FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the ___ day of ________, , by and
between PBHG INSURANCE SERIES FUND, INC. ("FUND"), a Maryland corporation,
PILGRIM ▇▇▇▇▇▇ & ASSOCIATES, LTD. ("Adviser"), a Pennsylvania corporation, and
______________ ("LIFE COMPANY"), a life insurance company organized under the
laws of the State of __________.
WHEREAS, FUND is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the " 40 Act"),
as an open-end, diversified management investment company; and
WHEREAS, FUND is organized as a series fund comprised of several
Portfolios ("Portfolios"), with those currently available being listed on
Appendix A hereto; and
WHEREAS, FUND was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable
Contracts") offered by life insurance companies through separate accounts
("Separate Accounts") of such life insurance companies ("Participating
Insurance Companies"); and
WHEREAS, FUND may also offer its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, FUND will apply for an order from the SEC, granting
Participating Insurance Companies and their separate accounts exemptions from
the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 40 Act, and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Portfolios of the FUND to be sold to and held by Variable
Contract separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and Qualified Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having FUND as one of the underlying funding vehicles for such
Variable Contracts; and
WHEREAS, ADVISER is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and as a broker-dealer under the
Securities Exchange Act of 1934, as amended and acts as the FUND's investment
adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of FUND to fund the
aforementioned Variable Contracts and FUND is authorized to sell such shares
to LIFE COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
FUND, and ADVISER agree as follows:
Article I. SALE OF FUND SHARES
1.1 FUND agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Portfolios as listed on Appendix B for
investment of purchase payments of Variable Contracts allocated to the
designated Separate Accounts as provided in FUND's Registration Statement.
1.2 FUND agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of FUND which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by FUND or its
designee of the order for the shares of FUND. For purposes of this Section
1.2, LIFE COMPANY shall be the designee of FUND for receipt of such orders
from the designated Separate Account and receipt by such designee shall
constitute receipt by FUND; provided that LIFE COMPANY receives the order by
4:00 p.m. New York time and FUND receives notice from LIFE COMPANY by
telephone or facsimile (or by such other means as FUND and LIFE COMPANY may
agree in writing) of such order by 9:00 a.m. New York time on the next
following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which FUND calculates its net
asset value pursuant to the rules of the SEC.
1.3 FUND agrees to redeem on LIFE COMPANY's request, any full or
fractional shares of FUND held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by FUND or its
designee of the request for redemption, in accordance with the provisions of
this agreement and FUND's Registration Statement. For purposes of this
Section 1.3, LIFE COMPANY shall be the designee of FUND for receipt of
requests for redemption from the designated Separate Account and receipt by
such designee shall constitute receipt by FUND; provided that LIFE COMPANY
receives the request for redemption by 4:00 p.m. New York time and FUND
receives notice from LIFE COMPANY by telephone or facsimile (or by such other
means as FUND and LIFE COMPANY may agree in writing) of such request for
redemption by 9:00 a.m. New York time on the next following Business Day.
1.4 FUND shall furnish, on or before the ex-dividend date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the shares of any Portfolio of FUND. LIFE COMPANY hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. FUND shall notify
LIFE COMPANY or its designee of the number of shares so issued as payment of
such dividends and distributions.
1.5 FUND shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use
its best efforts to make such net asset value available by 6:30 p.m. New York
time. If FUND provides LIFE COMPANY with materially incorrect share net asset
value information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of
the Separate Accounts, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct share net asset value.
Any material error in the calculation of net asset value per share, dividend
or capital gain information shall be reported promptly upon discovery to LIFE
COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar
amount of FUND shares which shall be purchased or redeemed at that day's
closing net asset value per share. The net purchase or redemption orders so
determined shall be transmitted to FUND by LIFE COMPANY by 9:00 a.m. New York
Time on the Business Day next following LIFE COMPANY's receipt of such
requests and premiums in accordance with the terms of Sections 1.2 and 1.3
hereof.
1.7 If LIFE COMPANY's order requests the purchase of FUND shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to FUND or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, FUND shall use its best
efforts to wire the redemption proceeds to LIFE COMPANY by the next Business
Day, unless doing so would require FUND to dispose of Portfolio securities or
otherwise incur additional costs. In any event, proceeds shall be wired to
LIFE COMPANY within three Business Days or such longer period permitted by the
'40 Act or the rules, orders or regulations thereunder and FUND shall notify
the person designated in writing by LIFE COMPANY as the recipient for such
notice of such delay by 3:00 p.m. New York Time the same Business Day that
LIFE COMPANY transmits the redemption order to FUND. If LIFE COMPANY's order
requests the application of redemption proceeds from the redemption of shares
to the purchase of shares of another Fund advised by ADVISER, FUND shall so
apply such proceeds the same Business Day that LIFE COMPANY transmits such
order to FUND.
