PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between XXXXXXX
VARIABLE LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust
created under a Declaration of Trust dated March 15, 1985, as amended, with a
principal place of business in Boston, Massachusetts and SECURITY FIRST LIFE
INSURANCE COMPANY, INC., Delaware corporation (the "Company"), with a principal
place of business in Los Angeles, California on behalf of Security First Life
Separate Account A, a separate account of the Company, and any other separate
account of the Company as designated by the Company from time to time, upon
written notice to the Fund in accordance with Section 10 herein (each, an
"Account").
WHEREAS, the Fund acts as the investment vehicle for the separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
substantially identical to this Agreement ("Participating Insurance Companies")
and their affiliated insurance companies; and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares of beneficial interest ("Shares"), and additional series of Shares
may be established, each designated a "Portfolio" and representing the interest
in a particular managed portfolio of securities; and
WHEREAS, it is in the best interest of Participating Insurance Companies to
make capital contributions if required so that the annual expenses of each
Portfolio of the Fund in which a
Participating Insurance Company is a shareholder will not exceed a fixed
percentage of the Portfolio's average annual net assets; and
WHEREAS, the Parties desire to evidence their agreement as to certain other
matters,
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
1. Additional Definitions.
For the purposes of this Agreement, the following definitions shall apply:
(a) The "expenses of a Portfolio" for any fiscal year shall mean the
expenses for such fiscal year as shown in the Statement of Operations (or
similar report) certified by the Fund's independent public accountants;
(b) A "Portfolio's average daily net assets" for each fiscal year shall
mean the sum of the net asset values determined throughout the year for the
purpose of determining net asset value per Share, divided by the number of
such determinations during such year;
(c) The Company's "Required Contribution" on behalf of the Account in
respect of a Portfolio for any fiscal year shall mean an amount equal to the
expenses of that Portfolio for such year minus the below-indicated
percentage of that Portfolio's average daily net assets for the year:
International Portfolio.... Each other Portfolio..... 1.50%
0.75%
multiplied by a fraction the denominator of which is the average daily net
assets of that Portfolio and the numerator of which is
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the average daily net asset value of the Shares of that Portfolio owned by
the Account (referred to herein as a "Participating Shareholder"). The
Company's Required Contribution in respect of a Portfolio shall be pro-rated
based on the number of business days on which this Agreement is in effect
for periods of less than a fiscal year.
(d) The "average daily net asset value of the Shares of the Portfolio"
owned by the Account for any fiscal year of the Fund shall mean the greater
of (i) $500,000 or (ii) the sum of the aggregate net asset values of the
Shares so owned determined during the fiscal year, as of each determination
of the net asset value per Share, divided by the total number of
determinations of net asset value during such year.
(e) "Shares" means shares of beneficial interest, without par value, of
any Portfolio, now or hereafter created, of the Fund.
2. Capital Contribution.
The Company on behalf of the Account shall, within sixty days after the end
of each fiscal year of the Fund, make a capital contribution to the Fund in
respect of each Portfolio equal to the Required Contribution for that Portfolio
for such year; provided, however, that in the event that both clauses (i) and
(ii) of paragraph (d) of Section 1 of this Agreement or similar agreements are
applicable to different Participating Insurance Companies during the same
fiscal year, there shall be a proportionate reduction of the Required
Contribution of each Participating Insurance Company to which said clause
(ii) is applicable so that the total of all required capital contributions to
the Fund on
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behalf of any Portfolio is not greater than the excess of the expenses of that
Portfolio for that fiscal year less the percentage of that Portfolio's total
expenses set forth in paragraph (c) of Section 1 of this Agreement for such
fiscal year.
3. Duty of Fund to Sell.
The Fund shall make its Shares available for purchase at the applicable net
asset value per Share by Participating Insurance Companies and their affiliates
and separate accounts on those days on which the Fund calculates its net asset
value pursuant to rules of the Securities and Exchange Commission; provided,
however, that the Trustees of the Fund may refuse to sell Shares of any
Portfolio to any person, or suspend or terminate the offering of Shares of any
Portfolio, if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees, necessary in
the best interest of the shareholders of any Portfolio.
