AMENDMENT NUMBER 2
TO PARTICIPATION AGREEMENT
WHEREAS, Security Benefit Life Insurance Company (the "Company"),
Xxxxxxxxxxx Variable Account Funds (the "Fund") and OppenheimerFunds, Inc (the
"Adviser") are parties to a Participation Agreement dated May 1, 2003 (the
"Agreement"); and
WHEREAS, terms of the Agreement contemplate that Accounts and Contracts of
the Company that are eligible to purchase Designated Portfolios of the Fund may
be changed from time to time by amending Schedule A to the Agreement; and
WHEREAS, the parties wish to add certain Accounts and Contracts to the
Agreement by deleting the existing Schedule A and replacing it with the Schedule
A attached hereto; and
WHEREAS, capitalized terms used but not defined herein, shall have the
meaning given them in the Agreement; and
WHEREAS, all other terms of the Agreement shall remain in full force and
effect;
NOW, THEREFORE, the parties agree to delete the existing Schedule A to the
Agreement and replace it with the Schedule A attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
#1 to the Agreement to be executed in its name and on its behalf by its duly
authorized representative effective July 1, 2005.
Security Benefit Life
Insurance Company By its authorized officer
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Title: Vice President
----------------
Date: July 8, 2005
-------------------
Xxxxxxxxxxx Variable Account Funds By its authorized officer
By: /s/
----------------------------------
Title: Treasurer
-------------------------------
Date: 7/20/05
--------------------------------
Xxxxxxxxxxx Funds, Inc By its authorized officer
By: /s/
----------------------------------
Title: Vice President
-------------------------------
Date: 7/20/05
--------------------------------
- 2 -
July 1, 2005
SCHEDULE A
ACCOUNT(S) CONTRACT(S) DESIGNATED PORTFOLIO(S)
SBL Variable Annuity Account SecureDesigns Variable Xxxxxxxxxxx Main Street
XIV Annuity Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account AdvanceDesigns Variable Xxxxxxxxxxx Main Street
XIV Annuity Small Cap Fund/VA-Service
Class
Variflex Separate Account Variflex Xxxxxxxxxxx Main Street
Small Cap Fund/VA -Service
Class
Variflex Separate Account Variflex XX Xxxxxxxxxxx Main Sheet
Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account Variflex XX Xxxxxxxxxxx Main Street
VIII Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account Variflex Signature Xxxxxxxxxxx Main Street
VIII Small Cap Fund/VA -Service
Class
SBL Variable Annuity Account Variflex Extra Credit Xxxxxxxxxxx Main Street
VIII Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account ClassicStrategies Xxxxxxxxxxx Main Street
XVII Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account ThirdFed Xxxxxxxxxxx Balanced
XVII Fund/VA - Initial Class,
CUSIP #000000000
A-1
AMENDMENT NUMBER 1
TO PARTICIPATION AGREEMENT
WHEREAS, Security Benefit Life Insurance Company (the "Company"),
Xxxxxxxxxxx Variable Account Funds (the "Fund") and OppenheimerFunds, Inc. (the
"Adviser") are parties to a Participation Agreement dated May 1, 2003 (the
"Agreement"); and
WHEREAS, terms of the Agreement contemplate that Accounts and Contracts of
the Company that are eligible to purchase Designated Portfolios of the Fund may
be changed from time to time by amending Schedule A to the Agreement; and
WHEREAS, the parties wish to add certain Accounts and Contracts to the
Agreement by deleting the existing Schedule A and replacing it with the Schedule
A attached hereto; and
WHEREAS, capitalized terms used but not defined herein, shall have the
meaning given them in the Agreement; and
WHEREAS, all other terms of the Agreement shall remain in full force and
effect;
NOW, THEREFORE, the parties agree to delete the existing Schedule A to the
Agreement and replace it with the Schedule A attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
#1 to the Agreement to be executed in its name and on its behalf by its duly
authorized representative effective
January 30, 2004.