1.8 FUND agrees that all shares of the Portfolios of FUND will be sold
only to Participating Insurance Companies which have agreed to participate in
FUND to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h) of the Internal Revenue
Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of
the Portfolios of FUND will not be sold directly to the general public.
1.9 FUND may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of or liquidate any Portfolio
of FUND if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Directors of the
FUND (the "Board"), acting in good faith and in light of its duties under
federal and any applicable state laws, deemed necessary, desirable or
appropriate and in the best interests of the shareholders of such Portfolios.
1.10 Issuance and transfer of Portfolio shares will be by book entry
only. Stock certificates will not be issued to LIFE COMPANY or the Separate
Accounts. Shares ordered from Portfolio will be recorded in appropriate book
entry titles for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance
company duly organized and in good standing under the laws of
___________________ and that it has legally and validly established each
Separate Account as a segregated asset account under such laws, and that
___________________, the principal underwriter for the Variable Contracts, is
registered as a broker-dealer under the Securities Exchange Act of 1934 (the
"'34 Act").
2.2 LIFE COMPANY represents and warrants that it has registered or,
prior to any issuance or sale of the Variable Contracts, will register each
Separate Account as a unit investment trust ("UIT") in accordance with the
provisions of the 40 Act and cause each Separate Account to remain so
registered to serve as a segregated asset account for the Variable Contracts,
unless an exemption from registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts
will be registered under the Securities Act of 1933 (the " 33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts and that the Variable Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and further that the sale of the Variable Contracts shall comply in all
material respects with applicable state insurance law suitability
requirements.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that
it will maintain such treatment and that it will notify FUND immediately upon
having a reasonable basis for believing that the Variable Contracts have
ceased to be so treated or that they might not be so treated in the future.
2.5 FUND represents and warrants that the Fund shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and FUND shall be
registered under the 40 Act prior to and at the time of any issuance or sale
of such shares. FUND, subject to Section 1.9 above, shall amend its
registration statement under the 33 Act and the 40 Act from time to time as
required in order to effect the continuous offering of its shares. FUND shall
register and qualify its shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by FUND.
2.6 FUND represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the
rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately
diversify the Portfolio to achieve compliance.
2.7 FUND represents and warrants that each Portfolio invested in by the
Separate Account intends to elect to be treated as a "regulated investment
company" under Subchapter M of the Code, and to qualify for such treatment for
each taxable year and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
2.8 ADVISER represents and warrants that it is and will remain duly
registered and licensed in all material respects under all applicable federal
and state securities laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and federal
laws.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 FUND shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of FUND.
FUND shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes and filing fees to which an issuer is subject on the issuance
and transfer of its shares.
3.2 At least annually, FUND or its designee shall provide LIFE COMPANY,
free of charge, with as many copies of the current prospectus for the shares
of the Portfolios as LIFE COMPANY may reasonably request for distribution to
existing Variable Contract owners whose Variable Contracts are funded by such
shares. FUND or its designee shall provide LIFE COMPANY, at LIFE COMPANY's
expense, with as many copies of the current prospectus for the shares as LIFE
COMPANY may reasonably request for distribution to prospective purchasers of
Variable Contracts. If requested by LIFE COMPANY in lieu thereof, FUND or its
designee shall provide such documentation (including a "camera ready" copy of
the new prospectus as set in type or, at the request of LIFE COMPANY, as a
diskette in the form sent to the financial printer) and other assistance as is
reasonably necessary in order for the parties hereto once a year (or more
frequently if the prospectus for the shares is supplemented or amended) to
have the prospectus for the Variable Contracts and the prospectus for the FUND
shares printed together in one document. The expenses of such printing will be
apportioned between (a) LIFE COMPANY and (b) FUND in proportion to the number
of pages of the Variable Contract and FUND prospectus, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; FUND to bear the cost of printing the FUND prospectus
portion of such document for distribution only to owners of existing Variable
Contracts funded by the FUND shares and LIFE COMPANY to bear the expense of
printing the portion of such documents relating to the Separate Account;
provided, however, LIFE COMPANY shall bear all printing expenses of such
combined documents where used for distribution to prospective purchasers or to
owners of existing Variable Contracts not funded by the shares. In the event
that LIFE COMPANY requests that FUND or its designee provide FUND's prospectus
in a "camera ready" or diskette format, FUND shall be responsible for
providing the prospectus in the format in which it is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g. typesetting expenses), and LIFE COMPANY shall bear the expense of
adjusting or changing the format to conform with any of its prospectuses.
