Exhibit 1.A(8)(a)(ix)
FUND PARTICIPATION AGREEMENT
BETWEEN
XXXXXXX XXXXX VARIABLE SERIES FUNDS, INC. AND SECURITY LIFE
OF DENVER INSURANCE COMPANY
THIS Fund Participation Agreement, by and between XXXXXXX XXXXX
VARIABLE SERIES FUNDS, INC., an open-end management investment company organized
as a Maryland corporation (the "Fund") and SECURITY LIFE OF DENVER INSURANCE
COMPANY (the "Company"), a life insurance company organized under the laws of
the state of [Colorado] on the Company's own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A as attached
hereto, as such schedule may be amended from time to time (the "Accounts"), is
made as of the __ day of ______, 2000.
W I T N E S S E T H
WHEREAS, the Fund has filed a registration statement with the
Securities and Exchange Commission to register itself as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and to register the offer and sale of its shares under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Fund desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Fund (the "Participating Insurance
Companies"); and
WHEREAS, the capital stock of the Fund is divided into several series
of shares, each series representing an interest in a particular managed
portfolio of securities and other assets; and
WHEREAS, the several series of shares of the Fund offered by the Fund
to the Company and the Accounts are set forth on Schedule B attached hereto
(each, a "Portfolio," and, collectively, the "Portfolios"); and
WHEREAS, the Fund has received an order from the SEC granting
Participating Insurance Companies and their separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and
rules 6e-2(b) (15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies and certain qualified pension and retirement plans (the
"Shared Fund Exemptive Order");
WHEREAS, Xxxxxxx Xxxxx Asset Management, L.P. ("MLAM") is duly
registered as an investment adviser under the Investment Advisers Act of 1940,
as
amended, and any applicable state securities law, and acts as the Fund's
investment adviser; and
WHEREAS, Princeton Funds Distributor, Inc. (the "Underwriter") is
registered as a broker-dealer with the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
is a member in good standing of The National Association of Securities Dealers,
Inc. (the "NASD") and acts as principal underwriter of the shares of the Fund;
and
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies funded or to be funded through one or
more of the Accounts (the "Contracts"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios (the "Shares") on behalf of the Accounts to fund the Contracts, and
the Fund intends to sell such Shares to the relevant Accounts at such Shares'
net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE 1
SALE OF THE FUND SHARES
1.1 Subject to Section 1.3 of this Agreement, the Fund shall cause the
Underwriter to make Shares of the Portfolios available to the Accounts at such
Shares' most recent net asset value provided to the Company prior to receipt of
such purchase order by the Fund (or the Underwriter or its agent), in accordance
with the operational procedures mutually agreed to by the Underwriter and the
Company from time to time and the provisions of the then-current prospectus of
the Fund. Shares of a particular Portfolio of the Fund shall be ordered in such
quantities and at such times as determined by the Company to be necessary to
meet the requirements of the Contracts. The Directors of the Fund (the
"Directors") may refuse to sell Shares of any Portfolio to any person (including
the Company and the Accounts), or suspend or terminate the offering of Shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Directors acting in
good faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
such Portfolio.
1.2 Subject to Section 1.3 of this Agreement, the Fund will redeem any
full or fractional Shares of any Portfolio when requested by the Company on
behalf of an Account at such Shares' most recent net asset value provided to the
Company PRIOR to receipt by the Fund (or the Underwriter or its agent) of the
request for redemption, as
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established in accordance with the operational procedures mutually agreed to by
the Underwriter and the Company from time to time and the provisions of the then
current-prospectus of the Fund. The Fund shall make payment for such Shares in
the manner established from time to time by the Fund, but in no event shall
payment be delayed for a greater period than is permitted by the 1940 Act
(including any Rule or order of the SEC thereunder).
1.3 The Fund shall accept purchase and redemption orders resulting from
investment in and payments under the Contracts on each Business Day, provided
that such orders are received prior to 9:00 a.m. on such Business Day and
reflect instructions received by the Company from Contract holders in good order
prior to the time the net asset value of each Portfolio is priced in accordance
with its prospectus (such Portfolio's "valuation time") on the prior Business
Day. Any purchase or redemption order for Shares of any Portfolio received, on
any Business Day, after such Portfolio's valuation time on such Business Day
shall be deemed received prior to 9:00 a.m. on the next succeeding Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC. Purchase and redemption orders shall be provided by the
Company to the Underwriter as agent for the Fund in such written or electronic
form (including facsimile) as may be mutually acceptable to the Company and the
Underwriter. The Underwriter may reject purchase and redemption orders that are
not in proper form. In the event that the Company and the Underwriter agree to
use a form of written or electronic communication which is not capable of
recording the time, date and recipient of any communication and confirming good
transmission, the Company agrees that it shall be responsible (i) for confirming
with the Underwriter that any communication sent by the Company was in fact
received by the Underwriter in proper form, and (ii) for the effect of any delay
in the Underwriter's receipt of such communication in proper form. The Fund and
its agents shall be entitled to rely, and shall be fully protected from all
liability in acting, upon the instructions of the persons named in the list of
authorized individuals attached hereto as SCHEDULE C, or any subsequent list of
authorized individuals provided to the Fund or its agents by the Company in such
form, without being required to determine the authenticity of the authorization
or the authority of the persons named therein.
