EXHIBIT 1.A(8)(a)(i)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
SECURITY LIFE OF DENVER,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
ING AMERICA EQUITIES, INC.
TABLE OF CONTENTS
SECTION 1. AVAILABLE FUNDS............................................... 1
1.1 Availability......................................................... 1
1.2 Addition, Deletion or Modification of Funds.......................... 2
1.3 No Sales to the General Public....................................... 2
SECTION 2. PROCESSING TRANSACTIONS....................................... 2
2.1 Timely Pricing and Orders............................................ 2
2.2 Timely Payments...................................................... 2
2.3 Applicable Price..................................................... 2
2.4 Dividends and Distributions.......................................... 3
2.5 Book Entry........................................................... 3
SECTION 3. COSTS AND EXPENSES............................................ 3
3.1 General.............................................................. 3
3.2 Registration......................................................... 3
3.3 Other (Non-Sales-Related)............................................ 3
3.4 Other (Sales-Related)................................................ 4
3.5 Parties To Cooperate................................................. 4
SECTION 4. LEGAL COMPLIANCE.............................................. 4
4.1 Tax Laws............................................................. 4
4.2 Insurance and Certain Other Laws..................................... 5
4.3 Securities Laws...................................................... 6
4.4 Notice of Certain Proceedings and Other Circumstances................ 6
4.5 SECURITY LIFE To Provide Documents: Information About AVIF........... 7
4.6 AVIF To Provide Documents; Information About SECURITY LIFE........... 7
SECTION 5. MIXED AND SHARED FUNDING...................................... 8
5.1 General.............................................................. 8
5.2 Disinterested Directors.............................................. 8
5.3 Monitoring for Material Irreconcilable Conflicts..................... 9
5.4 Conflict Remedies.................................................... 9
5.5 Notice to SECURITY LIFE.............................................. 10
5.6 Information Requested by Board of Directors.......................... 10
5.7 Compliance with SEC Rules............................................ 10
5.8 Other Requirements................................................... 10
SECTION 6. TERMINATION................................................... 11
6.1 Events of Termination................................................ 11
6.2 Notice Requirement for Termination................................... 11
6.3 Funds To Remain Available............................................ 12
6.4 Survival of Warranties and Indemnifications.......................... 12
6.5 Continuance of Agreement for Certain Purposes........................ 12
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION................... 12
SECTION 8. ASSIGNMENT.................................................... 12
SECTION 9. NOTICES....................................................... 12
i
SECTION 10. VOTING PROCEDURES............................................ 13
SECTION 11. FOREIGN TAX CREDITS.......................................... 13
SECTION 12. INDEMNIFICATION.............................................. 13
12.1 Of AVIF by SECURITY LIFE and ING.................................... 13
12.2 Of SECURITY LIFE and ING by AVIF.................................... 15
12.3 Effect of Notice.................................................... 16
12.4 Successors.......................................................... 16
SECTION 13. APPLICABLE LAW............................................... 16
SECTION 14. EXECUTION IN COUNTERPARTS.................................... 17
SECTION 15. SEVERABILITY................................................. 17
SECTION 16. RIGHTS CUMULATIVE............................................ 17
SECTION 17. HEADINGS..................................................... 17
SECTION 18. CONFIDENTIALITY.............................................. 17
SECTION 19. TRADEMARKS AND FUND NAMES.................................... 17
SECTION 20. PARTIES TO COOPERATE......................................... 18
ii
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 3rd day of December, 1997
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); Security Life of Denver, a Colorado life insurance company
("SECURITY LIFE"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and ING America
Equities, Inc., an affiliate of SECURITY LIFE and the principal underwriter of
the Contracts ("ING') (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC")
as an open-end management investment company under the Investment Company Act of
1940, as amended (the " 1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the " 1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the
Parties hereto may amend from time to time (each a "Fund'; reference herein to
"AVIF" includes reference to each Fund, to the extent the context requires)
available for purchase by the Accounts; and
WHEREAS, SECURITY LIFE will be the issuer of certain variable annuity contracts
and variable life insurance contracts ("Contracts") as set forth on Schedule A
hereto, as the Parties hereto may amend from time to time, which Contracts
(hereinafter collectively, the "Contracts"), if required by applicable law, will
be registered under the 1933 Act; and
WHEREAS, SECURITY LIFE will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, SECURITY LIFE will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
SECURITY LIFE intends to purchase Shares in one or more of the Funds on behalf
of the Accounts to fund the Contracts; and
WHEREAS, ING is a broker-dealer registered with the SEC under the Securities
Exchange Act of 1934 (" 1934 Act") and a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises contained
herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to SECURITY LIFE for purchase and
redemption at net asset value and with no sales charges, subject to the terms
and conditions of this Agreement. The Board of Directors of AVIF may refuse 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, in the sole discretion of the Directors
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, such action is deemed in the best interests of the
shareholders of such Fund.
