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FUND PARTICIPATION AGREEMENT Exhibit 8.b.
First SAFECO National Life Insurance Company of New York (the "Company")
and Lexington Emerging Markets Fund, Inc. and Lexington Natural Resources Trust
("Lexington Funds or the Funds") and its investment adviser, Lexington
Management Corporation ("LMC") hereby agree to an arrangement whereby shares of
the Funds shall be made available to serve as underlying investment media for
Variable Annuity and/or Variable Life Contracts ("Contracts") to be issued by
the Company, subject to the following provisions:
1. Establishment of Accounts: Availability of Funds.
(a) The Company represents that it has established variable annuity
accounts and variable life account (the "Accounts"), each of which
is a separate account under Washington Insurance law, and has
registered each of the Accounts as a unit investment trust under the
Investment Company Act of 1940 (the "1940") to serve as an
investment vehicle for the Contracts. Each Contract provides for the
allocation of net amounts received by the Company to an Account for
investment in the shares of one or more specified open-end companies
("Funds") available through that account as underlying investment
media. Selection of a particular Fund and changes therein from time
to time are made by the person covered under the Contract
("Participant") or Contract owner, as applicable under a particular
Contract.
(b) Lexington Funds and LMC represent and warrant that the investments
of the Funds will at all times be adequately diversified within the
meaning of Section 817(h) of the Internal Revenue Service Code of
1986, as amended (the "Code"), and the Regulations thereunder, and
that at all times while this agreement is in effect, all beneficial
interests will be owned by one or more insurance companies or by any
other party permitted under Section 1.817-5(f)(3) of the Regulations
promulgated under the Code.
2. Marketing and Promotion.
The Company agrees to make every reasonable effort to market its
Contracts, whether directly or through its affiliates. It will use its
best efforts to cause equal emphasis and promotion to be given to shares
of the Funds relative to other Funds available through the Accounts. In
marketing and administering the Contracts, the Company and its affiliates
will comply with all applicable State and Federal laws.
3. Pricing Information; Orders; Settlement.
(a) Lexington Funds will make shares available to be purchased by the
Company, and will accept redemption orders from the Company, on
behalf of each Account at the net asset value applicable to each
order. Fund shares shall be purchased and redeemed in such quantity
and at such time determined by the Company to be necessary to meet
the requirements of those Contracts for which the Funds serve as
underlying investment media.
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(b) Lexington Funds will provide to the Company closing net asset value,
dividend and capital gain information at the close of trading each
day that the New York Stock Exchange (the "Exchange") is open (each
such day, a "business day"). The Company will send via facsimile
transmission to Lexington Funds or its specified agent orders to
purchase and/or redeem Fund shares by 10:00 a.m., Eastern Time the
following business day. Payment for net purchases will be wired by
the Company to a custodial account designated by Lexington Funds to
coincide with the order for shares of the Funds.
(c) Orders from Contract owners or Participants received by the Company
and sent by the Company prior to the close of the Exchange on any
given business day via facsimile transmission to Lexington Funds or
its specified agent by 10:00 a.m., Eastern Time, the following
business day will be executed by Lexington Funds at the net asset
value determined as of the close of the Exchange on such prior
business day. Any orders received by the Company after the close of
the Exchange on such prior business day (or not meeting the
foregoing sentence's requirements) will be executed by Lexington
Funds at the net asset value determined as of the close of the
Exchange on the next business day following the day of receipt of
such order.
(d) Payments for net redemptions of shares of the Funds will be wired by
Lexington Funds from the Lexington Funds custodial account to an
account designated by the Company.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other
party), and shall not be liable in the event that an error is a
result of any misinformation supplied by the other party. If a
mistake is caused in supplying such information or confirmations,
which results in a reconciliation with incorrect information, the
amount required to make a Contract owner's or a Participant's
account whole shall be borne by the party providing the incorrect
information.
4. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by Lexington Funds under this Agreement
shall be paid by Lexington Funds including the cost of registration
of Lexington Funds shares with the Securities and Exchange
Commission (the "SEC") and in states where required.
(b) Lexington Funds shall distribute to the Company its proxy material,
periodic fund reports to shareholders and other material that are
required by law to be sent to Contract owners. In addition,
Lexington Funds shall provide the Company with a sufficient quantity
of its prospectuses to be used in connection with the offerings and
transactions contemplated by this Agreement. Subject to subsection
(c) below, the cost of preparing and printing such materials shall
be paid by Lexington Funds, and the cost of distributing such
materials shall be paid by the Company.
