EXHIBIT 99.8b
PARTICIPATION AGREEMENT
AMONG
LIBERTY VARIABLE INVESTMENT TRUST,
LIBERTY FINANCIAL INVESTMENTS, INC.,
AND
SECURITY BENEFIT LIFE INSURANCE COMPANY
This Agreement, made and entered into this _____ day of _______________,
1997, by and among Security Benefit Life Insurance Company (the "Company"), on
its own behalf and on behalf of each separate account, set forth in Schedule A
hereto as may be amended from time to time (each such account referred to as a
"Separate Account"), Liberty Variable Investment Trust (the "Trust"), and
Liberty Financial Investments, Inc. ("LFII").
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several series
of shares (such series being hereinafter referred to individually as a "Series"
or collectively as the "Series"); and
WHEREAS, the Trust relies on an order from the Securities and Exchange
Commission ("SEC"), dated July 1, 1988 (File No. 812-7044), granting life
insurance companies and variable annuity and variable life insurance 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 variable annuity and
variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "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, Liberty Advisory Services Corp. ("LASC") is a duly registered
investment adviser under the federal Investment Advisers Act of 1940 ("Advisers
Act") and any applicable state securities law; and
WHEREAS, Colonial Investors Service Center, Inc. ("CISC") serves as transfer
agent to the Trust; and
WHEREAS, the Company has registered or will register certain variable
insurance products (or interests in a separate account funding such contracts)
supported wholly or partially by the Separate Account (the "Contracts") under
the 1933 Act; and said Contracts are listed in Schedule B hereto, as it may be
amended from time to time by mutual written agreement; and
WHEREAS, each Separate Account is a duly organized, validly existing
segregated asset account established by resolution of its Board of Directors or
by the Executive Committee of the Board; and
WHEREAS, the Company has registered or will register each Separate Accounts
as a unit investment trust under the 1940 Act; and
WHEREAS, LFII is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
2
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Trust on behalf of
each Separate Account to fund certain Contracts and LFII is authorized to sell
such shares to unit investment trusts such as each Separate Account at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Trust and LFII and LASC agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. LFII will sell to the Company those shares of the Trust which each
Separate Account orders, executing such orders on a daily basis at the net asset
value next computed after receipt of such orders by the Trust. For the purposes
of this Section 1.1., CISC shall be the designee of the Trust for receipt of
such orders from each Separate Account and receipt by such designee shall
constitute receipt by the Trust.
1.2. The Trust will make its shares available indefinitely for purchase at
the applicable net asset value per share by the Company and its Separate
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall use reasonable efforts to
calculate such net asset value on each day on which the New York Stock Exchange
is open for trading ("Business Day"). Notwithstanding the foregoing, the Board
of Trustees of the Trust (the "Trustees") may refuse to sell shares of any
Series to any person, or suspend or terminate the offering of shares of any
Series if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees, acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Series.
3
1.3. The Trust and LFII agree that shares of the Trust will be sold only to
Participating Insurance Companies and their Separate Accounts. No shares of any
Series will be sold to the general public.
1.4. The Trust and LFII will not sell Trust shares to any insurance company
or separate account unless an agreement containing provisions substantially the
same as Articles I, III, V, VII and Sections 2.3 and 2.10 of Article II of this
Agreement is in effect to govern such sales.
1.5. The Trust will redeem for cash, at the Company's request, any full or
fractional shares of the Trust held by the Company, executing such requests at
the net asset value next computed after receipt by the Trust of such requests.
For purposes of this Section 1.5., CISC shall be the designee of the Trust for
receipt of requests for redemption for each Separate Account.
1.6. The Trust may suspend the right of redemption or postpone the date of
payment or satisfaction upon redemption consistent with Section 22(e) of the
1940 Act and any rules thereunder. Cash redemptions ordinarily shall be paid not
later than one Business Day following receipt by the Trust, or its designee, of
the request for redemption, unless, as described herein, the Trust exercises its
rights under Section 22(e) of the 1940 Act. Cash payments shall be made in
federal funds transmitted by wire.