1
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to provide
additional funding media for the Contracts, or to delete, combine, or modify
existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule
A, any applicable reference to a Fund, AVIF, or its Shares herein shall include
a reference to any such additional Fund. Schedule A, as amended from time to
time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will be
sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide SECURITY
LIFE with the net asset value per Share for each Fund by 5:30 p.m. Central Time
on each Business Day.
As used herein, "Business Day" shall mean any day on which (i) the New York
Stock Exchange is open for regular trading, (ii) AVIF calculates the Fund's net
asset value, and (iii) SECURITY LIFE is open for business.
(b) SECURITY LIFE will use the data provided by AVIF each Business Day pursuant
to paragraph (a) immediately above to calculate Account unit values and to
process transactions that receive that same Business Day's Account unit values.
SECURITY LIFE will perform such Account processing the same Business Day, and
will place corresponding orders to purchase or redeem Shares with AVIF by 9:00
a.m. Central Time the following Business Day; provided, however, that AVIF shall
provide additional time to SECURITY LIFE in the event that AVIF is unable to
meet the 5:30 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to SECURITY LIFE.
(c) With respect to payment of the purchase price by SECURITY LIFE and of
redemption proceeds by AVIF, SECURITY LIFE and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information (as
determined under SEC guidelines), SECURITY LIFE shall be entitled to an
adjustment to the number of Shares purchased or redeemed to reflect the correct
net asset value per Share. Any material error in the calculation or reporting of
net asset value per Share, dividend or capital gain information shall be
reported promptly upon discovery to SECURITY LIFE.
2.2 TIMELY PAYMENTS.
SECURITY LIFE will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by SECURITY LIFE by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable SECURITY LIFE to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that SECURITY LIFE receives prior to
the close of regular trading on the New York Stock Exchange on a Business Day
will be executed at the net asset values of the appropriate Funds next computed
after receipt by AVIF or its designated agent of the orders. For purposes of
this Section 2.3(a), SECURITY LIFE shall be the
2
designated agent of AVIF for receipt of orders relating to Contract transactions
on each Business Day and receipt by such designated agent shall constitute
receipt by AVIF; provided that AVIF receives notice of such orders by 9:00 a.m.
Central Time on the next following Business Day or suc h later time as computed
in accordance with Section 2. 1 (b) hereof.
(b) All other Share purchases and redemptions by SECURITY LIFE will be effected
at the net asset values of the appropriate Funds next computed after receipt by
AVIF or its designated agent of the order therefor, and such orders will be
irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written confirmation)
on or prior to the payment date to SECURITY LIFE of any income dividends or
capital gain distributions payable on the Shares of any Fund. SECURITY LIFE
hereby elects to reinvest all dividends and capital gains distributions in
additional Shares of the corresponding Fund at the ex-dividend date net asset
values until SECURITY LIFE otherwise notifies AVIF in writing, it being agreed
by the Parties that the ex-dividend date and the payment date with respect to
any dividend or distribution will be the same Business Day. SECURITY LIFE
reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to SECURITY LIFE. Shares ordered from AVIF will
be recorded in an appropriate title for SECURITY LIFE, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) AVIF will bear the cost of its registering as a management investment
company under the 1940 Act and registering its Shares under the 1933 Act, and
keeping such registrations current and effective; including, without limitation,
the preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
with respect to AVIF and its Shares and payment of all applicable registration
or filing fees with respect to any of the foregoing.
(b) SECURITY LIFE will bear the cost of registering, to the extent required,
each Account as a unit investment trust under the 1940 Act and registering units
of interest under the Contracts under the 1933 Act and keeping such
registrations current and effective; including, without limitation, the
preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) AVIF will bear, or arrange for others to bear, the costs of preparing,
filing with the SEC and setting for printing AVIF's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "AVIF Prospectus"), periodic reports to shareholders, AVIF proxy material
and other shareholder communications.
(b) SECURITY LIFE will bear the costs of preparing, filing with the SEC and
setting for printing each Account's prospectus, statement of additional
information and any amendments or supplements thereto (collectively, the
"Account Prospectus"), any periodic reports to Contract owners, annuitants,
insureds or participants (as appropriate) under the Contracts (collectively,
"Participants"), voting instruction solicitation material, and other Participant
communications.
(c) SECURITY LIFE will print in quantity and deliver to existing Participants
the documents described in Section 3.3(b) above
3
and the prospectus provided by AVIF in camera ready form. AVIF will print the
AVIF statement of additional information, proxy materials relating to AVIF and
periodic reports of AVIF.
3.4 OTHER (SALES-RELATED).
SECURITY LIFE will bear the expenses of distribution. These expenses would
include by way of illustration, but are not limited to, the costs of
distributing to Participants the following documents, whether they relate to the
Account or AVIF: prospectuses, statements of additional information, proxy
materials and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and advertising relating
to the Funds, as well as filing such materials with, and obtaining approval
from, the SEC, the NASD, any state insurance regulatory authority, and any other
appropriate regulatory authority, to the extent required.