1.4 Purchase orders that are transmitted to the Fund in accordance with
Section 1.3 of this Agreement shall be paid for no later than 12:00 noon on the
same Business Day that the Fund receives notice of the order. Payments shall be
made in federal funds transmitted by wire. In the event that the Company shall
fail to pay in a timely manner for any purchase order validly received by the
Underwriter on behalf of the Fund pursuant to Section 1.3 of this Agreement
(whether or not such failure is the fault of the Company), the Company shall
hold the Fund harmless from any losses reasonably sustained by the Fund as the
result of acting in reliance on such purchase order.
1.5 Issuance and transfer of the Fund's Shares will be by book entry
only. Stock certificates will not be issued to the Company or to any Account.
Shares ordered from the Fund will be recorded in the appropriate title for each
Account.
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1.6 The Fund shall furnish prompt notice to the Company of any income,
dividends or capital gain distribution payable on Shares of any Portfolio. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's Shares in additional Shares of
that Portfolio. The Fund shall notify the Company of the number of Shares so
issued as payments of such dividends and distributions.
1.7 The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after such net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:30 p.m., New
York time.
1.8 The Company agrees that it will not take any action to operate any
Account as a management investment company under the 1940 Act without the Fund's
and the Underwriter's prior written consent.
1.9 The Fund agrees that its Shares will be sold only to Participating
Insurance Companies and their separate accounts. No Shares of any Portfolio will
be sold directly to the general public. The Company agrees that the Fund Shares
will be used only for the purposes of funding the Contracts and Accounts listed
in Schedule A, as such schedule may be amended from time to time.
1.10 The Fund agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.11 and
Article 4 of this Agreement.
1.11 So long as it shall be the intention of the Fund to maintain the
net asset value per share of any Portfolio at $1.00, on any day on which (a) the
net asset value per share of the Shares is determined, (b) MLAM determines, in
the manner described in the then-current prospectus of the Fund, that the net
income of such Portfolio on such day is negative, and (c) MLAM delivers a
certificate to the Companies setting forth the reduction in the number of
outstanding Shares to be effected as described in the then-current prospectus of
the Fund in connection with such determination, the Company, on behalf of itself
and the Accounts, agrees to return to the Fund its pro rata share of the number
of Shares to be reduced and agrees that, upon delivery by MLAM to the Company of
such certificate, (a) the Company's ownership interest in the Shares so to be
returned shall immediately cease, (b) such Shares shall be deemed to have been
canceled and to be no longer outstanding, and (c) all rights in respect of such
Shares shall cease.
ARTICLE 2
OBLIGATION OF THE PARTIES
2.1 The Fund shall prepare and be responsible for filing with the SEC
and any state securities regulators requiring such filing, all shareholder
reports, notices, proxy materials (or similar materials such as voting
instruction solicitation materials),
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prospectuses and statements of additional information of the Fund. The Fund
shall bear the costs or registration and qualification of its Shares,
preparation and filing of the documents listed in this Section 2.1 and all taxes
to which an issuer is subject on the issuance and transfer of its shares.
2.2 At least annually, the Fund or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios) for the Shares as the Company may reasonably
request for distribution to EXISTING Contract owners whose Contracts are funded
by such Shares. The Fund or its designee shall provide the Company, at the
Companies' expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to PROSPECTIVE purchasers
of Contracts. If requested by the Company in lieu thereof, the Fund or its
designee shall provide such documentation (including a "camera ready" copy of
the new prospectus as set in type) and other assistance as is reasonably
necessary in order for the parties hereto once each year (or more frequently if
the prospectus for the Shares is supplemented or amended) to have the prospectus
for the Contracts and the prospectus for the Shares printed together in one
document; the expenses of such printing to be borne by the Company. In the event
that the Company requests that the Fund or its designee provide the Fund's
prospectus in a "camera ready" format, the Fund shall be responsible solely for
providing the prospectus in the format in which it is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g., typesetting expenses), and the Company shall bear the expense of
adjusting or changing the format to conform with any of its prospectuses.