1.7. The Company will purchase and redeem the shares of each Series offered
by the then current prospectus of the Trust in accordance with the provisions of
such prospectus and statement of additional information (the "SAI")
(collectively referred to as "Prospectus," unless otherwise provided).
4
1.8. The Company shall pay for Trust shares on the next Business Day after an
order to purchase Trust shares is made in accordance with the provisions of
Section 1.1. hereof. Payment shall be in federal funds transmitted by wire, or
may otherwise be provided by separate agreement. For purposes of Section 2.8 and
2.9, upon receipt by the Trust, or its designee, 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.
1.9. Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Separate Accounts.
Shares ordered from the Trust will be recorded in an appropriate title for each
Separate Account or the appropriate subaccount of each Separate Account.
1.10. The Trust, through its designee CISC, shall furnish same day notice (by
wire or telephone, followed by written confirmation) to the Company of any
income dividends or capital gain distributions payable on the shares of any
Series. The Company hereby elects to receive all such income, dividends and
capital gain distributions as are payable on the shares of each Series in
additional shares of that Series. The Company reserves the right to revoke this
election and to receive all such income, dividends and capital gain
distributions in cash. The Trust shall notify the Company through its designee,
CISC, of the number of shares so issued as payment of such income, dividends and
distributions.
1.11. The Trust shall make the net asset value per share for each Series
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m., Boston time.
5
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act to the extent required by the 1933 Act; that the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws and that the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that prior to any
issuance or sale of any Contract it has legally and validly established each
Separate Account as a segregated asset account under the applicable state
insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register each Separate Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant to
this Agreement shall be registered under the 1933 Act duly authorized for
issuance and sold in compliance with the laws of the State of Kansas and all
applicable federal and any state securities laws and that the Trust is and shall
remain registered under the 1940 Act. The Trust shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Trust
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Trust or
LFII.
6
2.3. The Trust currently does not intend to make any 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 consistent with applicable law.
To the extent that it decides to finance distribution expenses pursuant to Rule
12b-1, the Trust undertakes to have its 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.
2.4. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states,
except that the Trust represents that the Trust's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Kansas.
2.5. LFII represents and warrants that it is a member in good standing of the
NASD and is registered as a broker-dealer with the SEC. LFII further represents
that it will sell and distribute the Trust shares in accordance with the laws of
the State of Kansas and all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.6. The Trust represents that it is lawfully organized and validly existing
under the laws of The Commonwealth of Massachusetts and that it does and will
comply in all material aspects with the 1940 Act.
2.7. The Trust represents and warrants that LASC is and shall remain duly
registered as an investment adviser under all applicable federal and state
securities laws and that LASC shall perform its obligations for the Trust in
compliance in all material respects with the applicable laws of the State of
Kansas and any applicable state and federal securities laws.
7
2.8. The Trust and LFII represent and warrant that all of its trustees,
officers, employees, and other individuals/entities having access to securities
or funds of the Trust are and shall continue to be at all times covered by a
joint fidelity bond for the benefit of the Trust in an amount not less than the
minimum coverage required 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
fidelity insurance company.
2.9. The Company represents and warrants that all of its directors, officers,
employees, investment advisers, and other individuals/entities having access to
securities or funds of the Separate Account 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 $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
fidelity insurance company.
2.10. The Company represents and warrants that it will not transfer or
otherwise convey shares of the Trust, without the prior written consent of LFII.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. LFII shall provide the Company with as many copies of the Trust's
current prospectus, excluding the SAI, as the Company may reasonably request in
connection with delivery of the prospectus, excluding the SAI, to purchasers of
Contracts. If requested by the Company in lieu thereof, the Trust shall provide
such documentation (including a final copy of the new prospectus, excluding the
SAI, as set in type at the Trust's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Trust is amended) to have the prospectus for the
Contracts and the Trust's
8
prospectus, excluding the SAI, printed together in one document (such printing
to be at the Company's expense).
