Document:

Exhibit 10.2

 

ADMINISTRATIVE and MARKETING SERVICES AGREEMENT

 

This Agreement is entered into effective the 1st day of January, 2012 (“Effective Date”) by and between Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company (collectively referred to hereinafter “NWL”) and Waddell & Reed, Inc. (hereinafter “Waddell & Reed”), on its own behalf and on behalf of its affiliated corporate insurance agencies.

 

WHEREAS, NWL agrees to develop, issue and administer certain annuity contracts, life policies and qualified employer-sponsored retirement plan trust products (identified in Appendix A attached hereto and collectively, referred to hereinafter as (“the Products”); and

 

WHEREAS, Waddell & Reed agrees to support the marketing, sale and servicing of such Products as listed in Appendix A attached hereto.

 

NOW, THEREFORE, in consideration of the promises, covenants and undertakings contemplated herein, NWL and Waddell & Reed agree as follows:

 

APPOINTMENT OF PRODUCT DEVELOPER

 

NWL is hereby appointed Product Developer for the products referenced above and described in the attached Appendix A. The role of Product Developer means NWL shall develop and support the products for distribution exclusively by Waddell & Reed and perform those functions enumerated in the attached Exhibit A.

 

RELATIONSHIP AND WHOLESALER SUPPORT

 

NWL will dedicate one person to manage the relationship with Waddell & Reed during the term of the Exclusivity provision below. NWL will provide wholesaling and service support for the Products that is reasonably satisfactory to Waddell & Reed.  Nationwide will sponsor and participate in periodic meetings of Waddell & Reed’s sales representatives, as requested from time to time by Waddell & Reed during the term of the Exclusivity period below.

 

EXCLUSIVITY

 

Except as otherwise provided herein, NWL will be the exclusive provider to Waddell & Reed of the product types listed in the Appendix A, attached hereto, for the term of this agreement as specified in the “Term of Agreement” section, infra.  During this period, Waddell & Reed will not offer any other competitor’s products to its clients, except as otherwise provided herein. Notwithstanding the foregoing, this exclusivity provision will not apply to:

 

(a) clients transferring similar investment products from one investment advisor and/or broker-dealer to Waddell & Reed,

 

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(b) additions made by Waddell & Reed clients to products owned prior to the commencement of distribution of like NWL products by Waddell & Reed pursuant to the general agent selling agreement currently in force between the Parties, as amended (“General Agent Agreement”),

(c) sales made by new Waddell & Reed financial advisors to prospects to which non-NWL products were offered prior to their engagement by Waddell & Reed,

(d) products offered by Securian/Minnesota Life Insurance Company and its affiliates,

(e) products offered by one (1) additional insurance company manufacturer to be identified by Waddell & Reed following the effective date of this Agreement, and

(f) exception sales of products offered by other insurance companies where the sale of a NWL product is rejected by Waddell & Reed clients due to product features or other reasons.

 

Waddell & Reed will make a good faith effort to monitor and report these exceptions to ensure that the principle of overall exclusivity is maintained.

 

NWL will provide sufficient resources to fulfill mutually agreed upon product feature, support and service level standards. It is understood and agreed that in addition to the provisions of the “Termination” provisions of this Agreement, infra.  Waddell & Reed may terminate this Agreement if NWL fails in a material and substantial manner to meet the agreed upon support and service standards, after being provided with written notice specifying the alleged deficiencies and a reasonable period to cure same.

 

Waddell & Reed agrees that, at all times during the term of this Agreement, both the level of marketing and promotional services and the level of product and other administrative support services provided by Waddell & Reed to NWL will be at least equal to the level of such services provided in each case by Waddell & Reed to Minnesota Life and its affiliated companies (“Minnesota Life Companies”), and any other co-exclusive provider permitted under this Agreement (“Co-Exclusive Provider”).  Waddell & Reed shall provide NWL with such relevant information as NWL may reasonably request about the nature, scope and frequency of all marketing, promotional and administrative services provided by Waddell & Reed to the Minnesota Life Companies and/or the Co-Exclusive Provider, and shall keep NWL reasonably informed about changes in the levels of such services.

 

CHANGES OF CONTROL

 

Changes of control involving any Party shall be governed by the provisions of the “Assignment” section, infra, of this Agreement.  In addition, the following provisions shall apply to changes of control involving an unaffiliated organization:

 

(a) In the event that NWL experiences a change of control involving an unaffiliated organization, Waddell & Reed may elect to terminate this Agreement upon proper notice in accordance with the provisions of the “Termination” section of this agreement,

 

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infra.

 

(b) In the event that Waddell & Reed experiences a change of control involving an unaffiliated organization and such organization desires for Waddell & Reed to sell its products or the products of one or more of its affiliates (“Acquirer Products”), the Acquirer Products may be considered to be added as a new exception (g) to this “Exclusivity” section, supra, specifically  subject  to renegotiated compensation, evidenced by a duly executed amendment, under the “Compensation” Section and provisions of this Agreement, infra.  It is understood and agreed that if such a change of control should occur, and Waddell & Reed commences offering Acquirer Products, Waddell & Reed shall use its best efforts to ensure that NWL’s products receive and maintain an equitable competitive position in Waddell & Reed’s distribution system throughout the term of this Agreement period.  For purposes of this provision, an “equitable competitive position” shall mean the opportunity for NWL to provide products with substantially similar costs, features, total compensation, fund diversification and positioning as the Acquirer Products.

 

SALES MATERIAL AND OTHER DOCUMENTS

 

Waddell & Reed shall not print, publish or distribute any advertisement, circular or any document relating to the products distributed pursuant to this Agreement or relating to NWL unless such advertisement, circular or document shall have been approved in writing by NWL, which approval shall not be unreasonably withheld and shall be given as promptly as possible. Neither NWL nor any of its affiliates shall print, publish or distribute any advertisement, circular or any document relating to the products distributed pursuant to this Agreement or relating to Waddell & Reed unless such advertisement, circular or document shall have been approved in writing by Waddell & Reed, which approval shall not be unreasonably withheld and shall be given as promptly as possible. However, nothing herein shall prohibit any person from advertising the products in general or on a generic basis.

 

SALES MATERIAL

 

1.              NWL shall develop and prepare promotional material to  be used in the distribution of the products, in consultation with Waddell & Reed.

2.              NWL is responsible for the printing of such promotional material.

3.              NWL is responsible for the expense of providing such promotional material.

4.              NWL is responsible for approval of promotional material by state insurance regulators, where required.

5.              Waddell & Reed is responsible for the filing of all appropriate promotional material with federal securities regulators.

6.              All promotional material relating to the products shall be subject to prior approval by Waddell & Reed.

 

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7.              Waddell & Reed and NWL agree to abide by the Advertising and Sales Promotion Material Guidelines, attached hereto as EXHIBIT B, and incorporated herein by reference.

 

PRODUCT INFORMATION AND PROSPECTUSES

 

Waddell & Reed shall promptly inform NWL via written notice of any and all changes to mutual funds managed by Waddell & Reed and/or its affiliates related to changes in investment management strategies, fund objectives, portfolio management and/or any similar changes which may affect the investment characteristics, orientation, style or quality of any fund.  NWL and Waddell & Reed hereby acknowledge that NWL shall make adjustments to products as it deems appropriate or necessary in light of any fund changes or otherwise as appropriate.

 

NWL shall support the retention of Waddell & Reed Investment Management Company as the advisor to mutual funds included as investment options offered under certain Nationwide separate accounts, as reasonable within the bounds of its duties under applicable laws and regulations, unless Waddell & Reed experiences a change in control involving an unaffiliated organization or materially violates the Exclusivity provision described herein or otherwise breaches this Agreement.

