PARTICIPATION AGREEMENT
AMONG
PILGRIM VARIABLE PRODUCTS TRUST
AND
[INSURANCE COMPANY]
AND
ING PILGRIM SECURITIES, INC.
THIS AGREEMENT, made and entered into as of this ____ day of April, 2001,
among [Insurance Company] (the "Company"), a life insurance company organized
under the laws of [insert state], on its own behalf and on behalf of each
separate account of the Company as set forth on Schedule A hereto, as such
Schedule may be amended from time to time (each such account hereinafter
referred to as the "Account"), PILGRIM VARIABLE PRODUCTS TRUST (the "Trust"), an
open-ended management investment company and business trust organized under the
laws of Massachusetts, and ING PILGRIM SECURITIES, INC. (the "Distributor"), a
corporation organized under the laws of the State of Delaware.
WHEREAS, the Trust is an open-end diversified management investment company
and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into Participation Agreements with the Trust and
the Distributor (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust may rely on an order ("ING Variable Insurance Trust, et
al., Investment Company Act Rel. No. 24439 (May 3, 2000)) from the Securities
and Exchange Commission ("SEC"), granting the variable annuity and variable life
insurance separate accounts participating in the Trust exemptions from the
provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the Investment Company
Act of 1940, as amended (the "1940 Act"), and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Trust
to be sold to and held by variable annuity and variable life insurance separate
accounts of the Participating Insurance Companies (the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the " 1933 Act"); and
WHEREAS, the Company has registered or will register certain variable life
contracts under the 1933 Act and applicable state securities and insurance law;
and
WHEREAS, the Company represents herein that each Account is a duly
organized, validly existing separate account, which was established by
resolution of the Board of Directors of the Company, on the dates shown for such
Accounts on Schedule A hereto, to set aside and invest assets attributable to
one or more variable insurance contracts (the "Contracts"); and
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act; and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in certain Funds
("Authorized Funds") on behalf of each Account to fund certain of the Contracts
and the Distributor is authorized to sell such shares to unit investment trusts
such as each Account at net asset value;
NOW, THEREFORE, in consideration of the promises herein, the Company, the
Trust and the Distributor agree as follows:
ARTICLE I
SALE OF TRUST SHARES
1.1. The Distributor agrees, subject to the Trust's rights under Section
1.2 and otherwise under this Agreement, to sell to the Company those Trust
shares representing interests in Authorized Funds which each Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1. 1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 10:00 a.m. Eastern time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange
("NYSE") is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the SEC. The initial Authorized Funds are set
forth in Schedule B, as such schedule is amended from time to time.
1.2. The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Account on those days on which the Trust calculates its net asset value pursuant
to the rules of the SEC and the Trust shall use reasonable efforts to calculate
such net asset value on each day the NYSE is open for trading. Notwithstanding
the foregoing, the Trustees of the Trust (the "Trustees") may refuse to sell
shares of any Fund to the Company or any other person, or suspend or terminate
the offering of shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction over the Trust or if the Trustees
determine, in the exercise of their fiduciary responsibilities, that to do so
would be in the best interests of shareholders.
1.3. The Trust and the Distributor agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts and
other persons who are
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permissible investors consistent with the Accounts meeting the requirements of
Treas. Reg. 1.817-5. No shares of any Fund will be sold directly to the general
public.
1.4. The Trust shall redeem its shares in accordance with the terms of its
then-current prospectus. For purposes of this Section 1.4, the Company shall be
the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption by 10:00
a.m., Eastern time, on the next following Business Day.
1.5. The Company shall purchase and redeem the shares of Authorized Funds
offered by the then-current prospectus of the Trust in accordance with the
provisions of such prospectus.
1.6. The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or to any Account.
Shares ordered from the Trust will be recorded as instructed by the Company to
the Distributor in an appropriate title for each Account or the appropriate
sub-account of each Account.