3.2. The Trust's prospectus shall state that the SAI for the Trust is
available from LFII and the Trust, at its expense, shall provide final copy of
such SAI to LFII for duplication and provision to any prospective owner who
requests the SAI and to any owner of a Variable Insurance Product ("Owners").
3.3. The Trust, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders and other communications to shareholders
in such quantity as the Company shall reasonably require for distribution to
Owners.
3.4. If and to the extent required by law, the Company and, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for Owners, the Trust shall:
(i) solicit voting instructions from Owners;
(ii) vote the Trust shares in accordance with instructions received
from Owners; and
(iii) vote Trust shares for which no instructions have been received in
the same proportion as Trust shares of such Series for which
instructions have been received.
The Company reserves the right to vote Trust shares held in any segregated asset
account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
Separate Accounts participating in the Trust calculates voting privileges in a
manner consistent with the standards to be provided in writing to the
Participating Insurance Companies
9
3.5. The Trust shall comply with all provisions of the 1940 Act requiring
voting by shareholders. The Trust reserves the right to take all actions,
including but not limited to, the dissolution, merger, and sale of all assets of
the Trust upon the sole authorization of its Trustees, to the extent permitted
by the laws of The Commonwealth of Massachusetts and the 1940 Act.
ARTICLE IV. SALES MATERIAL AND INFORMATION
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 or LASC, or any sub-adviser, or LFII is named, at least fifteen
(15) days prior to its use. No such material shall be used if the Trust or its
designee reasonably objects to such use within fifteen (15) days after receipt
of such material.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or Prospectus for the Trust shares, as
such registration statement and Prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust or its designee
or by LFII, except with the permission of the Trust or LFII or the designee of
either.
4.3. The Trust or its designee shall furnish, or shall cause to be furnished,
to the Company or its designees, each piece of sales literature or other
promotional material in which the Company and/or its Separate Account(s), are
named at least fifteen ( 15) days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within
fifteen (15) days after receipt of such material.
10
4.4. The Trust and LFII shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, any Separate Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for such
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for such Separate
Account which are in the public domain or approved by the Company for
distribution to 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 statements, sales
literature and other promotional materials, applications for exemption, requests
for no-action letters, and all amendments to any of the above, that relate to
the Trust or its shares, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemption, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or any Separate Account, contemporaneously
with the filing of such document with the SEC.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers
11
or the public, including brochures, circulars, research reports, market letters,
form letters seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, SAIs,
shareholder reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust and LFII shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Series adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
LFII may make payments to the Company or to the underwriter for the Contracts if
and in amounts agreed to by LFII in writing and such payments will be made out
of fees payable to LFII by the Trust for this purpose. No such payments shall be
made directly by the Trust. Currently, no such plan pursuant to Rule 12b-1 or
payments are contemplated.
5.2. All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Trust, in accordance with
applicable state laws prior to their sale. The Trust shall bear the expenses of
registration and qualification of the Trust's shares, preparation and filing of
the Trust's prospectus and registration statement, proxy materials and reports,
setting the prospectus in type, setting in type and printing the proxy materials
and reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all taxes on the issuance or transfer
of the Trust's shares.
12
5.3. The Company shall bear the expenses of distributing the Trust's proxy
materials and reports to Owners.
ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1. The Trust will at all times invest money from the Contracts in such a
manner as to ensure that, insofar as such investment is required to assure such
treatment, 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 the Treasury Regulations thereunder relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Trust, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Trust so as to achieve compliance within the grace period afforded by Regulation
1.817-5.
6.2. The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Code and 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.
6.3. The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts under applicable provisions of
the Code and that they will make every effort to maintain such treatment and
that they will notify the Trust and LFII 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.
