PARTICIPATION AGREEMENT
AMONG
XXXXXX CAPITAL MANAGER TRUST
XXXXXX MUTUAL FUNDS, CORP.
AND
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 23rd day of December,
1996, by and among RELIASTAR BANKERS SECURITY COMPANY (hereinafter the
"Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and XXXXXX CAPITAL MANAGER TRUST, a Massachusetts business trust
organized under the laws of Massachusetts (hereinafter the "Trust") and XXXXXX
MUTUAL FUNDS CORP. (hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Trust engages in business as an open-end diversified
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") to
be offered by insurance companies which have entered into Participation,
agreements with the Trust and the Underwriter (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission, dated ______________ (File No._________), granting the Company and
certain variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the
Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Trust to be sold to and held by certain variable annuity
and variable life insurance separate account of the Company (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Xxxxxx Investment Management, Inc. (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940; and
WHEREAS, the Company has registered or will register certain variable life
and variable annuity contracts under the 1933 Act and any applicable state
securities and insurance law; 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 the one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), and is a member 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 and variable annuity
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 their mutual promises, the Company, the
Trust and the Underwriter agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1 The Underwriter agrees, subject to the Trust's rights under Section
1.2, to sell to the Company those shares of the Trust which each Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1.1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such
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order by 9:30 a.m. Boston 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 the Trust calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission.
1.2 The Trust 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 Trust calculates its net asset value pursuant to rules
of the Securities and Exchange Commission and the Trust 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 Trustees of the
Trust (hereinafter the "Trustees") 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
the Trustees determine, in the exercise of their fiduciary responsibilities,
that suspending or terminating the sale of Fund shares would be in the best
interests of shareholders.
1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.
1.4 The Trust agrees to redeem its shares in accordance with the terms of
its then current prospectus. For purposes of this Section 1.4, the Company shall
be the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption on the
next following Business Day.
1.5 The Company agrees to purchase and redeem the shares of each Fund
offered by the then current prospectus of the Trust and in accordance with the
provisions of such prospectus. The Company agrees that all net amounts available
under the variable life and variable annuity contracts with the form number(s)
which are listed on Schedule A attached hereto and incorporated herein by this
reference, as such Schedule A may be amended from time to time hereafter by
mutual written agreement of all the parties hereto (the "Contracts"), shall be
invested in the Trust, in such other registered investment companies advised by
the Adviser ("Xxxxxx Funds") as may be mutually agreed to in writing by the
parties hereto, or in the Company's general account, provided that such amounts
may also be invested in an investment company other than the Trust or a Xxxxxx
Fund if (a) such other investment company was available as a funding vehicle for
the Contracts prior to the date of this Agreement and the Company so informs the
Trust and Underwriter prior to their signing this Agreement; or (b) the Company
gives the Trust and the Underwriter 60 days
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written notice of its intention to make such other investment company available
as a funding vehicle for the Contract.
1.6 The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt by the Trust of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Trust.
1.7 Issuance and transfer of the Trust's shares will be by book entry only.
Share certificates will not be issued to the Company or any Account, Shares
ordered from the Trust will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.8 The Underwriter shall furnish same-day notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Underwriter
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.9 The Trust shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. Boston time.
1.10 The Company shall limit sales of the variable annuity insurance
contracts listed in Schedule A hereto in any calendar year to $50,000,000 in the
aggregate and sales of such variable annuity insurance contracts through any
single broker-dealer firm or other financial institution in any calendar year to
$10,000,000, excluding from these limitations sales through Washington Square
Securities, Inc.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that at all times during the term
of this Agreement the Contracts are or will be registered under the 1933 Act;
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and 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
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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 Section 4240 of the New York Insurance Laws and
has registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2 The Trust represents and warrants that at all times during the term of
this Agreement Trust shares sold pursuant to this Agreement shall be registered
under the 1933 Act, duly authorized for issuance and sold by the Trust to the
Company in compliance with all applicable federal laws and that the Trust is and
shall remain registered under the 0000 Xxx. The Underwriter represents that
Trust shares are duly authorized for issuance in compliance with the applicable
laws of the State of New York and all applicable state securities laws. The
Trust shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust or the Underwriter in connection with their sale
by the Trust to the Company.