3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging to
print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and represents that it will use its best
efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF
will notify SECURITY LIFE immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to maintain
each Fund's compliance with the diversification requirements set forth in
Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the
Code. AVIF will notify SECURITY LIFE immediately upon having a reasonable basis
for believing that a Fund has ceased to so comply or that a Fund might not so
comply in the future. In the event of a breach of this Section 4. 1 (b) by AVIF,
it will take all reasonable steps to adequately diversify the Fund so as to
achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) SECURITY LIFE agrees that if the Internal Revenue Service ("IRS") asserts
in writing in connection with any governmental audit or review of SECURITY LIFE
or, to SECURITY LIFE's knowledge, of any Participant, that any Fund has failed
to comply with the diversification requirements of Section 817(h) of the Code or
SECURITY LIFE otherwise becomes aware of any facts that could give rise to any
claim against AVIF or its affiliates as a result of such a failure or alleged
failure:
i. SECURITY LIFE shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of Section
18 as to any Participant);
ii. SECURITY LIFE shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
iii. SECURITY LIFE shall use its best efforts to minimize any liability of
AVIF or its affiliates resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury Regulations Section
1.8175(a)(2), to the Commissioner of the IRS that such failure was
inadvertent;
iv. SECURITY LIFE shall permit AVIF, its affiliates and their legal and
accounting advisors to participate in any conferences, settlement
discussions or other administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS, any Participant or
any other claimant regarding any claims that could give rise to
liability to AVIF or its affiliates as a result of such a failure or
alleged failure; provided, however, that SECURITY LIFE will retain
control of the conduct of such conferences discussions, proceedings,
contests or appeals;
4
v. any written materials to be submitted by SECURITY LIFE to the IRS,
any Participant or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation, any
such materials to be submitted to the IRS pursuant to Treasury
Regulations Section 1.817-5(a)(2)), (a) shall be provided by SECURITY
LIFE to AVIF (together with any supporting information or analysis);
subject to the confidentiality provisions of Section 18, at least ten
(10) business days or such shorter period to which the Parties hereto
agree prior to the day on which such proposed materials are to be
submitted, and (b) shall not be submitted by SECURITY LIFE to any
such person without the express written consent of AVIF which shall
not be unreasonably withheld;
vi. SECURITY LIFE shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF shall
reasonably request (including, without limitation, by permitting AVIF
and its accounting and legal advisors to review the relevant books
and records of SECURITY LIFE) in order to facilitate review by AVIF
or its advisors of any written submissions provided to it pursuant to
the preceding clause or its assessment of the validity or amount of
any claim against its arising from such a failure or alleged failure;
vii. SECURITY LIFE shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against AVIF or its
affiliates (a) compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable administrative or
judicial appeals, without the express written consent of AVIF or its
affiliates, which shall not be unreasonably withheld, provided that
SECURITY LIFE shall not be required, after exhausting all
administrative penalties, to appeal any adverse judicial decision
unless AVIF or its affiliates shall have provided an opinion of
independent counsel to the effect that a reasonable basis exists for
taking such appeal; and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and
viii. AVIF and its affiliates shall have no liability as a result of such
failure or alleged failure if SECURITY LIFE fails to comply with any
of the foregoing clauses (i) through (vii), and such failure could be
shown to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to any
compromise or settlement of any claim or liability hereunder, SECURITY LIFE may,
in its discretion, authorize AVIF or its affiliates to act in the name of
SECURITY LIFE in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall SECURITY LIFE have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
" affiliates " shall have the same meaning as " affiliated person " as defined
in Section 2(a)(3) of the 1940 Act.
(d) SECURITY LIFE represents and warrants that the Contracts currently are and
will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; SECURITY LIFE will notify AVIF immediately upon having
a reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(e) SECURITY LIFE represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817 of the Code and the regulations
thereunder. SECURITY LIFE will use its best efforts to continue to meet such
definitional requirements, and it will notify AVIF immediately upon having a
reasonable basis for believing that such requirements have ceased to be met or
that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by SECURITY LIFE, including, the furnishing of information not otherwise
available to SECURITY LIFE which is required by state insurance law to enable
SECURITY LIFE to obtain the authority needed to issue the Contracts in any
applicable state.
(b) SECURITY LIFE represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of Colorado and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account
5
as a segregated asset account under Section 10-7-402 of the Colorado Insurance
Law and the regulations thereunder, and (iii) the Contracts comply in all
material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) SECURITY LIFE represents and warrants that (i) interests in each Account
pursuant to the Contracts are or will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Colorado law, (iii) each Account is and will remain registered under the 1940
Act, to the extent required by the 1940 Act, (iv) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) SECURITY LIFE will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and q@ its Shares for sale in accordance
with the laws of any state or other jurisdiction if and to the extent reasonably
deemed advisable by AVIF.
