EXHIBIT (8e)
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PARTICIPATION AGREEMENT
AMONG
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
ALLIANCE FUND DISTRIBUTORS, INC.
ALLIANCE CAPITAL MANAGEMENT L.P.
AND
KEYPORT LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 21st day of August, 1996 by and
among Keyport Life Insurance Company, a Rhode Island corporation, (referred to
as the "Company"), each on its own behalf and on behalf of its Separate Account,
which is a segregated asset account of the Company; Alliance Variable Products
Series Fund, Inc. (the "Fund"), a corporation organized under the laws of the
State of Maryland; Alliance Capital Management L.P., ("Adviser"), a Delaware
limited partnership and Alliance Fund Distributors, Inc. ("Underwriter"), a
Delaware corporation.
WHEREAS, the Fund 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
("Variable Insurance Products") to be offered by insurance companies which have
entered into participation agreements with the Fund and Adviser on substantially
the same terms as in this Agreement (hereinafter "Participating Insurance
Companies"); and
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WHEREAS, the shares of the Fund are divided into several series of shares
(such series being hereinafter referred to individually as a "Portfolio" or
collectively as the "Portfolios") as shown on Schedule A attached hereto; and
WHEREAS, the Fund has been granted or currently intends to apply for an
order from the Securities and Exchange Commission ("SEC"), granting
Participating 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
(hereinafter the "1940 Act") and Rules 6e(b)(15) and 6e-3(T)(b)(15) thereunder
to the extent necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (hereinafter the "Shared
Funding Exemptive Order"); and
WHEREAS, the Fund 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 (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
federal Investment Advisers Act of 1940, as amended and any applicable state
securities law; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Company has established duly organized, a validly existing
segregated asset account as shown on Schedule B attached hereto (the "Separate
Account") established by resolution of the Board of Directors of the Company,
and divided such Separate Account into subaccounts to set aside and invest
assets attributable to aforesaid variable annuity contracts; and
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WHEREAS, the Company has registered or will register the certain Separate
Account as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, Keyport Financial Services Corporation ("KFSC"), the underwriter
for the individual variable annuity and the variable life policies, is
registered as a broker-dealer with the SEC under the 1934 Act and is a member in
good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Separate Account to fund certain Variable Insurance Products.
Underwriter is authorized to sell such shares to unit investment trusts such as
the Separate Account at net asset value, and acts as distributor of the
Portfolio shares.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Adviser and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Underwriter shall sell to the Company those shares of the Fund
which the Separate Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from the Separate
Account and receipt by such designee shall constitute receipt by the
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Fund provided that each Company receives the order by 4:00 p.m. New York time
and the Fund receives notice from the Company, as the Company and Fund may
agree, by 9:00 a.m. New York time on the next Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for regular
trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2 The Fund agrees subject to the terms of this Agreement, to make its
shares available indefinitely for purchase at the applicable net asset value per
share by the Company and the Separate Account on those days on which the Fund
calculates its net asset value pursuant to rules of the SEC and the Fund shall
use reasonable efforts to calculate such net asset value on each day on which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Directors of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
such Portfolio.
1.3 The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts which have agreed
to participate in the Fund to fund their Separate Accounts and/or certain
qualified plans, all in accordance with the requirement of Section 817(h) of the
Internal Revenue Code of 1986, as amended (hereinafter "Code") and Treasury
Regulation 1.817-5. No shares of any Portfolio will be sold to the general
public.
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1.4 The Fund and Adviser will not sell Fund shares to any insurance
company or separate account unless an agreement containing substantially similar
provisions as Articles I, III, V, VI and Sections 2.5 of Article II of this
Agreement is in effect to govern such sales.
1.5 The Fund will redeem for cash, on the Company's request, any full or
fractional shares of the Fund held by the Company, executing such requests on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of redemption requests. For purposes of this Section 1.5, the
Company shall be the designee of the Fund for receipt of requests for redemption
from the Separate Account, and receipt by such designee should constitute
receipt by the Fund; provided that the Company receives the request for
redemption by 4:00 p.m. New York time, and the Fund receives notice from the
Company, as the Company and Fund may agree, by 9:00 a.m. New York time on the
next Business Day.
