PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
SECURITY DISTRIBUTORS, INC.
AND
ARIEL DISTRIBUTORS, INC.
THIS AGREEMENT, dated as of the 20th day of November, 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"),
Security Distributors, Inc. ("SDI"), a Kansas corporation, registered
broker/dealer and distributor of the Contracts, as defined below, and Ariel
Distributors, Inc. (the "Underwriter"), an Illinois corporation.
WHEREAS, the shares of beneficial interest/common stock of the Ariel
Investment Trust (the "Fund") are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets (each a "Portfolio"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and shares of
the Portfolios are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Underwriter, which serves as distributor of the Fund, is
duly registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended; and
WHEREAS, the Company has issued or will issue certain variable annuity
contracts supported wholly or partially by the Account (the "Contracts"), and
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 Portfolios
listed in Schedule A hereto, as it may be amended from time to time by mutual
written agreement (the "Designated Portfolios"), on behalf of the Account to
fund the aforesaid Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company
and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. Subject to Article IX hereof, the Underwriter agrees to make
available, or cause to be made available, to the Company for purchase on behalf
of the Account, shares of the Designated Portfolios, such purchases to be
effected at net asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, (i) the Portfolios (other than those listed on
Schedule A) in existence now or that may be established in the future will be
made available to the Company only as the Underwriter may so provide, and (ii)
the Board of [insert Trustees or Directors] of the Fund (the "Board") may
suspend or terminate the offering of shares of any Designated Portfolio or class
thereof, if such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Board acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
suspension or termination is necessary and in the best interests of the
shareholders of such Designated Portfolio.
1.2. The Underwriter shall cause the Fund to redeem, at the
Company's request, any full or fractional Designated Portfolio shares held by
the Company on behalf of the Account, such redemptions to be effected at net
asset value in accordance with Section 1.3 of this Agreement. Notwithstanding
the foregoing, the Fund may delay redemption of Fund shares of any Designated
Portfolio to the extent permitted by the 1940 Act, and any rules, regulations or
orders thereunder.
1.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Underwriter, being duly authorized by the Fund to do
so, hereby appoints the Company as an agent of the Fund for the limited purpose
of receiving and accepting purchase and redemption requests on behalf of the
Account (but not with respect to any Fund shares that may be held in the general
account of the Company) for shares of those Designated Portfolios made available
hereunder, based on allocations of amounts to the Account or subaccounts thereof
under the Contracts and other transactions relating to the Contracts or the
Account. Receipt and acceptance of any such request (or relevant transactional
information therefor) on any day the New York Stock Exchange is open for trading
and on which a Designated Portfolio calculates its net asset value (a "Business
Day") pursuant to the rules of the Securities and Exchange Commission ("SEC"),
by the Company as such limited agent of the Fund prior to the time that the Fund
ordinarily calculates its net asset value as described from time to time in the
Fund's prospectus shall constitute receipt and acceptance by the Designated
Portfolio on that same Business Day, provided that the Fund receives notice of
such request by 9:30 a.m. Eastern Time on the next following Business Day.
(b) The Company shall pay for shares of each Designated
Portfolio on the same Business Day that it notifies the Fund of a purchase
request for such shares. Payment for Designated Portfolio shares shall be made
in federal funds transmitted to the Fund or other designated person by wire to
be received by 3:00 p.m. Eastern Time on the Business Day the Fund is notified
of the purchase request for Designated Portfolio shares (unless the Fund
determines and so advises the Company that sufficient proceeds are available
from redemption of shares of other Designated Portfolios effected pursuant to
redemption requests tendered by the Company on behalf of the Account, or unless
the Fund otherwise determines and so advises the Company to delay the date of
payment, to the extent the Fund may do so under the 1940 Act). If federal funds
are not received on time, such funds will be invested, and Designated Portfolio
shares purchased thereby will be issued, as soon as practicable and the Company
shall promptly, upon the Fund's or Underwriter's request, reimburse the Fund for
any charges, costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowing or overdrafts by, the Fund, or any
similar expenses incurred by the Fund, as a result of portfolio transactions
effected by the Fund based upon such purchase request. Upon receipt of federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed by the
Account or the Company shall be made by the Fund in federal funds transmitted by
wire to the Company or any other designated person by 3 p.m. Eastern Time on the
same Business Day the Fund is properly notified of the redemption order of such
shares (unless redemption proceeds are to be applied to the purchase of shares
of other Designated Portfolios in accordance with Section 1.3(b) of this
Agreement), except that the Fund reserves the right to delay payment of
redemption proceeds to the extent permitted under Section 22(e) of the 1940 Act
and any rules thereunder, and in accordance with the procedures and policies of
the Fund as described in the then-current prospectus.
