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EXHIBIT h(71)
PRIVATE PLACEMENT
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS,
SECURITY LIFE OF DENVER,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
ING AMERICA EQUITIES, INC.
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TABLE OF CONTENTS
DESCRIPTION PAGE
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Section 1. Available Funds.......................................................................................2
1.1 Availability........................................................................................2
1.2 Addition, Deletion or Modification of Funds.........................................................2
1.3 No Sales to the General Public......................................................................2
Section 2. Processing Transactions...............................................................................2
2.1 Timely Pricing and Orders...........................................................................2
2.2 Timely Payments.....................................................................................3
2.3 Applicable Price....................................................................................3
2.4 Dividends and Distributions.........................................................................4
2.5 Book Entry..........................................................................................4
Section 3. Costs and Expenses....................................................................................5
3.1 General.............................................................................................5
3.2 Registration........................................................................................5
3.3 Other (Non-Sales-Related)...........................................................................5
3.4 Other (Sales-Related)...............................................................................5
3.5 Parties To Cooperate................................................................................6
Section 4. Legal Compliance......................................................................................6
4.1 Tax Laws............................................................................................6
4.2 Insurance and Certain Other Laws....................................................................8
4.3 Securities Laws.....................................................................................9
4.4 Notice of Certain Proceedings and Other Circumstances..............................................10
4.5 SECURITY LIFE To Provide Documents: Information About AVIF.........................................11
4.6 AVIF To Provide Documents; Information About SECURITY LIFE.........................................12
Section 5. Mixed and Shared Funding.............................................................................13
5.1 General............................................................................................13
5.2 Disinterested Trustees.............................................................................13
5.3 Monitoring for Material Irreconcilable Conflicts...................................................14
5.4 Conflict Remedies..................................................................................14
5.5 Notice to SECURITY LIFE............................................................................16
5.6 Information Requested by Board of Trustees.........................................................16
5.7 Compliance with SEC Rules..........................................................................16
5.8 Other Requirements.................................................................................16
Section 6. Termination..........................................................................................16
6.1 Events of Termination..............................................................................16
6.2 Notice Requirement for Termination.................................................................17
6.3 Funds To Remain Available..........................................................................18
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6.4 Survival of Warranties and Indemnifications........................................................18
6.5 Continuance of Agreement for Certain Purposes......................................................18
Section 7. Parties To Cooperate Respecting Termination..........................................................19
Section 8. Assignment...........................................................................................19
Section 9. Notices..............................................................................................19
Section 10. Voting Procedures...................................................................................20
Section 11. Foreign Tax Credits.................................................................................20
Section 12. Indemnification.....................................................................................20
12.1 Of AVIF by SECURITY LIFE and ING..................................................................20
12.2 Of SECURITY LIFE and ING by AVIF..................................................................22
12.3 Effect of Notice..................................................................................25
12.4 Successors........................................................................................25
Section 13. Applicable Law......................................................................................25
Section 14. Execution in Counterparts...........................................................................25
Section 15. Severability........................................................................................25
Section 16. Rights Cumulative...................................................................................26
Section 17. Headings............................................................................................26
Section 18. Confidentiality.....................................................................................26
Section 19. Trademarks and Fund Names...........................................................................27
Section 20. Parties to Cooperate................................................................................28
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PRIVATE PLACEMENT
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 25th day of
September, 2000 ("Agreement"), by and among AIM Variable Insurance Funds, a
Delaware trust ("AVIF"); Security Life of Denver, a Colorado life insurance
company ("SECURITY LIFE"), on behalf of itself and each of its segregated asset
accounts listed in Schedule A hereto, as the parties hereto may amend from time
to time (each, an "Account," and collectively, the "Accounts"); and ING America
Equities, Inc., an affiliate of SECURITY LIFE and the principal underwriter of
the Contracts ("ING") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of seventeen separate series
("Series"), shares ("Shares") of each of which are registered under the
Securities Act of 1933, as amended (the "1933 Act") and are currently sold to
one or more separate accounts of life insurance companies to fund benefits under
variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, SECURITY LIFE will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which are
designed to qualify for an exemption from registration under the 1933 Act and
are not for general distribution; and
WHEREAS, SECURITY LIFE will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount thereof
to the extent the context requires); and
WHEREAS, SECURITY LIFE will serve as the depositor of the Accounts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, SECURITY LIFE intends to purchase Shares in one or more of the
Funds on behalf of the Accounts to fund the Contracts; and
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WHEREAS, ING is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to SECURITY LIFE for
purchase and redemption at net asset value and with no sales charges, subject to
the terms and conditions of this Agreement. The Board of Trustees of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Trustees acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public, it being understood by the Parties that AVIF
may sell shares of any Fund to any person eligible to invest in that Fund in
accordance with applicable provisions of Section 817(h) of the Code and the
regulations thereunder, and that if such provisions are not applicable, then
AVIF may sell shares of any Fund to any person, including members of the general
public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
SECURITY LIFE with the net asset value per Share for each Fund by 5:30 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean any
day on which (i) the New York Stock Exchange
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is open for regular trading, (ii) AVIF calculates the Fund's net asset value,
and (iii) SECURITY LIFE is open for business.
