As filed with the Securities and Exchange Commission on October 21, 1998.
Registration No. 333-xxxxx
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------
LLAC VARIABLE ACCOUNT
(Exact Name of Trust)
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
(Name of Depositor)
175 Berkeley Street
Boston, Massachusetts 02117
(Complete Address of Depositor's Principal Executive Offices)
Morton E. Spitzer
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
175 Berkeley Street
Boston, Massachusetts 02117
(Name and Complete Address of Agent for Service)
Copies to:
Joan E. Boros, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007-5201
William J. O'Connell, Esq.
Counsel
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, Massachusetts 02117
Securities being offered -- variable portion of modified single payment variable
universal life insurance contracts.
-----------
Approximate date of proposed public offering: as soon as practicable after the
effective date of this registration statement.
The registrant is registering an indefinite amount of securities, by reason of
Section 24(f) of the Investment Company Act of 1940.
The registrant hereby amends this registration statement on such dates as may be
necessary to delay its effective date until the registrant shall file a further
amendment which specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
================================================================================
<PAGE>
CROSS REFERENCE SHEET TO PROSPECTUS
Cross reference sheet pursuant to Rule 404(c) showing location in Prospectus of
information required by Items of Form N-8B-2.
<TABLE>
<CAPTION>
Item Number in Form N-8B-2 Caption in Prospectus
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<S> <C>
ORGANIZATION AND GENERAL INFORMATION
------------------------------------
1. (a) Name of trust..................................................... Cover, Definitions
(b) Title of each class of securities issued.......................... Cover, Purchase of Contract
and Allocation of Payments
2. Name & address of each depositor...................................... Cover, Liberty Life Assurance
Company of Boston
3. Name & address of custodian........................................... Variable Account
4. Name & address of principal underwriter............................... Distribution of Contracts
5. State in which organized.............................................. Variable Account
6. Date of organization.................................................. Variable Account
9. Material litigation................................................... Legal Proceedings
GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
------------------------------------------------------------
General Information Concerning Securities and Rights of Holders
- ---------------------------------------------------------------
10. (a), (b) Type of Securities........................................... Cover, Purchase of Contract
and Allocation of Payments
(c) Rights of security holders........................................ Cover, Amount Payable on
re: withdrawal or redemption Surrender of the Contract,
Contract Loans, Cancellation
(d) Rights of security holders........................................ Cover, Cancellation, Amount
re: conversion, transfer or partial withdrawal Payable on Surrender of the
Contract, Partial Withdrawals,
Allocation of Payments,
Transfer of Account Value
(e) Rights of security holders........................................ Termination
re: lapses, default, & reinstatement
(f) Provisions re: voting rights...................................... Voting Rights
(g) Notice to security holders........................................ Statements to Contract Owners
(h) Consent of security holders....................................... Additions, Deletions, and
Substitutions of Securities,
Allocation of Payments
(i) Other principal features.......................................... Deductions and Charges,
Contract Benefits and Rights,
Cash Value
Information Concerning Securities Underlying Trust's Securities
- ---------------------------------------------------------------
11. Unit of specified securities in which security holders
have an interest ..................................................... Cover, Portfolios
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<PAGE>
12. (a)-(d) Name of company, name & address of its custodian.............. Cover, Portfolios
Information Concerning Loads, Fees, Charges & Expenses
- ------------------------------------------------------
13. (a) With respect to each load, fee, charge & expense.................. Deductions and Charges
(b) Deductions for sales charges...................................... Withdrawal Charge
(c) Sales load as percentage of amount invested....................... Withdrawal Charge
(d)-(g) Other loads, fees & expenses.................................. Deductions and Charges
Information Concerning Operation of Trust
- -----------------------------------------
14. Procedure for applications for & issuance of trust's securities....... Application for a Contract,
Allocation of Payments,
Distribution of Contracts
15. Procedure for receipt of payments from purchases of trust's
securities ........................................................... Application for a Contract,
Allocation of Payments,
Payments, Transfer of Account
Value
16. Acquisition and disposition of underlying securities.................. Cover, Portfolios
17. (a) Procedure for withdrawal.......................................... Cover, Amount Payable on
Surrender of the Contract,
Partial Withdrawals,
Cancellation
(b) Redemption or repurchase.......................................... Cover, Amount Payable on
Surrender of the Contract,
Partial Withdrawals,
Cancellation
(c) Cancellation or resale............................................ Not Applicable
18. (a) Income of the Trust............................................... Portfolios, Allocation of