Security Benefit Life
Insurance Company By its authorized officer
By: /s/ Xxxxxx Xxxx
----------------------------------
Xxxxxx Xxxx
Title: Senior Vice President and
Chief Marketing Office
-------------------------------
Date: 3/22/04
--------------------------------
Xxxxxxxxxxx Variable Account Funds By its authorized officer
By: /s/
----------------------------------
Title: Secretary & Vice President
-------------------------------
Date: January 6, 2005
--------------------------------
OppenheimerFunds, Inc. By its authorized officer
By: /s/
----------------------------------
Title: Vice President
-------------------------------
Date: 1/14/05
--------------------------------
- 2 -
January 30, 2004
SCHEDULE A
ACCOUNT(S) CONTRACT(S) DESIGNATED PORTFOLIO(S)
SBL Variable Annuity Account SecureDesigns Variable Xxxxxxxxxxx Main Street
XIV Annuity Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account AdvanceDesigns Variable Xxxxxxxxxxx Main Street
XIV Annuity Small Cap Fund/VA-Service
Class
Variflex Separate Account Variflex Xxxxxxxxxxx Main Street
Small Cap Fund/VA-Service
Class
Variflex Separate Account Variflex XX Xxxxxxxxxxx Main Street
Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account Variflex XX Xxxxxxxxxxx Main Street
VIII Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account Variflex Signature Xxxxxxxxxxx Main Street
VIII Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account Variflex Extra Credit Xxxxxxxxxxx Main Street
VIII Small Cap Fund/VA-Service
Class
SBL Variable Annuity Account ClassicStrategies Xxxxxxxxxxx Main Street
XVII Small Cap Fund/VA-Service
Class
A-1
PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
XXXXXXXXXXX VARIABLE ACCOUNT FUNDS,
AND
OPPENHEIMERFUNDS, INC.
THIS AGREEMENT, dated as of the 1st day of May, 2003, 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"), Xxxxxxxxxxx
Variable Account Funds (the "Fund"), an open-end management investment company
organized under the laws of the State of Massachusetts, and OppenheimerFunds,
Inc. (the "Adviser"), a corporation organized under the laws of the State of
Colorado.
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 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,
the Fund and the Adviser agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. Subject to Article IX hereof, the Fund 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, increased by any initial sales charge, if the
Fund's prospectus then in effect imposes such a charge on such purchases.
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 Fund may so provide, and (ii) the
Board of Trustees of the Fund (the "Board") may refuse to sell shares of the
Designated Portfolio to any person, or 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 is, 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
in the best interests of the shareholders of such Designated Portfolio. The Fund
may restrict or refuse investments through Accounts by market timers as
described in the Fund's then current prospectus. Further, it is acknowledged and
agreed that the availability of shares of the Fund shall be subject to the
Fund's then current prospectus and statement of additional information, federal
and state securities laws and applicable rules and regulations of the SEC and
the NASD.
1.2. The Fund shall 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. In addition, the
Fund may redeem shares of any Designated Portfolio in kind to the extent
permitted by Ru1e 18f-l of the 1940 Act and any rules thereunder. The Company
agrees to purchase and redeem the shares of each Designated Portfolio in
accordance with the provision of that Portfolio's then current prospectus and
statement of additional information.
- 2 -
1.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Fund 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 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 Fund 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 Fund of a purchase
request for such shares. Payment for Designated Portfolio shares shall be made
in federal funds transmitted to the Fund or other designated person by wire to
be received by 2:00 p.m. Eastern Time on the Business Day the Fund is notified
of the purchase request for Designated Portfolio shares (unless the Fund
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 Fund 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). Upon receipt of
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed by
the Account or the Company shall be made by the Fund in federal funds
transmitted by wire to the Company or any other designated person by 2 p.m.
Eastern Time on the same Business Day the Fund 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
1.3(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.
- 3 -
1.4. The Fund 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 Trust provides the Company with materially incorrect
share net asset value information through no fault of the Company, 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 (determined in accordance with SEC guidelines) in the calculation
of the net asset value per share, dividend or capital gain information shall be
reported promptly to the Company upon discovery.
1.5. The Fund 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 by written notice to the Fund and
to receive all such dividends and capital gain distributions in cash. The Fund
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
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.
- 4 -
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
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, offered and sold in compliance in all
material respects with all applicable federal securities and state securities
and insurance laws and regulations and National Association of Securities
Dealers, Inc. ("NASD") conduct rules. 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 and that it
will maintain such registration for so long as any Contracts are outstanding or
until registration is no longer required under federal securities laws, or
alternatively (b) has not registered the Account in proper reliance upon an
exclusion from registration under the 0000 Xxx.