13
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the Owners of separate accounts
of the Participating Insurance Companies investing in the Trust. A material
irreconcilable conflict may arise for a variety of reasons, including: (a) an
action by any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretive letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Series are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance policy owners; or (f) a decision by an insurer to disregard the voting
instructions of Owners. The Trustees shall promptly inform the Company if they
determine that a material irreconcilable conflict exists and the implications
thereof.
7.2. The Company will report any potential or existing conflicts (including
the occurrence of any event specified in paragraph 7.1. which may give rise to
such a conflict) of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order, by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Trustees whenever
Owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Trustees, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as
14
determined by a majority of the disinterested Trustees), take whatever steps are
necessary to remedy or eliminate the material irreconcilable conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the separate
accounts of Participating Insurance Companies from the Trust or any Series and
reinvesting such assets in a different investment medium, including (but not
limited to) another Series of the Trust, or submitting the question whether such
segregation should be implemented to a vote of all affected 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 Owners the option of making such a
change; (2) establishing a new registered management investment company or
managed separate account; and (3) obtaining SEC approval.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard 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 Separate Account's
investment in the Trust and terminate this Agreement; provided, however that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented, and until the end of that six (6) month period LFII and
the Trust shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Trust.
7.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state
15
regulators, then the Company will withdraw the affected Separate Account's
investment in the Trust and terminate this Agreement within six (6) months after
the Trustees inform the Company in writing that they have determined that such
decision has created a material irreconcilable conflict; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of the foregoing six (6) month period,
LFII and Trust shall continue to accept and implement orders by the Company for
the purchase (and redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3. through 7.6. of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict, but in no event will
the Trust be required to establish a new funding medium for the Contracts. The
Company shall not be required by Section 7.3. to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote of a majority
of Owners materially adversely affected by the material irreconcilable conflict.
In the event that the Trustees determine that any proposed action does not
adequately remedy any material irreconcilable conflict, then the Company will
withdraw the affected Separate Account's investment in the Trust and terminate
this Agreement within six (6) months after the Trustees inform the Company in
writing of the foregoing determination, provided, however, that such withdrawal
and termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive
16
Order) or terms and conditions materially different from those contained in the
Shared Funding Exemptive Order, then (a) the Trust and/or the Company, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4., 3.5., 7.1., 7.2., 7.3., 7.4., and 7.5. of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.l.(a). The Company will indemnify and hold harmless the Trust and each
of its Trustees and Officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1.) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) 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 the Trust's shares or the Contracts and:
(i) 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 Contracts or
contained in the 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
17
the statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Trust
for use in the registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Trust shares; or
(ii) arise out of or are based upon statements or representations
(other than statements or representations contained in the
registration statement, Prospectus or sales literature of the
Trust not supplied by the Company, or persons under their control)
or wrongful conduct of one or both of the Company or persons under
their control, with respect to the sale or distribution of the
Contracts or Trust shares; or
(iii)arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, Prospectus,
or sales literature of the Trust or any amendment thereof or
supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement
or omission was made in reliance upon information furnished to the
Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company to provide
the services and furnish the materials contemplated by this
Agreement; or
18
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company, as limited by and in accordance
with the provisions of Section 8.1(b) and 8.1(c) hereof.
8. l.(b). The Company 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 or duties under this Agreement or to
the Trust, whichever is applicable.
8.l.(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 they may have
to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at 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
19
Company to such party of the election of the Company 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.
8.1.(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 or the Contracts or the operation of
the Trust.
8.2. INDEMNIFICATION BY THE TRUST
8.2.(a). The Trust will indemnify and hold harmless the Company, and
each of their directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust) 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 result
from the gross negligence, bad faith or willful misconduct of the Trustees or
any member thereof, are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
and other qualification requirements specified in Article VI of
this Agreement); or
20
(ii) 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; as limited by and in accordance with the
provisions of Sections 8.2.(b). and 8.2.(c). hereof.
8.2.(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Trust, LFII or each Separate Account, whichever is applicable.
