FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 8th day of August, 1997, by and between the
PBHG INSURANCE SERIES FUND, INC. ("FUND"), a Maryland corporation, PILGRIM
XXXXXX & ASSOCIATES, LTD. ("ADVISER"), a Delaware corporation, and EMPIRE
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY ("LIFE COMPANY"), a life
insurance company organized under the laws of the State of New York.
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 acts as the FUND's investment
adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of FUND to fund the
aforementioned Variable Contracts and FUND is authorized to sell such
shares to LIFE COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
FUND, and ADVISER agree as follows:
Article I. SALE OF FUND SHARES
1.1 FUND agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Portfolios as listed on Appendix B for
investment of purchase payments of Variable Contracts allocated to the
designated Separate Accounts as provided in FUND's Registration Statement.
1.2 FUND agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of FUND which LIFE COMPANY orders, executing such orders on a
daily basis at the net asset value next computed after receipt by FUND or
its designee of the order for the shares of FUND. For purposes of this
Section 1.2, LIFE COMPANY shall be the designee of FUND for receipt of such
orders from the designated Separate Account and receipt by such designee
shall constitute receipt by FUND; provided that LIFE COMPANY receives the
order by the close of business of the New York Stock Exchange and FUND
receives notice from LIFE COMPANY by telephone or facsimile (or by such
other means as FUND and LIFE COMPANY may agree in writing) of such order by
9:00 a.m. New York time on the next following Business Day. In the event
of a natural or manmade disaster, armed conflict, act of terrorism, riot,
labor disruption or any other circumstance beyond LIFE COMPANY's control
(not caused by its own negligence or which could have been adequately
remedied if not for LIFE COMPANY's negligence), LIFE COMPANY shall transmit
an estimate of such order by 9:00 a.m. New York time on the next following
Business Day, with a definitive order to be transmitted by 12:00 noon on
such 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 the closing of
business of the New York Stock Exchange and FUND receives notice from LIFE
COMPANY by telephone or facsimile (or by such other means as FUND and LIFE
COMPANY may agree in writing) of such request for redemption by 9:00 a.m.
New York time on the next following Business Day.
1.4 FUND shall furnish, on or before the ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain distributions payable on
the shares of any Portfolio of FUND. LIFE COMPANY hereby elects to receive
all such income dividends and capital gain distributions as are payable on
a Portfolio's shares in additional shares of the Portfolio. FUND shall
notify LIFE COMPANY or its designee of the number of shares so issued as
payment of such dividends and distributions.
1.5 FUND shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as
reasonably practicable after the net asset value per share is calculated
but shall use its best efforts to make such net asset value available by
6:30 p.m. New York time. If the net asset value per share for the selected
Portfolio(s) are unavailable by 6:30 p.m. New York time, FUND shall provide
LIFE COMPANY with such net asset value by no later than 7:30 p.m. New York
time. If FUND provides LIFE COMPANY with materially incorrect share net
asset value information through no fault of LIFE COMPANY, LIFE COMPANY on
behalf of the Separate Accounts, shall be entitled to an adjustment to the
number of shares purchased or redeemed to reflect the correct share net
asset value. Any material error in the calculation of net asset value per
share, dividend or capital gain information shall be reported promptly upon
discovery to LIFE COMPANY. If LIFE COMPANY suffers any out-of-pocket
expenses as a result of FUND or its designee providing LIFE COMPANY with an
incorrect net asset value for any Portfolio, ADVISER will reimburse LIFE
COMPANY for all such reasonable expenses suffered by 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 to determine the net dollar amount of FUND
shares which shall be purchased or redeemed at that day's closing net asset
value per share. The net purchase or redemption orders so determined shall
be transmitted to FUND by LIFE COMPANY by 9:00 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and
premiums in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of FUND shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to FUND or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, FUND shall use its best
efforts to wire the redemption proceeds to LIFE COMPANY by the close of the
Business Day on which the order is transmitted to FUND or its designee,
subject to such longer period of time as may be permitted by the '40 Act or
the rules, orders or regulations thereunder.