2.2. The Company represents and warrants that the contracts are
currently and at the time of issuance will be treated as life insurance or
annuity contracts under applicable provisions of the Code and the regulations
thereunder, and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Adviser 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. In addition, the Company
represents and warrants that the Accounts are "segregated asset accounts" and
that interests in the Accounts are offered exclusively through the purchase of
or transfer into a "variable contract" within the meaning of such terms under
Section 817 of the Code and the regulations thereunder (and any amendments or
other modifications to such section or such regulations and any revenue rulings,
revenue procedures, notices or other published announcements of the Internal
Revenue Service interpreting these provisions). The Company shall continue to
meet such definitional requirements, and it will notify the Fund and the Adviser
immediately upon having a reasonable basis for believing that such requirements
have ceased to be met or that they might not be met in the future. The Company
represents and warrants.
- 5 -
that it will not purchase Fund shares with assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
2.3. If the Contracts purchase shares of a series and class of the
Fund that have adopted a plan under Rule l2b-l under the 1940 Act to finance
distribution expenses (a"12b-l Plan"), the Company agrees to provide the
Trustees with any information as may be reasonably necessary for the Trustees to
review the Fund's 12b-l Plan or Plans.
2.4. The Fund 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.
2.5. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is registered as an
investment adviser with the SEC.
2.7. The Fund and the Adviser represent and warrant that all of
their 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-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.
2.8. The Company represents and warrants that all of its directors,
officers, 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 $10 million. To the extent that the Fund or Adviser
has suffered a loss as a result of conduct on the part of the Company or its
employees, offices, directors or agents, the Company agrees that any amount
received under such bond in connection with claims that derive from arrangements
described in this Agreement will be paid by the Company for the benefit of the
- 6 -
Fund. The Company agrees to make all reasonable efforts to see that this bond or
another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Adviser in the event that such coverage no longer
applies. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company.
2.9 The Fund will not sell shares of the Designated Portfolio(s) to
any other participating insurance company separate account unless an agreement
containing a provision similar in substance to Section 2.2 of this Agreement is
in effect to govern such sales, it being understood that this provision shall
apply prospectively to participation agreements that the Fund enters into on or
after the date hereof.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1. The Fund 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
Fund 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 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
Adviser shall be permitted to review and approve the typeset form of the Fund's
Prospectus prior to such printing. 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 Fund 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.
- 7 -
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. The Fund will pay or cause to be paid the expenses associated
with text composition, printing, mailing, distributing, and tabulation of proxy
statements and voting instruction solicitation materials to Contract owners with
respect to proxies related to the Fund, consistent with applicable provisions of
the 1940 Act.
3.5. In the event a meeting of shareholders of the Fund (or any
Designated Portfolio) is called by the Trustees, the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Portfolio(s) shares held in the Account in
accordance with instructions received from Contract owners;
(iii) vote the Portfolio(s) shares held in the Account for which
no instructions have been received, in the same proportion as Portfolio(s)
shares for which instructions have been received from Contract owners, so long
as and to the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners; and
(iv) take responsibility for assuring that the Accounts calculate
voting privileges in a manner consistent with other Participating Insurance
Companies. The Fund and Adviser agree to assist the Company and the other
Participating Insurance Companies in carrying out this responsibility.
3.6 The Fund and the Adviser shall provide the Company with as much
notice as is reasonably possible under the circumstances of any prospectus
stickers or supplements for a Designated Portfolio.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or otherwise uses which is not provided by
the Funds 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 Fund 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 seven (7) Business
Days after receipt of such material. The Fund or its
- 8 -
designee reserves the right to reasonably object to the continued use of
previously approved 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 Fund 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 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 Fund or its designee, except with the
permission of the Fund.
4.3. The Fund and the Adviser, or their designee, shall furnish, or
cause to be furnished, to the Company, each piece of sales literature or other
promotional material that it develops or otherwise uses which is not provided by
the Company 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
ten (10) Business Days after receipt of such material. The Company reserves the
right to reasonably object to the continued use of previously approved 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 Fund 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 Fund 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.
- 9 -
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 Fund and the Adviser any complaints received from the Contract
owners pertaining to the Fund or a Designated Portfolio.
