PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
STRONG CAPITAL MANAGEMENT, INC.,
AND
STRONG INVESTMENTS, INC.
THIS AGREEMENT, dated as of the 1st day of July, 2001, by and among
Security Benefit Life Insurance Company, (the "Company"), a stock life insurance
company organized under the laws of the State of Kansas, on its own behalf and
on behalf of each segregated asset account of the Company set forth on Schedule
A hereto, as may be amended from time to time (each an "Account"), Strong
Capital Management, Inc., ("Strong"), a Wisconsin corporation and the transfer
agent for the investment companies, or series or classes thereof, identified on
Schedule B to this Agreement (individually "Fund," collectively "Funds"), and
Strong Investments, Inc. ("Distributors"), a Wisconsin corporation and the
distributor for the Funds.
WHEREAS, the Funds, or series or classes thereof, are registered as
open-end management investment companies under the Investment Company Act of
1940 (the "1940 Act"); and
WHEREAS, Strong, which serves as the transfer agent for the Funds, is
duly registered as a transfer agent with the SEC; and
WHEREAS, the Company has issued or will issue certain variable annuity
contracts supported wholly or partially by the Account (the "Contracts"), and
said Contracts are listed in Schedule A hereto, as it may be amended from time
to time by mutual written agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts; and
WHEREAS, the Company intends to purchase shares in the Funds listed in
Schedule B hereto, as it may be amended from time to time by mutual written
agreement, on behalf of the Account to fund the aforesaid Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
Strong and Distributor agree as follows:
ARTICLE I. Accounts/Sale of Fund Shares
1.1(a). The Funds or Strong shall cause each Fund's books to
recognize one or more omnibus accounts in each Fund (each a "Fund Account") for
the Accounts, and neither the Funds nor Strong will maintain separate accounts
for the owners of Contracts as Fund shareholders of record.
1.1(b). Each Fund Account shall be opened based upon the
information contained in Schedule C to this Agreement, unless Company and Strong
mutually agree to use the National Securities Clearing Corporation ("NSCC")
Fund/SERV System ("Fund/SERV"). If Fund/SERV is to be used, each Fund Account
shall be opened following Company's satisfactory completion and transmission to
Distributors of the appropriate information through Fund/SERV necessary to
establish a new Fund Account and Distributors' receipt of such information. In
connection with each Fund Account, Company represents, warrants and certifies
that it is authorized to act on behalf of each Contract owner effecting
transactions in the Fund Account in connection with the services pursuant to an
agreement with the owners of the Contracts, it is satisfied that the person or
persons who signed the Contracts were, or were themselves properly authorized
by, the owners of the Contracts, and that the Fund Account information
communicated to Distributors, including the taxpayer ID number, is accurate and
correct.
1.1(c). The Fund shall designate each Fund Account with an
account number. Fund Account numbers shall be the means of identification when
the parties are transacting in the Fund Accounts. The assets in the Fund
Accounts are assets of the Programs and are segregated from Company's own
assets. Strong agrees to cause the Fund Accounts to be kept open on each Fund's
books regardless of a lack of activity or small position size except to the
extent Strong takes specific action to close a Fund Account or to the extent the
Fund's prospectus reserves the right to close accounts which are inactive or of
a small position size. In the latter two cases, Strong shall give prior notice
to Company before closing a Fund Account.
1.1(d). Subject to Article IX hereof, Distributors agrees to
make available to the Company for purchase on behalf of the Account, shares of
the Funds on any day the New York Stock Exchange ("NYSE") is open for trading
and on which the net asset value of for the respective Funds is calculated (a
"Business Day") pursuant to the rules of the Securities and Exchange Commission
("SEC"), such purchases to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) funds (other
than those listed on Schedule B) in existence now or that may be established in
the future will be made available to the Company only as Strong and Distributors
may so provide, and (ii) Strong and Distributors may suspend or terminate the
offering of shares of any Fund or class thereof; provided that Strong and
Distributors agree to treat Company's shareholders no less favorably than Strong
and Distributors treat their other retail shareholders in applying the
provisions of paragraph 1.1(d)(ii). Company shall not accept any conditional
orders. Distributors may in its sole discretion accept or reject an "as of"
order. If an "as of" order is accepted by Distributors, Company agrees to
indemnify the applicable Fund for any damage to the Fund or its shareholders
caused by the acceptance of such order.
