PARTICIPATION AGREEMENT (VARIABLE ANNUITY) FOR RETAIL MUTUAL FUNDS
THIS AGREEMENT, dated as of the 20th day of January 2006, by and among
Security Benefit Life Insurance Company, (the "Company"), a stock life insurance
company organized under the laws of the State of Kansas, 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 an "Account"), and Xxxxxxxxx
Xxxxxx Management Inc. (the "Adviser"), a New York corporation, on behalf of the
Xxxxxxxxx Xxxxxx Investor Class shares of the Xxxxxx Brothers Core Bond Fund, a
series of Xxxxxxxxx Xxxxxx Income Funds (the "Fund").
WHEREAS, the shares of beneficial interest/common stock of the Fund are
divided into several series of shares, each representing the interest in a
particular managed portfolio of securities and other assets (each a
"Portfolio"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and shares of
the Portfolios are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Adviser, which serves as administrator and investment adviser
to the Fund, is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended; and
WHEREAS, the Company has issued or will issue certain variable annuity
contracts supported wholly or partially by the Account (the "Contracts"), and
said Contracts are listed in Schedule A hereto, as it may be amended from time
to time by mutual written agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts; and
WHEREAS, the Company intends to purchase shares in the Portfolios listed
in Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios"), on behalf of the Account to fund the
aforesaid Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company and
the Adviser agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1.Subject to Article IX hereof, the Adviser agrees to make
available to the Company for purchase on behalf of the Account, shares of the
Designated Portfolios, such purchases to be effected at net asset value in
accordance with Section 1.3 of this Agreement. Notwithstanding the foregoing,
(i) the Portfolios (other than those listed on Schedule A) in existence now or
that may be established in the future will be made available to the Company only
as the Adviser may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may suspend or terminate the offering of shares of any Designated
Portfolio or class thereof if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, suspension or termination is necessary and in the best
interests of the shareholders of such Designated Portfolio.
1.2. The Adviser shall cause the Fund to redeem, at the Company's
request, any full or fractional Designated Portfolio shares held by the Company
on behalf of the Account, such redemptions to be effected at net asset value in
accordance with Section 1.3 of this Agreement. Notwithstanding the foregoing,
the Fund may delay redemption of Fund shares of any Designated Portfolio to the
extent permitted by the 1940 Act, and any rules, regulations or orders
thereunder.
1.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Adviser hereby appoints the Company as an agent
of the Fund for the limited purpose of receiving and accepting purchase and
redemption requests on behalf of the Account (but not with respect to any Fund
shares that may be held in the general account of the Company) for shares of
those Designated Portfolios made available hereunder, based on allocations of
amounts to the Account or subaccounts thereof under the Contracts and other
transactions relating to the Contracts or the Account. Receipt and acceptance of
any such request (or relevant transactional information therefor) on any day the
New York Stock Exchange is open for trading and on which a Designated Portfolio
calculates its net asset value (a "Business Day") pursuant to the rules of the
Securities and Exchange Commission ("SEC"), by the Company as such limited agent
of the Fund prior to the time that the Fund ordinarily calculates its net asset
value as described from time to time in the Fund's prospectus shall constitute
receipt and acceptance by the Designated Portfolio on that same Business Day,
provided that the Adviser receives notice of such request by 9:30 a.m. Eastern
Time on the next following Business Day.
(b) The Company shall pay for shares of each Designated
Portfolio on the same Business Day that it notifies the Adviser of a purchase
request for such shares. Payment for Designated Portfolio shares shall be made
in federal funds transmitted to the Adviser or other designated person by wire
to be received by 3:00 p.m. Eastern Time on the Business Day the Adviser is
notified of the purchase request for Designated Portfolio shares (unless the
Adviser determines and so advises the Company that sufficient proceeds are
available from redemption of shares of other Designated Portfolios effected
pursuant to redemption requests tendered by the Company on behalf of the
Account, or unless the Adviser otherwise determines and so advises the Company
to delay the date of payment, to the extent the Fund may do so under the 1940
Act). If federal funds are not received on time, such funds will be invested,
and Designated Portfolio shares purchased thereby will be issued, as soon as
practicable and the Company shall promptly, upon the Adviser's request,
reimburse the Fund for any charges, costs, fees, interest or other expenses
incurred by the Adviser or the Fund in connection with any advances to, or
borrowing or overdrafts by, the Adviser or the Fund, or any similar expenses
incurred by the Adviser or the Fund, as a result of portfolio transactions
effected by the Fund based upon such purchase request. Upon receipt by the
Adviser of federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the
Adviser.