(b) SECURITY LIFE will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. SECURITY LIFE will perform such Account processing the same Business
Day, and will place corresponding orders to purchase or redeem Shares with AVIF
by 9:00 a.m. Central Time the following Business Day; provided, however, that
AVIF shall provide additional time to SECURITY LIFE in the event that AVIF is
unable to meet the 5:30 p.m. time stated in paragraph (a) immediately above.
Such additional time shall be equal to the additional time that AVIF takes to
make the net asset values available to SECURITY LIFE.
(c) With respect to payment of the purchase price by SECURITY LIFE and
of redemption proceeds by AVIF, SECURITY LIFE and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), SECURITY LIFE shall be
entitled to an adjustment to the number of Shares purchased or redeemed to
reflect the correct net asset value per Share. Any material error in the
calculation or reporting of net asset value per Share, dividend or capital gain
information shall be reported promptly upon discovery to SECURITY LIFE.
2.2 TIMELY PAYMENTS.
SECURITY LIFE will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. AVIF will wire payment
for net redemptions to an account designated by SECURITY LIFE by 1:00 p.m.
Central Time on the same day as the Order is placed, to the extent practicable,
but in any event within five (5) calendar days after the date the order is
placed in order to enable SECURITY LIFE to pay redemption proceeds within the
time specified in Section 22(e) of the 1940 Act or such shorter period of time
as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that SECURITY LIFE
receives prior to the close of regular trading on the New York Stock Exchange on
a Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), SECURITY LIFE shall be the designated agent of
AVIF for
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receipt of orders relating to Contract transactions on each Business Day and
receipt by such designated agent shall constitute receipt by AVIF; provided that
AVIF receives notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance with Section
2.1(b) hereof.
(b) All other Share purchases and redemptions by SECURITY LIFE will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
(c) Notwithstanding any provision of the Agreement to the contrary, the
Parties agree that AVIF shall determine the applicable price for Share orders
attributable to Contracts funded by unregistered Accounts in accordance with
Section 2.3(a) hereof, provided that LIFE COMPANY represents and warrants that
it is legally or contractually obligated to treat such orders in the same manner
as orders attributable to Contracts funded by registered Accounts. Each Share
order placed by SECURITY LIFE that is attributable, in whole or in part, to
Contracts funded by an unregistered Account, shall be deemed to constitute such
representation and warranty by SECURITY LIFE unless the order specifically
states to the contrary. Otherwise, AVIF shall determine the applicable price for
Share orders attributable to Contracts funded by unregistered Accounts in
accordance with Section 2.3(b) hereof. As used herein, an Account is registered
if it is registered under the 1940 Act.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to SECURITY LIFE of any income
dividends or capital gain distributions payable on the Shares of any Fund.
SECURITY LIFE hereby elects to reinvest all dividends and capital gains
distributions in additional Shares of the corresponding Fund at the ex-dividend
date net asset values until SECURITY LIFE otherwise notifies AVIF in writing, it
being agreed by the Parties that the ex-dividend date and the payment date with
respect to any dividend or distribution will be the same Business Day. SECURITY
LIFE reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to SECURITY LIFE. Shares ordered from AVIF will
be recorded in an appropriate title for SECURITY LIFE, on behalf of its Account.
