PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
NORTHERN LIGHTS VARIABLE TRUST,
AND
XX XXXX INVESTMENT MANAGEMENT, LLC
THIS AGREEMENT, dated as of the 3rd day of _March_, 2008, by and among
Security Benefit Life Insurance Company, (the "Company"), a stock life insurance
company organized under the laws of the State of Kansas, on its own behalf and
on behalf of each segregated asset account of the Company that purchases shares
in a Designated Portfolio (as "Designated Portfolio" is defined below; each such
segregated asset account an "Account"), the Northern Lights Variable Trust, a
Delaware statutory trust (the "Fund"), on behalf of the Designated Portfolios
(as defined below), and XX Xxxx Investment Management, LLC (the "Adviser"), a
Texas Limited Liability Corporation.
WHEREAS, the shares of beneficial interest/common stock of the Fund are
divided into several series of shares, each representing the interest in a
particular managed portfolio of securities and other assets (each a
"Portfolio"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and shares of
the Portfolios are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Adviser, which serves as investment adviser to the Fund,
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended; and
WHEREAS, the Company has issued or will issue certain variable annuity
contracts supported wholly or partially by the Account (the "Contracts"), and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company to set aside and invest assets
attributable to the aforesaid Contracts; and
WHEREAS, the Company intends to purchase shares in the Portfolios
listed in Schedule A hereto, as it may be amended from time to time by mutual
written agreement (the "Designated Portfolios"), on behalf of the Account to
fund the aforesaid Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. Subject to Article X hereof, the Fund agrees to make available to
the Company for purchase on behalf of the Account, shares of the Designated
Portfolios, such purchases to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Portfolios
(other than those listed on Schedule A) in existence now or that may be
established in the future will be made available to the Company only as the Fund
may so provide, and (ii) the Board of Trustees of the Fund (the "Board") may
suspend or terminate the offering of shares of any Designated Portfolio or class
thereof upon written notice to the Company, if such action is required by law or
by regulatory authorities having jurisdiction or if, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, suspension or termination is necessary
and in the best interests of the shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or
fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, the Fund may delay
redemption of Fund shares of any Designated Portfolio to the extent permitted by
the 1940 Act, and any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent of the
Fund for the limited purpose of receiving and accepting purchase and redemption
requests on behalf of the Account (but not with respect to any Fund shares that
may be held in the general account of the Company) for shares of those
Designated Portfolios made available hereunder, based on allocations of amounts
to the Account or subaccounts thereof under the Contracts and other transactions
relating to the Contracts or the Account. Receipt and acceptance of any such
request (or relevant transactional information therefore) on any day the New
York Stock Exchange is open for trading and on which a Designated Portfolio
calculates its net asset value (a "Business Day") pursuant to the rules of the
Securities and Exchange Commission ("SEC"), by the Company as such limited agent
of the Fund prior to the time that the Fund ordinarily calculates its net asset
value as described from time to time in the Fund's prospectus shall constitute
receipt and acceptance by the Designated Portfolio on that same Business Day,
provided that the Fund receives notice of such request by 9:30 a.m. Eastern Time
on the next following Business Day.
(b) The Company shall pay for shares of each Designated
Portfolio on the same Business Day that it notifies the Fund of a purchase
request for such shares. Payment for Designated Portfolio shares shall be made
in federal funds transmitted to the Fund or other designated person by wire to
be received by 3:00 p.m. Eastern Time on the Business Day the Fund is notified
of the purchase request for Designated Portfolio shares (unless the Fund
determines and so advises the Company that sufficient proceeds are available
from redemption of shares of other Designated Portfolios effected pursuant to
redemption requests tendered by the Company on behalf of the Account, or unless
the Fund otherwise determines and so advises the Company to delay the date of
payment, to the extent the Fund may do so under the 1940 Act). If federal funds
are not received on time, such funds will be invested, and Designated Portfolio
shares purchased thereby will be issued, as soon as practicable and the Company
shall promptly, upon the Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in connection with
any advances to, or borrowing or overdrafts by, the Fund, or any similar
expenses incurred by the Fund, as a result of portfolio transactions effected by
the Fund based upon such purchase request. Upon receipt of federal funds so
wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund.