(d) AVIF 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
reserves the right to make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes
to have its Board of Directors, a majority of whom are not "interested' persons
of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers, employees,
investment advisers, and other individuals/entities having access to the funds
and/or securities of the Fund are and continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-l of
the 1940 Act or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is issued by a
reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify SECURITY LIFE of (i) the issuance by any court
or regulatory body of any stop order, cease and desist order, or other similar
order with respect to AVIF's registration statement under the 1933 Act or AVIF
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or AVIF Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of AVIF's Shares, or (iv) any
other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by SECURITY LIFE. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof
6
at the earliest possible time.
(b) SECURITY LIFE will immediately notify AVIF of (i) the issuance by any court
or regulatory body of any stop order, cease and desist order, or other similar
order with respect to each Account's registration statement under the 1933 Act
relating to the Contracts or each Account Prospectus, (ii) any request by the
SEC for any amendment to such registration statement or Account Prospectus that
may affect the offering of Shares of AVIF, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. SECURITY LIFE will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 SECURITY LIFE TO PROVIDE DOCUMENTS: INFORMATION ABOUT AVIF.
(a) SECURITY LIFE will provide to AVIF or its designated agent at least one (1)
complete copy of all SEC registration statements, Account Prospectuses, reports,
any preliminary and final voting instruction solicitation material, applications
for exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to each Account or the Contracts, contemporaneously with the
filing of such document with the SEC or other regulatory authorities.
(b) SECURITY LIFE will provide to AVIF or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which AVIF or any of its affiliates is named, at least five (5) Business Days
prior to its use or such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if AVIF or its designated agent
objects to such use within five (5) Business Days after receipt of such material
or such shorter period as the Parties hereto may, from time to time, agree upon.
AVIF hereby designates A I M as the entity to receive such sales literature,
until such time as AVIF appoints another designated agent by giving notice to
SECURITY LIFE in the manner required by Section 9 hereof.
(c) Neither SECURITY LIFE nor any of its affiliates, will give any information
or make any representations or statements on behalf of or concerning AVIF or its
affiliates in connection with the sale of the Contracts other than (i) the
information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) SECURITY LIFE shall adopt and implement procedures reasonably designed to
ensure that information concerning AVIF and its affiliates that is intended for
use only by brokers or agents selling the Contracts (i.e., information that is
not intended for distribution to Participants) ("broker only materials") is so
used, and neither AVIF nor any of its affiliates shall be liable for any losses,
damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, 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, (e.g., on-line
networks such as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 0000 Xxx.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT SECURITY LIFE.
(a) AVIF will provide to SECURITY LIFE at least one (1) complete copy of all
SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
7
(b) AVIF will provide to SECURITY LIFE camera ready or computer diskette copies
of all AVIF prospectuses and printed copies, in an amount specified by SECURITY
LIFE, of AVIF statements of additional information, proxy materials, periodic
reports to shareholders and other materials required by law to be sent to
Participants who have allocated any Contract value to a Fund. AVIF will provide
such copies to SECURITY LIFE in a timely manner so as to enable SECURITY LIFE,
as the case may be, to print and distribute such materials within the time
required by law to be furnished to Participants.
(c) AVIF will provide to SECURITY LIFE or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which SECURITY LIFE, or any of its respective affiliates is named, or that
refers to the Contracts, at least five (5) Business Days prior to its use or
such shorter period as the Parties hereto may, from time to time, agree upon. No
such material shall be used if SECURITY LIFE or its designated agent objects to
such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon.
SECURITY LIFE shall receive all such sales literature until such time as it
appoints a designated agent by giving notice to AVIF in the manner required by
Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or make
any representations or statements on behalf of or concerning SECURITY LIFE, each
Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by SECURITY LIFE for distribution; or (iii) in sales literature or
other promotional material approved by SECURITY LIFE or its affiliates, except
with the express written permission of SECURITY LIFE.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning SECURITY
LIFE, and its respective affiliates that is intended for use only by brokers or
agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
SECURITY LIFE, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, 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, (e.g., on-line
networks such as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain provisions of the
1940 Act and rules thereunder so that AVIF may be available for investment by
certain other entities, including, without limitation, separate accounts funding
variable annuity contracts or variable life insurance contracts, separate
accounts of insurance companies unaffiliated with SECURITY LIFE, and trustees of
qualified pension and retirement plans (collectively, "Mixed and Shared
Funding"). The Parties recognize that the SEC has imposed terms and conditions
for such orders that are substantially identical to many of the provisions of
this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to such an
exemptive order granted to AVIF. AVIF hereby notifies SECURITY LIFE that, in
the event that AVIF implements Mixed and Shared Funding, it may be appropriate
to include in the prospectus pursuant to which a Contract is offered disclosure
regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors
a majority of whom (the "Disinterested Directors") are not
8
interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940
Act and the Rules thereunder and as modified by any applicable orders of the
SEC, except that if this condition is not met by reason of the death,
disqualification, or bona fide resignation of any director, then the operation
of this condition shall be suspended (a) for a period of forty-five (45) days if
the vacancy or vacancies may be filled by the Board; (b) for a period of sixty
(60) days if a vote of shareholders is required to fill the vacancy or
vacancies; or (c) for such longer period as the SEC may prescribe by order upon
application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of any
material irreconcilable conflict between the interests of the Participants in
all separate accounts of life insurance companies utilizing AVIF ("Participating
Insurance Companies"), including each Account, and participants in all qualified
retirement and pension plans investing in AVIF ("Participating Plans").
