
The advisory fee for the Equity, Global Equity, Managed, Small Cap, Mid Cap
and Balanced Portfolios is at the annual rate of .80% on the first $400 million
of average daily net assets, .75% on the next $400 million of average daily net
assets and .70% of average daily net assets in excess of $800 million. The
advisory fee for the U.S. Government Income Portfolio is at the annual rate of
.60% of average daily net assets.
The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations
thereunder, the Manager is not liable for any act or omission in the course of,
or in connection with, the rendition of services thereunder. The Agreement
permits the Manager to act as investment advisor for any other person, firm, or
corporation.
PORTFOLIO TRANSACTIONS. Portfolio decisions are based upon recommendations
of the Manager and the judgment of the portfolio managers. As most, if not all,
purchases made by the U.S. Government Income Portfolio will be principal
transactions at net prices, the Portfolio pays no brokerage commissions; however
prices of debt obligations reflect mark-ups and mark-downs which constitute
compensation to the executing dealer. The Portfolios will pay brokerage
commissions on transactions in listed options and equity securities. Prices of
securities purchased from underwriters of new issues include a commission or
concession paid by the issuer to the underwriter, and prices of debt securities
purchased from dealers include a spread between the bid and asked prices. The
Fund seeks to obtain prompt execution of orders at the most favorable net price.
Transactions may be directed to dealers during the course of an underwriting in
return for their brokerage and research services, which are intangible and on
which no dollar value can be placed. There is no formula for such allocation.
The research information may or may
25
<PAGE>
not be useful to the Fund and/or other accounts of the Manager; information
received in connection with directed orders of other accounts managed by the
Manager or its affiliates may or may not be useful to the Fund. Such
information may be in written or oral form and includes information on
particular companies and industries as well as market, economic or institutional
activity areas. It serves to broaden the scope and supplement the research
activities of the Manager, to make available additional views for consideration
and comparison, and to enable the Manager to obtain market information for the
valuation of securities held by the Fund. For the year ended December 31, 1998,
the aggregate dollar amount involved in such transactions was $_____, with
related commissions of $_____.
Sales of shares of the Fund, subject to applicable rules covering the
Distributor's activities in this area, will also be considered as a factor in
the direction of portfolio transactions to brokers and dealers, but only in
conformity with the price, execution and other considerations and practices
discussed above. The Fund may execute brokerage transactions through CIBC
Oppenheimer Corp., Inc. ("CIBC Oppenheimer"), which prior to the consummation of
the acquisition by PIMCO Advisors of Oppenheimer Capital and OpCap Advisors on
November 4, 1997, was an affiliated broker-dealer.
The following table presents information as to the allocation of brokerage
commissions paid to CIBC Oppenheimer by the Equity, Global Equity, Managed, and
Small Cap Portfolios for the year ended December 31, 1996 and for the year
ended December 31, 1997.
26
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------
TOTAL BROKERAGE
PORTFOLIO COMMISSIONS PAID
- ------------------------------------------
1996 1997
- ------------------------------------------
<S> <C> <C>
EQUITY $14,116 $21,025
MANAGED 107,123 224,795
SMALL CAP 52,990 213,701
GLOBAL EQUITY 41,242 49,976
- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
BROKERAGE COMMISSIONS
PORTFOLIO PAID TO CIBC OPPENHEIMER
- ----------------------------------------------------------
$ AMOUNTS %
- ----------------------------------------------------------
1996 1997 1996 1997
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY $5,743 $5,221 40.7 24.8
MANAGED 61,183 82,229 57.1 36.6
SMALL CAP 23,565 76,787 44.5 35.9
GLOBAL EQUITY 4,563 4,675 11.1 9.4
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
TOTAL AMOUNT OF TRANSACTIONS
PORTFOLIO WHERE BROKERAGE COMMISSIONS PAID TO CIBC OPPENHEIMER
- -------------------------------------------------------------------------
$ AMOUNTS %
- -------------------------------------------------------------------------
1996 1997 1996 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY $5,747,719 $4,578,999 50.5 32.9
MANAGED 50,188,690 78,122,478 59.0 36.2
SMALL CAP 8,870,059 32,932,369 45.4 38.1
GLOBAL EQUITY 4,995,531 5,840,385 33.6 27.0
- -------------------------------------------------------------------------
</TABLE>
(1)The Fund did not effect principal transactions with CIBC Oppenheimer while it
was an affiliated broker-dealer. When the Fund effects principal transactions
with other broker-dealers commissions are imputed.
The Manager and its parent Oppenheimer Capital currently serve as investment
manager to a number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is the practice
of the Manager to cause purchase or sale transactions to be allocated among the
Fund and others whose assets it or Oppenheimer Capital manages in such manner as
it deems equitable. In making such allocations among the Fund and other client
accounts, the main factors considered are the respective investment objectives,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the opinions of the persons responsible for managing each
portfolio of the Fund and other client accounts. When orders to purchase or
sell the same security on identical terms are placed by more than one of the
funds and/or other advisory accounts managed by the Manager or its affiliates,
the transactions are generally executed as received, although a fund or advisory
account that does not direct trades to a specific broker ("free trades") usually
will have its order executed first. Purchases are combined where possible for
the purpose of negotiating brokerage commissions, which in some cases might have
a detrimental effect on the price or
27
<PAGE>
volume of the security in a particular transaction as far as the Fund is
concerned. Orders placed by accounts that direct trades to a specific broker
will generally be executed after the free trades. All orders placed on behalf
of the Fund are considered free trades. However, having an order placed first
in the market does not necessarily guarantee the most favorable price.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each of the Portfolios of the Fund is
determined each day the New York Stock Exchange (the "NYSE") is open, at the
close of the regular trading session of the NYSE that day, by dividing the value
of the Fund's net assets by the number of shares outstanding. The NYSE's most
recent annual announcement (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Martin Luther King's Birthday, Good
Friday, Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas Day. It
may also close on other days.
Securities listed on a national securities exchange or designated national
market system securities are valued at the last reported sale price on that day,
or, if there has been no sale on such day or on the previous day on which the
Exchange was open (if a week has not elapsed between such days), then the value
of such security is taken to be the reported bid price at the time as of which
the value is being ascertained. Securities actively traded in the
over-the-counter market but not designated as national market system securities
are valued at the last quoted bid price. Any securities or other assets for
which current market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision and responsibility of the Fund's Board of Trustees. The
value of a foreign security is determined in its national currency and that
value is then converted into its U.S. dollar equivalent at the foreign exchange
rate in effect on the date of valuation.
The Fund's Board of Trustees has approved the use of nationally recognized
bond pricing services for the valuation of each Portfolio's debt securities.
The service selected by the Manager creates and maintains price matrices of U.S.
Government and other securities from which individual holdings are valued
shortly after the close of business each trading day. Debt securities not
covered by the pricing service are valued based upon bid prices obtained from
dealers who maintain an active market therein or, if no readily available market
quotations are available from dealers, such securities (including restricted
securities and OTC options) are valued at fair value under the Board of
Trustees' procedures. Short-term (having a remaining maturity of more than
sixty days) debt securities are valued on a "marked-to-market" basis, that is,
at prices based upon market quotations for securities of similar type, yield,
quality and maturity. Short-term (having a maturity of 60 days or less) debt
securities are valued at amortized cost or value.
Puts and calls are valued at the last sales price therefor, or, if there
are no transactions, at the last reported sales price that is within the spread
between the closing bid and asked prices on the valuation date. Futures are
valued based on their daily settlement value. When a Portfolio writes a call,
an amount equal to the premium received is included in the Portfolio's Statement
of Assets and Liabilities as an asset, and an equivalent credit is included in
the liability section. The credit is adjusted ("marked-to-market") to reflect
the current market value of the call. If a call written by a Portfolio is
exercised, the proceeds on the sale of the underlying securities are increased
by the premium received. If a call or put written by a Portfolio
28
<PAGE>
expires on its stipulated expiration date the Portfolio will realize a gain
equal to the amount of the premium received. If a Portfolio enters into a
closing transaction, it will realize a gain or loss depending on whether the
premium was more or less than the transaction costs, without regard to
unrealized appreciation or depreciation on the underlying securities. If a put
held by a Portfolio is exercised by it, the amount the Portfolio receives on its
sale of the underlying investment is reduced by the amount of the premium paid
by the Portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The dividend policies of the Portfolios are discussed in the Prospectus.
In computing interest income, these Portfolios will accrete any discount or
amortize any premium resulting from the purchase of debt securities except for
mortgage or other receivables-backed obligations subject to monthly payment of
principal and interest.
CAPITAL GAINS AND LOSSES. Gains or losses on the sales of securities by
the Fund will be long-term capital gains or losses if the securities have been
held by the Fund for more than twelve months, regardless of how long you have
held your shares. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses.
PORTFOLIO YIELD AND TOTAL RETURN INFORMATION
The performance information shown below reflects deductions for all
charges, expenses and fees of the Fund but does not reflect charges and
deductions which are, or may be, imposed under the Contracts.
Yield information may be useful to investors in reviewing the Fund's
performance. However, a number of factors should be considered before using
yield information as a basis for comparison with other investments. An
investment in any of the Portfolios of the Fund is not insured; its yield is not
guaranteed and normally will fluctuate on a daily basis. The yield for any
given past period is not an indication or representation by the Fund of future
yields or rates of return on its shares. The Fund's yield is affected by
portfolio quality, portfolio maturity, type of instruments held, and operating
expenses. When comparing a Portfolio's yield with that of other investments,
investors should understand that certain other investment alternatives such as
money market instruments or bank accounts provide fixed yields and also that
bank accounts may be insured.
29
<PAGE>
YIELD FOR 30-DAY PERIOD ENDED DECEMBER 31, 1998 FOR
U.S. GOVERNMENT INCOME PORTFOLIO OF OCC ACCUMULATION TRUST
YIELD
U.S. GOVERNMENT INCOME PORTFOLIO _____%
Current yield is calculated according to the following formula:
x 6
YIELD = 2 ( --- + I) - I
cd
--------------------------
Where:
x = daily net investment income, based upon the subtraction of daily
accrued expenses from daily accrued income of the portfolio. Income
is accrued daily for each day of the indicated period based upon
yield-to-maturity of each obligation held in the portfolio as of the
day before the beginning of any thirty-day period or as of contractual
settlement date for securities acquired during the period. Mortgage
and other receivables-backed securities calculate income using coupon
rate and outstanding principal amount.
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
Yield does not reflect capital gains or losses, non-recurring or irregular
income. Gain or loss attributable to actual monthly paydowns on mortgage or
other receivables-backed obligations purchased at a discount or premium is
reflected as an increase or decrease in interest income during the period.
A Portfolio's average annual total return represents an annualization of
the Portfolio's total return ("T" in the formula below), over a particular
period and is computed by finding the current percentage rate which will result
in the ending redeemable value ("ERV" in the formula below) of a $1,000
investment, ("P" in the formula below) made at the beginning of a one, five or
ten year period, or for the period from the date of commencement of the
Portfolio's operation, if shorter ("N" in the formula below). The following
formula will be used to compute the average annual total return for each
Portfolio (other than the Money Market Portfolio):
N
P (1 + T) = ERV
In addition to the foregoing, each Portfolio may advertise its total return
over different periods of
30
<PAGE>
time by means of aggregate, average, year by year or other types of total return
figures.
Total returns quoted in advertising reflect all aspects of a Portfolio's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Portfolio's net asset value per share over
the period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical investment in a fund over a stated period,
and then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady
annual return that would equal 100% growth on a compounded basis in ten years.
In addition to average annual returns, each Portfolio may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns
may be quoted as a percentage or as a dollar amount and may be calculated for a
single investment, a series of investments and/or a series of redemptions over
any time period. Total returns and other performance information may be quoted
numerically or in a table, graph or similar illustration.
From time to time the Portfolios may refer in advertisements to rankings
and performance statistics published by (1) recognized mutual fund performance
rating services including but not limited to Lipper Analytical Services, Inc.
and Morningstar, Inc., (2) recognized indices including but not limited to the
S&P Composite Stock Price Index, S&P Mid Cap Index, the Wilshire 750 Mid Cap
Index, the Russell Mid Cap Index, Dow Jones Industrial Average, Consumer Price
Index, EAFE Index, Russell 2000 Index, the Morgan Stanley Capital International
(MSCI) All Country World Index and the Lehman Brothers US Government Bond Index
and (3) Money Magazine and other financial publications including but not
limited to magazines, newspapers and newsletters. Performance statistics may
include total returns, measures of volatility or other methods of portraying
performance based on the method used by the publishers of the information. In
addition, comparisons may be made between yields on certificates of deposit and
U.S. government securities and corporate bonds, and may refer to current or
historic financial or economic trends or conditions.
AVERAGE ANNUAL TOTAL RETURN OF EQUITY, MID CAP, MANAGED, SMALL CAP, U.S.
GOVERNMENT INCOME AND GLOBAL EQUITY PORTFOLIOS OF OCC ACCUMULATION TRUST(1,2)
<TABLE>
<CAPTION>
FOR THE ONE YEAR FOR THE FIVE YEAR FOR THE PERIOD FROM
PORTFOLIO PERIOD ENDED PERIOD ENDED INCEPTION TO
DECEMBER 31, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
---------------------- ----------------- ----------------- --------------------
<S> <C> <C> <C>
EQUITY
MID CAP
MANAGED
SMALL CAP
U.S. GOVERNMENT INCOME N/A
GLOBAL EQUITY N/A
</TABLE>
31
<PAGE>
*Inception date of the Global Equity Portfolio is March 1, 1995; the
inception date of the U.S. Government Income Portfolio is January 3, 1995 and
the inception date of the Mid Cap Portfolio is February 9, 1998. The Equity,
Managed and Small Cap Portfolios commenced operations as part of the Fund on
September 16, 1994. The Old Trust commenced operations on August 1, 1988.
(1)On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Fund, at which time the Fund commenced operations.
The total net assets for each of the Equity, Small Cap and Managed Portfolios
immediately after the transaction were $86,789,755, $139,812,573 and
$682,601,380, respectively, with respect to the Old Trust and for each of the
Equity, Small Cap and Managed Portfolios, $3,764,598, $8,129,274 and
$51,345,102, respectively, with respect to the Fund.
For the period prior to September 16, 1994, the performance figures above
for each of the Equity, Small Cap and Managed Portfolios reflect the performance
of the corresponding Portfolios of the Old Trust.
(2)Reflects waiver of all or a portion of the advisory fees and
reimbursement of other expenses for certain Portfolios by the Manager. Without
such waivers and reimbursements, the average annual total return during the
periods would have been lower.