2.3 The Trust 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 use its best efforts to maintain such
qualification (under Subchapter M or any successor 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 Trust and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5 The Trust currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Trust undertakes to
have a board of trustees, a majority of whom are not interested persons of the
Trust, approve any plan under Rule 12b-1 to finance distribution expenses.
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2.6 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
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 Trust shares
in accordance with the laws of the State of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 0000 Xxx.
2.8 The Trust represents that it is lawfully organized and validly existing
under the laws of Massachusetts and that it does and will comply in all material
respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and hall
remain duly registered, to the extent required, in all material respects under
all applicable federal and state securities laws and that the Adviser shall
perform its obligations for the Trust in compliance in all material respects
with the laws of the State of New York and any applicable state and federal
securities laws.
2.10 The Trust and Underwriter represent and warrant that all of their
respective directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Trust are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than the
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 individuals/entities dealing
with the money and/or securities of the Trust are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust, in an amount not less than the minimal coverage as required
currently by entities subject to the requirements of 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.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1 The Trust shall provide such documentation (including a final copy of
its prospectus as set in type at the Trust's expense) and other assistance as is
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reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Trust is amended) to have the prospectus for the
Contracts and the Trust's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2 The Trust's prospectus shall state that the Statement of Additional
Information for the Trust is available from the Underwriter or its designee (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust), and the Underwriter (or the Trust), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.
3.3 The Trust, at its expense, shall provide the Company with copies of its
proxy material reports to stockholders and other communications to stockholders
in such quantity as the Company shall reasonably require for distributing to
Contract owners.
3.4 The Company shall vote all Trust shares as required by law and the,
Shared Funding Exemptive Order. The Company reserves the right to vote Trust
shares held in any segregated asset account in its own right, to the extent
permitted by law and the Shared Funding Exemptive Order. The Company shall be
responsible for assuring that each of its separate accounts participating in the
Trust calculates voting privileges in a manner consistent with all legal
requirements.
3.5 The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust 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 Trust will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Underwriter each piece of sales literature or other promotional material in
which the Trust or its investment adviser or the Underwriter is named at least
15 days prior to its use. No such material shall be used if the Underwriter
objects to such use within five 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 Trust or concerning the Trust in connection with
the sale of the Contracts other than the information or
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representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in annual or semi-annual reports or proxy
statements for the Trust, or in sales literature or other promotional material
approved by the Trust or its designee or by the Underwriter, except with the
written permission of the Trust or the Underwriter or the designee of either.
4.3 The Underwriter or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least 15 days prior to its use. No such material shall be used if
the Company or its designee objects to such use within five Business Days after
receipt of such material.
4.4 Neither the Trust nor the Underwriter shall 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 or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for 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 Trust will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, and the Underwriter will
provide at least one complete copy of all sales literature and other promotional
materials that relate to the Trust or its shares, excluding sales literature and
other promotional materials relating to separate accounts of other participating
insurance companies, promptly following the filing of such document with the
Securities and Exchange Commission or other regulatory authorities.
4.6 The Company will provide to the Trust and the Underwriter at least one
complete copy of all registration statements, prospectuses, Statements of
Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials (to the Underwriter only),
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the Contracts or each Account, promptly
following the filing of such document with the Securities and Exchange
Commission.
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
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material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers 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 registered representatives.
ARTICLE V. FEES AND EXPENSES
5.1 The Trust and Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if the Trust 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 Trust. As of the date of this
Agreement, no such payments are contemplated.
5.2 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Underwriter, in accordance
with applicable state laws prior to their sale to the Company. The Trust shall
bear the expenses for the cost of registration and qualification of the Trust's
shares, preparation and filing of the Trust's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Trust's shares.