1.8. The Distributor shall furnish prompt notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Distributor
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.9. The Distributor shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the Trust calculates its net asset value per share, and each of the Trust and
the Distributor shall use its reasonable best efforts to make such net asset
value per share available by 6:00 p.m., Eastern time, but in no event later than
7:00 p.m., Eastern time, each Business Day.
1.10. Any error in the calculation of the net asset value, dividend and
capital gain information greater than or equal to $0.01 per share of the Trust's
shares, shall be reported immediately upon discovery to the Company. Any error
of a lesser amount shall be corrected in the next Business Day's net asset value
per share for the Trust. Any such notice will state for each day for which an
error occurred the incorrect price, the correct price and, to the extent
communicated to the Trust's shareholders, the reason for the price change. The
Company may send this notice or a derivation thereof (so long as such derivation
is approved in advance by the Distributor) to contractowners whose accounts are
affected by the price change. The parties will negotiate in good faith to
develop a reasonable method for effecting such adjustments. The Trust shall
provide the Company, on behalf of the Account or the appropriate subaccount of
each Account, with a prompt adjustment to the number of shares purchased or
redeemed to reflect the correct share net asset value.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that
(a) at all times during the term of this Agreement, the Contracts are
or will be registered under the 1933 Act; the Contracts will be issued and sold
in compliance in all material respects with all applicable laws and the sale of
the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a separate account under applicable law and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts; and
(b) the Contracts are currently treated as endowment, annuity or life
insurance contracts, under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such treatment and that it will notify the Trust and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.2. The Trust represents and warrants that
(a) at all times during the term of this Agreement, Trust shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold by the Trust to the Company in compliance with
all applicable laws, subject to the terms of Section 2.4 below, and the Trust is
and shall remain registered under the 1940 Act. The Trust shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Trust shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Trust or the Distributor in connection with their sale by the Trust to
the Company and only as required by Section 2.4;
(b) each Authorized Fund is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that the Trust will use
its best efforts to maintain such qualification (under Subchapter M or any
successor provision) and that it will notify the Company immediately upon having
a reasonable basis for believing that an Authorized Fund has ceased to so
qualify or that it might not so qualify in the future; and
(c) the Trust is lawfully organized and validly existing under the
laws of the Commonwealth of Massachusetts and that it does and will comply in
all material respects with the 1940 Act.
2.3. The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Distributor further represents that it will sell and distribute the Trust shares
in accordance with all applicable securities laws applicable to it, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
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2.4. Notwithstanding any other provision of this Agreement, the Trust shall
be responsible for the registration and qualification of its shares and of the
Trust itself under the laws of any jurisdiction only in connection with the sale
of shares directly to the Company through the Distributor. The Trust shall not
be responsible, and the Company shall take full responsibility, for determining
any jurisdiction in which any qualification or registration of Trust shares or
the Trust by the Trust may be required in connection with the sale of the
Contracts or the indirect interest of any Contract in any shares of the Trust
and advising the Trust thereof at such time and in such manner as is necessary
to permit the Trust to comply.
2.5. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
ARTICLE III
PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Trust shall provide such documentation (including a camera-ready
copy of its prospectus) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if the prospectus for the
Trust is amended) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one or more documents (such printing to be at the
Company's expense).
3.2. The Trust's prospectus shall state that the Statement of Additional
Information ("SAI") for the Trust is available from the Company, and the Company
shall provide the SAI free of charge to any owner of a Contract or to any
prospective Contract owner who requests the SAI. Distributor and Trust, as
appropriate, agree to provide to Company with as many copies of the SAI as
reasonably requested by Company.
3.3. The Trust, at its expense, shall provide the Company with copies of
its reports to shareholders, proxy material and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to the Contract owners. The Company shall respond to requests for
documents regarding the Trust in a manner that is consistent with SEC rules,
including, but not limited to, Item 1(b) of Form N-1A, which requires requested
documents to be sent within three (3) business days from the date of request.