2.3 The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Fund or its
designee. The Fund or its designee, at its expense, shall print and provide such
statement of additional information to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to any owner
of a Contract funded by the Shares. The Fund or its designee, at the Company's
expense, shall print and provide such statement to the Company (or a master of
such statement suitable for duplication by the Company) for distribution to a
prospective purchaser who requests such statement.
2.4 The Fund or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Fund's proxy
materials, reports to Shareholders and other communications to Shareholders in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.5 With respect to any prospectus, shareholder report or proxy
solicitation materials that concern solely the Fund and no other investment
vehicle funding the Accounts, the Fund shall pay for the Company's postage costs
in connection with mailing such materials to existing Contract owners. With
respect to any prospectus, shareholder report or proxy solicitation materials
that concern the Fund together with other investment vehicles funding the
Accounts, the Fund shall pay a proportionate amount of the Company's postage
costs, based on the percentage of such Account's overall assets
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that are invested in the Fund, in connection with mailing such materials to
existing Contract owners.
2.6 The Company shall furnish, or cause to be furnished, to the Fund or
its designee, a copy of each prospectus for the Contracts or statement of
additional information for the Contracts in which the Fund or its investment
adviser is named prior to the filing of such document with the SEC. 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 in which the Fund or its
investment adviser is named, at least five Business Days prior to is use. No
such prospectus, statement of additional information or material shall be used
if the Fund or its designee reasonably objects to such use within five Business
Days after receipt of such material.
2.7 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Fund Shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Fund, Fund-sponsored proxy statement, or in sales literature or
other promotional material approved by the Fund or its designee, except with the
written permission of the Fund or its designee.
2.8 The Fund shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, the Accounts
or the Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Contracts (as such registration statement and prospectus may be amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
with the written permission of the Company.
2.9 The Company shall amend the registration statement of the Contracts
under the 1933 Act and registration statement for each Account under the 1940
Act from time to time as required in order to effect the continuous offering of
the Contracts or as may otherwise be required by applicable law. The Company
shall register and qualify the Contracts for sale to the extent required by
applicable securities laws and insurance laws of the various states.
2.10 The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
probable that such Contract would be a "modified endowment contract," as that
term is defined in Section 7702A of the Internal Revenue Code of 1986, as
amended (the "Code"), will identify such Contract as a modified endowment
contract (or policy).
2.11 Solely with respect to Contracts and Accounts that are subject to
the 1940 Act, so long as, and the extent that, the SEC interprets the 1940 Act
to require pass-through voting privileges for variable policyowners: (a) the
Company will provide pass-
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through voting privileges to owners of Contracts whose cash values are invested,
through the Accounts, in Shares of the Fund; (b) the Fund shall require all
Participating Insurance Companies to calculate voting privileges in the same
manner and the Company shall be responsible for assuring that the Accounts
calculate voting privileges in the manner established by the Fund; (c) with
respect to each Account, the Company will vote Shares of the Fund held by the
Account and for which no timely voting instructions from Contract or
policyowners are received, as well as Shares held by the Account that are owned
by the Company for their general accounts, in the same proportion as the Company
votes Shares held by the Account for which timely voting instructions are
received from Contract owners; and (d) the Company and its agents will in no way
recommend or oppose or interfere with the solicitation of proxies for Fund
Shares held by Contract owners without the prior written consent of the Fund,
which consent may be withheld in the Fund's sole discretion.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of [Colorado]
and has established each Account as a segregated asset account under such law on
the date set forth in Schedule A.
3.2 The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each 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.
3.3 The Company represents and warrants that the Contracts will be
registered under the 1933 Act prior to any issuance or sale of the Contracts;
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance requirements.
3.4 The Company represents and warrants that the Contracts are
currently and at the time of issuance will be treated as annuity contracts or
life insurance policies, whichever is appropriate, under applicable provisions
of the Code. The Company shall make every effort to maintain such treatment and
shall notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
3.5 The Fund represents and warrants that it is duly organized and
validly existing under the laws of the State of Maryland.
3.6 The Fund represents and warrants that the sale of the Fund Shares
offered and sold pursuant to this Agreement will be registered under the 1933
Act and that the Fund is registered under the 1940 Act. The Fund shall use its
best efforts to amend its
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registration statement under the 1933 Act and the 1940 Act from time to time as
required in order to affect the continuous offering of its shares. If the Fund
determines registration is appropriate, the Fund shall use its best efforts to
register and qualify its Shares for sale in accordance with the laws of all
fifty states, the District of Columbia, Virgin Islands and Puerto Rico and such
other jurisdictions reasonably requested by the Company.