Subject to the applicable rules and regulations, if any, of the SEC, the
Fund may pay the redemption price for shares of any Portfolio in whole or in
part by a distribution in kind of securities from the Portfolio of the Fund
allocated to such Portfolio 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 Board may determine in good faith
to be fair and equitable.
1.6 The Fund may suspend the redemption of any full or fractional shares
of the Fund (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 Fund of
securities owned by it is not reasonably practicable or (b) it is not
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reasonably practicable for the Fund 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 Fund.
1.7 The Company will purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund in accordance with the
provisions of such prospectus and statement of additional information ("SAI")
(collectively referred to as "Prospectus," unless otherwise provided).
1.8 The Company shall pay for Fund shares on the same Business Day as an
order to purchase Fund 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. For purpose of Section 2.10
and 2.11, upon receipt by the Fund of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
1.9 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Separate Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Account or the appropriate subaccount of the Separate Account.
1.10 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income dividends or capital gain
distributions payable on the shares of any Portfolio. The Company hereby elects
to receive all such income dividends and capital gain distributions as are
payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income, dividends and capital gain distributions in cash. The Fund shall notify
the Company
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of the number of shares so issued as payment of such income,
dividends and capital gains distributions.
1.11 The Fund shall make the net asset value per share for each Series
available to the Company 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., New York time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants 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 distributed in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in al material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that prior to any issuance or sale of any Contract it has legally and validly
established the Separate Account as a segregated asset account under the
applicable state insurance laws and has registered or, prior to any issuance or
sale of the Contracts, will register the 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.
2.2 The Company represents and warrants that KFSC, the underwriter for the
individual variable annuity and the variable life policies, is a member in good
standing of the NASD and is a registered broker-dealer with the SEC. The
Company represents and warrants that the Company and KFSC will issue and
distribute such policies in accordance in all material
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respects with all applicable state and federal securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.3 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland, and all
applicable federal and any state securities laws and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Adviser.
2.4 The Fund represents that it does or intends to qualify as a Regulated
Investment Company under the 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 Company immediately upon
having a reasonable basis for believing that it has ceased to so qualify or that
it might not so qualify in the future. The Fund represents and warrants that
each Portfolio will comply with the diversification requirements set forth in
Section 817(h) of the Code, and the rules and regulations thereunder, including
without limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Fund has ceased to
comply or might not so comply and will immediately take all reasonable steps to
adequately diversify the Fund to achieve compliance within the grace period
afforded by Regulation 1.817-5. The Fund acknowledges that any failure to
qualify as a Regulated Investment Company will eliminate the ability of the
subaccounts to avail themselves
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of the "look through" provisions of Section 817(h) of the Code, and that as a
result the Contracts will almost certainly fail to qualify as annuity
contracts under Section 817(h) of the Code.
2.5 The Company represents that the Contracts are currently treated as
endowment or annuity contracts under applicable provisions of the Code and that
it will make every effort to maintain such treatment and that it will notify the
Fund and the Adviser 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.
2.6 The Fund 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 Fund represents that it believes it currently complies in all
material respects and intends at all times to comply in all material respects
with the applicable insurance laws of the domiciliary states of the
Participating Insurance Companies to the extent that the Participating Insurance
Companies advise the Fund, in writing, of such laws or any changes in such laws.
2.7 The Adviser represents and warrants that the Underwriter is a member
in good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund's
shares in accordance with applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.8 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act.