ADDITIONAL INFORMATION
DESCRIPTION OF THE TRUST. The Fund was formed under the laws of
Massachusetts as a business trust on May 12, 1994 under the name Quest for Value
Asset Builder Trust. The name of the Fund was changed to Quest for Value
Accumulation Trust and then to OCC Accumulation Trust. It is not contemplated
that share certificates will be issued or regular annual meetings of the
shareholders will be held. The Fund will provide without charge to any
shareholder, upon request to the Secretary at the Fund's principal office, (a) a
full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of
beneficial interest of each series which the Fund is authorized to issue, (b)
the differences in the relative rights and preferences between the shares of
each series to the extent they have been set, and (c) the authority of the Board
of Trustees to set the reliable rights and preferences of subsequent series.
Shareholders have the right, upon the declaration in writing or vote of a
majority of the outstanding shares of the Fund, to remove a Trustee. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon written request of the record holders (for at least six months) of 10% of
its outstanding shares. In addition, 10 shareholders holding the lesser of
$25,000 or 1% of the Fund's outstanding shares may advise the Trustees in
writing that they wish to communicate with other shareholders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then either give
the applicants access to the Fund's shareholder list or mail the applicants'
communication to all other shareholders at the applicants' expense.
The Declaration of Trust contains an express disclaimer of shareholder
liability for the Fund's obligations, and provides that the Fund shall indemnify
any shareholder who is held personally liable for the obligations of the Fund.
It also provides that the Fund shall assume, upon request, the defense of any
claim made against any shareholder for any act or obligation of the Fund and
shall satisfy any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a trust (such as the Fund) to be held personally
32
<PAGE>
liable as a partner under certain circumstances, the risk of a shareholder
incurring any financial loss on account of shareholder liability is limited to
the relatively remote circumstance in which the Fund itself would be unable to
meet the obligations described above.
POSSIBLE ADDITIONAL PORTFOLIO SERIES. If additional Portfolios are created
by the Board of Trustees, shares of each such Portfolio will be entitled to vote
as a class only to the extent permitted by the 1940 Act (see below) or as
permitted by the Board of Trustees. Income and operating expenses would be
allocated fairly among two or more Portfolios by the Board of Trustees.
Under Rule 18f-2 of the 1940 Act, any matter required to be submitted to a
vote of shareholders of any investment company which has two or more series
outstanding is not deemed to have been effectively acted upon unless approved by
the holders of a "majority" (as defined in that Rule) of the voting securities
of each series affected by the matter. Such separate voting requirements do not
apply to the election of trustees or the ratification of the selection of
independent accountants. The Rule contains special provisions for cases in
which an advisory agreement is approved by one or more, but not all, series. A
change in investment policy may go into effect as to one or more series whose
holders so approve the change even though the required vote is not obtained as
to the holders of other affected series.
DISTRIBUTION AGREEMENT. Under the Distribution Agreement between each
Portfolio and the Distributor, the Distributor acts as the Portfolio's agent in
the continuous public offering of its shares. Expenses normally attributed to
sales, including advertising and the cost of printing and mailing prospectuses
other than those furnished to existing shareholders, are borne by the
Distributor.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 1177 Avenue of the
Americas, New York, New York 10036 serves as independent accountants of the
Fund; their services include examining the annual financial statements of each
Portfolio as well as other related services.
33
<PAGE>
ITEM 22. Financial Statements
Financial Statements:
Included in the Prospectus:
None
Included in Part B:
None
Included in Part C:
None
34
<PAGE>
ITEM 23 EXHIBITS:
(a)(1) Declaration of Trust - Previously filed with
Post-Effective Amendment No. 3.
(a)(2) Amendment to Declaration of Trust dated September 1, 1994
- Previously filed with Post Effective Amendment No. 3.
(a)(3) Amendment to Declaration of Trust dated September 16,
1994 - Previously filed with Post-Effective Amendment No. 3.
(a)(4) Amendment to Declaration of Trust dated April 22, 1996 -
Previously filed with Post-Effective Amendment No. 2.
(b) By-Laws of Registrant - Previously filed with Post-Effective
Amendment No. 3.
(c) Articles VI, VIII, IX and X of The Declaration of Trust and
Article III of The Bylaws.
(d) Investment Advisory Agreement. - Previously filed with Post-
Effective Amendment No. 8.
(e) Distribution Agreement. - Previously filed with Post-Effective
Amendment No. 8.
(f) Retirement Plan for Non-Interested Trustees or Directors.
(g) Custody Agreement - Previously filed with Post-Effective
Amendment No. 3.
(h)(1) Participation Agreement for American Enterprise Life
Insurance Company - Previously filed with Post-Effective
Amendment No. 3.
(h)(2) Amendment No. 1 to Participation Agreement for American
Enterprise Life Insurance Company. - Previously filed with Post-
Effective Amendment No. 8.
(h)(3) Participation Agreement for Connecticut General Life
Insurance Company and amendment dated August 30, 1996 -
Previously filed with Post-Effective Amendment No. 3.
C-1
<PAGE>
(h)(4) Participation Agreement for IL Annuity and Insurance
Company- Previously filed with Post-Effective Amendment No. 2.
(h)(5) Participation Agreement for Connecticut General Life
Insurance Company (Separate Account T3)-Previously filed with
Post-Effective Amendment No. 2.
(h)(6) Fund Participation Agreement for CIGNA Life Insurance
Company dated September 5, 1996 - Previously filed with Post-
Effective Amendment No. 3.
(h)(7) Amendment to Fund Participation Agreement for Connecticut
General Life Insurance Company dated 4/23/97 - Previously filed
with Post-Effective Amendment No. 5.
(h)(8) Participation Agreement for Providentmutual Life dated
9/16/94 - Previously filed with Post-Effective Amendment No. 4.
(h)(9) Participation Agreement for PRUCO Life Insurance Company
of Arizona dated 7/1/96 - Previously filed with Post-Effective
Amendment No. 4.
(h)(10) Participation Agreement for PRUCO Life Insurance Company
of New Jersey dated 1/1/97 - Previously filed with Post-Effective
Amendment No. 4.
(h)(11) Participation Agreement for Prudential Insurance Company
of America - Previously filed with Post-Effective Amendment
No. 4.
(h)(12) Participation Agreement for MONY Life Insurance Company
of America and The Mutual Life Insurance Company of New York
dated as of September 16, 1994 - Previously filed with
Post-Effective Amendment No. 7.
(h)(13) Participation Agreement for ReliaStar Life Insurance
Company dated August 8, 1997 - Previously filed with
Post-Effective Amendment No. 7.
(h)(14) Participation Agreement for ReliaStar Bankers Security
Life Insurance Company dated August 8, 1997 - Previously filed
with Post-Effective Amendment No. 7.
(h)(15) Participation Agreement for Northern Life Insurance
Company dated August 8, 1997 - Previously filed with
Post-Effective Amendment No. 7.
(h)(16) Participation Agreement for American Centurion Life
Insurance Assurance Company - Previously filed with
Post-Effective Amendment No. 7.
(h)(17) Participation Agreement for Sun Life Assurance Company
of Canada (U.S.) dated as of February 17, 1998 - Previously filed
with Post-Effective Amendment No. 8.
C-2
<PAGE>
(h)(18) Participation Agreement for Transamerica Life Insurance
Company of New York dated December 15, 1997 - Previously filed
with Post-Effective Amendment No. 8.
(h)(19) Participation Agreement for Transamerica Occidental Life
Insurance Company dated December 15, 1997 - Previously filed with
Post-Effective Amendment No. 8.
(h)(20) Participation Agreement for Transamerica Life and Annuity
Company dated December 15, 1997 - Previously filed with
Post-Effective Amendment No. 8.
(h)(21) Amendment No. 2 dated August 21, 1998 to Participation
Agreement for American Enterprise Life Insurance Company, dated
February 21, 1995.
(h)(22) Participation Agreement for Lincoln National Life
Insurance, dated May 15, 1998 and amendment thereto dated
October 7, 1998.
(h)(23) Participation Agreement for First Providian Life and
Health Insurance Company, dated November 1, 1996.
(h)(24) Participation Agreement for Providian Life and Health
Insurance Company, dated September 16, 1994.
(h)(25) Amendment dated September 1, 1998 to Participation
Agreement of August 8, 1997 for ReliaStar Life Insurance Company
of New York (formerly ReliaStar Bankers Life Insurance Company).
(h)(26) Amendment dated October 14, 1998 to Participation
Agreement dated September 17, 1997 for American Centurion Life
Insurance Company.
(h)(27) Amendment dated December 1, 1998 to Participation
Agreement of February 17, 1998 for Sun Life Assurance Company of
Canada (U.S.)
(h)(28) Participation Agreement for Travelers Insurance Company
dated May 1, 1998.
(i) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when sold be
legally issued, fully paid and non-assessable - Previously filed with
Post-Effective Amendment No. 3.
(j) Consent of Independent Accountants.*
(k) Not Applicable.
C-3
<PAGE>
(l) Agreement relating to initial capital - Previously filed with
Post-Effective Amendment No. 3.
(m) Not Applicable.
(n) Financial Data Schedules. *
(o) Not applicable.
*To be filed with Post-Effective Amendment No. 10.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is presently controlled by or under common control
with the Registrant.
ITEM 25. INDEMNIFICATION
Pursuant to Article V, Sec. 5.3 of the Registrant's Declaration
of Trust, the Trustees shall provide for indemnification by the Trust
of any present or former trustee, officer or agent in connection with
any claim, action, suit or proceeding in which he becomes involved as
a party or otherwise by virtue of his being, or having been, a
trustee, officer or agent of the Trust. The Trust By-
Laws provide that, in other than derivative or shareholder suits,
trustees, officers and/or agents will be indemnified against expenses
of actions or omissions if the actions or omissions complained of were
in good faith and reasonably believed to be in and not opposed to the
best interests of the Trust, or, if a criminal action, the accused had
no cause to believe his conduct was unlawful.
C-4
<PAGE>
In derivative and shareholder actions, such trustee, officer
and/or agent shall be indemnified against expenses except where
liability arises by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duties as described in Section
17(h) and (i) of the Investment Company Act of 1940. Either Trustees
not a party to the action, shareholders or independent legal counsel
by written opinion may, in appropriate circumstances, decide questions
of indemnification under the By-Laws.
The Trust may purchase insurance insuring its officers and
trustees against certain liabilities in their capacity as such, and
insuring the Trust against any payments which it is obligated to make
to such persons under any foregoing indemnification provisions.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Fund" in the Prospectus and "Investment
Management and Other Services" in the Additional Statement regarding
the business of the investment adviser. Set forth below is
information as to the business, profession, vocation or employment of
a substantial nature of each of the officers and directors of the
investment adviser.
NAME & CURRENT POSITION WITH OPCAP OTHER BUSINESS AND CONNECTIONS DURING
ADVISORS THE PAST TWO YEARS
Thomas E. Duggan, General Counsel & Managing Director and General Counsel
Secretary of Oppenheimer Capital; General Counsel
and Secretary of OCC Distributors.
Bernard H. Garil, President Managing Director of Oppenheimer
Capital; Director of Oppenheimer
Capital Trust Company.
C-5
<PAGE>
Lawrence K. Becker, Treasurer and Managing Director/Treasurer/Chief
Chief Financial Officer Financial Officer of Oppenheimer
Capital; Treasurer and Chief
Financial Officer of OCC Distributors
The address of OpCap Advisors is 200 Liberty Street, New York, New York 10281.
ITEM 27. PRINCIPAL UNDERWRITER
(a) OCC Distributors acts as principal underwriter for the
Registrant and, OCC Cash Reserves, Inc.
(b) Set forth below is certain information pertaining to the
partners and officers of OCC Distributors, Registrant's Principal
Underwriter; the Principal Business Address of EACH IS ONE WORLD
FINANCIAL CENTER, NEW YORK, NEW YORK, 10281 EXCEPT FOR VALUE
ADVISORS LLC WHOSE PRINCIPAL BUSINESS ADDRESS IS: 800 NEWPORT
CENTER DRIVE, NEWPORT BEACH, CA 92660
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
------------------- --------------------- ---------------------
Oppenheimer Capital General Partner None
Value Advisors LLC General Partner None
Everett Alcenat Principal None
Lawrence K. Becker Treasurer Treasurer
Thomas E. Duggan Secretary None
(c) Not applicable.
ITEM 28. LOCATION OF REQUIRED RECORDS -- RULE 31a-1
(Except those maintained by Custodian and Transfer Agent)
OpCap Advisors
One World Financial Center
New York, NY 10281
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
C-6
<PAGE>
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to assist shareholder communication in
accordance with the provisions of Section 16 of the Investment Company
Act of 1940 and to call a meeting of shareholders for the purpose of
voting upon the question of the removal of a Trustee or Trustees when
requested in writing to do so by the holders of at least 10% of the
Registrant's outstanding shares of beneficial interest.
(d) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders upon request and without charge, if the
information called for by Item 5A of Form N-1A is contained in the
latest annual report to shareholders.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned thereto duly authorized
in the City of New York, and State of New York on the 12 day of February, 1999.
OCC ACCUMULATION TRUST
s/Joseph M. La Motta
-----------------------------
Joseph M. La Motta, President
Attest:
s/Deborah Kaback
- ------------------------
Deborah Kaback, Secretary
Pursuant to the requirements of the Securities Act of 1933 this
registration statement has been signed below by the following persons in the
capacities and on the date indicated:
OCC ACCUMULATION TRUST
<TABLE>
<CAPTION>
Date
<S> <C>
s/Joseph M. La Motta February 12, 1999
- ------------------------------------- ---------------------------------
Joseph M. La Motta, President, Trustee
s/Paul Y. Clinton February 12, 1999
- ------------------------------------- ---------------------------------
Paul Y. Clinton, Trustee
s/Thomas W. Courtney February 12, 1999
- ------------------------------------- ---------------------------------
Thomas W. Courtney, Trustee
s/Lacy B. Herrmann February 12, 1999
- ------------------------------------- ---------------------------------
Lacy B. Herrmann, Trustee
s/George Loft February 12, 1999
- ------------------------------------- ---------------------------------
George Loft, Trustee
s/Deborah Kaback February 12, 1999
- ------------------------------------- ---------------------------------
Deborah Kaback, Secretary
s/Richard Peteka February 12, 1999
- ------------------------------------- ---------------------------------
Richard Peteka, Treasurer
</TABLE>
C-8
<PAGE>
OCC ACCUMULATION TRUST
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C>
(f) Retirement Plan for non-interested trustees or Directors.
(h)(21) Amendment No. 2 dated August 21, 1998 to Participation
Agreement for American Enterprise Life Insurance Company, dated
February 21, 1995.
(h)(22) Participation Agreement for Lincoln National Life
Insurance, dated May 15, 1998 and amendment thereto dated
October 7, 1998.
(h)(23) Participation Agreement for First Providian Life and
Health Insurance Company, dated November 1, 1996.