1.2. The Distributors shall redeem, at the Company's request,
any full or fractional Fund 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 Distributors may delay
redemption of Fund shares to the extent permitted by the 1940 Act, and any
rules, regulations or orders thereunder.
1.3. PURCHASE AND REDEMPTION PROCEDURES
1.3.1 MANUAL TRANSACTIONS.
(a) PURCHASE AND REDEMPTION ORDERS. Distributors
hereby appoints the Company as its agent 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 Funds made available hereunder, based on
allocations of amounts to the Account or subaccounts thereof under the Contracts
and other transactions relating to the Contracts or the Account. Receipt and
acceptance of any such request (or relevant transactional information therefor)
on any Business Day by the Company as such limited agent of the Distributors
prior to the close of trading on the NYSE (i.e., 4:00 p.m. Eastern Time, unless
the NYSE closes at an earlier time in which case such earlier time shall apply)
(the "Trade Date") shall constitute receipt and acceptance by the Distributors
on that same Business Day, provided that the Company communicates such purchase
and redemption requests to Distributors by 10:00 a.m. Eastern Time on the next
following Business Day. This communication shall be by electronic transmission
through direct access to Strong's recordkeeping system, telephone, or facsimile
(or by such other means as the parties to this Agreement may agree to in
writing).
(b) SETTLEMENT OF TRANSACTIONS.
(i) The Company shall pay for shares of each
Fund on the same Business Day that it notifies the Distributors of a purchase
request for such Fund shares. Payment for Fund shares shall be made in federal
funds transmitted to the custodian for the Fund or other designated person by
wire to be received by 1:00 p.m. Eastern Time on the Business Day the
Distributors is notified of the purchase request for such Fund shares, or
Distributors shall be provided with the Federal Funds wire system reference
number prior to such 1:00 p.m. deadline evidencing the entry of the wire
transfer of the purchase price to the applicable custodian into the Federal
Funds wire system prior to such time ( unless the Distributors otherwise
determines and so advises the Company to delay the date of payment, to the
extent the Distributors may do so under the 1940 Act). If federal funds are not
received on time, at the option of Distributors, (i) the purchase request may be
canceled, or (ii) late funds will be invested, and Fund shares purchased thereby
will be issued, as soon as practicable and the Company shall promptly reimburse,
indemnify and hold harmless Strong and Distributors for any charges, costs,
fees, interest or other expenses incurred by Strong or Distributors in
connection with any advances to, or borrowing or overdrafts by, Strong or
Distributors, or any other expenses incurred by Strong or Distributors, as a
result of such purchase request, but in no event shall such amounts include any
special or consequential damages. 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.
(ii) Distributors shall use its best efforts
to cause payment, in federal funds, for Fund shares redeemed by the Account or
the Company, the requests for which have been provided to Distributors in
accordance with Section 1.3.1(a), to be transmitted by wire to the Company or
any other designated person by 1 p.m. Eastern Time on the next Business Day
following the Trade Date, except that Distributors 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 Funds as described in the then-current prospectus.
1.3.2 FUND/SERV TRANSACTIONS. If the parties choose
to use Fund/SERV, the provisions of this Section 1.3.2 shall apply:
(a) PURCHASE AND REDEMPTION ORDERS.
