AMENDED AND RESTATED
PARTICIPATION AGREEMENT
AMONG
KEYPORT FINANCIAL SERVICES CORP.,
KEYPORT LIFE INSURANCE COMPANY,
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
and
STEINROE VARIABLE INVESTMENT TRUST
This Agreement, made and entered into as of this 3rd day of April, 1998
by and among Keyport Life Insurance Company and Liberty Life Assurance
Company of Boston (the "Companies"), on their own behalf and on behalf of
their Separate Accounts, each of which is a segregated asset account of one
of the Companies, SteinRoe Variable Investment Trust (the "Trust"), and
Keyport Financial Services Corp. ("KFSC").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares (such series being hereinafter referred to individually as
a "Series" or collectively as the "Series"); and
WHEREAS, the Trust relies on an order from the Securities and Exchange
Commission ("SEC"), dated July 1, 1988 (File No. 812-7044), granting life
insurance companies and variable annuity and variable life insurance
separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a), and 15(b) of the Investment Company Act of 1940, as amended (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 Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Xxxxx Xxx & Xxxxxxx Incorporated. ("Xxxxx Xxx") is duly
registered as an investment adviser under the Advisers Act and applicable
state securities laws; and provides certain administrative services; and
WHEREAS, Liberty Investment Services, Inc. ("LIS") serves as transfer
agent to the Trust; and
WHEREAS, the Companies have registered or will register certain
Variable Insurance Products under the 1933 Act; and
WHEREAS, the Companies have established duly organized, validly
existing segregated asset accounts (the "Separate Accounts") by resolution
of the Board of Directors of the Companies; and
WHEREAS, the Companies have registered or will register certain
Separate Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Companies rely on certain provisions of the 1940 and 1933
Acts that exempt certain Separate Accounts and Variable Insurance Products
from the registration requirements of the Acts in connection with the sale
of Variable Insurance Products under certain tax-advantaged retirement
programs, described in Article II., Section 2.12. and as provided for by
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, KFSC is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Companies intend to purchase shares of the Trust on behalf
of each Separate Account to fund certain Variable Insurance Products and
KFSC is authorized to sell such shares to unit investment trusts such as
each Separate Account at net asset value; and
WHEREAS, this Agreement is being amended and restated hereby in order
to effect certain technical corrections to this Agreement from the form
hereof as originally executed and delivered, such amendment and restatement
to be effective nunc pro tunc as of the date first written above.
NOW, THEREFORE, in consideration of their mutual promises, the
Companies, the Trust and KFSC agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. KFSC will sell to the Companies those shares of the Trust which
each Separate Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Separate Accounts of
purchase payments or for the business day on which transactions under
Variable Insurance Products are effected by the Separate Accounts. For
purposes of this Section 1.1., LIS shall be the designee of the Trust for
receipt of such orders from each Separate Account and receipt by such
designee shall constitute receipt by the Trust. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and any
other day on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust will make its shares available indefinitely for purchase
at the applicable net asset value per share by the Companies and their
Separate Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall use reasonable
efforts to calculate such net asset value on each Business Day.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Trustees") may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series if such action is
required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, 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 Series.
1.3. The Trust and KFSC agree that shares of the Trust will be sold
only to Participating Insurance Companies and their Separate Accounts. No
shares of any Series will be sold to the general public.
1.4. The Trust and KFSC will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles I., III., V., VII. and Sections 2.5. and
2.12. of Article II. of this Agreement is in effect to govern such sales.
1.5. The Trust will redeem for cash, at the Companies' request, any
full or fractional shares of the Trust held by the Companies, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Separate Accounts of redemption requests or for the Business Day on
which transactions under Variable Insurance Products are effected by the
Separate Accounts. For purposes of this Section 1.5., Xxxxx Xxx shall be
the designee of the Trust for receipt of requests for redemption for each
Separate Account.
Subject to the applicable rules and regulations, if any, of the SEC,
the Trust may pay the redemption price for shares of any Series in whole or
in part by a distribution in kind of securities from the portfolio of the
Trust allocated to such Series in lieu of money, valuing such securities at
their value employed for determining net asset value governing such
redemption price, and selecting such securities in a manner the Trustees may
determine in good faith to be fair and equitable.