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SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
AVIF will bear the cost of its registering as a management investment
company under the 1940 Act and registering its Shares under the 1933 Act, and
keeping such registrations current and effective; including, without limitation,
the preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
with respect to AVIF and its Shares and payment of all applicable registration
or filing fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) AVIF will bear, or arrange for others to bear, the costs of
preparing, filing with the SEC and setting for printing AVIF's prospectus,
statement of additional information and any amendments or supplements thereto
(collectively, the "AVIF Prospectus"), periodic reports to shareholders, AVIF
proxy material and other shareholder communications. All expenses incident to
the solicitations and tabulation of AVIF's proxy materials will be paid by AVIF.
(b) SECURITY LIFE will bear the costs of preparing and setting for
printing disclosure documents, any periodic reports to Contract owners,
annuitants, insureds or participants (as appropriate) under the Contracts
(collectively, "Participants"), voting instruction solicitation material, and
other Participant communications.
(c) SECURITY LIFE will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b) above and the prospectus
provided by AVIF in camera ready form. AVIF will print the AVIF statement of
additional information, proxy materials relating to AVIF and periodic reports of
AVIF.
3.4 OTHER (SALES-RELATED).
SECURITY LIFE will bear the expenses of distribution. These expenses
would include by way of illustration, but are not limited to, the costs of
distributing to Participants the following documents, whether they relate to the
Account or AVIF: prospectuses, statements of additional information, proxy
materials and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and advertising relating
to the Funds, as well as filing such materials with, and obtaining approval from
the NASD, any state insurance regulatory authority, and any other appropriate
regulatory authority, to the extent required.
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3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified
as a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify SECURITY LIFE immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify SECURITY LIFE immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code. The representations and warranties of this Section
4.1(b) shall not apply with respect to any Fund whose beneficial interests are
held solely by owners of "pension plan contracts" within the meaning of Section
818(a) of the Code and other persons whose federal income tax treatment is not
dependent on the Fund"s compliance with the requirements of Section 817(h) of
the Code.
(c) SECURITY LIFE agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of
SECURITY LIFE or, to SECURITY LIFE's knowledge, of any Participant, that any
Fund has failed to comply with the diversification requirements of Section
817(h) of the Code or SECURITY LIFE otherwise becomes aware of any facts that
could give rise to any claim against AVIF or its affiliates as a result of such
a failure or alleged failure:
(i) SECURITY LIFE shall promptly notify AVIF of such
assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) SECURITY LIFE shall consult with AVIF as to how to
minimize any liability that may arise as a result of
such failure or alleged failure;
(iii) SECURITY LIFE shall use its best efforts to minimize
any liability of AVIF or its affiliates resulting
from such failure, including, without
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limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was
inadvertent;
(iv) SECURITY LIFE shall permit AVIF, its affiliates and
their legal and accounting advisors to participate in
any conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS,
any Participant or any other claimant regarding any
claims that could give rise to liability to AVIF or
its affiliates as a result of such a failure or
alleged failure; provided, however, that SECURITY
LIFE will retain control of the conduct of such
conferences discussions, proceedings, contests or
appeals;
(v) any written materials to be submitted by SECURITY
LIFE to the IRS, any Participant or any other
claimant in connection with any of the foregoing
proceedings or contests (including, without
limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations Section
1.817-5(a)(2)), (a) shall be provided by SECURITY
LIFE to AVIF (together with any supporting
information or analysis); subject to the
confidentiality provisions of Section 18, at least
ten (10) business days or such shorter period to
which the Parties hereto agree prior to the day on
which such proposed materials are to be submitted,
and (b) shall not be submitted by SECURITY LIFE to
any such person without the express written consent
of AVIF which shall not be unreasonably withheld;
(vi) SECURITY LIFE shall provide AVIF or its affiliates
and their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting AVIF
and its accounting and legal advisors to review the
relevant books and records of SECURITY LIFE) in order
to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a
failure or alleged failure;
(vii) SECURITY LIFE shall not with respect to any claim of
the IRS or any Participant that would give rise to a
claim against AVIF or its affiliates (a) compromise
or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or
judicial appeals, without the express written consent
of AVIF or its affiliates, which shall not be
unreasonably withheld, provided that SECURITY LIFE
shall not be required, after exhausting all
administrative penalties, to appeal any adverse
judicial decision unless AVIF or its affiliates shall
have provided an opinion of independent counsel to
the effect that a reasonable basis exists for taking