 

NWL represents that the Contracts and Policies for the products, (collectively referred to hereinafter as “the Contracts”), are or shall be properly registered under the 1933 Act and/or the 1940 Act and agrees that the registration statements under the 1933 Act and/or the 1940 Act for the Contracts will remain in full force and effect for the duration of this Agreement. If any state should amend its current securities laws to require registration of insurance contracts, then NWL will comply with the amended state law.

 

Combined Product and Underlying Sub Account Prospectus- NWL shall be responsible for producing the product prospectuses and the underlying sub account prospectuses, which may be produced as a combined document as may be agreed upon by the Parties, for its use in sales kits and in the contract package for newly issued contracts.  NWL shall supply Waddell & Reed with sufficient quantities of printed combined prospectuses for its use in marketing the products.  Waddell & Reed shall be responsible for providing a camera-ready copy of the underlying sub account prospectuses, as amended from time to time, to NWL for its use in producing the product prospectuses.  The total printing expense for the combined document shall be borne by NWL.  Any annual product prospectus mailing required to be distributed to policyholders by applicable law will not be produced as a combined document.

 

Product Prospectus- NWL shall be responsible for producing the product prospectuses for the annual product prospectus delivery required to be distributed to policyholders by applicable law. The total production expense and delivery expense (postage) for

 

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the product prospectuses will be borne by NWL.

 

Underlying Sub Account Prospectus- Waddell & Reed will produce the underlying sub account prospectuses, and shall bear the total production expenses relating to any annual underlying sub account prospectus delivery required to be  distributed to  policyholders (Shareholders) by applicable law. NWL, within ten (10) business days of a request by Waddell & Reed, shall send to Waddell & Reed an electronic file in a format reasonably acceptable to Waddell & Reed containing the names and mailing addresses of then-current policyholders to enable it to deliver the underlying sub account prospectuses.  NWL will reimburse Waddell & Reed for the postage expense of the annual underlying sub account prospectus delivery required to be distributed to policyholders (Shareholders) by applicable law. Waddell & Reed and NWL shall share equally that portion of total production expenses relating to the underlying sub account prospectuses produced for soliciting prospective policyholders (Marketing).

 

Supplements to Underlying Sub Account Prospectus- Waddell & Reed is responsible for the production and delivery of any supplements to underlying sub account prospectuses required to be distributed to policyholders (Shareholders) by applicable law.  NWL, within ten (10) business days of a request by Waddell & Reed, shall send to Waddell & Reed an electronic file in a format reasonably acceptable to Waddell & Reed containing the names and mailing addresses of then-current policyholders to enable it to deliver the underlying sub account prospectus supplement.  Waddell & Reed shall be responsible for providing NWL a camera-ready copy of the supplement to the underlying sub account prospectuses to update the product and underlying sub account prospectus. NWL shall reimburse Waddell & Reed for associated delivery expense of any supplements to underlying sub account prospectuses.

 

Underlying Sub Account Semiannual and Annual Reports- Waddell & Reed will produce and bear the production expense for the underlying sub account semiannual and annual reports distributed to policyholders (Shareholders) and NWL will reimburse Waddell & Reed for the delivery expense of the underlying sub account semiannual and annual reports distributed to policyholders (Shareholders).

 

Upon reasonable request, NWL will provide Waddell & Reed copies of all registration statements, prospectuses, statements of additional information, reports, sales literature and other promotional materials, applications of exemption, requests for no action letters, and all amendments to any of the above, that relate to the Contracts or a Variable Account.

 

Upon request, NWL will provide Waddell & Reed with a report, in a format reasonably acceptable to Waddell & Reed, listing the total number of Contract policyholders who have selected each of the sub accounts.

 

NWL, during the term of this Agreement, will immediately notify Waddell & Reed of the following: (i) When the Registration Statement for any Contract has become effective or when any amendment with respect to the Registration Statement thereafter becomes effective; (ii) Any request by the SEC for any amendments or supplements to

 

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the Registration Statement for any Contract or any request for additional information that must be provided by Waddell & Reed; and (iii) The issuance by the SEC of any stop order  with respect to the Registration Statement for any Contact or any amendments thereto or the initiation of any proceedings for that purpose or for any other purpose relating to the registration and/or offering of the Contracts.

 

CONTRACTS, APPLICATIONS, SUITABILITY AND RELATED DOCUMENTATION

 

NWL is responsible for the design of product applications, contracts and related service forms in consultation with Waddell & Reed;

 

NWL is responsible for the production of adequate supplies of product applications, contracts and related service forms;

 

NWL will, during the term of this Agreement, immediately notify Waddell & Reed of the following: (i) The states or jurisdictions where approval of the product contract forms is required under applicable insurance laws and regulations, and whether and when such approvals have been obtained; and (ii)  The states or jurisdictions where any product contract form may not lawfully be sold.

 

NWL is responsible for the design and production of service forms which the parties jointly determine to be necessary.

 

NWL is responsible for supplying adequate quantities of service forms and will arrange for delivery of such forms in bulk to any location designated by Waddell & Reed.

 

Upon reasonable request by NWL, Waddell & Reed agrees to provide full access and copies of complete documentation related to individual product sales/exchanges and suitability determinations and approvals in the possession, control or otherwise accomplished by Waddell & Reed.  In addition, Waddell & Reed agrees that it has and will continue to have:

 

1.              established and maintained a system to supervise recommendations to consumers by or through Waddell & Reed regarding the purchase or exchange of annuities issued by NWL, which system is reasonably designed to achieve compliance with, as applicable, the following:

 

a.  all state insurance laws or regulations based on the NAIC Suitability in Annuity Transactions Model Regulation, as amended, or otherwise pertaining to annuity sales practices, and

 

b.  all FINRA Conduct Rules regarding suitability, including but not limited to Rule 2310 (or new Rule 2111) and Rule 2330, as amended, if and to the extent that such rules are applicable to Waddell & Reed; and

 

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2.              maintained written procedures and conducted periodic reviews of its records to confirm that by or through Waddell & Reed was in compliance with applicable laws, rules and regulations referenced above.

 

Waddell & Reed acknowledges and agrees that NWL may review the compliance of Waddell & Reed with this provision and the laws, regulations and rules referenced herein.

 

PRODUCTION REPORTS

 

NWL will provide periodic production reports to Waddell & Reed during the term of this Agreement.  The frequency, content and format of such production reports shall be reasonably satisfactory to Waddell & Reed.

 

COMPLAINT HANDLING

 

NWL and Waddell & Reed shall promptly inform the other Part in writing of (i) any complaints made to such party relating to the Services or Products provided under this Agreement, (ii) any actions, proceedings, claims, demands or complaints brought by a third party relating to the services or products provided under this Agreement, or to (iii) any complaints brought by a regulatory body relating to the Services or Products provided under this Agreement; and cooperate with the other party with respect to the resolution of such complaints and when possible adhering to regulatory deadlines.

 

COMPENSATION

 

NWL agrees to provide Waddell & Reed, promptly upon written request, records to verify the accuracy of the compensation calculations.

 

A.            Deferred Variable Annuities

 

In addition to the compensation payable to Waddell & Reed by NWL under other agreements between the Parties, NWL will pay to Waddell & Reed the following:

 

Assets Received On or After Effective Date:  NWL shall calculate and pay monthly to Waddell & Reed compensation in an amount equal to an annual rate of 22 basis points of the average monthly account value of all variable annuity assets received on or after the Effective Date of this Agreement for the products listed below distributed by Waddell & Reed.  The compensation shall be calculated and paid by NWL to Waddell & Reed on a monthly basis.  However, the compensation described in this Section relating to assets received on or after the Effective Date of this Agreement shall not survive termination of this Agreement and shall terminate upon termination of this Agreement, whether for or without cause.