5.3 The Company shall bear the expenses of printing and distributing the
Trust's prospectus in connection with sales of the Contracts and of distributing
the Trust's proxy materials and reports to owners of the Contracts.
5.4 Notwithstanding any other provision of this Agreement, the Trust shall
be responsible for the registration and qualification of its shares and of the
Trust itself under the laws of any jurisdiction only in connection with the
sales of shares directly to the Company. The Trust shall not be responsible, and
the Company shall take full responsibility for, determining any jurisdiction in
which any qualification or registration of Trust shares or the Trust by the
Trust may be
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required in connection with the sale of the Contracts and advising the Trust
thereof at such time and in such manner as is necessary to permit the Trust to
comply.
ARTICLE VI. DIVERSIFICATION
6.1 Each Fund will maintain a diversified pool of investments that would,
if the Fund were a segregated asset account, satisfy the diversification
provisions of Treas. Reg. Section 1.8175(b)(1) or (2). The Underwriter shall be
jointly and severally liable, with the Trust for any losses, claims, litigation,
damages or expenses resulting to the Company due to the failure to satisfy the
diversification requirements described in this Section 6.1.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the Contract owners of all
separate accounts investing in the Trust. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities law 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 owners; or (f) a decision by an insurer to disregard the voting
instructions of Contract owners. The Trust shall promptly inform the Company if
the Trustees determine that an irreconcilable material conflict exists and the
implications thereof.
7.2 The Company will report any potential or existing conflicts of which it
is aware to the Board. The Company will assist the Trustees in carrying out
their responsibilities under the Shared Funding Exemptive Order, by providing
the Trustees with all information reasonably necessary for the Trustees to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Trustees whenever Contract owner voting
instructions are disregarded.
7.3 If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary to remedy or eliminate the irreconcilable material conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting such assets in a
different
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investment medium including (but not limited to) another Fund of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity Contract owners, life insurance Contract
owners, or variable Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented, and until the end of
that six month period the Underwriter and Trust shall, to the extent permitted
by law and any exemptive relief previously granted to the Trust, continue to
accept and implement orders by the Company for the purchase (or redemption) of
shares of the Trust.
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company to disregard Contract
owner voting instructions and that decision represents a minority position that
would preclude a majority vote, then the Company may be required, at the Trust's
direction, to withdraw the affected Account's investment in the Trust; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Until the end of the foregoing six month
period, the Underwriter and Trust shall, to the extent permitted by law and any
exemptive relief previously granted to the Trust, continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Trust.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict. Neither the Trust nor
the Underwriter shall be required to establish a new funding medium for the
Contracts, nor shall the Company be required to do so, if an offer to do so has
been declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict. In the event that the Trustees
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determine that any proposed action does not adequately remedy any irreconcilable
material conflict, then the Company will withdraw the Account's investment in
the Trust and terminate this Agreement within six (6) months (or such shorter
period as may be required by law or any exemptive relief previously granted to
the Trust) after the Trustees inform the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
7.7 The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Section 7 shall be carried out with
a view only to the interests of Contract owners.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
7.9 The Company has reviewed the Shared Funding Exemption Order and hereby
assumes all obligations referred to therein which are required, as conditions to
such Order, to be assumed or undertaken by the Company.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a) The Company agrees to indemnify and hold harmless the Trust and the
Underwriter and each of the Trustees, directors of the Underwriter and officers
of the Trust or the Underwriter and each person, if any, who controls the Trust
or the Underwriters within the meaning of Section 15 of the 1933
Act.(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
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losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Trust's shares or
the Contracts or the performance by the parties of their obligations hereunder
and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement, Prospectus or Statement of Additional
Information 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 Trust for
use in the Registration Statement, Prospectus or Statement of
Additional Information for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Trust's Registration Statement or prospectus, or in sales
literature for Trust shares not supplied by the Company, or 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 Trust Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Trust or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Trust
or the Underwriter by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
13
8.1(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 to the extent 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 Trust, whichever is applicable.