(c) In lieu of Lexington Funds' providing printed copies of prospectuses
and periodic fund reports to shareholders, the Company shall have
the right to request that Lexington
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Funds provide a copy of such materials in an electronic format,
which the Company may use to have such materials printed together
with similar materials of other Account funding media that the
Company or any distributor will distribute to existing or
prospective Contract owners or participants. In that event Lexington
Funds shall reimburse the Company for the same proportion of the
total printing expense for such materials as the number of pages in
each such printed document provided by Lexington Funds bears to the
total number of pages in such printed document.
5. Representations.
(a) The Company agrees that it and its agents shall not, without the
written consent of Lexington Funds, make representations concerning
Lexington Funds or its shares except those contained in the then
current prospectuses and in current printed sales literature of
Lexington Funds.
(b) The Company represents and warrants that interests in certain
Contracts are or will be registered under the Securities Act of 1933
("1933 Act") or are exempt from registration thereunder; that the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the
sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has
legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account and that each Account
is or will be registered 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 is exempt from registration
thereunder.
(c) The Company represents that the Contracts are currently treated as
annuity and/or life insurance contracts under applicable provisions
of the Code and that it will make every effort to maintain such
treatment and that it will notify Lexington Fund and LMC immediately
upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the
future.
(d) The Company represents and warrants that all of its directors,
officers, and employees dealing with the money and/or securities of
the Funds are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the
Funds in an amount not less than $2 million. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
(e) LMC and Lexington Funds make no representation as to whether any
aspect of the Funds' operations (including, but not limited to, fees
and expenses and investment policies) complies with the insurance
laws or regulations of the various states.
(f) The Lexington Funds represents that it will sell and distribute
Funds' shares in accordance with all applicable federal and state
securities laws, including without limitation, the 1933 Act, the
Securities Exchange Act of 1934, and the 1940 Act.
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(g) Lexington Funds represents it is currently qualified as a regulated
investment company under Subchapter M of the Code and that it will
make every effort to maintain such qualification (under Subchapter M
or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing
that it ceased to so qualify or might not so qualify in the future.
(h) LMC and Lexington Funds represent and warrant that the Fund's shares
sold pursuant to this Agreement shall be registered under the 1933
Act, duly authorized for issuance and sold in compliance with the
laws of the State of Washington and all applicable federal and state
securities laws and that the Funds are and shall remain registered
under the ▇▇▇▇ ▇▇▇. The Funds shall amend the registration statement
for its shares under the 1933 Act and 1940 Act from time to time as
required in order to effect the continuous offering of its shares.
The Funds shall also register and qualify its shares for sale in
accordance with the laws of the various states only if and to the
extent deemed advisable by the Funds or LMC.
(i) Lexington Funds represents that it is lawfully organized and validly
existing under the laws of its state of domicile and that it is and
will comply in all material respects with the 1940 Act.
(j) LMC and Lexington Funds represent and warrant that LMC is duly
organized under its state of domicile, and is and shall remain duly
registered in all material respects under all applicable federal and
state securities laws, and further that LMC shall perform its
obligations for the Funds in compliance in all material respects
with applicable federal and state securities laws.
(k) LMC and Lexington Funds represent and warrant that all of their
respective directors, officers, and employees dealing with the money
and/or securities of the Funds are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the
benefit of the Funds in an amount not less than the minimal coverage
as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid
bond shall include coverage for larceny and embezzlement and shall
be issued by a reputable bonding company.
6. Administration of Accounts.
(a) Administrative services to Contract owners and Participants shall be
the responsibility of the Company and shall not be the
responsibility of Lexington Funds or LMC. LMC recognizes the Company
as the sole shareholder of fund shares issues under this Agreement.
From time to time, LMC may pay amounts from it past profits to the
Company for providing certain administrative services for the Funds
or for providing Contract owners with other services that relate to
the Funds. These services may include, among other things,
sub-accounting services, answering inquiries of Contract owners
regarding the Funds, transmitting, on behalf of the funds, proxy
statements, annual reports, updated prospectus and other
communications to Contract owners regarding the Funds and such other
related services as the Funds or a Contract holder may request. In
consideration of the savings resulting from such arrangement, and to
compensate the Company for its costs, LMC agrees to pay to the
Company an amount equal to 25 basis points (0.25%) per annum of the
average aggregate amount
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invested by the Company in the Fund under this Agreement. Payment of
such amounts by LMC will not increase the fees paid by the Funds or
its shareholders.
(b) The parties agree that LMC's payments to the Company are for
administrative services only and do not constitute payment in any
manner for investment advisory services or for costs of
distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated by this Section 6, the average aggregate amount
invested by the Company over a one month period shall be computed by
totaling the Company's aggregate investment (share net asset value
multiplied by total number of shares held by the Company) on each
business day during the month and dividing by the total number of
business days during each month.
