Exhibit 1.(8)(b)
FORM OF
PARTICIPATION AGREEMENT AMONG
__________________ LIFE INSURANCE COMPANY,
LIBERTY VARIABLE INVESTMENT TRUST,
and
LIBERTY FINANCIAL INVESTMENTS, INC.
This Agreement, made and entered into as of this ______ day of
_________, 1998 by and among ________________ Life Insurance Company (the
"Company"), on its own behalf and on behalf of its Separate Accounts, each of
which is a segregated asset account of the Company, Liberty Variable Investment
Trust (the "Trust"), and Liberty Financial Investments, Inc. ("LFII").
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 (each hereinafter a "Participating
Insurance Company"); 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, Liberty Advisory Services Corp. ("LASC") is duly registered
as an investment adviser under the Advisers Act and applicable state securities
laws; and provides certain administrative services to the Trust; and
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WHEREAS, Colonial Investors Service Center, Inc. ("CISC") serves as
transfer agent to the Trust; 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, validly existing
segregated asset accounts (the "Separate Accounts") by resolution of the Board
of Directors of the Company; and
WHEREAS, the Company has registered or will register certain Separate
Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Company relies on certain provisions of the 1933 and
1940 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, LFII has 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 Company intends to purchase shares of the Trust on behalf of
each Separate Account to fund certain Variable Insurance Products and LFII is
authorized to sell such shares to unit investment trusts such as each Separate
Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Trust and LFII agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. LFII will sell to the Company 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, CISC shall be the designee of the Trust to receive such orders from each
Separate Account and receipt by CISC 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 Company and its
Separate Accounts on those days on which the
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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 LFII 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 LFII 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 Company's request, any
full or fractional shares of the Trust held by the Company, 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, CISC shall be the designee of the
Trust to receive 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 Company 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 the "Prospectus," unless otherwise
provided). [The Company agrees 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
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hereafter by mutual written agreement of all the parties hereto (the
"Contracts"), shall be invested in the Trust, in such other trusts advised by
LASC and its subadvisers as may be mutually agreed to in writing by the parties
hereto, or in the Company's 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) the Company gives the Trust and LFII 45
days written notice of its 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 the Company so informs the Trust and LFII prior to their
signing this Agreement; or (d) the Trust and LFII consent to the use of such
other investment company.]
1.8. The Company shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is placed 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 Trust's shares will be by book
entry only. The Trust will not issue share certificates to either the Company 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 CISC, 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 Series. The Company hereby elects 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 Company reserves the right to revoke this
election and to receive all such income, dividends and capital gain
distributions in cash. The Trust shall notify the Company through CISC 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 Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculate 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 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 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 Company further represents and warrants that it is 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
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established each Separate Account as a segregated asset account under all
applicable state insurance laws and has 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 LFII.
2.3. The Trust represents that it has qualified 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 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.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Trust and LFII 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 Company to the extent that the
Participating Insurance Company advises the Trust, in writing, of such laws or
any changes in such laws.
2.7. LFII represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. LFII
further represents that it will sell and distribute
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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. LASC represents and warrants that it is and will remain duly
registered as an investment adviser in all material aspects under all applicable
federal and state securities laws and that it shall perform its obligations for
the Trust in compliance in all material respects with 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 _________ $
dollars with no deductible amount. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable fidelity insurance
company. Such fidelity bond may be a joint bond with other investment companies
having the same investment adviser, sub-adviser, distributor or transfer agent.
2.11. The Company represents and warrants that all of its 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 _________ dollars ($ ) 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 Company represents and warrants that it will not, without
the prior written consent of LFII, 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 Company represents and warrants that it will not transfer
or otherwise convey shares of the Trust, without the prior written consent of
LFII.
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ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. LFII shall provide the Company with as many copies of the
Trust's current prospectus, excluding the SAI, as the Company 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
Company 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 Company 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
Company's expense).
3.2. The Trust's prospectus shall state that the SAI for the Trust is
available from LFII and the Trust, at its expense, shall provide a final copy of
such SAI to LFII 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 Company with copies
of its proxy material, reports to shareholders and other communications 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 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 Company reserves the right to vote Trust shares held in any
segregated asset account in its own right, to the extent permitted by law. Each
Participating Insurance Company shall be responsible for assuring that each of
its 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 Company.
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.
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ARTICLE IV. Sales Material and Information
4.1. The Company 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 LASC or any sub-adviser or LFII is named, at
least 15 days prior to its use. No such material shall be used if the Trust or
its designee objects to such use within 15 days after receipt of such material.
4.2. The Company 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 LFII, except with the permission of the Trust or LFII or the
designee of either.
4.3. The Trust 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 a Separate Account(s) is
named at least 15 days prior to its use. No such material shall be used if the
Company or its designee objects to such use within 15 days after receipt of such
material.
4.4. The Trust and LFII shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, 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 Company or its designee, except with the
permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for 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 Company 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
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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 LFII shall pay no fee or other compensation to the
Company 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
LFII may make payments to the Company or to the underwriter for the Variable
Insurance Products if and in amounts agreed to by LFII in writing and such
payments will be made out of existing fees payable to LFII 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.
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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 Participating Insurance 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 Participating Insurance Companies if they determine that a material
irreconcilable conflict exists and the implications thereof.
