PARTICIPATION AGREEMENT
AMONG
AMERICAN FAMILY MUTUAL LIFE INSURANCE COMPANY
SEI INSURANCE PRODUCTS TRUST
AND
SEI INVESTMENTS DISTRIBUTION COMPANY
DATED AS OF MARCH __, 2001
TABLE OF CONTENTS
Page
Article I. Sale and Redemption of Trust Shares..................................................2
Article II. Representations and Warranties.......................................................4
Article III. Prospectuses, Reports to Shareholders and Proxy Statements;
Voting.............................................................................6
Article IV. Sales Material, Information and Notifications........................................8
Article V. Diversification.....................................................................10
Article VI. Potential Conflicts.................................................................10
Article VII. Indemnification.....................................................................12
Article VIII. Applicable Law and Venue............................................................17
Article IX. Termination.........................................................................18
Article X. Notices.............................................................................20
Article XI. Miscellaneous.......................................................................20
ii
THIS AGREEMENT, dated as of the __ day of March, 2001, by and among
AMERICAN FAMILY MUTUAL LIFE INSURANCE COMPANY (the "Company"), a Wisconsin
life insurance company, on its own behalf and on behalf of each separate
account of the Company set forth on Schedule A hereto, as may be amended from
time to time (each such separate account hereinafter referred to as an
"Account"), SEI INSURANCE PRODUCTS TRUST (the "Trust"), a Massachusetts
business trust, and SEI INVESTMENTS DISTRIBUTION COMPANY (the "Underwriter"),
a Delaware corporation.
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for variable life
insurance policies and variable annuity contracts ("Variable Contracts") and
(ii) the investment vehicle for certain qualified pension and retirement
plans ("Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Trust as an
investment vehicle under their variable life insurance policies and/or
Variable Contracts may enter into participation agreements with the Trust and
the Underwriter (the "Participating Insurance Companies"); and
WHEREAS, shares of the Trust are divided into several series of
shares, each representing an interest in a particular managed portfolio of
securities and other assets, any one or more of which may be made available
under this Agreement (each such series hereinafter referred to as a "Fund");
and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, dated November 15, 1999 (File No. 812-11722), 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 Investment
Company Act of 1940, as amended (the "1940 Act"), and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Trust to be sold to and held by (i) separate accounts of both affiliated and
unaffiliated life insurance companies offering variable life insurance
policies and variable annuity contracts, (ii) Qualified Plans, and (iii) SEI
Investments Management Corporation ("SIMC"), investment adviser to the Trust,
or any of its affiliates (the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Underwriter is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD") and serves as principal underwriter of the shares of the Trust; and
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WHEREAS, each Account is a duly organized, validly existing separate
account, established by resolution or under authority of the Board of
Directors of the Company on the date shown in Schedule A hereto, to fund
variable life insurance policies or variable annuity contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company is authorized to purchase shares of the Funds on
behalf of each Account and the Underwriter is authorized to sell such shares
to the Company for each such Account;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust and the Underwriter agree as follows:
ARTICLE I.
SALE AND REDEMPTION OF TRUST SHARES
1.1 The Trust agrees to sell shares of the Funds listed in
Schedule A (as may be amended from time to time) to the Company for its
Accounts on each Business Day. The Trust or its designee shall execute
purchase orders placed for Fund shares at the net asset value of such shares
next computed after receipt of such order by the Trust or its designee. For
purposes of this Section 1.1, the Company shall be the designee of the Trust
for receipt of such orders; provided that the Company receives the order
prior to 4:00 p.m. Eastern time and that the Trust receives notice of such
order prior to 11:00 a.m., provided however that such order is for a money
market fund Eastern time on the next following Business Day in accordance
with the procedures set forth in Schedule B, as may be amended from time to
time (the "Procedures"). "Business Day" shall mean any day on which the Trust
calculates its net asset value pursuant to its then-current prospectus and
the rules of the Securities and Exchange Commission.
1.2 The Trust, so long as this Agreement is in effect, agrees
to make its shares available to the Company indefinitely for purchase at the
applicable net asset value per share on each Business Day. Notwithstanding
the foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
permit the Trust to sell shares of any Fund to any person, or suspend or
terminate the offering of shares of any Fund, if such action is required by
law or by regulatory authorities having jurisdiction or if such action is, in
the sole discretion of the Board acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary and
in the best interests of the shareholders of such Fund (it being understood
that for this purpose shareholders means Variable Contract owners). Notice of
election to suspend or terminate shall be furnished by the Trust, said
termination to be effective 10 business days after receipt of such notice by
the Company (or such other date as required by law or other regulatory
authority).
1.3 The Trust agrees that shares of the Trust will be sold only
to: (i) Participating Insurance Companies and their separate accounts, (ii)
Qualified Plans, and
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(iii) such other persons permitted under the Internal Revenue Code of 1986,
as amended. No shares of any Fund will be sold to the general public.
1.4 The Trust will not make its shares available for purchase
by any insurance company or separate account unless an agreement containing
provisions substantially the same as in Section 1.3 of Article I, Section 3.5
of Article III, Article V and Article VI of this Agreement is in effect to
govern such sales.