8.2.(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 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
the Indemnified Parties, 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
21
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 Trustees
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.
8.2.(d). The Company and LFII agree promptly to notify the Trust of the
commencement of any litigation or proceedings against them or any of their
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of any Separate Account,
or the sale or acquisition of shares of the Trust.
8.3. INDEMNIFICATION BY LFII
8.3.(a). LFII agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of LFII) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Trust's shares by 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 or
22
prospectus or SAI 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 the
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 LFII or the Trust by or on behalf of
the Company for use in the Registration Statement or prospectus of
SAI for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the 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's prospectus, SAI or sales literature for
the Contracts not supplied by LFII or persons under its control)
or wrongful conduct of the Trust, or LFII or persons under their
control, with respect to the sale or distribution of the Contracts
or Trust shares; or
(iii)arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus,
SAI, or sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged omission
to state therein a materiel fact required to be stated therein or
necessary to make the statement or statement therein not
misleading, if such statement or omission was made
23
in reliance upon information furnished to the Company by or on
behalf of the Trust; or
(iv) arise as a result of any failure by LFII or the Trust to provide
the services and furnish the materials under the terms of this
Agreement (including a failure by the Trust, whether unintentional
or in good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the LFII in the Agreement
or arise out of or result from any other material breach of this
Agreement by LFII; as limited by and in accordance with the
provisions of Sections 8.3(b) and 8.3(c) hereof.
8.3.(b) LFII shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company or the Account, whichever is applicable.
8.3.(c) LFII 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 LFII 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 LFII of any such claim shall not
24
relieve LFII 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, LFII will be entitled to participate, at its own expense,
in the defense thereof. KSFC also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from LFII to such party of KFSC's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and LIFI 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.
8.3.(d) The Company agrees promptly to notify LFII of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issuance or sale of the Contracts or the operation of
each Separate Account.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Kansas;
provided, however, that if such laws or any of the provisions of this Agreement
conflict with applicable provisions of the 1940 Act, the latter shall control.
9.2. This Agreement shall be made subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
25
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 6 months advance written notice to
the other parties;
(b) at the option of the Company to the extent that shares of Series
are not reasonably available to meet the requirements of the
Contracts as determined by the Company; or
(c) at the option of the Trust in the event that formal administrative
proceedings are instituted against the Company or LFII by the
NASD, the SEC, the Insurance Commissioner of the domiciliary state
of the Company or any other regulatory body regarding the duties
of the Company under this Agreement or related to the sale of the
Contracts, with respect to the operation of a Separate Account, or
the purchase of the Trust shares; provided, however, that the
Trust determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material
adverse effect upon the ability of the Company to perform its
obligations under this Agreement or of LFII to perform its
obligations under its underwriting agreement with the Trust; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Trust or
LFII by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body; provided, however,
26
that the Company determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Trust or LFII to
perform its obligations under this Agreement; or
(e) with respect to a Separate Account, upon requisite authority to
substitute the shares of another investment company for shares of
the corresponding Series of the Trust in accordance with the terms
of the Contracts for which those Series shares had been selected
to serve as the underlying investment media. The Company will give
thirty (30) days' prior written notice to the Trust of the date of
any proposed action to replace the Trust shares; or
(f) at the option of the Company, in the event any of the Trust's
shares are not registered, issued or sold in accordance with
applicable federal and any state 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
(g) at the option of the Company, if the Trust 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
(h) at the option of the Company, if the Trust fails to meet the
diversification requirements specified in Article VI hereof; or
27
(i) at the option of either the Trust or LFII, if (1) the Trust or
LFII, respectively, shall determine, in their sole judgment
reasonably exercised in good faith, that the Company has suffered
a material adverse change in its business or financial condition
or is the subject of material adverse publicity and such material
adverse publicity will have a material adverse impact upon the
business and operations of either the Trust or LFII, (2) the Trust
or LFII shall notify the Company in writing of such determination
and its intent to terminate this Agreement, and (3) after
considering the actions taken by the Company and any other changes
in circumstances since the giving of such notice, such
determination of the Trust or LFII shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which
sixtieth (60th) day shall be the effective date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good
faith, that either the Trust or LFII has suffered a material
adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse
publicity will have a material adverse impact upon the business
and operations of the Company, (2) the Company shall notify the
Trust and LFII in writing of such determination and its intent to
terminate the Agreement, and
29
(3) after considering the actions taken by the Trust and/or LFII
and any other changes in circumstances since the giving of such
notice, such determination shall continue to apply on the sixtieth
(60th) day following the giving of such notice, which sixtieth
(60th) day shall be the effective date of termination.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10. l.(a). may be exercised for any
reason or for no reason.