such appeal; and provided further that the costs of
any such appeal shall be borne equally by the Parties
hereto; and
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(viii) AVIF and its affiliates shall have no liability as a
result of such failure or alleged failure if SECURITY
LIFE fails to comply with any of the foregoing
clauses (i) through (vii), and such failure could be
shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, SECURITY
LIFE may, in its discretion, authorize AVIF or its affiliates to act in the name
of SECURITY LIFE in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all administrative or judicial
appeals thereof, and in that event AVIF or its affiliates shall bear the fees
and expenses associated with the conduct of the proceedings that it is so
authorized to control; provided, that in no event shall SECURITY LIFE have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
(d) SECURITY LIFE represents and warrants that the Contracts currently
are and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; SECURITY LIFE will notify AVIF immediately upon having
a reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(e) SECURITY LIFE represents and warrants that each Account is a
"segregated asset account" and that interests in each Account 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. SECURITY LIFE will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF 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.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by SECURITY LIFE, including, the furnishing of information not otherwise
available to SECURITY LIFE which is required by state insurance law to enable
SECURITY LIFE to obtain the authority needed to issue the Contracts in any
applicable state law.
(b) SECURITY LIFE represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Colorado and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 10-7-402 of the Colorado
Insurance Law and the regulations thereunder, and (iii) the Contracts comply in
all material respects with all other applicable federal and state laws and
regulations.
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(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) SECURITY LIFE represents and warrants that (i) the Contracts are
designed to qualify for an exemption from registration under the 1933 Act and
are not for general distribution but are rather usually developed for a specific
limited distribution channel which may be "private labeled" for that
distribution channel, (ii) the Contracts will be duly authorized for issuance
and sold in compliance with all applicable federal and state laws, including,
without limitation, the 1933 Act, the 1934 Act, the 1940 Act and Colorado law,
(iii) SECURITY LIFE will amend its Contracts and modify its Accounts from time
to time as required in order to effect the continuous offering of its Contracts
or as may otherwise be required by applicable law, and (iv) each Account"s
prospectus, statement of additional information, private placement memoranda and
other documents pursuant to which Contracts are offered, and any amendments or
supplements thereto (collectively, the "Account Prospectus") will at all times
comply in all material respects with all applicable requirements of the 1933 Act
and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's prospectus, statement of additional information and any amendments or
supplements thereto (collectively, the "AVIF Prospectus") will at all times
comply in all material respects with all applicable requirements of the 1933 Act
and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale
in accordance with the laws of any state or other jurisdiction if and to the
extent reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Trustees, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
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(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and 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 minimal 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 includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
(f) SECURITY LIFE represents and warrants that prior to any issuance or
sale of the variable contracts, that the variable contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and further that the sale of the variable contracts shall comply in
all material respects with state insurance law suitability requirements.
(g) SECURITY LIFE represents and warrants that the variable contracts
are currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify AVIF immediately upon
having a reasonable basis for believing that the variable contracts have ceased
to be so treated or that they might not be so treated in the future.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify SECURITY LIFE of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIF's Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by SECURITY LIFE. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) SECURITY LIFE will immediately notify AVIF of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to the disclosure documents for the Contracts, (ii)
the initiation of any proceedings for that purpose or for any other purpose
relating to the offering of each Account's interests pursuant to the Contracts,
or (iii) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in
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which said interests are not in all material respects, issued and sold in
accordance with applicable state and federal law. SECURITY LIFE will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 SECURITY LIFE TO PROVIDE DOCUMENTS: INFORMATION ABOUT AVIF.
(a) SECURITY LIFE will provide to AVIF or its designated agent at least
one (1) complete copy of all disclosure documents, reports, any preliminary and
final voting instruction solicitation material, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to each Account or the Contracts, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.