4. Requirement to Execute Participation Agreement; Requests.
Each Participating Insurance Company shall, prior to purchasing Shares in
the Fund, execute and deliver a participation agreement in a form substantially
identical to this Agreement.
The Fund shall make available, upon written request from the Participating
Insurance Company given in accordance with Paragraph 10, to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 8 (i) a list of all other Participating
Insurance Companies, and (ii) a copy of the Agreement as executed by any other
Participating Insurance Company.
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The Fund shall also make available upon request to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 8, the net asset value of any Portfolio
of the Fund as of any date upon which the Fund calculates the net asset value
of its Portfolios for the purpose of purchase and redemption of Shares.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Fund and each
of its Trustees and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the Securities Act of 1933 (the "Act")
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), arising out of the acquisition of any
Shares by any person, to which the Fund or such Trustees, officers or
controlling person may become subject under the Act, under any other
statute, at common law or otherwise, which (i) may be based upon any
wrongful act by the Company, any of its employees or representatives, any
affiliate of or any person acting on behalf of the Company or a principal
underwriter of its insurance products, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering Shares 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 Fund by the Company, or
(iii) may be based on any untrue statement or alleged untrue statement of a
material fact contained in a
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registration statement or prospectus covering insurance products sold by the
Company or any insurance company which is an affiliate thereof, or any
amendments or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, unless such
statement or omission was made in reliance upon information furnished to the
Company or such affiliate by or on behalf of the Fund; provided, however,
that in no case (i) is the Company's indemnity in favor of a Trustee or
officer or any other person deemed to protect such Trustee or officer or
other person against any liability to which any such person would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence
in the performance of his duties or by reason of his reckless disregard of
obligations and duties under this Agreement or (ii) is the Company to be
liable under its indemnity agreement contained in this Paragraph 5 with
respect to any claim made against the Fund or any person indemnified unless
the Fund or such person, as the case may be, shall have notified the Company
in writing pursuant to Paragraph 10 within a reasonable time after the
summons or other first legal process giving information of the nature of the
claims shall have been served upon the Fund or upon such person (or after
the Fund or such person shall have received notice of such service on any
designated agent), but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it has to the Fund or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this Paragraph 5. The Company shall be
entitled to participate, at its own expense,
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in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if it elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Fund, to its officers and Trustees, or to any
controlling person or persons, defendant or defendants in the suit. In the
event that the Company elects to assume the defense of any such suit and
retain such counsel, the Fund, such officers and Trustees or controlling
person or persons, defendant or defendants in the suit, shall bear the fees
and expenses of any additional counsel retained by them, but, in case the
Company does not elect to assume the defense of any such suit, the Company
will reimburse the Fund, such officers and Trustees or controlling person or
persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them. The Company agrees promptly to
notify the Fund pursuant to Paragraph 10 of the commencement of any
litigation or proceedings against it in connection with the issue and sale
of any Shares.
(b) The Fund 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 Act against any and all
losses, claims, damages, liabilities or litigation (including legal and
other expenses) to which it or such directors, officers or controlling
person may become subject under the Act, under any other statute, at common
law or otherwise, arising out of the acquisition of any Shares by any person
which (i) may be based upon any wrongful act by the Fund, any of its
employees or representatives or a principal underwriter of the
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Fund, or (ii) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or
prospectus covering Shares 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 unless such statement or omission was made in reliance upon
information furnished to the Fund by the Company or (iii) may be based on
any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering insurance
products sold by the Company, or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund provided,
however, that in no case (i) is the Fund's indemnity in favor of a director
or officer or any other person deemed to protect such director or officer or
other person against any liability to which any such person would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence
in the performance of his duties or by reason of his reckless disregard of
obligations and duties under this Agreement or (ii) is the Fund to be liable
under its indemnity agreement contained in this Paragraph 5 with respect to
any claims made against the Company or any such director, officer or
controlling person unless it or such director, officer or controlling
person, as the case may be, shall have notified the Fund in writing pursuant
to Paragraph 10 within a reasonable time after the summons
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or other first legal process giving information of the nature of the claim
shall have been served upon it or upon such director, officer or controlling
person (or after the Company or such director, officer or controlling person
shall have received notice of such service on any designated agent), but
failure to notify the Fund of any claim shall not relieve it from any
liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in
this Paragraph. The Fund will be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but if the Fund elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Company, its directors, officers or controlling person
or persons, defendant or defendants, in the suit. In the event the Fund
elects to assume the defense of any such suit and retain such counsel, the
Company, its directors, officers or controlling person or persons, defendant
or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Company or such
directors, officers or controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund agrees promptly to notify the Company pursuant to
Paragraph 10 of the commencement of any litigation or proceedings against it
or any of its officers or Trustees in connection with the issuance or sale
of any Shares.