SECURITY LIFE agrees to inform the Board of Directors of AVIF of the existence
of or any potential for any such material irreconcilable conflict of which it is
aware. The concept of a "material irreconcilable conflict" is not defined by
the 1940 Act or the rules thereunder, but the Parties recognize that such a
conflict may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract and
variable life insurance contract Participants or by Participants of different
Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting
instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions of
Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders of
the type referred to in Section 5.1 hereof, SECURITY LIFE will assist the Board
of Directors in carrying out its responsibilities by providing the Board of
Directors with all information reasonably necessary for the Board of Directors
to consider any issue raised, including information as to a decision by SECURITY
LIFE to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the
Board of Directors or a majority of the Disinterested Directors that a material
irreconcilable conflict exists, SECURITY LIFE will, if it is a Participating
Insurance Company for which a material irreconcilable conflict is relevant, at
its own expense and to the extent reasonably practicable (as determined by a
majority of the Disinterested Directors), take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict, which steps may
include, but are not limited to:
i. withdrawing the assets allocable to some or all of the Accounts from
AVIF or any Fund and reinvesting such assets in a different investment
medium, including another Fund of AVIF, or submitting the question
whether such segregation should be implemented to a vote of all
affected Participants and, as appropriate, segregating the assets of
any particular group (e.g., annuity Participants, life insurance
Participants or all Participants) that votes in favor of such
segregation, or offering to the affected Participants the option of
making such a change; and
ii. establishing a new registered investment company of the type defined
as a "management company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of SECURITY LIFE's
decision to disregard Participant voting instructions
9
and that decision represents a minority position or would preclude a majority
vote, SECURITY LIFE may be required, at AVIF's election, to withdraw each
Account's investment in AVIF or any Fund. No charge or penalty will be imposed
as a result of such withdrawal. Any such withdrawal must take place within six
(6) months after AVIF gives notice to SECURITY LIFE that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by SECURITY LIFE for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to SECURITY LIFE conflicts with the
majority of other state regulators, then SECURITY LIFE will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs SECURITY LIFE that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by SECURITY LIFE for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) SECURITY LIFE agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
SECURITY LIFE will not be required by the terms hereof to establish a new
funding medium for any Contracts if an offer to do so has been declined by vote
of a majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 NOTICE TO SECURITY LIFE.
AVIF will promptly make known in writing to SECURITY LIFE the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
SECURITY LIFE and AVIF (or its investment adviser) will at least annually submit
to the Board of Directors of AVIF such reports, materials or data as the Board
of Directors may reasonably request so that the Board of Directors may fully
carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-
2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect
to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and Participating
Plan enter into an agreement with AVIF that contains in substance the same
provisions as are set forth in Sections 4.l(b), 4.l(d), 4.3(a), 4.4(b), 4.5(a),
5, and 10 of this Agreement.
10
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the Fund,
upon six(6) months advance written notice to the other parties, or, if later,
upon receipt of any required exemptive relief from the SEC, unless otherwise
agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
SECURITY LIFE or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding SECURITY LIFE's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of SECURITY LIFE upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, SECURITY
LIFE reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on SECURITY LIFE, or the Subaccount corresponding to the
Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are not
registered and, in all material respects, issued and sold in accordance with any
applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by SECURITY LIFE; or
(e) upon termination of the corresponding Subaccount's investment in the Fund
pursuant to Section 5 hereof; or
(f) at the option of SECURITY LIFE if the Fund ceases to qualify as a RIC under
Subchapter M of the Code or under successor or similar provisions, or if
SECURITY LIFE reasonably believes that the Fund may fail to so qualify; or
(g) at the option of SECURITY LIFE if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if SECURITY LIFE
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by SECURITY LIFE cease to
qualify as annuity contracts or life insurance contracts under the Code (other
than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M
of the Code) or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the Party
terminating this Agreement gives prior written notice to the other Party to this
Agreement of its intent to terminate, and such notice shall set forth the basis
for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of Sections
6. l (a) or 6. l(e) hereof, such prior written notice shall be given at least
six (6) months in advance of the effective date of termination unless a shorter
time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of Sections
6. 1 (b) or 6. 1 (c) hereof, such prior written notice shall be given at least
ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
11
(c) in the event that any termination is based upon the provisions of Sections
6. 1 (d), 6.1(f), 6.1(g),6.1(h) or 6.1(i) hereof, such prior written notice
shall be given as soon as possible within twenty-four (24) hours after the
terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the option of
SECURITY LIFE, continue to make available additional shares of the Fund 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 will be permitted to reallocate investments in the Fund (as
in effect on such date), redeem investments in the Fund and/or invest in the
Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this -Section 6.3 will not apply to any
terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6. 1 (b), 6. 1 (c), 6. 1 (d), 6. 1 (f), 6. 1 (g), 6. 1 (h) or 6. 1 (i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date
as of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that SECURITY LIFE may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6. 1 (d), 6. 1 (f), 6. 1 (g), 6.