1.5 The Trust agrees to redeem for cash, on the Company's
request, any full or fractional share of a Fund held by the Company in an
Account, at the net asset value of such share next computed after receipt by
the Trust or its designee of the request for redemption. Subject to and in
accordance with applicable laws and the prospectus and statement of
additional information of the Trust, and subject to the consent of the
Company, the Trust may redeem shares for assets other than cash. For purposes
of this Section 1.5, the Company shall be the designee of the Trust for
receipt of such requests for redemptions; provided that the Company receives
the request prior to 4:00 p.m. Eastern time and that the Trust receives
notice of such request prior to 11:00 a.m. Eastern time on the next following
Business Day in accordance with the Procedures.
1.6 The Company agrees that purchases and redemptions of Fund
shares shall be made in accordance with the provisions of the then-current
prospectus of the Trust and this Agreement. The variable life insurance
policies and/or variable annuity contracts issued by the Company, under which
amounts may be invested in the Trust (the "Contracts"), are listed on
Schedule A attached hereto, as may be amended from time to time.
1.7 The Company shall pay for Trust shares on the next Business
Day after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1 hereof and the Procedures. Payment shall be in
federal funds transmitted by wire. For purposes of Section 2.10 and 2.11,
upon receipt by the Trust of the federal funds so wired, such funds shall
cease to be the responsibility of the Company and shall become the
responsibility of the Trust.
1.8 Issuance and transfer of the Trust's shares will be by book
entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Trust will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9 The Trust shall furnish same day notice (by electronic
mail, by facsimile transmission or by telephone followed by written
confirmation) to the Company of any income dividends or capital gain
distributions payable on the Trust's shares. The Company hereby elects to
receive all such income dividends and capital gain distributions as are
payable on the Fund shares in additional shares of that Fund. The Company
reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash. Any such revocation must be
in writing.
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The Trust shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.10 The Trust shall make the net asset value per share for each
Fund available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated, and the Trust
shall use its best efforts to make such net asset value per share available
no later than 7:00 p.m. Eastern time in accordance with the Procedures. If,
however, the Trust provides the net asset value per share later than 7:00
p.m. Eastern time, then the 11:00 a.m. deadline on the following day for
receipt of orders in Sections 1.1 and 1.5 shall be extended by the lesser of
(1) the amount of time from 7:00 p.m. Eastern time to the time that the Trust
provided the net asset value per share, and (2) four hours; provided,
however, that if the Trust does not provide the net asset value per share by
11:00 p.m. Eastern time the parties will work together to facilitate
processing in a reasonable manner given the circumstances.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that it is an insurance
company duly organized and in good standing under the insurance laws and
regulations of the State of Wisconsin (and other laws and regulations of
Wisconsin to the extent applicable to Wisconsin insurance companies), that
each Account is legally and validly established as a separate account under
applicable law, that the Company has registered each Account as a unit
investment trust under the 1940 Act (unless exempt therefrom), and that the
Company will maintain such registration for each Account (unless exempt
therefrom) for as long as any Contract under that Account is outstanding.
2.2 The Company further represents and warrants that the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state insurance and securities laws and
regulations. The Company further represents and warrants that the Contracts
are or will be registered under the 1933 Act or are or will be exempt from or
not subject to registration thereunder. The Company shall amend the
registration statements under the 1933 Act for the Contracts and the
registration statements under the 1940 Act for the Accounts from time to time
as required in order to effect the continuous offering of the Contracts or as
may otherwise be required by applicable law (unless the Contracts and
Accounts are exempt from or not subject to the registration requirements of
the 1933 Act and the 1940 Act).
2.3 The Company represents and warrants that each principal
underwriter of the Contracts is registered as a broker-dealer under the 1934
Act and is a member in good standing of the NASD.
2.4 The Company represents and warrants that the shares held in
each Account or division thereof are the only securities held in the Account
or division thereof,
4
and that the Company, on behalf of the Account or division thereof, will (i)
vote such shares in the same proportion as shares of voted by all other
holders of shares (in accordance with Section 3.4) and (ii) refrain from
substituting another security for such shares unless the Commission has
approved such substitution in the manner provided in Section 26 of the 0000
Xxx.
2.5 The Trust represents and warrants that Trust shares sold
pursuant to this Agreement shall be registered under the 1933 Act, and shall
be duly authorized for issuance and sold in compliance with the laws of the
Commonwealth of Massachusetts and all applicable federal and state securities
laws. The Trust represents and warrants that it is and shall remain
registered as an open-end management investment company under the 1940 Act.
The Trust represents and warrants that it shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of its shares and
that it shall register and qualify the shares for sale in accordance with the
laws of the various states to the extent required by applicable state law.
2.6 The Trust represents and warrants that it is currently
qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), that it will make
every effort to maintain such qualification (under Subchapter M or any
successor or similar provision), and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future.
2.7 The Trust represents that it believes, in good faith, that
the Funds currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for the Variable Contracts.