(b) SECURITY LIFE will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates A I M as the entity to receive such
sales literature, until such time as AVIF appoints another designated agent by
giving notice to SECURITY LIFE in the manner required by Section 9 hereof.
(c) Neither SECURITY LIFE nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF prospectus contained therein, relating to shares, as such
registration statement and AVIF prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) SECURITY LIFE shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e.,
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any written communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the NASD rules, the
1933 Act or the 0000 Xxx.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT SECURITY LIFE.
(a) AVIF will provide to SECURITY LIFE at least one (1) complete copy
of all SEC registration statements, AVIF Prospectuses, reports, any preliminary
and final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to SECURITY LIFE camera ready or computer
diskette copies of all AVIF prospectuses and printed copies, in an amount
specified by SECURITY LIFE, of AVIF statements of additional information, proxy
materials, periodic reports to shareholders and other materials required by law
to be sent to Participants who have allocated any Contract value to a Fund. AVIF
will provide such copies to SECURITY LIFE in a timely manner so as to enable
SECURITY LIFE, as the case may be, to print and distribute such materials within
the time required by law to be furnished to Participants.
(c) AVIF will provide to SECURITY LIFE or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which SECURITY LIFE, or any of its respective affiliates is named,
or that refers to the Contracts, at least five (5) Business Days prior to its
use or such shorter period as the Parties hereto may, from time to time, agree
upon. No such material shall be used if SECURITY LIFE or its designated agent
objects to such use within five (5) Business Days after receipt of such material
or such shorter period as the Parties hereto may, from time to time, agree upon.
SECURITY LIFE shall receive all such sales literature until such time as it
appoints a designated agent by giving notice to AVIF in the manner required by
Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning SECURITY LIFE,
each Account, or the Contracts other than (i) the information or representations
contained in the Contracts; or (ii) in published reports for the Account or the
Contracts that are in the public domain and approved by SECURITY LIFE for
distribution; or (iii) in sales literature or other promotional material
approved by SECURITY LIFE or its affiliates, except with the express written
permission of SECURITY LIFE.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning SECURITY
LIFE, and its respective affiliates that is intended for use only by brokers or
agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and
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neither SECURITY LIFE, nor any of its respective affiliates shall be liable for
any losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with SECURITY
LIFE, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies
SECURITY LIFE that, in the event that AVIF implements Mixed and Shared Funding,
it may be appropriate to include in the prospectus pursuant to which a Contract
is offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED TRUSTEES.
AVIF agrees that its Board of Trustees shall at all times consist of
trustees a majority of whom (the "Disinterested Trustees") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
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5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Trustees will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). SECURITY LIFE agrees to inform the Board of Trustees of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other 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 action by insurance, tax or
securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, SECURITY LIFE will assist
the Board of Trustees in carrying out its responsibilities by providing the
Board of Trustees with all information reasonably necessary for the Board of
Trustees to consider any issue raised, including information as to a decision by
SECURITY LIFE to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Trustees or a majority of the Disinterested Trustees that a
material irreconcilable conflict exists, SECURITY LIFE will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Trustees), take whatever steps are
necessary to
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remedy or eliminate the material irreconcilable conflict, which steps may
include, but are not limited to:
(i) withdrawing the assets allocable to some or all of
the Accounts from AVIF or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of AVIF, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (e.g., annuity Participants, life
insurance Participants or all Participants) that
votes in favor of such segregation, or offering to
the affected Participants the option of making such a
change; and
(ii) establishing a new registered investment company of
the type defined as a "management company" in Section
4(3) of the 1940 Act or a new separate account that
is operated as a management company.
(b) If the material irreconcilable conflict arises because of SECURITY
LIFE's decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, SECURITY LIFE
may be required, at AVIF's election, to withdraw each Account's investment in
AVIF or any Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six (6) months after AVIF
gives notice to SECURITY LIFE that this provision is being implemented, and
until such withdrawal AVIF shall continue to accept and implement orders by
SECURITY LIFE for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to SECURITY LIFE conflicts with
the majority of other state regulators, then SECURITY LIFE will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Trustees informs SECURITY LIFE that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by SECURITY LIFE for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) SECURITY LIFE agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
SECURITY LIFE will not be required by the terms hereof to establish a new
funding medium for any Contracts if an offer to do so has been declined by vote
of a majority of Participants materially adversely affected by the material
irreconcilable conflict.