(d) LMC will calculate the reimbursement of administrative expenses at
the end of each calendar quarter and will make such reimbursement to
the Company within 30 days thereafter. The reimbursement check will
be accompanied by a statement showing the calculation of the monthly
amounts payable by LMC and such other supporting data as may be
reasonably requested by the Company.
7. Termination.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company or Lexington Funds, upon three
months advance written notice to the other;
(b) at the option of the Company, upon one week advance written notice
to Lexington Funds if Lexington Fund shares are not available for
any reason to meet the requirement of Contracts as determined by the
Company.
(c) at the option of either the Company or Lexington Funds, immediately
upon institution of formal proceedings against the broker-dealer or
broker-dealers marketing the Contracts, the Account, the Company,
Lexington Funds, or LMC by the National Association of Securities
Dealers, Inc. (the "NASD"), the SEC or any other regulatory body;
(d) upon the requisite vote of Contract owners or Participants having an
interest in the Funds, to substitute for the Funds' shares the
shares of another investment company in accordance with the terms of
the applicable Contracts. The Company will give 60 days written
notice to Lexington Funds of any proposed vote to replace the Funds'
shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if the Funds' shares are not registered, issued or sold in
conformance with Federal law or such law precludes the use of Funds'
shares as an underlying investment medium
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for Contracts issued or to be issued by the Company. Prompt notice
shall be given by either party should such situation occur.
8. Continuation of Agreement.
Termination as the result of any cause listed in Section 7 shall not
affect Lexington Funds' obligation to furnish its shares to Contacts then
in force for which its share serve or may serve as the underlying medium
unless such further sale of Funds' shares is proscribed by law or the SEC
or other regulatory body.
9. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the Funds prepared
by the Company or its agents for use in marketing its Contracts will
be submitted to Lexington Funds for review before such material is
submitted by any regulatory body for review.
(b) Lexington Funds will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements of
additional information, annual and semiannual reports, proxy
statements and all amendments or supplements to any of the above
that relate to the Funds promptly after the filing of such document
with the SEC or other regulatory authorities. The Company will
provide to Lexington Funds at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, and
all amendments or supplements to any of the above that relate to
each Account promptly after the filing of such document with the SEC
or other regulatory authority.
10. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on Funds'
shares to all Contract owners and Participants to the extent the SEC
continues to interpret the 1940 Act as requiring such privileges. If
shares are held in any other separate account not required to be
registered under the 1940 Act, those shares will be voted in the
Company's sole discretion.
(b) The Company will distribute to Contract owners and participants, as
appropriate, all proxy material furnished by Lexington Funds and
will vote Funds' shares in accordance with instructions received
from Contract owners and participants. The Company, with respect to
each Contract and in each Account, shall vote Fund shares for which
no instructions have been received in the same proportion as shares
for which such instructions have been received. The Company and its
agents shall not oppose or interfere with the solicitation of
proxies for Fund shares held for such Contract owners and
participants.
11. Indemnification.
(a) The Company agrees to indemnify and hold harmless Lexington Funds,
LMC, and each of its directors, officers, employees, agents and each
person, if any, who controls the Funds or its investment adviser
within the meaning of the Securities Act of
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1933 (the "1933 Act") against any losses, claims, damages or
liabilities to which the Funds or any such director, officer,
employee, agent, or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, prospectus or
sales literature of the Company, 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 or representations (other than statement or
representations contained in the prospectuses or sales literature of
the Funds) of the Company or its agents, with respect to the sale
and distribution of Contracts for which Fund shares are the
underlying investment. The Company will reimburse any legal or other
expenses reasonably incurred by the Fund or any such director,
officer, employee, agent, investment adviser, or controlling person
in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written
materials furnished to the Company by the Fund specifically for use
therein. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) The Company shall not be liable under this Section 11. to Lexington
Funds, LMC or other parties covered under Section 11.(a) with
respect to any losses, claims, damages or liabilities (or actions in
respect thereof) incurred or assessed against any such party
(including Lexington Funds and LMC) as such may arise from such
party's willful misfeasance, bad faith, or gross negligence in the
performance of such party's duties or by reason of such party's
reckless disregard of obligations or duties under this Agreement.
(c) Lexington Fund and LMC agree to indemnify and hold harmless the
Company and its directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of the
1933 Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer, employee, agent or
controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectuses or sales
literature of the Funds, 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. Lexington Funds will reimburse any legal or
other expenses reasonably incurred by the Company or any such
director, officer, employee, agent, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that LMC and
Lexington Funds will not be liable in any such case to the extent
that any such loss, claim, damage or liability rises out of or is
based upon a Registration Statement or prospectuses which are in
conformity with written materials furnished to Lexington Funds by
the Company specifically for use therein. This indemnity agreement
will be in addition to any liability which Lexington Funds of LMC
may otherwise have.