(i) On each Business Day, Company shall
aggregate all purchase and redemption orders for shares of a Fund that it
received prior to the close of trading on the NYSE (i.e., 4:00 p.m., Eastern
Time, unless the NYSE closes at an earlier time in which case such earlier time
shall apply). Company shall communicate to Distributors by 5 a.m. Eastern Time
on the next Business Day, via Fund/SERV, the purchase or redemption orders for
each Fund Account (if any) that it received prior to the close of trading on the
previous Business Day. Any orders received by Company after the close of trading
on a Business Day shall not be transmitted to NSCC prior to the following
Business Day. All trades communicated to Distributors in accordance with this
paragraph shall be treated by Distributors as if they were received by
Distributors prior to the close of trading on the Trade Date;
(ii) All orders are subject to acceptance by
Distributors and become effective only upon confirmation by Distributors.
Distributors reserves the right (aa) not to accept any specific order for the
purchase or exchange of shares through Fund/SERV, and (bb) to require any
redemption order to be settled outside of Fund/SERV, in which case the order
shall not be "confirmed" by Distributors, but rather shall be accepted for
redemption in accordance with Section 1.3.1(a) and (b);
(b) SETTLEMENT OF TRANSACTIONS. All trades placed
through Fund/SERV and confirmed by Distributors via Fund/SERV shall settle in
accordance with Distributors' profile within Fund/SERV applicable to Company;
1.4. Distributors shall use its best efforts to make the net
asset value per share for each Fund 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 Fund is calculated, and
shall ensure that such net asset value is calculated in accordance with the
Fund's prospectus.
1.5. PRICE ERROR:
(a) NOTIFICATION. If an adjustment is required in accordance
with a Fund's then current policies on reimbursement ("Fund Reimbursement
Policies") to correct any error in the computation of the net asset value of
Fund shares ("Price Error"), Strong or Distributors shall notify Company as soon
as practicable after discovering the Price Error. Notice may be made via
facsimile or via direct or indirect systems access and shall state the incorrect
price, the correct price and, to the extent communicated to the Fund's
shareholders, the reason for the price change.
(b) UNDERPAYMENTS. If a Price Error causes an Account to
receive less than the amount to which it otherwise would have been entitled,
Strong shall make all necessary adjustments (subject to the Fund Reimbursement
Policies) so that the Account receives the amount to which it would have been
entitled.
(c) OVERPAYMENTS. If a Price Error causes an Account to
receive more than the amount to which it otherwise would have been entitled,
Company, when requested by Strong (in accordance with the Fund Reimbursement
Policies), will use its best efforts to collect such excess amounts from the
applicable Owners.
(d) FUND REIMBURSEMENT POLICIES. Strong agrees to treat
Company's customers no less favorably than Strong treats its retail shareholders
in applying the provisions of paragraphs 1.5(b) and 1.5(c).
1.6. The Distributors 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 Fund 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 Fund shares in the form of additional shares of that Fund. 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 Distributors shall notify the Company promptly of the number of Fund
shares so issued as payment of such dividends and distributions.
1.7. 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.
1.8. (a) The parties hereto acknowledge that the
arrangement contemplated by this Agreement is not exclusive; the Fund's shares
may be sold to other insurance companies and the cash value of the Contracts may
be invested in other investment companies.
(b) The Company shall not, without prior written
notice to Strong and Distributors take any action to operate the Account as a
management investment company under the 1940 Act.
(c) The Company shall not induce Contract owners to
change or modify the Fund or change the Fund's investment adviser.
(d) The Company and its designee shall not recommend
action in connection with, or oppose or interfere with, the solicitation of
proxies for the Fund shares held for Owners.
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 it is an
insurance company duly organized and in good standing under applicable law, that
it has legally and validly established the Account as a segregated asset account
under Kansas insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company further represents and warrants that it has full
power and authority under applicable law, and has taken all action necessary, to
enter into and perform this Agreement and the person executing this Agreement on
its behalf is duly authorized and empowered to execute and deliver this
Agreement. The Company further represents and warrants that this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms. The Company further represents and warrants that no
consent or authorization of, filing with, or other act by or in respect of any
governmental authority is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement. The Company further
represents and warrants that the execution, performance and delivery of this
Agreement shall not result in it violating any applicable law or breaching or
otherwise impairing any of its contractual obligations.