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5.5 NOTICE TO SECURITY LIFE.
AVIF will promptly make known in writing to SECURITY LIFE the Board of
Trustees' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF TRUSTEES.
SECURITY LIFE and AVIF (or its investment adviser) will at least
annually submit to the Board of Trustees of AVIF such reports, materials or data
as the Board of Trustees may reasonably request so that the Board of Trustees
may fully carry out the obligations imposed upon it by the provisions hereof or
any exemptive order granted by the SEC to permit Mixed and Shared Funding, and
said reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Trustees. All reports received by the Board of
Trustees of potential or existing conflicts, and all Board of Trustees actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Trustees or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.l(b), 4.l(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with respect to
the Fund, upon six (6) months advance written notice to the other parties, or,
if later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
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(b) at the option of AVIF upon institution of formal proceedings
against SECURITY LIFE or its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding SECURITY LIFE's
obligations under this Agreement or related to the sale of the Contracts, the
operation of each Account, or the purchase of Shares, if, in each case, AVIF
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of SECURITY LIFE upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIF's obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, SECURITY LIFE reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material likelihood of imposing
material adverse consequences on SECURITY LIFE, or the Subaccount corresponding
to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered, where required, and, in all material respects, issued and
sold in accordance with any applicable federal or state law, or (ii) such law
precludes the use of such Shares as an underlying investment medium of the
Contracts issued or to be issued by SECURITY LIFE; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of SECURITY LIFE if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions, or
if SECURITY LIFE reasonably believes that the Fund may fail to so qualify; or
(g) at the option of SECURITY LIFE if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if
SECURITY LIFE reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by SECURITY LIFE
cease to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts, in
all material respects, are not issued or sold in accordance with any applicable
federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
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(a) in the event that any termination is based upon the provisions of
Sections 6.l(a) or 6.l(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of SECURITY LIFE, 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, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that SECURITY LIFE may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
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SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
SECURITY LIFE OF DENVER
ING AMERICA EQUITIES, INC.
0000 Xxxxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Variable Counsel
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SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, SECURITY LIFE will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. SECURITY LIFE will vote
Shares in accordance with timely instructions received from Participants.
SECURITY LIFE will vote Shares that are (a) not attributable to Participants to
whom pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
SECURITY LIFE nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. SECURITY LIFE reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
SECURITY LIFE shall be responsible for assuring that each of its Accounts
holding Shares calculates voting privileges in a manner consistent with that of
other Participating Insurance Companies or in the manner required by the Mixed
and Shared Funding exemptive order obtained by AVIF. AVIF will notify SECURITY
LIFE of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, AVIF will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with SECURITY LIFE concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF BY SECURITY LIFE AND ING.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, SECURITY LIFE and ING agree to indemnify and hold harmless AVIF, its
affiliates, and each person, if any, who controls AVIF or its affiliates within
the meaning of Section 15 of the 1933 Act and each of their respective trustees
and officers, (collectively, the "Indemnified Parties" for purposes of this
Section 12.1) against any and all losses, claims, damages, liabilities
(including
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amounts paid in settlement with the written consent of SECURITY LIFE and ING) or
actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages, liabilities or
actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any disclosure documents, the Contracts,
or sales literature or advertising 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 SECURITY
LIFE or ING by or on behalf of AVIF for use in any
disclosure documents, the Contracts, or sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, not supplied
for use therein by or on behalf of SECURITY LIFE, ING
or their respective affiliates and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of SECURITY LIFE, ING
or their respective affiliates or persons under their
control (including, without limitation, their