2.8 Subject to the Fund's compliance with applicable
diversification requirements, the Company represents and warrants that the
Contracts are currently treated as life insurance policies (which may include
modified life endowment contracts) or annuity contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Trust and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.9 The Trust represents and warrants that it is lawfully
organized and validly existing under the laws of Commonwealth of
Massachusetts and that it does and will comply in all material respects with
the 1940 Act.
2.10 The Trust represents and warrants that the Trust's
investment policies, fees and expenses are and shall at all times remain in
compliance with the laws of the Commonwealth of Massachusetts and that its
operations are and shall at all times remain in material compliance with the
laws of the Commonwealth of Massachusetts to the extent required to perform
this Agreement.
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2.11 The Trust represents and warrants that its Trustees,
officers, employees, and other individuals and entities dealing with the
money and/or securities of the Trust are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust in an amount not less than the minimum coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The Trust represents and warrants that the
blanket fidelity bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company. The Trust represents that
shall notify the Company in the event that it no longer has the coverage
required by this Section 2.11.
2.12 The Company represents and warrants that all of its
Directors, officers, employees, investment advisers, and other individuals
and affiliates dealing with the money and/or securities of the Trust are
covered by a blanket fidelity bond or similar coverage, in an amount not less
than $10 million; that the bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Company
represents that it shall notify the Trust and the Underwriter in the event
that it no longer has the coverage required by this Section 2.12.
2.13 The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the
SEC. The Underwriter represents and warrants that it is duly organized and in
good standing under the laws of the State of Delaware.
2.14 The Trust currently does not intend to make payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent
that it decides to finance distribution expenses pursuant to Rule 12b-1, the
Trust undertakes to have a board of trustees, a majority of whom are not
interested persons of the Trust, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
ARTICLE III.
PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1 The Trust or its designee shall provide the Company with an
electronic version of the Trust's current prospectus and statement of
additional information ("SAI"), including any prospectus or SAI supplements.
3.2 The Trust or its designee, shall provide the Company with
an electronic version of its proxy materials, shareholder reports and other
communications to shareholders.
3.3 The Company shall bear the expenses of distributing to
Contract owners and to prospective Contract owners the documents of the Trust
listed in Sections 3.1 and 3.2.
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3.4 So long as and to the extent that the Securities and
Exchange Commission continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners, the Company
shall:
(i) solicit voting instructions from Contract owners;
(ii) vote Trust shares in accordance with instructions
received from Contract owners; and
(iii) vote Trust shares for which no instructions have been
received in the same proportion as Trust shares of such Fund for which
instructions have been received.
The Company reserves the right to vote Trust shares held in any Account in
its own right to the extent permitted by law. Participating Insurance
Companies shall be responsible for ensuring that each of their Accounts
calculates voting privileges in a manner consistent with the Mixed and Shared
Funding Exemptive Order; provided, however, that the Trust or its designee
shall provide each shareholder, including the Company and each Account, with
the information necessary for the shareholder meeting, including each
Account's respective ownership in each Fund.
3.5 The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders. Further, the Trust will act in accordance
with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of Trustees
and with whatever rules the Commission may promulgate with respect thereto.
3.6 The Trust shall use reasonable efforts to provide Trust
documents listed in Section 3.1 and 3.2 to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete, at
reasonable cost, the printing, assembling and distribution of the documents
in accordance with applicable laws and regulations. The Trust will provide
the Company with as much advance notice as is reasonably practicable of any
proxy solicitation for any Fund, and of any material change in the Trust's
registration statement or prospectus, particularly any change resulting in a
change to the registration statement or prospectus for any Variable Account.
The Trust will work with the Company so as to enable the Company to solicit
proxies from Variable Contract owners, or to make changes to its registration
statement or prospectus, in an orderly manner. The Trust will make reasonable
efforts to attempt to have changes affecting the Variable Contract
prospectuses become effective simultaneously with annual updates for such
prospectuses.
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ARTICLE IV.
SALES MATERIAL, INFORMATION AND NOTIFICATIONS
4.1 The Company shall furnish, or shall cause to be furnished,
to the Trust or its designee, each piece of sales literature or other
promotional material in which the Trust is named, at least fifteen (15)
Business Days prior to its use. No such material shall be used if the Trust
or its designee reasonably objects to such use within ten (10) Business Days
after receipt of such material. The Trust, the Underwrites, or its designee
reserves the right to reasonably object to the continued use of any such
sales literature or other promotional material in which the Trust is named,
and no such material shall be used if the Trust, the Underwriter, or its
designee so reasonably object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee, except with the permission of the Trust.
4.3 The Trust or its designee shall furnish, or shall cause to
be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company or its Account(s) or
Contracts are named at least fifteen (15) Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects
to such use within ten (10) Business Days after receipt of such material. The
Company reserves the right to reasonably object at any time thereafter to the
continued use of any such literature or other promotional material in which
the Company or the Variable Accounts or the Variable Contracts are named, and
no such material shall be used thereafter if the Company so reasonably
objects.