 

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Assets Prior to Effective Date:  For variable annuity assets received prior the Effective Date, NWL shall calculate and pay to Waddell & Reed compensation in an amount equal to an annual rate of 24.4 basis points of the average monthly account value of all variable annuity assets received prior to the Effective Date of this Agreement for the products listed below distributed by Waddell & Reed.  The compensation shall be reduced by 0.6 basis points a year over each of the five (5) years subsequent to the Effective Date, from a starting rate of 24.4 basis points annually of the average monthly account value for the first year, to 22 basis points beginning in the fifth year.  The compensation shall be calculated and paid by NWL to Waddell & Reed on a monthly basis and shall survive termination of this Agreement, whether for or without cause.

 

	
Year
    	
 
    	
Timeframe
    	
 
    	
Basis points
    	
 
    
	
1
    	
 
    	
1/1/2012 through 12/31/2012
    	
 
    	
24.4
    	
 
    
	
2
    	
 
    	
1/1/2013 through 12/31/2013
    	
 
    	
23.8
    	
 
    
	
3
    	
 
    	
1/1/2014 to 1/31/2014
    	
 
    	
23.2
    	
 
    
	
4
    	
 
    	
1/1/2015 to 1/31/2015
    	
 
    	
22.6
    	
 
    
	
5
    	
 
    	
From 1/1/2016 and thereafter
    	
 
    	
22
    	
 
    

 

Variable Annuity Products

Waddell & Reed Advisors Select Annuity

Waddell & Reed Advisors Select Plus Annuity

Waddell & Reed Advisors Select Plus Annuity NY

Waddell & Reed Advisors Select Preferred Annuity

 

B.            Fixed Annuities

 

In addition to the compensation payable to Waddell & Reed by NWL under the General Agent Agreement, NWL shall calculate and pay to Waddell & Reed compensation in an amount equal to an annual rate of 25 basis points of gross sales of the fixed annuities listed below distributed by Waddell & Reed.

 

Fixed Annuity Products

Nationwide Platinum V Plus Fixed Annuity

Nationwide Quatro Select

Nationwide Quatro Select NY

 

C.            Compensation related to Commission Options

 

Contemplated within this Agreement is a certain contemporaneous compensation arrangement which is related to the commission options available to Waddell & Reed pursuant to the General Agent Agreement between the Parties and its commission schedules, as amended (“GA Agreement”).  This compensation arrangement includes

 

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payments made by Waddell & Reed to NWL of the amounts specified below, a portion of which come from the 12b-1 fees received by Waddell & Reed to support distribution of Waddell & Reed products.  For the variable annuity products contemplated by this Agreement, Waddell & Reed shall make the following payments to NWL in the manner provided in the  Agreement (and amendments thereto) between Nationwide Financial Services, Inc. and Waddell & Reed Inc., setting forth service fees to be paid to Nationwide Financial Services, Inc..   Such fees shall be based on the commission options available under the GA Agreement for sales after the Effective Date:

 

a)             If the high commission option is chosen, then Waddell & Reed shall pay 35 basis points to NWL, a portion of which to be paid out of the 12b-1 fees received by Waddell & Reed and/or its affiliates.

 

b)             If the low commission option is chosen, then Waddell & Reed shall pay 10 basis points to NWL out of the 12b-1 fees received by Waddell & Reed and/or its affiliates.

 

Nothing contained herein shall be construed to modify or abridge agreed upon service fee arrangements in place prior to the effective date of this Agreement.

 

It is hereby acknowledged and agreed by the Parties that (a) the obligation to pay the amounts specified above in this section to NWL shall survive the termination of this agreement, whether for or without cause, and (b) any deviation from or failure to strictly adhere to the compensation arrangement as described above in this section shall constitute a material breach of this Agreement, and, in accordance with the Termination provision of this Agreement, shall constitute grounds for termination for cause of this Agreement if such breach is not cured in accordance with subsection (g) of the Termination provision.

 

WEBSITE HOSTING AND MAINTENANCE

 

NWL shall have sole control over the internet site at www.nationwidefinancial.com/waddellreed (the “Web Site”). Both parties agree that NWL will conduct regular performance updates and Web Site enhancements. Modifications in the Web Site shall be deemed approved if Waddell and Reed fails, within 10 business days, to object in writing to NWL’s Web Site changes. In the event Waddell and Reed objects to certain updates or enhancements, the parties shall negotiate in good faith, without penalty, and agree in writing to a Web Site solution acceptable to both parties.

 

NWL shall be responsible for compliance with the security, privacy and user access policies of the Web Site and compliance with all applicable state and federal laws pertaining to the Web Site, with the exception of the form and content of materials created by and obtained from Waddell & Reed.

 

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No compensation shall be paid and each party shall bear its own costs with respect to the creation, maintenance and operation of the Web Site.

 

Both parties expressly agree that the indemnifications and representations of the Agreement are extended to include the Web Site activities. In addition, the following acknowledgements and representations are made, specifically relating to the Web Site:

 

Ownership of the Web Site.  As between Waddell & Reed and NWL, Waddell & Reed acknowledges that NWL is the exclusive owner of the Web Site, its services and content. NWL acknowledges that content given to NWL by Waddell & Reed for the Web Site shall remain the property of Waddell & Reed or its licensor. Neither NWL nor Waddell & Reed shall have any rights in the other party’s content other than the limited right to use such content as required to perform the terms of this Agreement.

 

Since NWL has customized this particular Web Site for Waddell & Reed, Waddell & Reed hereby grants to NWL the non-exclusive, non-transferable, non-assignable right during the term of this Agreement to use (i.e., to copy, transmit, distribute, display and perform both privately and publicly), the Waddell & Reed icon, the Waddell & Reed name and any other related textual and graphic materials, if any, that are provided by Waddell & Reed to NWL for the express purpose of inclusion on the Web Site.

 

To further the purpose, and subject to the terms of this Agreement, each party hereby grants to the other party a limited, non-exclusive, non-sublicenseable, royalty-free, worldwide license to use such party’s trademarks, service marks, trade names, logos, or other commercial or product designations (collectively, the “Marks”). The owner of the Marks may terminate the foregoing license if, in its sole discretion, the licensee’s use of the Marks does not conform to the owner’s standards. Title to and ownership of the owner’s Marks shall remain with the owner. The licensee shall not take any action inconsistent with the owner’s ownership of the Marks and any benefit accruing from the use of such Marks shall automatically vest in the owner.

 

NWL shall acquire no ownership to Waddell & Reed’s intellectual property rights by virtue of its inclusion of Waddell & Reed’s trademark on the Web Site, nor shall Waddell & Reed acquire any rights in NWL’s intellectual property or in NWL’s ownership of the Web Site by its trademark’s inclusion on the Web Site.

 

Neither party makes any express or implied warranties to the other party with respect to the Web site including, but not limited to, warranties of merchantability, fitness for a particular purpose, or that the operation of the Web site will be uninterrupted or error-free. Neither party  shall be liable to the other for loss of use, data, or profits, business interruption, or any other damages caused by or resulting from interruptions or errors on the Web site caused by forces outside of reasonable control, including but not limited to malicious codes, interrupted communications, and/or hackers.

 

Waddell & Reed warrants that any passwords or access devices provided

 

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to the Web site are for the sole use of the General Agent or Agents, and shall not be provided to any consumers.

 

Waddell & Reed and NWL agree that consumer’s nonpublic personal information obtained from and provided to each party will be maintained as confidential, will be used for only the intent and purpose shared, and will comply with all laws relating to privacy, confidentiality, security and the handling of customer information which may from time to time be established.

 

Either party may terminate the Web Site relationship without penalty by 30 days prior written notice. Upon termination of the Web Site relationship, all rights, licenses, and privileges shall automatically revert to the granting party.