1 (h) or 6. 1 (i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6. 1 (a), the termination date specified in the notice of termination. Such
steps may include combining the affected Account with another Account,
substituting other mutual fund shares for those of the affected Fund, or
otherwise terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written consent
of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will be
given by means mutually acceptable to the Parties concerned. Each other notice
or communication required or permitted by this Agreement will be given to the
following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
12
AIM VARIABLE INSURANCE FUNDS, INC.
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
SECURITY LIFE OF DENVER
0000 Xxxxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx,
Assistant General Counsel
ING AMERICA EQUITIES, INC.
0000 Xxxxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx,
Assistant General Counsel
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
SECURITY LIFE will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. SECURITY LIFE will vote
Shares in accordance with timely instructions received from Participants.
SECURITY LIFE will vote Shares that are (a) not attributable to Participants to
whom pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants.
Neither SECURITY LIFE nor any of its affiliates will in any way recommend action
in connection with or oppose or interfere with the solicitation of proxies for
the Shares held for such Participants. SECURITY LIFE reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
SECURITY LIFE shall be responsible for assuring that each of its Accounts
holding Shares calculates voting privileges in a manner consistent with that of
other Participating Insurance Companies or in the manner required by the Mixed
and Shared Funding exemptive order obtained by AVIF. AVIF will notify SECURITY
LIFE of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, AVIF will act in accordance with the SEC's interpretation of
the requirements of Section 16(a) with respect to periodic elections of
directors and with whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with SECURITY LIFE concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
13
SECTION 12. INDEMNIFICATION
12.1 OF AVIF BY SECURITY LIFE AND ING.
(a) Except to the extent provided in Sections 12. 1 (b) and 12. 1 (c), below,
SECURITY LIFE and ING agree to indemnify and hold harmless AVIF, its affiliates,
and each person, if any, who controls AVIF or its affiliates within the meaning
of Section 15 of the 1933 Act and each of their respective directors and
officers, (collectively, the "Indemnified Parties" for purposes of this Section
12. 1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of SECURITY LIFE and ING) or
actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages, liabilities or
actions:
i. arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or
sales literature or advertising 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 SECURITY LIFE or
ING by or on behalf of AVIF for use in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or
sales literature or advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
ii. arise out of or as a result of any other statements or representations
(other than statements or representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of SECURITY
LIFE, ING or their respective affiliates and on which such persons
have reasonably relied) or the negligent, illegal or fraudulent
conduct of SECURITY LIFE, ING or their respective affiliates or
persons under their control (including, without limitation, their
employees and "Associated Persons," as that term is defined in
paragraph (m) of Article I of the NASD's By-Laws), in connection with
the sale or distribution of the Contracts or Shares; or
iii. arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, 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
AVIF or its affiliates by or on behalf of SECURITY LIFE, ING or their
respective affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, sales literature or advertising of AVIF,
or any amendment or supplement to any of the foregoing; or
iv. arise as a result of any failure by SECURITY LIFE or ING to perform
the obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any material
breach of any representation and/or warranty made by SECURITY LIFE or
ING in this Agreement or arise out of or result from any other
material breach of this Agreement by SECURITY LIFE or ING; or
v. arise as a result of failure by the Contracts issued by SECURITY LIFE
to qualify as annuity contracts or life insurance contracts under the
Code, otherwise than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither SECURITY LIFE nor ING shall be liable under this Section 12.1 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of that Indemnified Party's reckless disregard of
obligations or duties (i) under this Agreement, or (ii) to AVIF.