employees and "Associated Persons," as that term is
defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale or distribution
of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the
foregoing, 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 and in conformity with
information furnished to AVIF or its affiliates by or
on behalf of SECURITY LIFE, ING or their respective
affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement
to any of the foregoing; or
(iv) arise as a result of any failure by SECURITY LIFE or
ING to perform the obligations, provide the services
and furnish the materials required of them
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under the terms of this Agreement, or any material
breach of any representation and/or warranty made by
SECURITY LIFE or ING in this Agreement or arise out
of or result from any other material breach of this
Agreement by SECURITY LIFE or ING; or
(v) arise as a result of failure by the Contracts issued
by SECURITY LIFE to qualify as annuity contracts or
life insurance contracts under the Code, otherwise
than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither SECURITY LIFE nor ING shall be liable under this Section
12.1 with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither SECURITY LIFE nor ING shall be liable under this Section
12.1 with respect to any action against an Indemnified Party unless AVIF shall
have notified SECURITY LIFE and ING in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action 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 SECURITY LIFE and ING of any such action shall not
relieve SECURITY LIFE and ING from any liability which they may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this Section 12.1. Except as otherwise provided herein, in case any such
action is brought against an Indemnified Party, SECURITY LIFE and ING shall be
entitled to participate, at their own expense, in the defense of such action and
also shall be entitled to assume the defense thereof, with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from SECURITY LIFE or ING to such
Indemnified Party of SECURITY LIFE's or ING's election to assume the defense
thereof, the Indemnified Party will cooperate fully with SECURITY LIFE and ING
and shall bear the fees and expenses of any additional counsel retained by it,
and neither SECURITY LIFE nor ING will be liable to such Indemnified Party under
this Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
12.2 OF SECURITY LIFE AND ING BY AVIF.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF agrees to indemnify and hold harmless SECURITY LIFE, ING,
their respective affiliates, and each person, if any, who controls SECURITY
LIFE, ING or their respective affiliates within the meaning of Section 15 of the
1933 Act and each of their respective trustees and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of AVIF ) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at
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common law, or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus or sales literature or advertising of
AVIF (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 AVIF or
its affiliates by or on behalf of SECURITY LIFE, ING
or their respective affiliates for use in AVIF's 1933
Act registration statement, AVIF Prospectus, or in
sales literature or advertising or otherwise for use
in connection with the sale of Contracts or Shares
(or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any disclosure
documents, sales literature or advertising for the
Contracts, or any amendment or supplement to any of
the foregoing, not supplied for use therein by or on
behalf of AVIF or its affiliates and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of AVIF or its
affiliates or persons under its control (including,
without limitation, their employees and "Associated
Persons" as that Term is defined in Section (n) of
Article 1 of the NASD By-Laws), in connection with
the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any disclosure documents, sales
literature or advertising covering the Contracts, or
any amendment or supplement to any of the foregoing,
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 statement or omission was made in
reliance upon and in conformity with information
furnished to SECURITY LIFE, ING or their respective
affiliates by or on behalf of AVIF for use in any
disclosure documents, sales literature or advertising
covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform
the obligations, provide the services and furnish the
materials required of it under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
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(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF agrees to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF)
or actions in respect thereof (including, to the extent reasonable, legal and
other expenses) to which the Indemnified Parties may become subject directly or
indirectly under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or indirectly result
from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against SECURITY LIFE pursuant to the Contracts, the costs
of any ruling and closing agreement or other settlement with the IRS, and the
cost of any substitution by SECURITY LIFE of Shares of another investment
company or portfolio for those of any adversely affected Fund as a funding
medium for each Account that SECURITY LIFE reasonably deems necessary or
appropriate as a result of the noncompliance.
(c) AVIF shall not be liable under this Section 12.2 with respect to
any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of such Indemnified Party's reckless disregard of its obligations and
duties (i) under this Agreement, or (ii) to SECURITY LIFE, ING, each Account or
Participants.