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2.9 The Fund represents and warrants that the Adviser is and shall remain
duly registered under all applicable federal and state securities laws and that
the Adviser shall perform its obligations for the Fund in compliance in all
material respects with the applicable laws of the State of Delaware and any
applicable state and federal securities laws.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1 The Fund and the Adviser shall provide the Company with as many copies
of the Fund's current prospectus and Statement of Additional Information
(describing only the Portfolios listed in Schedule A) as the Company may
reasonably request in connection with delivery of the prospectus to shareholders
of Variable Insurance Products. If requested by Company in lieu thereof, the
Fund or the Adviser shall provide such documentation (including a "camera ready"
copy of the new prospectus as set in type or, at the request of Company, as a
diskette in the form sent to the financial printer) and other assistance as is
reasonably necessary in order for the parties hereto once a year (or more
frequently if the prospectus for the shares is supplemented or amended) to have
the prospectus for the Variable Insurance Products and the prospectus for the
Fund shares printed together in one document the expenses of such printing will
be apportioned between (a) the Company (b) Fund in proportion to the number of
pages of the Policy and Shares prospectuses, taking into account other relevant
factors affecting the cost of printing such as covers, columns, graphs, and
charts; the Fund to bear the cost with printing the Shares's prospectus portion
of such document and the company to bear the expenses of printing the portion
with such documents relating to the Accounts. the Company will bear all
printing costs when the prospectuses are used for distribution to prospective
purchasers. In the event that the Company requests that the Fund or the Adviser
provide the Fund's prospectus in
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a "camera-ready" or diskette format, the Fund
shall be responsible for providing the prospectus in the format in which it is
accustomed to formatting prospectuses and shall bear the expense of providing
the prospectus in such format (E.G., typesetting expenses) and the Company shall
bear the expense of adjusting or changing the format to conform with any of its
prospectuses.
3.2 The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from Fund and the Company, and
at the Fund's expense, the Fund shall provide a final copy of such Statement of
Additional Information to Company for duplication and provision to any Owner of
a Variable Insurance Product or prospective owner who requests it.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy materials, reports to shareholders and other communications (except for
prospectus and Statements of Additional Information, which are covered in
Section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distribution to Owners.
3.4 If and to the extent required by law the Company shall;
(i) solicit voting instructions from Owners;
(ii) vote the Fund shares in accordance with instructions received
from Owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular Separate Account in the same
proportion as Fund shares of such Portfolio for which
instructions have been received in that Separate Account,
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so long and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund 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 Fund calculates voting privileges in a
manner consistent with the standards to be provided in writing to the
Participating Insurance Companies.
3.5 The Fund shall comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Section 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, the form of each piece of sales literature or other promotional
material in which the Fund or its investment adviser is named, at least three
(3) Business Days prior to its use. No such materials shall be used unless the
Fund or its designee approves such use within three (3) Business Days after
receipt of its material, which approval shall not be unreasonably withheld.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of Variable Insurance Products other than the information or
representations contained in the registration
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statement or Prospectus for the Fund shares, as such registration statement
and Prospectus may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee, except with the
permission of the Fund or its designee.
4.3 The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its Separate Account(s),
are named at least three (3) Business Days prior to its use. No such material
shall be used unless the Company or its designee approves of such use within
three (3) Business Days after receipt of such material, which approval shall not
be unreasonably withheld.
4.4 The Fund shall not give any information or make any representations or
statements on behalf of the Company or concerning the Company, each Separate
Account, or the Variable Insurance Products other than the information or
representations contained in or accurately derived from 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 Company or its designee, except with
the permission of the Company.
4.5 The Fund shall provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests
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for no-action letters, and all amendments to any of the above, that relate to
the Fund or its shares, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.6 The Company shall provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
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 Variable
Insurance Products or any Separate Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.
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 articles), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
1933 Act, the 1940 Act or NASD rules.
ARTICLE V. FEES AND EXPENSES
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5.1 The Fund shall pay no compensation to the Company under this Agreement
(except for items covered in Article III).
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses 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 (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all taxes on the issuance or transfer
of the Fund's shares.
5.3 The Company shall bear the expense of distributing the Share's
prospectus or prospectuses in connection with new sales of the Policies and of
distributing the Fund's Shareholder reports and proxy materials to Policy
owners. The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal securities
and individual account statements for Policy owners as required by state
insurance laws.