(c) Neither SECURITY LIFE nor ING shall be liable under this Section 12.1 with
respect to any action against an Indemnified Party unless AVIF shall have
notified SECURITY LIFE and ING in writing within a reasonable time after the
summons or other first legal
14
process giving information of the nature of the action 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 SECURITY
LIFE and ING of any such action shall not relieve SECURITY LIFE and ING from any
liability which they may have to the Indemnified Party against whom such action
is brought otherwise than on account of this Section 12. 1. Except as otherwise
provided herein, in case any such action is brought against an Indemnified
Party, SECURITY LIFE and ING shall be entitled to participate, at their own
expense, in the defense of such action and also shall be entitled to assume the
defense thereof, with counsel approved by the Indemnified Party named in the
action, which approval shall not be unreasonably withheld. After notice from
SECURITY LIFE or ING to such Indemnified Party of SECURITY LIFE's or ING's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with SECURITY LIFE and ING and shall bear the fees and expenses of any
additional counsel retained by it, and neither SECURITY LIFE nor ING will be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.2 OF SECURITY LIFE AND ING BY AVIF.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF agrees to indemnify and hold harmless SECURITY LIFE, ING, their
respective affiliates, and each person, if any, who controls SECURITY LIFE, ING
or their respective affiliates within the meaning of Section 15 of the 1933 Act
and each of their respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of AVIF ) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law, or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
i. arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus or sales literature or
advertising of AVIF (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 AVIF or its affiliates by or
on behalf of SECURITY LIFE, ING or their respective affiliates for use
in AVIF's 1933 Act registration statement, AVIF Prospectus, or in
sales literature or advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
ii. arise out of or as a result of any other statements or representations
(other than statements or representations contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any amendment or
supplement to any of the foregoing, not supplied for use therein by or
on behalf of AVIF or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent conduct of
AVIF or its affiliates or persons under its control (including,
without limitation, their employees and "Associated Persons" as that
Tenn is defined in Section (n) of Article 1 of the NASD By-Laws), in
connection with the sale or distribution of AVIF Shares; or
iii. arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or supplement to
any of the foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with information
furnished to SECURITY LIFE, ING or their respective affiliates by or
on behalf of AVIF for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or supplement to any of the
foregoing; or
iv. arise as a result of any failure by AVIF to perform the obligations,
provide the services and furnish the materials required of it under
the terms of this Agreement, or any material breach of any
representation and/or warranty made by AVIF in this Agreement or arise
out of or result from any other material breach of this Agreement by
AVIF.
15
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF agrees to indemnify and hold harmless the Indemnified Parties from
and against any and all losses, claims, damages, liabilities (including amounts
paid in settlement thereof with, the written consent of AVIF) or actions in
respect thereof (including, to the extent reasonable, legal and other expenses)
to which the Indemnified Parties may become subject directly or indirectly under
any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or actions directly or indirectly result from or arise out
of the failure of any Fund to operate as a regulated investment company in
compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii)
Section 817(h) of the Code and regulations thereunder, including, without
limitation, any income taxes and related penalties, rescission charges,
liability under state law to Participants asserting liability against SECURITY
LIFE pursuant to the Contracts, the costs of any ruling and closing agreement or
other settlement with the IRS, and the cost of any substitution by SECURITY LIFE
of Shares of another investment company or portfolio for those of any adversely
affected Fund as a funding medium for each Account that SECURITY LIFE reasonably
deems necessary or appropriate as a result of the noncompliance.
(c) AVIF shall not be liable under this Section 12.2 with respect to any
losses, claims, damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its obligations and
duties (i) under this Agreement, or (ii) to SECURITY LIFE, ING, each Account or
Participants.
(d) AVIF shall not be liable under this Section 12.2 with respect to any action
against an Indemnified Party unless the Indemnified Party shall have notified
AVIF in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the action 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 AVIF of
any such action shall not relieve AVIF from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this Section 12.2. Except as otherwise provided herein, in case any
such action is brought against an Indemnified Party, AVIF will be entitled to
participate, at its own expense, in the defense of such action and also shall be
entitled to assume the defense thereof (which shall include, without limitation,
the conduct of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from AVIF to such Indemnified Party of AVIF's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and shall bear the
fees and expenses of any additional counsel retained by it, and AVIF will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
(e) In no event shall AVIF be liable under the indemnification provisions
contained in this Agreement to any individual or entity, including, without
limitation, SECURITY LIFE, ING or any other Participating Insurance Company or
any Participant, with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any representation,
warranty, and/or covenant made by SECURITY LIFE or ING hereunder or by any
Participating Insurance Company under an agreement containing substantially
similar representations, warranties and covenants; (ii) the failure by SECURITY
LIFE or any Participating Insurance Company to maintain its segregated asset
account (which invests in any Fund) as a legally and validly established
segregated asset account under applicable state law and as a duly registered
unit investment trust under the provisions of the 1940 Act (unless exempt
therefrom); or (iii) the failure by SECURITY LIFE or any Participating Insurance
Company to maintain its variable annuity or life insurance contracts (with
respect to which any Fund serves as an underlying funding vehicle) as annuity
contracts or life insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the Indemnifying Party to an Indemnified Party referred to
in Sections 12. l(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying@g Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
16
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted under and
in accordance with Maryland law, without regard for that state's principles of
conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts, each
of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be affected
thereby.