(h)(24) Participation Agreement for Providian Life and Health
Insurance Company dated September 16, 1994.
(h)(25) Amendment dated September 1, 1998 to Participation
Agreement dated August 8, 1997 for ReliaStar Life Insurance
Company of New York (formerly ReliaStar Bankers Security Life
Insurance Company).
(h)(26) Amendment dated October 14, 1998 to Participation
Agreement dated September 17, 1997 for American Centurion Life
Insurance Company.
(h)(27) Amendment dated December 1, 1998 to Participation
Agreement dated February 17, 1998 for Sun Life Assurance Company
of Canada (U.S.)
(h)(28) Participation Agreement for Travelers Insurance Company
dated May 1, 1998.
</TABLE>
<PAGE>
RETIREMENT PLAN FOR
NON-INTERESTED TRUSTEES
OR DIRECTORS
The investment companies referred to on Schedule A, as such schedule
may be amended from time to time, (the "Adopting Funds") have adopted this
Retirement Plan for Non-Interested Trustees and Directors (the "Plan"). OpCap
Advisors acts as manager or adviser ("OCA") for the Adopting Funds.
The Plan has been established for the benefit of (i) the Trustees of
an Adopting Fund if the Adopting Fund is organized as a Massachusetts business
trust, (ii) the Directors of an Adopting Fund if the Adopting Fund is organized
as a corporation, and (iii) the "directors" (as such term is defined in Section
2(a)(12) of the Investment Company Act of 1940, as amended [the "Act"]) of an
Adopting Fund if the Adopting Fund is any other type of organization, who in any
such case are not interested persons (as such term is defined in Section
2(a)(19) of the Act) of OCA or OCD. Such Trustees, Directors or "directors"
are referred to as "Independent Board Members" regardless of the form of
business organization of the Adopting Funds. "Board" shall mean, with respect
to any Adopting Fund, the Board of Directors or Trustees or "directors," (as
such term is defined in Section 2(a)(12) of the Act), of such Adopting Fund.
1. ELIGIBILITY
Each Independent Board Member who serves as a director on the date
hereof or hereafter commences service as a director and who, at the time of
Retirement (as defined in paragraph 6(d)), has served as an Independent Board
Member ("Eligible Service") for at least
<PAGE>
seven years, or such lesser period as may be approved by the board, will be an
"Eligible Board Member", and will be eligible to receive a Benefit(as defined in
paragraph 6(e)) from each Adopting Fund commencing on the last day of the
calendar month in which such Eligible Board Member's seventy-fifth birthday
occurs (such day is referred to as such Eligible Board Member's "Eligible
Retirement Date"). An Independent Board Member's period of Eligible Service
commences on the date of election to the board of directors or trustees, as the
case may be, as an Independent Board Member (the "Board") of any Adopting Fund
or of any other registered investment company as to which OCA acts as manager or
adviser.
2. RETIREMENT DATE; AMOUNT OF BENEFIT
a. RETIREMENT. Each Independent Board Member other than an
Independent Board member serving on the date (the "Original Adoption Date") of
the original adoption of this Plan by the Board of any Adopting Fund (an
"Adopting Board Member"), will retire not later than the last day of the
calendar month in which such Eligible Board Member's seventy-fifth birthday
occurs; PROVIDED, HOWEVER, that the Board of any Adopting Fund may, to avoid the
simultaneous retirement of more than one of the Independent Board Members or for
any other appropriate reason, waive the obligation of any Independent Board
Member to retire on such date and may establish a later date as his or her
"Eligible Retirement Date." Any establishment of an Eligible Retirement Date
may be further extended by the Board.
-2-
<PAGE>
The "Base Retirement Date" for each Eligible Board Member shall
be the last day of the calendar month in which such Eligible Board Member
retires. Each retired Independent Board Member is referred to as a "Retired
Board Member".
b. REGULAR RETIREMENT BENEFIT. Upon Retirement, each Eligible
Board Member will receive, commencing as of the later of such Eligible Board
Member's Eligible Retirement Date or Base Retirement Date, for the remainder of
the Eligible Board Member's life, a retirement benefit (the "Regular Benefit")
paid at an annual rate equal to 40% of the average total compensation, inclusive
of compensation received for attendance at meetings, paid to such Eligible Board
Member as an Independent Board Member in each of the five highest years of
compensation for Eligible Service ("Average Compensation"), PLUS an additional
0.4166666666667%of such Average Compensation for each full month of Eligible
Service in excess of seven years, up to a maximum of 80% of such Average
Compensation for fifteen or more years of Eligible Service.
c. ELECTION OF ALTERNATE PAYMENT OF BENEFIT. Each
Independent Board Member shall have the option, exercisable within ninety
days after the later of the Original Adoption Date or the first date of such
Eligible Board Member's election as an Independent Board Member, to elect to
receive, subject to becoming an Eligible Board Member, a retirement benefit
(the "Alternate Benefit") based upon the combined life expectancy of such
Eligible Board Member and his or her spouse on the date of election by such
Eligible Board Member (rather than solely upon such Eligible Board Member and
his or her spouse on the date of election by such Eligible Board Member
(rather than solely upon such Eligible Board Member's own life, as shall be
the case unless such Eligible Board
-3-
<PAGE>
Member shall otherwise elect as provided in this Section 2(c)), commencing on
the later of such Eligible Board Member's Base Retirement Date and payable
through the remainder of the later of the lives of such Eligible Board Member
and spouse. Each Eligible Board Member shall have the option, exercisable
within ninety days before such Eligible Board Member's Base Retirement Date,
to change such Eligible Board Member's previous election, and to choose
either the Regular Benefit or the Alternate Benefit. In the event of the
death of an Eligible Board Member who has chosen the Alternate Benefit prior
to such Eligible Board Member's Retirement, his or her spouse shall be
entitled to a retirement benefit, commencing upon such death, which shall be
the Actuarial Equivalent of the benefit such spouse would have received had
such Eligible Board Member died on his or her Eligible Retirement Date. The
Alternate Benefit shall be the actuarial equivalent of the Regular Benefit
provided under paragraph 2(b). Actuarial equivalence for these purposes
shall be computed by the Board with the advice of an enrolled actuary (as
defined in the Employee Retirement Income Security Act of 1974, as amended
["ERISA"]).
d. EARLY PAYMENT OF BENEFIT. At the discretion of the Board,
an Eligible Board Member may receive, commencing on a date earlier than such
Eligible Board Member's Eligible Retirement Date that is fixed by the Board in
its sole discretion upon a showing of good cause by the Eligible Board Member, a
retirement benefit (the "Early Benefit") for the remainder of such Eligible
Board Member's life or based upon the combined life expectancy of such Eligible
Board Member and his or her spouse (rather than solely upon such Eligible Board
Member's own life) which is the actuarial equivalent of the Regular Benefit or
Alternate Benefit elected by such Eligible Board Member pursuant to Section
2(c). Actuarial equivalence for these
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<PAGE>
purposes shall be computed by the Board with the advice of an Enrolled Actuary
selected by the Board. Good cause for these purposes may include (but is not
limited to) the permanent disability of the Eligible Board Member, and any
substantial medical or other similar expenses of the Eligible Board Member.
3. TIME OF PAYMENT
The Benefit to each Eligible Board Member will, except as provided in
Section 2(d) hereof, commence on the later of such Eligible Board Member's Base
Retirement Date or Eligible Retirement Date and will be paid each year in
quarterly installments that are as nearly equal as possible, on the first day of
each calendar quarter.
4. PAYMENT OF BENEFIT; ALLOCATION OF COSTS
The Adopting Funds are responsible for the payment of the Benefits, as
well as all expenses of administration of the Plan, including without limitation
all accounting and legal fees and expenses and fees and expenses of any Enrolled
Actuary. The obligations of the Adopting Funds to pay such benefits and
expenses will not be secured or funded in any manner, and such obligations will
not have any preference over the lawful claims of the Adopting Funds' creditors
and stockholders, shareholders beneficiaries or limited partners, as the case
may be. To the extent that the Adopting Funds consist of one or more separate
portfolios, such costs and expenses will be allocated among such portfolios in
the proportion that compensation of Independent Board Members is allocated among
such portfolios.
-5-
<PAGE>
5. ADMINISTRATION
a. ADMINISTRATION. Any question involving entitlement to
payments under or the administration of the Plan will be referred to the
Independent Board Members of each of the Adopting Funds, who will make all
interpretations and determinations necessary or desirable for the Plan's
administration (such interpretations and determinations will be final and
conclusive), adopt, amend or repeal by-laws or other regulations, relating to
the administration of the Plan and cause such records to be kept as may be
necessary for the administration of the Plan.
6. MISCELLANEOUS AND TRANSITION PROVISIONS
a. RIGHTS NOT ASSIGNABLE. The right to receive any payment
under the Plan is not transferable or assignable. Except as otherwise provided
herein with respect to the Alternate Benefit, the Plan shall not create any
benefit, cause of action, right of sale, transfer, assignment, pledge,
encumbrance, or other such right in any spouse or heirs or the estate of any
Eligible Board Member or Retired Board Member.
b. AMENDMENT, ETC. The Board of the Adopting Funds, with the
concurrence of the Independent Board Members of such Funds, may at any time
amend or terminate the Plan or waive any provision of the Plan, PROVIDED that
except as otherwise provided herein, no amendment, termination or waiver will
impair the rights of an Eligible Board Member to receive upon Retirement the
payments which would have been made to such Board Member had there been no such
amendment, termination or waiver (based upon such Board Member's Eligible
Service to the date of such amendment, termination or waiver) or the rights of a
Retired Board
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<PAGE>
Member to receive any Benefit due under the Plan, without the consent of such
Eligible Board Member or Retired Board Member, as the case may be.
Notwithstanding any provision to the contrary, (a) the Board of the Adopting
Funds, with the concurrence of the Independent Board Members of such Funds, may
at any time: (i) amend or terminate the Plan to comply with any applicable
provision of law or any rule or regulation adopted, or proposed to be adopted,
by any governmental agency or any decision of any court or administrative
agency; (ii) change any assumptions used to determine what benefit may be an
Actuarial Equivalent, or (iii) terminate the Plan of an Adopting Fund (an
"Acquired Adopting Fund") substantially all the assets of which are acquired by
an entity which is itself an Adopting Fund (the "Acquiring Adopting Fund")
pursuant to a plan of reorganization between the Acquired Adopting Fund and the
Acquiring Adopting Fund (the "Reorganization Plan"), such termination to be
deemed approved upon adoption of the Reorganization Plan and to be effective
upon the effectiveness of the reorganization contemplated thereby without
liability or further obligation for any Benefits accrued or otherwise payable to
an Independent Board Member by the Acquired Adopting Fund, and (b) the Plan of
an Adopting Fund (a "Liquidated Adopting Fund") which adopts a plan of
liquidation (the "Liquidation Plan") shall be deemed terminated upon adoption of
the Liquidation Plan, to be effective upon the effectiveness of the liquidation
contemplated thereby without any further liability or obligation other than for
any Benefits theretofore accrued on the books of the Fund (whether or not then
due and payable) with respect to an Independent Board Member by the Liquidated
Adopting Fund.
c. WAIVER. An Eligible Board Member or Retired Board Member
may elect to waive receipt of his Benefit by so advising the Board.
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<PAGE>
d. NO RIGHT TO REELECTION. Nothing in the Plan will create any
obligation on the part of the Board to nominate any Independent Board Member for
reelection.
e. "RETIREMENT" DEFINED. The term "Retirement" includes any
termination of service of an Eligible Board Member except any termination which
the Committee determines to have resulted from the Eligible Board Member's
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Independent Board Member.
f. "BENEFIT" DEFINED. The term "Benefit" shall mean, with
respect to an Eligible Board Member, (i) the Regular Benefit, unless the
Alternate Benefit has been elected or the Early Benefit granted, (ii) the
Alternate Benefit, if elected by such Eligible Board Member within the period
set forth in Section 3(c), unless the Early Benefit has been granted, or (iii)
the Early Benefit, if granted by the Board.
g. VACANCIES. Although the Board will retain the right to
increase or decrease its size, it shall be the general policy of the Board to
replace each Retired Board Member by selecting a new Independent Board Member
from candidates recommended by the remaining Independent Board Members.
h. CONSULTING. Each Retired Board Member may render such
services for the Adopting Funds, for such compensation, as may be agreed upon
from time to time by such Retired Board Member and the Board of the Adopting
Funds.
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<PAGE>
i. TRANSITION PROVISIONS. The Plan will be effective for all
Eligible Board Members who have dates of Retirement occurring on or after the
Adoption Date. Periods of Eligible Service shall include periods commencing
prior to such date.
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<PAGE>
SCHEDULE A
LIST ALL OPCAP FUNDS
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<PAGE>
<PAGE>
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT
BY AND AMONG
OCC ACCUMULATION TRUST,
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY AND
OCC DISTRIBUTORS
This is an amendment to the February 21, 1995 Participation Agreement, as
amended ("Agreement") among OCC Accumulation Trust (formerly Quest for Value
Accumulation Trust), American Enterprise Life Insurance Company and OCC
Distributors (formerly Quest for Value Distributors).
SCHEDULE 1 to the Agreement is amended to read as follows:
The following separate accounts of American Enterprise Life Insurance
Company are permitted in accordance with the provisions of this Agreement
to invest in Portfolios of the Fund shown in Schedule 2:
American Enterprise Variable Annuity Account, established July 15, 1987 as
used to fund the flexible premium variable annuity contracts known as the
AEL Personal Portfolio,-SM- AEL Personal Portfolio Plus and AEL Personal
Portfolio Plus (2).
SCHEDULE 2 to the Agreement is amended to read as follows:
The separate account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Managed Portfolio
U.S. Government Income Portfolio
Small Cap Portfolio
Equity Portfolio
OCC ACCUMULATION TRUST OCC DISTRIBUTORS
Signature: s/ Bernard H. Garil Signature: s/ Thomas E. Duggan
------------------------- -------------------------
By s/ Bernard H. Garil By s/ Thomas E. Duggan
-------------------------------- --------------------------------
Title: Vice President Title: Secretary
---------------------------- ----------------------------
AMERICAN ENTERPRISE LIFE ATTEST:
INSURANCE COMPANY
Signature: s/ James E. Choat Signature: s/ Mary Ellyn Minenko
------------------------- -------------------------
By s/ James E. Choat By s/ Mary Ellyn Minenko
-------------------------------- --------------------------------
Title: President Title: Assistant Secretary
---------------------------- ----------------------------
Date: August 21, 1998
-----------------------
<PAGE>
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 15 day of May 1998 by and
among The Lincoln National Life Insurance Company, an Indiana Corporation
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time (each account referred to as the "Account"), OCC
ACCUMULATION TRUST, an open-end diversified management investment company
organized under the laws of the State of Massachusetts (hereinafter the "Fund")
and OCC DISTRIBUTORS, a Delaware general partnership (hereinafter the
"Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
<PAGE>
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (alternatively referred to as the "SEC" or the
"Commission"), dated February 22, 1995 (File No. 812-9290), granting
Participating Insurance Companies and variable annuity separate accounts and
variable life insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity separate accounts and variable life insurance
separate accounts of both affiliated and unaffiliated Participating Insurance
Companies and qualified pension and retirement plans (hereinafter the "Mixed and
Shared Funding Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts and variable life insurance policies (the "Contracts") under
the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of Indiana, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
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<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Accounts named in Schedule 2 to fund the Contracts
and the Underwriter is authorized to sell such shares to unit investment trusts
such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE AND REDEMPTION OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of each Account, executing such
orders on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the Fund
for receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day
after it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Trustees of the Fund (hereinafter the "Directors")
3
<PAGE>
may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Directors, acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the contracts. No
shares of any Portfolio will be sold to the general public.