5.4 Nothing herein shall prevent the parties hereto from otherwise
agreeing to perform, and arranging appropriate compensation for, other services
relating to the Fund, the Separate Accounts or both.
ARTICLE VI. POTENTIAL CONFLICTS
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6.1 The Fund agrees that the Board, constituted with a majority of
disinterested directors, shall monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the Owners of separate
accounts of Participating Insurance Companies investing in the Fund. 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 interpretative 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 Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance policy Owners; (f) a decision by an insurer to disregard the voting
instructions of Owners; or (g) if applicable, a decision of a Qualified Plan to
disregard the voting instructions of plan participants. The Board shall
promptly inform the Company if it determines that a material irreconcilable
conflict exists and the implications thereof.
6.2 The Company will report any potential or existing conflicts (including
the occurrence of any event specified in paragraph 6.1 which may give rise to
such a conflict) of which it is aware to the Board. The Company will assist the
Board in carrying out their responsibilities under the Shared Funding Exemptive
Order, by providing the Board with all information reasonably necessary for the
Board to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever Owner voting instructions
are disregarded. The responsibilities of the Company will be carried out with a
view only to the interests of the Owners.
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6.3 If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expenses 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 Fund or any Portfolio and reinvesting such assets
in a different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected Owners and, as appropriate,
segregating the assets of any particular 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; and (2)
establishing a new registered management investment company or managed separate
account.
6.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Owner voting instructions and that decision represents
a minority position or would preclude a majority vote, the Company shall be
required, at the Fund's election, to withdraw the affected Separate Account's
(or subaccount's) investment in the Fund and terminate this Agreement with
respect to such Separate Account (or subaccount) and no charge or penalty will
be imposed as a result of such withdrawal; 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 members of the Board. The
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responsibility to take such remedial action in the event of a Board
determination of a material irreconcilable conflict and to bear the cost of
such remedial action as the obligation of each Participating Insurance
Company and the Company agrees to carry out its responsibilities with a view
only to the interests of the Owners.
6.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Separate Account's investment in the Fund and terminate this Agreement
promptly after the Board informs the Company in writing that it has determined
that such decision has created a irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing irreconcilable material conflict as determined by a
majority of the disinterested members of the Board.
6.6 For purposes of Sections 6.3 through 6.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Variable
Insurance Products. The Company shall not be required by Section 6.4 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 irreconcilable material conflict. In the event that the Board
determines that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company shall withdraw the affected
Separate Account's investment in the Fund and terminate this Agreement promptly
provided, however, that such withdrawal and termination
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shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Members of the
Board.
6.7 If and to the extent that Rule 6e-2 or 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) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance 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, 6.1, 6.2, 6.3, 6.4, and 6.5 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 VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY
7.1(a) The Company shall indemnify and hold harmless the
Underwriter, the Adviser, the Fund and each member of the Board and officers and
each person, if any, who controls the Fund within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
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, regulation, at common law or
otherwise, insofar as such
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losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale of 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 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 the
Company by or on behalf of the Fund for use in the registration
statement or prospectus for the Variable Insurance Products or in the
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Variable Insurance Products or Fund
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 Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Variable Insurance Products; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement,
prospectus, or sales literature of the Fund
21
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 he 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 from any 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
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
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
22
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 satisfactory to the party
names in the action. After notice from the Company to such party of the
election of one or both of the Company 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 expense subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Company of
the commencement of any litigation or proceeding against them in connection with
the issuance or sale of Variable Insurance Products or the operation of the
Fund. This indemnification shall be in addition to any liability which the
Company may otherwise have.