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(c) Payment for Designated Portfolio shares redeemed by the
Account or the Company shall be made by the Fund in federal funds transmitted by
wire to the Company or any other designated person by 3 p.m. Eastern Time on the
same Business Day the Fund is properly notified of the redemption order of such
shares (unless redemption proceeds are to be applied to the purchase of shares
of other Designated Portfolios in accordance with Section 1.3(b) of this
Agreement), except that the Fund reserves the right to delay payment of
redemption proceeds to the extent permitted under Section 22(e) of the 1940 Act
and any rules thereunder, and in accordance with the procedures and policies of
the Fund as described in the then-current prospectus.
Any purchase or redemption request for Designated Portfolio shares held or to be
held in the Company's general account shall be effected at the net asset value
per share next determined after the Fund's receipt and acceptance of such
request, provided that, in the case of a purchase request, payment for Fund
shares so requested is received by the Fund in federal funds prior to close of
business for determination of such value, as defined from time to time in the
Fund's prospectus.
1.4. The Fund shall use its best efforts to make the net asset value
per share for each Designated Portfolio available to the Company by 6:30 p.m.
Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the net asset value per share for such Designated Portfolio is
calculated, and shall calculate such net asset value in accordance with the
Fund's prospectus. If the Fund provides the Company with materially incorrect
share net asset value information, the Company on behalf of the Account, shall
be entitled to an adjustment to the number of shares purchased or redeemed to
reflect the correct share net asset value. Any material error in the calculation
of the net asset value per share, dividend or capital gain information shall be
reported promptly to the Company upon discovery. In the event that any such
material error is the result of the gross negligence of the Fund, or its
designated agent for calculating the net asset value, any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at the Adviser's expense.
1.5. The Fund shall use its best efforts to furnish notice (by wire or
telephone followed by written confirmation) to the Company of any income
dividends or capital gain distributions payable on any Designated Portfolio
shares by the record date, but in no event later than 6:30 p.m. Eastern Time on
the ex-dividend date. The Company, on its behalf and on behalf of the Account,
hereby elects to receive all such dividends and distributions as are payable on
any Designated Portfolio shares in the form of additional shares of that
Designated Portfolio. The Company reserves the right, on its behalf and on
behalf of the Account, to revoke this election and to receive all such dividends
and capital gain distributions in cash. The Fund shall notify the Company
promptly of the number of Designated Portfolio shares so issued as payment of
such dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry only.
Share certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Fund shares shall be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.7. (a) Except as noted in 1.7(b) below, the parties hereto
acknowledge that the arrangement contemplated by this Agreement is not
exclusive; the Fund's shares may be sold to other insurance companies and the
cash value of the Contracts may be invested in other investment companies.
(b) During the 18-month period from the date that the prospectus
for the SecureDesigns variable annuity discloses that the Dent Strategic
Portfolio of the Fund (the "Dent Portfolio") is available as an investment
option (the "Exclusivity Period") the Fund agrees that the Dent Portfolio shall
not be offered as an investment option under any other insurance company's
variable
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insurance product (other than the Company's affiliated insurance company, First
Security Benefit Life Insurance and Annuity Company of New York ("FSBL")).
(c) The Company shall not, without prior notice to the Adviser
(unless otherwise required by applicable law), take any action to operate the
Account as a management investment company under the 1940 Act.
(d) The Company shall not, without prior notice to the Adviser
(unless otherwise required by applicable law), induce Contract owners to change
or modify the Fund or change the Fund's investment adviser.
(e) The Company shall not, without prior notice to the Fund,
induce Contract owners to vote on any matter submitted for consideration by the
shareholders of the Fund in a manner other than as recommended by the Board.
1.8 The parties may agree, in lieu of the procedures set forth above in
this Article 1, to place and settle trades for Fund shares through a clearing
corporation. In the event that such a clearing corporation is used, the parties
agree to abide by the rules of the clearing corporation.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts (a) are, or
prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws. The Company further represents and warrants that the Company
will file or register the Contracts with the appropriate insurance regulator in
those states where such filing or registration is required under state insurance
laws or regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law, that
it has legally and validly established the Account as a segregated asset account
under Kansas insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 0000 Xxx.