1.8 (a) FUND agrees that all shares of the Portfolios of FUND will be
sold only to Participating Insurance Companies which have agreed to
participate in FUND to fund their Separate Accounts and/or to Qualified
Plans, all in accordance with the requirements of Section 817(h) of the
Internal Revenue Code of 1986, as amended ("Code") and Treasury Regulation
1.817-5. Shares of the Portfolios of FUND will not be sold directly to the
general public. (b) The FUND agrees that through October 31, 1998, shares
of the FUND's Select 20 Portfolio will be sold only to LIFE COMPANY and to
Fidelity Investments Life Insurance Company, an affiliate of LIFE COMPANY.
The foregoing sentence shall not apply if before October 31, 1998, LIFE
COMPANY or Fidelity Investments Life Insurance Company adds any additional
investment option to any of their Separate Accounts to be funded by an
investment company other than those advised by or sponsored by Xxxxxx
Xxxxxxx & Co., Warburg, Pincus, Strong Capital Management or Fidelity
Management & Research Company or any of their respective affiliates.
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 New York
and that it has legally and validly established each Separate Account as a
segregated asset account under such laws, and that Fidelity Brokerage
Services, Inc., the principal underwriter for the Variable Contracts, is
registered as a broker-dealer under the Securities Exchange Act of 1934
(the "'34 Act").
2.2 LIFE COMPANY represents and warrants that it has registered or, prior
to any issuance or sale of the Variable Contracts, will register each
Separate Account as a unit investment trust ("UIT") in accordance with the
provisions of the `40 Act and cause each Separate Account to remain so
registered to serve as a segregated asset account for the Variable
Contracts, unless an exemption from registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will
be registered under the Securities Act of 1933 (the "`33 Act") unless an
exemption from registration is available prior to any issuance or sale of
the Variable Contracts and that the Variable Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and further that the sale of the Variable Contracts shall comply
in all material respects with applicable state insurance law suitability
requirements.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code,
that it will maintain such treatment and that it will notify FUND
immediately upon having a reasonable basis for believing that the Variable
Contracts have ceased to be so treated or that they might not be so treated
in the future.
2.5 FUND represents and warrants that the Fund shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and FUND shall be
registered under the `40 Act prior to and at the time of any issuance or
sale of such shares. FUND, subject to Section 1.9 above, shall amend its
registration statement under the `33 Act and the x00 Xxx 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. Contemporaneously with the
execution of this Agreement, FUND will furnish a copy of its written
compliance procedures concerning Section 817 and Regulation 1.817-5 to LIFE
COMPANY. ADVISER agrees to provide LIFE COMPANY a statement of the assets
of each Portfolio in which LIFE COMPANY invests within 20 days after the
end of each calendar quarter, together with a statement certifying that
each such Portfolio has complied with the requirements of Section 817 and
Rule 1.817-5 for the quarter, and that each such Portfolio has for the
calendar quarter complied with all diversification and other requirements
for qualification as a regulated investment company under Section 851.
2.7 FUND represents and warrants that each Portfolio invested in by the
Separate Account has elected to be treated as a "regulated investment
company" under Subchapter M of the Code, and to qualify for such treatment
for each taxable year and will notify LIFE COMPANY immediately upon having
a reasonable basis for believing it has ceased to so qualify or might not
so qualify in the future.
2.8. ADVISER represents and warrants that it is and will remain duly
registered and licensed in all material respects under all applicable
federal and state securities laws and shall perform its obligations
hereunder in compliance in all material respects with any applicable state
and federal laws. The FUND and ADVISER represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the FUND
are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the FUND in an amount not less
than the minimal coverage as required currently by Rule 17g-(1) of the 1940
Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company. The FUND and ADVISER
further represent and warrant that the FUND and its directors are and at
all times will be covered by an errors and omissions policy in an amount of
not less than $30,000,000.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 FUND shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional
information of FUND. FUND shall bear the costs of registration and
qualification of shares of the Portfolios, preparation and filing of the
documents listed in this Section 3.1 and all taxes and filing fees to which
an issuer is subject on the issuance and transfer of its shares.