 

PRIVACY/CONFIDENTIALITY OF INFORMATION

 

Confidentiality Obligation.  Each party (in such capacity, the “Receiving Party”) shall hold the Confidential Information (as defined below) of the other party (in such capacity, the “Disclosing Party”) in strict confidence.  Each party shall take all reasonable steps to assure that any material or information considered by either party to be confidential which has or will come into the possession or knowledge of the other in connection with this Agreement shall not be disclosed to others, in whole or in part, without the prior written permission of the other party or as otherwise provided herein.  In addition, each party agrees not to use, disclose or distribute any Confidential Information except as necessary to perform the terms of this Agreement.  Each party warrants that it will protect and maintain the other party’s Confidential Information with reasonable care, which shall not be less than the degree of care it uses to protect and maintain is own Confidential Information.  Each party represents and agrees that it shall not disclose Confidential Information on other than a “need to know basis” and then only to (a) Receiving Party’s employees, officers or agents engaged in a use permitted hereby, (b) affiliates of Receiving Party provided they shall be restricted in use and subsequent disclosure to the same extent as Receiving Party, and (c) third party service providers of Customer and customer’s affiliated and subsidiary companies solely for use in connection with the provision of services to Customer and affiliated and subsidiary companies; provided that Customer’s third party service providers shall in advance sign a confidentiality agreement that includes reasonable nondisclosure provisions and that is no less restrictive than the terms of this Agreement.  The Receiving Party shall not duplicate any material containing Confidential Information except in the direct performance of its obligations under this Agreement.

 

CONFIDENTIAL INFORMATION

 

As used herein, “Confidential Information” shall mean information, including trade secrets, know-how, proprietary information, formulae, processes, techniques and information relating to the Disclosing Party’s past, present and future marketing, financial, research and development activities, and personal information about

 

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employees, policyholders, customers, licensors, contractors and others, that may be disclosed, whether orally or in writing, to the Receiving Party, or that may be otherwise received or accessed by the Receiving Party in connection with this Agreement, whether transmitted prior to or after the Effective Date, and which is information either identified as being Confidential Information, or which is information that a reasonable business person would understand to be confidential Information.  Examples of Confidential Information include, but are not limited to, the terms and conditions of this Agreement, the Disclosing Party’s (or its third party business partner’s, who shall be an express third party beneficiary under this Agreement) customer lists, pricing policies, market analyses, market projections, consulting and sales methods and techniques, expansion plans, programs, program decks, routines, subroutines, operating systems, internal controls, security procedures, inventions, methods of operation or proposed  methods of operation, object and source codes, updates thereto, and related items, including, but not limited, specifications, layout, charts and other like materials and documents, together with all information, data, and know-how, technical or otherwise, included therein, manuals printouts, notes and annotations on disks, diskettes, tapes or cassettes, both master and duplicate.

 

Notwithstanding the foregoing, “Confidential Information” shall not include information: (i) previously known to the Receiving Party without an obligation of confidence; (ii) independently developed by or for the Receiving Party or Receiving Party’s employees, consultants or agents without reference to or use of the Confidential Information; (iii) was lawfully acquired by the Receiving Party form a third party which is not, to the Receiving Party’s knowledge, under an obligation of confidence with respect to such information; or (iv) which is or becomes publicly available through not fault of the Receiving Party or by no breach of this Agreement.  If the Receiving Party receives a subpoena or other validly issued administrative or judicial process demanding confidential Information, it shall promptly notify the Disclosing Party of such receipt and tender to it the defense of such demand.  After providing such notification, the Receiving Party shall be entitled to comply with such subpoena or other process to the extent permitted by Law.  Notwithstanding the fact that a portion of Confidential Information is or may become non-confidential, each party’s obligations under this Agreement will continue to apply to all other Confidential Information.

 

Customer Information: As used herein, “Customer Information” means non-public personally identifiable information as defined in the Gramm-Leach-Bliley Act and the rules and regulations promulgated there under.  Each party agrees to comply with all applicable provisions of the Gramm-Leach-Bliley Act.

 

Customer Information shall not include information that is not personally identifiable (de-identified information).  De-identified information may be used by NWL and/or its service providers, either alone or in aggregate, for research, studies, and for other business purposes.

 

Unauthorized Disclosure.  Receiving Party shall:  (a) promptly notify Disclosing Party of any unauthorized possession, use or knowledge, or attempt thereof, of Disclosing

 

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Party’s Confidential Information by any person or entity that may become known to Receiving Party, (b) promptly furnish to Disclosing Party full details of the unauthorized possession, use or knowledge, or attempt thereof, and assist Disclosing Party in investigating or preventing the recurrence of any unauthorized possession, use or knowledge, or attempt thereof, of Disclosing Party’s Confidential Information, (c) cooperate with Disclosing Party in any litigation and investigation against third parties deemed necessary by Disclosing Party to protect its proprietary rights, and (d) use reasonable steps to prevent a recurrence of any such unauthorized possession, use  or knowledge, or attempt thereof, of Disclosing Party’s Confidential Information.  Receiving Party shall bear the cost it incurs as a result of compliance with this Section.

 

Return or Destruction of Confidential Information.  Upon the Disclosing Party’s written request or following the completion or termination of any Statement of Work, the Receiving Party shall promptly (i) return to NWL all documents and other media containing Confidential Information that is in Receiving Party’s possession or control, and (ii) purge, delete or destroy, to the extent reasonably practical, any Confidential Information that cannot feasibly be returned to Disclosing Party, and (iii) safeguard all other documents or media, containing personal information, that cannot be returned, purged, deleted or destroyed.  With respect to identical copies of documents or other media whose originals have been returned to Disclosing Party, Receiving Party will purge, delete or destroy such copies.

 

Data Security.  In addition to complying with Customer Policies relating to security of and access to Customer Information, in performing the Services here under, Supplier shall adhere to industry standard best practices for security customer data so as to reasonably ensure that Customer Information is not lost or stolen or otherwise used, modified or accessed by any other party without Customer’s prior written approval.

 

Indemnification and Limitation on Liability.  The parties understand and agree that there shall be no cap on liability for direct damages arising out of breaches of confidentiality involving breaches of data that lead to the release and misuse of data pertaining to Customer or its employees (“Identified Breaches”).  All damages arising out of or relating to Identified Breaches shall be deemed direct damages for purposes of this Agreement.

 

This Section shall survive and continue in full force and effect notwithstanding the expiration or termination of the Agreement.

 

TERM OF AGREEMENT

 

This Agreement shall remain in full force and effect for five (5) years from the Effective Date (“Initial Term”) unless terminated for cause, and may be amended only by mutual agreement of the parties, in writing. Thereafter, unless otherwise terminated as provided for herein, this Agreement shall be renewed automatically for successive (5) five-year periods (“Rollover Periods”). In

 

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addition to the provisions for termination set forth in the “Termination” Section, below, this Agreement may be terminated without penalty by provision of a notice of non-renewal provided at least sixty (60) days prior to the expiration of the Initial Term or any Rollover Period in order to avoid automatic renewal. Any decision by either party to cease issuance or distribution of any specific product contemplated under this Agreement shall not effect a termination of the Agreement unless the Parties mutually agree to terminate this Agreement with proper notice and in writing as provided for in this Agreement.

 

TERMINATION

 

In addition to the provisions for termination set forth in the “Exclusivity” and “Term of Agreement” Sections of this Agreement, either party may terminate this Agreement for cause at any time, upon written notice to the other, if the other knowingly and willfully (a) materially fails to comply with the laws or regulations of any state or governmental agency or body having jurisdiction over the sale of insurance or securities, (b) misappropriates any money or property belonging to the other, (c) subjects the other to any material actual or potential liability due to misfeasance, malfeasance, or nonfeasance, (d) commits any fraud upon the other, (e) has an assignment for the benefit of creditors, (f) incurs bankruptcy, or (g) commits a material breach of this Agreement; and does not cure such breach within 30 days following its receipt of written notice from the terminating party.