8.1(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), on the basis of which the Indemnified Party should reasonably
know of the availability of indemnity hereunder in respect of such claim, 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.
8.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust Shares or the Contracts or the operation of
the Trust.
8.1(e) The provisions of this Section 8.l shall survive any termination of
this Agreement.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(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 8.2) against
14
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 thereof) or settlements are
related to the sale or acquisition of the Trust's shares or the Contracts or the
performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, Prospectus, Statement of Additional Information
or sales literature of the Trust prepared by or approved by the Trust
or Underwriter(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 Trust by or on behalf of the Company for use in the
Registration Statement, Prospectus, or Statement of Additional
Information for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than amendments or representations contained in
the Registration Statement, Prospectus, Statement of Additional
Information or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the
Trust, Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Trust shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
Prospectus, Statement of Additional Information 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 information furnished to the Company by or on
behalf of the Trust; or
15
(iv) arise as a result of any failure, whether intentional or
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 and/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 8.2(b) and 8.2(c) hereof.
8.2(b) The Underwriter 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
each Company or the Account, whichever is applicable.
8.2(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) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, 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.
8.2(d) The Company agrees to promptly notify the Underwriter of the Trust
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
16
8.2(e) The provisions of this Section 8.2 shall survive any termination of
this Agreement.
8.3 INDEMNIFICATION BY THE TRUST
8.3(a) The Trust agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust) 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 Trustees or any member
thereof are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust, as limited by and in accordance with the provisions of
Sections 8.3(b) and 8.3(c) hereof.
8.3(b) The Trust shall not be liable under the 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 or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Trust, the Underwriter or each Account,
whichever is applicable.
8.3(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against any Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent) on the basis of which the Indemnified Party should reasonably
know of the availability of indemnity hereunder in respect of such claim, but
failure to notify the Trust of any such claim shall not relieve the Trust from
any liability
17
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Trust will be entitled to
participate, at its own expense, in the defense thereof. The Trust also shall be
entitled to assume the defense thereof with counsel satisfactory to the party
named in the action. After notice from the Trust to such party of the Trust's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Trust will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d) The Company and the Underwriter agree promptly to notify the Trust
of the commencement of any litigation or proceedings against them or any of
their respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts or the sale or acquisition of shares of the
Trust.
8.3(e) The provisions of this Section 8.3 shall survive any termination of
this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
9.2 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 (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice to the
other parties; provided, however, such notice shall not be given earlier than
one year following the date of this Agreement; or
(b) at the option of the Company to the extent that shares of the Funds are
not reasonably available to meet the requirements of the Contracts, provided,
however, that such termination shall apply only to the Fund(s) not
18
reasonably available. Prompt notice of the election to terminate for such cause
shall be furnished by the Company; or
(c) at the option of the Trust or the Underwriter in the event that formal
administrative proceedings are instituted against the Company by the NASD, the
Securities and Exchange Commission, the Commerce Commissioner of the State of
Minnesota or any other regulatory body regarding the Company's duties under this
Agreement or related to the sales of the Contracts, with respect to the
operation of any Account, or the purchase of the Trust shares, provided,
however, that the Trust or the Underwriter determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have
material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(d) at the option of the Company in the event that formal administrative
proceedings are instituted against the Trust or Underwriter by the NASD, the
Securities and Exchange Commission, or any state securities or insurance
department or any other regulatory body, provided, however, that the Company
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Trust or Underwriter to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract owners
having an interest in such Account (or any subaccount) to substitute the shares
of another investment company for the corresponding Fund shares of the Trust in
accordance with the terms of the Contracts for which those Fund shares had been
selected to serve as the underlying investment media. The Company will give 30
days' prior written notice to the Trust of the date of any proposed vote to
replace the Trust's shares; or
