PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
NORTHERN FUNDS,
AND
NORTHERN TRUST INVESTMENTS, INC.
THIS AGREEMENT, dated as of the 1st day of July, 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"), Northern
Funds and Northern Institutional Funds, each a Delaware statutory trust (and
each a "Fund") and Northern Trust Investments, Inc. (the "Adviser"), an Illinois
corporation.
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. 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 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 in the best interests of the
shareholders of such Designated Portfolio.
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.
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 (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 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 3:00 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). 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 Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in connection with
any advances to, or borrowing or overdrafts by, the Fund, or any similar
expenses incurred by the Fund, as a result of portfolio transactions effected by
the Fund based upon such purchase request. 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 3 p.m. Eastern Time on the
same Business Day the Fund is properly notified of the redemption order of such
shares in accordance with the procedures and policies of the Fund as described
in the then-current prospectus. (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
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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.
(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 Fund's
receipt and acceptance of such request, provided that, in the case of a purchase
request, payment for Fund shares so requested is received by the Fund 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 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 Fund 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, in accordance with the Fund's pricing
error correction procedures. 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 Fund, 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 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 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
Adviser (unless otherwise required by applicable law), induce Contract owners to
change or modify the Fund or change the Fund's investment adviser.
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(d) 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.
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 and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws. The Company further represents that an investment by an Account
in a Fund or Portfolio does not violate any provision of applicable federal or
state law, including without limitation, any provision of the 1940 Act. 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 1940
Act. 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, subject to the authority of the Board to
suspend or terminate the offering of shares as described in Section 1.1 above.
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.
2.2. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.3. The Adviser represents and warrants that it is registered as
an investment adviser with the SEC.
2.4. The Fund and the Adviser represent and warrant that all of
their trustees/directors, officers, employees, and agents 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.
2.5. 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 $5 million. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding company.
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2.6. The Company understands and acknowledge that shares of a Fund
or any Designated Portfolio may be sold to the general public and are not
restricted for sale to separate accounts of insurance companies or qualified
plans under the Internal Revenue Code of 1986, as amended (the "Code"), and that
no Fund or Designated Portfolio has agreed to comply with Section 817(h) of the
Code or Treasury Regulation 1.817-5, as each may be amended from time to time,
relating to the diversification requirements for variable annuity, endowment or
life insurance contracts. The Company represents that the foregoing facts do not
render a Fund or Designated Portfolio ineligible for use with the Accounts and
Contracts set forth on Schedule A and will not cause a violation of any
applicable federal or state securities, insurance or other laws..
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
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.
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. 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 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 facilitate the Fund's
solicitation of voting instructions from Contract owners on behalf of the
Company. The Company shall also provide such other information and assistance to
the Fund as is reasonably necessary in order for the Fund solicit Contract
owners with value allocated to a Designated Portfolio and to properly tabulate
votes for Fund initiated proxies. 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.
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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 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
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 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 or its designee.
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 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 seven (7) 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 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 prospectuses, SAIs, shareholder reports and proxy statements 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 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 to shareholders and solicitations for voting
instructions 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
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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 to facilitate the solicitation of proxies from Contract owners
in an orderly manner.
ARTICLE V. FEES AND EXPENSE
5.1. Any fees or other compensation paid by a Fund or the Adviser
to the Company for services performed in connection with an Account's
investments in a Fund shall be as set forth in a separate written agreement
among the parties.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. 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 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 of the Fund's shares. The Fund shall bear the
expenses of distributing the Fund's proxy materials to existing Contract owners.
The Fund shall also bear the expense of printing the Fund's prospectus and
annual and semi annual reports which are delivered to existing Contract owners
with value allocated to one or more Designated Portfolios (with respect to the
expense of printing of prospectuses, the expense shall be borne by the Fund
regardless of whether such prospectuses are printed by the Fund or the Company.
5.3. 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 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
The Fund represents and warrants that it 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
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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 statement 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
(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
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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 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 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
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(iv) arise as a result of any material failure by the Fund
or the Adviser 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 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.
7.3. INDEMNIFICATION BY THE FUND
7.3(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 7.3)
against any and all losses, claims, expenses, 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 be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Fund and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature of
the Fund (or any amendment or supplement to any of the foregoing),
- 10 -
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 (other than statements
or representations contained in the registration statement,
prospectus, SAI or sales literature for the Contracts not supplied
by the Fund) or wrongful conduct of 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 Fund; or
(iv) arise as a result of any material failure by the Fund
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 or on behalf of 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 Fund;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof. The parties acknowledge that the Fund's indemnification
obligations under this Section 7.3 are subject to applicable law. The Company
agrees that, in the event an obligation to indemnify exists pursuant to Section
7.3 as well as Section 7.2 hereof, it will seek satisfaction under the
indemnification provisions of Section 7.2 before seeking indemnification under
this Section 7.3.
7.3(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.
7.3(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
- 11 -
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.
7.3(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.
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 Securities 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:
(a) termination by any party, for any reason with respect to some
or all Designated Portfolios, by four (4) 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 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
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
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 Fund or Adviser determines in its
sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse
- 12 -
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 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
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 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
(h) 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
(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, for a
period of one-year from the date of termination, the Fund and 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"). 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 and
under Section 11.2 regarding confidentiality shall survive.
- 13 -
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 the Fund or Adviser: Northern Trust Investments, Inc.
Attention: Xxxx X. Xxxxxxxxx,
Senior Vice President
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000.
ARTICLE XI. MISCELLANEOUS
11.1. It is understood and agreed that this document shall constitute a
separate agreement with respect to each Fund and that no Fund shall have any
liability under this document for the obligations of another Fund. All persons
dealing with a 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
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents nor shareholders of a Fund assume any personal liability
or responsibility for obligations entered into by or on behalf of the Fund. A
copy of each Fund's Agreement and Declaration of Trust, together with all
amendments thereto, is on file with the Secretary of State of Delaware.
11.2. 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, 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.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any 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.
- 14 -
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the 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.
11.7. 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.
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.
- 15 -
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: Senior Vice President & CMO
Date: June 23, 2003
Northern Funds By its authorized officer
By:/s/
-------------------------------
Title: Vice President
-------------------------------
Date: 6-27-03
--------------------------------
Northern Institutional Funds By its authorized officer
By:/s/
-------------------------------
Title: Vice President
-------------------------------
Date: 6-27-03
--------------------------------
Northern Trust Investments, Inc. By its authorized officer
By:/s/
-------------------------------
Title: Vice President
-------------------------------
Date: 6-27-03
--------------------------------
- 16 -
July 1,2003
SCHEDULE A
ACCOUNT(S) CONTRACT(S) DESIGNATED PORTFOLIO(S)
NORTHERN FUNDS' SELECT EQUITY
FUND
NORTHERN FUNDS' LARGE CAP
VALUE FUND
NORTHERN INSTITUTIONAL FUNDS'
BALANCED FUND, CLASS A
A-1