2.2. The Fund represents and warrants that Designated Portfolio shares
sold pursuant to this Agreement shall be registered under the 1933 Act, shall be
duly authorized for issuance and sold in compliance with applicable state and
federal securities laws and that the Fund is and shall remain registered under
the 0000 Xxx. The Fund shall amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its shares. The Fund shall register and
qualify the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Fund.
2.3. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the 1940 Act, including, without
limitation, Rule 38a-1 under the 1940 Act.
2.4. The Adviser represents and warrants that it is registered as an
investment adviser with the SEC and that it does and will comply in all material
respects with the Investment Advisers Act of 1940, including, without
limitation, Rule 206(4)-7 under the Investment Advisers Act.
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2.5. The Fund and the Adviser represent and warrant that all of their
trustees/directors, officers, employees, and other individuals or entities
dealing with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimum coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.6. The Adviser represents and warrants that, neither the Adviser, nor
any of its affiliates, subsidiaries or entities controlled by, or under common
control with, the Adviser, shall serve as an investment adviser or sub-adviser
to (a) any other fund (registered or un-registered) that serves as the
underlying investment of a variable insurance product of any other insurer other
than the Company and/or FSBL during the Exclusivity Period or (b) any other
separate account of any other insurance company other than the Company and/or
FSBL during the Exclusivity Period.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund shall provide the Company with as many printed copies of
the current prospectus, current Statement of Additional Information ("SAI"),
supplements, proxy statements, and annual or semi-annual reports of each
Designated Portfolio as the Company may reasonably request to deliver to
existing Contract owners and for marketing of the Contracts. If requested by the
Company in lieu thereof, the Fund shall provide such documents (including a
"camera-ready" copy of such documents as set in type, a diskette in the form
sent to the financial printer, or an electronic copy of the documents in a
format suitable for posting on the Company's website, all as the Company may
reasonably request) and such other assistance as is reasonably necessary in
order for the Company to have prospectuses, SAIs, supplements and annual or
semi-annual reports for the Contracts and the Fund printed together in a single
document or posted on the Company's web-site or printed individually by the
Company if it so chooses. The expenses associated with printing and providing
such documentation shall be as set forth in Article V.
3.2. The Fund's prospectus shall state that the current SAI for the
Fund is available.
3.3. The Fund shall provide the Company with information regarding the
Fund's expenses, which information may include a table of fees and related
narrative disclosure for use in any prospectus or other descriptive document
relating to a Contract. The Company agrees that it will use such information
substantially in the form provided. The Company shall provide prior written
notice of any proposed modification of such information, which notice will
describe the manner in which the Company proposes to modify the information, and
agrees that it may not modify such information in any way without the prior
consent of the Fund, which consent shall not be unreasonably withheld.
3.4. So long as, and to the extent the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable contract owners,
or to the extent otherwise required by law, the Company shall, at the Company's
option, follow one of the two methods described below to provide pass-through
voting privileges to contract owners:
(a) Provide a list of Contract owners with value allocated to a
Designated Portfolio as of the record date to the Fund or its agent in order to
permit the Fund to send solicitation material and gather voting instructions
from Contract owners on behalf of the Company. The Company shall also provide
such other information to the Fund as is reasonably necessary in order for the
Fund to properly
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tabulate votes for Fund initiated proxies. In the event that the Company chooses
this option, the Fund shall be responsible for properly "echo voting" shares of
a Designated Portfolio for which no voting instructions have been received.
(b) Solicit voting instructions from Contract holders itself and vote
shares of the Designated Portfolio in accordance with instructions received from
Contract holders. The Company shall vote the shares of the Designated Portfolios
for which no instructions have been received in the same proportion as shares of
the Designated Portfolio for which instructions have been received.
3.5 The Company reserves the right to vote Fund shares held in its
general account in its own right, to the extent permitted by applicable laws.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops and in which the Fund (or a Designated
Portfolio thereof) or the Adviser is named. No such material shall be used until
approved by the Fund or its designee, and the Fund will use its best efforts for
it or its designee to review such sales literature or promotional material
within five (5) Business Days after receipt of such material. The Fund or its
designee reserves the right to reasonably object to the continued use of any
such sales literature or other promotional material in which the Fund (or a
Designated Portfolio thereof) or the Adviser is named, and no such material
shall be used if the Fund or its designee so objects.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
prospectus or SAI for the Fund shares, as such registration statement and
prospectus or SAI may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee, except with the
permission of the Fund or its designee.