1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating Insurance Companies and
(ii) a copy of the Participation Agreement executed by any other Participating
Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, the Company shall be the designee of the Fund for receipt
of requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment shall be in federal funds
4
<PAGE>
transmitted by wire to the Company's account as designated by the Company in
writing from time to time, on the same Business Day the Fund receives notice of
the redemption order from the Company, except that the Fund reserves the right
to delay payment of redemption proceeds in the event that portfolio holdings
other than cash equivalents must be liquidated to pay the redemption proceeds,
but in no event may such payment be delayed longer than the period permitted
under Section 22(e) of the 1940 Act. Neither the Fund nor the Underwriter shall
bear any responsibility whatsoever for the proper disbursement or crediting of
redemption proceeds; the Company alone shall be responsible for such action. If
notification of redemption is received after 10:00 a.m. Eastern Time, payment
for redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund shall furnish notice as soon as reasonably practicable
to the Company of any income, dividends or capital gain distributions payable on
the Fund's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this
election and to receive all such dividends and distributions in cash. The Fund
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
5
<PAGE>
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 5:30 p.m.,
Eastern Time, each business day. Any material error in the calculation of net
asset value per share, dividend or capital gain information shall be reported
promptly to the Company upon discovery by the Fund and the Company shall be
entitled to an adjustment to the number of shares purchased or redeemed to
reflect the correct net asset value.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts will be issued and
sold in compliance with all applicable federal and state laws. The Company
further represents and warrants that it is an insurance company duly organized
and validly existing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
the 1940 Act requires. The Company shall amend the registration statement under
the 1933 Act for the Contracts and the registration statement under the 1940 Act
for the Account from time to time as required in order to effect the continuous
offering of the Contracts or as may otherwise be required by applicable law.
The Company shall register and qualify the Contracts for sale in accordance with
the securities laws of the various states only if and to the extent deemed
necessary by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts or
life insurance policies under
6
<PAGE>
applicable provisions of the Internal Revenue Code and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code,
and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws and regulations of any state. The
Company alone shall be responsible for informing the Fund of any investment
restrictions imposed by state insurance laws which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the
7
<PAGE>
aforementioned state insurance laws upon written notice from the Company of such
requirements and proposed adjustments, it being agreed and understood that in
any such case the Fund shall be allowed a reasonable period of time under the
circumstances after receipt of such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have its Board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the National Association of Securities Dealers, Inc., ("NASD")
and is registered as a broker-dealer with the SEC. The Underwriter further
represents that it will sell and distribute the Fund shares in accordance with
all applicable federal and state securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser,
OpCap Advisors, is and shall remain duly registered under federal securities
laws and that the Adviser will perform its obligations to the Fund in accordance
with the laws of Massachusetts and any applicable state and federal securities
laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds
8
<PAGE>
and/or securities of the Fund are and continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
adopted pursuant to the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid Bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$5 million. The aforesaid includes coverage for larceny and embezzlement and is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus or, if requested
by the Company, a version of the Fund's prospectus that includes only the
Portfolios of the Fund that are used to fund the Company's contracts, as the
Company may reasonably request for use with prospective contractowners and
applicants. The Underwriter shall print and distribute, at the Fund's or
Underwriter's expense, as many copies of said prospectus as necessary for
distribution to existing contractowners or participants. If requested by the
Company in lieu thereof, the Fund shall provide such documentation including a
final copy of a current prospectus set in type at the Fund's expense and other
assistance as is reasonably necessary in order for the Company at least
9
<PAGE>
annually (or more frequently if the Fund prospectus is amended more frequently)
to have the new prospectus for the Contracts and the Fund's new prospectus
printed together in one document. In such case the Fund shall bear its share of
expenses as described above.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
alternatively from the Company (or, in the Fund's discretion, the Prospectus
shall state that such Statement is available from the Fund), and the Underwriter
(or the Fund) shall provide such Statement, at its expense, to the Company and
to any owner of or participant under a Contract who requests such Statement or,
at the Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, if any, reports to shareholders and other communications
to shareholders in such quantity as the Company shall reasonably require and
shall bear the costs of distributing them to existing contractowners or
participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or
participants;
(ii) vote the Fund shares held in an Account in accordance with
instructions received from contractowners or participants;
and
(iii) vote Fund shares held in an Account for which no timely
instructions have been received, in the same proportion as
Fund shares of such Portfolio for which instructions have
been received from the Company's contractowners or
participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
10
<PAGE>
accounts participating in the Fund calculates voting privileges in a manner
consistent with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required, the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Fund's adviser or the Underwriter is named, at
least fifteen business days prior to its use. No such material shall be used if
the Fund or the Underwriter reasonably objects in writing to such use within ten
business days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
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4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least fifteen 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.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to contractowners or participants,
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.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within 20
days after the filing of such document with the SEC or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to
12
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the Fund, within 20 days after the filing of such document with the SEC or other
regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. All Fund
shares will be duly authorized for issuance and registered in accordance with
applicable federal law and to the extent deemed
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<PAGE>
advisable by the Fund, in accordance with applicable state law, prior to sale.
The Fund shall bear the expenses for the cost of registration and qualification
of the Fund's shares, preparation and filing of the Fund's prospectus and
registration statement, Fund proxy materials and reports, setting in type,
printing and distributing the prospectuses, the proxy materials and reports to
existing shareholders and contractowners, the preparation of all statements and
notices required by any federal or state law, all taxes on the issuance or
transfer of the Fund's shares, and any expenses permitted to be paid or assumed
by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Internal Revenue Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section or
Regulations in accordance with guidelines provided by the Company prior to the
execution of this Agreement and as necessary thereafter. In the event of a
breach of this Article VI by the Fund, it 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 with the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Fund Board") will
monitor the Fund for the existence of any material irreconcilable conflict among
the interests of the contractowners
14
<PAGE>
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by variable annuity
contract and variable life insurance contractowners; or (f) a decision by an
insurer to disregard the voting instructions of contractowners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof. A majority of the Fund Board
shall consist of persons who are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding
Exemptive Order, the Company will report any potential or existing conflicts of
which it is aware to the Fund Board. The Company agrees to assist the Fund
Board in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board upon its request with all
information reasonably necessary for the Fund Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Company to
inform the Fund Board whenever contractowner voting instructions are
disregarded. The Fund Board shall record in its minutes or other appropriate
records, all reports received by it and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable material
conflict exists, the Company and other Participating
15
<PAGE>
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the disinterested Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1) withdrawing the assets allocable to some or
all of the separate accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected contractowners and, as
appropriate, segregating the assets of any appropriate group (I.E., variable
annuity contractowners or variable life insurance contractowners, of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account.
7.4. If the Company's disregard of voting instructions could conflict
with the majority of contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement with respect to such
Account. Any such withdrawal and termination must take place within 90 days
after the Fund gives written notice to the Company that this provision is being
implemented. Until the end of such 90 day period the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. If a particular state insurance regulator's decision applicable
to the Company conflicts with the majority of other state insurance regulators,
then the Company will withdraw the Account's investment in the Fund and
terminate this Agreement with respect to such Account. Any such withdrawal and
termination must take place within 90 days after the Fund gives written notice
to the Company that this provision is being implemented. Until the end of such
90 day
16
<PAGE>
period the Underwriter and Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund or the Underwriter be required to establish a new
funding medium for the Contracts. The Company shall not be required by Section
7.3 to establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of contractowners materially adversely
affected by the irreconcilable material conflict.
7.7. The Company shall from time to time submit to the Fund Board
such reports, materials or data as the Fund Board may reasonably request so that
the Fund Board may fully carry out the duties imposed upon it as delineated in
the Mixed and Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if deemed appropriate by the Fund Board.
7. 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 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
17
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls or is associated with
the Fund or the Underwriter within the meaning of such terms under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including reasonable legal and other expenses), to which the
indemnified parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the registration
statement, prospectus or statement of additional
information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided
that this agreement to indemnify shall not apply
as to any indemnified party if such statement or
omission or such alleged statement or omission was
made in reliance upon and in conformity with
information furnished to the Company by or on
behalf of the Fund for use in the registration
statement, prospectus or statement of additional
information for the Contracts or in the Contracts
or sales literature or other promotional material
for the Contracts (or any amendment or supplement
to any of the foregoing) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of untrue statements
or representations by or on behalf of the Company
(other than statements or representations
contained in the Fund registration statement,
Fund
18
<PAGE>
prospectus, Fund statement of additional
information or sales literature or other
promotional material of the Fund not supplied by
the Company or persons under its control) or
willful malfeasance, bad faith or gross negligence
of the Company or persons under its control, with
respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in
the Fund registration statement, Fund prospectus,
statement of additional information or sales
literature or other promotional material of the
Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to
state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading in light of the
circumstances in which they were made, if such a
statement or omission was made in reliance upon
and in conformity with information furnished to
the Fund by or on behalf of the Company or persons
under its control; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or
to make any payments under the terms of this
Agreement; or
(v) arise out of any material breach of any
representation and/or warranty made by the Company
in this Agreement or arise out of or result from
any other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
19
<PAGE>
(a) The Underwriter, on its own behalf and on behalf of the Fund,
agrees to indemnify and hold harmless the Company and each of its directors,
officers, employees or agents and each person, if any, who controls or is
associated with the Company within the meaning of such terms under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Underwriter) or
litigation (including reasonable legal and other expenses) to which the
indemnified parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(i) 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 Fund or sales literature or
other promotional material of the Fund (or any
amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or
the alleged omission to state therein a material
fact required to be stated therein or necessary to
make the statements therein not misleading in
light of the circumstances in which they were
made; provided that this agreement to indemnify
shall not apply as to any indemnified party if
such statement or omission or such alleged
statement or omission was made in reliance upon
and in conformity with information furnished to
the Underwriter or Fund by or on behalf of the
Company for use in the registration statement,
prospectus or statement of additional information
for the Fund or in sales literature or other
promotional material of the Fund (or any amendment
or supplement to any of the foregoing) or
otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of untrue statements
or representations (other than statements or
representations contained in the Contracts or in
the Contract or Fund registration statement, the
Contract or Fund prospectus, statement of
additional information, or sales literature or
other promotional material for the Contracts or of
the Fund not supplied by the Underwriter or the
Fund or persons under the control of the Underwriter
or the Fund respectively) or willful malfeasance,
bad faith or gross negligence of the Underwriter
or the Fund or persons under the control of the
Underwriter or the Fund
20
<PAGE>
respectively, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or
other promotional material covering the Contracts
(or any amendment thereof or supplement thereto),
or the omission or alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statement or
statements therein not misleading in light of the
circumstances in which they were made, if such
statement or omission was made in reliance upon
and in conformity with information furnished to
the Company by or on behalf of the Underwriter or
the Fund or persons under the control of the
Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials
under the terms of this Agreement (including a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements and procedures related thereto
specified in Article VI of this Agreement except
if such failure is a result of the Company's
failure to comply with the notification procedures
specified in Article VI); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter or the Fund in this Agreement or arise
out of or result from any other material breach of
this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Underwriter of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
21
<PAGE>
Any person obligated to provide indemnification under this Article
VIII ("indemnifying party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("indemnified party" for the purpose of this Section 8.3) unless such
indemnified party shall have notified the indemnifying party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the
indemnified party of the indemnifying party's election to assume the defense
thereof, the indemnified party shall bear the fees and expenses of any
additional counsel retained by it, and the indemnifying party will not be liable
to such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation, unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be
22
<PAGE>
inappropriate due to actual or potential differing interests between them. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. CONTRIBUTION
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII is
due in accordance with its terms but for any reason is held to be unenforceable
with respect to a party entitled to indemnification ("indemnified party" for
purposes of this Section 8.4) pursuant to the terms of this Article VIII, then
each party obligated to indemnify pursuant to the terms of this Article VIII
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and litigations in such
proportion as is appropriate to reflect the relative benefits received by the
parties to this Agreement in connection with the offering of Fund shares to the
Account and the acquisition, holding or sale of Fund shares by the Account, or
if such allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. APPLICABLE LAW
23
<PAGE>
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months' advance written
notice to the other parties unless otherwise agreed in a separate written
agreement among the parties; or
(b) at the option of the Company if shares of the Portfolios
delineated in Schedule 2 are not reasonably available to meet the requirements
of the Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance commission
of any state or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the administration of
the Contracts, the operation of the Account, or the purchase of the Fund shares,
which the Fund reasonably believes would have a material adverse effect on the
Company's ability to perform its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body, which the
Company reasonably believes would have a
24
<PAGE>
material adverse effect on the Fund's or the Underwriter's ability to perform
its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will
give 30 days prior written notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of
(i) all contractowners of variable insurance products of all separate accounts
or (ii) the interests of the Participating Insurance Companies investing in the
Fund as delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code, or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
25
<PAGE>
(j) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement; or
(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement; or
(l) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without notice.
10.2. NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
(b) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written
notice of the election to terminate this Agreement for cause shall be furnished
by the party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the non-terminating
parties.
(c) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-
26
<PAGE>
terminating parties. Such prior written notice shall be given by the party
terminating this Agreement to the non-terminating parties at least 30 days
before the effective date of termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 of this Agreement, and subject to Section 1.3 of this Agreement,
the Company may require the Fund and the Underwriter to, continue to make
available additional shares of the Fund for so long after the termination of
this Agreement as the Company desires pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, for all Contracts in effect
on the effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other party,
such notice to be for a period that is reasonable under the circumstances but,
if given by the Fund or Underwriter, need not be for more than 90 days.
10.5. Except as necessary to implement contractowner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem
27
<PAGE>
Fund shares attributable to the Contracts (as opposed to Fund shares
attributable to the Company's assets held in the Account), and the Company shall
not prevent contractowners from allocating payments to a Portfolio that was
otherwise available under the Contracts, until 90 days after the Company shall
have notified the Fund or Underwriter of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt or by certified mail, return receipt requested, 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. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Kelly D. Clevenger
The Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. MISCELLANEOUS
28
<PAGE>
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto
shall treat as confidential all information reasonably identified as such in
writing by any other party hereto (including without limitation the names and
addresses of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit 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.