4.7. The Fund 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 Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund 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 Fund and Adviser shall pay no fee or other compensation to
the Company under this Agreement. Nothing herein shall prevent the parties
hereto from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Fund and/or to the Accounts..
All expenses incident to performance by each party of its respective
duties under this Agreement shall be paid by that party. The Fund 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 Fund
shall 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, costs of tabulating Fund shares voted
in response to a solicitation of proxies by the Fund 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.
The Fund shall bear the expenses of distributing the Fund's proxy materials and
reports to existing Contract owners. With respect to any prospectuses for the
Designated Portfolio that are printed in combination with any one or more
- 10 -
Contract prospectus (the "Prospectus Booklet"), the costs of printing Prospectus
Booklets for distribution to existing Contract owners shall be prorated to the
Fund based on (a) the ratio of the number of pages of the prospectuses included
for the Portfolio in the Prospectus Booklets to the number of pages in the
Prospectus Booklet as a whole, provided, however, that the Company shall bear
all printing expenses of such combined documents where used for distribution to
prospective purchasers or to owners of existing Contracts not funded by the
Designated Portfolios.
5.2. The Company shall bear 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
6.1 The Adviser represents and warrants that each Designated Portfolio
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 each Designated Portfolio will maintain such qualification (under
Subchapter M or any successor or similar provisions) and that the Adviser will
notify the Company immediately upon having a reasonable basis for believing that
any Designated Portfolio has ceased to so qualify or that a Designated Portfolio
might not so qualify in the future.
6.2 The Adviser represents and warrants that each Designated Portfolio
will comply and will maintain each Designated Portfolio's compliance with the
diversification requirements set forth in Section 817(h) of the Internal Revenue
Code (or any successor or similar provisions and Section 1.817-5(b) of the
regulations under the Code (or any successor or similar provisions) or will take
all reasonable steps to meet the diversification requirements within the grace
period afforded by Section 1.817-5 of the regulations under the Code. The
Adviser will notify the Company immediately upon having a reasonable basis for
believing that a Designated Portfolio has ceased to so comply or that a
Designated Portfolio might not comply in the future.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the Contract owners of all
separate accounts investing in the Fund. 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 laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar
- 11 -
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 a Designated Portfolio are managed; (e) a difference
in voting instructions given by participating insurance companies or 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 Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2 The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. The Company agrees to be bound by the responsibilities
of a participating insurance company as set forth in the Mixed and Shared
Funding Exemptive Order, including without limitation the requirement that the
Company report any potential or existing conflicts of which it is aware to the
Board. The Company will assist the Board in carrying out its responsibilities in
monitoring such conflicts under the Mixed and Shared Funding Exemptive Order, by
providing the Board in a timely manner with all information reasonably necessary
for the Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Board whenever Contract owner
voting instructions are disregarded and by confirming in writing, at the Fund's
request, that the Company is unaware of any such potential or existing material
irreconcilable conflicts.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall, at its expenses and to the extent reasonably practicable, (as
determined by a majority of the disinterested Trustees), take 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 Accounts
from the Fund or any Designated Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio or
Fund, 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 vote 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
accounts. The Company's obligations under this Section 7.3 shall not depend on
whether other affected Participating Insurance Companies fulfill a similar
obligation.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
could conflict with the majority of Contact
- 12 -
owner instructions, the Company may be required, at the Fund's election, to
withdraw the Accounts' investment in the Fund and terminate this Agreement;
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 disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of the six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
Accounts' investment in the Fund and terminate this Agreement within six months
after the Board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; 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 members of the Board. Until the end of the foregoing six month
period, the Fund shall continue to accept and implement orders by the Company
for the purchase and redemption of shares of the Fund, subject to applicable
regulatory limitation.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts 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 Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the particular Accounts' investment in
the Fund and terminate this Agreement within six (6) months after the Board
informs 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 members of the Board.
- 13 -
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(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 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 or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities (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 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 Fund shares,
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
- 14 -
under the Company's authorization or control, 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 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 8.1(b) and
8.1(c) hereof.
8.1(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.
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), 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
-15-
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 Fund shares or the Contracts or the
operation of the Fund.
8.2 INDEMNIFICATION BY THE ADVISER
8.2(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 8.2)
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 become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities (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
- 16 -
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 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 8.2(b) and
8.2(c) hereof.