4.4 The Trust and the Underwriter shall not give any
information or make any representations on behalf of the Company or
concerning the Company, the Accounts or the Contracts, other than the
information or representations contained in a registration statement or
prospectus for the Contracts, as such registration statement and prospectus
may be amended or supplemented from time to time, or in published reports for
the Accounts or the Contracts which are in the public domain or approved by
the Company for distribution to Contract owners, or in sales literature or
other promotional material approved by the Company or its designee, except
with the permission of the Company.
4.5 The Trust will provide to the Company at least one complete
copy of all registration statements, prospectuses, SAIs, reports, proxy
materials, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters and notices, orders or responses
thereto, and all amendments and supplements to any of the above, that relate
to the sale of Trust shares to the Company and the Accounts, within ten (10)
Business Days after the earlier of the use of such document or the filing of
such document with the Securities and Exchange Commission or the NASD.
8
4.6 The Company will provide to the Trust at least one complete
copy of all registration statements, prospectuses, SAIs, reports, proxy
materials, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters and notices, orderes or responses relating thereto, and all
amendments and supplements to any of the above, that relate to the investment
in shares of the Trust under the Contracts, within ten (10) Business Days
after the earlier of the use of such document or the filing of such document
with the Securities and Exchange Commission or the NASD.
4.7 For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to,
any of the following: 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, telephone directories (other than routine listings), electronic
media, computerized media, or other public media), sales literature (I.E.,
any written or electronic communication distributed or made generally
available to customers or the public, including but not limited to,
brochures, circulars, research reports, market letters, performance reports
or summaries, form letters, telemarketing scripts, seminar texts, reprints or
excerpts of any other advertisement, sales literature or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
4.8 The Company shall furnish, or shall cause to be furnished,
to the Trust or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year; and
(b) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the
delivery thereof to stockholders.
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ARTICLE V.
DIVERSIFICATION
5.1 The Trust will at all times invest money from the Contracts
in such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Trust will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations.
ARTICLE VI.
POTENTIAL CONFLICTS
6.1 The Board will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the owners of
Contracts participating in the Accounts and participants of all Qualified
Plans investing in the Trust, and determine what action, if any, should be
taken in response to such conflicts. A material irreconcilable conflict may
arise for a variety of reasons, including: (i) an action by any state
insurance regulatory authority; (ii) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax or securities regulatory authorities; (iii) an administrative
or judicial decision in any relevant proceeding; (iv) the manner in which the
investments of the Trust are being managed; (v) a difference in voting
instructions given by variable annuity Contract owners, variable life
insurance Contract owners, and trustees of the Qualified Plans; (vi) a
decision by a Participating Insurance Company to disregard the voting
instructions of Contract owners; or (vii) if applicable, a decision by a
Qualified Plan to disregard the voting instructions of plan participants. The
Trust shall promptly inform the Company if the Board determines that a
material irreconcilable conflict exists and the implications thereof.
6.2 The Company will report any potential or existing conflicts
of which it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
Contract owner voting instructions are disregarded. The responsibility to
report such information and assist the Board will be carried out with a view
only to the interests of Contract owners.
6.3 If it is determined by a majority of the Board, or a
majority of its members who are not "interested persons" of the Trust under
the 1940 Act (the "Independent Trustees"), that a material irreconcilable
conflict exists, the Company shall, at its expense and to the extent
reasonably practicable (as determined by a majority of the Independent
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Trustees), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, up to and including: (i) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Fund
and reinvesting such assets in a different investment medium, including (but
not limited to) another Fund, or submitting the question whether such
segregation should be implemented to a vote of all affected Contract owners
and, as appropriate, segregating the assets of any appropriate group (I.E.,
annuity Contract owners, life insurance Contract owners, or variable Contract
owners of one or more Participating Insurance Companies) that votes in favor
of such segregation, or offering to the affected Contract owners the option
of making such a change; and (ii) establishing a new registered management
investment company or managed separate account. The responsibility of the
Company to take remedial action will be carried out with a view only to the
interests of Contract owners.
6.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account (at the Company's expense); provided that no charge
or penalty will be imposed as a result of such withdrawal.
6.5 For purposes of this Article VI, a majority of the
Independent Trustees shall determine whether any proposed action adequately
remedies any material irreconcilable conflict, but in no event will the
Trust, the Underwriter, the Trust's adviser or any affiliate be required to
establish a new funding medium for the Contracts. The Company shall not be
required by the Article VI to establish a new funding medium for any Contract
if an offer to do so has been declined by vote of a majority of Contract
owners materially and adversely affected by the material irreconcilable
conflict.
6.6 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or proposed Rule 6e-3 is adopted, to provide exemptive relief from
any provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then (a) the
Trust and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5 and Article VI of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical
to such Sections are contained in such Rule(s) as so amended or adopted.
6.7 The Trust hereby notifies the Company that Account
prospectus disclosure regarding potential risks of mixed and shared funding
may be appropriate.