4.3. The Fund and the Adviser, or their designee, shall furnish, or
cause to be furnished, to the Company, each piece of sales literature or other
promotional material that it develops and in which the Company, and/or the
Account, is named. No such material shall be used until approved by the Company,
and the Company will use its best efforts to review such sales literature or
promotional material within five (5) Business Days after receipt of such
material. The Company reserves the right to reasonably object to the continued
use of any such sales literature or other promotional material in which the
Company and/or its Account is named, and no such material shall be used if the
Company so objects.
4.4. The Fund shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement, prospectus (which shall include an offering memorandum,
if any, if the Contracts issued by the Company or interests therein are not
registered under the 1933 Act), or SAI for the Contracts, as such registration
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the Account which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company, except with
the permission of the Company.
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4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Designated Portfolios or their shares, promptly after the filing
of such document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Adviser any complaints received from the Contract
owners pertaining to the Fund or a Designated Portfolio.
4.7. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio,
and of any material change in the Fund's registration statement, particularly
any change resulting in a change to the registration statement or prospectus for
any Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.8. The Adviser shall provide (or cause its affiliates to provide) the
Company with sales material acceptable to the Company to be used in marketing
the Dent Portfolio as an investment option in the Contract.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Designated Portfolio adopts
and implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then the Fund may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Fund in
writing.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type the proxy materials and reports to shareholders (including the costs of
printing a prospectus that constitutes an annual report), the preparation of all
statements and notices required by any federal or state law, and all taxes on
the issuance or transfer of the Fund's shares.
5.3. The Fund will pay or cause to be paid the expenses associated with
printing, mailing, distributing, solicitation and tabulation of proxy materials
to Contract owners with respect to proxies related to the Fund, consistent with
applicable provisions of the 1940 Act. The Fund shall also bear the expense of
printing and postage with respect to Fund prospectuses, annual and semi-annual
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reports and all other Fund reports delivered to existing Contract owners with
value allocated to one or more Designated Portfolios (regardless of whether such
documents are printed by the Fund or the Company). In the event that the Company
chooses to print prospectuses, annual and/or semi-annual reports (and/or any
other Fund report) delivered to existing Contract owners with value allocated to
one or more Designated Portfolios with such documents for other funds or
portfolios, the Fund shall only be required to pay its pro-rata expense of such
printing costs.
5.4. The Company shall bear the expense of distributing all
prospectuses and reports to prospective Contract owners. The Company shall bear
the expense of printing copies of the prospectus for the Contracts for use with
prospective Contract owners. The Company shall bear the expenses incident to
(including the costs of printing) sales literature and other promotional
material that the Company develops and in which the Fund (or a Designated
Portfolio thereof) is named.
5.5. The Adviser shall bear the expense of printing the sales material
contemplated in Section 4.8 in quantities reasonably specified by the Company.
The Company shall bear the expense of distributing such sales material.
ARTICLE VI. Qualification
6.1 The Fund will invest its assets in such a manner as to ensure that
the Contracts will be treated as annuity or life insurance contracts, whichever
is appropriate, under the Internal Revenue Code of 1986, as amended ("Code") and
the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, each Designated Portfolio represents and
warrants that it has complied and will continue to comply with Section 817(h) of
the Code and Treasury Regulation ss.1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
the Fund so as to achieve compliance within the grace period afforded by
Regulation 1.817-5.
6.2 The Fund represents and warrants that it is qualified as a
regulated investment company under Subchapter M of the Code and that it will
maintain such qualification (under Subchapter M or any successor or similar
provisions) and that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it might
not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance or annuity insurance
contracts, under applicable provisions of the Code, and that it will maintain
such treatment, and that it will notify the Fund immediately upon having a
reasonable basis for believing the Contracts have ceased to be so treated or
that they might not be so treated in the future. The Company agrees that any
prospectus offering a contract that is a "modified endowment contract" as that
term is defined in Section 7702A of the Code (or any successor or similar
provision), shall identify such contract as a modified endowment contract.