2.2. Strong and Distributors represent and warrant that Fund
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 Funds are and shall remain
registered under the 1940 Act. Strong or Distributors shall amend the
registration statement for the Funds' 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. Strong or Distributors shall register and qualify the Funds' shares for
sale in accordance with the laws of the various states only if and to the extent
deemed advisable by the Funds.
2.3. Strong represents that the Funds are lawfully organized
and validly existing under the laws of the State of their incorporation,
respectively, and that the Funds do and will comply in all material respects
with the 1940 Act.
2.4. Strong represents and warrants that it is registered as a
transfer agent with the SEC.
2.5. The Distributors and Strong represent and warrant on
behalf of themselves and on behalf of the Funds, that all of their respective
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 Company represents and warrants that all of its
directors, officers, employees, and other individuals/entities employed or
controlled by the Company dealing with the money and/or securities of the
Account are covered by a blanket fidelity bond or similar coverage for the
benefit of the Account, in an amount not less than $5 million. The aforesaid
bond includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
2.7. COMPLIANCE WITH LAWS. Company, Distributors and Strong
represent and warrant that each shall comply, in all material respects, with all
laws, rules and regulations applicable to them in connection with the
performance of each of their respective obligations under this Agreement, or
applicable to the performance of each of their respective businesses.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. Strong or Distributors shall provide the Company, to the
extent required by applicable law, in bulk, at a single address 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 Fund (for distribution to Contract owners as required by
applicable law) as the Company may reasonably request to deliver to existing
Contract owners. If requested by the Company in lieu thereof, the Company may
receive 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; provided that Distributors has the capability of
transmitting such materials in such formats; and provided that in no event shall
the cost associated with providing the materials in such formats exceed the cost
Strong or Distributors would have incurred had such materials been provided in
print form. Company agrees to distribute such documents exactly in the format
provided by Strong or Distributors. In particular, if such documents contain
information regarding registered investment companies other than the Funds, the
entire document shall be distributed unless Strong or Distributors agrees
otherwise. The expenses associated with printing and providing such
documentation shall be as set forth in Article V.
3.2. With regard to a Fund proxy, the parties agree to work
together, and shall put forth their best efforts to facilitate the solicitation
and tabulation of voting instructions from Contract owners. Company shall, 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, follow one
of the two procedures outlined below:
(a) If the Company chooses to solicit the vote, Company shall,
in a timely fashion, provide a list of Contract owners with value allocated to a
Fund as of the record date to a proxy service mutually agreed upon by the
parties, and shall:
(i) solicit voting instructions from owners of or
participants in the Contract;
(ii) vote the Fund shares in accordance with
instructions received from owners of or participants in the Contract; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such Fund for which
instructions have been received.
(b) If the Company chooses to work with the Fund's proxy
service, the Company shall, in a timely fashion, provide a list of Contract
owners with value allocated to a Fund as of the record date to Strong or
Distributors or its agent in order to facilitate the Fund's solicitation of
voting instructions from Contract owners. The Company shall also provide such
other information to Strong or Distributors as is reasonably necessary in order
for Strong or Distributors to properly tabulate votes for Fund proxies.
(c) The expenses associated with printing, distribution and
tabulation of proxies shall be as set forth in Article V.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be
furnished, to Strong and Distributors, each piece of sales literature or other
promotional material that the Company develops and in which the Funds,
Distributors or Strong is named. No such material shall be used until approved
by Strong and Distributors, and Strong and Distributors will use their best
efforts to review such sales literature or promotional material within five (5)
Business Days after receipt of such material. Neither Strong nor Distributors
shall review the materials for compliance with applicable law. Strong and
Distributors reserve the right to reasonably object to the continued use of any
such sales literature or other promotional material in which a Fund,
Distributors or Strong is named, and no such material shall be used if Strong or
Distributors so objects.
4.2. The Company shall not give any information or make any
representations concerning the Funds or Strong or Distributors in connection
with the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for each Fund, 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 Funds, or in sales
literature or other promotional material approved by Strong and Distributors,
except with the permission of Strong and Distributors.