1.6. The Trust may suspend the redemption of any full or fractional
shares of the Trust (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or
(b) during which trading on the New York Stock Exchange is restricted; (2)
for any period during which an emergency exists as a result of which (a)
disposal by the Trust of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for the Trust fairly to
determine the value of its net assets; or (3) for such other periods as the
SEC may by order permit for the protection of shareholders of the Trust.
1.7. The Companies will purchase and redeem the shares of each Series
offered by the then current prospectus of the Trust and in accordance with
the provisions of such prospectus and statement of additional information
(the "SAI") (collectively referred to as "Prospectus," unless otherwise
provided). The Companies agree that all net amounts available under the
Variable Insurance Products with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as
such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"), shall be invested in
the Trust, in such other trusts advised by Xxxxx Xxx as may be mutually
agreed to in writing by the parties hereto, or in the Companies' general
accounts, provided that such amounts may also be invested in an investment
company other than the Trust if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of each of the Series
of the Trust; or (b) one or both of the Companies give the Trust and KFSC
forty-five (45) days written notice of its or their intention to make such
other investment company available as a funding vehicle for the Contracts;
or (c) such other investment company was available as a funding vehicle for
the Contracts prior to the date of this Agreement and one or both of the
Companies so inform the Trust and KFSC prior to their signing this
Agreement; or (d) the Trust or KFSC consents to the use of such other
investment company.
1.8. The Companies shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1. hereof. Payment shall be in federal funds
transmitted by wire, or may otherwise be provided by separate agreement.
1.9. Issuance and transfer of the Trusts' shares will be by book entry
only. Stock certificates will not be issued to either the Companies or the
Separate Accounts. Shares ordered from the Trust will be recorded in an
appropriate title for each Separate Account or the appropriate subaccount of
each Separate Account.
1.10. The Trust, through its designee LIS, shall furnish same day
notice (by wire or telephone, followed by written confirmation) to the
Companies of any income dividends or capital gain distributions payable on
the shares of any Series. The Companies hereby elect to receive all such
income, dividends and capital gain distributions as are payable on the
shares of each Series in additional shares of that Series. The Companies
reserve the right to revoke this election and to receive all such income,
dividends and capital gain distributions in cash. The Trust shall notify
the Companies through its designee, LIS, of the number of shares so issued
as payment of such income, dividends and distributions.
1.11. The Trust shall make the net asset value per share for each
Series available to the Companies on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use
its best efforts to make such net asset value per share available by 7 p.m.,
Boston time.
ARTICLE II. Representations and Warranties
2.1. The Companies represent and warrant that the Contracts are or will
be registered under the 1933 Act to the extent required by the 1933 Act;
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the sale of the
Contracts shall comply in all material respects with state insurance
suitability requirements. The Companies further represent and warrant that
they are insurance companies duly organized and in good standing under
applicable law and that prior to any issuance or sale of any Contract they
have legally and validly established each Separate Account as a segregated
asset account under the applicable state insurance laws and have registered
or, prior to any issuance or sale of the Contracts, will register each
Separate 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, to the extent required by the 0000 Xxx.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act to the extent
required by the 1933 Act, duly authorized for issuance and sold in
compliance with the laws of the Commonwealth of Massachusetts and all
applicable federal and any state securities laws and that the Trust is and
shall remain registered under the 1940 Act to the extent required by the
1940 Act. The Trust shall amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order
to effect the continuous offering of its shares. The Trust shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or KFSC.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Code and that it will make
every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Companies
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future.
2.4. The Companies represent that the Contracts are currently treated
as endowment, annuity or life insurance contracts under applicable
provisions of the Code and that they will make every effort to maintain such
treatment and that they will notify the Trust and KFSC 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.
2.5. The Trust currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future consistent with
applicable law. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Trust undertakes to have its Trustees,
a majority of whom are not interested persons of the Trust, formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Trust represents that it is currently in compliance
and shall at all times remain in compliance with the applicable insurance
laws of the domiciliary states of the Participating Insurance Companies to
the extent that the Participating Insurance Company advises the Trust, in
writing, of such laws or any changes in such laws.