7.2 INDEMNIFICATION BY THE FUND
7.2(a) The Fund shall indemnify and hold harmless the Company, and
each of its directors and offices and each person, if any, who controls the
Company within a 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 Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or
23
otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
operations of the Fund and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration
statement or prospectus or sales literature for 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 in
writing the Adviser, Underwriter or the Fund by or on behalf of the
Company for use in the registration statement or prospectus for the
Fund or in the sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of Fund 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 Variable Insurance
Products not supplied by the Adviser, Underwriter or persons under its
control) or wrongful conduct of one or both of the Fund or the Adviser
or persons under its control, with respect to the sale or distribution
of Fund 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
24
Variable Insurance Products, 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 and in conformity with
information furnished to the Company by or on behalf of the Fund; or
(iv) arise out of or result from any failure by the Fund 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 II of this Agreement); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Section 7.2(b) and 7.2(c)
hereof.
7.2(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Separate Account, whichever is
applicable.
7.2(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have
25
notified the Fund in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve the Fund from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against an Indemnified Party,
the Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Fund to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
7.2(d) The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this Agreement, the issuance or sale of the
Variable Insurance Products or the operation of the Account. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
26
7.3 INDEMNIFICATION BY THE UNDERWRITER
7.3(a) The Underwriter shall 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 7.3)
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, 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 Fund's shares and:
(i) arise out of or are based upon statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Variable Insurance
Products not supplied by the Underwriter, Advisor, Fund or persons
under its control) or wrongful conduct of the Underwriter or persons
under its control, with respect to the sale or distribution of the
Fund shares; or
(ii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in sales literature of the Variable Insurance
Products, 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
and in conformity with information furnished to the Company by the
Underwriter; or
27
(iii) arise out of or result from any failure by the Underwriter to
provide the services and furnish the materials under the terms of
this Agreement; or
(iv) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise out
of or result from any other material breach of this Agreement by the
Underwriter;
as limited by and in accordance with the provisions of Section 7.3(b) and 7.3(c)
hereof.
7.3(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 of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Separate Account, whichever is
applicable.
7.3(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
served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such services 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 and
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 Underwriter will be entitled to participate, at its own expense, in the
defense thereof. The Underwriter also shall be entitled
28
to assume the defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Underwriter to such party of the
Distributor'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.
7.3(d) The Company agrees promptly to notify the Underwriter 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 Variable Insurance Products or the operation of either Account.
This indemnification shall be in addition to any liability which the Underwriter
may otherwise have.
ARTICLE VIII. APPLICABLE LAW
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of Massachusetts.
8.2 This Agreement shall be 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.
29
ARTICLE XI. TERMINATION
9.1 This Agreement shall continue in full force and affect until the first
to occur of:
(a) termination by any party for any reason by sixty days' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund with
respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to
meet the requirements of the Contracts or not consistent with the
Company's obligations to Owners; or
(c) termination by the Company by written notice to the Fund with
respect to any Portfolio in the event any of the 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 investments media of the
Variable Insurance Products issued or to be issued by the
Company; or
(d) termination by the Company by written notice to the Fund with
respect to any Portfolio in the event that such Portfolio ceases
to qualify as a Regulated Investment Company under Subchapter M
of the Code or any independent or resulting failure under Section
817 of the Code, or under any successor or similar provision of
either, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by either the Fund or the Adviser by written notice
to the Company, if either one or both of the Fund or the Adviser
respectively,
30
shall determine, in their sole judgement exercised
in good faith, that the Company has suffered a material adverse
change in their business, operations, financial condition or
prospects since the date of this Agreement or are the subject of
material adverse publicity; but no termination shall be effective
under this subsection (e) until the Company has been afforded a
reasonable opportunity to respond to a statement by the Fund or
the Adviser concerning the reason for notice of termination
hereunder; or
(f) termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgement
exercised in good faith, that either the Fund or the Adviser 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; but no
termination shall be effective under this subsection (f) until
the Fund or Adviser has been afforded a reasonable opportunity to
respond to a statement by the Company concerning the reason for
notice of termination hereunder; or
(g) at the option of the Fund, if the Variable Insurance Products
cease to qualify as annuity contracts or life insurance
contracts, as applicable, under the Code, or if the Fund
reasonably believes that the Variable Insurance Products may fail
to so qualify; or
31
(i) at the option of the Fund, upon the Company's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of the Fund within ten (10) days after
written notice of such breach is delivered to the Company; or
(j) upon assignment of this Agreement, unless made with the written
consent of the parties hereto; or
(k) at the option of the Fund, if the Variable Insurance Products are
not registered and issued in accordance with applicable federal
and/or state law. Termination shall be effective immediately
upon such occurrence without notice.