4.3. The Distributors and Strong, 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. Strong and Distributors shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus (which shall include an
offering memorandum, if any, if the Contracts issued by the Company or interests
therein are not registered under the 1933 Act), or SAI for the Contracts, as
such registration statement, prospectus, or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company,
except with the permission of the Company.
4.5. Strong or Distributors 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 Funds, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to Strong and Distributor 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 Distributors and Strong
any complaints received from the Contract owners pertaining to the Funds.
4.7. Strong and Distributors will provide the Company with as
much notice as is reasonably practicable of any proxy solicitation for any Fund,
and of any material change in a Fund's registration statement, particularly any
change resulting in a change to the registration statement or prospectus for any
Account.
ARTICLE V. Fees and Expenses
5.1. Strong and Distributors shall see to it that all Fund
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. Strong or
Distributors shall, as applicable, bear the expenses for the cost of
registration and qualification of the Funds' shares, preparation and filing of
the Funds' prospectus and registration statement, SAI, and annual and semi
annual reports and the expense of printing and providing (subject to the
limitation on costs set forth in Section 3.1) such materials to Company.
5.2. The Company shall bear the expenses of distributing the
prospectuses, SAI, and the annual and semi annual reports regarding the Funds to
shareholders (whether for existing or prospective Contract owners).
5.3. With regard to a Fund proxy, the expenses associated with
printing proxy materials, distributing proxy materials to Company and/or
Contract owners (as applicable), and the expenses associated with tabulating the
proxy votes shall be borne by the Fund, Strong or Distributor (as applicable).
5.4. The Company shall bear the expense of printing and
distributing the prospectus for the Contracts for use with existing and
prospective Contract owners, and all costs associated with a Contract proxy. 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 a Fund, Strong and/or Distributors are named.
ARTICLE VI. QUALIFICATION
Distributors, on behalf of the Funds, represent and warrant
that each Fund is or will be qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code,") and that each Fund will maintain such qualification (under
Subchapter M or any successor or similar provisions) and that Distributors will
notify the Company immediately upon having a reasonable basis for believing that
any Fund has ceased to so qualify or that any Fund might not so qualify in the
future.
ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE COMPANY
7.1(a). The Company agrees to indemnify and hold harmless each
of the Funds, Distributors and Strong and each of its trustees/directors,
officers and affiliates, and each person, if any, who controls the Fund or
Strong within the meaning of Section 15 of the 1933 Act or who is under common
control with the Fund or Strong (collectively, the "Indemnified Parties" for
purposes of this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified 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 Distributors or Strong 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 a 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 a 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 Strong or Distributors by or on behalf of the Company;
or
(iv) arise as a result of any material failure by the
Company to provide the services and furnish the materials under the terms of
this Agreement;
(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; or
(vi) arise out of, or as a result of, adherence by
Strong or Distributors to instructions that it reasonably believes were
originated by authorized agents of Company. For purposes of Section 7.1,
"authorized agents of the Company" shall mean any individual set forth in
Schedule C, as it may be amended from time to time.
as limited by and in accordance with the provisions of Sections 7.1(c)and 7.1(d)
hereof.
7.1(b). If the parties choose to use Fund/SERV, then in
consideration for the establishment of the Fund Accounts without the physical
delivery of properly executed account applications and the authorization of the
purchase and redemption of non-certificated shares of any of the Funds for Fund
Accounts through Fund/SERV without the delivery of a properly executed and
guaranteed stock power or other power of attorney, Company shall further
indemnify and hold harmless Indemnified Parties from and against all losses,
claims, damages, liabilities and expenses (including reasonable attorney's fees)
("Losses") that may arise from the establishment of the Fund Accounts or in
connection with any orders for the purchase, exchange or sale of shares of the
Funds communicated by Company or its agents by way of Fund/SERV. Company shall
also reimburse Strong, the Funds and Distributors for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending against such Losses. This indemnity agreement is in addition to any
other liability which Company may otherwise have.