29
<PAGE>
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.
30
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative as of the date and year first written above.
COMPANY:
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
SEAL By: s/ Kelly D. Clevenger
---------------------------
FUND:
OCC ACCUMULATION TRUST
SEAL By: s/ Deborah Kaback
----------------------------
UNDERWRITER:
OCC DISTRIBUTORS
By: s/ Thomas E. Duggan
----------------------------
31
<PAGE>
SCHEDULE 1
Participation Agreement
Among
OCC Accumulation Trust, The Lincoln National Life Insurance Company
and
OCC Distributors
The following separate accounts of The Lincoln National Life Insurance
Company are permitted in accordance with the provisions of this Agreement to
invest in Portfolios of the Fund shown in Schedule 2:
Lincoln Life Flexible Premium Variable Life Separate Account M
Lincoln Life Flexible Premium Variable Life Separate Account R
May 15, 1998
<PAGE>
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, The Lincoln National Life Insurance Company
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Global Equity Portfolio
Managed Portfolio
May 15, 1998
<PAGE>
AMENDMENT TO THE PARTICIPATION AGREEMENT
DATED MAY 15, 1998
BY AND AMONG
OCC ACCUMULATION TRUST,
OCC DISTRIBUTORS AND
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
This is an amendment to the May 15, 1998 Participation Agreement
("Agreement") among OCC Accumulation Trust, OCC Distributors, and The Lincoln
National Life Insurance Company.
The following separate accounts of The Lincoln National Life Insurance
Company are permitted in accordance with the provisions of this Agreement to
invest in Portfolios of the Fund shown in Schedule 2:
Lincoln Life Flexible Premium Variable Life Separate Acount M
Lincoln Life Premium Variable Life Separate Account R
Lincoln Life Variable Annuity Account N
October 7, 1998
OCC ACCUMULATION TRUST
By: s/ Bernard H. Garil
-------------------
Name: s/ Bernard H. Garil
----------------------
Title: Vice President
OCC DISTRIBUTORS
By: s/ Thomas E. Duggan
-------------------
Name: s/ Thomas E. Duggan
-------------------
Title: Secretary
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: s/ Kelly D. Clevenger
----------------------
Name: s/ Kelly D. Clevenger
---------------------
Title: Vice President
<PAGE>
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 1st day of November, 1996,
by and among FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY, a New York
Corporation (hereinafter the "Company"), on its own behalf and on behalf of
each separate account of the Company named in Schedule 1 to this Agreement, as
may be amended from time to time (each account referred to as the "Account"),
OCC ACCUMULATION TRUST (formerly known as Quest for Value Accumulation Trust),
an open-end diversified management investment company organized under the laws
of the State of Massachusetts (hereinafter the "Fund") and OCC DISTRIBUTORS
(formerly known as Quest for Value Distributors), a Delaware general partnership
(hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
<PAGE>
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"), dated
February 22, 1995 (File No. 812-9290), granting Participating Insurance
Companies and variable annuity separate accounts and variable life insurance
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity separate accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and qualified
pension and retirement plans (hereinafter the "Mixed and Shared Funding
Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of New York, to set aside and
invest assets attributable to the Contracts; and
2
<PAGE>
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of the Account, executing such
orders on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the Fund
for receipt of such orders from each Account and receipt and acceptance by such
designee shall constitute receipt and acceptance by the Fund; provided that the
Fund receives notice of such order by 10:00 a.m. Eastern Time on the next
following Business Day. "Business
3
<PAGE>
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day
after it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire. Upon receipt by
the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.3. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading; provided, however, that the Board of
Trustees of the Fund (hereinafter the "Directors") may refuse to sell shares of
any Portfolio to any person, or suspend or terminate the offering of shares of
any Portfolio if such action (a) is required by law or by regulatory authorities
having jurisdiction or (b) is, in the sole discretion of the Directors, acting
in good faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated
4
<PAGE>
thereunder, the sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be sold to the general
public.
1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating Insurance Companies and
(ii) a copy of the Participation Agreement executed by any other Participating
Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the request for redemption. For
purposes of this Section 1.6, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt and acceptance
by such designee shall constitute receipt and acceptance by the Fund; provided
the Fund receives notice of request for redemption by 10:00 a.m. Eastern Time on
the next following Business Day. Payment shall be in federal funds transmitted
by wire (typically by 4:00 pm) to the Company's account as designated by the
Company in writing from time to time, on the same Business Day the Fund receives
notice of the redemption order from the Company except that the Fund reserves
the right to delay payment of redemption proceeds, but in no event may such
payment be delayed longer than the period permitted under Section 22(e) of the
1940 Act. Neither the Fund nor the Underwriter shall bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds by
the Company; the Company alone shall be responsible for such action. If
5
<PAGE>
notification of redemption is received after 10:00 a.m. Eastern Time, payment
for redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus. The parties
acknowledge that the arrangement contemplated by this Agreement is not
exclusive; the Fund's shares may be sold to other insurance companies, subject
to Section 1.5 and Article VI hereof and that the cash value of the Contracts
may be invested in investment companies other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
the Portfolios of the Fund named in Schedule 2; or (b) the Company gives the
Fund and the Underwriter 45 days written notice of its intention to make such
other investment company available as a funding vehicle for the Contracts; or
(c) such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and appears on Schedule 2; or (d)
the Fund or Underwriter consents in writing to the use of such other investment
company.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such dividends and
6
<PAGE>
distributions as are payable on the Portfolio shares in the form of
additional shares of that Portfolio. The Company reserves the right to
revoke this election and to receive all such dividends and distributions in
cash. The Fund shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 5:30 p.m.,
Eastern Time, each business day.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts will be issued and
sold in compliance with all applicable federal and state laws. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by applicable law. The
7
<PAGE>
Company shall register and qualify the Contracts for sale in accordance with the
securities laws of the various states only if and to the extent deemed necessary
by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts under
applicable provisions of the Internal Revenue Code and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance and sold in accordance with applicable state and federal law and that
the Fund is and shall remain registered under the 1940 Act for as long as the
Fund shares are sold. The Fund shall amend the registration statement for its
shares under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Fund shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code,
and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. The Fund makes no
8
<PAGE>
representation as to whether any aspect of its operations (including, but not
limited to, fees and expenses and investment policies) complies with the
insurance laws and regulations of any state; except that the Fund represents
that the Fund's investment policies, fees and expenses are and shall at all
times remain in compliance with the laws of the State of New York to the extent:
(i) required to perform this Agreement; and (ii) the Company informs the Fund in
writing of such relevant laws of the State of New York. The Company alone shall
be responsible for informing the Fund of any insurance restrictions imposed by
New York insurance laws and any other state which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the aforementioned New York insurance laws
upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have its Directors, a majority of whom are not interested persons
of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.7. The Underwriter represents and warrants that it is and will be a
member in good standing of the National Association of Securities Dealers, Inc.,
("NASD") and is and will be registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell
9
<PAGE>
and distribute the Fund shares in accordance with all applicable federal and
state securities laws, including without limitation the 1933 Act, the 1934 Act,
and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser,
OpCap Advisors (formerly known as Quest for Value Advisors), is and shall remain
duly registered under all applicable federal and state securities laws and that
the Adviser will perform its obligations to the Fund in accordance with the laws
of Massachusetts, New York and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$5 million. The aforesaid includes coverage for larceny and embezzlement and is
issued by a reputable bonding company. The Company agrees to make all
10
<PAGE>
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective contractowners and applicants. The
Underwriter shall print and distribute, at the Fund's or Underwriter's expense,
as many copies of said prospectus as necessary for distribution to existing
contractowners or participants. If requested by the Company in lieu thereof,
the Fund shall provide such documentation including a final copy of a current
prospectus set in type (including an 8 1/2" x 11" camera ready copy) at the
Fund's expense and other assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund prospectus is amended
more frequently) to have the new prospectus for the Contracts and the Fund's new
prospectus printed together in one document. In such case the Fund shall bear
its share of expenses as described above.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
alternatively from the Company (or, in the Fund's discretion, the Prospectus
shall state that such Statement is available from the Fund), and the Underwriter
(or the Fund) shall provide such Statement, at its expense, to the Company and
to any owner of or participant under a Contract who requests such Statement or,
at
11
<PAGE>
the Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, (a) shall provide the Company with
copies of its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity as the Company shall reasonably
require and (b) shall bear the costs of distributing them to existing
contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners;
(ii) vote the Fund shares held in the Account in accordance
with instructions received from contractowners; and
(iii) vote Fund shares held in the Account for which no
timely instructions have been received, in the same
proportion as Fund shares of such Portfolio for which
instructions have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required, the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
12
<PAGE>
Further, the Fund will act in accordance with the SEC interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or the Underwriter, each piece of sales literature or other promotional
material that the Company develops or uses in which the Fund or the Fund's
adviser or the Underwriter is named, at least five Business Days prior to its
use. No such material shall be used if the Fund or the Underwriter reasonably
objects in writing to such use within five Business Days after receipt of such
material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or
statement of additional information for the Fund shares, as such registration
statement and prospectus or statement of additional information may be amended
or supplemented from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material approved by the Fund
or by the Underwriter, except with the permission of the Fund or the
Underwriter. The Fund and the Underwriter agree to respond to any request for
approval on a prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least five Business Days prior to its use. No
13
<PAGE>
such material shall be used if the Company reasonably objects in writing to such
use within five Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to contractowners, 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.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
14
<PAGE>
4.7. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for the Fund and/or any Fund
Portfolio named in Schedule 2, and of any material change in the Fund's
registration statement, particularly any change resulting in change to the
registration statement or prospectus for any Account. The Fund will work with
the Company so as to enable the Company to solicit proxies from contractowners,
or to make changes to its prospectus or registration statement, in an orderly
manner.
4.8. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any
15
<PAGE>
required exemptive orders or other regulatory approvals, the Underwriter may
make payments to the Company or to the underwriter for the Contracts if and in
amounts agreed to by the Underwriter in writing. Currently, no such payments
are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. All Fund
shares will be duly authorized for issuance and registered in accordance with
applicable federal law and to the extent deemed advisable by the Fund, in
accordance with applicable state law, prior to sale. The Fund shall bear the
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement, Fund
proxy materials and reports, setting in type (including camera ready), printing
and distributing the prospectuses, the proxy materials and reports to existing
shareholders and contractowners, the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Fund's shares, and any expenses permitted to be paid or assumed by the Fund
pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Internal Revenue Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code, Treasury Regulation 1.817-5 and any
Treasury interpretations thereof, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any amendments
or other modifications or
16
<PAGE>
successor provisions to such Section or Regulations. In the event of a breach
of this Article VI by the Fund, it will (a) notify the Company of such breach
and (b) take all reasonable steps to adequately diversify the Fund so as to
achieve compliance within the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Directors of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Fund Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth
17
<PAGE>
therein. As set forth in the Mixed and Shared Funding Exemptive Order, the
Company will report any potential or existing conflicts of which it is aware to
the Fund Board. The Company agrees to assist the Fund Board in carrying out its
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Fund Board with all information reasonably necessary for the Fund
Board to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever contractowner voting
instructions are disregarded. The Fund Board shall record in its minutes or
other appropriate records, all reports received by it and all action with regard
to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable material
conflict exists, the Company and other Participating Insurance Companies shall,
at their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate, segregating the assets
of any appropriate group (I.E., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
18
<PAGE>
7.4. If the Company's disregard of voting instructions could conflict
with the majority of contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund 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 irreconcilable conflict as
determined by a majority of disinterested Directors. Any such withdrawal and
termination must take place within six months after the Fund gives written
notice to the Company that this provision is being implemented. Until the end
of such six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a particular state insurance regulator's decision applicable
to the Company conflicts with the majority of other state insurance regulators,
then the Company will withdraw the Account's investment in the Fund 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 irreconcilable conflict as determined by a majority of disinterested
Directors. Any such withdrawal and termination must take place within six
months after the Fund gives written notice to the Company that this provision is
being implemented. Until the end of such six month period the Underwriter and
Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund or OpCap Advisors be
19
<PAGE>
required to establish a new funding medium for the Contracts. The Company shall
not be required by Section 7.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
contractowners materially adversely affected by the irreconcilable material
conflict.
7.7. The Company shall at least annually submit to the Fund Board
such reports, materials or data as the Fund Board may reasonably request so that
the Fund Board may fully carry out the duties imposed upon it as delineated in
the Mixed and Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if deemed appropriate by the Fund Board.