9.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and 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 Variable Insurance Products in effect
on the effective date of termination of this Agreement (hereinafter referred to
as "Existing Contracts"). Specifically, without limitation, the Owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 9.2 shall not apply to any terminations under Article VI and
the effect of such Article VI terminations shall be governed by Article VI of
this Agreement. (However, in no event shall the Fund and the Underwriter be
required to make additional shares available to Existing Contracts for more than
six (6) months after the date of termination of the Agreement).
32
9.3 The Company shall not redeem Fund shares attributable to the Variable
Insurance Products (as opposed to Fund shares attributable to the Company's
assets held in the Separate Account) except (i) as necessary to implement Owner
initiated or approved 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"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to the clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Variable
Insurance Products, and as may be in the best interests of Owners, as determined
by the Company, the Company shall not prevent Owners from allocating payments to
a Portfolio that was otherwise available under the Contracts without first
giving the Fund or the Underwriter sixty (60) days notice of its intention to do
so.
9.4 Notwithstanding any termination of this Agreement for any reason, the
terms and conditions of the following provisions of this Agreement shall remain
in effect with respect to any Existing Contract, for so long as such Existing
Contract has assets invested in the Fund: Section 1.3 to 1.10 of Article I
(governing the pricing and redemption of shares); Article II (Representations
and Warranties); Section 3.1 through 3.3 and 3.5 of Article III (Prospectus and
Proxy Statements, and Voting); Articles IV and VIII (Sales Material and
Information; Fees and Expenses, Diversification; Potential Conflicts;
Indemnification; and Applicable Law); Article X (Notices); and Sections 11.1,
11.2, and 11.5 through 11.8 of Article XI (Miscellaneous).
33
Further, notwithstanding any termination of this Agreement for any reason,
the terms and conditions of the following provisions of this Agreement shall
remain in effect with regard to Variable Insurance Products previously
invested in the Fund; Article II (Representations and Warranties); and
Article VIII (Indemnification).
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 Fund:
Alliance Capital Management L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
If to the Company:
Keyport Life Insurance Company
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: General Counsel
If to Adviser:
Alliance Capital Management L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxx
If to Underwriter:
Alliance Fund Distributors, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxx
34
ARTICLE XI. MISCELLANEOUS
11.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for any
obligations entered into on behalf of the Fund.
11.2 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 by
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.
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
35
connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
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 No provision of the Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by the Fund, the
Adviser and the Company.
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: /s/ Xxxxx X. Xxxxxxxxx
-----------------------
Title: VICE PRESIDENT
--------------
Date: 8/21/96
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
By its authorized officer,
By: /s/ Xxxx Xxxxxx
----------------
Title: CHAIRMAN AND PRESIDENT
----------------------
Date: 8/20/96
-------
36
ALLIANCE CAPITAL MANAGEMENT L.P.
By its authorized officer,
By: /s/ Xxxx Xxxxxx
----------------
Title: PRESIDENT AND CHIEF OPER. OFFICER
---------------------------------
Date: 8/20/96
-------
ALLIANCE FUND DISTRIBUTORS, INC.
By its authorized officer,
By: /s/ Xxxxxxx X Xxxxx
--------------------
Title: MANAGING DIRECTOR
-----------------
Date: 8/20/96
-------
37
Schedule A
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Premier Growth Portfolio
Global Bond Portfolio
38
As of ________________
Schedule B
SEPARATE ACCOUNTS SELECTED FUNDS
Variable Account A Premier Growth Portfolio
(Est. 1/9/80)
Global Bond Portfolio
KMA Variable Account Same as above
(Est. 1/9/80)
39