7.1(c). The Company shall not be liable under this
indemnification provision (including Section 7.1(b)) with respect to any losses,
claims, damages, liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of its
obligations or duties under this Agreement.
7.1(d). 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.
7.1(e). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
7.2. INDEMNIFICATION BY STRONG AND DISTRIBUTORS
7.2(a). Strong and Distributors agree to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Strong) 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 a 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 Strong or Distributors by or on behalf of the Company for use in the
registration statement, prospectus or SAI for the Funds 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 Distributors or Strong (other than
statements or representations contained in the registration statement,
prospectus, SAI or sales literature for the Contracts not supplied by the
Distributors or Strong) or wrongful conduct of Strong or the Distributors 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 Strong or the Distributors; or
(iv) arise as a result of any failure by the
Distributors or Strong to perform its obligation and furnish the materials under
the terms of this Agreement (including a failure of the Distributors, on behalf
of the Funds, 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 Strong or the
Distributors in this Agreement or arise out of or result from any other material
breach of this Agreement by or on behalf of Strong or the Distributors;
as limited by and in accordance with the provisions of Sections 7.2(b)and 7.2(c)
hereof.
7.2(b). Strong and Distributors 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 and
duties under this Agreement or to the Company or the Account, whichever is
applicable.
7.2(c). Strong and Distributors 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 Strong and the
Distributors 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 Strong and Distributors of any such claim shall not relieve Strong and
Distributors 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, Strong and Distributors will be entitled to participate, at
their own expense, in the defense thereof. Strong and Distributors also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from Strong and Distributors to such
party of Strong's or Distributors' election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Strong and Distributors will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.2(d). The Company agrees promptly to notify Strong and
Distributors 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.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of
Wisconsin, without regard to the conflict of laws provisions thereof.
8.2. This Agreement shall be subject to the provisions of the
1933 and 1940 Acts as well as the Exchange Act of 1934, and the rules and
regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant, and the terms hereof shall
be interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party, for any reason, by ninety (90)
days 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 Funds 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 Funds' 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 Distributors or Strong in the event
that formal administrative proceedings are instituted against the Company by the
National Association of Securities Dealers, Inc. (the "NASD"), the SEC, the
Insurance Commissioner or like official of any state or any other regulatory
body regarding the Company's duties under this Agreement or related to the sale
of the Contracts, the operation of any Account, or the purchase of the Funds'
shares; provided, however, that the Distributors or Strong determine in their
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 in the event that formal
administrative proceedings are instituted against the Distributors or Strong 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 Distributors or Strong 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 Fund ceases to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, or if the
Company reasonably believes that any such Portfolio may fail to so qualify or
comply; or
(g) termination by either the Distributors or Strong by
written notice to the other parties, if either one or both the Distributors and
Strong, 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 Distributors or Strong has suffered a material adverse change in
its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(i) termination by the Company upon any substitution of the
shares of another investment company or series thereof for shares of a Fund in
accordance with the terms of the Contracts, provided that the Company has given
at least 45 days prior written notice to the Distributors and Strong of the date
of substitution.
(j) notwithstanding the foregoing, this Agreement may be
terminated by any party at any time by giving written notice to the other
parties at such time as any party ceases to participate in Fund/SERV or no
longer has direct or indirect access to the NSCC's Networking System; provided
that the parties no longer agree to transact manually. The parties acknowledge
that certain Funds may only be available through Fund/SERV. In the event that
any party ceases to participate in Fund/SERV or no longer has direct or indirect
access to the NSCC's Networking System and the parties continue the Agreement by
transacting manually, such Funds will not be available as investment options.
(k) Company takes any action to operate the Account as a
management investment company under the 1940 Act, whereupon this Agreement shall
automatically terminate upon the happening of such event, and Strong and
Distributors obligations under this Agreement shall terminate at that time.