2.7. KFSC represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. KFSC further
represents that it will sell and distribute the Trust shares in accordance
with the laws of the Commonwealth of Massachusetts and all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 0000 Xxx.
2.8. The Trust represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material aspects with the 1940 Act.
2.9. The Trust represents and warrants that XXXXX XXX is and shall
remain duly registered as an investment adviser in all material aspects
under all applicable federal and state securities laws and that XXXXX XXX
shall perform its obligations for the Trust in compliance in all material
respects with the applicable laws of the Commonwealth of Massachusetts and
any applicable state and federal securities laws.
2.10. The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a joint fidelity bond in an amount not less than
three million seven hundred fifty thousand dollars ($3,750,000) with no
deductible amount. The aforesaid bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable fidelity insurance
company.
2.11. The Companies represent and warrant that all of their directors,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Trust, in an amount not less than ten million dollars
($10,000,000) with no deductible amount. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable
fidelity insurance company.
2.12. The Companies represent and warrant that they will not, without
the prior written consent of KFSC, purchase Trust shares with Separate
Account assets derived from the sale of Contracts to individuals or entities
which qualify under current or future state or federal law for any type of
tax advantage (whether by a reduction or deferral of, deduction or exemption
from, or credit against income or otherwise). Examples of such types of
funds under current law include: any tax-advantaged retirement program,
whether maintained by an individual, employer, employee association or
otherwise (including, without limitation, retirement programs which qualify
under Sections 401(a), 401(k), 403(a), 403(b), 408 and 457 of the Code), and
any retirement programs maintained for employees of the Government of the
United States or by the government of any state or political subdivision
thereof, or by any agency or instrumentality of any of the foregoing.
2.13. The Companies represent and warrant that they will not transfer
or otherwise convey shares of the Trust, without the prior written consent
of KFSC.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. KFSC shall provide the Companies with as many copies of the
Trust's current prospectus, excluding the SAI, as the Companies may
reasonably request in connection with delivery of the prospectus, excluding
the SAI, to shareholders and purchasers of Variable Insurance Products. If
requested by the Companies in lieu thereof, the Trust shall provide such
documentation (including a final copy of the new prospectus, excluding the
SAI, as set in type at the Trust's expense) and other assistance as is
reasonably necessary in order for the Companies once each year (or more
frequently if the prospectus for the Trust is amended) to have the
prospectus for the Contracts and the Trust's prospectus, excluding the SAI,
printed together in one document (such printing to be at the Companies'
expense).
3.2. The Trust's prospectus shall state that the SAI for the Trust is
available from KFSC and the Trust, at its expense, shall provide final copy
of such SAI to KFSC for duplication and provision to any prospective owner
who requests the SAI and to any owner of a Variable Insurance Product
("Owners").
3.3. The Trust, at its expense, shall provide the Companies with copies
of its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Companies shall reasonably require for
distribution to Owners.
3.4. If and to the extent required by law, the Companies and, so long
as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for Owners, the Trust shall:
(i) solicit voting instructions from Owners;
(ii) vote the Trust shares in accordance with instructions received
from Owners; and
(iii) vote Trust shares for which no instructions have been received in
the same proportion as Trust shares of such Series for which
instructions have been received;
The Companies reserve the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their Separate Accounts participating in the Trust calculates voting
privileges in a manner consistent with the standards to be provided in
writing to the Participating Insurance Companies.
3.5. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders. The Trust reserves the right to take all
actions, including but not limited to, the dissolution, merger, and sale of
all assets of the Trust upon the sole authorization of its Trustees, to the
extent permitted by the laws of the Commonwealth of Massachusetts and the
1940 Act.
ARTICLE IV. Sales Material and Information
4.1. The Companies shall furnish, or shall cause to be furnished, to
the Trust or its designee, each piece of sales literature or other
promotional material in which the Trust or XXXXX XXX, or any sub-adviser
("Sub-Adviser"), or KFSC is named, at least fifteen (15) days prior to its
use. No such material shall be used if the Trust or its designee object to
such use within fifteen (15) days after receipt of such material.