7.8. 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 Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the Mixed and
Shared Funding Exemptive Order, (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
20
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls the Fund or the
Underwriter within the meaning of such term under the federal securities laws
(collectively, the "indemnified parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the indemnified parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Contracts
or contained in the Contracts or sales literature or
other promotional material for the Contracts (or any
amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify shall not apply as to any
indemnified party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund
or the Underwriter for use in the registration
statement, prospectus or statement of additional
information for the Contracts or in the Contracts or
sales literature or other promotional material for the
Contracts (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other
than statements or representations
21
<PAGE>
contained in the Fund registration statement, Fund
prospectus, statement of additional information or
sales literature or other promotional material of the
Fund not supplied by the Company or persons under its
control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, Fund prospectus, statement of
additional information or sales literature or other
promotional material of the Fund or any amendment
thereof or supplement thereto or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such a
statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by
or on behalf of the Company or persons under its
control; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement; or
(v) arise out of any material breach of any representation
and/or warranty made by the Company in this Agreement
or arise out of or result from any other material
breach by the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
22
<PAGE>
8.2. INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter, on its own behalf and on behalf of the Fund,
agrees to indemnify and hold harmless the Company and each of its directors,
officers, employees or agents and each person, if any, who controls the Company
within the meaning of such term under the federal securities laws (collectively,
the "indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including reasonable
legal and other expenses) to which the indemnified parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements:
(i) 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 Fund or sales literature or
other promotional material of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances in which they were made; provided
that this agreement to indemnify shall not apply as to any
indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
registration statement, prospectus or statement of
additional information for the Fund or in sales literature
or other promotional material of the Fund (or any amendment
or supplement thereto) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Contracts or in the Contract registration statement, the
Contract prospectus, statement of additional information,
or sales literature or other promotional material for the
Contracts not supplied by the
23
<PAGE>
Underwriter or the Fund or persons under the control of the
Underwriter or the Fund respectively) or wrongful conduct of
the Underwriter or the Fund or persons under the control of
the Underwriter or the Fund respectively, with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information
or sales literature or other promotional material covering
the Contracts (or any amendment thereof or supplement
thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading in light of the circumstances in which they were
made, if such statement or omission was made in reliance
upon and in conformity with information furnished to the
Company by or on behalf of the Underwriter or the Fund or
persons under the control of the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements and procedures related thereto specified in
Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter or
the Fund in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
24
<PAGE>
(c) The indemnified parties will promptly notify the Underwriter of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this Article
VIII ("indemnifying party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("indemnified party" for the purpose of this Section 8.3) unless such
indemnified party shall have notified the indemnifying party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the
indemnified party of the indemnifying party's election to assume the defense
thereof, the indemnified party shall bear the fees and expenses of any
additional counsel retained by it, and the
25
<PAGE>
indemnifying party will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. CONTRIBUTION
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII is
due in accordance with its terms but for any reason is held to be unenforceable
with respect to a party entitled to indemnification ("indemnified party" for
purposes of this Section 8.4) pursuant to the terms of this Article VIII, then
each party obligated to indemnify pursuant to the terms of this Article VIII
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and litigations in such
proportion as is appropriate to reflect the relative benefits received by the
26
<PAGE>
parties to this Agreement in connection with the offering of Fund shares to the
Account and the acquisition, holding or sale of Fund shares by the Account, or
if such allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect as of
the date hereof, unless terminated under any of the following circumstances:
(a) at the option of any party upon six months advance written
notice to the other parties unless otherwise agreed in a separate written
agreement among the parties; or
27
<PAGE>
(b) with respect to the Fund Portfolios delineated in Schedule 2,
at the option of the Company if shares of such Fund Portfolios delineated in
Schedule 2 are not reasonably available to meet the requirements of the
Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance commission
of any state or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the administration of
the Contracts, the operation of the Account, or the purchase of the Fund shares,
which would have a material adverse effect on the Company's ability to perform
its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body, which
would have a material adverse effect on the Fund's or the Underwriter's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will
give 30 days prior written notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares; or
28
<PAGE>
(f) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists in accordance with
Article VII of this Agreement; or
(g) with respect to a Fund Portfolio, at the option of the
Company if such Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or under any successor or
similar provision, or if the Company reasonably believes that such Portfolio may
fail to so qualify; or
(h) with respect to a Fund Portfolio, at the option of the
Company if such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision, representation or warranty of this
Agreement unless the party who committed the material breach cures such material
breach within 30 days after written notice of such material breach; or
(j) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company or the Account; or
(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date
29
<PAGE>
of this Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and operations of the
Fund or Underwriter; or
(l) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without notice;
or
(m) at the option of the Company in the event any of the Fund
Portfolio's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use of such shares
as the underlying investment media of the Contracts issued or to be issued by
the Company.
10.2. NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
(b) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(b) - (d), 10.1(g), 10.1 (h), or 10.1(m),
prompt written notice of the election to terminate this Agreement for cause
shall be furnished by the party terminating the Agreement to the non-terminating
parties, with said termination to be effective upon receipt of such notice by
the non-terminating parties.
(c) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(i) - 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-
30
<PAGE>
terminating parties. Such prior written notice shall be given by the party
terminating this Agreement to the non-terminating parties at least 30 days
before the effective date of termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 of this Agreement, and subject to Section 1.3 of this Agreement,
the Company may require the Fund and the Underwriter to, continue to make
available additional shares of the Fund for so long after the termination of
this Agreement as the Company desires pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, for all Contracts in effect
on the effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other party,
such notice to be for a period that is reasonable under the circumstances but,
if given by the Fund or Underwriter, need not be for more than 180 days.
31
<PAGE>
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement contractowner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application, or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940
Act and the Company shall not prevent contractowners from allocating payments to
a Portfolio that was otherwise available under the Contracts, until 90 days
after the Company shall have notified the Fund or Underwriter of its intention
to do so.
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt, overnight delivery or by certified mail, return receipt
requested, 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. All notices shall be deemed given three Business Days after the
date received or rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Mr. Jeffrey Lammers
Providian Corporation
400 West Market Street
Louisville, KY 40202
32
<PAGE>
with copy to:
First Providian Life and Health Insurance Company
520 Colombia Drive
Johnson City, NY 13790
Attn: Marketing Director
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto
shall treat as confidential all information reasonably identified as such in
writing by any other party hereto (including without limitation the names and
addresses of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
33
<PAGE>
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit 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.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
New York variable annuity laws and regulations and any other applicable law or
regulations.
34
<PAGE>
12.9. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.10. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative as of the date and year first written above.
COMPANY:
FIRST PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
SEAL By: /s/ Gregory J. Garvin
------------------------------
FUND:
OCC ACCUMULATION TRUST
SEAL By: /s/ Ilana R. Marcus
-------------------------------
UNDERWRITER:
OCC DISTRIBUTORS
By: /s/ Peter Muratore
------------------------------
35
<PAGE>
SCHEDULE 1
Participation Agreement
Among
OCC Accumulation Trust, First Providian Life and Health Insurance Company
and
OCC Distributors
The following separate accounts of First Providian Life and Health
Insurance Company are permitted in accordance with the provisions of this
Agreement to invest in Portfolios of the Fund shown in Schedule 2:
First Providian Life and Health Insurance Company Separate Account C
11/1/96
<PAGE>
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, First Providian Life and Health Insurance Company
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of OCC Accumulation Trust:
Managed Portfolio
Small Cap Portfolio
U.S. Government Income Portfolio
Other Funding Vehicles for Marquee Variable Annuity:
Fidelity Investments:
Fidelity Asset Manager
Fidelity Equity - Income
Fidelity Growth
Fidelity Money Market
Dreyfus:
Dreyfus Growth and Income
Dreyfus Quality Bond
T.Rowe Price:
T. Rowe Price New America Growth
T.Rowe Price Equity Income
T.Rowe Price International Stock
11/1/96
FUNDS\ASSET\WORD\PARTAGR1.NH1
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
OCC ACCUMULATION TRUST
AND
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
AND
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into as of this 16th day of
September, 1994, by and among PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY, a
Missouri Corporation (hereinafter the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1 to this
Agreement, as may be amended from time to time (each account referred to as
the "Account"), OCC ACCUMULATION TRUST (formerly known as Quest for Value
Accumulation Trust), an open-end diversified management investment company
organized under the laws of the State of Massachusetts (hereinafter the
"Fund") and OCC DISTRIBUTORS (formerly known as Quest for Value
Distributors), a Delaware general partnership (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
<PAGE>
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"),
dated February 22, 1995 (File No. 812-9290), granting Participating Insurance
Companies and variable annuity separate accounts and variable life insurance
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a),
and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Fund to be sold to and held by
variable annuity separate accounts and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance
Companies and qualified pension and retirement plans (hereinafter the "Mixed
and Shared Funding Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of Missouri, to set aside and
invest assets attributable to the Contracts; and
2
<PAGE>
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named
in Schedule 2 on behalf of the Account to fund the Contracts and the
Underwriter is authorized to sell such shares to unit investment trusts such
as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of the Account, executing such
orders on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the Fund
for receipt of such orders from each Account and receipt and acceptance by such
designee shall constitute receipt and acceptance by the Fund; provided that the
Fund receives notice of such order by 10:00 a.m. Eastern Time on the next
following Business Day. "Business
3
<PAGE>
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day
after it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire. Upon receipt by
the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.3. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading; provided, however, that the Board of
Trustees of the Fund (hereinafter the "Directors") may refuse to sell shares of
any Portfolio to any person, or suspend or terminate the offering of shares of
any Portfolio if such action (a) is required by law or by regulatory authorities
having jurisdiction or (b) is, in the sole discretion of the Directors, acting
in good faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated
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thereunder, the sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be sold to the general
public.
1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating Insurance Companies and
(ii) a copy of the Participation Agreement executed by any other Participating
Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the request for redemption. For
purposes of this Section 1.6, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt and acceptance
by such designee shall constitute receipt and acceptance by the Fund; provided
the Fund receives notice of request for redemption by 10:00 a.m. Eastern Time on
the next following Business Day. Payment shall be in federal funds transmitted
by wire (typically by 4:00 pm) to the Company's account as designated by the
Company in writing from time to time, on the same Business Day the Fund receives
notice of the redemption order from the Company except that the Fund reserves
the right to delay payment of redemption proceeds, but in no event may such
payment be delayed longer than the period permitted under Section 22(e) of the
1940 Act. Neither the Fund nor the Underwriter shall bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds by
the Company; the Company alone shall be responsible for such action. If
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<PAGE>
notification of redemption is received after 10:00 a.m. Eastern Time, payment
for redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus. The parties
acknowledge that the arrangement contemplated by this Agreement is not
exclusive; the Fund's shares may be sold to other insurance companies, subject
to Section 1.5 and Article VI hereof and that the cash value of the Contracts
may be invested in investment companies other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
the Portfolios of the Fund named in Schedule 2; or (b) the Company gives the
Fund and the Underwriter 45 days written notice of its intention to make such
other investment company available as a funding vehicle for the Contracts; or
(c) such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and appears on Schedule 2; or (d)
the Fund or Underwriter consents in writing to the use of such other investment
company.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such dividends and
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distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this
election and to receive all such dividends and distributions in cash. The Fund
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 5:30 p.m.,
Eastern Time, each business day.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts will be issued and
sold in compliance with all applicable federal and state laws. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by applicable law. The
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Company shall register and qualify the Contracts for sale in accordance with the
securities laws of the various states only if and to the extent deemed necessary
by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts under
applicable provisions of the Internal Revenue Code and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance and sold in accordance with applicable state and federal law and that
the Fund is and shall remain registered under the 1940 Act for as long as the
Fund shares are sold. The Fund shall amend the registration statement for its
shares under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Fund shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code,
and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. The Fund makes no
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representation as to whether any aspect of its operations (including, but not
limited to, fees and expenses and investment policies) complies with the
insurance laws and regulations of any state; except that the Fund represents
that the Fund's investment policies, fees and expenses are and shall at all
times remain in compliance with the laws of the State of Missouri to the extent:
(i) required to perform this Agreement; and (ii) the Company informs the Fund in
writing of such relevant laws of the State of Missouri. The Company alone shall
be responsible for informing the Fund of any insurance restrictions imposed by
Missouri insurance laws and any other state which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the aforementioned Missouri insurance laws
upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have its Directors, a majority of whom are not interested persons
of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.7. The Underwriter represents and warrants that it is and will be a
member in good standing of the National Association of Securities Dealers, Inc.,
("NASD") and is and will be registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell
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<PAGE>
and distribute the Fund shares in accordance with all applicable federal and
state securities laws, including without limitation the 1933 Act, the 1934 Act,
and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser,
OpCap Advisors (formerly known as Quest for Value Advisors), is and shall remain
duly registered under all applicable federal and state securities laws and that
the Adviser will perform its obligations to the Fund in accordance with the laws
of Massachusetts, Missouri and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$5 million. The aforesaid includes coverage for larceny and embezzlement and is
issued by a reputable bonding company. The Company agrees to make all
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<PAGE>
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective contractowners and applicants. The
Underwriter shall print and distribute, at the Fund's or Underwriter's expense,
as many copies of said prospectus as necessary for distribution to existing
contractowners or participants. If requested by the Company in lieu thereof,
the Fund shall provide such documentation including a final copy of a current
prospectus set in type (including an 8 1/2" x 11" camera ready copy) at the
Fund's expense and other assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund prospectus is amended
more frequently) to have the new prospectus for the Contracts and the Fund's new
prospectus printed together in one document. In such case the Fund shall bear
its share of expenses as described above.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
alternatively from the Company (or, in the Fund's discretion, the Prospectus
shall state that such Statement is available from the Fund), and the Underwriter
(or the Fund) shall provide such Statement, at its expense, to the Company and
to any owner of or participant under a Contract who requests such Statement or,
at
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<PAGE>
the Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, (a) shall provide the Company with
copies of its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity as the Company shall reasonably
require and (b) shall bear the costs of distributing them to existing
contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners;
(ii) vote the Fund shares held in the Account in accordance
with instructions received from contractowners; and
(iii) vote Fund shares held in the Account for which no timely
instructions have been received, in the same proportion as
Fund shares of such Portfolio for which instructions have
been received from the Company's contractowners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required, the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
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Further, the Fund will act in accordance with the SEC interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or the Underwriter, each piece of sales literature or other promotional
material that the Company develops or uses in which the Fund or the Fund's
adviser or the Underwriter is named, at least five Business Days prior to its
use. No such material shall be used if the Fund or the Underwriter reasonably
objects in writing to such use within five Business Days after receipt of such
material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or
statement of additional information for the Fund shares, as such registration
statement and prospectus or statement of additional information may be amended
or supplemented from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material approved by the Fund
or by the Underwriter, except with the permission of the Fund or the
Underwriter. The Fund and the Underwriter agree to respond to any request for
approval on a prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least five Business Days prior to its use. No
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<PAGE>
such material shall be used if the Company reasonably objects in writing to such
use within five Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to contractowners, 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.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts
or each Account, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
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4.7. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for the Fund and/or any Fund
Portfolio named in Schedule 2, and of any material change in the Fund's
registration statement, particularly any change resulting in change to the
registration statement or prospectus for any Account. The Fund will work with
the Company so as to enable the Company to solicit proxies from contractowners,
or to make changes to its prospectus or registration statement, in an orderly
manner.
4.8. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any
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<PAGE>
required exemptive orders or other regulatory approvals, the Underwriter may
make payments to the Company or to the underwriter for the Contracts if and in
amounts agreed to by the Underwriter in writing. Currently, no such payments
are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. All Fund
shares will be duly authorized for issuance and registered in accordance with
applicable federal law and to the extent deemed advisable by the Fund, in
accordance with applicable state law, prior to sale. The Fund shall bear the
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement, Fund
proxy materials and reports, setting in type (including camera ready), printing
and distributing the prospectuses, the proxy materials and reports to existing
shareholders and contractowners, the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Fund's shares, and any expenses permitted to be paid or assumed by the Fund
pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Internal Revenue Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code, Treasury Regulation 1.817-5 and any
Treasury interpretations thereof, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any amendments
or other modifications or
16
<PAGE>
successor provisions to such Section or Regulations. In the event of a breach
of this Article VI by the Fund, it will (a) notify the Company of such breach
and (b) take all reasonable steps to adequately diversify the Fund so as to
achieve compliance within the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Directors of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Fund Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth
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therein. As set forth in the Mixed and Shared Funding Exemptive Order, the
Company will report any potential or existing conflicts of which it is aware to
the Fund Board. The Company agrees to assist the Fund Board in carrying out its
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Fund Board with all information reasonably necessary for the Fund
Board to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever contractowner voting
instructions are disregarded. The Fund Board shall record in its minutes or
other appropriate records, all reports received by it and all action with regard
to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable material
conflict exists, the Company and other Participating Insurance Companies shall,
at their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate, segregating the assets
of any appropriate group (I.E., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
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7.4. If the Company's disregard of voting instructions could conflict
with the majority of contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund 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 irreconcilable conflict as
determined by a majority of disinterested Directors. Any such withdrawal and
termination must take place within six months after the Fund gives written
notice to the Company that this provision is being implemented. Until the end
of such six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a particular state insurance regulator's decision applicable
to the Company conflicts with the majority of other state insurance regulators,
then the Company will withdraw the Account's investment in the Fund 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 irreconcilable conflict as determined by a majority of disinterested
Directors. Any such withdrawal and termination must take place within six
months after the Fund gives written notice to the Company that this provision is
being implemented. Until the end of such six month period the Underwriter and
Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund or OpCap Advisors be
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required to establish a new funding medium for the Contracts. The Company shall
not be required by Section 7.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
contractowners materially adversely affected by the irreconcilable material
conflict.