Payments
19. Procedure for keeping records & furnishing information to Portfolios, Statements to
security holders...................................................... Contract Owners
21. (a) & (b) Loans to security holders................................... Contract Loans
23. Bonding arrangements for depositor.................................... Safekeeping of the Variable
Account's Assets
24. Other material provisions............................................. General Contract Provisions
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<PAGE>
ORGANIZATION, PERSONNEL & AFFILIATED PERSONS OF DEPOSITOR
---------------------------------------------------------
Organization & Operations of Depositor
- --------------------------------------
25. Form, state & date of organization of depositor....................... Liberty Life Assurance
Company of Boston
27. General character of business of depositor............................ Liberty Life Assurance
Company of Boston
28. (a) Officials and affiliates of the depositor......................... Liberty Life Assurance
Company of Boston, Officers
and Directors of Liberty Life
(b) Business experience of officers and directors
of the depositor.................................................. Officers and Directors of
Liberty Life
Companies Owning Securities of Depositor
- ----------------------------------------
29. Each company owning 5% of voting securities of depositor.............. Liberty Life Assurance
Company of Boston
Controlling Persons
- -------------------
30. Control of depositor.................................................. Liberty Life Assurance
Company of Boston
DISTRIBUTION & REDEMPTIONS OF SECURITIES
----------------------------------------
Distribution of Securities
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35. Distribution.......................................................... Liberty Life Assurance
Company of Boston,
Distribution of Contracts
38. (a) General description of method of distribution of securities....... Distribution of Contracts
(b) Selling agreement between trust or depositor & underwriter........ Distribution of Contracts
(c) Substance of current agreements................................... Distribution of Contracts
Principal Underwriter
- ---------------------
39. (a) & (b) Principal Underwriter....................................... Distribution of Contracts
41. Character of Underwriter's business................................... Distribution of Contracts
Offering Price or Acquisition Value of Securities of Trust
- ----------------------------------------------------------
44. Information concerning offering price or acquisition valuation of
securities of trust. (All underlying securities are shares in
registered investment companies.)..................................... Portfolios, Account Value
Redemption Valuation of Securities of Trust
- -------------------------------------------
46. Information concerning redemption valuation of securities of trust. (All
underlying securities are shares in a registered investment company.)....Portfolios, Account Value
iv
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Purchase & Sale of Interests in Underlying Securities
- -----------------------------------------------------
47. Maintenance of Position.................................................. Cover, Variable Account,
Portfolios, Allocation of
Payments
INFORMATION CONCERNING TRUSTEE OR CUSTODIAN
-------------------------------------------
48. Custodian of trust....................................................... Variable Account
50. Lien on trust assets..................................................... Variable Account
INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
---------------------------------------------------------
51. (a) Name & address of insurer............................................ Cover, Liberty Life Assurance
Company of Boston
(b) Types of Contracts................................................... Cover, Purchase of Contract
and Allocation of Payments,
Federal Tax Considerations
(c) Risks insured & excluded............................................. Death Benefit, Optional
Insurance Benefits,
Misstatement as to Age and
Sex, Suicide
(d) Coverage............................................................. Cover, Purchase of Contract
and Allocation of Payments
(e) Beneficiaries........................................................ Death Benefit, Beneficiary
(f) Terms of cancellations & reinstatement............................... Termination
(g) Method of determining amount of premium paid by holder............... Purchase of Contract and
Allocation of Payments
POLICY OF REGISTRANT
--------------------
52. (a) & (c) Selection of Portfolio securities.............................. Additions, Deletions, and
Substitutions of Securities
Regulated Investment Company
- ----------------------------
53. (a) Taxable status of trust.............................................. Taxation of Liberty Life and
the Variable Account
FINANCIAL AND STATISTICAL INFORMATION
-------------------------------------
59. Financial Statements..................................................... Financial Statements
</TABLE>
*Items not listed are not applicable to this Registration Statement.
v
<PAGE>
PROSPECTUS
[SUBJECT TO COMPLETION]
MODIFIED SINGLE PAYMENT
VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS
(SINGLE LIFE AND SURVIVORSHIP)
issued by
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
in connection with its
LLAC VARIABLE ACCOUNT
175 Berkeley Street, P.O. Box 140
Boston, Massachusetts 02117-0140
Service Center
100 Liberty Way
Dover, New Hampshire 03820
[1-800-xxx-xxxx]
This prospectus describes Modified Single Payment Variable Universal Life
Insurance Contracts (the "Contracts") offered by Liberty Life Assurance Company
of Boston ("we" or "Liberty Life") for prospective insured persons ages 0-85.