3.2 At least annually, FUND or its designee shall provide LIFE COMPANY,
free of charge, with as many copies of the current prospectus, proxy
materials, notices, annual report and semi-annual report 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 ADVISER's
expense, with as many copies of the current prospectus, annual report and
semi-annual report for the shares as LIFE COMPANY may reasonably request
for distribution to prospective purchasers of Variable Contracts and
existing Variable Contract owners whose Variable Contracts are not funded
by shares of the Fund. 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, annual report and semi-annual report 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, annual report and semi-annual report for the Variable Contracts
and the prospectus, annual report and semi-annual report for the FUND
shares printed together in one document. The FUND's share of printing and
production costs for such materials shall be determined by assigning to the
FUND a pro-rata share of such expenses, the calculation of which shall be
determined by applying the following formula:
A/B x C
Where A equals the number of pages contained in the document relating to
the Fund; B equals the total number of pages in the entire document and C
equals the total cost of printing and producing the entire document. LIFE
COMPANY shall provide the FUND, or its designee, and the ADIVSER with such
information as may be reasonably necessary to allow the FUND and the
ADVISER to assure themselves that the FUND's allocated portion of expenses
do not include the cost of printing any prospectuses, statements of
additional information, annual reports or semi-annual reports other than
those actually distributed to existing owners of Variable Contracts whose
contracts are funded by the FUND's shares.
3.3 LIFE COMPANY shall bear the expenses of distributing the FUND's
prospectuses, annual reports and semi-annual reports to prospective
Variable Contract owners. Fund shall bear a portion of the postage and
mailing expenses with respect to such materials that are delivered to
Variable Contract owners. The FUND shall bear a portion of such expenses
in accordance with the following formula:
A x F
A + B + C + D + E
Where A is the aggregate number of Variable Contract Owners who own shares
of the Fund, B is the aggregate number of Variable Contract owners who own
shares of mutual funds advised by FMR; C, D and E are the aggregate number
of Variable Contract owners who own shares in the other mutual funds
participating in the Variable Contracts as available investment options. F
equals the total cost of postage and handling attributable to such
materials to all Variable Contract owners. In the event that LIFE COMPANY
requests that FUND, or its designee, provide FUND's prospectus, annual
report and semi-annual report in a "camera ready" or diskette format, FUND
shall be responsible for providing the prospectus, annual report and
semi-annual report in the format in which it is accustomed and shall bear
the expense of providing the prospectus, annual report and semi-annual
report in such format (e.g. typesetting expenses), and LIFE COMPANY shall
bear the expense of adjusting or changing the format to conform with its
customary format.
3.4 FUND will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly
after the filing of each such document with the SEC or other regulatory
authority. LIFE COMPANY will provide FUND with at least one complete copy
of all prospectuses, statements of additional information, annual and
semi-annual reports, proxy statements, exemptive applications and all
amendments or supplements to any of the above that relate to a Separate
Account promptly after the filing of each such document with the SEC or
other regulatory authority.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to FUND and
ADVISER, each piece of sales literature or other promotional material in
which FUND or ADVISER is named, at least 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 seven (7) Business Days after receipt of such
material.
4.2 FUND and ADVISER will furnish, or will cause to be furnished, to LIFE
COMPANY, each piece of sales literature or other promotional material in
which LIFE COMPANY or its Separate Accounts are named, at least 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 seven (7) Business Days
after receipt of such material.