 

Either party may terminate this Agreement, without regard to cause, upon six months prior written notice.

 

In the event of termination of this Agreement, NWL and Waddell & Reed will use “best efforts,” as defined below, to preserve in force the business relating to the products issued pursuant to this Agreement.

 

“Best efforts” with respect to Waddell & Reed shall mean that Waddell & Reed shall endeavor to ensure that the various sales representatives appointed by it shall not recommend to an owner of a product that the product be exchanged for a non-NWL policy unless there are reasonable grounds that the exchange of the product is suitable for the product owner, with both Waddell & Reed and NWL acknowledging the limitations on Waddell & Reed’s ability to do so due to the independent contractor status of its sales representatives. “Best efforts” with respect to NWL shall include, but not be limited to, efforts by NWL to make available new product features, contractual benefits and administrative and service enhancements which can, if economically feasible, be introduced to owners  of the products, thereby discouraging the surrender, cancellation, exchange or transfer of the products identified in Appendix A.

 

14

 

GENERAL PROVISIONS

 

PREVIOUS AGREEMENT

 

As of the Effective date of this Agreement, this Agreement shall supersede and effectively terminate any and all Administrative Services Agreements and amendments to all Administrative Service Agreements that may have been entered into between NWL and Waddell & Reed.

 

OTHER AGREEMENTS

 

NWL and Waddell & Reed acknowledge other agreements are established between the two parties however, the provisions of this Agreement control the conduct contemplated herein.

 

AMENDMENT

 

This Agreement and any provision contained or arrangement contemplated herein, may only be amended as agreed to by all Parties as evidenced by a writing duly executed by authorized officers of each Party.

 

WAIVER

 

Failure of NWL or Waddell & Reed to insist upon strict compliance with any of the conditions of this Agreement shall not be construed as a waiver of any of the conditions, but the same shall remain in full force and effect. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver.

 

LIMITATIONS

 

Neither party shall have authority on behalf of the other to (i) make, alter or discharge any contractual terms of the products, (ii) to waive any forfeiture, (iii) extend the time of making any contributions to the products, (iv) guarantee dividends, (v) alter the forms which either may prescribe (vi) or substitute other forms in place of those prescribed by the other.

 

BINDING EFFECT

 

Except as expressly limited otherwise in this Agreement, this Agreement shall be binding on and shall inure to the benefit of the parties to it and their respective successors and assigns, provided that neither party shall assign or sub-contract this Agreement or any rights or obligations hereunder without the prior written consent of the other, which consent shall not be unreasonably withheld.

 

15

 

ASSIGNMENT

 

Neither Party shall have the right to assign, transfer, or sublicense any obligation or benefits under this Agreement without the prior written consent of the other Party; however, such consent shall not be unreasonably withheld.  Any attempt to do any of the foregoing without such consent shall be void.  The obligations of the Parties under this Agreement shall not terminate upon any attempted, unauthorized assignment.  However, either Party may assign its rights, licenses and obligations hereunder to any  affiliate, subsidiary or organization controlled by or under common control with it, or in connection with a change of control, reorganization, demutualization, merger, consolidation, or corporate reorganization.

 

INDEMNIFICATIONS

 

NWL agrees to indemnify and hold Waddell & Reed harmless from any and all losses, claims, damages, liabilities or expenses to which Waddell & Reed may become subject under any statute, regulation, common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses relate directly to the sale of the Contracts and arise as a direct consequence of: (i) any material misrepresentation or omission, or alleged misrepresentation or omission, contained in the registration statement, prospectuses or the Contracts; (ii) any failure by NWL or its employees, whether negligent or intentional, to perform the duties and discharge the obligations contemplated in this Agreement;  (iii) any fraudulent, unauthorized or wrongful act or omission by NWL, its employees, contractors or agents; and (iv) NWL’s misuse, modification and/or unauthorized use of the Marks or any claims that the Marks or materials provided to Waddell & Reed by NWL pursuant to this Agreement constitute an infringement of title, copyright, trademark or other intellectual property rights of a third party, or piracy, plagiarism, or unfair competition or idea misappropriation under implied or express contract or any other cause of action in any way related to the Marks or materials provided to Waddell & Reed by NWL pursuant to this Agreement.

 

Waddell & Reed agrees to indemnify and hold NWL, their officers, directors, employees and agents harmless from any and all losses, claims, damages, liabilities or expenses to which NWL may become subject under any statute, regulation, common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses related directly to the sale of the Contracts and arise as a direct consequence of: (i) any material misrepresentation or omission, or alleged misrepresentation or omission involving the sales subject to this Agreement, provided that such misrepresentations or omissions are not caused by NWL; (ii) any failure by Waddell & Reed, its Agents or affiliated agencies, whether negligent or intentional, to perform the duties and discharge the obligations contemplated in this Agreement; (iii) any fraudulent, unauthorized or wrongful act or omission by Waddell & Reed, its Agents or affiliated agencies; (iv) Waddell & Reed’s misuse, modification and/or unauthorized use of the Marks or any claims that the Marks or materials provided to NWL by Waddell & Reed pursuant to this

 

16

 

Agreement constitute an infringement of title, copyright, trademark or other intellectual property rights of a third party, or piracy, plagiarism, or unfair competition or idea misappropriation under implied or express contract or any other cause of action in any way related to the Marks or materials provided to NWL by Waddell & Reed pursuant to this Agreement; (iv) any and all actions conducted on the part of Waddell & Reed, its Agents or affiliated agencies related to  findings by any regulatory agency  that a sale of a Contract was unsuitable; and  (v) any loss, damage, liability, claim, demand, suit, judgment and expense (including reasonable attorneys’ fees) brought against NWL due to the misuse of Waddell & Reed’s access number(s), password(s) and account number(s) collectively referred to as “Security Codes.”

 

In the event that NWL is compelled or agrees to pay any amount in the settlement of any claim, judgment, arbitration or similar action pursuant to this Section, Waddell & Reed shall reimburse NWL. NWL, in the alternative, may deduct the amount of such reimbursement obligation from any sales compensation subsequently payable to Waddell & Reed.

 

No party shall be liable, as the indemnifying party pursuant to this Section, to the extent that the losses, claims, damages, liabilities or legal expenses incurred by the indemnified party arise out of the indemnified party’s willful misfeasance, bad faith, or gross negligence in the performance of its duties, or through the reckless disregard of the indemnified party’s duties, under this Agreement.

 

The parties will promptly notify each other of the commencement of any litigation or proceedings, or the assertion of any claim or any material inquiries related to the duties set forth in the Agreement.  The indemnifying party shall have control of the defense of any such action, including appeals, and of all negotiations relating thereto, including the right to effect the settlement or compromise thereof.

 

Nothing in this Section shall preclude the parties from exercising any other rights and remedies that may be available to them at law or in equity.

 

NOTICES

 

All notices, requests, demands and other communication under this Agreement shall be in writing and shall be deemed to have been given on the date of service if served personally on the party to whom notice is to be given, or on the date of mailing if sent by First Class Mail, Registered or Certified, postage prepaid and properly addressed as follows:

 

To NWL:

Nationwide Life Insurance Company

John L. Carter

Senior Vice-President, Nationwide Life Insurance Company

One Nationwide Plaza, MC 1-9-101

Columbus, OH 43215

 

17

 

To Waddell & Reed:

Waddell & Reed, Inc.

Tom Butch

President and Chief Marketing Officer

6300 Lamar Avenue

Overland Park, KS 66202

 

With a copy to:

Waddell & Reed, Inc.

Attn: Legal Department

6300 Lamar Avenue

Overland Park, KS 66202

 

GOVERNING LAW

 

This Agreement shall be construed in accordance with and governed by the laws of the State of Ohio.