3.3 FUND will provide LIFE COMPANY with at least one complete copy of
all prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after
the filing of each such document with the SEC or other regulatory authority.
LIFE COMPANY will provide FUND with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to a Separate Account promptly
after the filing of each such document with the SEC or other regulatory
authority.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to FUND
and ADVISER, each piece of sales literature or other promotional material in
which FUND or ADVISER is named, at least fifteen (15) Business Days prior to
its intended use. No such material will be used if FUND or ADVISER objects to
its use in writing within ten (10) Business Days after receipt of such
material.
4.2 FUND and ADVISER will furnish, or will cause to be furnished, to
LIFE COMPANY, each piece of sales literature or other promotional material in
which LIFE COMPANY or its Separate Accounts are named, at least fifteen (15)
Business Days prior to its intended use. No such material will be used if
LIFE COMPANY objects to its use in writing within ten (10) Business Days after
receipt of such material.
4.3 FUND and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other
than the information or representations contained in a registration statement
or prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission
of LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of FUND or concerning FUND
other than the information or representations contained in a registration
statement or prospectus for FUND, as such registration statement and
prospectus may be amended or supplemented from time to time, or in sales
literature or other promotional material approved by FUND or its designee,
except with the written permission of FUND.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
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 (such as any written communication distributed
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts, or
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 National Association of Securities
Dealers, Inc. ("NASD") rules, the 40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that FUND will be filing an application with
the SEC to request an order granting relief from various provisions of the '40
Act and the rules thereunder to the extent necessary to permit FUND shares to
be sold to and held by Variable Contract separate accounts of both affiliated
and unaffiliated Participating Insurance Companies and Qualified Plans. It is
anticipated that the Exemptive Order, when and if issued, shall require FUND
and each Participating Insurance Company to comply with conditions and
undertakings substantially as provided in this Section 5. If the Exemptive
Order imposes conditions materially different from those provided for in this
Section 5, the conditions and undertakings imposed by the Exemptive Order
shall govern this Agreement and the parties hereto agree to amend this
Agreement consistent with the Exemptive Order. The Fund will not enter into a
participation agreement with any other Participating Insurance Company unless
it imposes the same conditions and undertakings as are imposed on LIFE COMPANY
hereby.
5.2 The Board will monitor FUND for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of
all separate accounts investing in FUND. An irreconcilable material conflict
may arise for a variety of reasons, which may include: (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 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 FUND are being
managed; (e) a difference in voting instructions given by Variable Contract
owners; (f) a decision by a Participating Insurance Company to disregard the
voting instructions of Variable Contract owners and (g) if applicable, a
decision by a Qualified Plan to disregard the voting instructions of plan
participants.
5.3 LIFE COMPANY will report any potential or existing conflicts to the
Board. LIFE COMPANY will be responsible for assisting the Board in carrying
out its duties in this regard by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. The
responsibility includes, but is not limited to, an obligation by the LIFE
COMPANY to inform the Board whenever it has determined to disregard Variable
Contract owner voting instructions. These responsibilities of LIFE COMPANY
will be carried out with a view only to the interests of the Variable Contract
owners.
5.4 If a majority of the Board or majority of its disinterested
Directors, determines that a material irreconcilable conflict exists affecting
LIFE COMPANY, LIFE COMPANY, at its expense and to the extent reasonably
practicable (as determined by a majority of the Board's disinterested
Directors), will take any steps necessary to remedy or eliminate the
irreconcilable material conflict, including; (a) withdrawing the assets
allocable to some or all of the Separate Accounts from FUND or any Portfolio
thereof and reinvesting those assets in a different investment medium, which
may include another Portfolio of FUND, or another investment company; (b)
submitting the question as to whether such segregation should be implemented
to a vote of all affected Variable Contract owners and as appropriate,
segregating the assets of any appropriate group (i.e variable annuity or
variable life insurance Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Variable Contract owners the option of making such a change; and (c)
establishing a new registered management investment company (or series
thereof) or managed separate account. If a material irreconcilable conflict
arises because of LIFE COMPANY's decision to disregard Variable Contract owner
voting instructions, and that decision represents a minority position or would
preclude a majority vote, LIFE COMPANY may be required, at the election of
FUND, to withdraw the Separate Account's investment in FUND, and no charge or
penalty will be imposed as a result of such withdrawal. The responsibility to
take such remedial action shall be carried out with a view only to the
interests of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict but in no event will
FUND or ADVISER (or any other investment adviser of FUND) be required to
establish a new funding medium for any Variable Contract. Further, LIFE
COMPANY shall not be required by this Section 5.4 to establish a new funding
medium for any Variable Contracts if any offer to do so has been declined by a
vote of a majority of Variable Contract owners materially and adversely
affected by the irreconcilable material conflict.