4.3 FUND and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE
COMPANY, the Separate Accounts, or the Variable Contracts issued by LIFE
COMPANY, other than the information or representations contained in a
registration statement or prospectus for such Variable Contracts, as such
registration statement and prospectus may be amended or supplemented from
time to time, or in reports of the Separate Accounts or reports prepared
for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by LIFE COMPANY or its
designee, except with the written permission of LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of FUND or concerning
FUND other than the information or representations contained in a
registration statement or prospectus for FUND, as such registration
statement and prospectus may be amended or supplemented from time to time,
or in sales literature or other promotional material approved by FUND or
its designee, except with the written permission of FUND.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for
use, in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards, motion
pictures or other public media), sales literature (such as any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. ("NASD")
rules, the `40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that FUND will be filing an application with
the SEC to request an order granting relief from various provisions of the
'40 Act and the rules thereunder to the extent necessary to permit FUND
shares to be sold to and held by Variable Contract separate accounts of
both affiliated and unaffiliated Participating Insurance Companies and
Qualified Plans. It is anticipated that the Exemptive Order, when and if
issued, shall require FUND and each Participating Insurance Company to
comply with conditions and undertakings substantially as provided in this
Section 5. If the Exemptive Order imposes conditions materially different
from those provided for in this Section 5, the conditions and undertakings
imposed by the Exemptive Order shall govern this Agreement and the parties
hereto agree to amend this Agreement consistent with the Exemptive Order.
The Fund will not enter into a participation agreement with any other
Participating Insurance Company unless it imposes the same conditions and
undertakings as are imposed on LIFE COMPANY hereby.
5.2 The Board will monitor FUND for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners
of all separate accounts investing in FUND. An irreconcilable material
conflict may arise for a variety of reasons, which may include: (a) an
action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling or any similar
action by insurance, tax or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of FUND are being managed; (e) a difference
in voting instructions given by Variable Contract owners; (f) a decision by
a Participating Insurance Company to disregard the voting instructions of
Variable Contract owners and (g) if applicable, a decision by a Qualified
Plan to disregard the voting instructions of plan participants.
5.3 LIFE COMPANY will report any potential or existing conflicts to the
Board. LIFE COMPANY will be responsible for assisting the Board in
carrying out its duties in this regard by providing the Board with all
information reasonably necessary for the Board to consider any issues
raised. The responsibility includes, but is not limited to, an obligation
by the LIFE COMPANY to inform the Board whenever it has determined to
disregard Variable Contract owner voting instructions. These
responsibilities of LIFE COMPANY will be carried out with a view only to
the interests of the Variable Contract owners.
5.4 If a majority of the Board or majority of its disinterested Directors,
determines that a material irreconcilable conflict exists affecting LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably
practicable (as determined by a majority of the Board's disinterested
Directors), will take any steps necessary to remedy or eliminate the
irreconcilable material conflict, including; (a) withdrawing the assets
allocable to some or all of the Separate Accounts from FUND or any
Portfolio thereof and reinvesting those assets in a different investment
medium, which may include another Portfolio of FUND, or another investment
company; (b) submitting the question as to whether such segregation should
be implemented to a vote of all affected Variable Contract owners and as
appropriate, segregating the assets of any appropriate group (i.e variable
annuity or variable life insurance Contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract owners the option of making
such a change; and (c) establishing a new registered management investment
company (or series thereof) or managed separate account. If a material
irreconcilable conflict arises because of LIFE COMPANY's decision to
disregard Variable Contract owner voting instructions, and that decision
represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at the election of FUND, to withdraw the Separate
Account's investment in FUND, and no charge or penalty will be imposed as a
result of such withdrawal. The responsibility to take such remedial action
shall be carried out with a view only to the interests of the Variable
Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict but in no event
will FUND or ADVISER (or any other investment adviser of FUND) be required
to establish a new funding medium for any Variable Contract. Further, LIFE
COMPANY shall not be required by this Section 5.4 to establish a new
funding medium for any Variable Contracts if any offer to do so has been
declined by a vote of a majority of Variable Contract owners materially and
adversely affected by the irreconcilable material conflict.
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 No less than annually, LIFE COMPANY shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the
Board may fully carry out its obligations. Such reports, materials, and
data shall be submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the `40
Act as requiring pass-through voting privileges for Variable Contract
owners. Accordingly, LIFE COMPANY, where applicable, will vote shares of
the Portfolio held in its Separate Accounts in a manner consistent with
voting instructions timely received from its Variable Contract owners.