(f) at the option of the Company, in the event any of the Trust's shares
are not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by the Company; or
(g) at the option of the Company, if the Trust ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(h) at the option of the Company, if the Trust falls to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of either the Trust or the Underwriter, if (1) the Trust
or the Underwriter, respectively, shall determine, in its sole judgment
reasonably
19
exercised in good faith, that the Company has suffered a material adverse change
in its business or financial condition or is the subject of material adverse
publicity such material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of either the Trust or
the Underwriter, (2) the Trust or the Underwriter shall notify the Company in
writing of such determination and its intent to terminate this Agreement, and
(3) after considering the actions taken by the Company and any other changes in
circumstances since the giving of such notice, such determination of the Trust
or the Underwriter shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth day shall be the effective date of
termination; or
(j) at the option of the Company, if (1) the Company shall determine, in
its sole judgment reasonably exercised in good faith, that either the Trust or
the Underwriter has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Company, (2) the Company
shall notify the Trust and the Underwriter in writing of such determination and
its intent to terminate the Agreement, and (3) after considering the actions
taken by the Trust and/or the Underwriter and any other changes in circumstances
since the giving of such notice, such determination shall continue to apply or,
the sixtieth (60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination; or
(k) at the option of either the Trust or the Underwriter, if the Company
gives the Trust and the Underwriter the written notice specified in Section
1.5(b) hereof and at the time such notice was given there was no notice of
termination outstanding under any other provision of this Agreement; provided,
however, any termination under this Section 10.1(k) shall be effective forty
five (45) days after the notice specified in Section 1.5(b) was given.
10.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 NOTICE REQUIREMENT. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for such termination.
Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(i), 10.1(j) or 10.1(k) of
this Agreement, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions; and
20
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice shall be
given at least ninety (90) days before the effective date of termination.
10.4 EFFECT OF TERMINATION. Notwithstanding any termination of this
agreement, subject to Section 1.2 of this Agreement, the Trust and the
Underwriter shall, at the option of the Company, continue to make available
additional shares of the Trust pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitations subject to Section 1.2 of this Agreement, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
10.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Underwriter the opinion of counsel for the Company,
reasonably satisfactory to the Trust, 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, subject to Section 1.2
of this Agreement, the Company shall not prevent Contract owners from allocating
payments to a Fund that was otherwise available under the Contracts without
first giving the Trust or the Underwriter 90 days notice of its intention to do
so.
21
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: ___________________
If to the Company:
00 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Saginaw
If to the Underwriter:
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
ARTICLE XII. MISCELLANEOUS
12.1 A copy of the Agreement and Declaration of Trust of the Fund is on
file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Fund as Trustees and not individually and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees or
shareholders individually but binding only upon the assets and property of the
Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners 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 without the express written
consent of the affected party such time as it may come into the public domain.
22
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. 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.
12.7 The Underwriter agrees that to the extent any advisory or other fees
received by the Trust, 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 amount of such
indemnity shall be limited to the amount of the fees determined to be unlawful
and that the provisions of Section 8.2(b) and 8.2(c) of this Agreement 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 Trust and/or the Underwriter under this
Agreement.
12.8 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
23
12.9 Notwithstanding any other provision of this Agreement, the obligations
of the Trust and the Underwriter are several and, without limiting in any way
the generality of the foregoing, neither party shall have any liability for any
action or failure to act by the other party, or any person acting on such other
party's behalf.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
Company:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By its authorized officer,
(SEAL)
By: /s /XXXXXXX X. XXXXX
Name: XXXXXXX X. XXXXX
Title: SENIOR VICE PRESIDENT AND GENERAL COUNSEL
Date: -----------------------
Trust:
(SEAL)
XXXXXX CAPITAL MANAGER TRUST
By its authorized officer,
By: -----------------------
Name: -----------------------
Title: -----------------------
Date: -----------------------
Underwriter:
(SEAL)
XXXXXX MUTUAL FUNDS CORP.
By its authorized officer,
By: -----------------------
Name: -----------------------
Title: -----------------------
Date: -----------------------
24
SCHEDULE A
CONTRACTS
1. ReliaStar Bankers Security Variable Life Separate Account I
(a) Flexible Premium Variable Life Insurance Policy.
Contract Form Number: 85-251 and State Exceptions.
25