(c) Adviser shall cause payment for Designated Portfolio
shares redeemed by the Account or the Company to be made by the Fund in federal
funds transmitted by wire to the Company or any other designated person by 3
p.m. Eastern Time on the same Business Day the Adviser is properly notified of
the redemption order of such shares (unless redemption proceeds are to be
applied to the purchase of shares of other Designated Portfolios in accordance
with Section l.3(b) of this Agreement), except that the Fund reserves the right
to delay payment of redemption proceeds to the extent permitted under Section
22(e) of the 1940 Act and any rules thereunder, and in accordance with the
procedures and policies of the Fund as described in the then-current prospectus.
(d) Any purchase or redemption request for Designated
Portfolio shares held or to be held in the Company's general account shall be
effected at the net asset value per share next determined after the Adviser's
receipt and acceptance of such request, provided that, in the case of a
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purchase request, payment for Fund shares so requested is received by the
Adviser in federal funds prior to close of business for determination of such
value, as defined from time to time in the Fund's prospectus.
1.4. The Adviser shall use its best efforts to make the net asset
value per share for each Designated Portfolio available to the Company by 6:30
p.m. Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the net asset value per share for such Designated Portfolio is
calculated, and shall calculate such net asset value in accordance with the
Fund's prospectus. If the Adviser provides the Company with materially incorrect
share net asset value information, the Company on behalf of the Account, shall
be entitled to an adjustment to the number of shares purchased or redeemed to
reflect the correct share net asset value. Any material error in the calculation
of the net asset value per share, dividend or capital gain information shall be
reported promptly to the Company upon discovery. In the event that any such
material error is the result of the gross negligence of the Adviser, or its
designated agent for calculating the net asset value, any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at the Adviser's expense.
1.5. The Adviser shall use its best efforts to furnish notice (by
wire or telephone followed by written confirmation) to the Company of any income
dividends or capital gain distributions payable on any Designated Portfolio
shares by the record date, but in no event later than 6:30 p.m. Eastern Time on
the ex-dividend date The Company, on its behalf and on behalf of the Account,
hereby elects to receive all such dividends and distributions as are payable on
any Designated Portfolio shares in the form of additional shares of that
Designated Portfolio. The Company reserves the right, on its behalf and on
behalf of the Account, to revoke this election and to receive all such dividends
and capital gain distributions in cash. The Adviser shall notify the Company
promptly of the number of Designated Portfolio shares so issued as payment of
such dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry
only. Share certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other insurance companies and the cash value of the Contracts may be invested
in other investment companies.
(b) The Company shall not, without prior notice to the
Adviser (unless otherwise required by applicable law), take any action to
operate the Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the
Adviser (unless otherwise required by applicable law), induce Contract owners to
change or modify the Fund or change the Fund's investment adviser.
(d) The Company shall not, without prior notice to the
Adviser and the Fund, induce Contract owners to vote on any matter submitted
for consideration by the shareholders of the Fund in a manner other than as
recommended by the Board.
1.8. The parties may agree, in lieu of the procedures set forth
above in this Article 1, to place and settle trades for Fund shares through a
clearing corporation. In the event that such a clearing corporation is used, the
parties agree to abide by the rules of the clearing corporation.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
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2.1 The Company represents and warrants that the Contracts (a) are,
or prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law, that
it has legally and validly established the Account as a segregated asset account
under Kansas insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the 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, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 0000 Xxx.
2.2. The Adviser represents and warrants that Designated Portfolio
shares sold pursuant to this Agreement shall be registered under the 1933 Act,
shall be duly authorized for issuance and sold in compliance with applicable
state and federal securities laws and that the Fund is and shall remain
registered under the 0000 Xxx. The Fund 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 Fund
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 Fund.
2.3 The Adviser represents and warrants that the Fund is lawfully
organized and validly existing under the laws of the State of Delaware and that
the Fund does and will comply in all material respects with the 1940 Act,
including, without limitation, Rule 38a-l under the 0000 Xxx.
2.4. The Adviser represents and warrants that it is registered as an
investment adviser with the SEC and that it does and will comply in all material
respects with the Investment Advisers Act of 1940, including, without
limitation, Rule 206(4)-7 under the Investment Advisers Act.