6.8 The Company, at least annually, will submit to the Board
such reports, materials or data as the Board reasonably may request so that
the Board may fully
11
carryout the obligations imposed upon it by the Mixed and Shared Funding
Exemptive Order, and such reports, materials and data will be submitted more
frequently if deemed appropriate by the Board.
ARTICLE VII.
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY
7.1(a). The Company agrees to indemnify and hold harmless the Trust
and each member of the Board and each officer and employee of the Trust, the
Underwriter and each director, officer and employee of the Underwriter, and
each person (other than a Participating Insurance Company or a separate
account of a Participating Insurance Company) who controls the Trust or the
Underwriter within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" and individually, an "Indemnified Party," for
purposes of this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or expenses (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
alleged to be or are determined to be related to the sale or acquisition of
the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
registration statement, prospectus (which shall include an offering
memorandum) or SAI for the Contracts or contained in the Contracts or
advertisement or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Trust for use in any registration statement, prospectus or SAI for
the Contracts or in the Contracts or advertisement or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus, SAI or advertisement or sales
literature of the Trust not supplied by the Company, or persons under
its control and other than statements or representations authorized by
the Trust or the Underwriter) or unlawful conduct of
12
the Company or persons under its control, with respect to the sale or
distribution of the Contracts or Trust shares; or
(iii) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, SAI or advertisement or sales literature of the
Trust or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon and in
conformity with information furnished to the Trust by or on behalf of
the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
7.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
expenses 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.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company
of any such claim shall not relieve the Company from any liability which it
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against an Indemnified Party, the Company shall be entitled
to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company
to such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such 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.
13
7.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust shares, the Contracts or the operation
of the Trust.
7.2 INDEMNIFICATION BY THE UNDERWRITER
7.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors, officers and employees and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933
Act (collectively, "Indemnified Parties" and individually, "Indemnified
Party," for purposes of this Section 7.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or expenses (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 alleged to be or are determined to be related to the sale or
acquisition of shares of a Fund or the Contracts and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
registration statement, prospectus, SAI or advertisement or sales
literature of the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust by or on behalf of the Company for
use in the registration statement, prospectus, statement of additional
information for the Trust or in any advertisement or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus, SAI or sales literature for the
Contracts not supplied by the Underwriter, Trust or persons under their
control and other than statements or representations authorized by the
Company) or unlawful conduct of the Trust or the Underwriter or persons
under their control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, SAI or advertisement or sales literature
covering the Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission was
made in
14
reliance upon and in conformity with information furnished to the
Company by or on behalf of the Underwriter or Trust; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter or the Trust in
this Agreement or arise out of or result from any other material breach
of this Agreement by the Underwriter or the Trust (including a failure,
whether unintentional or in good faith or otherwise, to comply with the
diversification requirements specified in Section 2.8 and 5.1 of this
Agreement, or to qualify as a regulated investment company under
Subchapter M of the Code).
7.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or expenses incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement.
7.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter 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 the Underwriter of any such claim shall not relieve the
Underwriter 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 any
Indemnified Party, the Underwriter will be entitled to participate, at its
own expense, in the defense thereof. The Underwriter also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter 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.
7.2(d). The Company will promptly notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts, the operation of the Accounts or the Trust.
7.3 INDEMNIFICATION BY THE TRUST
7.3(a). The Trust agrees to indemnify and hold harmless the
Company, the principal underwriter of the Variable Contracts, and each of
their directors, officers, and employees and each person, if any, who
controls the Company within the meaning of
15
Section 15 of the 1933 Act (hereinafter collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
7.3) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or expenses
(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 alleged to or are determined to be related
to the sale or acquisition of shares of a Fund or the Contracts, and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement, prospectus, SAI or
advertisement or sales literature of the Trust (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Trust or the
Underwriter by or on behalf of the Company for use in the
registration statement, prospectus, statement of additional
information for the Trust or in any advertisement or sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contract or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI or
sales literature for the Contracts not supplied by the
Underwriter, Trust or persons under their control and other
than statements or representations authorized by the Company)
or unlawful conduct of the Trust or the Underwriter or persons
under their control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, SAI or
advertisement or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with the
information furnished to the Company by or on behalf of the
Underwriter or the Trust; or
(iv) arise as a result of any failure by the Trust
to provide the services and furnish the materials under the
terms of this Agreement; or
16
(v) arise out of or result from any material breach
of any representation and/or warranty made by the Trust in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Trust (including a
failure, whether unintentional or in good faith or otherwise,
to comply with the diversification requirements specified in
Sections 2.8 and 5.1 of this Agreement, or to qualify as a
regulated investment company under Subchapter M of the Code).
7.3(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
expenses incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
7.3(c). The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust 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 the Trust of
any such claim shall not relieve the Trust 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 any Indemnified Party, the Trust will be entitled to
participate, at its own expense, in the defense thereof. The Trust also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Trust to such party of the
Trust's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Trust 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.
7.3(d). The Company will promptly notify the Trust of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts, the operation of the Accounts, or the Trust.
ARTICLE VIII. APPLICABLE LAW AND VENUE
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the substantive laws of the State of
Delaware without regard to principles of conflict of laws.
