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EXHIBIT 1.A.(9)(h)
FORM OF PARTICIPATION AGREEMENT
THIS AGREEMENT is made and entered into as of this ---th day of
April, 1997, by and among SECURITY EQUITY LIFE INSURANCE COMPANY, a New York
insurance company (hereinafter the "Company"), on its own behalf and on behalf
of each segregated asset account of the Company set forth on Schedule A hereto
as such schedule may be amended from time to time (each such account
hereinafter referred to as the "Account" and collectively as the "Accounts"),
and XXXXXXX INSURANCE FUNDS, a Massachusetts Business Trust (hereinafter the
"Investment Company"), and XXXXXXX FUND DISTRIBUTORS, INC. a Washington
corporation (hereinafter the "Underwriter").
WHEREAS, Investment Company engages in business as a
diversified open-end management investment company and is available to act as
the investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts (collectively, the "Variable
Insurance Products"); and
WHEREAS, the beneficial interest in the Investment Company is
divided into several series of shares, referred to individually as "Funds" and
representing the interest in a particular managed portfolio of securities and
other assets; and
WHEREAS, Investment Company is registered as an open-end
management investment company under the 1940 Act, and its shares are
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, Xxxxx Xxxxxxx Investment Management Company (the
"Adviser") is registered as an investment adviser under the federal Investment
Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life contracts under the 1933 Act, and offers or will offer for sale
certain variable life contracts which are or will be exempt from registration;
and
WHEREAS, Each Account is a duly organized, validly existing,
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to
set aside and invest assets attributable to one or more variable life
contracts; and
WHEREAS, The Company has registered or will register one of
the Accounts as a unit investment trust under the 1940 Act and other Accounts
are exempt from registration; and
WHEREAS, The Underwriter is registered as a broker/dealer
with the SEC under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act") and is a member
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in good standing of the National Association of Securities Dealers, Inc.
(hereinafter the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Funds on behalf
of each Account to fund certain of the aforesaid variable life contracts, and
the Underwriter is authorized to sell such shares to unit investment trusts
such as each Account at net asset value.
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE I
SALE OF INVESTMENT COMPANY SHARES
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1.1. The Underwriter agrees to sell to the Company those shares of
Investment Company which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Investment
Company or its designee of the order for the shares of the Investment Company.
For purposes of this Section 1.1, the Company shall be the designee of the
Investment Company for receipt of such orders from each Account and receipt by
such designee shall constitute receipt by the Investment Company; provided
that the Investment Company receives notice of such order by 8:00 a.m. Pacific
time on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which Investment
Company calculates its net asset value pursuant to the rules of the Securities
and Exchange Commission.
1.2. The Investment Company agrees to make its shares available
indefinitely for purchase at the applicable net asset value per share by the
Company and its Accounts on those days on which the Investment Company
calculates its net asset value pursuant to rules of the Securities and
Exchange Commission, and the Investment Company shall use reasonable efforts
to calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Investment Company (hereinafter the "Board") may refuse to
sell shares of any Fund, 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 is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Fund.
1.3. The Investment Company and the Underwriter agree that no shares
of any Fund will be sold to the general public.
1.4. The Investment Company agrees to redeem for cash, on the
Company's request, any full or fractional shares of the Investment Company
held by the Company, executing such requests on a daily basis at the net asset
value next computed after receipt by the Investment Company or its designee of
the request for redemption. For purposes of this Section 1.4, the Company
shall be the designee of the Investment Company for receipt of requests for
redemption
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from each Account, and receipt by such designee shall constitute receipt by the
Investment Company; provided that the Investment Company receives notice of such
request for redemption by 8:00 a.m. Pacific time on the next following Business
Day.
1.5. The Company agrees to purchase and redeem the shares of
selected Funds offered by the then-current prospectus of the Investment
Company and in accordance with the provisions of such prospectus. The parties
agree that all net amounts available under the variable life contracts with
the form numbers(s) which are listed on Schedule B attached hereto and
incorporated herein by this reference, as such Schedule B may be amended from
time to time hereafter by mutual written agreement of all the parties hereto
(the "Contracts"), may be invested in the Investment Company, in other
investment companies, or in the Company's general account or other separate
accounts.
1.6. The Company shall pay for Investment Company shares on the next
Business Day after an order to purchase Investment Company shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire.