This prospectus describes Contracts which provide insurance coverage on the life
of one Insured ("Single Life Contracts") and Contracts which provide insurance
on the lives of two Insureds ("Survivorship Contracts"). You may pay a
significant initial Payment and, subject to certain restrictions, additional
Payments. Your initial Payment must equal at least $10,000.
The Contracts are modified endowment contracts for Federal income tax purpose,
except in certain cases as described in "Federal Tax Considerations" beginning
on page [44]. A loan, distribution or other amount received from a modified
endowment contract during the life of the Insured will be taxed to the extent of
any accumulated income in the Contract. Any taxable withdrawal will also be
subject to an additional ten percent penalty tax, with certain exceptions.
- --------------------------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offer to buy be accepted before the registration statement becomes effective.
This prospectus is not an offer to sell nor is it soliciting an offer to buy
these securities nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of such state.
The Securities and Exchange Commission Has Not Approved or Disapproved of these
Securities or Passed upon the Accuracy or Adequacy of this Prospectus. Any
Representation to the Contrary is a Criminal Offense.
The Date of this Prospectus is October 21, 1998.
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The Contracts currently offer nineteen investment options, each of which is a
Sub-Account of LLAC Variable Account of Liberty Life (the "Variable Account").
Each Sub-Account invests exclusively in shares of one of the following
Portfolios:
AIM Variable Insurance Funds, Inc.: AIM V.I. Capital Appreciation Fund;
AIM V.I. International Equity Fund.
Dreyfus: Dreyfus Stock Index Fund; Dreyfus Variable Investment Fund,
Capital Appreciation Portfolio; and Dreyfus Socially Responsible Growth
Fund, Inc.
Liberty Variable Investment Trust: Colonial Small Cap Value Fund, Variable
Series; Colonial High Yield Securities Fund, Variable Series; Colonial
Strategic Income Fund, Variable Series; Colonial U.S. Stock Fund, Variable
Series; and Liberty All-Star Equity Fund, Variable Series.
MFS Variable Insurance Trust: MFS Emerging Growth Series; MFS Research
Series; MFS Utilities Series; and MFS Growth with Income Series.
Oppenheimer Variable Account Funds: Oppenheimer Bond Fund; and Oppenheimer
Growth and Income Fund.
Stein Roe Variable Investment Trust: Stein Roe Balanced Fund, Variable
Series; Stein Roe Growth Stock Fund, Variable Series; and Stein Roe Money
Market Fund, Variable Series.
Not all of the Sub-Accounts may be available under your Contract. You should
contact your representative for further information as to the availability of
the Sub-Accounts. We may make other investment options available in the future.
You also may allocate all or part of your Payment to our Fixed Account.
The Contract does not have a guaranteed minimum Account Value. Your Contract's
Account Value will rise and fall, depending on the investment performance of the
Portfolios underlying the Sub-Accounts to which you allocate your Payment. You
bear the entire investment risk on amounts allocated to the Sub-Accounts. The
investment policies and risks of each Portfolio are described in the
accompanying prospectuses for the Portfolios. The Account Value will also
reflect Payments, amounts withdrawn, and cost of insurance or any other charges.
The Contract provides for an Initial Death Benefit as shown on the Contract
Information page of your Contract. The Death Benefit payable under your Contract
may be greater than the Initial Death Benefit. In certain circumstances, the
Death Benefit may increase or decrease based on the investment experience of the
Portfolios underlying the Sub-Accounts to which you have allocated your Payment.
As long as the Contract remains in force and you make no withdrawals the Death
Benefit will never be less than the Initial Death Benefit.
Under the Single Life Contracts, when the Insured dies, we will pay a Death
Benefit to a Beneficiary specified by you. Under the Survivorship Contracts, the
Death Benefit is payable upon the second
2
<PAGE>
death, as long as the Contract is in force. We will reduce the amount of the
Death Benefit payment by any unpaid Indebtedness and any unpaid Contract
charges.
You generally may cancel the Contract by returning it to us within twenty days
after you receive it. In some states, however, this right to return period may
be longer or shorter as provided by state law. We will refund your Payment or
Account Value, as provided by state law.
In certain states the Contracts may be offered as group contracts with
individual ownership represented by Certificates. The discussion of Contracts in
this Prospectus applies equally to Certificates under group contracts, unless
the context specifies otherwise.