17
8.2. This Agreement shall be subject to the provisions of the 1933
Act, the 1934 Act and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant (including,
but not limited to, the Mixed and Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company, the Trust or the Underwriter by
written notice to the other parties upon a material breach
of the Agreement by other party; or
(c) termination by the Trust or the Underwriter upon the
institution of formal proceedings against the Company or
its agents by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Variable Contracts issued by the Company, the
operation of the Variable Accounts, or the purchase of Trust
shares; or
(d) termination by the Company upon the institution of formal
proceedings against the Trust or the Underwriter or their
agents by the NASD, the SEC, or any state securities or
insurance department or any other regulatory agency; or
(e) termination by the Company by written notice to the Trust and
the Underwriter with respect to any Fund in the event any of
the Fund's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(c) termination by the Company by written notice to the Trust and
the Underwriter with respect to any Fund in the event that
such Fund ceases to qualify as a regulated investment company
under Subchapter M of the Code or under any successor or
similar provision, or if the Company reasonably believes that
the Trust may fail to so qualify; or
18
(d) termination by the Company by written notice to the Trust and
the Underwriter with respect to any Fund in the event that
such Fund falls to meet the diversification requirements
specified in Article V hereof; or
(e) termination by the Trust by written notice to the Company if
the Trust shall determine, in its sole judgment exercised in
good faith, that the Company and/or its affiliated companies
has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse
publicity; or
(f) termination by the Company by written notice to the Trust and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Trust or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity.
9.2 Notwithstanding any termination of this Agreement, the
Trust and the Underwriter shall, at the option of the Company, continue to
make available additional shares of the Trust pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the
Trust, redemption of investments in the Trust and investment in the Trust
upon the making of additional purchase payments under the Existing Contracts.
The parties agree that this Section 9.2 shall not apply to any terminations
under Article VI, and the effect of such Article VI terminations shall be
governed by Article VI of this Agreement.
9.3 Notwithstanding any termination of the Agreement, for so
long as the Variable Contracts remain outstanding and invested in a Fund,
each party to this Agreement shall continue to perform its duties under this
Agreement with reasonable efforts to maintain to the extent possible the
continued tax deferred status of the Variable Contracts and the payment of
benefits thereunder, except to the extent proscribed by law, the SEC or other
regulatory body.
9.4 Notwithstanding anything in this Agreement to the contrary,
the parties agree that the Trust may terminate and liquidate any Fund at any
time the Board determines, in its sole judgment, that it is not in the
interest of shareholders to continue the Fund. The Trust agrees that it shall
give the Company reasonable advance notice of its intention to conduct any
such Fund termination or liquidation and that any such Fund termination or
liquidation shall comply with all applicable laws and regulations.
19
ARTICLE X. NOTICES
10.1 Any notice shall be sufficiently given when sent by
registered or certified mail (or through a nationally recognized overnight
courier that provides evidence of receipt) to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Company:
American Family Mutual Life Insurance Company
0000 Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxxxxx Xxxx Xxxxxx
If to the Trust:
SEI Insurance Products Trust
Xxx Xxxxxxx Xxxxxx Xxxxx
Xxxx, Xx. 00000
Attn: Secretary
If to Underwriter:
SEI Investments Distribution Co.
Xxx Xxxxxxx Xxxxxx Xxxxx
Xxxx, Xx. 00000
Attn: Secretary
ARTICLE XI.
MISCELLANEOUS
11.1 The Company and the Underwriter understand and acknowledge
that: (i) the Trust is a registered investment company organized under
Massachusetts law consisting of separate investment portfolios; (ii) no Fund
of the Trust shall have any liability for the obligations of any other Fund
of the Trust; (iii) under Massachusetts law, shareholders of a Massachusetts
business trust could, under certain circumstances, be held personally liable
for the Trust's obligations; and (iv) the Trust's declaration of trust,
however, disclaims the shareholder liability set forth in (iii) above, for
the Trust's acts or obligations.
11.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement, shall not disclose, disseminate or utilize
such names and addresses and other confidential information until such time
as it may come into the public domain without the express written consent of
the affected party.
20
11.3 Each of the parties acknowledges and agrees that this
Agreement and the arrangement described herein are intended to be
non-exclusive and that each of the parties is free to enter into similar
agreements and arrangements with other entities.
11.4 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.
11.5 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.6 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.
11.7 Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators)
and shall permit such authorities reasonable access to its books and records
in connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
11.8 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.
11.9 This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent
of all parties hereto; provided, however, that the Underwriter may assign
this Agreement or any rights or obligations hereunder to any affiliate of or
company under common control with the Underwriter, if such assignee is duly
licensed and registered to perform the obligations of the Underwriter under
this Agreement.
11.10 This Agreement may be amended only by written agreement of
the parties to the Agreement.
11.11 This Agreement contains the full and complete understanding
between parties with respect to the transactions covered and contemplated
under this Agreement, and supersedes all prior agreements and understandings
between the parties relating to the subject matter hereof, whether oral or
written, express or implied.