ARTICLE VII. Exemptive Order
Prior to offering the shares of any Designated Portfolio in variable
life insurance contracts of any insurance company, the Fund shall seek and
obtain a customary "mixed and shared funding order" from
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the SEC, provided that the Fund shall not be required to obtain such an order if
the SEC adopts a rule obviating the need for such an order and the Fund complies
with such rule.
Article VIII. Indemnification
8.1 Indemnification by the Company
8.1(a). The Company agrees to indemnify and hold
harmless each of the Fund and the Adviser and each of its trustees/directors and
officers, and each person, if any, who controls the Fund or Adviser within the
meaning of Section 15 of the 1933 Act or who is under common control with the
Fund or the Adviser (collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statements of any material fact
contained in the registration statement, prospectus (which
shall include a written description of a Contract that is not
registered under the 1933 Act), or SAI for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund or the
Adviser for use in the registration statement, prospectus or
SAI for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts, or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other than
statements or representations contained in the registration
statement, prospectus, SAI, or sales literature of the Fund
not supplied by the Company or persons under its control) or
wrongful conduct of the Company or its agents or persons under
the Company's authorization or control, with respect to the
sale or distribution of the Contracts, or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI, or sales literature
of the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company for use in the
registration statement, prospectus or SAI of the Fund or in
sales literature; or
(iv) arise as a result of any material failure by the
Company to provide the services and furnish the materials
under the terms of this Agreement; or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company;
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as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2 Indemnification by the Adviser
8.2(a). The Adviser agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements:
(i) arise out of or are based upon any
untrue statement or alleged untrue statement of any
material fact contained in the registration statement
or prospectus or SAI or sales literature of the Fund
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Adviser or Fund by
or on behalf of the Company for use in the
registration statement, prospectus or SAI for the
Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
10
(ii) arise out of or as a result of
statements or representations by or on behalf of the
Fund or the Adviser (other than statements or
representations contained in the registration
statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Fund or the
Adviser) or wrongful conduct of the Adviser or the
Fund with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or
alleged untrue statement of a material fact contained
in a registration statement, prospectus, SAI or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Adviser or the Fund; or
(iv) arise as a result of any failure by the
Fund or the Adviser to provide the services and
furnish the materials under the terms of this
Agreement (including a failure of the Fund, whether
unintentional or in good faith or otherwise, to
comply with the diversification and other
qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material
breach of any representation and/or warranty made by
or on behalf of the Adviser or the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by or on behalf of
the Adviser or the Fund;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Adviser shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Adviser shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Adviser will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
11
8.2(d). The Company agrees promptly to notify the
Adviser of the commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or sale of the
Contracts or the operation of the Account.
8.3 Indemnification by the Fund
8.3(a). The Fund agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Fund and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the registration
statement or prospectus or SAI or sales
literature of the Fund (or any amendment or
supplement to any of the foregoing), or
arise out of or are based upon the omission
or the alleged omission to state therein a
material fact required to be stated therein
or necessary to make the statements therein
not misleading, provided that this agreement
to indemnify shall not apply as to any
Indemnified Party if such statement or
omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to the
Adviser or Fund by or on behalf of the
Company for use in the registration
statement, prospectus or SAI for the Fund or
in sales literature (or any amendment or
supplement) or otherwise for use in
connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Fund
or the Adviser (other than statements or
representations contained in the
registration statement, prospectus, SAI or
sales literature for the Contracts not
supplied by the Fund or the Adviser) or
wrongful conduct of the Adviser or the Fund
with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a registration statement,
prospectus, SAI or sales literature covering
the Contracts, or any amendment thereof or
supplement thereto, or the omission or
alleged omission to state therein a material
fact required to be stated therein or
necessary to make the statement or
statements therein not misleading, if such
statement or omission was made in reliance
upon information furnished to the Company by
or on behalf of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund
to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional
or in good faith or otherwise, to comply
with the diversification and other
qualification requirements specified in
Article VI of this Agreement); or
12
(v) arise out of or result from any material
breach of any representation and/or warranty
made by or on behalf of the Fund in this
Agreement or arise out of or result from any
other material breach of this Agreement by
or on behalf of the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the Fund to such party of the Fund's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Fund will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State
of Kansas, without regard to the conflict of laws provisions thereof.