8.2(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.
8.2(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
- 17 -
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.
8.2(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.
8.3 INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 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 Fund) 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, expenses, damages, liabilities (or actions in respect thereof)
or settlements, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the diversification and other qualification 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 or on behalf of
the Fund in this Agreement or arise out
- 18 -
of or result from any other material breach of this
Agreement by or on behalf of the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof. The parties acknowledge that the Fund's indemnification
obligations under this Section 8.3 are subject to applicable law. The Company
agrees that, in the event an obligation to indemnify exists pursuant to Section
8.3 as well as Section 8.2 hereof, it will seek satisfaction under the
indemnification provisions of Section 8.2 before seeking indemnification under
this Section 8.3.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.3(c). The Fund 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 Fund 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 Fund of any
such claim shall not relieve the Fund 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 Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the Fund to such party of the Fund'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 Fund 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 agrees promptly to notify the Fund of
the commencement of any litigation or proceeding against it or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
- 19 -
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 State of Kansas,
without regard to the conflict of laws provisions thereof.
9.2 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 X. TERMINATION
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(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
parties based upon the Company's reasonable, good faith
determination that shares of the Designated Portfolio are
not reasonably available to meet the requirements of the
Contracts. Prompt notice of the election to terminate for
such cause and an explanation of such cause shall be
furnished by the Company; or
(c) termination by the Company by written notice to the other
parties 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 Fund or Adviser in the event that formal
administrative proceedings are instituted against the
Company (or its affiliates) by the National Association of
Securities Dealers, Inc. (the "NASD"), the SEC, the
Insurance Commissioner, state securities department or like
official of any state or any other regulatory body that the
Fund or Adviser determines in its sole judgment
- 20 -
exercised in good faith 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 in the event that formal
administrative proceedings are instituted against the Fund
or Adviser (or any of their respective controlled
affiliates) by the SEC or any state securities department or
any other regulatory body that the Company determines in its
sole judgment exercised in good faith 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
parties 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 Company by written notice to the Fund and
the Adviser in the event that any Designated Portfolio fails
to meet the diversification requirements specified in
Article VI hereof, or if the Company, in good faith,
reasonably believes that any Designated Portfolio may feel
to meet such diversification requirements; or
(h) termination by either the Fund or 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
(i) termination by the Company by written notice to the other
parties, 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
- 21 -
(j) termination as provided in Article VII; or
(k) termination by the Company or the Fund upon a determination
by a majority of the Board, or a majority of the
disinterested Board members, that an irreconcilable material
conflict exists among the interests of (i) all Contract
owners of variable insurance products of all separate
accounts; or (ii) the interests of Participating Insurance
Company investing in the Fund as delineated in Article VII
of this Agreement; or
(l) termination by any party to this Agreement, upon another
party's failure to cure a material breach of any provision
of this Agreement within thirty days after written notice
thereof; or
(m) termination by the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable
requirements of federal and/or state securities law.
(n) termination by the Company or the Fund upon receipt of any
necessary regulatory approvals or the vote of the Contract
owners having an interest in the Account to substitute 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. The Company will give at
least 45 days prior written notice to the Fund and Adviser
of the date of any proposed vote or other action taken to
replace the Fund's shares.
10.2 Notwithstanding any termination of this Agreement, the Fund and the
Adviser shall, at the option of the Company, continue to make available
additional shares of the Fund for up to six months following termination,
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, provided that the Fund and/or
Portfolio has not been terminated or otherwise closed by the Fund's Board to
current investors and investments. Specifically, for up to six months following
termination of this Agreement, 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). Neither
this, nor any other provision in the agreement, will
- 22 -
interfere with the Board's ability to take action it determines in good faith it
is required to take under the 1940 Act and/or state law.
10.3 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
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 Company: Security Benefit Life Insurance Company
Attention General Counsel
One Security Benefit Place
Topeka, Kansas 66636 - 0001
If to the Fund: Xxxxxxxxxxx Variable Account Funds
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
With a copy to:
Myer, Swanson, Xxxxx & Wolf, P.C.
0000 Xxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
If to Adviser: OppenheimerFunds, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the respective Designated Portfolios listed on Schedule
A hereto as though each such Designated Portfolio had separately
contracted with the Company and the Adviser for the
- 23 -
enforcement of any claims against the Fund. The parties agree that
neither the Board, officers, agents or shareholders of the Fund
assume any personal liability or responsibility for obligations
entered into by or on behalf of the Fund.