It may not be advantageous for you to purchase variable life insurance to
replace your existing insurance coverage or if you already own a variable life
insurance contract.
The Contracts and the investments in the Portfolios are not deposits, or
obligations of, or guaranteed or endorsed by any bank. The Contracts are subject
to investment risks, including the possible loss of the principal amount
invested. The Contracts are not insured by the FDIC, the Federal Reserve Board,
or any other agency.
This Prospectus is valid only if accompanied by the current Prospectuses for the
Portfolios listed above. If any of those Prospectuses are missing or outdated,
please contact us and we will send you the Prospectus you need.
Please read this Prospectus carefully and retain it for your future reference.
The Contracts may not be available in all states.
3
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
DEFINITIONS.................................................................7
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT...................................9
FEES AND EXPENSES..........................................................15
PURCHASE OF CONTRACT AND ALLOCATION OF PAYMENTS............................18
Application for a Contract..............................................18
Payments................................................................19
Allocation of Payments..................................................19
Account Value...........................................................19
Accumulation Unit Value.................................................21
Transfer of Account Value...............................................21
Transfers Authorized by Telephone.......................................22
Dollar Cost Averaging...................................................22
Asset Rebalancing.......................................................22
THE INVESTMENT AND FIXED ACCOUNT OPTIONS...................................23
Variable Account Investments............................................23
Portfolios...........................................................23
Voting Rights........................................................27
Additions, Deletions, and Substitutions of Securities................28
The Fixed Account.......................................................29
CONTRACT BENEFITS AND RIGHTS...............................................29
Death Benefit...........................................................29
Accelerated Death Benefit...............................................30
Optional Insurance Benefits.............................................31
Contract Loans..........................................................31
Amount Payable on Surrender of the Contract.............................32
Partial Withdrawals.....................................................33
Systematic Withdrawal Program...........................................34
Proceeds Options........................................................34
Termination and Grace Period............................................35
Reinstatement ..........................................................36
Cancellation ...........................................................36
Postponement of Payments ...............................................37
DEDUCTIONS AND CHARGES.....................................................37
Separate Account Expense Charge ........................................37
Monthly Deduction.......................................................38
Portfolio Expenses......................................................39
Withdrawal Charge.......................................................39
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Withdrawal Fee..........................................................41
Transfer Fee............................................................41
Special Provisions for Group or Sponsored Arrangements .................41
GENERAL CONTRACT PROVISIONS................................................41
Statements to Contract Owners...........................................41
Limit on Right to Contest...............................................42
Suicide.................................................................42
Misstatement as to Age and Sex..........................................42
Beneficiary.............................................................42
Assignment..............................................................43
Creditors' Claims.......................................................43
Dividends...............................................................43
Notice and Elections....................................................43
Modification............................................................43
Survivorship Contracts..................................................43
FEDERAL TAX CONSIDERATIONS.................................................44
Taxation of Liberty Life and the Variable Account.......................44
Tax Status of the Contract .............................................44
Diversification Requirements.........................................45
Owner Control........................................................46
Tax Treatment of Life Insurance Death Benefit Proceeds..................46
Tax Deferral During Accumulation Period.................................47
Contracts Which Are MECs.............................................47
Contracts Which Are Not MECs.........................................48
Survivorship Contracts..................................................48
Treatment of Maturity Benefits and Extension of Maturity Date...........49
Actions to Ensure Compliance with the Tax Law...........................49
Federal Income Tax Withholding..........................................49
Tax Advice..............................................................49
DESCRIPTION OF LIBERTY LIFE AND THE VARIABLE ACCOUNT.......................50
Liberty Life Assurance Company of Boston................................50
Officers and Directors of Liberty Life..................................50
Financial Information Concerning Liberty Life...........................52
Variable Account........................................................52
Safekeeping of the Variable Account's Assets............................53
State Regulation of Liberty Life........................................53
YEAR 2000 MATTERS..........................................................53
DISTRIBUTION OF CONTRACTS..................................................54
5
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LEGAL PROCEEDINGS..........................................................54
LEGAL MATTERS..............................................................54
REGISTRATION STATEMENT.....................................................54
EXPERTS....................................................................55
FINANCIAL STATEMENTS.......................................................55
APPENDIX..................................................................A-1
</TABLE>
This Prospectus Does Not Constitute an Offering in any Jurisdiction in which
Such Offering May Not Be Lawfully Made. Liberty Life Does Not Authorize any
Information or Representations Regarding the Offering Described in this
Prospectus other than as Based in this Prospectus.