1.7. Issuance and transfer of the Investment Company's shares will
be by book entry only. Stock certificates will not be issued to the Company
or any Account. Shares ordered from the Investment Company will be recorded
in an appropriate title for each Account.
1.8. The Investment Company shall furnish same day notice (by wire,
facsimile transmission, or telephone, followed by written confirmation) to the
Company of any income dividends or capital gain distributions payable on the
Investment Company's shares. The Company hereby elects to receive all such
income dividends and capital gain distributions as are payable on the Fund
shares in additional shares of that Fund. The Company reserves the right to
revoke this election and to receive all such income dividends and capital gain
distributions in cash. Investment Company shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.9. The Investment Company shall make the net asset value per share
for each Fund available to the Company on a daily basis by 3:00 p.m., Pacific
Time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
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2.1. The Company represents and warrants that the Contracts are
registered under the 1933 Act or are exempt from registration thereunder; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under applicable state insurance
law and that each Account is or will be registered as a unit investment trust in
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accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts or is exempt from registration
thereunder.
2.2. The Investment Company represents and warrants that Investment
Company shares sold pursuant to this Agreement shall be registered under the
1933 Act, duly authorized for issuance and sold in compliance with the laws of
the State of Washington and all applicable federal and state securities laws
and that the Investment Company is and shall remain registered under the 1940
Act. The Investment Company shall amend the registration statement for its
shares under the 1933 and the 1940 Act from time to time as required in order
to effect the continuous offering of its shares. The Investment Company shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Investment
Company or the Underwriter.
2.3. The Investment Company represents that it is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended, (the "Code) and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity, or life insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Investment Company and the Underwriter
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.
2.5. The Investment Company currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act or otherwise, although it may make such payments in the future. To
the extent that it decides to finance distribution expenses pursuant to Rule
12b-1, the Investment Company undertakes to have a board of trustees, a
majority of whom are not interested persons of the Investment Company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Investment Company makes no representation as to whether
any aspect of its operations (including, but not limited to, fees and expenses
and investment policies) complies with the insurance laws or regulations of
the various states.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the
Investment Company shares in accordance with any applicable state laws and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Investment Company represents that it is lawfully organized
and validly existing under the laws of the Commonwealth of Massachusetts and
that it does and will comply in all material respects with the 1940 Act.
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2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Investment Company in compliance in all material respects
any applicable state laws and federal securities laws.
2.10. The Investment Company and Underwriter represent and warrant
that all of their directors, officers, employees, investment advisers, and
other individuals/entities dealing with the money or securities of the
Investment Company are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Investment
Company in an amount not less than the minimal coverage as required currently
by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Investment Company are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Investment Company in an amount not less than five million
dollars ($5 million). The aforesaid Bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable bonding company.
ARTICLE III
PROSPECTUSES AND PROXY STATEMENTS; VOTING
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3.1. The Underwriter shall provide the Company with as many printed
copies of the Investment Company's current prospectus and statement of
additional information as the Company may reasonably request. If requested by
the Company in lieu thereof, the Investment Company shall provide camera-ready
film or computer diskettes containing the Investment Company's prospectus and
statement of additional information and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus and/or statement of additional information for the Investment
Company is amended during the year) to have the prospectus for the Contracts
and the Investment Company's prospectus printed together in one document, and
to have the statement of additional information for the Investment Company and
the statement of additional information for the Contracts printed together in
one document. Alternatively, the Company may print the Investment Company's
prospectus and/or its statement of additional information in combination with
other fund companies' prospectuses and statements of additional information.
Except as provided in the following three sentences, all expenses of printing
and distributing Investment Company prospectuses and statements of additional
information shall be the expense of the Company. For prospectuses and
statements of additional information provided by the Company to its existing
owners of Contracts in order to update disclosure as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Investment
Company. If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Investment Company's
prospectus, the Investment Company will reimburse the Company in an
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amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Investment
Company's per unit cost of typesetting and printing the Investment Company's
prospectus. The same procedures shall be followed with respect to the Investment
Company's statement of additional information.
The Company agrees to provide the Investment Company or its designee
with such information as may be reasonably requested by the Investment Company
to assure that the Investment Company's expenses do not include the cost of
printing any prospectuses or statements of additional information other than
those actually distributed to existing owners of the Contracts.