7.7. The Company shall at least annually submit to the Fund Board
such reports, materials or data as the Fund Board may reasonably request so that
the Fund Board may fully carry out the duties imposed upon it as delineated in
the Mixed and Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if deemed appropriate by the Fund Board.
7.8. 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 Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the Mixed and
Shared Funding Exemptive Order, (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
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ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the
Fund, the Underwriter, and each of the Fund's or the Underwriter's directors,
officers, employees or agents and each person, if any, who controls the Fund
or the Underwriter within the meaning of such term under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or litigation (including reasonable legal and other expenses), to
which the indemnified parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus or
statement of additional information for the Contracts
or contained in the Contracts or sales literature or
other promotional material for the Contracts (or any
amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify shall not apply as to any
indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to the
Company by or on behalf of the Fund or the Underwriter
for use in the registration statement, prospectus or
statement of additional information for the Contracts
or in the Contracts or sales literature or other
promotional material for the Contracts (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations
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contained in the Fund registration statement, Fund
prospectus, statement of additional information or
sales literature or other promotional material of
the Fund not supplied by the Company or persons
under its control) or wrongful conduct of the
Company or persons under its control, with respect
to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, Fund prospectus, statement of
additional information or sales literature or other
promotional material of the Fund or any amendment
thereof or supplement thereto or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such a
statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by or
on behalf of the Company or persons under its control;
or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement; or
(v) arise out of any material breach of any representation
and/or warranty made by the Company in this Agreement
or arise out of or result from any other material
breach by the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
22
<PAGE>
8.2. INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter, on its own behalf and on behalf of the
Fund, agrees to indemnify and hold harmless the Company and each of its
directors, officers, employees or agents and each person, if any, who
controls the Company within the meaning of such term under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including reasonable legal and other expenses) to
which the indemnified parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(i) 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 Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify shall not apply as to any indemnified
party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company
for use in the registration statement, prospectus or
statement of additional information for the Fund or
in sales literature or other promotional material of
the Fund (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in the
Contract registration statement, the Contract
prospectus, statement of additional information, or
sales literature or other promotional material for
the Contracts not supplied by the
23
<PAGE>
Underwriter or the Fund or persons under the
control of the Underwriter or the Fund respectively)
or wrongful conduct of the Underwriter or the Fund
or persons under the control of the Underwriter or
the Fund respectively, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment thereof or supplement thereto), or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement or statements
therein not misleading in light of the circumstances
in which they were made, if such statement or
omission was made in reliance upon and in conformity
with information furnished to the Company by or on
behalf of the Underwriter or the Fund or persons
under the control of the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification requirements and
procedures related thereto specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter or the Fund in this Agreement or arise
out of or result from any other material breach of
this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
24
<PAGE>
(c) The indemnified parties will promptly notify the Underwriter
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this Article
VIII ("indemnifying party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect
to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.3) unless
such indemnified party shall have notified the indemnifying party in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
such indemnified party (or after such party shall have received notice of
such service on any designated agent), but failure to notify the indemnifying
party of any such claim shall not relieve the indemnifying party from any
liability which it may have to the indemnified party against whom such action
is brought under the indemnification provision of this Article VIII, except
to the extent that the failure to notify results in the failure of actual
notice to the indemnifying party and such indemnifying party is damaged
solely as a result of failure to give such notice. In case any such action
is brought against the indemnified party, the indemnifying party will be
entitled to participate, at its own expense, in the defense thereof. The
indemnifying party also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
indemnifying party to the indemnified party of the indemnifying party's
election to assume the defense thereof, the indemnified party shall bear the
fees and expenses of any additional counsel retained by it, and the
25
<PAGE>
indemnifying party will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. CONTRIBUTION
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII
is due in accordance with its terms but for any reason is held to be
unenforceable with respect to a party entitled to indemnification
("indemnified party" for purposes of this Section 8.4) pursuant to the terms
of this Article VIII, then each party obligated to indemnify pursuant to the
terms of this Article VIII shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities and litigations in such proportion as is appropriate to reflect
the relative benefits received by the
26
<PAGE>
parties to this Agreement in connection with the offering of Fund shares to
the Account and the acquisition, holding or sale of Fund shares by the
Account, or if such allocation is not permitted by applicable law, in such
proportions as is appropriate to reflect the relative net benefits referred
to above but also the relative fault of the parties to this Agreement in
connection with any actions that lead to such losses, claims, damages,
liabilities or litigations, as well as any other relevant equitable
considerations.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect as of
the date hereof, unless terminated under any of the following circumstances:
(a) at the option of any party upon six months advance written
notice to the other parties unless otherwise agreed in a separate written
agreement among the parties; or
27
<PAGE>
(b) with respect to the Fund Portfolios delineated in Schedule 2,
at the option of the Company if shares of such Fund Portfolios delineated in
Schedule 2 are not reasonably available to meet the requirements of the
Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance commission
of any state or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the administration of
the Contracts, the operation of the Account, or the purchase of the Fund shares,
which would have a material adverse effect on the Company's ability to perform
its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body, which
would have a material adverse effect on the Fund's or the Underwriter's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will
give 30 days prior written notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares; or
28
<PAGE>
(f) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists in accordance with
Article VII of this Agreement; or
(g) with respect to a Fund Portfolio, at the option of the
Company if such Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or under any successor or
similar provision, or if the Company reasonably believes that such Portfolio may
fail to so qualify; or
(h) with respect to a Fund Portfolio, at the option of the
Company if such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision, representation or warranty of this
Agreement unless the party who committed the material breach cures such material
breach within 30 days after written notice of such material breach; or
(j) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company or the Account; or
(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date
29
<PAGE>
of this Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and operations of
the Fund or Underwriter; or
(l) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without notice;
or
(m) at the option of the Company in the event any of the Fund
Portfolio's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use of such shares
as the underlying investment media of the Contracts issued or to be issued by
the Company.
10.2. NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
(b) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(b) - (d), 10.1(g), 10.1 (h), or 10.1(m),
prompt written notice of the election to terminate this Agreement for cause
shall be furnished by the party terminating the Agreement to the non-
terminating parties, with said termination to be effective upon receipt of
such notice by the non-terminating parties.
(c) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(i) - 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-
30
<PAGE>
terminating parties. Such prior written notice shall be given by the party
terminating this Agreement to the non-terminating parties at least 30 days
before the effective date of termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 of this Agreement, and subject to Section 1.3 of this Agreement,
the Company may require the Fund and the Underwriter to, continue to make
available additional shares of the Fund for so long after the termination of
this Agreement as the Company desires pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, for all Contracts in effect
on the effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other party,
such notice to be for a period that is reasonable under the circumstances but,
if given by the Fund or Underwriter, need not be for more than 180 days.
31
<PAGE>
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement contractowner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application, or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940
Act and the Company shall not prevent contractowners from allocating payments to
a Portfolio that was otherwise available under the Contracts, until 90 days
after the Company shall have notified the Fund or Underwriter of its intention
to do so.
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt, overnight delivery or by certified mail, return receipt
requested, 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. All notices shall be deemed given three Business Days after the
date received or rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Mr. Jeffrey Lammers
Providian Corporation
400 West Market Street
Louisville, KY 40202
32
<PAGE>
with copy to:
Mr. Dennis E. Brady
Senior Financial Officer
Providian Life and Health Insurance Company
Valley Forge, PA 19493
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto
shall treat as confidential all information reasonably identified as such in
writing by any other party hereto (including without limitation the names and
addresses of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
33
<PAGE>
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit 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.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Missouri Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
Missouri variable annuity laws and regulations and any other applicable law or
regulations.
34
<PAGE>
12.9. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.10. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative as of the date and year first written above.
COMPANY:
PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY
SEAL By: /s/ Jeffrey Lammers
---------------------------------
FUND:
OCC ACCUMULATION TRUST
SEAL By: /s/ Ilana R. Marcus
---------------------------------
UNDERWRITER:
OCC DISTRIBUTORS
By: /s/ Peter Muratore
---------------------------------
35
<PAGE>
SCHEDULE 1
Participation Agreement
Among
OCC Accumulation Trust, Providian Life and Health Insurance Company
and
OCC Distributors
The following separate accounts of Providian Life and Health Insurance
Company are permitted in accordance with the provisions of this Agreement to
invest in Portfolios of the Fund shown in Schedule 2:
Providian Life and Health Insurance Company Separate Account V
<PAGE>
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, Providian Life and Health Insurance Company
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of OCC Accumulation Trust:
Managed Portfolio
Small Cap Portfolio
U.S. Government Income Portfolio
Other Funding Vehicles for Marquee Variable Annuity:
Fidelity Investments:
Fidelity Asset Manager
Fidelity Equity - Income
Fidelity Growth
Fidelity Money Market
Dreyfus:
Dreyfus Growth and Income
Dreyfus Quality Bond
T.Rowe Price:
T. Rowe Price New America Growth
T.Rowe Price Equity Income
T.Rowe Price International Stock
<PAGE>
SEPTEMBER 1, 1998 AMENDMENT TO
PARTICIPATION AGREEMENT
AMONG
OCC ACCUMULATION TRUST,
OCC DISTRIBUTORS, and
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
This is an amendment to the August 8, 1997 Participation Agreement
("Agreement") among OCC Accumulation Trust, OCC Distributors and ReliaStar Life
Insurance Company of New York (formerly ReliaStar Bankers Security Life
Insurance Company).
Schedule A to the Agreement is hereby amended to add the following separate
account of the Company:
- ReliaStar Life Insurance Company of New York Variable Annuity Separate
Account II
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment to the Agreement as of September 1, 1998.
OCC ACCUMULATION TRUST
By: s/ Deborah Kaback
-----------------------------------
Name: s/ Deborah Kaback
---------------------------------
Title: Secretary
--------------------------------
OCC DISTRIBUTORS
By: s/ Thomas E. Duggan
-----------------------------------
Name: s/ Thomas E. Duggan
---------------------------------
Title: Secretary
--------------------------------
RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: s/ Robert B. Saginaw
-----------------------------------
Name: s/ Robert B. Saginaw
---------------------------------
Title: Assistant Secretary
--------------------------------
<PAGE>
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT
by and among
OCC ACCUMULATION TRUST,
AMERICAN CENTURION LIFE ASSURANCE COMPANY and
OCC DISTRIBUTORS
This is an amendment to the September 17, 1997 Participation Agreement
("Agreement") among OCC Accumulation Trust, American Centurion Life Assurance
Company and OCC Distributors.
SCHEDULE 1 to the Agreement is amended to read as follows:
The following separate accounts of American Centurion Life Assurance
Company are permitted in accordance with the provisions of this Agreement
to invest in Portfolios of the Fund shown in Schedule 2:
ACL Variable Annuity Account 2, established October 12, 1995 as used to
fund the flexible premium variable annuity contracts known as the ACL
Personal Portfolio-SM- and ACL Personal Portfolio Plus(2).
SCHEDULE 2 to the Agreement is amended to read as follows:
The separate account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Managed Portfolio
U.S. Government Income Portfolio
Small Cap Portfolio
Equity Portfolio
OCC ACCUMULATION TRUST OCC DISTRIBUTORS
Signature: /s/ Bernard H. Garil Signature: /s/ Thomas E. Duggan
------------------------ ------------------------
By /s/ Bernard H. Garil By s/ Thomas E. Duggan
------------------------------ -----------------------------
Title: Vice President Title: Secretary
-------------------------- ----------------------------
AMERICAN CENTURION LIFE ATTEST:
ASSURANCE COMPANY
Signature /s/ Stuart Sedlacek Signature: /s/ Eric L. Marhoun
: ------------------------ ------------------------
By /s/ Stuart Sedlacek By /s/ Eric L. Marhoun
------------------------------ -----------------------------
Title: President Title: General Counsel & Secretary
-------------------------- ----------------------------
Date: October 14, 1998
---------------------
<PAGE>
DECEMBER 1, 1998 AMENDMENT TO
PARTICIPATION AGREEMENT
AMONG
OCC ACCUMULATION TRUST,
OCC DISTRIBUTORS, and
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
This is an amendment to the February 17, 1998 Participation Agreement
("Agreement") among OCC Accumulation Trust, OCC Distributors and Sun Life
Assurance Company of Canada (U.S.).
Schedule 2 to the Agreement is hereby amended to add the following
Portfolio of OCC Accumulation Trust:
- Managed Portfolio
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment to the Agreement as of December 1, 1998.
OCC ACCUMULATION TRUST
By: /s/ Bernard H. Garil
---------------------
Name: /s/ Bernard H. Garil
---------------------
Title: Vice President
---------------------
OCC DISTRIBUTORS
By: /s/ Thomas E. Duggan
---------------------
Name: /s/ Thomas E. Duggan
---------------------
Title: Secretary
---------------------
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)
By: /s/ Robert K. Leach
---------------------
Name: /s/ Robert K. Leach
---------------------
Title: Vice President,
Retirement Products
and Services Division
---------------------
<PAGE>
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
TRAVELERS INSURANCE COMPANY
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 1st day of May 1998 by
and among Travelers Insurance Company, a Connecticut corporation (hereinafter
the "Company"), on its own behalf and on behalf of each separate account of
the Company named in Schedule 1 to this Agreement, as may be amended from
time to time (each account referred to as the "Account"), OCC ACCUMULATION
TRUST, an open-end diversified management investment company organized under
the laws of the State of Massachusetts (hereinafter the "Fund") and OCC
DISTRIBUTORS, a Delaware general partnership (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
<PAGE>
WHEREAS, the Fund has obtained an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"), dated
February 22, 1995 (File No. 812-9290), granting Participating Insurance
Companies and variable annuity separate accounts and variable life insurance
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity separate accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and qualified
pension and retirement plans (hereinafter the "Mixed and Shared Funding
Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of Connecticut, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member
2
<PAGE>
in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of the Account, executing such
orders on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the Fund
for receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day
after it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire.