3.4. The Company shall vote all Trust shares as required by law and the
Mixed and Shared Funding Exemptive Order. The Company reserves the right to vote
Trust shares held in any separate account in each Company's own right, to the
extent permitted by law and the Mixed and Shared Funding Exemptive Order. The
Company shall be responsible for assuring that each of its separate accounts
participating in the Trust calculates voting privileges in a manner consistent
with all legal requirements and the Mixed and Shared Funding Exemptive Order.
3.5. The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders.
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ARTICLE IV
SALES MATERIAL AND INFORMATION
4.1. Without limiting the scope or effect of Section 4.2 hereof, the
Company shall furnish, or shall cause to be furnished, to the Distributor each
piece of sales literature or other promotional material (as defined hereafter)
in which the Trust, its investment adviser or the Distributor is named at least
15 days prior to its use. No such material shall be used if the Distributor
objects to such use within five (5) Business Days after receipt of such
material.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Trust shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in annual or semi-annual reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee or by the Distributor, except with the written permission
of the Trust or the Distributor or the designee of either or as is required by
law.
4.3. The Distributor or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Distributor in which the Company
and/or the Company's Account is named at least 15 days prior to its use. No such
material shall be used if the Company or its designee object to such use within
five (5) Business Days after receipt of such material.
4.4. Neither the Trust nor the Distributor shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the written permission of the Company or as is required by
law.
4.5. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e. any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all registered representatives.
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ARTICLE V
FEES AND EXPENSES
5.1. If the Trust or any Authorized Fund adopts and implements a plan
pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses,
subject to obtaining any required exemptive orders or other regulatory
approvals, the Trust or Distributor may make payments to the Company or to the
underwriter for the Account if and in such amounts agreed to by the parties in
writing.
5.2. All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust to the extent permitted by law. The Trust shall bear
the expenses for the cost of registration and qualification of the Trust's
shares, preparation and filing of the Trust's prospectus and registration
statement, proxy materials and reports, setting the prospectus and shareholder
reports in type, setting in type and printing the proxy materials, and the
preparation of all statements and notices required by any federal or state law,
in each case as may reasonably be necessary for the performance by it of its
obligations under this Agreement. All expenses incident to the solicitation and
tabulation of the Trust's proxy materials will be paid by the Trust, except
postage which will be paid by the Company.
5.3. The Company shall bear the expenses of (a) printing and distributing
the Trust's prospectus in connection with sales of the Contracts, (b)
distributing the reports to the Trust's Shareholders who are owners of the
Contracts, (c) mailing the Trust's proxy materials to owners of the Contracts,
and (d) distributing the Trust's SAI to Shareholders who are owners of the
Contracts.
ARTICLE VI
DIVERSIFICATION
6.1 The Trust shall use its best efforts to cause each Authorized Fund to
maintain a diversified pool of investments that would, if such Fund were a
segregated asset account, satisfy the diversification provisions of Treasury
Reg. ss. 1.817-5(b)(1) or (2).
ARTICLE VII
POTENTIAL CONFLICTS
7.1. The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the Contract owners of all
separate accounts investing in the Trust. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Authorized Fund are being managed; (e) a difference in voting instructions
given by variable annuity contract and variable life insurance contract owners;
or (f) a decision by an insurer to disregard the voting instructions of Contract
owners. The Trust shall promptly inform the Company if the Trustees determine
that a material irreconcilable conflict exists and the implications thereof.
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7.2. The Company will report any potential or existing conflicts of which
it is aware to the Trustees. The Company will assist the Trustees in carrying
out their responsibilities under the Mixed and Shared Funding Exemptive Order,
by providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised. This responsibility includes, but is not
limited to, an obligation by the Company to inform the Trustees whenever
Contract owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Authorized Fund thereof and reinvesting
such assets in a different investment medium, including (but not limited to)
another series of the Trust, or submitting the question whether such segregation
should be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
a Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, that Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in one or more portfolios of the Trust and terminate this Agreement
with respect to such Account; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. No charge or penalty shall be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being implemented, and
until the end of that six month period, the Distributor and Trust shall, to the
extent permitted by law and any exemptive relief previously granted to the
Trust, continue to accept and implement orders of the Company for the purchase
(and redemption) of shares of the Trust.