 

IN WITNESS WHEREOF, the parties hereto execute this Agreement effective as of the date written above.

 

Waddell & Reed, Inc.

 

 

	
By:
    	
/s/   Thomas W. Butch
    	
 
    
	
 
    	
 
    
	
 
    	
Thomas   W. Butch
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
President   and Chief Marketing Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
NATIONWIDE   LIFE INSURANCE COMPANY
    	
 
    
	
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   John L. Carter
    	
 
    
	
 
    	
 
    
	
 
    	
John   L. Carter
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Senior   Vice President Non-Affiliated Sales, Nationwide Life Insurance Company and   Nationwide Life and Annuity Insurance Company
    
				

 

18

 

APPENDIX A

 

PRODUCT TYPES

 

Exclusivity refers to the following product types:

 

Variable Annuities

Variable Universal Life Insurance

Retirement Plans

 

This APPENDIX may be amended from time to time with the addition of certain other annuity or insurance product types.

 

19

 

Exhibit A
 Administration Services Agreement
 Analysis of Functions and Responsibilities

 

Administration and Customer Service

 

	
NWL
    	
 
    	
WADDELL &   REED
    
	
 

·    Applies underwriting issue   criteria to application. Notifies agent and/or customer of any error or   missing data necessary to underwrite application and establish Contract Owner   records.

 

·    Receives and processes all   Policyholder service requests, including but not limited to informational   requests, beneficiary changes, payments, deposits, and transfers of contract   value between eligible investment options. Receives and processes surrenders,   loans, death claims in accordance with established guidelines.

 

·    Prepares checks for   surrenders, loans, death claims and forwards to payee. Prepares and mails   confirmation statement of disbursement to Contract Owner/Beneficiary, with   copy to agent.

 

·    Maintains daily records of   all changes made to Contract Owner accounts and values those accounts daily.

 

·    Researches and responds to   all customer/broker policy inquiries. Keeps all required policyholder records.

 

·    Produces and provides all   forms ancillary to contract policy issue.

 

·             Maintain adequate number   of toll-free lines to service customer-broker policy inquiries.
    	
 
    	
 

·    Forwards completed   application and associated forms to NWL.

 

·    Gathers information, conducts   individual suitability determinations, and maintains records for all product   recommendations, sales and exchanges in accordance with applicable state,   federal and FINRA laws, rules and regulations, and in accordance with   the provisions of this Agreement.

 

·    Waddell & Reed   shall maintain its registration under the 1934 Act and shall continue   registration in good standing with the FINRA. Waddell & Reed shall   promptly notify NWL in the event that any appointed agent fails to maintain   required licenses, or materially fails to adhere to supervisory standards in   connection with the sale of the products provided jointly by NWL and   Waddell & Reed.

 

·    Responds to formal   complaints on behalf of itself and its affiliates from state insurance   departments, the SEC, and other outside agencies where such complaints are   specifically addressed to and directed toward Waddell & Reed.

 

·    Accommodates customer   service function by providing any supporting information or documentation   which may be in the control of Waddell & Reed.

 

·    Researches and responds to   customer/broker inquiries regarding fund performance and distribution   practices.
    

 

20

 

	
NWL

 

· Maintains a   24 hour “voice response” system for unit values and contract values and other   applications as developed. 

 

· Responds to   formal complaints on behalf of it and its affiliates from state insurance   departments, the SEC, and other outside agencies where such complaints are   specifically addressed to and directed toward NWL. 

 

· Promptly   communicates complaints (formal written complaints and all inquires or   complaints from any federal or state regulatory body) received by NWL which   may relate to sales by Waddell & Reed, and assists in resolution. 

 

· Provides   payout quotes information for customers. 

 

· Provides   service support for all new contract sales. 

 

· Provides   several daily outbound data feeds on existing contracts, including registration,   transaction, unit values, and production history files in lieu of paper   delivery of producer confirmation, quarterly statements, and commission   statements.

 
    	
 
    	
 

· Promptly   communicates complaints (formal written complaints and all inquires or   complaints from any federal or state regulatory body) received by   Waddell & Reed which may relate to NWL products and assists in   resolution. 

 

· Communicates responsibilities to producers and   supports the process as appropriate.
    

 

21

 

Accounting, Daily Trades and Valuations

 

This Section is governed by the fund participation agreement which has been entered into by NWL and the W&R Target Funds-such agreement is hereby incorporated by reference into this Agreement.

 

Banking

 

	
NWL-
    	
 
    	
WADDELL &   REED
    
	
 
    	
 
    	
 
    
	
· Balances,   edits, endorses and prepares daily deposit.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
· Places   deposits in depository account. Prepares daily cash journal summary reports   and maintains same for review by Waddell & Reed.
    	
 
    	
 
    

 

Proxy Processing

 

This section is governed by the fund participation agreement which has been entered into by NWL and the W&R Target Funds-such agreement is hereby incorporated by reference into this Agreement.

 

Premium Taxes

 

	
NWL
    	
 
    	
WADDELL &   REED
    
	
 
    	
 
    	
 
    
	
·  Collects, pays and accounts   for premium taxes as appropriate.
    	
 
    	
 
    
	
· Prepares and   maintains all premium tax records by state. Maintains liabilities in General   Account ledger for accrual of premium taxes collected. Integrates all company   premium taxes due and performs related accounting.
    	
 
    	
 
    

 

22

 

Regulatory and Other Reporting

 

	
NWL
    	
 
    	
WADDELL &   REED
    
	
 
    	
 
    	
 
    
	
· Prepares and   files all contracts and registrations required by SEC and state insurance   departments as related to the annuity product. 

 

· Prepares and   files Separate Account Semi-Annual and Annual Statements. 

 

· Prepares and delivers the   appropriate, required IRS reports at the Contract Owner level. Files same   with required regulatory agencies. 

 

· Prepares and   files N-SAR for the Separate Account. 

 

· Responsible   for all audits related to the separate account and registration. Provides   periodic reports in accordance with Schedule of Reports to be jointly   prepared by NWL and Waddell & Reed.
    	
 
    	
· Prepares and   files registrations as required by the SEC relative to the mutual funds   managed by Waddell & Reed..

 

·  Prepares and files form N-SAR for the mutual   funds managed by Waddell & Reed. 

 

· Responsible   for all audits related to the mutual funds managed by Waddell &   Reed. 

 

· Provides   periodic reports in accordance with Schedule of Reports to be jointly   prepared by NWL and Waddell & Reed.
    

 

Sales and Marketing

 

	
NWL
    	
 
    	
WADDELL &   REED
    
	
 
    	
 
    	
 
    
	
· Supports the   wholesaling effort of the Products. 

 

· Provides   input into the Sales and Marketing plan. Responsible for planning service and   administration support to appropriately support the sales efforts. 

 

· Responsible   for leading joint development of all sales and marketing materials and for   all costs associated with producing, storing, postage and delivery.
    	
 
    	
· Responsible   for wholesaling the Products to prospective producers including seminars,   one-on-one presentations, training, and other normal wholesaling activities. 

 

· Participates   in joint development of all sales and marketing materials, and files with   state insurance authorities as required, 

 

· Responsible   for filing sales and marketing material with FINRA.

 

· Responsible   for development and
    

 

23

 

	
·  Provides input and prior   approval on advertising materials. Files with regulatory agencies as   required.
    	
 
    	
associated   costs of all advertising developed by Waddell & Reed.
    

 

24

 

EXHIBIT B

 

ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES

 

In order to assure compliance with state and federal regulatory requirements and to maintain control over the distribution of promotional materials dealing with the Products, NWL and Waddell & Reed require that all variable contract promotional materials be reviewed and approved by both NWL and Waddell & Reed prior to their use. These guidelines are intended to provide appropriate regulatory and distribution controls.