(d) Any purchase or redemption request for Designated Portfolio
shares held or to be held in the Company's general account shall be effected at
the net asset value per share next determined after the Fund's receipt and
acceptance of such request, provided that, in the case of a purchase request,
payment for Fund shares so requested is received by the Fund in federal funds
prior to close of business for determination of such value, as defined from time
to time in the Fund's prospectus.
1.4. The Underwriter shall use its best efforts to make the net
asset value per share for each Designated Portfolio available to the Company by
6:30 p.m. Eastern Time each Business Day, and in any event, as soon as
reasonably practicable after the net asset value per share for such Designated
Portfolio is calculated, and shall calculate such net asset value in accordance
with the Fund's prospectus. If the Underwriter provides the Company with
materially incorrect share net asset value information, the Company on behalf of
the Account, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of the net asset value per share, dividend or capital
gain information shall be reported promptly to the Company upon discovery. In
the event that any such material error is the result of the negligence of the
Underwriter, or the designated agent for calculating the net asset value, any
administrative or other costs or losses incurred for correcting underlying
Contract owner accounts shall be at the Underwriter's expense.
1.5. The Underwriter shall use its best efforts to furnish, or cause
to be furnished, notice (by wire or telephone followed by written confirmation)
to the Company of any income dividends or capital gain distributions payable on
any Designated Portfolio shares by the record date, but in no event later than
6:30 p.m. Eastern Time on the ex-dividend date. The Company, on its behalf and
on behalf of the Account, hereby elects to receive all such dividends and
distributions as are payable on any Designated Portfolio shares in the form of
additional shares of that Designated Portfolio. The Company reserves the right,
on its behalf and on behalf of the Account, to revoke this election and to
receive all such dividends and capital gain distributions in cash. The
Underwriter shall notify the Company promptly, or cause the Company to be
notified promptly, of the number of Designated Portfolio shares so issued as
payment of such dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry
only. Share certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
1.7. (a) 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 notice to the
Underwriter (unless otherwise required by applicable law), take any action to
operate the Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), induce Contract
owners to change or modify the Fund or change the Fund's investment adviser.
(d) The Company shall not, without prior notice to the
Underwriter, induce Contract owners to vote on any matter submitted for
consideration by the shareholders of the Fund in a manner other than as
recommended by the Board.
(e) The Company shall not knowingly sell the Contract to
participants in plans governed by Internal Revenue Code Section 457.
1.8. The parties may agree, in lieu of the procedures set forth
above in this Article 1, to place and settle trades for Fund shares through a
clearing corporation. In the event that such a clearing corporation is used, the
parties agree to abide by the rules of the clearing corporation.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts (a) are,
or prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws. The Company further represents and warrants that 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 ▇▇▇▇ ▇▇▇.
2.2. The Underwriter represents and warrants on behalf of the Fund
that Designated Portfolio shares sold pursuant to this Agreement shall be
registered under the 1933 Act, shall be duly authorized for issuance and sold in
compliance with applicable state and federal securities laws and that the Fund
is and shall remain registered under the 1940 Act. The Underwriter shall amend
the Fund's registration statement, or cause it to be amended, under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Underwriter shall register and qualify the Fund's
shares, or cause them to be registered and qualified, for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Underwriter.
2.3. The Underwriter, on behalf of the Fund, represents that the
Fund is lawfully organized and validly existing under the laws of the
Commonwealth of Massachusetts and that the Fund does and will comply in all
material respects with the 1940 Act.
2.4. The Underwriter represents and warrants that (i) it is duly
organized and validly existing and in good standing under the laws of the State
of Illinois; (ii) it is registered as a broker/dealer with the SEC and (iii) is
a member in good standing of the National Association of Securities Dealers
("NASD") and is in compliance with the conditions and qualifications set forth
in the Conduct Rules of the NASD.