4.2. The Companies shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus for
the Trust shares, as such registration statement and Prospectus may be
amended or supplemented from time to time, or in reports or proxy statements
for the Trust, or in sales literature or other promotional material approved
by the Trust or its designee or by KFSC, except with the permission of the
Trust or KFSC or the designee of either.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Companies or their designees, each piece of sales
literature or other promotional material in which the Companies and/or their
Separate Account(s), are named at least fifteen (15) days prior to its use.
No such material shall be used if the Companies or their designee object to
such use within fifteen (15) days after receipt of such material.
4.4. The Trust and KFSC shall not give any information or make any
representations or statements on behalf of the Companies or concerning the
Companies, any Separate Account, or the Variable Insurance Products other
than the information or representations contained in a registration
statement or prospectus for such Variable Insurance Products, as such
registration statement and prospectus may be amended or supplemented from
time to time, or in published reports for such Separate Account which are in
the public domain or approved by the Company for distribution to Owners, or
in sales literature or other promotional material approved by the Companies
or their designee, except with the permission of the Companies.
4.5. The Trust will provide to the Companies at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications
for exemption, requests for no-action letters, and all amendments to any of
the above, that relate to the Trust or its shares, contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
4.6. The Companies will provide to the Trust at least one complete copy
of all registration statements, prospectuses, SAIs, reports, solicitations
for voting instructions, sales literature and other promotional materials,
applications for exemption, requests for no-action letters, and all
amendments to any of the above, that relate to the Variable Insurance
Products or any Separate Account, contemporaneously with the filing of such
document with the SEC.
4.7. For purposes of this Article IV., the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or all agents
or employees, and registration statements, prospectuses, SAIs, shareholder
reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust and KFSC shall pay no fee or other compensation to the
Companies under this Agreement, except that if the Trust or any Series
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then KFSC may make payments to the Companies or to the underwriter
for the Variable Insurance Products if and in amounts agreed to by KFSC in
writing and such payments will be made out of existing fees payable to KFSC
by the Trust for this purpose. No such payments shall be made directly by
the Trust. Currently, no such plan pursuant to Rule 12b-1 or payments are
contemplated.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all
its shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the
Trust, in accordance with applicable state laws prior to their sale. The
Trust shall bear the expenses of registration and qualification of the
Trust's shares, preparation and filing of the Trust'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 (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by
any federal or state law, and all taxes on the issuance or transfer of the
Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
proxy materials and reports to Owners.
ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Variable
Insurance Products in such a manner as to ensure that, insofar as such
investment is required to assure such treatment, the Variable Insurance
Products will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the foregoing,
the Trust will at all times comply with Section 817(h) of the Code and the
Treasury Regulations thereunder relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any
amendments or other modifications to such Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the Owners of
separate accounts of the Companies investing in the Trust. A material
irreconcilable 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
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Series
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance policy owners; or (f) a
decision by an insurer to disregard the voting instructions of Owners. The
Trustees shall promptly inform the Companies if they determine that a
material irreconcilable conflict exists and the implications thereof.
7.2. The Companies will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 7.1. which may
give rise to such a conflict) of which they are aware to the Trustees. The
Companies will assist the Trustees in carrying out their responsibilities
under the Shared Funding Exemptive Order, by providing the Trustees with all
information reasonably necessary for the Trustees to consider any issues
raised. This includes, but is not limited to, an obligation by the
Companies to inform the Trustees whenever Owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Trustees, or a majority
of its disinterested Trustees, that a material irreconcilable conflict
exists, the Companies and other Participating Insurance Companies shall, at
their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Trustees), take whatever steps are necessary
to remedy or eliminate the material irreconcilable conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the
separate accounts of Participating Insurance Companies from the Trust or any
Series and reinvesting such assets in a different investment medium,
including (but not limited to) another Series of the Trust, or submitting
the question whether such segregation should be implemented to a vote of all
affected 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 Owners the option of making such a change; (2), establishing a new
registered management investment company or managed separate account; and
(3) obtaining SEC approval.