3.2. The Investment Company's prospectus shall state that the
statement of additional information for the Investment Company is available
from the Underwriter or the Company (or in the Fund's discretion, the
prospectus shall state that such statement of additional information is
available from the Investment Company).
3.3. The Investment Company, at its expense, shall provide the
Company with copies of its proxy statements, reports to shareholders, and
other required communications (except for prospectuses and statements of
additional information, which are covered in Section 3.1) to shareholders in
such quantity as the Company shall reasonably require for distributing to
Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote Investment Company shares in accordance with instructions
received from Contract owners: and
(iii) vote Investment Company shares for which no instructions have
been received in the same proportion as Investment Company
shares of such Fund for which instructions have been received.
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote
Investment Company shares held in any segregated asset account in its own
right, to the extent permitted by law.
3.5. The Investment Company will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular the Investment
Company will either provide for annual or special meetings or comply with the
requirements of Section 16(c) of the 1940 Act (although the Investment Company
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, the
Investment Company 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.
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ARTICLE IV
SALES MATERIAL AND INFORMATION
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4.1. The Company shall furnish, or shall cause to be furnished, to
the Investment Company or its designee, each piece of sales literature or
other promotional material, or component thereof, in which the Investment
Company, the Adviser, or the Underwriter is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Investment
Company or its designee object to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Investment Company or
concerning the Investment Company in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or prospectus for the Investment Company shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports or proxy statements for the Investment Company, or in
sales literature or other promotional material approved by the Investment
Company or its designee or by the Underwriter, except with the permission of
the Investment Company or the Underwriter or the designee of either.
4.3. The Investment Company, the Underwriter, or their designees
shall furnish, or shall cause to be furnished, to the Company or its designee,
each piece of sales literature or other promotional material, or component
thereof, in which the Company or its separate Accounts are named at least
fifteen Business Days prior to its use. No such material shall be used if the
Company or its designee objects to such use within fifteen Business Days after
receipt of such material.
4.4. The Investment Company and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or offering
materials for the Contracts, as such may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Investment Company will provide to the Company at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Investment
Company or its shares, contemporaneously with the filing of such document with
the Securities and Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Investment Company at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports,
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solicitations for voting instructions, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or each Account,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. In the case of unregistered Contracts, in lieu of
providing prospectuses and statements of additional information, the Company
shall provide the Investment Company with one complete copy of the offering
materials for the Contracts.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, electronic media, or other
public media), sales literature (i.e., any written communication distributed
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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,
and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE V
FEES AND EXPENSES
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5.1. The Investment Company and the Underwriter shall pay no fee or
other compensation to the Company under this Agreement, except that if the
Investment Company or any Fund adopts and implements a plan pursuant to Rule
12b-1 to finance distribution expenses, then the Underwriter may make payments
to the Company or to the underwriter for the Contracts if and in amounts
agreed to by the Underwriter in writing and such payments will be made out of
existing fees otherwise payable to the Underwriter, past profits of the
Underwriter, or other resources available to the Underwriter. No such
payments shall be made directly by the Investment Company. Currently, no such
payments are contemplated.
5.2. All expenses incident to performance by the Investment Company
under this Agreement shall be paid by the Investment Company. The Investment
Company shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Investment Company, in accordance with applicable
state laws prior to their sale. The Investment Company shall bear the
expenses for the cost of registration and qualification of the Investment
Company's shares, preparation and filing of the Investment Company's
prospectus and registration statement, proxy materials and reports, setting
the prospectus in type, setting in type and printing the proxy materials and
reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Investment Company's shares.
5.3. The Company shall bear the expenses of distributing the
Investment Company's prospectus, proxy materials, and reports to owners of
Contracts issued by the Company.
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ARTICLE VI
DIVERSIFICATION
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6.1. The Investment Company will at all times invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Internal Revenue Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Investment
Company will at all times comply with Section 817(h) of the Code and Treasury
Regulation 1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or other
modifications to such Section or Regulations.
ARTICLE VII
INDEMNIFICATION
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7.1. INDEMNIFICATION BY THE COMPANY
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7.1(a). The Company agrees to indemnify and hold harmless the
Investment Company and each member of the Board and officers and each person,
if any, who controls the Investment Company within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements are related to the sale or
acquisition of the Investment Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in any
registration statement, prospectus or other offering materials for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Company by or on behalf of the Investment Company for use in any
registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Investment Company's shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature of the
Investment Company not supplied by the Company, or
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persons under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Investment Company shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Investment Company 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 Investment Company by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of a result from any material breach of any
representation or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Investment Company, whichever is applicable.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company
to such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
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7.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Investment Company shares or the Contracts or
the operation of the Investment Company.