10.3. NOTICE REQUIREMENT. No termination of this Agreement shall be effective
unless and until the party terminating this Agreement gives prior written notice
to all other parties to this Agreement of its intent to terminate which notice
shall set forth the basis for such termination. Furthermore,
(a) in the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1 (a), 10. l(i), or
10. l(j) of this Agreement, such prior written notice shall be
given in advance of the effective date of termination as required
by such provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1.(c). or 10.1.(d). of this Agreement, such prior
written notice shall be given at least ninety (90) days before the
effective date of termination.
10.4. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Trust and LFII 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
29
Agreement (hereinafter referred to as "Existing Products"). Specifically,
without limitation, the Owners of the Existing Products shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Products. The parties agree that this Section 10.4. shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.5. The Company shall not redeem Trust shares attributable to the Contracts
(as opposed to Trust shares attributable to the Company's assets held in a
Separate Account) except (i) as necessary to implement Owner-initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption") or (iii) as permitted by an order of the
SEC pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will
promptly furnish to the Trust and LFII the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Trust and LFII) to the
effect that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Owners from allocating payments to a
Series that was otherwise available under the Contracts without first giving the
Trustee or LFII ninety (90) days notice of their intention to do so.
30
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
c/o Colonial Investors Service Center, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
If to the Company:
Security Benefit Life Insurance Company
Attention: General Counsel
000 XX Xxxxxxxx
Xxxxxx, Xxxxxx 00000
If to LFII:
Liberty Financial Investments, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Secretary
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with Trust must look solely to the property of the
Trust for the enforcement of any claims against the Trust hereunder and
otherwise understand that neither the Trustees, officers, agents or shareholders
of the Trust have any personal liability for any obligations entered into by or
on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory authority,
each Party hereto shall treat as confidential the names and addresses of the
Owners and all information reasonably identified as confidential in writing be
any other party hereto and, except as permitted by this Agreement, shall not
disclose, disseminate or utilize such
31
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.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be effected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, the Internal Revenue Service and state insurance regulators) and shall
permit such authorities reasonable access to its books and records in connection
with any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.7. The Trust and LFII agree that to the extent any advisory or other fees
received by the Trust, LFII, CISC or LASC are determined to be unlawful in
appropriate legal or administrative proceedings, the Trust shall indemnify and
reimburse the Company for any out of pocket expenses and actual damages the
Company has incurred as a result of any such proceeding; provided, however, that
the provision of Section 8.2.(b). of this and 8.2.(c). shall apply to such
indemnification and reimbursement
32
obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Trust under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligation,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
[this space intentionally left blank]
33
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below:
SECURITY BENEFIT LIFE INSURANCE COMPANY
By its authorized officer,
By: ________________________________
Title: ________________________________
Date: ________________________________
LIBERTY VARIABLE INVESTMENT TRUST
By its authorized officer,
By: ________________________________
Title: ________________________________
Date: ________________________________
LIBERTY FINANCIAL INVESTMENTS, INC.
By its authorized officer,
By: ________________________________
Title: ________________________________
Date: ________________________________
34
SCHEDULE A
A-1
Parkstone Variable Annuity Account
35