6
<PAGE>
DEFINITIONS
Please refer to this list for the meaning of the following terms:
Account Value - The sum of the values of your interests in the Sub-Accounts, the
Fixed Account and the Loan Account.
Accumulation Unit - An accounting unit of measurement which we use to calculate
the value of a Sub-Account.
Age - An Insured's age at his or her last birthday.
Beneficiary(ies) - The person(s) named by you to receive the Death Benefit under
the Contract.
Cash Value - The Account Value less any applicable Withdrawal Charges.
Contract Anniversary - The same day and month as the Contract Date for each
subsequent year the Contract remains in force.
Contract Date - The effective date of insurance coverage under your Contract. It
is used to determine Contract Anniversaries, Contract Years and the Monthly
Date.
Contract Owner ("You") - The person(s) having the privileges of ownership
defined in the Contract. The Contract Owner(s) may or may not be the same
person(s) as the Insured(s). If your Contract is issued pursuant to a retirement
plan, your ownership privileges may be modified by the plan.
Contract Year - Each twelve-month period beginning on the Contract Date and each
Contract Anniversary.
Death Benefit - The amount payable to the Beneficiary under the Contract upon
the death of the Insured(s), before payment of any unpaid Indebtedness or
Contract charges.
Delivery Date - The date on which your Contract is personally delivered to you
by one of our agents or, if your Contract is not delivered to you in person,
five days after we mail your Contract to you.
Fixed Account - The portion of the Account Value allocated to our general
account.
Grace Period - A 61-day period during which the Contract will remain in force so
as to permit you to pay a sufficient amount to keep the Contract from lapsing.
Indebtedness - The sum of all unpaid Contract Loans and accrued loan interest.
Initial Death Benefit - The initial amount of insurance under your Contract,
adjusted for any changes in accordance with the terms of your Contract.
Insured - A person whose life is insured under the Contract.
7
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Loan Account - An account established for amounts transferred from the
Sub-Accounts or the Fixed Account as security for outstanding Indebtedness.
Maturity Date - For Single Life Contracts, the Contract Anniversary on or after
the Insured's 100th birthday. For Survivorship Contracts, the Contract
Anniversary on or after the younger Insured's 100th birthday.
Monthly Date - The same day in each month as the Contract Date. The day of the
month on which the Monthly Deduction is taken from your Account Value.
Monthly Deduction - The amount deducted from the Account Value on each Monthly
Date for the cost of insurance charge, the Contract Fee (when due), the Expense
Charge on the Fixed Account and the cost of any benefit rider.
Net Investment Factor - The factor we use to determine the change in value of an
Accumulation Unit in any Valuation Period. We determine the Net Investment
Factor separately for each Sub-Account.
Payment - An amount paid to us as payment for the Contract by you or on your
behalf.
Portfolio(s) - The underlying mutual funds in which the Sub-Accounts invest.
Each Portfolio is an investment company registered with the SEC or a separate
investment series of a registered investment company.
SEC - The United States Securities and Exchange Commission.
Sub-Account - A division of the Variable Account, which invests wholly in shares
of one of the Portfolios.
Sub-Account Value - The value of the assets held in a Sub-Account.
Surrender Value - The Cash Value less the Contract Fee less any unpaid
Indebtedness.
Tax Code - The Internal Revenue Code of 1986, as amended.
Valuation Day - Each day the New York Stock Exchange is open for business and we
are open.
Valuation Period - The period of time over which we determine the change in the
value of the Sub-Accounts. Each Valuation Period begins at the close of normal
trading on the New York Stock Exchange ("NYSE"), currently 4:00 p.m. Eastern
time, on each Valuation Day and ends at the close of the NYSE on the next
Valuation Day, or the next day we are open, if later.
Variable Account - LLAC Variable Account, which is a segregated investment
account of Liberty Life.
8
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QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT
These are answers to questions that you may have about some of the most
important features of your Contract. The Contract is described more fully in the
remainder of this Prospectus. Please read this Prospectus carefully. Unless
otherwise indicated, the description of the Contract contained in this
Prospectus assumes that the Contract is in force, that there is no Indebtedness,
and that current federal tax laws apply.