7.2. INDEMNIFICATION BY THE UNDERWRITER
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7.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Investment Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Investment Company (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Investment Company by or on
behalf of the Company for use in the registration statement or
prospectus for the Investment Company or in the sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Investment Company shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
any registration statement, prospectus, other offering materials or
sales literature for the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the Investment
Company, Adviser, or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Investment
Company shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in any registration statement,
prospectus, other offering materials or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon
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information furnished to the Company by or on behalf of the Investment
Company; or
(iv) arise as a result of any failure by the Investment Company
to provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Underwriter; as limited by and in accordance with the provisions
of Sections 7.2(b) and 7.2(c) hereof.
7.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or each Account, whichever is
applicable.
7.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Underwriter of any such claim shall not relieve the Underwriter
from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, the Underwriter will be entitled to participate, at its own expense,
in the defense thereof. The Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Underwriter to such party of the Underwriter's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Underwriter will
not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of any Account.
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7.3. INDEMNIFICATION BY THE INVESTMENT COMPANY
-----------------------------------------
7.3(a). The Investment Company agrees to indemnify and hold
harmless the Company, and each of its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 7.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Investment Company or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of the Board or any member thereof, are related to the
operations of the Investment Company and:
(i) arise as a result of any failure by the Investment Company
to provide the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation or warranty made by the Investment Company in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Investment Company, as limited by and in
accordance with the provisions of Sections 7.3(b) and 7.3(c) hereof.
7.3(b). The Investment Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Investment Company, the
Underwriter or any Account, whichever is applicable.
7.3(c). The Investment Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Investment Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but
failure to notify the Investment Company of any such claim shall not relieve
the Investment Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Investment Company will be entitled to participate,
at its own expense, in the defense thereof. The Investment Company also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Investment Company to such
party of the Investment Company's election to assume the defense thereof, the
Indemnified Party
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shall bear the fees and expenses of any additional counsel retained by it, and
the Investment Company will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.3(d). The Company and the Underwriter agree promptly to notify
the Investment Company of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in connection with
this Agreement, the issuance or sale of the Contracts, with respect to the
operation of any Account, or the sale or acquisition of shares of the
Investment Company.
ARTICLE VIII
APPLICABLE LAW
--------------
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Washington.
8.2. To the extent they are applicable, this Agreement shall be
subject to the provisions of the 1933, 1934 and 1940 acts, and the rules and
regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the Securities and Exchange Commission may
grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX
TERMINATION OF AGREEMENT
------------------------
9.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by sixty (60)
days advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund based
upon the Company's determination that shares of such Fund are not
reasonably available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund in the
event any of the Fund's shares are not registered, issued, or sold
materially in accordance with applicable state or federal law or such
law precludes the use of such shares as the underlying investment media
of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund in the
event that such
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Fund ceases to qualify as a Regulated Investment Company under Subchapter
M of the Code or under any successor or similar provision, or if the
Company reasonably believes that the Investment Company may fail to so
qualify; or
(e) termination by the Company by written notice to the
Investment Company and the Underwriter with respect to any Fund in the
event that such Fund fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Investment Company or the
Underwriter by written notice to the Company, if either one or both of
the Investment Company or the Underwriter respectively, shall determine,
in their sole judgment exercised in good faith, that the Company or its
affiliated companies has suffered a material adverse change in its
business, operations, financial condition, or Prospects since the date
of this Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the
Investment Company and the Underwriter, if the Company shall determine,
in its sole judgment exercised in good faith, that either the Investment
Company or the Underwriter has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date
of this Agreement or is the subject of material adverse publicity.
9.2. Notwithstanding any termination of this Agreement, the
Investment Company and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Investment Company
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate investment
in the Investment Company, redeem investments in the Investment Company, or
invest in the Investment Company upon the making of additional purchase
payments under the Existing Contracts.