(d) AVIF shall not be liable under this Section 12.2 with respect to
any action against an Indemnified Party unless the Indemnified Party shall have
notified AVIF in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action 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 AVIF of any such action shall not relieve AVIF from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, AVIF
will be entitled to participate, at its own expense, in the defense of such
action and also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the IRS), with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF to such Indemnified Party of
AVIF's election to assume the defense thereof, the Indemnified Party will
cooperate fully with AVIF and shall bear the fees and expenses of any additional
counsel retained by it, and AVIF will not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
(e) In no event shall AVIF be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, SECURITY LIFE, ING or any other Participating Insurance
Company or any Participant, with respect to any losses,
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claims, damages, liabilities or expenses that arise out of or result from (i) a
breach of any representation, warranty, and/or covenant made by SECURITY LIFE or
ING hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and covenants; (ii)
the failure by SECURITY LIFE or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Fund) as a legally and
validly established segregated asset account under applicable state law; or
(iii) the failure by SECURITY LIFE or any Participating Insurance Company to
maintain its variable annuity or life insurance contracts (with respect to which
any Fund serves as an underlying funding vehicle) as annuity contracts or life
insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the Indemnifying Party to an Indemnified Party
referred to in Sections 12.l(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
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SECTION 16. RIGHTS CUMULATIVE
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, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of SECURITY LIFE
or any of its affiliates (collectively, the "SECURITY LIFE Protected Parties"
for purposes of this Section 18), information maintained regarding those
customers, and all computer programs and procedures or other information
developed by the SECURITY LIFE Protected Parties or any of their employees or
agents in connection with SECURITY LIFE's performance of its duties under this
Agreement are the valuable property of the SECURITY LIFE Protected Parties. AVIF
agrees that if it comes into possession of any list or compilation of the
identities of or other information about the SECURITY LIFE Protected Parties'
customers, or any other information or property of the SECURITY LIFE Protected
Parties, other than such information as may be independently developed or
compiled by AVIF from information supplied to it by the SECURITY LIFE Protected
Parties' customers who also maintain accounts directly with AVIF, AVIF will hold
such information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with SECURITY
LIFE's prior written consent; or (b) as required by law or judicial process.
SECURITY LIFE acknowledges that the identities of the customers of AVIF or any
of its affiliates (collectively the "AVIF Protected Parties" for purposes of
this Section 18), information maintained regarding those customers, and all
computer programs and procedures or other information developed by the AVIF
Protected Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. SECURITY LIFE agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVEP
Protected Parties, other than such information as may be independently developed
or compiled by SECURITY LIFE from information supplied to it by the AVIIF
Protected Parties' customers who also maintain accounts directly with SECURITY
LIFE, SECURITY LIFE will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
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SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service xxxx "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to SECURITY LIFE (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
SECURITY LIFE and its affiliates are hereby granted a non-exclusive license to
use the AIM licensed marks in connection with SECURITY LIFE's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to SECURITY LIFE and its affiliates (the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that SECURITY LIFE shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, SECURITY LIFE and its affiliates
shall immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that SECURITY LIFE shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
(c) The licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing the
licensor's licensed marks. The licensor's approvals shall not be unreasonably
withheld.
(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor, when requesting
reconsideration of a prior approval, shall assume the reasonable expenses of
withdrawing and replacing such disapproved materials. The licensee shall obtain
the prior written approval of the licensor for the use of any new materials
developed to replace the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to
the best of the knowledge of the licensee, the licensor's licensed marks are
valid and enforceable trademarks and/or service marks and that such licensee
does not own the licensor's licensed marks and claims no rights therein other
than as a licensee under this Agreement; (ii) agrees never to contend otherwise
in legal proceedings or in other circumstances; and (iii) acknowledges and
agrees that the use of the licensor's licensed marks pursuant to this grant of
license shall inure to the benefit of the licensor.
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SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
----------
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ XXXXX X. XXXXXX By: /s/ XXXX X. XXXX
------------------- ----------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxx X. Xxxx
Title: Assistant Secretary --------------------------
Title: Sr. Vice President
-------------------------
SECURITY LIFE OF DENVER, on behalf of
itself and its separate accounts
Attest: /s/ XXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXXXX, XX.
------------------- ----------------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxxxxx, Xx.
Title: Assistant Secretary Title: Executive Vice President
ING AMERICA EQUITIES, INC.
Attest: /s/ XXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXXXX, XX.
------------------- ----------------------------
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxxxxxxx, Xx.
Title: Assistant Secretary Title: President
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SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE
THE CONTRACTS UTILIZING THE FUNDS SEPARATE ACCOUNTS
--------------------- ------------------- -----------------------
AIM V.I. Capital Appreciation Fund Security Life Separate Account Magnastar Private Placement Variable Life
AIM V.I. Government Securities Fund SLDM1
Security Life Separate Account
SLDM2
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SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
o AIM and Design
[AIM LOGO]
--Registered Trademark--
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