1. What is a modified single payment variable universal life insurance contract?
The Contract has a Death Benefit, Account Value, and other features similar to
life insurance contracts providing fixed benefits. The Contract permits the
Contract Owner to pay a single significant initial Payment and, subject to
restrictions, additional Payments. It is a "variable" Contract because the
Account Value and, in some circumstances, the Death Benefit vary according to
the investment performance of the Sub-Accounts to which you have allocated your
Payment. The Account Value is not guaranteed. This Contract provides you with
the opportunity to take advantage of any increase in your Account Value, but you
also bear the risk of any decrease.
2. Who may purchase a Contract?
We will issue Contracts on the lives of prospective Insureds age 0-85 who meet
our underwriting standards. You may purchase a Contract to provide insurance
coverage on the life of one Insured ("Single Life Contract") or a Contract to
provide insurance coverage in the lives of two Insureds ("Survivorship
Contract").
3. What is the Death Benefit?
Under a Single Life Contract, while the Contract is in force, we will pay a
Death Benefit to the Beneficiary upon the death of the Insured. Under a
Survivorship Contract, we will pay the Death Benefit to the Beneficiary upon the
death of the second Insured. The Death Benefit is equal to the greater of your
Contract's Initial Death Benefit and the Account Value multiplied by a specified
percentage. Decreases in the Account Value of an in force Contract will never
cause the Death Benefit to be less than the Initial Death Benefit. Before we pay
the Death Benefit to the Beneficiary, however, we will subtract an amount
sufficient to repay any outstanding Indebtedness and to pay any due and unpaid
charges. In addition, if you withdraw part of your Account Value, we will reduce
the Initial Death Benefit as described in this Prospectus on page [34].
4. How will the Account Value of my Contract be determined?
Your Payments are invested in one or more of the Sub-Accounts or allocated to
the Fixed Account, as you instruct us. Your Account Value is the sum of the
values of your interests in the Sub-Accounts, plus the values in the Fixed
Account and the Loan Account. Your Account Value will depend on the investment
performance of the Sub-Accounts and the amount of interest we credit to the
Fixed Account and the Loan Account, as well as the Payments paid, partial
withdrawals, and charges assessed. We do not guarantee a minimum Account Value
on the portion of your Payments allocated to the Variable Account.
9
<PAGE>
5. What are the Payments for this Contract?
Your initial Payment must equal at least $10,000. If you choose, you may make
additional Payments of at least $1,000 each, subject to the restrictions
described in this Prospectus. We may require you to provide evidence of
insurability if an increase in the Death Benefit would result from an additional
Payment. We will refuse to accept any additional Payment that would cause the
Contract to lose its status as a life insurance contract under the Tax Code.
6. When is the Contract effective?
Simplified underwriting. If your application is approved through simplified
underwriting, your Contract will be effective and your life insurance coverage
under the Contract will begin on the date of your application.
Full underwriting. If your application requires full underwriting and we approve
your application, your Contract will be effective as of the date that we receive
your initial Payment. If you submit your initial Payment with your application,
the effective date of your Contract will be the date of your application, which
will be designated your Contract's Contract Date. Otherwise, when we deliver
your Contract we will require you to pay sufficient Payment to place your
insurance in force. At that time, we also will provide you with a document
showing your Contract's effective date, which will be designated as the Contract
Date. While your application is in underwriting, if you have paid your initial
Payment we may provide you with temporary life insurance coverage in accordance
with the terms of our conditional receipt.
If we approve your application, you will earn interest on your Payment from the
Contract Date. We will also begin to deduct the Contract charges as of the
Contract Date. We will temporarily allocate your initial Payment to our Fixed
Account until we allocate it to the Sub-Accounts in accordance with the
procedures described in the Answer to Question 7.
If we reject your application, we will not issue you a Contract. We will return
any Payment you have made, adding interest as and at the rate required in your
state. We will not subtract any contract charges from the amount we refund to
you.
7. How are my Payments allocated?
When you apply for the Contract, you specify in your application how to allocate
your Payment among the Sub-Accounts and the Fixed Account. You must use whole
number percentages and the total allocations must equal 100%. We allocate any
subsequent Payment in those percentages until you give us new written
instructions. You may allocate your Payment to up to ten Sub-Accounts and the
Fixed Account at any one time. You must allocate at least five percent of your
Payment to each option that you choose. In the future, we may change these
limits.