9.3. The Company shall not redeem Investment Company shares
attributable to the Contracts (as opposed to Investment Company shares
attributable to the Company's assets held in any of the Accounts) except (i)
as necessary to implement Contract Owner initiated transactions, or (ii) as
required by state or federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a "Legally
Required Redemption"). Upon request, the Company will promptly furnish to the
Investment Company and the Underwriter the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Investment Company and
the Underwriter) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Fund that was otherwise
available under the Contracts without first giving the Investment Company or
the Underwriter ninety (90) days notice of its intention to do so.
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ARTICLE X
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 Investment Company:
Xxxxxxx Insurance Funds
000 X Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxx, Esq.
If to the Company:
Security Equity Life Insurance Company
00 Xxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
If to the Underwriter:
Xxxxxxx Fund Distributors, Inc.
000 X Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxx, Esq.
ARTICLE XI
MISCELLANEOUS
-------------
11.1. All persons dealing with the Investment Company must look
solely to the property of the Investment Company for the enforcement of any
claims against the Investment Company as neither the Board, officers, agents
or shareholders assume any personal liability for obligations entered into on
behalf of the Investment Company.
11.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
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11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish the California Insurance Commissioner
with any information or reports in connection with services provided under
this Agreement which such Commissioner may request in order to ascertain
whether the variable life insurance operations of the Company are being
conducted in a manner consistent with the California Variable Life Insurance
Regulations and any other applicable law or regulations.
11.7. The Investment Company and Underwriter agree that to the extent
any advisory or other fees received by the Investment Company, the
Underwriter, or the Adviser are determined to be unlawful in legal or
administrative proceedings under the 1973 NAIC model variable life insurance
regulation in the states of California, Colorado, Maryland, or Michigan, the
Underwriter shall indemnify and reimburse the Company for any out of pocket
expenses and actual damages the Company has incurred as a result of any such
proceeding; provided however that the provisions of Section 7.2(b) and 7.2(c)
shall apply to such indemnification and reimbursement obligation. Such
indemnification and reimbursement obligation shall be in addition to any other
indemnification and reimbursement obligations of the Investment Company or the
Underwriter under this Agreement.
11.8. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
11.9. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or
company under common control with the Underwriter, if such assignee is duly
licensed and registered to perform the obligations of the Underwriter under
this Agreement.
11.10. The Company shall furnish, or shall cause to be furnished, to
the Investment Company or its designee copies of the following reports:
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(a) the Company's annual statement prepared under statutory
accounting principles, as soon as practical and in any event within 90
days after the end of each fiscal year;
(b) the Company's quarterly statement (statutory), as soon as
practical and in any event within 45 days after the end of each
quarterly period; and
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders or policyholders, as soon as
practical after the delivery thereof.
11.11. The Master Trust Agreement dated 11 July 1996, as amended
from time to time, establishing the Investment Company, which is hereby
referred to and a copy of which is on file with the Secretary of The
Commonwealth of Massachusetts, provides that the name Xxxxxxx Insurance Funds
means the Trustees from time to time serving (as Trustees but not personally)
under said Master Trust Agreement. It is expressly acknowledged and agreed
that the obligations of the Investment Company hereunder shall not be binding
upon any of the shareholders, Trustees, officers, employees or agents of the
Investment Company, personally, but shall bind only the trust property of the
Investment Company, as provided in its Master Trust Agreement. The execution
and delivery of this Agreement have been authorized by the Trustees of the
Investment Company and signed by the President of the Investment Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of the personally,
but shall bind only the trust property of the Investment Company as provided
in its Master Trust Agreement.
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed in its name and on behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
first written above.
SECURITY EQUITY LIFE INSURANCE COMPANY
Attest: ------------------- By: --------------------------
Secretary President
XXXXXXX INSURANCE FUNDS
Attest: ------------------- By: ---------------------------
Secretary President
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XXXXXXX FUND DISTRIBUTORS, INC.
Attest: ------------------- By: ---------------------------
Secretary President
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SCHEDULE A
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ACCOUNTS
--------
NAME OF ACCOUNT DATE OF RESOLUTION OF COMPANY'S
BOARD WHICH ESTABLISHED THE ACCOUNT
Separate Account 13 April 1, 1997
Separate Account 38 April 1, 1997
Separate Account 39 April 1, 1997
Separate Account 40 April 1, 1997
Separate Account 41 April 1, 1997
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SCHEDULE B
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CONTRACTS
---------
Contract Form Numbers:
LCL1 (G)(I)
LCL2
