EXHIBIT 8(d)
FORM OF PARTICIPATION AGREEMENT WITH
PBHG INSURANCE SERIES FUND, INC.
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 1st day of May, 1997, by and between the PBHG
INSURANCE SERIES FUND, INC. ("FUND"), a Maryland corporation, PILGRIM XXXXXX &
ASSOCIATES, LTD. ("Adviser"), a Delaware corporation, AMERICAN UNITED LIFE
INSURANCE COMPANY ("LIFE COMPANY"), a life insurance company organized under the
laws of the State of Indiana.
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
2
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 8:30 a.m.
New York time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange 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 8:30 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
3
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 7:00 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 8:30 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 to FUND.
If LIFE COMPANY's order requests a net redemption resulting in a payment of
redemption proceeds to LIFE COMPANY, FUND shall wire the redemption proceeds to
LIFE COMPANY ordinarily on the next Business Day. 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 any delay in wiring redemption proceeds beyond the next
Business Day by 3:00 p.m. New York Time the same Business Day that LIFE COMPANY
transmits the redemption 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
4
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 the State of Indiana and that
it has legally and validly established each Separate Account as a segregated
asset account under such laws, and that Life Company, 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 securities 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
5
annuity contracts, as pertinent, 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 each Portfolio will 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 securities laws. Adviser
represents and warrants that each Portfolio shall be managed consistent of its
investment objective or objectives, investment policies, and investment
restrictions as described in the Fund's prospectus and registration statement,
as amended or modified from time to time.
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
5
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's 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's prospectus portion of such document
for distribution only to owners of existing Variable Contracts funded by the
FUND's 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 FUND's 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
7
promptly after the filing of each such document with the SEC or other regulatory
authority.
3.4 The FUND, at its expense, shall provide the LIFE COMPANY with copies of its
proxy materials, periodic reports to shareholders and other communications to
shareholders in such quantity as the LIFE COMPANY shall reasonably require for
purposes of distributing to owners of Variable Contacts issued by the LIFE
COMPANY. The FUND, at the LIFE COMPANY's expense, shall provide the LIFE COMPANY
with copies of its periodic reports to shareholders and other communications to
shareholders in such quantity as the LIFE COMPANY shall reasonably request for
use in connection with offering the Variable Contracts issued by the LIFE
COMPANY. If requested by the LIFE COMPANY in lieu thereof, the FUND shall
provide such documentation (including a final copy of the FUND's proxy
materials, periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other assistance as
reasonably necessary in order for the LIFE COMPANY to print such shareholder
communications for distribution to owners of Variable Contacts issued by the
LIFE COMPANY.
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 ten (10) 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.
Notwithstanding the above, FUND and ADVISER agree that total return information
of the FUND's Portfolios may be used in sales literature or other promotional
material developed by LIFE COMPANY without first furnishing such sales
literature or other promotional material to FUND and ADVISER, provided that such
total return information is derived from the prospectus or registration
statement of the FUND or from reports provided by FUND or ADVISER or the
designee of either to LIFE COMPANY and provided that FUND and ADVISER have been
provided prior to its intended use within the time period described above the
form of the sales literature or other promotional material that contains or will
contain the total return information, and that neither FUND nor ADVISER has
objected to its use in writing and provided further that LIFE COMPANY shall be
responsible for using such total return information in conformity with the
information it is provided.
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 ten (10) 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.
8
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 supplied or approved by FUND or its designee, except with
the written permission of FUND or its designee.
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
9
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 of which Life Company is provided with a copy 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
10
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 owners of
Variable Contract funded by Separate Accounts that are registered with the SEC
as investment companies so long as the SEC continues to interpret the '40 Act as
requiring pass-through voting privileges for such Variable Contract owners.
Accordingly, LIFE COMPANY, where applicable, will vote shares of the Portfolio
held in its registered Separate Accounts in a manner consistent with voting
instructions timely received from its Variable Contract owners. LIFE COMPANY
will be responsible for following reasonable instructions provided by Fund so
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 held by its registered Separate Accounts for which
it has not received timely voting instructions
11
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:
(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 or Adviser 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,
12
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
13
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:
(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
14
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 or FUND in this Agreement or arise out of or result
from any other material breach of this Agreement by ADVISER or FUND.
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
15
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
60 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
16
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.
(k) At the option of either party, in the event of a material irreconcilable
conflict as provided in Article V.
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
17
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:
PBHG Insurance Series Fund, Inc. 0000 Xxxxxxxx Xxxx, Xxxxx 000 Xxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
With a copy to:
PBHG Insurance Series Fund, Inc. 0000 Xxxxxxxx Xxxx, Xxxxx 000 Xxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
18
If to the ADVISER:
PBHG Insurance Series Fund, Inc. 0000 Xxxxxxxx Xxxx, Xxxxx 000 Xxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
With a copy to:
PBHG Insurance Series Fund, Inc. 0000 Xxxxxxxx Xxxx, Xxxxx 000 Xxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
If to LIFE COMPANY:
American United Life Insurance Company Xxx Xxxxxxxx Xxxxxx Xxxxxxxxxxxx, XX
00000 Attention: Xxxxxxx X. Xxxxxx, Esq.
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 Commonwealth of Pennsylvania. It
shall
19
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.
20
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: /s/ Xxx X. Xxxxxxxx
Name: Xxx X. Xxxxxxxx
Title: Vice President
PILGRIM XXXXXX & ASSOCIATES, LTD.
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: CFO
AMERICAN UNITED LIFE
INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Associate General Counsel
Appendix A
PBHG Insurance Series Fund, Inc. - Portfolios*
PBHG Growth II Portfolio
PBHG Technology & Communications Portfolio
* Expected to begin investment operations on May 1, 1997.
Appendix B
Separate Accounts and Associated Contracts
Name of Separate Account and Date Contracts Funded
Established by the AUL Exec. Comm. By Separate Account Selected Portfolios
---------------------------------- ------------------- ---------------------
AUL American Unit Trust Registered 401, 403(b), Growth II
(established 8/17/89) 457 & 408 contracts Technology &
Communications
Group Retirement Annuity Separate Qualified 401 contracts Growth II
Account I (established 8/17/89) Technology &
Communications
Group Retirement Annuity Separate Qualified 401 contracts Growth II
Account II (established 8/17/89) Technology &
Communications