3.7 The Fund represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in section
817(h) of the Code and the rules and regulations thereunder.
ARTICLE 4
POTENTIAL CONFLICTS
4.1 The parties acknowledge that the Fund's Shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Directors will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities decision in any relevant proceeding; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Directors shall promptly inform the Company
if they determine that an irreconcilable material conflict exists and the
implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which they are aware to the Directors. The Company will assist the
Directors in carrying out their responsibilities under the Shared Fund Exemptive
Order by providing the Directors with all information reasonably necessary for
the Directors to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Directors, or a majority
of the Fund's Directors who are not affiliated with the Adviser or the
Underwriter (the "Disinterested Directors"), that a material irreconcilable
conflict exists that affects the interests of Contract owners, the Company
shall, in cooperation with other Participating Insurance Companies whose
contract owners are also affected, at their expense and to the extent reasonably
practicable (as determined by the Directors) take whatever steps are necessary
to remedy or eliminate the irreconcilable material conflict, which steps could
include: (a) withdrawing the assets allocable to some or all of the Accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question of whether or not
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such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a change; and
(b) establishing a new registered management investment company or managed
separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's or
Accounts' investment in the Fund and terminate this Agreement with respect to
such Account(s); provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Disinterested Directors. Any such
withdrawal and termination must take place within 30 days after the Fund gives
written notice that this provision is being implemented. Until the end of such
30-day period, the Fund shall continue to accept and implement orders by the
Company for the purchase and redemption of Shares of the Fund.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's (or Accounts') investment in the Fund and terminate this
Agreement with respect to such Account(s) within 30 days after the Fund informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Disinterested
Directors. Until the end of such 30-day period, the Fund shall continue to
accept and implement orders by the Company for the purchase and redemption of
Shares of the Fund.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the Disinterested Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Directors determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
affected Account's (or Accounts') investment in the Fund and terminate this
Agreement with respect to such Account(s) within 30 days after the Directors
inform the Company in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority of the
Disinterested Directors.
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4.7 The Company shall at least annually submit to the Directors such
reports, materials or data as the Directors may reasonably request so that the
Directors may fully carry out the duties imposed upon them by the Shared Fund
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if deemed appropriate by the Directors.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the application for the Shared Fund Exemptive Order) on
terms and conditions materially different from those contained in the
application for the Shared Fund Exemptive Order, then the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary (a) to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Fund and each of its Directors, officers, employees and agents
and each person, if any, who controls the Fund within the meaning of Section 15
of the 1933 Act (collectively the "Indemnified Parties" for purposes of this
Article 5) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which such Indemnified
Parties may become subject under any statute or regulation, or common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved by
the Company on behalf of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively, "Company Documents"
for the purposes of this Article 5), 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 statement
therein not misleading, provided that this indemnity 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 was accurately
derived from written information furnished to the Company by or on
behalf of the Fund for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Fund Documents (as defined in Section 5.2(a) below) or
wrongful conduct of the
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Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Fund Documents
(defined below) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Fund by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) 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.
5.2 Indemnification by the Fund. The Fund agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
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
Article 5) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which such Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statement of any material fact contained in the
registration statement or prospectus for the Fund (or any amendment or
supplement thereto) or in sales literature approved by the Fund (but
solely with respect to statements regarding the Fund), (collectively,
"Fund Documents" for the purposes of this Article 5), 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 indemnity 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 was
accurately derived from written information furnished to the Fund by or
on behalf of the Company for use in Fund Documents or otherwise for use
in connection with the sale of the Contracts or Shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Fund or
persons under its control, with respect to the sale or acquisition of
the Contracts or Shares; or
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(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Fund; or
(d) arise out of or result from any failure by the Fund to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund.
5.3 Neither the Company nor the Fund shall be liable under the
indemnification provisions of Section 5.1 or 5.2, as applicable, with respect to
any Losses incurred or assessed against any Indemnified Party to the extent such
Losses arise out of or result from 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 or duties under this Agreement.
5.4 Neither the Company nor the Fund shall be liable under the
indemnification provisions of Section 5.1 or 5.2, as applicable, with respect to
any claim made against an Indemnified Party unless such Indemnified Party shall
have notified the party against whom indemnification is sought in writing within
a reasonable time after the summons, or other first written notification, giving
information of the nature of the claim shall have been served upon or otherwise
received by such Indemnified Party (or after such Indemnified Party shall have
received notice of service upon or other notification to any designated agent),
but failure to notify the party against whom indemnification is sought of any
such claim shall not relieve that party from any liability that it may have to
the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof other
than reasonable costs of investigation.