11.12 Except for the limited purposes provided in Sections 1.1 and
1.5, it is understood and agreed that the Company and each of its designees
shall be acting as an independent contractor and not as an employee or agent
of the Trust or the Underwriter, and none of the parties shall hold itself
out as an agent of any other party with the authority to bind such party.
Neither the execution nor performance of this Agreement
21
shall be deemed to create a partnership or joint venture by and among any of
the Company, any designees, Trust, or Underwriter.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified above.
AMERICAN FAMILY MUTUAL LIFE INSURANCE COMPANY
By:
------------------------------------------
Title:
---------------------------------------
Print Name:
----------------------------------
SEI INSURANCE PRODUCTS TRUST
By:
------------------------------------------
Xxxxxxxxx X. XxXxxxxxxx
Vice President and Assistant Secretary
SEI INVESTMENTS DISTRIBUTORS COMPANY
By:
------------------------------------------
Xxxxxx X. Xxxxx
Vice President
22
SCHEDULE A
PARTICIPATION AGREEMENT
AMONG
AMERICAN FAMILY MUTUAL LIFE INSURANCE COMPANY
SEI INSURANCE PRODUCTS TRUST
AND
SEI INVESTMENTS DISTRIBUTION COMPANY
Shares of the following Fund(s) are available:
SEI VP Prime Obligation Fund - Class B
Shares of the Fund(s) listed above shall be made available as
investments for the following Accounts and Contracts funded by the Accounts:
NAME OF ACCOUNT: NAME OF CONTRACT FUNDED BY ACCOUNT:
------------------------------------ ---------------------------------------
[ADD] [ADD]
Dated as of May ___, 2000.
A-1
SCHEDULE B
PARTICIPATION AGREEMENT
AMONG
AMERICAN FAMILY MUTUAL LIFE INSURANCE COMPANY
SEI INSURANCE PRODUCTS TRUST
AND
SEI INVESTMENTS DISTRIBUTION COMPANY
PROCEDURES
(a) On each day the Funds calculate their net asset value pursuant
to the requirements of their then current prospectus and the rules of the
Securities and Exchange Commission (each a "Business Day"), the Company may
receive Instructions from the Contract owners of Contracts specified in
Exhibit A for the purchase or redemption of shares of the Funds based solely
upon each Company's receipt of Instructions from Contract owners, prior to
the Close of Trading on that Business Day. Instructions in good order
received by the Company prior to 4:00 p.m. Eastern time ("ET") on any given
Business Day, or earlier if the New York Stock Exchange ("Exchange") closes
earlier than 4:00 p.m. ET on any given Business Day (the "Trade Date") and
transmitted to SEI Investments Fund Management or other SEI entity serving as
the Funds' transfer agent (the "Transfer Agent") by no later than 10:00 a.m.
ET on the Business Day following the Trade Date ("Trade Date plus One" or
"TD+1"), will be executed at the NAV ("Share Price") of each applicable Fund,
determined as of the Close of Trading on the prior Business Day ("Effective
Trade Date"). Money Market activity will be executed at the NAV on TD+1 as an
AM trade.
(b) By no later than 7:00 p.m. ET on each Business Day ("Price
Communication Time"), SEI Investments Fund Management or other SEI entity
serving as fund administrator (the "Administrator") will use its best efforts
to communicate to the Company via a mutually agreed upon format, the Share
Price of each applicable Fund, as well as dividend and capital gain
information and, in the case of income Funds, the daily accrual for interest
rate factor (mil rate), determined at the Close of Trading on that Business
Day. The Administrator will notify the Company when and if the Administrator
does not communicate the required Share Price information by 7:00 p.m. ET on
any Business Day. It is understood and agreed that, in the context of Section
22 of the 1940 Act and the rules and public interpretations thereunder by the
staff of the Securities and Exchange Commission ("SEC Staff"), receipt by the
Company of any Instructions from the Contract owners in a timely manner shall
be deemed to be receipt by the Funds of such Instructions solely for pricing
purposes and shall cause purchases and sales for the Contract owners to be
deemed to occur at the Share Price for such Business Day.
(c) As noted in Paragraph (a) above, by 10:00 a.m. ET on TD+1
("Instruction Cutoff Time") and after the Company has processed all approved
Contract owner activity, the Company will transmit to the Funds' Transfer
Agent, by a method acceptable to the Company and the Funds' Transfer Agent, a
report (the "Instruction Report") detailing the Instructions that were
received by the Company prior to the Funds' daily determination of Share
Price for each Fund (i.e., the Close of Trading) on each Business Day. The
Company shall transmit a report on each Business Day, even if there are no
Contract owner instructions to report. If the Transfer Agent does not receive
an Instruction Report on any Business Day, it will notify the Company.
(i) It is understood by the parties that all Instructions
from the Contract owners shall be received and
processed by the Company in accordance with its
standard transaction processing procedures that apply
to all investment options offered
B-1
under the Contract. The Company shall maintain
records sufficient to identify the date and time of
receipt of all Contract owner transactions involving
the Funds and shall make such records available upon
reasonable request for examination by the Funds or
its designated representative or, at the request of
the Funds, by appropriate governmental authorities.