7.4. If a material irreconcilable conflict arises because of a decision
by one or both of the Companies to disregard Owner voting instructions and
that decision represents a minority position or would preclude a majority
vote, one or both of the Companies may be required, at the Trust's election,
to withdraw the affected Separate Account's investment in the Trust and
terminate this Agreement; provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this
provision is being implemented, and until the end of that six (6) month
period KFSC and Trust shall continue to accept and implement orders by one
or both of the Companies for the purchase (and redemption) of shares of the
Trust.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to one or both of the
Companies conflicts with the majority of other state regulators, then one or
both of the Companies will withdraw the affected Separate Account's
investment in the Trust and terminate this Agreement within six (6) months
after the Trustees inform one or both of the Companies in writing that they
have determined that such decision has created a material irreconcilable
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 Trustees. Until
the end of the foregoing six (6) month period, KFSC and Trust shall continue
to accept and implement orders by one or both of the Companies for the
purchase (and redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3. through 7.6. of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in no
event will the Trust be required to establish a new funding medium for the
Variable Insurance Products. One or both of the Companies shall not be
required by Section 7.3. to establish a new funding medium for the Variable
Insurance Products if an offer to do so has been declined by vote of a
majority of Owners materially adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine that any
proposed action does not adequately remedy any material irreconcilable
conflict, then one or both of the Companies will withdraw the affected
Separate Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform one or both of the Companies
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 Trustees.
7.7. 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 Shared Funding Exemptive Order) or terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (a) the Trust and/or the Companies, as
appropriate, shall take such steps as may be necessary 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; and (b) Sections 3.4., 3.5., 7.1., 7.2., 7.3., 7.4.,
and 7.5. of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Companies
8.1.(a). The Companies will indemnify and hold harmless the Trust and
each of its Trustees and Officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of one or both of the Companies) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
the Trust's shares or the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Variable Insurance
Products or contained in the sales literature for the Variable
Insurance Products (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 in writing to one or both
of the Companies by or on behalf of the Trust for use in the
registration statement or prospectus for the Variable Insurance
Products or in the Variable Insurance Products or sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Insurance Products or
Trust shares; or
(ii) arise out of or are based upon statements or representations
(other than statements or representations contained in the
registration statement, Prospectus or sales literature of the
Trust not supplied by one or both of the Companies, or persons
under their control) or wrongful conduct of one or both of the
Companies or persons under their control, with respect to the sale
or distribution of the Variable Insurance Products or Trust
shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, Prospectus,
or sales literature of the Trust 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 in
writing to the Trust by or on behalf of one or both of the
Companies; or
(iv) arise out of or result from any failure by one or both of the
Companies to provide the services and furnish the materials
contemplated by this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by one or both of the
Companies in this Agreement or arise out of or result from any
other material breach of this Agreement by one or both of the
Companies.
8.1.(b). The Companies 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
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 or to the Trust, whichever is applicable.
8.1.(c). The Companies 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 Companies 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
Companies of any such claim shall not relieve the Companies from any
liability which they may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, the Companies shall be entitled to participate, at their own
expense, in the defense of such action. The Companies also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from one or both of the Companies
to such party of the election of one or both of the Companies to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Companies will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.1.(d). The Indemnified Parties will promptly notify the Companies of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust shares or the Contracts or the
operation of the Trust.
8.2. Indemnification By the Trust
8.2.(a). The Trust will indemnify and hold harmless the Companies, and
each of their directors and officers and each person, if any, who controls
the Companies within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2.)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Trust) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements result from the gross negligence, bad
faith or willful misconduct of the Trustees or any member thereof, are
related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI. of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Trust;
as limited by and in accordance with the provisions of Sections 8.2.(b). and
8.2.(c). hereof.
8.2.(b). The Trust 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 by subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Companies, the Trust, KFSC or each
Separate Account, whichever is applicable.