9.2. Notwithstanding any termination of this Agreement, except
for termination in accordance with Section 9.1(k), each party's obligations
shall survive until no Active Interests (i.e., a Contract owner that holds a
positive dollar balance as of the last day of the prior month) are maintained in
the Fund Accounts; provided, however, that (i) Strong shall have no obligation
to open new Fund Accounts, and (ii) Strong's obligation to pay the Fees shall
survive for a period no longer than one year from the date of termination
(unless termination is the result of an event described in Sections 9.1 (d), (g)
or (k), in which case Strong's obligation to pay the Fees shall end as of the
date of such termination). Notwithstanding the foregoing, nothing in this
Section 9 obligates a Fund to continue in existence.
9.3 Notwithstanding any termination of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Company: Security Benefit Life Insurance Company
Attention General Counsel
000 XX Xxxxxxxx
Xxxxxx, Xxxxxx 00000 - 0001
Facsimile No.: 785/431-3080
If to the Distributors: Strong Investments, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Strong: Strong Capital Management, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile No.: 414/359-3948
ARTICLE XI. MISCELLANEOUS
11.1 All persons dealing with the Fund must look solely to the
property of the respective Funds listed on Schedule B hereto as though each such
Fund had separately contracted with the Company and Strong for the enforcement
of any claims against a 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.
11.2 In no way shall the provisions of this Agreement limit
the authority of any Fund, Strong or Distributors to take any action as it may
deem appropriate or advisable in connection with all matters relating to the
operation of such Fund and the sale of its shares. In no way shall the
provisions of this Agreement limit the authority of Company to take any action
as it may deem appropriate or advisable in connection with all matters relating
to the provision of services, as defined in the Services Agreement, or the
shares of funds other than the Funds offered to the owners of Contracts.
11.3 Confidentiality. Each party agrees to take all steps
necessary to comply with all applicable laws, rules and regulations (including,
without limitation, the Securities and Exchange Commission Regulation S-P)
protecting the privacy of consumer nonpublic personal financial information
disclosed to each party under this Agreement ("Consumer Information"). Each
party agrees not to disclose or use Consumer Information other than to carry out
the purposes for which such Consumer Information is disclosed or as otherwise
permitted by law.
11.4 Unless expressly set forth to the contrary in this
Agreement, all expenses incident to the performance by each party of its
respective duties under this Agreement shall be paid by that party.
11.5 Except for the limited purpose provided in Section 1.3,
it is understood and agreed that the Company and its designees shall be acting
as an independent contractor and not as an employee or agent of Strong,
Distributors or the Funds, and none of the parties shall hold itself out as an
agent of any other party with the authority to bind such party. Neither the
execution nor performance of this Agreement shall be deemed to create a
partnership or joint venture by and among any of the Company, any designees,
Funds, Strong, or Distributors.
11.6 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
11.8 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.
11.9 Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, and the NASD) 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.
11.10 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
11.11 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.
11.12 No provision of this Agreement shall be modified,
amended or waived except in writing and only when signed by all of the parties
to this Agreement. Notwithstanding anything in this Agreement to the contrary,
Strong may unilaterally amend Schedule B to this Agreement to add additional
investment companies, or series or classes thereof, ("New Funds") as Funds by
sending to Company a written notice of the New Funds and indicating therein the
fees to be paid to Company with respect to the Services provided in connection
with such New Funds. However, Company has no obligation to offer New Funds in
the Contracts.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative.
Security Benefit Life By its authorized officer
Insurance Company XXXXXX XXXX
-------------------------
By: Xxxxxx Xxxx
Title: Senior Vice President
Strong Investments, Inc. By its authorized officer
XXXXXXXXX X. XXXX
-------------------------
By: Xxxxxxxxx X. Xxxx
Title: Assistant Secretary
Strong Capital Management, Inc. By its authorized officer
XXXXXX X. XXXXXX, XX.
-------------------------
By: Xxxxxx X. Xxxxxx, Xx.