7.5. If a material irreconcilable conflict arises because of a particular
state insurance regulator's decision applicable to the Company to disregard
Contract owner voting instructions and that decision represents a minority
position that would preclude a majority vote, then the Company may be required,
at the Trust's direction, to withdraw the affected Account's investment in one
or more Authorized Funds of the Trust; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented, unless a shorter period is required by law, and until the
end of the foregoing six month period (or such shorter period if required by
law), the Distributor and Trust shall, to the extent permitted by law and any
exemptive relief previously granted to the Trust, continue to accept and
implement orders by that Company for the purchase
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(and redemption) of shares of the Trust. No charge or penalty will be imposed as
a result of such withdrawal.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict. Neither the Trust nor
the Distributor shall be required to establish a new funding medium for the
Contracts, nor shall the Company be required to do so, if an offer to do so has
been declined by vote of a majority of Contract owners materially adversely
affected by the material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any material
irreconcilable conflict, then the Company will withdraw the Account's investment
in one or more Authorized Funds of the Trust and terminate this Agreement within
six (6) months (or such shorter period as may be required by law or any
exemptive relief previously granted to the Trust) after the Trustees inform the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty will be imposed as a result of such
withdrawal.
7.7. The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Article VII shall be carried out
with a view only to the interests of Contract owners.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
7.9. The Company has reviewed the Mixed and Shared Funding Exemption Order
and hereby assumes all obligations referred to therein which are required,
including, without limitation, the obligation to provide reports, material or
data as the Trustees may request, as conditions to such order, to be assumed or
undertaken by the Company.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by the Company
8.1. (a). The Company shall indemnify and hold harmless the Trust, the
Distributor and ING Pilgrim Investments, LLC (the "Adviser"), and each of the
Trustees, directors of the Distributor or the Adviser, officers, employees or
agents of the Trust, the Distributor or the
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Adviser, and each person, if any, who controls the Trust, Adviser or the
Distributor within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company which consent may not be unreasonably
withheld) or litigation expenses (including reasonable legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Trust's shares or the Contracts or
the performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement, prospectus or SAI for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Trust for use in the registration statement,
prospectus or SAI for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in
the Trust's registration statement or prospectus, or in sales
literature for Trust shares not supplied by the Company, or persons
under its control) or wrongful conduct of the Company or its agents or
employees or persons under its control, with respect to the sale or
distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, or
sales literature of the Trust or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Trust or the
Distributor by or on behalf of the Company; or
(iv) arise out of or result from any breach of any material
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1. (b) The 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 to the extent such may arise
from such Indemnified Party's willful
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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 or to the Trust,
whichever is applicable.
8.1. (c) The 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 the 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), on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim but failure to notify the Company of any such claim shall
not relieve the 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 the
Indemnified Parties, the Company shall be entitled to participate, at the
Company's expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
Indemnified Party named in the action. After notice from the Company to such
Indemnified Party of the 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 the Company will not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.1. (d) The Distributor shall promptly notify the Company of the
commencement of any litigation or proceedings against the Trust or the
Distributor in connection with the issuance or sale of the Trust Shares or the
Contracts or the operation of the Trust.
8.1. (e) The provisions of this Section 8.1 shall survive any termination
of this Agreement.