8.2.(c). The Trust 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 Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have 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
Trust of any such claim shall not relieve the Trust from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Trust will be
entitled to participate, at its own expense, in the defense thereof. The
Trust also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Trust
to such party of the Trust'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 Trustees 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 cases of investigations.
8.2.(d). The Companies and KFSC agree promptly to notify the Trust of
the commencement of any litigation or proceedings against them or any of
their respective officers or directors in connection with this Agreement,
the issuance or sale of the Contracts, with respect to the operation of
either Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts provided, however, that if such laws or any of the provisions
of this Agreement conflict with applicable provisions of the 1940 Act, the
latter shall control.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934, and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year advance written notice
to the other parties; provided, however such notice shall not be given
earlier than one (1) year following the date of this Agreement; or
(b) at the option of one or both of the Companies to the extent that
shares of Series are not reasonably available to meet the requirements of
the Variable Insurance Products as determined by one or both of the
Companies, provided however, that such termination shall apply only to the
Series not reasonably available. Prompt notice of the election to terminate
for such cause shall be furnished by one or both of the Companies; or
(c) at the option of the Trust in the event that formal administrative
proceedings are instituted against one or both of the Companies or KFSC by
the NASD, the SEC, the Insurance Commissioner or any other regulatory body
regarding the duties of one or both of the Companies under this Agreement or
related to the sale of the Variable Insurance Products, with respect to the
operation of a Separate Account, or the purchase of the Trust shares,
provided, however, that the Trust determines in its sole judgement exercised
in good faith, that any such administrative proceedings will have a material
adverse effect upon the ability of one or both of the Companies to perform
their obligations under this Agreement or of KFSC to perform its obligations
under its underwriting agreement with the Trust; or
(d) at the option of one or both of the Companies in the event that
formal administrative proceedings are instituted against the Trust by the
NASD, the SEC, or any state securities or insurance department or any other
regulatory body, provided, however, that one or both of the Companies
determine in their sole judgement exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the
ability of the Trust to perform its obligations under this Agreement; or
(e) with respect to a Separate Account, upon requisite authority to
substitute the shares of another investment company for shares of the
corresponding Series of the Trust in accordance with the terms of the
Variable Insurance Products for which those Series shares had been selected
to serve as the underlying investment media. The Companies will give thirty
(30) days' prior written notice to the Trust of the date of any proposed
action to replace the Trust shares; or
(f) at the option of one or both of the Companies, in the event any of
the Trust's shares are not registered, issued or sold in accordance with
applicable federal and any state law or such law precludes the use of such
shares as the underlying investment media of the Variable Insurance Products
issued or to be issued by the Companies; or
(g) at the option of one or both of the Companies, if the Trust ceases
to qualify as a Regulated Investment Company under Subchapter M of the Code
or under any successor or similar provision, or if one or both of the
Companies reasonably believes that the Trust may fail to so qualify; or
(h) at the option of one or both of the Companies, if the Trust fails
to meet the diversification requirements specified in Article VI. hereof; or
(i) at the option of either the Trust or KFSC, if (1) the Trust or
KFSC, respectively, shall determine, in their sole judgement reasonably
exercised in good faith, that one or both of the Companies has suffered a
material adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse publicity
will have a material adverse impact upon the business and operations of
either the Trust or KFSC, (2) the Trust or KFSC shall notify one or both of
the Companies in writing of such determination and its intent to terminate
this Agreement, and (3) after considering the actions taken by one or both
of the Companies and any other changes in circumstances since the giving of
such notice, such determination of the Trust or KFSC shall continue to apply
on the sixtieth (60th) day following the giving of such notice, which
sixtieth (60th) day shall be the effective date of termination; or
(j) at the option of one or both of the Companies, if (1) one or both
of the Companies shall determine, in its sole judgment reasonably exercised
in good faith, that either the Trust or KFSC has suffered a material adverse
change in its business or financial condition or is the subject of material
adverse publicity and such material adverse publicity will have a material
adverse impact upon the business and operations of one or both of the