7.2. The Company will report to the Trustees 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 it is aware. The Company
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 Company to inform the
Trustees whenever Owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Trust's Trustees, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company 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 of
the 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 the Company to disregard Owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
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
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foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees Any such withdrawal and termination must take place
within six months after the Trust gives written notice that this provision is
being implemented, and until the end of that six-month period LFII and Trust
shall continue to accept and implement orders by the Company 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 the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Separate Account's investment in the Trust and terminate
this Agreement within six months after the Trustees inform the Company 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-month period, LFII and Trust shall continue to accept
and implement orders by the Company 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. The Company 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. If the Trustees determine that
any proposed action does not adequately remedy any material irreconcilable
conflict, then the Company will withdraw the affected Separate Account's
investment in the Trust and terminate this Agreement within six (6) months after
the Trustees inform the Company in writing of the foregoing determination,
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined by a
majority of the disinterested 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 Company, 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.
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ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1.(a). The Company 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 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
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 the Company 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 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 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 the Company; or
(iv) arise out of or result from any failure by the Company to
provide the services and furnish the materials contemplated by this Agreement;
or
12
(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.
8.1.(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or 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 Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which 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 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
named in the action. After notice from the Company to such party of the election
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
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 Company 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 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 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:
13
(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 Company, the Trust, LFII 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 Party, 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 Company and LFII agree promptly to notify the Trust 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 Contracts, with respect to the operation of any separate Account, or the
sale or acquisition of shares of the Trust.
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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 year advance written notice
to the other parties; provided, however such notice shall not be given earlier
than one year following the date of this Agreement; or
(b) at the option of the Company to the extent that shares of Series
are not reasonably available to meet the requirements of the Variable Insurance
Products as determined by the Company, 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 the Company; or
(c) at the option of the Trust or of LFII, if formal administrative
proceedings are instituted against the Company by the NASD, the SEC, the
Insurance Commissioner or any other regulatory body regarding the duties of the
Company 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 or LFII, as the case may
be, shall determine in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Company to perform its obligations under this Agreement or of LFII to
perform its obligations under its underwriting agreement with the Trust; or
(d) at the option of the Company, if 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 the Company determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a material adverse
effect upon the ability of the Trust to perform its obligations under this
Agreement; or
15
(d 1/2) at the option of LFII, if formal administrative proceedings
are instituted against the Company by the NASD, the SEC, the Insurance
Commissioner or any other regulatory body regarding the duties of the Company
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 judgment
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to perform its
obligations under this Agreement or of LFII to perform its obligations under its
underwriting agreement with the Trust; 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 Company will give the Trust 30 days' prior
written notice the date of any proposed action to replace the Trust shares; or
(f) at the option of the Company, 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 Company; or
(g) at the option of the Company, 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 the Company reasonably believes that the
Trust may fail to so qualify; or
(h) at the option of the Company, if the Trust fails to meet the
diversification requirements specified in Article VI. hereof; or
(i) at the option of either the Trust or LFII, if:
(1) the Trust or LFII, respectively, shall determine, in
their sole judgment reasonably exercised in good faith, that the Company has
suffered a material adverse change in its business or financial condition or is
the subject of material adverse publicity and that such material adverse
publicity will have a material adverse impact upon the business and operations
of either the Trust or LFII,
(2) the Trust or LFII shall notify the Company in writing
of such determination and its intent to terminate this Agreement, and
(3) after considering the actions taken by the Company and
any other changes in circumstances since the giving of such notice, such
determination of the Trust or LFII shall continue to apply on the 60th day
following the giving of such notice, which 60th day shall be the effective date
of termination; or
16
(j) at the option of the Company, if
(1) the Company shall determine, in its sole judgment
reasonably exercised in good faith, that either the Trust or LFII 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 the Company, and
(2) after making such determination, the Company has
notified the Trust and LFII in writing of such determination and of its intent
to terminate the Agreement, and
(3) after considering the actions taken by the Trust and/or
LFII and any other changes in circumstances since the giving of such notice,
such determination shall continue to apply on the 60th day following the giving
of such notice, which 60th day shall be the effective date of termination; or
(k) at the option of either the Trust or LFII, if the Company gives
the Trust and LFII 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 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 LFII shall at the option of the Company, 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
17
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 Company shall not redeem Trust shares attributable to the
Variable Insurance Products (as opposed to Trust shares attributable to the
Company' 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
Company will promptly furnish to the Trust and LFII the opinion of counsel for
the Company (which counsel shall be reasonably satisfactory to the Trust and
LFII) 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 Company shall not prevent
Owners from allocating payments to a Series that was otherwise available under
the Variable Insurance Products without first giving the Trustees or LFII 90
days notice of its 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 Company:
Name Address
Attention: [Title]
If to the Trust:
c/o Liberty Financial Companies, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Secretary
If to LFII:
Liberty Financial Investments, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
With a copy to: General Counsel
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ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust
hereunder and otherwise understand that the Trustees, officers, agents or
shareholders of the Trust shall have no 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 LFII agree that to the extent any advisory or
other fees received by the Trust, LFII, or LASC are determined to be unlawful in
appropriate legal or administrative proceedings, the Trust shall indemnify and
reimburse the Company for any out-of-pocket expenses and actual damages the
Company has incurred as a result of any such proceeding, provided however that
the provisions of Section 8.2(b) and 8.2(c) of this Agreement 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.
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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
officer and its seal to be hereunder affixed hereto as of the date first set
forth above.
COMPANY [name of sponsor]
By:
Title:
LIBERTY VARIABLE INVESTMENT TRUST
By:
Title:
LIBERTY FINANCIAL INVESTMENTS, INC.
By:
Title:
20
Schedule A
Individual and group variable annuity contracts and certificates.
Individual variable life contracts.
39575.2
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