2.5. The Adviser, on its own behalf and on behalf of the Fund,
represents and warrants that all of the trustees/directors, officers, employees,
and other individuals or entities dealing with the money and/or securities of
the Fund are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
the minimum coverage as required currently by Rule 17g-l of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.6. The Company represents and warrants that all of its directors,
officer's, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Account are covered
by a blanket fidelity bond or similar coverage for the benefit of the Account,
in an amount not less than $5 million. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding company,
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Adviser shall provide the Company with as many printed
copies of the current prospectus, current Statement of Additional Information
("SAI"), supplements, proxy statements, and annual or semi-annual reports of
each Designated Portfolio (for distribution to Contract owners with value
allocated to such Designated Portfolios) as the Company may reasonably request
to deliver to existing Contract owners. If requested by the Company in lieu
thereof, the Adviser shall provide such documents (including a "camera-ready"
copy of such documents as set in type, a diskette in the form sent to the
financial printer, or
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an electronic copy of the documents in a format suitable for posting on the
Company's website, all as the Company may reasonably request) and such other
assistance as is reasonably necessary in order for the Company to have
prospectuses, SAIs, supplements and annual or semi-annual reports for the
Contracts and the Fund printed together in a single document or posted on the
Company's web-site or printed individually by the Company if it so chooses. The
expenses associated with printing and providing such documentation shall be as
set forth in Article V.
3.2. The Fund's prospectus shall state that the current SAI for the
Fund is available.
3.3. The Adviser shall provide the Company with information
regarding the Fund's expenses, which information may include a table of fees and
related narrative disclosure for use in any prospectus or other descriptive
document relating to a Contract. The Company agrees that it will use such
information substantially in the form provided. The Company shall provide prior
written notice of any proposed modification of such information, which notice
will describe the manner in which the Company proposes to modify the
information, and agrees that it may not modify such information in any way
without the prior consent of the Fund, which consent shall not be unreasonably
withheld.
3.4. So long as, and to the extent the SEC continues to interpret
the 1940 Act to require pass-through voting privileges for variable contract
owners, or to the extent otherwise required by law, the Company shall, at the
Company's option, follow one of the two methods described below to provide pass-
through voting privileges to contract owners:
(a) Provide a list of Contract owners with value
allocated to a Designated Portfolio as of the record date to the Fund or its
agent in order to permit the Fund to send solicitation material and gather
voting instructions from Contract owners on behalf of the Company. The Company
shall also provide such other information to the Fund as is reasonably necessary
in order for the Fund to properly tabulate votes for Fund initiated proxies In
the event that the Company chooses this option, the Fund shall be responsible
for properly "echo voting" shares of a Designated Portfolio for which no voting
instructions have been received
(b) Solicit voting instructions from Contract holders
itself and vote shares of the Designated Portfolio in accordance with
instructions received from Contract holders. The Company shall vote the shares
of the Designated Portfolios for which no instructions have been received in the
same proportion as shares of the Designated Portfolio for which instructions
have been received.
3.5. The Company reserves the right to vote Fund shares held in
its general account in its own right, to the extent permitted by applicable
laws.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Adviser or its designee, each piece of sales literature or other promotional
material that the Company develops and in which the Fund (or a Designated
Portfolio thereof) or the Adviser is named. No such material shall be used until
approved by the Adviser or its designee, and the Fund will use its best efforts
for it or its designee to review such sales literature or promotional material
within five (5) Business Days after receipt of such material. The Adviser or its
designee reserves the right to reasonably object to the continued use of any
such sales literature or other promotional material in which the Fund (or a
Designated Portfolio thereof) or the Adviser is named, and no such material
shall be used if the Adviser or its designee so objects.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser in connection with the sale of the Contracts
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other than the information or representations contained in the registration
statement or prospectus or SAI for the Fund shares, as such registration
statement and prospectus or SAI may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Adviser or its designee, except with
the permission of the Adviser or its designee.
4.3. The Adviser, or its designee, shall furnish, or cause to be
furnished, to the Company, each piece of sales literature or other promotional
material that it develops and in which the Company, and/or the Account, is
named. No such material shall be used until approved by the Company, and the
Company will use its best efforts to review such sales literature or promotional
material within five (5) Business Days after receipt of such material. The
Company reserves the right to reasonably object to the continued use of any such
sales literature or other promotional material in which the Company and/or its
Account is named, and no such material shall be used if the Company so objects.
4.4. The Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement, prospectus (which shall include an offering memorandum,
if any, if the Contracts issued by the Company or interests therein are not
registered under the 1933 Act), or SAI for the Contracts, as such registration
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the 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, except with
the permission of the Company.