2.5. The Underwriter, on its own behalf and on behalf of the Fund,
represents and warrants that all of their trustees/directors, officers,
employees, and other individuals or entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimum coverage as required currently by Rule 17g-1 of
the 1940 Act or related provisions as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.6. The 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.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide, or cause to provide, the Company
with as many printed copies of the current prospectus, current Statement of
Additional Information ("SAI"), supplements, proxy statements, and annual or
semi-annual reports of each Designated Portfolio (for distribution to Contract
owners with value allocated to such Designated Portfolios) as the Company may
reasonably request to deliver to existing Contract owners. If requested by the
Company in lieu thereof, the Underwriter shall provide, or cause to be provided,
such documents (including a "camera-ready" copy of such documents as set in
type, a diskette in the form sent to the financial printer, or an electronic
copy of the documents in a format suitable for posting on the Company's website,
all as the Company may reasonably request) and such other assistance as is
reasonably necessary in order for the Company to have prospectuses, SAIs,
supplements and annual or semi-annual reports for the Contracts and the Fund
printed together in a single document or posted on the Company's web-site or
printed individually by the Company if it so chooses. The expenses associated
with printing and providing such documentation shall be as set forth in Article
V.
3.2. The Fund's prospectus shall state that the current SAI for the
Fund is available.
3.3. The Underwriter shall provide the Company with information
regarding the Fund's expenses, which information may include a table of fees and
related narrative disclosure for use in any prospectus or other descriptive
document relating to a Contract. The Company agrees that it will use such
information substantially in the form provided. The Company shall provide prior
written notice of any proposed modification of such information, which notice
will describe the manner in which the Company proposes to modify the
information, and agrees that it may not modify such information in any way
without the prior consent of the Underwriter, which consent shall not be
unreasonably withheld.
3.4. The Underwriter will pay or cause to be paid the expenses
associated with text composition, printing, mailing, distributing, and
tabulation of proxy statements and voting instruction solicitation materials to
Contract owners with respect to proxies related to the Fund, consistent with
applicable provisions of the 1940 Act.
3.5. So long as, and to the extent the SEC continues to interpret
the 1940 Act to require pass-through voting privileges for variable contract
owners, or to the extent otherwise required by law, the Company shall follow one
of the two procedures outlined below with respect to Fund initiated proxies:
(a) If the Company chooses to solicit Contract owners
itself, it shall:
(i) Solicit voting instructions from Contract owners; and
(ii) Vote the shares in accordance with instructions
received from such owners. If and to the extent permitted
by law, the Company may vote Fund shares for which no
instructions have been received in the same proportion as
shares for which such instructions have been received from
Contract owners.
(b) If the Company chooses to work with the Fund's proxy
service provider, the Company shall provide a list of Contract
owners with value allocated to a Fund as of the record date to the
Fund 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 the Fund or its agent as is
reasonably necessary in order for the Fund to properly tabulate
votes for Fund initiated proxies.
Regardless of which procedure is followed, the Underwriter will pay, or cause to
be paid, the expense associated with text composition, printing, mailing,
distributing and tabulation of proxy statements and voting instructions
solicitation materials. The Company reserves the right to vote Fund shares held
in its general account in its own right, to the extent permitted by applicable
laws.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Underwriter or its designee, each piece of sales literature or other
promotional material that the Company develops and in which the Fund (or a
Designated Portfolio thereof) or the Underwriter is named. No such material
shall be used until approved by the Underwriter or its designee, and the
Underwriter will use its best efforts for it or its designee to review such
sales literature or promotional material within five (5) Business Days after
receipt of such material. The Underwriter or its designee reserves the right to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund (or a Designated Portfolio thereof) or
the Underwriter is named, and no such material shall be used if the Underwriter
or its designee so objects.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Underwriter in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
prospectus or SAI for the Fund shares, as such registration statement and
prospectus or SAI may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee, except with the
permission of the Underwriter or its designee.
4.3. The Underwriter, or its designee, shall furnish, or cause to be
furnished, to the Company, each piece of sales literature or other promotional
material that it develops and in which the Company, and/or the Account, is
named. No such material shall be used until approved by the Company, and the
Company will use its best efforts to review such sales literature or promotional
material within five (5) Business Days after receipt of such material. The
Company reserves the right to reasonably object to the continued use of any such
sales literature or other promotional material in which the Company and/or its
Account is named, and no such material shall be used if the Company so objects.