12
ARTICLE 6
TERMINATION
6.1 This Agreement may be terminated by either party for any reason by
six (6) months' advance written notice to the other party, and may be terminated
by the Fund pursuant to Sections 6.2 through 6.4 below upon sixty (60) days'
advance written notice to the Company or by the Company pursuant to Section 6.5
below upon sixty (60) days' advance written notice to the Fund.
6.2 This Agreement may be terminated at the option of the Fund upon
institution of formal proceedings against the Company by the NASD, the SEC, the
insurance department 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 the Account, the administration of the Contracts or the
purchase of the Shares, or an expected or anticipated ruling, judgment or
outcome that would, in the Fund's reasonable judgment, materially impair the
Company's ability to meet and perform the Company's obligations and duties
hereunder.
6.3 This Agreement may be terminated at the option of the Fund if the
Internal Revenue Service determines that the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the Code.
6.4 This Agreement may be terminated by the Fund, at its option, if the
Fund shall determine, in its sole judgment exercised in good faith, that either
(1) the Company shall have suffered a material adverse change in its business or
financial condition, (2) the Company shall have been the subject of material
adverse publicity that is likely to have a material adverse impact upon the
business and operations of either the Fund, the Adviser or the Underwriter, or
(3) the Company breaches any obligation under this Agreement in a material
respect and such breach shall continue unremedied for thirty (30) days after
receipt of notice from the Fund of such breach. Notwithstanding any other
provision of this Agreement, in the event that the Fund exercises its right to
terminate this Agreement pursuant to this Section 6.4, such termination shall
not become effective until the earlier of (i) the time which the Company
notifies the Fund it has made arrangements (including obtaining any necessary
regulatory approvals) to substitute other funding vehicles for shares of the
Portfolios under the Contracts, and (ii) one year following the date the Fund
exercises its right to terminate.
6.5 This Agreement may be terminated at the option of the Company if
(A) the Internal Revenue Serve determines that any Portfolio fails to qualify as
a `Regulated Investment Company' under the Code or fails to comply with the
diversification requirements of Section 817(h) of the Code, or (B) the Company
shall determine, in its sole judgment exercised in good faith, that either (1)
the Fund or the Underwriter shall have been the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company, or (2) the Fund breaches any obligation under
this Agreement in a material respect and such breach shall
13
continue unremedied for thirty (30) days after receipt of notice from the
Company of such breach.
6.6 The provisions of Article 5 shall survive the termination of this
Agreement, and the provisions of Article 4 and Sections 2.4 and 2.11 shall
survive the termination of this Agreement as long as shares of the Fund are held
on behalf of Contract owners in accordance with Section 6.5.
ARTICLE 7
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 Fund:
Xxxxxxx Xxxxx Variable Series Fund, Inc.
c/o Merrill Xxxxx Asset Management, L.P.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
If to the Company:
Security Life Insurance Company of Denver
ARTICLE 8
MISCELLANEOUS
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together constitute one and the same
instrument.
8.3 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.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York,
shall be subject to the provisions of the 1933, 1934, and 1940 Acts, and the
rules, regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the
14
SEC may grant and the terms hereof shall be interpreted and construed in
accordance therewith.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Fund arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Fund and that no Director, officer, agent, or holder of shares of
beneficial interest of the Fund shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
8.7 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.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
15
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Fund Participation Agreement as of the date and year
first above written.
SECURITY LIFE INSURANCE COMPANY OF DENVER
By: _______________________________
Name: _____________________________
Title: ____________________________
XXXXXXX XXXXX VARIABLE SERIES
FUNDS, INC.
By: _______________________________
Name: Xxxxx X. Xxxxx
Title: President
16
SCHEDULE A
Segregated Accounts of Security Life Insurance Company of Denver
Name of Separate Account Date Established
------------------------ ----------------
SCHEDULE B
Portfolios of Xxxxxxx Xxxxx Variable Series Funds, Inc.
Offered to Segregated Accounts
Class A Shares
Xxxxxxx Xxxxx Global Growth Focus Fund
Xxxxxxx Xxxxx Index 500 Fund
Xxxxxxx Xxxxx Capital Focus Fund
Class B Shares
Xxxxxxx Xxxxx Basic Value Focus Fund
Xxxxxxx Xxxxx Special Value Focus Fund
SCHEDULE C
Persons Authorized to Act on Behalf of Security Life Insurance Company of Denver
--------------------------------------------------------------------------------
The Fund, the Underwriter and their respective agents are authorized to
rely on instructions from the following individuals on behalf of each Account:
Name Signature
---- ---------