12.2 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 and by Title V, Subtitle A of the
Xxxxx-Xxxxx-Xxxxxx Act and by regulations adopted thereunder by
regulators having jurisdiction over the parties hereto, 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.
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 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.
- 24 -
12.7 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.
12.8 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. Notwithstanding the foregoing or
anything to the contrary set forth in this Agreement, the Adviser
may transfer or assign its rights, duties and obligations hereunder
or interest herein to any entity owned, directly or indirectly, by
Xxxxxxxxxxx Acquisition Corp. (the Adviser's parent corporation) or
to a successor in interest pursuant to a merger, reorganization,
stock sale, asset sale or other transaction, without the consent of
the Company, as long as (i) that assignee agrees to assume all the
obligations imposed on the Adviser by the Agreement, and (ii) the
Fund consents to that assignment.
12.9 The Company and the Adviser each understand and agree that
the obligations of the Fund under this Agreement are not binding
upon any Trustee or shareholder of the Fund personally, but bind
only the Fund with respect to the Designated Portfolio(s) and the
Designated Portfolio(s)' property; The Company and the Adviser each
represent that it has notice of the provisions of the Declaration of
Trust of the Fund disclaiming Trustee and shareholder liability for
acts or obligations of the Fund.
- 25 -
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 By its authorized officer
Insurance Company
By: /s/ Xxx Xxxx
----------------------------------
Title: Senior Vice President
-------------------------------
Date: April 30, 2003
--------------------------------
Xxxxxxxxxxx Variable Account Funds By its authorized officer
By: /s/ XXXXX XXXXXXX
----------------------------------
XXXXX XXXXXXX
Title: ASSISTANT SECRETARY
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Date: May 1, 2003
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OppenheimerFunds, Inc. By its authorized officer
By: /s/ XXXXX XXXXXXX
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XXXXX XXXXXXX
Title: VICE PRESIDENT & SENIOR
COUNSEL
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Date: May 1, 2003
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May 1,2003
SCHEDULE A
ACCOUNT(S) CONTRACT(S) DESIGNATED PORTFOLIO(S)
SBL Variable Annuity Account SecureDesigns Variable Xxxxxxxxxxx Main Street Small
XIV Annuity Cap Fund/VA-Service Class
SBL Variable Annuity Account AdvanceDesigns Variable Xxxxxxxxxxx Main Street Small
XIV Annuity Cap Fund/VA-Service Class
A-1
OPPENHEIMERFUNDS, INC.
000 XXXXXXX XXXXXX
XXX XXXX, XXX XXXX 00000
DESCRIPTION OF PORTFOLIO PROXY VOTING PROCEDURES AND GUIDELINES
AUGUST 1, 2003
Under the investment advisory agreement between OppenheimerFunds, Inc.
("OFI") and each Xxxxxxxxxxx fund, OFI regularly provides investment advice and
recommendations to the Fund with respect to its investments, investment policies
and the purchase and sale of securities. Voting proxies relating to securities
held by the Xxxxxxxxxxx funds ("portfolio proxies") is within OFI's
responsibility to supervise the Funds' investment program.
In addition, OFI is the sub-adviser for more than 20 funds across 12
outside fund families. Pursuant to the sub-advisory agreement between OFI and
each such fund's advisor, OFI is responsible for portfolio proxy voting unless
the adviser has directed OFI to the contrary in writing.
OBJECTIVE
OFI has a fiduciary duty under its investment advisory and sub-advisory
agreements to vote portfolio proxies in the best interests of the Fund and its
shareholders. OFI undertakes to vote portfolio proxies with a view to enhancing
the value of the company's stock held by the Funds. When making portfolio proxy
voting decisions on behalf of the Funds, OFI adheres to its Proxy Voting
Guidelines. These Guidelines set forth OFI's position on routine issues and
parameters for assessing non-routine issues. In the case of social and political
responsibility issues, OFI believes they do not primarily involve financial
considerations and OFI abstains from voting on those issues.