4.4. The Underwriter 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. The Underwriter will provide or cause to be provided to the
Company at least one complete copy of all registration statements, prospectuses,
SAIs, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Designated Portfolios or
their shares, promptly after the filing of such document(s) with the SEC or
other regulatory authorities.
4.6. The Company will provide to the Underwriter 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 Underwriter any complaints
received from the Contract owners pertaining to the Fund or a Designated
Portfolio.
4.7. The Underwriter will provide or cause to be provided to the
Company with as much notice as is reasonably practicable of any proxy
solicitation for any Designated Portfolio, and of any material change in the
Fund's registration statement, particularly any change resulting in a change to
the registration statement or prospectus for any Account. The Underwriter will
work with theCompany so as to enable the Company to solicit proxies from
Contract owners, or to make changes to its prospectus or registration statement,
in an orderly manner. The Underwriter will make reasonable efforts to attempt to
have changes affecting Contract prospectuses become effective simultaneously
with the annual updates for such prospectuses.
ARTICLE V. FEES AND EXPENSES
5.1. All expenses incident to performance by the Underwriter under
this Agreement shall be paid by the Underwriter. The Underwriter shall see to it
that all the Fund's shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Underwriter, in accordance with applicable state laws prior to
their sale. The Underwriter or an affiliated party of the Underwriter (which may
include the Fund) shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (i.e. annual and semi-annual reports), the preparation of all
statements and notices required by any federal or state law, and all taxes on
the issuance or transfer of the Fund's shares. The Underwriter or an affiliated
party of the Underwriter (which may include the Fund) shall bear the expenses of
printing and distributing the Fund's proxy materials and reports to shareholders
to existing Contract owners. In addition, each year the Underwriter or an
affiliated party of the Underwriter (which may include the Fund) shall also bear
the expense of printing the first 5,000 Fund prospectuses (and supplements)
requested by the Company (regardless of whether such documents are printed by
the Underwriter or the Company).
5.2. The Company shall bear the expense of distributing all
prospectuses to shareholders (whether for existing Contract owners or
prospective Contract owners). The Company shall bear the expense of printing
copies of Fund prospectuses (and supplements) in excess of 5,000 per year. The
Company shall bear the expenses incident to (including the costs of printing)
sales literature and other promotional material that the Company develops and in
which the Fund (or a Designated Portfolio thereof) is named.
5.4. In consideration of performance of the Administrative Services
specified on Schedule B by the Company, Underwriter will pay the Company a fee
(the "Administrative Services Fee") of 15 basis points (0.15%) of the average
aggregate amount of the shares of the Designated Portfolios held in the
Account(s) under this Agreement. Underwriter will calculate the amount of the
payment to be made pursuant to this Section 5.4 at the end of each calendar
month and will make such payment to the Company within 30 days thereafter. The
parties acknowledge that the payments received by the Company under this Section
5.4 are for administrative and shareholder services only and do not constitute
payment in any manner for investment advisory services or for costs of
distribution.
5.5. In consideration of performance of the Distribution Services
specified on Schedule C by SDI, Underwriter will pay SDI a fee (the
"Distribution Fee") of 20 basis points (0.20%) of the average aggregate amount
of the shares of the Designated Portfolios held in the Account(s) under this
Agreement. Underwriter will calculate the amount of the payment to be made
pursuant to this Section 5.5 at the end of each calendar month and will make
such payment to SDI within 30 days thereafter.
5.6. The check for the payments referenced above will be accompanied
by a statement showing the calculation of the amounts being paid to the Company
or SDI, as applicable, and such other supporting data as may be reasonably
requested by the Company or SDI.
ARTICLE VI. QUALIFICATION
The Underwriter represents and warrants on behalf of the Fund that
the Fund, and each Designated Portfolio, 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 the Fund and each Designated
Portfolio will maintain such qualification (under Subchapter M or any successor
or similar provisions) and that Underwriter will notify the Company immediately
upon having a reasonable basis for believing that the Fund or any Designated
Portfolio has ceased to so qualify or that the Fund or any Designated Portfolio
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 Fund and the Underwriter and each of its trustees/directors and officers,
and each person, if any, who controls the Fund or Underwriter within the meaning
of Section 15 of the 1933 Act or who is under common control with the Fund or
the Underwriter (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 Fund or the
Underwriter for use in the registration statement, prospectus
or SAI for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts, or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other than
statements or representations contained in the registration
statement, prospectus, SAI, or sales literature of the Fund not
supplied by the Company or persons under its control) or
wrongful conduct of the Company or its agents or persons under
the Company's authorization or control, with respect to the
sale or distribution of the Contracts, or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, SAI, or sales literature of the Fund or
any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf
of the Company; or
(iv) arise as a result of any material failure by the
Company to provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company;
as limited by and in accordance with the provisions of Sections 7.1(b) and
7.1(c) hereof.