SECTION 16. RIGHTS CUMULATIVE
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, that the Parties are entitled to under federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of
reference only and shall not limit or define the meaning of the provisions of
this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of SECURITY LIFE or any
of its affiliates (collectively, the "SECURITY LIFE Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
SECURITY LIFE Protected Parties or any of their employees or agents in
connection with SECURITY LIFE's performance of its duties under this Agreement
are the valuable property of the SECURITY LIFE Protected Parties. AVIF agrees
that if it comes into possession of any list or compilation of the identities of
or other information about the SECURITY LIFE Protected Parties' customers, or
any other information or property of the SECURITY LIFE Protected Parties, other
than such information as may be independently developed or compiled by AVIF from
information supplied to it by the SECURITY LIFE Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with SECURITY LIFE's prior
written consent; or (b) as required by law or judicial process. SECURITY LIFE
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. SECURITY LIFE agrees that if it comes into possession
of any list or compilation of the identities of or other information about the
AVIF Protected Parties' customers or any other information or property of the
AVIF Protected Parties, other than such information as may be independently
developed or compiled by SECURITY LIFE from information supplied to it by the
AVIF Protected Parties' customers who also maintain accounts directly with
SECURITY LIFE, SECURITY LIFE will hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (a) with AVIF's prior written consent; or
(b) as required by law or judicial process. Each party acknowledges that any
breach of the agreements in this Section 18 would result in immediate and
irreparable harm to the other parties for which there would be no adequate
remedy at
17
law and agree that in the event of such a breach, the other parties will be
entitled to equitable relief by way of temporary and permanent injunctions, as
well as such other relief as any court of competent jurisdiction deems
appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF,
owns all right, title and interest in and to the name, trademark and service
xxxx "AIM" and such other tradenames, trademarks and service marks as may be set
forth on Schedule B, as amended from time to time by written notice from AIM to
SECURITY LIFE (the "AIM licensed marks" or the "licensor's licensed marks") and
is authorized to use and to license other persons to use such marks. SECURITY
LIFE and its affiliates are hereby granted a non-exclusive license to use the
AIM licensed marks in connection with SECURITY LIFE's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to SECURITY LIFE and its affiliates ( the "licensee")
shall terminate automatically upon termination of this Agreement. Upon automatic
termination, the licensee shall cease to use the licensor's licensed marks,
except that SECURITY LIFE shall have the right to continue to service any
outstanding Contracts bearing any of the AIM licensed marks. Upon AIM's elective
termination of this license, SECURITY LIFE and its affiliates shall immediately
cease to issue any new annuity or life insurance contracts bearing any of the
AIM licensed marks and shall likewise cease any activity which suggests that it
has any right under any of the AIM licensed marks or that it has any association
with AIM, except that SECURITY LIFE shall have the right to continue to service
outstanding Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the licensor for
the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that a
licensee submit samples of any materials bearing any of the licensor's licensed
marks which were previously approved by the licensor but, due to changed
circumstances, the licensor may wish to reconsider. If, on reconsideration, or
on initial review, respectively, any such samples fail to meet with the written
approval of the licensor, then the licensee shall immediately cease distributing
such disapproved materials. The licensor's approval shall not be unreasonably
withheld, and the licensor, when requesting reconsideration of a prior approval,
shall assume the reasonable expenses of withdrawing and replacing such
disapproved materials. The licensee shall obtain the prior written approval of
the licensor for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the best
of the knowledge of the licensee, the licensor's licensed marks are valid and
enforceable trademarks and/or service marks and that such licensee does not own
the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
___________________________
18
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ By: /s/
------------------------------ ----------------------------
Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Assistant Secretary Title: President
SECURITY LIFE OF DENVER, on
behalf of itself and its
separate accounts
Attest: /s/ By: /s/
------------------------------ ---------------------------
Name: Xxxx X. Xxxxxxxx Name: Xxxxx X. Hard
Title: Assistant General Counsel Title: Senior Vice President
ING AMERICA EQUITIES, INC.
Attest: /s/ By: /s/
------------------------------ ---------------------------
Name: X. Xxxxxxxx Name: Xxxxx X. Hard
Title: Assistant General Counsel Title: President
19
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
-----------------------------------
. AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
-------------------------------------
. SECURITY LIFE OF DENVER
Separate Account Ll
Separate Account Al
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
-----------------------------------------
. STRATEGIC ADVANTAGE VARIABLE UNIVERSAL LIFE
. STRATEGIC ADVANTAGE II VARIABLE UNIVERSAL LIFE
. FIRST LINE VARIABLE UNIVERSAL LIFE
. FIRST LINE II VARIABLE UNIVERSAL LIFE
. THE EXCHEQUER VARIABLE ANNUITY
20
SCHEDULE B
. AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
. AIM and Design
21