LIFE COMPANY will be responsible for assuring that each of its Separate
Accounts that participates in FUND calculates voting privileges in a manner
consistent with other Participating Insurance Companies. LIFE COMPANY will
vote shares for which it has not received timely voting instructions, as
well as shares it owns, in the same proportion as its votes those shares
for which it has received voting instructions. ADVISER will bear all
expenses incurred by LIFE COMPANY in connection with the (solicitation)
tabulation and any necessary archiving of any proxy materials, provided
LIFE COMPANY uses a tabulation service designated by ADVISER.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
`40 Act or the rules thereunder with respect to mixed and shared funding on
terms and conditions materially different from any exemptions granted in
the Exemptive Order, then FUND, and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to
comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such Rules are applicable.
Article VII. INDEMNIFICATION
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify
and hold harmless FUND, ADVISER and each of their directors, principals,
officers, employees and agents and each person, if any, who controls FUND
or ADVISER within the meaning of Section 15 of the `33 Act (collectively,
the "Indemnified Parties" for purposes of this Article VII) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of LIFE COMPANY, which consent shall
not be unreasonably withheld) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of FUND's shares or the
Variable Contracts and:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the Registration Statement or
prospectus for the Variable Contracts or contained in the Variable
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to LIFE COMPANY by or on
behalf of FUND for use in the registration statement or prospectus for the
Variable Contracts or in the Variable Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale
of the Variable Contracts or FUND shares; or
(b) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of FUND not supplied by LIFE COMPANY, or
persons under its control) or wrongful conduct of LIFE COMPANY or persons
under its control, with respect to the sale or distribution of the Variable
Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of FUND or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information
furnished to FUND by or on behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials under the terms of
this Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by LIFE COMPANY in this Agreement or arise out of or
result from any other material breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from
such Indemnified Party's willful misfeasance, bad faith, or negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
7.3 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify LIFE
COMPANY of any such claim shall not relieve LIFE COMPANY from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against an Indemnified Party, LIFE COMPANY
shall be entitled to participate at its own expense in the defense of such
action. LIFE COMPANY also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice
from LIFE COMPANY to such party of LIFE COMPANY's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and LIFE COMPANY will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.4 Indemnification by ADVISER. ADVISER agrees to indemnify and hold
harmless LIFE COMPANY and each of its directors, officers, employees, and
agents and each person, if any, who controls LIFE COMPANY within the
meaning of Section 15 of the `33 Act (collectively, the "Indemnified
Parties" for the purposes of this Article VII) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of ADVISER which consent shall not be unreasonably
withheld) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of FUND's shares or the Variable
Contracts and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of FUND (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to ADVISER or FUND by or on behalf of LIFE COMPANY for use in the
registration statement or prospectus for FUND or in sales literature (or
any amendment or supplement) or otherwise for use in connection with the
sale of the Variable Contracts or FUND shares; or
(b) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by
ADVISER or persons under its control) or wrongful conduct of FUND or
ADVISER or persons under their control, with respect to the sale or
distribution of the Variable Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts, or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity
with information furnished to LIFE COMPANY for inclusion therein by or on
behalf of FUND; or
(d) arise as a result of (i) a failure by FUND to provide substantially
the services and furnish the materials under the terms of this Agreement;
or (ii) a failure by a Portfolio(s) invested in by the Separate Account to
comply with the diversification requirements of Section 817(h) of the Code;
or (iii) a failure by a Portfolio(s) invested in by the Separate Account to
qualify as a "regulated investment company" under Subchapter M of the Code;
or
(e) arise out of or result from any material breach of any representation
and/or warranty made by ADVISER in this Agreement or arise out of or result
from any other material breach of this Agreement by ADVISER.
7.5 ADVISER shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
7.6 ADVISER shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified ADVISER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify
ADVISER of any such claim shall not relieve ADVISER from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, ADVISER
shall be entitled to participate at its own expense in the defense thereof.