Initially, we will temporarily allocate your initial Payment to the Fixed
Account as of the Contract Date. We generally will then reallocate that amount
(including any interest) among the Sub-Accounts and the Fixed Account in
accordance with your instructions, on the twenty-fifth day after the Delivery
Date. This period may be longer or shorter, depending on the length of the right
to return period in your state, as it will always equal five days plus the
number of days in the right to return period in your state. As a general rule,
any subsequent Payment will be allocated to the Sub-Accounts and the Fixed
Accounts as of the date your Payment is received in our Service Center.
You may transfer Account Value among the Sub-Accounts and the Fixed Account
while the Contract is in force, by writing to us or calling us at
1-800-xxx-xxxx. Although we currently are not charging a transfer fee, the
Contract gives us the right to impose a transfer fee of $25 per transfer. You
may not make any transfer that would cause your Account Value to be allocated to
more than ten Sub-Accounts at any one time. While you may also transfer amounts
from the Fixed Account, certain restrictions apply. For more detail, see
"Transfer of Account Value" and "Transfers Authorized by Telephone", on pages
[21-22].
You may also use our automatic Dollar Cost Averaging program or our Asset
Rebalancing program. Under the Dollar Cost Averaging program, amounts are
automatically transferred to the Sub-Accounts at regular intervals from the
account of your choice. For more detail, see "Dollar Cost Averaging", on page
[22].
Under the Asset Rebalancing program, you periodically can readjust the
percentage of your Account Value allocated to each Sub-Account to maintain a
pre-set level. Investment results will shift the balance of your Account Value
allocations. If you elect Asset Rebalancing, we automatically transfer your
Account Value back to the specified percentages at the frequency that you
specify. For more detail, see "Asset Rebalancing", on pages [22-23].
10
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8. What are my investment choices under the Contract?
You can allocate and reallocate your Account Value among the Sub-Accounts, each
of which in turn invests in a single Portfolio. Under the Contract, the Variable
Account currently invests in the following Portfolios:
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
Dreyfus
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund, Capitol Appreciation Portfolio
Dreyfus Socially Responsible Growth Fund, Inc.
Liberty Variable Investment Trust
Colonial Small Cap Value Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial U.S. Stock Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
MFS Variable Insurance Trust
MFS Emerging Growth Series
MFS Research Series
MFS Utilities Series
MFS Growth with Income Series
Oppenheimer Variable Account Funds
Oppenheimer Bond Fund
Oppenheimer Growth & Income Fund
Stein Roe Variable Investment Trust
Stein Roe Balanced Fund, Variable Series
Stein Roe Growth Stock Fund, Variable Series
Stein Roe Money Market Fund, Variable Series
Each Portfolio holds its assets separately from the assets of the other
Portfolios. Each Portfolio has distinct investment objectives and policies,
which are described in the accompanying Prospectuses for the Portfolios.
In addition, the Fixed Account is available.
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<PAGE>
9. May I take out a Contract Loan?
Yes, you may borrow money from us using your Contract as security for the loan.
You may borrow up to 90% of the Cash Value of your Contract. In most instances
Contract Loans are treated as distributions for Federal tax purposes. Therefore,
you may incur tax liabilities if you borrow a Contract Loan. For more detail,
see "Contract Loans", on pages [31-32], and "Contracts Which Are MECs", on pages
[47-48].
10. What are the charges deducted from my Account Value?
On each Valuation Day we deduct the Separate Account Expense Charge from the
Sub-Accounts to compensate Liberty Life for its expenses incurred and certain
risks assumed under the Contracts. The Separate Account Expense Charge is
calculated at an annual rate equivalent to 1.65% of average daily net assets.
We also deduct a monthly deduction from your Account Value for the cost of
insurance charge, the Contract Fee (when due), the Fixed Account Expense Charge,
and the cost of any benefit rider. The cost of insurance charge covers our
anticipated mortality costs. The Contract Fee covers certain administrative
expenses in connection with the Contracts. The Fixed Account Expense Charge is
intended to cover state premium taxes and administration expenses. The Fixed
Account Expense Charge equals 0.04% of the Account Value in the Fixed Account on
each Monthly Date, which is equivalent to an annual rate of 0.48% of the average
monthly Account Value in the Fixed Account.
We subtract the Fixed Account Expense Charge from your Fixed Account balance. We
allocate the remainder of the monthly deduction pro rata among your Account
Value in the Sub-Accounts and the Fixed Account.
Although we currently are not charging a transfer fee, the Contract gives us the
right to impose a transfer fee of $25 per transfer.