9.2. This Agreement shall be subject to the provisions of the
1933 and 1940 Acts as well as the Exchange Act of 1934, and the rules
and regulations and rulings thereunder, including such exemptions from
those statutes, rules and regulations as the SEC may grant, and the
terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
13
(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by six (6)
months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
other parties based upon the Company's determination
that shares of the Fund are not reasonably available
to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the
other parties in the event any of the Designated
Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal
law or such law precludes the use of such shares as
the underlying investment media of the Contracts
issued or to be issued by the Company; or
(d) termination by the Fund or Adviser by written notice
to the Company in the event that formal
administrative proceedings are instituted against the
Company by the Financial Industry Regulatory
Authority ("FINRA"), the SEC, the Insurance
Commissioner or like official of any state or any
other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the
purchase of the Designated Portfolios' shares;
provided, however, that the Fund or Adviser
determines in its sole judgment exercised in good
faith, that any such administrative proceedings will
have a material adverse effect upon the ability of
the Company to perform its obligations under this
Agreement; or
(e) termination by the Company by written notice to the
other parties in the event that formal administrative
proceedings are instituted against the Fund or
Adviser by the SEC or any state securities department
or any other regulatory body; provided, however, that
the Company determines in its sole judgment exercised
in good faith, that any such administrative
proceedings will have a material adverse effect upon
the ability of the Fund or Adviser to perform its
obligations under this Agreement; or
(f) termination by the Company by written notice to the
other parties in the event that any Designated
Portfolio ceases to qualify as a regulated investment
company under Subchapter M of the Code or fails to
comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if
the Company reasonably believes that any such
Portfolio may fail to so qualify or comply with
either provision; or
(g) termination by either the Fund or the Adviser by
written notice to the other parties, if either one or
both the Fund and the Adviser, respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company has suffered a material
adverse change in its business, operations, financial
condition, or prospects since the date of this
Agreement or is the subject of material adverse
publicity; or
(h) termination by the Company by written notice to the
other parties, if the Company shall determine, in its
sole judgment exercised in good faith, that the Fund
or the Adviser has suffered a material adverse change
in its business,
14
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or
(i) termination by the Company upon any substitution of
the shares of another investment company or series
thereof for shares of a Designated Portfolio of the
Fund in accordance with the terms of the Contracts,
provided that the Company has given at least 45 days
prior written notice to the Fund and Adviser of the
date of substitution.
10.2. Notwithstanding any termination of this Agreement, the Fund and
the Adviser shall, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Company seeks an order pursuant to Section 26(b) of the 1940 Act to permit the
substitution of other securities for the shares of the Designated Portfolios.
Specifically, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts (subject to any such election by the Company).
10.3. Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
Article XI Contractholder Information
11.1 The Company agrees to provide the Fund, upon written
request (which may include electronic writings and facsimile
transmissions, a "Request"), the taxpayer identification
number (the "TIN"), the Individual/International Taxpayer
Identification Number ("ITIN") or other government-issued
identifier ("GII"), if known, of any person that is a party to
a Contract that uses a Portfolio of the Fund as an underlying
investment medium by investments through the Company or its
affiliates (individually, a "Contractholder" or collectively,
the "Contractholders") who have purchased, redeemed,
transferred or exchanged Shares held through an Account during
the period covered by the Request and the amount, date, name
or other identifier of any investment professional(s)
associated with the Contractholders or Account (if known), and
transaction type (purchase, redemption, transfer, or exchange)
of every purchase, redemption, transfer, or exchange of
Shares.
(a) Requests must set forth a specific period, not to
exceed 90 days from the date of the Request for which transaction information is
sought. The Fund may request transaction information older than 90 days from the
date of the Request as it deems necessary to investigate compliance with
policies established by the Fund for the purpose of eliminating or reducing any
dilution of the value of its Shares.
(b) The Company agrees to transmit the requested
information that is on its books and records to the Fund or its designee
promptly, but in any event not later than ten (10) Business Days after receipt
of a Request. To the extent practicable, the format for any transaction
information provided to the Fund should be consistent with the National
Securities Clearing Corporation Standardized Data Report Format, or any other
format acceptable to the Fund.
15
(c) The Fund agrees not to use the information
received for marketing or any other similar purpose without the prior written
consent of the Company.