Title: Assistant Executive Vice
President and Assistant
Secretary
July 1, 2001
SCHEDULE A
ACCOUNT(S) CONTRACT(S)
SBL VARIABLE ANNUITY ACCOUNT XIV V6029
SCHEDULE B
FUND(S)
STRONG GROWTH & INCOME FUND - ADVISOR CLASS
STRONG GROWTH 20 FUND - ADVISOR CLASS
STRONG ADVISOR SMALL CAP VALUE FUND - LOAD
WAIVED A
STRONG OPPORTUNITY FUND - ADVISOR CLASS
EXHIBIT C--ACCOUNT INFORMATION
(FOR ACCOUNTS TO HAVE DIVIDENDS AND CAPITAL GAINS REINVESTED AUTOMATICALLY)
1. Entity in whose name each Security Benefit Life Insurance Company
Account will be opened: SBL Variable Annuity Account XIV
Mailing address: Attn: Finance Department
000 Xxxxxxxx
Xxxxxx, XX 00000
2. Employer ID number (FOR INTERNAL USE ONLY):000000000
3. Authorized contact persons: The following persons are authorized on behalf
of Security to effect transactions in each Account:
Name: Xxxxx Xxxxxxxxx Phone: (000) 000-0000
Name: Xxxxx Xxxx Phone: (000) 000-0000
Name: Xxxx Xxxxx Phone: (000) 000-0000
Name: Xxxxx Xxxxxxxxxx Phone: (000) 000-0000
4. Will the Accounts have telephone exchange? ____ Yes __X_ No
(THIS OPTION LETS SECURITY REDEEM SHARES BY TELEPHONE AND APPLY THE PROCEEDS
FOR PURCHASE IN ANOTHER IDENTICALLY REGISTERED ACCOUNT.)
5. Will the Accounts have telephone redemption? ____ Yes __X_ No
(THIS OPTION LETS SECURITY SELL SHARES BY TELEPHONE. THE PROCEEDS WILL BE
WIRED TO THE BANK ACCOUNT SPECIFIED BELOW.)
6. All dividends and capital gains will be reinvested automatically.
7. Instructions for all outgoing
wire transfers: UMB Bank, n.a.
Account #9870848783
ABA # 000000000
Security Benefit Life Operating A Account
Kansas, City, MO
8. COMPANY CERTIFIES UNDER PENALTY OF PERJURY THAT:
(i) THE NUMBER SHOWN ON THIS FORM IS THE CORRECT EMPLOYER ID NUMBER (OR
THAT COMPANY IS WAITING TO BE ISSUED AN EMPLOYER ID NUMBER), AND
(ii) COMPANY IS NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE (A) COMPANY
IS EXEMPT FROM BACKUP WITHHOLDING, OR (B) COMPANY HAS NOT BEEN NOTIFIED BY THE
INTERNAL REVENUE SERVICE ("IRS") THAT IT IS SUBJECT TO BACKUP WITHHOLDING AS A
RESULT OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS
NOTIFIED COMPANY THAT IT IS NO LONGER SUBJECT TO BACKUP WITHHOLDING.
(CROSS OUT (ii) IF COMPANY HAS BEEN NOTIFIED BY THE IRS THAT IT IS SUBJECT TO
BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON ITS TAX
RETURN.)
THE IRS DOES NOT REQUIRE COMPANY'S CONSENT TO ANY PROVISION OF THIS
DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
XXXXX X. XXXXX July 1, 2001
------------------------------------ ------------------------------
(SIGNATURE OF AUTHORIZED OFFICER) (DATE)
(Company shall inform Strong and Distributors of any changes to information
provided in this Account Information Form.)
PLEASE NOTE: DISTRIBUTORS EMPLOYS REASONABLE PROCEDURES TO CONFIRM THAT
INSTRUCTIONS COMMUNICATED BY TELEPHONE ARE GENUINE AND MAY NOT BE LIABLE FOR
LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS. PLEASE SEE THE PROSPECTUS
FOR THE APPLICABLE FUND FOR MORE INFORMATION ON THE TELEPHONE EXCHANGE AND
REDEMPTION PRIVILEGES.