7.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
7.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
7.2. INDEMNIFICATION BY THE UNDERWRITER
7.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus or SAI or
sales literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on
behalf of the Company for use in the registration statement,
prospectus or SAI for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Fund or the Underwriter
(other than statements or representations contained in the
registration statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Fund or the Underwriter) or
wrongful conduct of the Underwriter or the Fund with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, SAI or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Underwriter or
the Fund; or
(iv) arise as a result of any failure by the Fund or
the Underwriter to provide the services and furnish the
materials under the terms of this Agreement (including a
failure of the Fund, whether unintentional or in good faith or
otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach
of any representation and/or warranty made by or on behalf of
the Underwriter or the Fund in this Agreement or arise out of
or result from any other material breach of this Agreement by
or on behalf of the Underwriter or the Fund;
as limited by and in accordance with the provisions of Sections 7.2(b)and 7.2(c)
hereof.
7.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
7.2(c). The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter'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 Underwriter 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 the Underwriter
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 Kansas,
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 with respect to some or
all Designated Portfolios, by six (6) months advance written notice
delivered to the other parties; or
(b) termination by the Company by written notice to the other
parties based upon the Company's determination that shares of the
Fund are not reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the other
parties in the event any of the Designated Portfolio's shares are
not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or to be
issued by the Company; or
(d) termination by the Underwriter 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 Designated Portfolios' shares;
provided, however, that the Underwriter determines in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Company to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter 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 Underwriter to perform its obligations under
this Agreement; or
(f) termination by the Company by written notice to the Underwriter
in the event that any Designated Portfolio 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 the Underwriter by written notice to the Company
if the Underwriter shall determine, in its 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 Underwriter,
if the Company shall determine, in its sole judgment exercised in
good faith, that the Fund or the Underwriter 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
Designated Portfolio of the Fund in accordance with the terms of the
Contracts, provided that the Company has given at least 45 days
prior written notice to the Underwriter of the date of substitution.
9.2. Notwithstanding any termination of this Agreement, the
Underwriter shall, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Company obtains an order pursuant to Section 26(b) of the 1940 Act to permit the
substitution of other securities for the shares of the Designated Portfolios.
Specifically, the owners of the Existing Contracts may be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts (subject to any such election by the Company).
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
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If to Underwriter: Ariel Distributors, Inc.
Attention ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ARTICLE XI. MISCELLANEOUS
11.1. All persons dealing with the Fund must look solely to the
property of the respective Designated Portfolios listed on Schedule A hereto as
though each such Designated Portfolio had separately contracted with the Company
and the Underwriter for the enforcement of any claims against the Fund. The
parties agree that neither the Board, officers, agents or shareholders of the
Fund assume any personal liability or responsibility for obligations entered
into by or on behalf of the Fund.
11.2. Subject to the requirements of legal process and regulatory
authority, the Underwriter shall treat as confidential the names and addresses
of the owners of the Contracts. Each party shall treat as confidential all
information reasonably identified as confidential in writing by any other party
hereto and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such information without the express written consent of
the affected party until such time as such information has come into the public
domain.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
11.6. Each party hereto 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.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Kansas Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable insurance
operations of the Company are being conducted in a manner consistent with the
Kansas insurance laws and regulations and any other applicable law or
regulations.
11.7. 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.