4.5. The Adviser will provide to the Company at least one complete
copy of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Designated Portfolios or their shares, promptly after
the filing of such document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, 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 the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Adviser any complaints received from the Contract owners
pertaining to the Fund or a Designated Portfolio.
4.7. The Adviser will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio,
and of any material change in the Fund's registration statement, particularly
any change resulting in a change to the registration statement or prospectus for
any Account. The Adviser will work with the Company so as to facilitate the
solicitation of proxies from Contract owners, or to make changes to its
prospectus or registration statement, in an orderly manner. The Adviser will
make reasonable efforts to attempt to have changes affecting Contract
prospectuses become effective simultaneously with the annual updates for such
prospectuses.
ARTICLE V. FEES AND EXPENSES
5.1. The Adviser shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Designated
Portfolio adopts and implements a plan pursuant to Rule 12b-l to finance
distribution expenses, then the Fund may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Fund in
writing.
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5.2. The Adviser shall pay, or cause to be paid, all expenses
incident to the performance of the Adviser or Funds obligations under this
Agreement. The Adviser 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 Fund, in accordance with applicable state
laws prior to their sale. The Adviser shall bear or cause the Fund to bear the
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, setting in type and
printing the proxy materials and reports to shareholders (including the costs of
printing a prospectus that constitutes an annual report), the preparation of all
statements and notices required by any federal or state law, and all taxes on
the issuance or transfer of the Fund's shares.
5.3. The Adviser will pay or cause to be paid the expenses
associated with printing, mailing, distributing, solicitation and tabulation of
proxy materials to Contract owners with respect to proxies related to the Fund,
consistent with applicable provisions of the 1940 Act, The Advisor shall also
bear the expense of printing and postage with respect to Fund prospectuses,
annual and semi-annual reports and all other Fund reports delivered to existing
Contract owners with value allocated to one or more Designated Portfolios
(regardless of whether such documents are printed by the Fund or the Company).
5.4. The Company shall bear the expense of distributing all
prospectuses and reports to shareholders (whether for existing Contract owners
or prospective Contract owners). The Company shall bear the expense of printing
copies of the prospectus for the Contracts for use with prospective Contract
owners. The Company shall beat the expenses incident to (including the costs of
printing) sales literature and other promotional material that the Company
develops and in which the Fund (or a Designated Portfolio thereof) is named.
ARTICLE VI. QUALIFICATION
The Adviser represents and warrants that the Fund is or will be qualified
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code,") and that it will
maintain such qualification (under Subchapter M or any successor or similar
provisions) 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.
ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE COMPANY
7.1(a). The Company agrees to indemnify and hold harmless
each of the Fund and the Adviser and each of its trustees/directors and
officers, and each person, if any, who controls the Fund or Adviser within the
meaning of Section 15 of the 1933 Act or who is under common control with the
Fund or the Adviser (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 or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statements of any material fact contained in the
registration statement, prospectus (which shall include a written
description of a Contract that is not registered under the 1933
Act), or SAI 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
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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 Fund or the Adviser
for use in the registration statement, prospectus or SAI 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
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other than
statements or representations contained in the registration
statement, prospectus, SAI, or sales literature of the Fund not
supplied by the Company or persons under its control) or wrongful
conduct of the Company or its agents or persons under the Company's
authorization or control, with respect to the sale or distribution
of the Contracts, or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, SAI, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any material 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 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 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 its obligations or
duties under this Agreement.
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 an Indemnified Party, 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 reasonably 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
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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.
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 Fund shares or the Contracts or the
operation of the Fund.
7.2. INDEMNIFICATION BY THE ADVISER
7.2(a). The Adviser 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 Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may be required to
pay or may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(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 SAI or sales literature of
the Fund (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 Adviser or Fund by or on behalf of
the Company for use in the registration statement, prospectus or SAI
for the Fund or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Fund or the Adviser (other
than statements or representations contained in the registration
statement, prospectus, SAI or sales literature for the Contracts not
supplied by the Fund or the Adviser) or wrongful conduct of the
Adviser or the Fund with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, SAI or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a 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 Adviser
or the Fund; or
(iv) arise as a result of any failure by the Fund or the
Adviser to provide the services and furnish the materials under the
terms of this Agreement (including a failure of the Fund, whether
unintentional or in good faith or otherwise, to comply
- 9 -
with the diversification and other qualification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by or on behalf of the Adviser
or the Fund in this Agreement or arise out of or result from any
other material breach of this Agreement by or on behalf of the
Adviser or the Fund;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof
7.2(b). The Adviser 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 or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
7.2(c). The Adviser 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 Adviser 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 Adviser of any
such claim shall not relieve the Adviser 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 Party, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the Adviser to such party of the
Adviser'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
Adviser 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 Adviser 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 the Account.