Under no circumstances shall the Company change,
alter or modify any Instructions received by it in
good order.
(ii) The Instruction Report shall state whether the
Instructions received by the Company from the
Contract owners by the Close of Trading on such
Business Day resulted in the Accounts being a net
purchaser or net seller of shares in each of the
Funds and shall indicate the net dollar value
purchased or net dollar value redeemed by each
Account in each of the Funds and the date of the
transaction. On Business Days where there are no
Instructions in a Fund for an Account or all the
Accounts, the Instruction Report will so indicate.
Each transmission of Instructions by the Company of a
net purchase or redemption Instruction relating to a
particular Fund and a Business Day shall constitute a
representation and covenant by the Company that such
net purchase or redemption Instruction was based on
Contract owner transactions received by the Company
prior to the Close of Trading (and prior to the time
the Share Price for each Fund) was determined on such
Business Day, and that each net purchase or
redemption Instruction included all such Contract
owner transactions so received by the Company. All
Instructions will be communicated in U.S. dollars.
(d) As set forth below, upon the timely receipt from the Company
of the Instruction Report, the Funds will execute the purchase or redemption
transactions (as the case may be) at the Share Price for each Fund computed
as of the Close of Trading on the Effective Trade Date.
(i) Except as otherwise provided herein, all purchase
and redemption transactions will settle on TD+1. Settlements
will be through net Federal Wire transfers between the Company
and a custodial account designated by the Funds. In the case
of Instructions which constitute a net purchase order,
settlement shall occur by the Company initiating a wire
transfer to the custodian for the Funds for receipt by the
Funds' custodian by no later than the Close of Business at the
New York Federal Reserve Bank on TD+1, causing the remittance
of the requisite Funds to cover such net purchase order. In
the case of Instructions which constitute a net redemption
order, settlement shall occur by the Funds' Transfer Agent
instructing the Funds' custodian to initiate a wire transfer
from the Funds' custodial accounts to the Company's custodial
account for its receipt by no later than the Close of Business
at the New York Federal Reserve Bank on TD+1, causing the
remittance of the requisite Funds to cover such net redemption
order. On any Business Day when the Federal Reserve Wire
Transfer System is closed, all communication and processing
rules will be suspended for the settlement of Instructions.
Instructions will be settled on the next Business Day on which
the Federal Reserve Wire Transfer System is open. The original
TD+1 Settlement Date will not apply. Rather, for purposes of
this Paragraph only, the Settlement Date will be the date on
which the Instruction settles. The Funds reserve the right to
(i) delay settlement of redemptions for up to five (5)
Business Days after receiving a net redemption order in
accordance with Section 22 of the 1940 Act and Rule 22c-1
thereunder, or (ii) suspend redemptions pursuant to the 1940
Act or as otherwise required by law. Settlements shall be in
U.S. dollars.
(ii) The Trust will verify, for each Fund, the NAV,
the total dollar amount of transactions, and the number of
shares transacted listed on the Instruction Report. The
B-2
Trust will contact the Company on or before 1:00 p.m. Eastern
time on TD+1 if any of the information to be verified is
incorrect. The Trust will give the Company access to its
system to verify its transactions. The Company and the Trust
will cooperate to resolve any discrepancies as soon as
reasonably practicable. This process will be reviewed
periodically by both parties to make sure that the needs of
both the Trust and the Company are being met.
(e) In the event of any error or delay with respect to the
Procedures outlined in SCHEDULE B herein: (i) which is caused by the Funds,
the Funds' Transfer Agent or the adviser, the Funds or its agents (as
appropriate) shall make any adjustments on the Funds' accounting system
necessary to correct such error or delay and the responsible party or parties
shall reimburse the Company for any losses or reasonable costs incurred
directly as a result of the error or delay but specifically excluding any and
all consequential punitive or other indirect damages; or (ii) which is caused
by the Company or by any Contract owner, the Funds or its agent shall make
any adjustment on the Funds' accounting system necessary to correct such
error or delay and the affected party or parties shall be reimbursed by the
Company for any losses or reasonable costs incurred directly as a result of
the error or delay (or the Company shall make any adjustments on its
recordkeeping system, if appropriate), but specifically excluding any and all
consequential punitive or other indirect damages. In the event of any such
adjustments on the Funds' accounting system, the Company shall make the
corresponding adjustments on its internal recordkeeping system. In the event
that errors or delays with respect to the Procedures are contributed to by
more than one party hereto, each party shall be responsible for that portion
of the loss or reasonable cost which results from its error or delay. The
portion of any loss or cost for which the Funds is responsible may be
adjusted between the Funds and its agents in accordance with the agreement
between the Funds and such agent whereby the agency is created. All parties
agree to provide the other parties prompt notice of any errors or delays of
the type referred to herein and to use reasonable efforts to take such action
as may be appropriate to avoid or mitigate any such costs or losses.
Dated as of May ___, 2000.
B-3