PROXY VOTING AGENT
OFI, on behalf of the Funds, has engaged an independent unaffiliated
third-party as its agent to vote portfolio proxies in accordance with the Proxy
Voting Guidelines and to maintain records of such portfolio proxy voting. The
proxy voting agent is responsible for coordinating with the Funds' custodians to
ensure that all proxy materials received by the custodians relating to the
Funds' portfolio securities are processed in a timely fashion. To the extent
applicable, the proxy voting agent will refer proxy voting questions to the
Proxy Voting Coordinator (described below) for instructions under circumstances
where: (1) a particular proxy question is not covered by the Proxy Voting
Guidelines; or (2) the Proxy Voting Guidelines call for instructions on a
case-by-case basis.
PROXY VOTING COORDINATOR
The Proxy Voting Coordinator, who reports to a senior attorney within
OFI's Legal Department, is responsible for monitoring proxy voting by the proxy
voting agent. The Proxy Voting Coordinator deals directly with the proxy voting
agent and, as to questions referred by the proxy voting agent, will solicit
recommendations and instructions from OFI's investment professionals, as
appropriate. The Proxy Voting Coordinator will review the investment
professionals' recommendation with the senior attorney in determining how to
vote the portfolio proxy. The Proxy Voting Coordinator is responsible for
ensuring that these questions are responded to in a timely fashion and for
transmitting appropriate voting instructions to the proxy voting agent.
CONFLICTS OF INTEREST
OFI's primary consideration when voting proxies is the financial interests
of the Funds and their shareholders. It is possible that a conflict of interest
may arise between the interests of the Fund's shareholders and OFI or its
directly-controlled affiliates in voting a portfolio proxy. A potential conflict
of interest situation may include where an OFI directly-controlled affiliate
manages or administers the assets of a pension plan of the company soliciting
the proxy, and failure to vote the proxy as recommended by the company's
management might harm the OFI affiliate's business relationship with the
company. In order to prevent potential conflicts of interest between OFI and its
directly-controlled affiliates, OFI and its directly-controlled affiliates each
maintain separate investment decision making processes to prevent the sharing of
business objectives with respect to proposed or actual actions regarding
portfolio proxy voting decisions. When voting proxies on behalf of Fund
shareholders, OFI votes in a manner consistent with the best interest of the
Fund and its shareholders, and votes a company's proxies without regard to any
other business relationship between OFI (or its directly-controlled affiliates)
and the company.
SUMMARY OF PORTFOLIO PROXY VOTING GUIDELINES
The following is a summary of the Portfolio Proxy Voting Guidelines under
which OFI votes proxies relating to securities held by (i) the Xxxxxxxxxxx
funds, and (ii) the funds for which OFI is the sub-adviser (unless the fund's
adviser has advised OFI that the adviser will vote the fund's portfolio
proxies). Under Portfolio Proxy Voting Guidelines:
o We vote with the recommendation of the company's management on routine
matters, including election of directors nominated by management and
ratification of auditors, unless circumstances indicate otherwise.
o In general, we oppose anti-takeover proposals and support elimination of
anti- takeover proposals, absent unusual circumstances.
o We support shareholder proposals to reduce a super-majority vote
requirement.
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o We oppose management proposals to add a super-majority vote requirement.
o We oppose proposals to classify the board of directors. A company that has
a classified, or staggered, board is one in which directors are typically
divided into three classes, with each class serving three-year terms; each
class's reelection occurs in different years. In contrast, all directors
of an annually elected board serve one- year terms and the entire board
stands for election each year. We believe classified boards
inappropriately limit the ability of shareholders to effect change in a
board's composition.
o We support proposals to eliminate cumulative voting. Cumulative voting
permits a shareholder to amass (cumulate) all his or her votes for
directors and apportion these votes among one, a few, or all of the
directors on a multi-candidate slate. We believe cumulative voting
promotes special interest candidates who may not represent the interests
of all shareholders.
o We oppose re-pricing of stock options.
o In general, we consider executive compensation questions such as stock
option plans and bonus plans to be ordinary business activity. We analyze
stock option plans, paying particular attention to their dilutive effect.
While we generally support management proposals, we oppose compensation
plans we consider to be excessive.
A copy of the Portfolio Proxy Voting Procedures and Guidelines and the proxy
voting record is available upon request to OppenheimerFunds, Inc. 000 Xxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Attn: Proxy Department.
August 1,2003
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