 

Sufficient lead time must be allowed in the submission of all promotional material. NWL and Waddell & Reed shall approve in writing all promotional material. Such approval shall not be unreasonably withheld and shall be given as promptly as possible within a reasonable period of time as agreed.

 

All promotional material will be submitted in “draft” form to permit any changes or corrections to be made prior to the printing.

 

NWL and Waddell & Reed will provide each other with the information below regarding the intended use of promotional material submitted. Approval for one use will not constitute approval for any other use. Different standards of review may apply when the same advertising material is intended for different uses. The following information will be provided for each item of promotional material:

 

i)                                         In what jurisdiction(s) the material will be used.

ii)                                      Whether distribution will be for “public” or “broker dealer only” use.

iii)                                   How the material will be used (e.g., brochure, mailings, 482 ads, etc.)

iv)                                  The projected date of initial use and, if a special promotion, the projected date of last use.

 

NWL and Waddell & Reed will advise each other of the date on which any material is discontinued from use.

 

Any changes to previously approved promotional material must be resubmitted, following these procedures. When approved material is to be put to a different use, request for approval of the material for the new use must be submitted.

 

NWL and Waddell & Reed will assign a form number to each item of advertising on each piece of advertising and sales promotional material. It will be used to aid in necessary filings, and to maintain appropriate controls.

 

NWL and Waddell & Reed will provide written approval for all material to be used.

 

Waddell & Reed will provide NWL with a minimum of 50 copies of all material

 

25

 

in final print form to effect necessary state insurance regulatory filings.

 

Waddell & Reed will coordinate, perform and be responsible for FINRA and any state securities regulatory filings of sales and promotional material to be used by Waddell & Reed registered representatives.

 

All telephone communication and written correspondence should be directed to Compliance Director, Nationwide Life Insurance Company, One Nationwide Plaza 1-33-401, Columbus, OH 43216 and if to Waddell & Reed, to, Tom Kennedy, Waddell & Reed, Inc, 6300 Lamar Avenue, Overland Park, KS 66202 (phone 913-236-2059).

 

26Exhibit 10.21

 

INVESTMENT MANAGEMENT AGREEMENT

 

THIS AGREEMENT, dated as of April 30, 2009, is entered into by and between Waddell & Reed InvestEd Portfolios (the “Trust”) and Waddell & Reed Investment Management Company (“WRIMCO”), with respect to each series of the Trust listed in Exhibit A (each, a “Fund”).

 

WITNESSETH:

 

In consideration of the mutual promises and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, it is hereby agreed by and between the parties hereto as follows:

 

I.             In General

 

WRIMCO agrees to act as investment adviser to each Fund with respect to the investment of its assets and in general to supervise the investments of the Fund, subject at all times to the direction and control of the Board of Trustees of the Trust, all as more fully set forth herein.

 

II.            Duties of WRIMCO with respect to investment of assets of the Trust

 

A.  WRIMCO shall regularly provide investment advice to each Fund and shall, subject to the succeeding provisions of this section, continuously supervise the investment and reinvestment of cash, securities or other property comprising the assets of the investment portfolios of each Fund; and in furtherance thereof, WRIMCO shall as to each Fund:

 

1.  obtain and evaluate pertinent information about significant developments and economic, statistical and financial data, domestic, foreign or otherwise, whether affecting the economy generally or one or more of the portfolios of the Fund, and whether concerning the individual companies whose securities are included in the Fund’s portfolios or the industries in which they engage, or with respect to securities which WRIMCO considers desirable for inclusion in the Fund’s portfolio;

 

2.  furnish continuously an investment program for the Fund;

 

3.  determine what securities shall be purchased or sold by the Fund; and

 

4.  take, on behalf of the Fund, all actions which appear to WRIMCO necessary to carry into effect such investment programs and supervisory functions as aforesaid, including the placing of purchase and sell orders.

 

B.  WRIMCO shall make appropriate and regular reports to the Board of Trustees of the Trust on the actions it takes pursuant to Section II.A. above.  Any investment programs furnished

 

 

by WRIMCO under this section, or any supervisory function taken hereunder by WRIMCO shall at all times conform to and be in accordance with any requirements imposed by:

 

1.  the provisions of the Investment Company Act of 1940, as amended (“1940 Act”) and any rules or regulations in force thereunder;

 

2.  any other applicable provision of law;

 

3.  the provisions of the Trust Instrument of the Trust as amended from time to time;

 

4.  the provisions of the Bylaws of the Trust as amended from time to time;

 

5.  the terms of the registration statements of the Trust, as amended from time to time, under the Securities Act of 1933 and the 1940 Act.

 

C.  Any investment programs furnished by WRIMCO under this section or any supervisory functions taken hereunder by WRIMCO shall at all times be subject to any directions of the Board of Trustees of the Trust, its Executive Committee, or any committee or officer of the Trust acting pursuant to authority given by the Board of Trustees.

 

III.          Allocation of Expenses

 

The expenses of the Trust and the expenses of WRIMCO in performing its functions under this Agreement shall be divided into two classes, to wit:  (i) those expenses which will be paid in full by WRIMCO as set forth in subparagraph “A” hereof, and (ii) those expenses which will be paid in full by each Fund, as set forth in subparagraph “B” hereof.

 

A.  With respect to the duties of WRIMCO under Section II above, it shall pay in full, except as to the brokerage and research services acquired through the allocation of commissions as provided in Section IV hereinafter, for (a) the salaries and employment benefits of all employees of WRIMCO who are engaged in providing these advisory services; (b) adequate office space and suitable office equipment for such employees; and (c) all telephone and communications costs relating to such functions.  In addition, WRIMCO shall pay the fees and expenses of all trustees of the Trust who are employees of WRIMCO or an affiliated corporation and the salaries and employment benefits of all officers of the Trust who are affiliated persons of WRIMCO.

 

B.  The Funds shall pay in full for all of their respective expenses which are not listed above (other than those assumed by WRIMCO or its affiliates in their respective capacities as principal underwriter of the shares of each of the Fund, as Administrative and Shareholder Servicing Agent or as Accounting Services Agent for the Funds), including (a) the costs of preparing and printing prospectuses and reports to shareholders of the Funds, including mailing costs; (b) the costs of printing all proxy statements and all other costs and expenses of meetings of shareholders of the Fund (unless the Trust and WRIMCO shall otherwise agree); (c) interest,

 

2

 

taxes, brokerage commissions and premiums on fidelity and other insurance; (d) audit fees and expenses of independent accountants and legal fees and expenses of attorneys, but not of attorneys who are employees of WRIMCO or an affiliated company; (e) fees and expenses of its trustees not affiliated with WRIMCO or its affiliates; (f) custodian fees and expenses; (g) fees payable by the Trust and/or the Funds under the Securities Act of 1933, the 1940 Act, and the securities or “Blue-Sky” laws of any jurisdiction; (h) fees and assessments of the Investment Company Institute or any successor organization; (i) such nonrecurring or extraordinary expenses as may arise, including litigation affecting the Trust and/or the Funds, and any indemnification by the Trust of its officers, directors, employees and agents with respect thereto; (j) the costs and expenses provided for in any Administrative and Shareholder Servicing Agreement or Accounting Services Agreement, including amendments thereto, contemplated by subsection C of this Section III.  In the event that any of the foregoing shall, in the first instance, be paid by WRIMCO, a Fund shall pay the same to WRIMCO on presentation of a statement with respect thereto.