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 No less than annually, LIFE COMPANY shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the
Board may fully carry out its obligations. Such reports, materials, and data
shall be submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the 40 Act
as requiring pass-through voting privileges for Variable Contract owners.
Accordingly, LIFE COMPANY, where applicable, will vote shares of the Portfolio
held in its Separate Accounts in a manner consistent with voting instructions
timely received from its Variable Contract owners. LIFE COMPANY will be
responsible for assuring that each of its Separate Accounts that participates
in FUND calculates voting privileges in a manner consistent with other
Participating Insurance Companies. LIFE COMPANY will vote shares for which it
has not received timely voting instructions, as well as shares it owns, in the
same proportion as its votes those shares for which it has received voting
instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
40 Act or the rules thereunder with respect to mixed and shared funding on
terms and conditions materially different from any exemptions granted in the
Exemptive Order, then FUND, and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rule
6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent
such Rules are applicable.
Article VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY LIFE COMPANY. LIFE COMPANY agrees to indemnify
and hold harmless FUND, ADVISER and each of their directors, principals,
officers, employees and agents and each person, if any, who controls FUND or
ADVISER within the meaning of Section 15 of the 33 Act (collectively, the
"Indemnified Parties" for purposes of this Article VII) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of LIFE COMPANY, which consent shall not be
unreasonably withheld) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of FUND's shares or the
Variable Contracts and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration Statement
or prospectus for the Variable Contracts or contained in the Variable
Contracts (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this 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 LIFE COMPANY by or on behalf of FUND for use in
the registration statement or prospectus for the Variable Contracts or in the
Variable Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable Contracts or
FUND shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the registration
statement, prospectus or sales literature of FUND not supplied by LIFE
COMPANY, or persons under its control) or wrongful conduct of LIFE COMPANY or
persons under its control, with respect to the sale or distribution of the
Variable Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus, or sales
literature of FUND or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to FUND by or on
behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this Agreement or arise
out of or result from any other material breach of this Agreement by LIFE
COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement.
7.3 LIFE COMPANY shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify LIFE COMPANY
of any such claim shall not relieve LIFE COMPANY from any liability which it
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against an Indemnified Party, LIFE COMPANY shall be entitled
to participate at its own expense in the defense of such action. LIFE COMPANY
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from LIFE COMPANY
to such party of LIFE COMPANY's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and LIFE COMPANY 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.
7.4 INDEMNIFICATION BY ADVISER. ADVISER agrees to indemnify and hold
harmless LIFE COMPANY and each of its directors, officers, employees, and
agents and each person, if any, who controls LIFE COMPANY within the meaning
of Section 15 of the 33 Act (collectively, the "Indemnified Parties" for the
purposes of this Article VII) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
ADVISER which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
FUND's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
or prospectus or sales literature of FUND (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that this 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 ADVISER or
FUND by or on behalf of LIFE COMPANY for use in the registration statement or
prospectus for FUND or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable Contracts or
FUND shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Contracts not
supplied by ADVISER or persons under its control) or wrongful conduct of FUND
or ADVISER or persons under their control, with respect to the sale or
distribution of the Variable Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts, or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity with
information furnished to LIFE COMPANY for inclusion therein by or on behalf of
FUND; or
(d) arise as a result of (i) a failure by FUND to provide
substantially the services and furnish the materials under the terms of this
Agreement; or (ii) a failure by a Portfolio(s) invested in by the Separate
Account to comply with the diversification requirements of Section 817(h) of
the Code; or (iii) a failure by a Portfolio(s) invested in by the Separate
Account to qualify as a "regulated investment company" under Subchapter M of
the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by ADVISER in this Agreement or arise out
of or result from any other material breach of this Agreement by ADVISER.