3
<PAGE>
1.3. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Trustees of the Fund (hereinafter the "Directors") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Directors,
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the contracts. No
shares of any Portfolio will be sold to the general public.
1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating Insurance Companies and
(ii) a copy of the Participation Agreement executed by any other Participating
Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the
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net asset value next computed after receipt and acceptance by the Fund or its
agent of the request for redemption. For purposes of this Section 1.6, the
Company shall be the designee of the Fund for receipt of requests for redemption
from each Account and receipt by such designee shall constitute receipt by the
Fund; provided the Fund receives notice of request for redemption by 10:00 a.m.
Eastern Time on the next following Business Day. Payment shall be in federal
funds transmitted by wire to the Company's account as designated by the Company
in writing from time to time, on the same Business Day the Fund receives notice
of the redemption order from the Company except that the Fund reserves the right
to delay payment of redemption proceeds, but in no event may such payment be
delayed longer than the period permitted under Section 22(e) of the 1940 Act.
Neither the Fund nor the Underwriter shall bear any responsibility whatsoever
for the proper disbursement or crediting of redemption proceeds; the Company
alone shall be responsible for such action. If notification of redemption is
received after 10:00 a.m. Eastern Time, payment for redeemed shares will be made
on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund shall furnish notice as soon as reasonably practicable
to the Company of any income, dividends or capital gain distributions payable on
the Fund's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the
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Portfolio shares in the form of additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
dividends and distributions in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 5:30 p.m.,
Eastern Time, each business day.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. With respect to Separate Account QP the Company represents
and warrants that the Contracts are or will be registered under the 1933 Act
and that the Contracts will be issued and sold in compliance with all
applicable federal and state laws. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established Account
QP as a segregated asset account under applicable state law and has
registered Account QP as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for
the Contracts, and that it will maintain such registration for so long as any
Contracts are outstanding. The Company shall amend the registration statement
under the 1933 Act for the Contracts and the registration statement under the
1940 Act for the Account from time to time as required in order to effect the
continuous offering of the Contracts or as may otherwise be required by
applicable law. With respect to Separate Account QPN, the Company represents
and warrants that the Contracts are exempt from registration under Section
3(a)(2) under the 1933
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<PAGE>
Act; that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the sale of the
Contracts shall comply in all material respects with applicable state
insurance laws and regulations. The Company further represents and warrants
that it is an insurance company duly organized and in good standing under the
laws of the state of Connecticut and that it has legally and validly
established Account QPN prior to any issuance or sale thereof as a segregated
asset account under Section 38a-433 of the Connecticut General Statutes and
Account QPN is exempt from registration an investment company under Section
3(c)(11) of the 1940 Act. The Company shall register and qualify the
Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts under
applicable provisions of the Internal Revenue Code and that it will make every
effort to maintain such treatment and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
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<PAGE>
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code,
and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws and regulations of any state. The
Company alone shall be responsible for informing the Fund of any insurance
restrictions imposed by state insurance laws which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the aforementioned state insurance laws
upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have its Board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
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<PAGE>
2.7. The Underwriter represents and warrants that it is a member in
good standing of the National Association of Securities Dealers, Inc., ("NASD")
and is registered as a broker-dealer with the SEC. The Underwriter further
represents that it will sell and distribute the Fund shares in accordance with
all applicable federal and state securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser,
OpCap Advisors, is and shall remain duly registered under all applicable federal
and state securities laws and that the Adviser will perform its obligations to
the Fund in accordance with the laws of Massachusetts and any applicable state
and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$5 million. The aforesaid includes coverage for larceny and
9
<PAGE>
embezzlement and is issued by a reputable bonding company. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective contractowners and applicants. The
Underwriter shall print and distribute, at the Fund's or Underwriter's expense,
as many copies of said prospectus as necessary for distribution to existing
contractowners or participants. If requested by the Company in lieu thereof,
the Fund shall provide such documentation including a final copy of a current
prospectus set in type at the Fund's expense and other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the new
prospectus for the Contracts and the Fund's new prospectus printed together in
one document. In such case the Fund shall bear its share of expenses as
described above.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
alternatively from the Company (or, in the Fund's discretion, the Prospectus
shall state that such Statement is available from the Fund), and the Underwriter
(or the Fund) shall provide such Statement, at its expense, to the Company and
to any owner of or participant under a Contract who requests such Statement or,
at the Company's expense, to any prospective contractowner and applicant who
requests such statement.
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<PAGE>
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, if any, reports to shareholders and other communications
to shareholders in such quantity as the Company shall reasonably require and
shall bear the costs of distributing them to existing contractowners or
participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or
participants;
(ii) vote the Fund shares held in the Account in accordance
with instructions received from contractowners or
participants; and
(iii) vote Fund shares held in the Account for which no timely
instructions have been received, in the same proportion as
Fund shares of such Portfolio for which instructions have
been received from the Company's contractowners or
participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required, the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
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<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Fund's adviser or the Underwriter is named, at
least fifteen business days prior to its use. No such material shall be used if
the Fund or the Underwriter reasonably objects in writing to such use within
fifteen business days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing to such use within fifteen
business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or
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<PAGE>
prospectus for the Contracts, as such registration statement and prospectus may
be amended or supplemented from time to time, in a Disclosure Document for
Separate Account QPN or in published reports for each Account which are in the
public domain or approved by the Company for distribution to contractowners or
participants, 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.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, disclosure documents,
statements of additional information, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications
for exemptions, requests for no-action letters, and all amendments to any of
the above, that relate to the Contracts or each Account, contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form
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<PAGE>
letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. All Fund
shares will be duly authorized for issuance and registered in accordance with
applicable federal law and to the extent deemed advisable by the Fund, in
accordance with applicable state law, prior to sale. The Fund shall bear the
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement, Fund
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
contractowners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any
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<PAGE>
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Internal Revenue Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section or
Regulations in accordance with guidelines provided by the Company prior to the
execution of this Agreement and as necessary thereafter. In the event of a
breach of this Article VI by the Fund, it 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 with the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Fund Board") will
monitor the Fund for the existence of any material irreconcilable conflict among
the interests of the contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant
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<PAGE>
proceeding; (d) the manner in which the investments of any Portfolio are being
managed; (e) a difference in voting instructions given by Participating
Insurance Companies or by variable annuity contract and variable life insurance
contractowners; or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding
Exemptive Order, the Company will report any potential or existing conflicts of
which it is aware to the Fund Board. The Company agrees to assist the Fund
Board in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are disregarded. The Fund Board
shall record in its minutes or other appropriate records, all reports received
by it and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable material
conflict exists, the Company and other Participating Insurance Companies shall,
at their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and rein-
16
<PAGE>
vesting such assets in a different investment medium, including (but not limited
to) another Portfolio of the Fund, or submitting the question whether such
segregation should be implemented to a vote of all affected contractowners and,
as appropriate, segregating the assets of any appropriate group (I.E., variable
annuity contractowners or variable life insurance contractowners, of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account.
7.4. If the Company's disregard of voting instructions could conflict
with the majority of contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement with respect to such
Account. Any such withdrawal and termination must take place within 60 days
after the Fund gives written notice to the Company that this provision is being
implemented. Until the end of such 60 day period the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. If a particular state insurance regulator's decision applicable
to the Company conflicts with the majority of other state insurance regulators,
then the Company will withdraw the Account's investment in the Fund and
terminate this Agreement with respect to such Account. Any such withdrawal and
termination must take place within 60 days after the Fund gives written notice
to the Company that this provision is being implemented. Until the end of such
60 day period the Underwriter and Fund shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund.
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<PAGE>
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund or Quest Advisors be required to establish a new
funding medium for the Contracts. The Company shall not be required by Section
7.3 to establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of contractowners materially adversely
affected by the irreconcilable material conflict.
7.7. The Company shall at least annually submit to the Fund Board
such reports, materials or data as the Fund Board may reasonably request so that
the Fund Board may fully carry out the duties imposed upon it as delineated in
the Mixed and Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if deemed appropriate by the Fund Board.
7. 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 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
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<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls or is associated with
the Fund or the Underwriter within the meaning of such terms under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including reasonable legal and other expenses), to which the
indemnified parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement, prospectus or statement of
additional information for the Contracts or contained in
the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of
the circumstances in which they were made; provided that
this agreement to indemnify shall not apply as to any
indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to the
Company by or on behalf of the Fund for use in the
registration statement, prospectus or statement of
additional information for the Contracts or in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other than
statements or representations contained in the Fund
registration statement, Fund prospectus, Fund statement
of additional information or sales literature or other
promotional material of the Fund not supplied by the
Company or
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persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, Fund prospectus, statement of
additional information or sales literature or other
promotional material of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they
were made, if such a statement or omission was made in
reliance upon and in conformity with information furnished
to the Fund by or on behalf of the Company or persons
under its control; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any
payments under the terms of this Agreement; or
(v) arise out of any material breach of any representation
and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach by
the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter, on its own behalf and on behalf of the Fund,
agrees to indemnify and hold harmless the Company and each of its directors,
officers, employees or agents
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and each person, if any, who controls or is associated with the Company within
the meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including reasonable
legal and other expenses) to which the indemnified parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements:
(i) 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 Fund or sales literature or
other promotional material of the Fund (or any amendment
or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they
were made; provided that this agreement to indemnify shall
not apply as to any indemnified party if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished
to the Underwriter or Fund by or on behalf of the Company
for use in the registration statement, prospectus or
statement of additional information for the Fund or in
sales literature or other promotional material of the Fund
(or any amendment or supplement thereto) or otherwise for
use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Contracts or in the Contract or Fund
registration statement, the Contract or Fund prospectus,
statement of additional information, or sales literature
or other promotional material for the Contracts or of the
Fund not supplied by the Underwriter or the Fund or
persons under the control of the Underwriter or the Fund
respectively) or wrongful conduct of the Underwriter or
the Fund or persons under the control of the Underwriter
or the Fund respectively, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information
or sales literature or other
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promotional material covering the Contracts (or any
amendment thereof or supplement thereto), or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading in light of
the circumstances in which they were made, if such
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or
on behalf of the Underwriter or the Fund or persons under
the control of the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement except
if such failure is a result of the Company's failure to
comply with the notification procedures specified in
Article VI); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter or
the Fund in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Underwriter of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this Article
VIII ("indemnifying party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party
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entitled to indemnification under this Article VIII ("indemnified party" for the
purpose of this Section 8.3) unless such indemnified party shall have notified
the indemnifying party in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such indemnified party (or after such party shall have
received notice of such service on any designated agent), but failure to notify
the indemnifying party of any such claim shall not relieve the indemnifying
party from any liability which it may have to the indemnified party against whom
such action is brought under the indemnification provision of this Article VIII,
except to the extent that the failure to notify results in the failure of actual
notice to the indemnifying party and such indemnifying party is damaged solely
as a result of failure to give such notice. In case any such action is brought
against the indemnified party, the indemnifying party will be entitled to
participate, at its own expense, in the defense thereof. The indemnifying party
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the indemnifying party to
the indemnified party of the indemnifying party's election to assume the defense
thereof, the indemnified party shall bear the fees and expenses of any
additional counsel retained by it, and the indemnifying party will not be liable
to such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation, unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if
23
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settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. CONTRIBUTION
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII is
due in accordance with its terms but for any reason is held to be unenforceable
with respect to a party entitled to indemnification ("indemnified party" for
purposes of this Section 8.4) pursuant to the terms of this Article VIII, then
each party obligated to indemnify pursuant to the terms of this Article VIII
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and litigations in such
proportion as is appropriate to reflect the relative benefits received by the
parties to this Agreement in connection with the offering of Fund shares to the
Account and the acquisition, holding or sale of Fund shares by the Account, or
if such allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. APPLICABLE LAW
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9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written
notice to the other parties unless otherwise agreed in a separate written
agreement among the parties; or
(b) at the option of the Company if shares of the Portfolios
delineated in Schedule 2 are not reasonably available to meet the requirements
of the Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance commission
of any state or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the administration of
the Contracts, the operation of the Account, or the purchase of the Fund shares,
which would have a material adverse effect on the Company's ability to perform
its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance
25
<PAGE>
department or any other regulatory body, which would have a material adverse
effect on the Fund's or the Underwriter's ability to perform its obligations
under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will
give 30 days prior written notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of
(i) all contractowners of variable insurance products of all separate accounts
or (ii) the interests of the Participating Insurance Companies investing in the
Fund as delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases to qualify as
a Regulated Investment Company under Subchapter M of the Internal Revenue Code,
or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
26
<PAGE>
(j) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company; or
(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or Underwriter; or
(l) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without notice.
10.2. NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
(b) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written
notice of the election to terminate this Agreement for cause shall be furnished
by the party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the non-terminating
parties.
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<PAGE>
(c) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-terminating parties. Such prior written
notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 of this Agreement, and subject to Section 1.3 of this Agreement,
the Company may require the Fund and the Underwriter to, continue to make
available additional shares of the Fund for so long after the termination of
this Agreement as the Company desires pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, for all Contracts in effect
on the effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to
28
<PAGE>
the other party, such notice to be for a period that is reasonable under the
circumstances but, if given by the Fund or Underwriter, need not be for more
than 90 days.
10.5. Except as necessary to implement contractowner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the
Account), and the Company shall not prevent contractowners from allocating
payments to a Portfolio that was otherwise available under the Contracts, until
90 days after the Company shall have notified the Fund or Underwriter of its
intention to do so.
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt or by certified mail, return receipt requested, 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. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
PRESIDENT
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Kathleen Sullivan, GENERAL COUNSEL
Travelers Insurance Company
One Tower Square
Hartford, CT 06183
If to the Underwriter:
29
<PAGE>
Mr. Thomas E. Duggan
SECRETARY
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto
shall treat as confidential all information reasonably identified as such in
writing by any other party hereto (including without limitation the names and
addresses of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
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<PAGE>
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit 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.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative as of the date and year first written above.
COMPANY:
TRAVELERS INSURANCE COMPANY
SEAL By: /s/ George KoKulis
-------------------------------
FUND:
OCC ACCUMULATION TRUST
SEAL By: /s/ Deborah Kaback
-------------------------------
UNDERWRITER:
OCC DISTRIBUTORS
By: /s/ Thomas E. Duggan
-------------------------------
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SCHEDULE 1
Participation Agreement
Among
OCC Accumulation Trust, Travelers Insurance Company
and
OCC Distributors
The following separate accounts of Travelers Insurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Portfolios of the Fund shown in Schedule 2:
Separate Account QP
Separate Account QPN
May 1, 1998
<PAGE>
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, Travelers Insurance Company
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust: Equity Portfolio.
May 1,1998