ADVISER also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from ADVISER
to such party of ADVISER's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and ADVISER will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY 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 the FUND at any time from the date hereof upon 120
days' notice, unless shorter time is agreed to by the parties;
(c) 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;
(d) 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;
(e) At the option of FUND, upon the institution of formal proceedings
against LIFE COMPANY by the SEC, the NASD, or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which would, in
FUND's reasonable judgment, materially impair LIFE COMPANY's ability to
meet and perform its obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by FUND with said termination to
be effective upon receipt of notice;
(f) 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;
(g) 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;
(h) 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;
(i) 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;
(j) 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;
(k) 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, except that LIFE
COMPANY may assign this Agreement to an affiliated life insurance company
without consent.
8.3 Notwithstanding any termination of this Agreement pursuant to Section
8.2(a), 8.2(c), (d), (h) or (k) hereof, the FUND shall, at the option of
LIFE COMPANY, continue to make available additional FUND shares, pursuant
to the terms and conditions of this Agreement, for all Variable Contracts
in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, 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. If FUND
shares continue to be made available after such termination, the provisions
of this Agreement shall remain in effect.
8.4 LIFE COMPANY shall not redeem FUND shares attributable to the Variable
Contracts (as opposed to FUND shares attributable to LIFE COMPANY's assets
held in its Separate Accounts) except (i) as necessary to implement
Variable Contract owner initiated or approved 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") or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, LIFE COMPANY will
promptly furnish to the FUND and the ADVISER the opinion of counsel for
LIFE COMPANY (which counsel shall be reasonably satisfactory to the FUND
and the ADVISER) 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 Variable Contracts, LIFE COMPANY shall not
prevent Variable Contract owners from allocating payments to a Portfolio
that was otherwise available under the Variable Contracts without first
giving the FUND and the ADVISER sixty (60) days notice 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. Zerrr, Esq.
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. Zerrr, Esq.
If to LIFE COMPANY: Empire Fidelity Investments Life Insurance Company
00 Xxxxxxxxxx Xxxxxx
Mail Zone R25B
Boston, MA 02109-3614
Attn: Xxxxxxx X. Xxxxxx
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 also be subject to the provisions of the federal
securities laws and the rules and regulations thereunder and to any orders
of the SEC granting exemptive relief therefrom and the conditions of such
orders.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Directors or officers of
FUND or any Portfolio shall be personally liable hereunder. No Portfolio
shall be liable for the liabilities of any other Portfolio. All persons
dealing with FUND or a Portfolio must look solely to the property of FUND
or that Portfolio, respectively, for enforcement of any claims against FUND
or that Portfolio. It is also understood that each of the Portfolios shall
be deemed to be entering into a separate Agreement with LIFE COMPANY so
that it is as if each of the Portfolios had signed a separate Agreement
with LIFE COMPANY and that a single document is being signed simply to
facilitate the execution and administration of the Agreement.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD
and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
10.8 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by
FUND, ADVISER and the LIFE COMPANY.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first
above written.
PBHG INSURANCE SERIES FUND, INC.
By:_____________________________
Name:
Title:
PILGRIM XXXXXX & ASSOCIATES, LTD.
By:_____________________________
Name:
Title:
EMPIRE FIDELITY INVESTMENTS LIFE
INSURANCE COMPANY
By:______________________________
Name:
Title:
APPENDIX A
PBHG Insurance Series Fund, Inc. - Portfolios
PBHG Growth II Portfolio
PBHG Technology & Communications Portfolio
PBHG Select 20 Portfolio
PBHG Large Cap Value Portfolio
PBHG Small Cap Value Portfolio
APPENDIX B
Separate Accounts Selected Portfolios
Empire Fidelity Investments PBHG Growth II Portfolio
Variable Annuity Account I PBHG Technology &
Communications Portfolio
PBHG Select 20 Portfolio
PBHG Large Cap Value Portfolio
PBHG Small Cap Value Portfolio
FundPart\Fidelity