7.5 ADVISER shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to
which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
7.6 ADVISER shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified ADVISER in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify ADVISER of any such claim shall not
relieve ADVISER from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, ADVISER shall be entitled to participate at its own
expense in the defense thereof. ADVISER also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from ADVISER to such party of ADVISER's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and ADVISER 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.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY or FUND at any time from the date
hereof upon 180 days' notice, unless a shorter time is agreed to by the
parties;
(b) At the option of LIFE COMPANY, if FUND shares are not
reasonably available to meet the requirements of the Variable Contracts as
determined by LIFE COMPANY. Prompt notice of election to terminate shall be
furnished by LIFE COMPANY, said termination to be effective ten days after
receipt of notice unless FUND makes available a sufficient number of shares
to reasonably meet the requirements of the Variable Contracts within said
ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against FUND by the SEC, the NASD, or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which would, in
LIFE COMPANY's reasonable judgment, materially impair FUND's ability to meet
and perform FUND's obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by LIFE COMPANY with said termination
to be effective upon receipt of notice;
(d) At the option of FUND, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the NASD, or any other regulatory
body, the expected or anticipated ruling, judgment or outcome of which would,
in FUND's reasonable judgment, materially impair LIFE COMPANY's ability to
meet and perform its obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by FUND with said termination to be
effective upon receipt of notice;
(e) In the event FUND's shares are not registered, issued or sold
in accordance with applicable state or federal law, or such law precludes the
use of such shares as the underlying investment medium of Variable Contracts
issued or to be issued by LIFE COMPANY. Termination shall be effective upon
such occurrence without notice;
(f) At the option of FUND if the Variable Contracts cease to
qualify as annuity contracts or life insurance contracts, as applicable, under
the Code, or if FUND reasonably believes that the Variable Contracts may fail
to so qualify. Termination shall be effective upon receipt of notice by LIFE
COMPANY;
(g) At the option of LIFE COMPANY, upon FUND's breach of any
material provision of this Agreement, which breach has not been cured to the
satisfaction of LIFE COMPANY within ten days after written notice of such
breach is delivered to FUND;
(h) At the option of FUND, upon LIFE COMPANY's breach of any
material provision of this Agreement, which breach has not been cured to the
satisfaction of FUND within ten days after written notice of such breach is
delivered to LIFE COMPANY;
(i) At the option of FUND, if the Variable Contracts are not
registered, issued or sold in accordance with applicable federal and/or state
law. Termination shall be effective immediately upon such occurrence without
notice;
(j) In the event this Agreement is assigned without the prior
written consent of LIFE COMPANY, FUND, and ADVISER, termination shall be
effective immediately upon such occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to
Section 8.2 hereof, FUND at its option may elect to continue to make available
additional FUND shares, as provided below, for so long as FUND desires
pursuant to the terms and conditions of this Agreement, for all Variable
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if FUND so elects to make additional FUND shares available, the
owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in FUND,
redeem investments in FUND and/or invest in FUND upon the payment of
additional premiums under the Existing Contracts. In the event of a
termination of this Agreement pursuant to Section 8.2 hereof, FUND and
ADVISER, as promptly as is practicable under the circumstances, shall notify
LIFE COMPANY whether FUND elects to continue to make FUND shares available
after such termination. If FUND shares continue to be made available after
such termination, the provisions of this Agreement shall remain in effect and
thereafter either FUND or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the
Separate Accounts), and LIFE COMPANY shall not prevent Variable Contract
owners from allocating payments to a Portfolio that was otherwise available
under the Variable Contracts until thirty (30) days after the LIFE COMPANY
shall have notified FUND of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or 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.
If to FUND, or ADVISER.
Pilgrim ▇▇▇▇▇▇ & Associates, Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to LIFE COMPANY:
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
It shall also be subject to the provisions of the federal securities laws and
the rules and regulations thereunder and to any orders of the SEC granting
exemptive relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Directors or officers of FUND
or any Portfolio shall be personally liable hereunder. No Portfolio shall be
liable for the liabilities of any other Portfolio. All persons dealing with
FUND or a Portfolio must look solely to the property of FUND or that
Portfolio, respectively, for enforcement of any claims against FUND or that
Portfolio. It is also understood that each of the Portfolios shall be deemed
to be entering into a separate Agreement with LIFE COMPANY so that it is as if
each of the Portfolios had signed a separate Agreement with LIFE COMPANY and
that a single document is being signed simply to facilitate the execution and
administration of the Agreement.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
10.8 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by FUND,
ADVISER and the LIFE COMPANY.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Fund Participation Agreement as of the date and year
first above written.
PBHG INSURANCE SERIES FUND, INC.
By:_______________________________________
Name:
Title:
PILGRIM ▇▇▇▇▇▇ & ASSOCIATES, LTD.
By:_______________________________________
Name:
Title:
LIFE COMPANY
By:________________________________________
Name:
Title:
APPENDIX A
PBHG INSURANCE SERIES FUND, INC. - PORTFOLIOS
PBHG Growth II
PBHG Large Cap Growth
PBHG Technology & Communications
PBHG Select 20
PBHG Small Cap Value
PBHG Large Cap Value
APPENDIX B
SEPARATE ACCOUNTS SELECTED PORTFOLIOS