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6. Procedure for Resolving Irreconcilable Conflicts.
(a) The Trustees of the Fund will monitor the operations of the Fund for
the existence of any material irreconcilable conflict among the interests of
all the contract holders and policy owners of Variable Insurance Products
(the "Participants") of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise, among other things, from: (a) an
action by any state insurance regulatory authority; (b) a change in
applicable insurance laws or regulations; (c) a tax ruling or provision of
the Internal Revenue Code or the regulations thereunder; (d) any other
development relating to the tax treatment of insurers, contract holders or
policy owners or beneficiaries of Variable Insurance Products; (e) the
manner in which the investments of any Portfolio are being managed; (f) a
difference in voting instructions given by variable annuity contract
holders, on the one hand, and variable life insurance policy owners, on the
other hand, or by the contract holders or policy owners of different
participating insurance companies; or (g) a decision by an insurer to
override the voting instructions of Participants.
(b) The Company will be responsible for reporting any potential or
existing conflicts to the Trustees of the Fund. The Company will be
responsible for assisting the Trustees in carrying out their
responsibilities under this Paragraph 6(b) and Paragraph 6(a), by providing
the Trustees with all information reasonably necessary for the Trustees to
consider the issues raised. The Fund will also request its investment
adviser to report to the Trustees any such conflict which comes to the
attention of the adviser.
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(c) If it is determined by a majority of the Trustees of the Fund, or a
majority of its disinterested Trustees, that a material irreconcilable
conflict exists involving the Company, the Company shall, at its expense,
and to the extent reasonably practicable (as determined by a majority of the
disinterested Trustees), take whatever steps are necessary to eliminate the
irreconcilable material conflict, including withdrawing the assets allocable
to some or all of the separate accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including another
Portfolio of the Fund, offering to the affected Participants the option of
making such a change or establishing a new funding medium including a
registered investment company.
For purposes of this Paragraph 6 (c), the Trustees, or the disinterested
Trustees, shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict. In the event of a determination
of the existence of an irreconcilable material conflict, the Trustees shall
cause the Fund to take such action, such as the establishment of one or more
additional Portfolios, as they in their sole discretion determine to be in the
interest of all shareholders and Participants in view of all applicable
factors, such as cost, feasibility, tax, regulatory and other considerations.
In no event will the Fund be required by this Paragraph 6 (c) to establish a
new funding medium for any variable contract or policy.
The Company shall not be required by this Paragraph 6 (c) to establish a new
funding medium for any variable contract or policy if an offer to do so has
been declined by a vote of a majority of the Participants materially adversely
affected by the material
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irreconcilable conflict. The Company will recommend to its Participants that
they decline an offer to establish a new funding medium only if the Company
believes it is in the best interest of the Participants.
(d) The Trustees' determination of the existence of an irreconcilable
material conflict and its implications promptly shall be communicated to all
Participating Insurance Companies by written notice thereof delivered or
mailed, first class postage prepaid.
7. Voting Privileges.
The Company shall be responsible for assuring that its separate account or
accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants
permitted to give instructions and the number of Shares for which instructions
may be given will be determined as of the record date for the Fund
shareholders' meeting, which shall not be more than 60 days before the date of
the meeting. Whether or not voting instructions are actually given by a
particular Participant, all Fund shares held in any separate account or
sub-account thereof and attributable to policies will be voted for, against, or
withheld from voting on any proposition in the same proportion as (i) the
aggregate record date cash value held in such sub-account for policies giving
instructions, respectively, to vote for, against, or withhold votes on such
proposition, bears to (ii) the aggregate record date cash value held in the
sub-account for all policies for which voting instructions are received.
Participants continued in effect under lapse options will not be permitted to
give voting instructions.