8.2. Indemnification by the Distributor
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8.2. (a) The Distributor shall indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor which consent may not
be unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Contracts or the performance by
the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a registration
statement, prospectus, or SAI for the Trust or the sales literature
for the Trust prepared by the Trust or Distributor (or any amendment
or supplement to any of the foregoing), or arise
11
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
the Distributor or Trust by or on behalf of the Company for use in
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in
the registration statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Distributor or persons under its
control) of the Distributor or persons under its control, with respect
to the sale or distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, SAI
or sales literature covering the Contracts, or any amendment thereof
or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Distributor; or
(iv) arise out of or result from any breach of any material
representation and/or warranty made by the Distributor or the Trust in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Distributor or the Trust; as limited
by and in accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2. (b) The Distributor 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 and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2. (c) The Distributor 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 the Distributor 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) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Distributor of any such claim
shall not relieve the Distributor 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, the Distributor will be entitled to participate, at its
own expense, in the defense thereof. The
12
Distributor also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from the
Distributor to such Indemnified Party of the Distributor's election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Distributor will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.2. (d) The Company shall promptly notify the Distributor, the Adviser,
and the Trust of the commencement of any litigation or proceedings against it or
any of its officers or directors, in connection with the issuance or sale of the
Contracts or the operation of each Account.
8.2. (e) The provisions of this Section 8.2 shall survive any termination
of this Agreement.
ARTICLE IX
APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Delaware.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X
TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party, with respect to some or all of the
Funds, upon sixty (60) days' advance written notice to the other parties; or
(b) at the option of the Trust or the Distributor in the event that
formal administrative proceedings are instituted against the Company by the
NASD, the SEC, any State Insurance Commissioner or any other regulatory body
regarding the Company's duties under this Agreement or related to the sales of
the Contracts, with respect to the operation of any Account, or the purchase of
the Trust shares, provided, however, that the Trust or the Distributor
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Company to perform its obligations under this Agreement; or
(c) at the option of the Company in the event that formal
administrative proceedings are instituted against the Trust or Distributor by
the NASD, the SEC, or any state securities or insurance department or any other
regulatory body in respect of the sale of shares of
13
the Trust to the Company, provided, however, that the Company determines in its
sole judgment exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Trust or Distributor
to perform its obligations under this Agreement; or
(d) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Fund shares of the
Trust in accordance with the terms of the Contracts for which those Fund shares
had been selected to serve as the underlying investment media. The Company will
give 30 days' prior written notice to the Trust of the date of any proposed vote
to replace the Trust's shares;
(e) with respect to any Authorized Fund, upon 30 days' advance
written notice from the Distributor to the Company, upon a decision by the
Distributor to cease offering shares of the Trust for sale; or
(f) at the option of any party to this Agreement, upon written notice
to the other parties, upon another party's material breach of any provision of
this Agreement which material breach is not cured within thirty (30) days of
said notice.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1 (a) may be exercised for any
reason or for no reason.
10.3. No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for such termination. Such prior written notice shall be given
in advance of the effective date of termination as required by this Article X.
10.4. Notwithstanding any termination of this Agreement, subject to
Sections 1.2 and 10.5 of this Agreement, the Trust and the Distributor shall, at
the option of the Company, continue to make available additional shares of the
Trust pursuant to the terms and conditions of this Agreement, for all Contracts
in effect as of the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, subject to Sections 1.2 and
10.5 of this Agreement, the owners of the Existing Contracts shall be permitted
to reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 shall not apply to
any termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement.
10.5. If any party terminates this Agreement with respect to any Authorized
Fund pursuant to the provisions under Article X, the Agreement shall
nevertheless continue in effect as to any shares of the Trust that are
outstanding as of the date of such termination (the "Initial Termination Date").
This continuation shall extend to the earlier of (a) the date as of which an
Account no longer owns shares of the affected Fund or (b) the date (the "Final
Termination Date") as of 180 days following the Initial Termination Date, or, at
the Distributor's option, such later date as is necessary for the Company to
obtain a substitution order from the SEC, the application for which the Company
will diligently pursue.
14
10.6. The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Distributor an opinion of counsel for the Company,
reasonably satisfactory to the Trust, to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, subject to Sections 1.2
and 10.5 of this Agreement, the Company shall not prevent owners from allocating
payments to an Authorized Fund that was otherwise available under the Contracts
without first giving the Trust or the Distributor 90 days' written notice of its
intention to do so.
ARTICLE XI
NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
Pilgrim Variable Products Trust
0000 Xxxx Xxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Attn: _________________________
If to the Distributor:
ING Pilgrim Securities, Inc.