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(d) Lexington Funds and LMC shall not be liable under this Section 11.
to the Company or other parties covered under Section 11.(c) with
respect to any losses, claims, damages or liabilities (or actions in
respect thereof) incurred or assessed against any such party
(including the Company) as such may arise from such party's willful
misfeasance, bad faith, or gross negligence in the performance of
such party's duties or by reason of such party's reckless disregard
of obligations or duties under this Agreement.
(e) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 11. In case any
such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to
the extent that it may wish to, assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 11 for
any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
12. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by Lexington Funds on March 21, 1994, with
the SEC and the order issued by the SEC in response thereto (the
"Shared Funding Exemptive Order"). The Company has reviewed the
conditions to the requested relief set forth in such application for
exemptive relief. As set forth in such application, the Board of
Directors of Funds (the "Board") will monitor the Funds for the
existence of any material irreconcilable conflict between the
interests of the contract holders of all separate accounts
("Participating Companies") investing in the Funds. An
irreconcilable material conflict may arise for a variety of reasons,
including: (i) an action by any state insurance regulatory
authority; (ii) 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
actions by insurance, tax or securities regulatory authorities;
(iii) an administrative or judicial decision in any relevant
proceeding, (iv) the manner in which the investments of any
portfolio are being managed; (v) a difference in voting instructions
given by variable annuity contract holders and variable life
insurance contract holders; or (vi) a decision by an insurer to
disregard the voting instructions of contract holders. The Board
shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications
thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive
Order by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This
includes, but
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is not limited to, an obligation by the Company to inform the Board
whenever contract holder voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists
with regard to contract holder investments in the Funds, the Board
shall give prompt notice to all Participating Companies. If the
Board determines that the Company is responsible for causing or
creating said conflict, the Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by
a majority of the disinterested Board members), take such action as
is necessary to remedy or eliminate the irreconcilable material
conflict. Such necessary action may include but shall not be limited
to:
(i) withdrawing the assets allocable to the Account from the fund
and reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contract holders and as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners, life insurance contract owners,
or variable contract owners of one or more Participating
Companies) that votes in favor of such segregation, or offering
to the affected contract holders the option of making such a
change; and/or
(ii) establishing a new registered management investment company
or managed separate account.
(d) If a material irreconcilable conflict arises as a result of a
decision by the Company to disregard its contract holder voting
instructions and said decision represents a minority position or
would preclude a majority vote by all of its contact holders having
an interest in the Fund, the Company at its sole cost, may be
required, at the Board's election, to withdraw an Account's
investment in the Fund and terminate this Agreement; provided,
however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of
the Board.
(e) For the purpose of this Section 12, a majority of the disinterested
Board members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will Lexington Funds be required to establish a new funding
medium for any Contract. The Company shall not be required by this
Section 12 to establish a new funding medium for any Contract if an
offer to do so has been declined by vote of a majority of the
Contract owners or participants materially adversely affected by the
irreconcilable material conflict.
13. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
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(b) Notices. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent
by telex, telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the party or parties to whom
they are directed at the following addresses, or at such other
addresses as may be designated by notice from such party to all
other parties.
To the Company:
First SAFECO National Life Insurance Company of New York
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
To Lexington Management Corporation:
Lexington Management Corporation
Park ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Vice President & Secretary
Any notice, demand or other communication given in a manner
prescribed in this subsection (b) shall be deemed to have been
delivered on receipt.
(c) Successors and Assigns. This agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by
signing any such counterpart.
(e) Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto and supersedes all
prior agreement and understandings relating to the subject matter
hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of New Jersey.
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14. Limitation on Liability of Trustees, etc.
This Agreement has been executed on behalf of the Funds by the undersigned
officer of the Funds in his/her capacity as an officer of the Funds. The
obligations of this Agreement that pertain to the Funds shall only be
binding upon the assets and property of the Funds and shall not be binding
upon any individual trustee, officer or shareholder of the Funds. This
provision shall not affect the obligations or liabilities of LMC under
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers as of this ___________ day of January 1995.
FIRST SAFECO NATIONAL LIFE LEXINGTON
INSURANCE COMPANY OF NEW YORK MANAGEMENT CORPORATION
By:__________________________________ By: ____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President Title: Managing Director
LEXINGTON NATURAL RESOURCES TRUST
LEXINGTON EMERGING MARKETS FUND, INC.
By: ____________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President & Secretary
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