11.2 The Company agrees to execute a Request from the Fund to
restrict or prohibit further purchases or exchanges of Shares
by a Contractholder that has been identified by the Fund as
having engaged in transactions in Shares (directly or
indirectly through an Account) that violate policies
established by the Fund for the purpose of eliminating or
reducing any dilution of the value of its Shares.
(a) Such Request must include the TIN, ITIN or GII,
if known, and the specific restriction(s) to be executed. If the TIN, ITIN or
GII is not known, the instructions must include an equivalent identifying number
of the Contractholder(s) or Account(s) or other agreed upon information to which
the instruction relates.
(b) The Company agrees to execute the Request as soon
as reasonably practicable, but not later than five (5) Business Days after
receipt of the instructions by the Company.
(c) The Company agrees to provide written
confirmation to the Fund as soon as reasonably practicable that the Request has
been executed, but not later than ten (10) Business Days after the Request has
been executed.
11.3 Company will use best efforts to determine, promptly upon
the request of the Fund, whether any specific person or entity
about whom the Fund has received information pursuant to
Section 11.1 of this Agreement is an "indirect intermediary"
as defined in Rule 22c-2 of the 1940 Act (the "Rule") (an
"Indirect Intermediary") and, upon further Request from the
Fund, promptly after receipt of such Request either:
(a) provide (or arrange to have provided) the identification
and transaction information set forth in Section 11.1(a) of this Agreement
regarding a Contractholder who holds Shares through the Indirect Intermediary;
or
(b) restrict or prohibit the Indirect Intermediary from
purchasing Shares on behalf of itself or other persons.
The Company agrees to inform the Fund whether it plans to perform (a)
or (b) above.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Company: Security Benefit Life Insurance Company
Attention General Counsel
One Security Benefit Place
Topeka, Kansas 66636 - 0001
If to the Fund: Dent Strategic Portfolio
c/o Gemini Fund Services, LLC
000 Xxxxxxxx Xxxxxxxxx
00
Xxxxxxxxx, XX 00000
If to Adviser: XX Xxxx Investment Management, LLC
00000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxx, XX 00000
ARTICLE XIII. Miscellaneous
13.1. All persons dealing with the Fund must look solely to
the property of the respective Designated Portfolios listed on
Schedule A hereto as though each such Designated Portfolio had
separately contracted with the Company and the Adviser for the
enforcement of any claims against the Fund. The parties agree
that neither the Board, officers, agents or shareholders of
the Fund assume any personal liability or responsibility for
obligations entered into by or on behalf of the Fund.
13.2. Subject to the requirements of legal process and
regulatory authority, the Fund and the Adviser shall treat as
confidential the names and addresses of the owners of the
Contracts. Each party shall treat as confidential all
information reasonably identified as confidential in writing
by any other party hereto and, except as permitted by this
Agreement, shall not disclose, disseminate or utilize such
information without the express written consent of the
affected party until such time as such information has come
into the public domain.
13.3. The captions in this Agreement are included for
convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect
their construction or effect.
13.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall
constitute one and the same instrument.
13.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including
without limitation the SEC, FINRA, and state insurance
regulators) and shall permit such authorities reasonable
access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the
generality of the foregoing, each party hereto further agrees
to furnish the Kansas Insurance Commissioner with any
information or reports in connection with services provided
under this Agreement which such Commissioner may request in
order to ascertain whether the variable insurance operations
of the Company are being conducted in a manner consistent with
the Kansas insurance laws and regulations and any other
applicable law or regulations.
13.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies, and obligations, at law or in equity, which
the parties hereto are entitled to under state and federal
laws.
17
13.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior
written consent of all parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative.
Security Benefit Life
Insurance Company By its authorized officer
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Title: Senior Vice President & Chief
Operating Officer
-----------------------------
Date: March 3, 2008
-----------------------------
Northern Lights Variable Fund Trust By its authorized officer
(on behalf of the Designated Portfolios)
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------
Title: Secretary
-----------------------------
Date: March 3, 2008
-----------------------------
XX Xxxx Investment Management, LLC By its authorized officer
By: /s/ Xxxxxx Xxxxxxx
-----------------------------
Title: President
-----------------------------
Date: March 3, 2008
-----------------------------
18
February 5, 2008
SCHEDULE A
DESIGNATED PORTFOLIO(S)
Dent Strategic Portfolio
A-1