11.8 This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative.
Security Benefit Life
Insurance Company By its authorized officer
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By: ▇▇▇ ▇. ▇▇▇
Title: Vice President & Associate
General Counsel
Date: November 20, 2001
Security Distributors, Inc. By its authorized officer
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By: ▇▇▇ ▇. ▇▇▇
Title: Secretary
Date: November 20, 2001
Ariel Distributors, Inc. By its authorized officer
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By: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
Date: 11/21/01
November 20, 2001
SCHEDULE A
ACCOUNT(S) CONTRACT(S) DESIGNATED PORTFOLIO(S)
SBL VARIABLE ACCOUNT XIV V6029 ARIEL PREMIER BOND -
INVESTORS CLASS
ARIEL FUND - INVESTOR CLASS
SCHEDULE B
Administrative Services
Pursuant to the Agreement to which this is attached, the Company or its agents
shall perform the administrative and shareholder services, on behalf of the
Designated Portfolios, as set forth below:
1. Teleservicing support in connection with the Designated Portfolios.
2. Maintenance of records reflecting Shares purchased and redeemed and Share
balances attributable to the Contracts, and the conveyance of that
information to the Fund or its agents as may be reasonably requested.
3. Provision and administration of Contract features for the benefit of
Contract owners in connection with the Designated Portfolios, which may
include fund transfers, dollar cost averaging, asset allocation, portfolio
rebalancing, earnings sweep, and pre-authorized deposits and withdrawals.
4. Provision of other services as may be agreed upon from time to time,
consistent with applicable law and regulation.
Company agrees to provide to Underwriter each year, a report showing the total
number of Contract owners with value allocated to each Designated Portfolio as
of September 30th, such report to be delivered to the Underwriter within 30 days
of September 30th. The fees payable to the Company as described in this Schedule
B shall survive any termination of this Agreement for so long as shares of a
Designated Portfolio are held in the Contracts.
SCHEDULE C
Distribution Services
Pursuant to the Agreement to which this is attached, SDI or its agents shall
perform distribution services, on behalf of the Designated Portfolios, as set
forth below:
1. Receive and answer correspondence from prospective shareholders, including
distributing prospectuses, statements of additional information, and
shareholder reports.
2. Provide facilities to answer questions from prospective investors about
Designated Portfolio shares.
3. Assist investors in completing application forms and selecting dividend and
other account options.
4. Provide other reasonable assistance in connection with the distribution of
Designated Portfolio shares.
AMENDMENT NUMBER 1 TO
PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
SECURITY DISTRIBUTORS, INC.
AND
ARIEL DISTRIBUTORS, INC.
WHEREAS, Security Benefit Life Insurance Company (the "Company"),
Security Distributors, Inc. ("SDI") and Ariel Distributors, Inc. (the
"Underwriter") are parties to a Participation Agreement dated November 20, 2001
(the "Agreement"); and
WHEREAS, pursuant to the Agreement, the Company issues Contracts in
which Designated Portfolios of the Fund are made available; and
WHEREAS, Section 1.7(e) of the Agreement provides that the Company
shall not knowingly sell Contracts in which Designated Portfolios are made
available to participants in plans governed by Internal Revenue Code Section
457; and
WHEREAS, the parties to the Agreement now wish to amend Section 1.7(e).
NOW, THEREFORE, in consideration of the mutual promises as set forth
herein the parties agree as follows:
1. Section 1.7(e) of the Agreement is hereby deleted in its
entirety and replaced with the following new section 1.7(e):
The parties agree that the Company will not be
permitted to market and sell Contracts offering Designated Portfolios
to participants in plans governed by Section 457 of the Internal
Revenue Code ("457 Participants"), except that the Company is permitted
to market and sell such Contracts to 457 Participants that are employed
by public or private schools or universities.
2. Capitalized terms used, but not otherwise defined herein shall
have the meaning given them in the Agreement.
3. In the event of a conflict between the terms of this Amendment
No. 1 and the Agreement, it is the intention of the parties that the terms of
this Amendment No. 1 shall control and the Agreement shall be interpreted on
that basis. To the extent the provisions of the Agreement have not been amended
by this Amendment No. 1, the parties hereby confirm and ratify the Agreement.
The Agreement, along with this Amendment No. 1, constitutes the entire agreement
among the parties with respect to the arrangements described herein. All other
agreements, either written or oral, with respect to these matters are superceded
and replaced hereby.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment Number 1 to the Agreement to be executed in its name and on its behalf
by its duly authorized representative.
Security Benefit Life
Insurance Company By its authorized officer
By: ▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Senior Vice President & CMO
Date: February 14, 2002
Security Distributors, Inc. By its authorized officer
By: ▇▇▇ ▇. ▇▇▇
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Name: ▇▇▇ ▇. ▇▇▇
Title: Secretary
Date: February 14, 2002
Ariel Distributors, Inc. By its authorized officer
By: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
Date: 2-15-02