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Shares held in any other insurance company general or separate account or
sub-account thereof will be voted in the proportion specified in the second
preceding sentence for shares attributable to policies.
8. Duration and Termination.
This Agreement shall remain in force for the period ending five years from
the date of its execution (such date and any anniversary of such date being
hereinafter called a "Renegotiation Date"), and from year to year thereafter
provided that neither the Company nor the Fund shall have given written notice
to the other within thirty (30) days prior to a Renegotiation Date that it
desires to renegotiate the amount of contribution to capital due hereunder
("Renegotiation Notice"). If a Renegotiation Notice is properly given as
aforesaid and the Fund and the Company shall fail, within sixty (60) days after
the Renegotiation Date, either to enter into an amendment to this Agreement or
a written acknowledgment that the Agreement shall continue in effect, this
Agreement shall terminate as of the one hundred twentieth day after such
Renegotiation Date. If this Agreement is so terminated, the Fund may, at any
time thereafter, automatically redeem the Shares of any Portfolio held by a
Participating Shareholder. This Agreement may be terminated at any time, at the
option of either of the Company or the Fund, when neither the Company, any
insurance company nor the separate account or accounts of such insurance
company which is an affiliate thereof which is not a Participating Insurance
Company own any Shares of the Fund or may be terminated by either party to the
Agreement upon a determination by a majority of the Trustees of the Fund, or a
majority of its disinterested
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Trustees, following certification thereof by a Participating Insurance Company
given in accordance with Paragraph 10 that an irreconcilable conflict exists
among the interests of (i) all contract holders and policy holders of Variable
Insurance Products of all separate accounts or (ii) the interests of the
Participating Insurance Companies investing in the Fund. Notwithstanding
anything to the contrary in this Agreement or its termination as provided
herein, the Company's obligation to make a capital contribution to the Fund in
accordance with this Agreement at the time in effect shall continue
(i) following a properly given Renegotiation Notice, in the absence of
agreement otherwise, until termination of this Agreement, and (ii) (except
termination due to the existence of an irreconcilable conflict), following
termination of this Agreement, until the later of the fifth anniversary of the
date of this Agreement or the date on which the Company, its separate
account(s) or the separate account(s) of any affiliated insurance company owns
no Shares.
9. Compliance.
The Fund will comply with the provisions of Section 4240(a) of the New York
Insurance Law.
Each Portfolio of the Fund will comply with the provisions of Section 817(h)
of the Internal Revenue Code of 1986, as amended (the "Code"), relating to
diversification requirements for variable annuity, endowment and life insurance
contracts. Specifically, each Portfolio will comply with either (i) the
requirement of Section 817(h) (1) of the Code that its assets be adequately
diversified, or (ii) the "Safe Harbor for Diversification" specified in
Section 817 (h) (2) of the Code, or (iii) the
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diversification requirement of Section 817(h) (1) of the Code by having all or
part of its assets invested in U.S. Treasury securities which qualify for the
"Special Rule for Investments in United states Obligations" specified in
Section 817(h) (3) of the Code.
The provisions of Paragraphs 6 and 7 of this Agreement shall be interpreted
in a manner consistent with any Rule or order of the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, applicable to
the parties hereto.
No Shares of any Portfolio of the Fund may be sold to the general public.
10. 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 Fund:
Xxxxxxx Variable Life Investment Fund
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
(000) 000-0000
Attn: Xxxxx X. Xxxxx
If to the Company:
Security First Life Insurance Company, Inc.
00000 Xxxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx/The Xxxxxx Group
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11. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
12. Miscellaneous.
The name "Xxxxxxx Variable Life Investment Fund" is the designation of the
Trustees for the time being under a Declaration of Trust dated March 15, 1985,
as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. No Portfolio
shall be liable for any obligations properly attributable to any other
Portfolio.
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. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
13. Entire Agreement.
This Agreement incorporates the entire understanding and agreement among the
parties hereto, and supersedes any and all prior understandings and agreements
between the parties hereto with respect to the subject matter hereof.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the ____ day of April, 1995.
SEAL XXXXXXX VARIABLE LIFE
INVESTMENT FUND
SEAL SECURITY FIRST LIFE INSURANCE
COMPANY, INC.
By: /s/ XXXXXXXXXXXXX
Its: XXXXXXXXXXXXX
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