 

C.  WRIMCO, or an affiliate of WRIMCO, may also act as (i) transfer agent or administrative and shareholder servicing agent of each Fund of the Trust and/or as (ii) accounting services agent of each Fund of the Trust if at the time in question there is a separate agreement, “Administrative and Shareholder Servicing Agreement” and/or “Accounting Services Agreement,” covering such functions between the Trust and WRIMCO, or such affiliate.  The entity, whether WRIMCO, or its affiliate, which is the party to such Agreement with the Trust is referred to as the “Agent.”  Each such Agreement shall provide in substance that it shall not go into effect, or be amended, or a new agreement covering the same topics between the Trust and the Agent be entered into as to a Fund, unless the terms of such Agreement, such amendment or such new agreement have been approved by the Board of Trustees of the Trust, including the vote of a majority of the trustees who are not “interested persons” as defined in the 1940 Act, of either party to the Agreement, such amendment or such new agreement (considering WRIMCO to be such a party even if at the time in question the Agent is an affiliate of WRIMCO), cast in person at a meeting called for the purpose of voting on such approval.  Such a vote is referred to as a “disinterested trustee” vote.  Each such Agreement shall also provide in substance for its continuance, unless terminated, for a specified period which shall not exceed two years from the date of its execution and from year to year thereafter only if such continuance is specifically approved at least annually by a disinterested trustee vote, and that any disinterested trustee vote shall include a determination that (a) the Agreement, amendment, new agreement or continuance in question is in the best interests of each affected Fund and its shareholders; (b) the services to be performed under the Agreement, the Agreement as amended, new agreement or agreement to be continued are services required for the operation of the Fund; (c) the Agent can provide services the nature and quality of which are at least equal to those provided by others offering the same or similar services; and (d) the fees for such services are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality.  Any such Agreement may also provide in substance that any disinterested trustee vote may be conditioned on the favorable vote of the holders of a majority (as defined in or under the 1940 Act) of the outstanding shares of each class or series of the Trust.  Any such Agreement shall also provide in substance that it may be terminated as to a Fund by the Agent at any time without penalty upon giving the Trust one hundred twenty (120) days’ written notice (which notice may

 

3

 

be waived by the Trust) and may be terminated as to a Fund by the Trust at any time without penalty upon giving the Agent sixty (60) days’ written notice (which notice may be waived by the Agent), provided that such termination by the Trust shall be directed or approved by the vote of a majority of the Board of Trustees of the Trust in office at the time or by the vote of the holders of a majority (as defined in or under the 1940 Act) of the outstanding shares of each class or series of the Trust.

 

IV.          Brokerage

 

A.  WRIMCO may select brokers to effect the portfolio transactions of each Fund on the basis of its estimate of their ability to obtain, for reasonable and competitive commissions, the best execution of particular and related portfolio transactions.  For this purpose, “best execution” means prompt and reliable execution at the most favorable price obtainable.  Such brokers may be selected on the basis of all relevant factors including the execution capabilities required by the transaction or transactions, the importance of speed, efficiency, or confidentiality, and the willingness of the broker to provide useful or desirable investment research and/or special execution services.  WRIMCO shall have no duty to seek advance competitive commission bids and may select brokers based solely on its current knowledge of prevailing commission rates.

 

B.  Subject to the foregoing, WRIMCO shall have discretion, in the interest of the Funds, to direct the execution of its portfolio transactions to brokers who provide brokerage and/or research services (as such services are defined in Section 28(e) of the Securities Exchange Act of 1934) for the Funds and/or other accounts for which WRIMCO exercises “investment discretion” (as that term is defined in Section 3(a)(35) of the Securities Exchange Act of 1934); and in connection with such transactions, to pay commission in excess of the amount another adequately qualified broker would have charged if WRIMCO determines, in good faith, that such commission is reasonable in relation to the value of the brokerage and/or research services provided by such broker, viewed in terms of either that particular transaction or the overall responsibilities of WRIMCO with respect to the accounts for which it exercises investment discretion.  In reaching such determination, WRIMCO will not be required to attempt to place a specified dollar amount on the brokerage and/or research services provided by such broker; provided that WRIMCO shall be prepared to demonstrate that such determinations were made in good faith, and that all commissions paid by the Funds over a representative period selected by the Trust’s Board of Trustees were reasonable in relation to the benefits to the Funds.

 

V.            Compensation of WRIMCO

 

A.  As compensation in full for services rendered and for the facilities and personnel furnished under sections I, II, and IV of this Agreement, each Fund will pay to WRIMCO for each day the fees specified in Appendix B hereto.

 

B.  The amounts payable to WRIMCO shall be determined as of the close of business each day; shall, except as set forth below, be based upon the value of net assets computed in accordance with the Trust Instrument; and shall be paid in arrears whenever requested by WRIMCO.  In computing the value of the net assets of each Fund, there shall be excluded the

 

4

 

amount owed to the Fund with respect to shares which have been sold but not yet paid to the Fund by Waddell & Reed, Inc.

 

VI.          Undertakings of WRIMCO; Liabilities

 

A.  WRIMCO shall give to the Trust the benefit of its best judgment, efforts and facilities in rendering advisory services hereunder.

 

B.  WRIMCO shall at all times be guided by and be subject to each Fund’s investment policies, the provisions of the Trust Instrument and Bylaws of the Trust as each shall from time to time be amended, and to the decision and determination of the Trust’s Board of Trustees.

 

C.  This Agreement shall be performed in accordance with the requirements of the 1940 Act, the Investment Advisers Act of 1940, the Securities Act of 1933, and the Securities Exchange Act of 1934, to the extent that the subject matter of this Agreement is within the purview of such Acts.  Insofar as applicable to WRIMCO, as an investment adviser and affiliated person of the Trust, WRIMCO shall comply with the provisions of the 1940 Act, the Investment Advisers Act of 1940 and the respective rules and regulations of the Securities and Exchange Commission thereunder.

 

D.  In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of WRIMCO, it shall not be subject to liability to the Trust or to any shareholder of the Funds (direct or beneficial) for any act or omission in the course of or connected with rendering services thereunder or for any losses that may be sustained in the purchase, holding or sale of any security.

 

VII.         Duration of this Agreement

 

This Agreement shall become effective on the date hereof and shall continue in effect as to a Fund, unless terminated as hereinafter provided, for a period of one year and from year-to-year thereafter only if such continuance is specifically approved at least annually by the Board of Trustees, including the vote of a majority of the trustees who are not parties to this Agreement or “interested persons” (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval, or by the vote of the holders of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund.

 

VIII.       Termination

 

This Agreement may be terminated as to a Fund by WRIMCO at any time without penalty upon giving the Trust one hundred twenty (120) days written notice (which notice may be waived by the Trust) and may be terminated as to a Fund by the Trust at any time without penalty upon giving WRIMCO sixty (60) days written notice (which notice may be waived by WRIMCO), provided that such termination by the Trust shall be directed or approved by the vote of a majority of the Board of Trustees of the Trust in office at the time or by the vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the affected Fund.

 

5

 

This Agreement shall automatically terminate in the event of its assignment, the term “assignment” for this purpose having the meaning defined in Section 2(a)(4) of the 1940 Act and the rules and regulations thereunder.

 

IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to be executed by their duly authorized officers and their corporate seal to be hereunto affixed, all as of the day and year first above written.

 

	
 
    	
 
    	
WADDELL &   REED INVESTED PORTFOLIOS
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Mara Herrington
    
	
 
    	
 
    	
 
    	
Mara   Herrington, Vice President
    
	
 
    	
 
    	
 
    
	
ATTEST:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Megan E. Bray
    	
 
    	
 
    
	
 
    	
Megan E. Bray, Assistant Secretary
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
WADDELL &   REED INVESTMENT
    
	
 
    	
 
    	
MANAGEMENT   COMPANY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Henry J. Herrmann
    
	
 
    	
 
    	
 
    	
Henry   J. Herrmann, President
    
	
 
    	
 
    	
 
    
	
ATTEST:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Wendy J. Hills
    	
 
    	
 
    
	
 
    	
Wendy J. Hills, Secretary
    	
 
    	
 
    

 

6

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