Companies, (2) one or both of the Companies shall notify the Trust and KFSC
in writing of such determination and its intent to terminate the Agreement,
and (3) after considering the actions taken by the Trust and/or KFSC and any
other changes in circumstances since the giving of such notice, such
determination shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth (60th) day shall be the effective
date of termination; or
(k) at the option of either the Trust or KFSC, if one or both of the
Companies gives the Trust and KFSC the written notice specified in Section
10.3.(a). hereof and at the time such notice was given there was no notice
of termination outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1.(k). shall be
effective forty-five (45) days after the notice specified in 10.3.(a). was
given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1.(a). may be exercised for
any reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) in the event that any termination is based upon the provisions of
Article VII., or the provision of Section 10.1.(a)., 10.1.(i)., 10.1.(j). or
10.1.(k). of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions;
and
(b) in the event that any termination is based upon the provisions of
Section 10.1.(c). or 10.1.(d). of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust and KFSC shall at the option of one or both of the
Companies, continue to make available additional shares of the Trust
pursuant to the terms and conditions of this Agreement, for all Variable
Insurance Products in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Products"). Specifically,
without limitation, the Owners of the Existing Products shall be permitted
to reallocate investments in the Trust, redeem investments in the Trust
and/or invest in the Trust upon the making of additional purchase payments
under the Existing Products. The parties agree that this Section 10.4.
shall not apply to any terminations under Article VII. and the effect of
such Article VII. terminations shall be governed by Article VII. of this
Agreement.
10.5. The Companies shall not redeem Trust shares attributable to the
Variable Insurance Products (as opposed to Trust shares attributable to the
Companies' assets held in a Separate Account) except (i) as necessary to
implement Owner initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption").
Upon request, the Companies will promptly furnish to the Trust and KFSC the
opinion of counsel for the Companies (which counsel shall be reasonably
satisfactory to the Trust and KFSC) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Variable
Insurance Products, the Companies shall not prevent Owners from allocating
payments to a Series that was otherwise available under the Variable
Insurance Products without first giving the Trustee or KFSC ninety (90) days
notice of their intention to do so.
ARTICLE XI. 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 Trust:
c/o Liberty Investment Services, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Secretary
If to one or both of the Companies:
Keyport Life Insurance Company
000 Xxxx Xxxxxx
Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Liberty Life Assurance Company of Boston
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
If to KFSC:
Keyport Financial Services, Corp.
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Secretary
ARTICLE XII. Miscellaneous
12.1. All persons dealing with Trust must look solely to the property
of the Trust for the enforcement of any claims against the Trust hereunder
and otherwise understand that neither the Trustees, officers, agents or
shareholders of the Trust have any personal liability for any obligations
entered into by or on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each Party hereto shall treat as confidential the names and
addresses of the Owners and all information reasonably identified as
confidential in writing be any other party hereto and, except as permitted
by this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
12.3. 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.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. 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 effected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD, the Internal Revenue Service 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.
12.7. The Trust and KFSC agree that to the extent any advisory or other
fees received by the Trust, KFSC, or Xxxxx Xxx are determined to be unlawful
in appropriate legal or administrative proceedings, the Trust shall
indemnify and reimburse the Companies for any out of pocket expenses and
actual damages the Companies have incurred as a result of any such
proceeding, provided however that the provision of Section 8.2.(b). of this
and 8.2.(c). shall apply to such indemnification and reimbursement
obligation. Such indemnification and reimbursement obligation shall be in
addition to any other indemnification and reimbursement obligations of the
Trust under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligation, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
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 and its seal to be hereunder affixed hereto as of
the date specified below.
KEYPORT LIFE INSURANCE COMPANY
By its authorized officer,
By:
Title:
Date:
LIBERTY LIFE ASSURANCE
COMPANY OF BOSTON
By its authorized officer,
By:
Title:
Date:
STEINROE VARIABLE INVESTMENT TRUST
By its authorized officer,
By:
Title:
Date:
KEYPORT FINANCIAL SERVICES CORP.
By its authorized officer,
By:
Title:
Date:
Schedule A
Individual and group variable annuity contracts and certificates.
Individual variable life contracts.