0000 Xxxx Xxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Attn: _________________________
If to the Company:
[Insurance Company]
ARTICLE XII
MISCELLANEOUS
12.1. A copy of the Agreement and Declaration of Trust is on file with the
Secretary of State of the State of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of or arising out of this
instrument, including without limitation Article VI, are not binding upon any of
the Trustees or shareholders individually but binding only upon the assets and
property of the Trust.
15
12.2. The Fund and the Distributor acknowledge that the identities of the
customers of the Company or any of its affiliates, except for customers of the
Fund or the Distributor or their affiliates (collectively, the "Company
Protected Parties" for purposes of this Section 12.2), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Company Protected Parties or any of their
employees or agents in connection with the Company's performance of its duties
under this Agreement are the valuable property of the Company Protected Parties.
The Fund and the Distributor agree that if they come into possession of any list
or compilation of the identities of or other information about the Company
Protected Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Fund or the Distributor
from information supplied to them by the Company Protected Parties' customers
who also maintain accounts directly with the Fund or the Distributor, the Fund
and the Distributor will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Company's prior written consent; or (b) as
permitted without customer consent under Title V of the Xxxxx-Xxxxx-Xxxxxx Act
and the applicable regulations thereunder or other applicable law. The Company
acknowledges that the identities of the customers of the Fund, the Distributor
or any of their affiliates (collectively, the "Fund Protected Parties" for
purposes of this Section 12.2), information maintained regarding those
customers, and all computer programs and procedures or other information
developed or used by the Fund Protected Parties or any of their employees or
agents in connection with the Fund's or the Distributor's performance of their
respective duties under this Agreement are the valuable property of the Fund
Protected Parties. The Company agrees that if it comes into possession of any
list or compilation of the identities of or other information about the Fund
Protected Parties' customers, or any other information or property of the Fund
Protected Parties, other than such information as is publicly available or as
may be independently developed or compiled by the Company from information
supplied to them by the Fund Protected Parties' customers who also maintain
accounts directly with the Company, the Company will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other properly except: (a) with the Fund's or the
Distributor's prior written consent; or (b) as required by law or judicial
process. Each party acknowledges that any breach of the agreements in this
Section 12.2 would result in immediate and irreparable harm to the other parties
for which there would be no adequate remedy at law and agree that in the event
of such a breach, the other parties will be entitled to equitable relief by way
of temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
16
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, 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.
12.7. 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.
12.8. Notwithstanding any other provision of this Agreement, the
obligations of the Trust and the Distributor are several and, without limiting
in any way the generality of the foregoing, neither such party shall have any
liability for any action or failure to act by the other party, or any person
acting on such other party's behalf.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
[INSURANCE COMPANY]
By its authorized officer,
----------------------------------------
Name:
Title:
PILGRIM VARIABLE PRODUCTS TRUST
By its authorized officer,
----------------------------------------
Name:
Title:
ING PILGRIM SECURITIES, INC.
By its authorized officer,
----------------------------------------
Name:
Title:
17
Schedule A
----------
Contracts and Separate Accounts
A-1
Schedule B
----------
PILGRIM VARIABLE PRODUCTS TRUST
Funds
-----
Pilgrim VP MagnaCap Portfolio
Pilgrim VP Research Enhanced Index Portfolio
Pilgrim VP Growth Opportunities Portfolio
Pilgrim XX XxxXxx Opportunities Portfolio
Pilgrim VP Growth + Value Portfolio
Pilgrim VP SmallCap Opportunities Portfolio
Pilgrim VP International Value Portfolio
Pilgrim VP High Yield Bond Portfolio
Pilgrim VP Worldwide Growth Portfolio
Pilgrim VP International SmallCap Growth Portfolio
Pilgrim VP International Portfolio
Pilgrim VP Emerging Countries Portfolio
Pilgrim VP Growth and Income Portfolio
Pilgrim VP LargeCap Growth Portfolio
Pilgrim VP Financial Services Portfolio
Pilgrim VP Convertible Portfolio
B-1