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 Kansas,
without regard to the conflict of laws provisions thereof.
8.2. This Agreement shall be subject to the provisions of the 1933
and 1940 Acts as well as the Exchange Act of 1934, and the rules and regulations
and rulings thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant, and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect until
the first to occur of:
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(a) termination by any party, for any reason with respect to
some or all Designated Portfolios, by six (6) months
advance written notice delivered to the other parties;
or
(b) termination by the Company by written notice to the
other party based upon the Company's determination that
shares of the Fund are not reasonably available to meet
the requirements of the Contracts; or
(c) termination by the Company by written notice to the
other party in the event any of the Designated
Portfolio'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
(d) termination by the Adviser by written notice to the
Company in the event that formal administrative
proceedings are instituted against the Company by the
National Association of Securities Dealers, Inc. (the
"NASD"), the SEC, the Insurance Commissioner or like
official of any state or any other regulatory body
regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of
any Account, or the purchase of the Designated
Portfolios' shares; provided, however, that the Adviser
determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a
material adverse effect upon the ability of the Company
to perform its obligations under this Agreement; or
(e) termination by the Company by written notice to the
other party in the event that formal administrative
proceedings are instituted against the Fund or Adviser
by the SEC or any state securities 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 Fund or Adviser to perform its obligations under
this Agreement; or
(f) termination by the Company by written notice to the
other party in the event that any Designated Portfolio
ceases to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986,
or if the Company reasonably believes that any such
Portfolio may fail to so qualify or comply; or
(g) termination by the Adviser by written notice to the
other parties, if either one or both the Fund and the
Adviser, respectively, shall determine, in their sole
judgment exercised in good faith, that the Company 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
(h) termination by the Company by written notice to the
other party, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund or the
Adviser 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
- 11 -
(i) termination by the Company upon any substitution of the
shares of another investment company or series thereof
for shares of a Designated Portfolio of the Fund in
accordance with the terms of the Contracts, provided
that the Company has given at least 45 days prior
written notice to the Fund and Adviser of the date of
substitution.
9.2. Notwithstanding any termination of this Agreement, the Adviser
shall, at the option of the Company, continue to make available additional
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"), unless the Company seeks an
order pursuant to Section 26(b) of the 1940 Act to permit the substitution of
other securities for the shares of the Designated Portfolios. Specifically, the
owners of the Existing Contracts may be permitted to reallocate investments in
the Fund, redeem investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing Contracts (subject to
any such election by the Company).
9.3. Notwithstanding any termination of this Agreement, each party's
obligation under Article VII to indemnify the other parties shall survive.
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 Company: Security Benefit Life Insurance Company
Attention: General Counsel
One Security Benefit Place
Topeka, Kansas 66636 - 0001
If to Adviser: Xxxxxxxxx Xxxxxx Management Inc.
Attention: General Counsel
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ARTICLE XI. MISCELLANEOUS
11.1. Subject to the requirements of legal process and regulatory
authority, the Fund and the Adviser shall treat as confidential the names and
addresses of the owners of the Contracts. Each party shall treat as confidential
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 information without the express written consent of
the affected party until such time as such information has come into the public
domain.
11.2. 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.
11.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
- 12 -
11.4. 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.
11.5. Each party hereto shall cooperate with the 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 Kansas 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 insurance
operations of the Company are being conducted in a manner consistent with the
Kansas insurance laws and regulations and any other applicable law or
regulations.
11.6. 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.
11.8. 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.
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.
Security Benefit Life
Insurance Company By its authorized officer
By: /s/
---------------------------------
Title: SR. VP, CFO & TREASURER
-------------------------------
Date: 1/23/06
-------------------------------
Xxxxxxxxx Xxxxxx By its authorized officer
Management Inc.
By: /s/
---------------------------------
Title: President
-------------------------------
Date: 1-26-06
-------------------------------
- 13 -
January 20, 2006
SCHEDULE A
ACCOUNT(S) CONTRACT(S) DESIGNATED PORTIBLIO(S)
SBL VARIABLE ACCOUNT XIV V6029 x XXXXXXXXX XXXXXX CORE BOND
FUND -- INVESTOR CLASS
CUSIP #000000000
A-1