We impose a Withdrawal Charge to cover a portion of our premium tax expenses and
a portion of the sales expenses we incur in distributing the Contracts. These
sales expenses include agents' commissions, advertising, and the printing of
Prospectuses. The Withdrawal Charge is described in the answer to Question 11
below and in "Withdrawal Charge", on pages [39-41]. We also impose a withdrawal
fee of up to $25 on each partial withdrawal after the first in each Contract
Year. The withdrawal fee is used to cover our administrative expenses in
processing your partial withdrawal request.
The charges assessed under the Contract are summarized in the table entitled
"Contract Charges and Deductions" on pages [15-18] and described in more detail
in "Deductions and Charges", beginning on page [37].
In addition to our charges under the Contract, each Portfolio deducts amounts
from its assets to pay its investment advisory fee and other expenses. The
Prospectuses for the Portfolios describe their respective charges and expenses
in more detail. We may receive compensation from the investment
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advisers or administrators of the Portfolios. Such compensation will be
consistent with the services we provide or the cost savings resulting from the
arrangement and therefore may differ between Portfolios.
11. Do I have access to the value of my Contract?
While the Contract is in force, you may surrender your Contract for the
Surrender Value, which is the Cash Value less any Indebtedness, the Contract
Fee, and unpaid charges. Upon surrender, life insurance coverage under the
Contract will end. You may also withdraw part of your Account Value through a
partial withdrawal. You may not withdraw less than $250 at one time. Currently,
if the Account Value after any partial withdrawal would be less than $10,000, we
may treat your request as a request to surrender your Contract. We may waive or
change this limit. We do not permit any partial withdrawals during the first
Contract Year. For more detail, see "Amount Payable on Surrender of the
Contract" and "Partial Withdrawals", on pages [32-34].
We may deduct a Withdrawal Charge and a withdrawal fee on a surrender or a
partial withdrawal.
Withdrawal Charge. If you surrender your Contract, the Withdrawal Charge will
equal a percentage of your initial Payment net of all previous withdrawal
amounts on which you paid a Withdrawal Charge. If you make a partial withdrawal
from your Contract, the Withdrawal Charge will equal a percentage of the amount
withdrawn until your total partial withdrawals on which you paid a Withdrawal
Charge equals your initial Payment. After that limit is reached, partial
withdrawals are not subject to the Withdrawal Charge. The Withdrawal Charge is
intended to cover our actual premium tax expenses and sales expenses.
The rate used to determine the Withdrawal Charge depends on the year the
withdrawal is made. The Withdrawal Charge declines to zero percent after the
seventh Contract Year. The Withdrawal Charge is assessed at the following rates:
<TABLE>
<CAPTION>
Contract Withdrawal Contract Withdrawal
Year Charge Year Charge
<S> <C> <C> <C>
1 9.75% 5 7.25%
2 9.50% 6 5.00%
3 9.25% 7 4.75%
4 7.50% 8+ 0%
</TABLE>
We will waive the Withdrawal Charge on the portion of a withdrawal equal to the
greater of:
Ten percent of the Account Value, less any prior free partial withdrawals
and preferred loans since the most recent Contract Anniversary; or
earnings not previously withdrawn.
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We also will waive the Withdrawal Charge for qualified medical stays.
Withdrawal fee. We may charge a withdrawal fee on any partial withdrawal after
the first in any Contract Year. The withdrawal fee will equal the lesser of $25
or two percent of the amount withdrawn. The withdrawal fee does not apply to
full surrenders. The withdrawal fee is intended to compensate us for our
administrative costs in processing your partial withdrawal request.
For more detail, see "Withdrawal Charge", on pages [39-41].
12. What are the tax consequences of buying this Contract?
Your Contract is structured to meet the definition of a life insurance contract
under the Tax Code. We may need to limit the amount of Payments you pay under
the Contract to ensure that your Contract continues to meet that definition.
In most circumstances, your Contract will be considered a "modified endowment
contract", which is a form of life insurance contract under the Tax Code.
Special rules govern the tax treatment of modified endowment contracts. Under
current tax law, death benefit payments under modified endowment contracts, like
death benefit payments under other life insurance contracts, generally are
excluded from the gross income of the beneficiary. Withdrawals and Contract
Loans, however, are treated differently. Amounts withdrawn and Contract Loans
are treated first as income, to the extent of any gain, and then as a return of
Payment. The income portion of the distribution is includable in your taxable
income. Also, an additional ten percent penalty tax is generally imposed on the
taxable portion of amounts received before age 59 1/2. For more information on
the tax treatment of the Contract, see "Federal Tax Considerations", beginning
on page [44], and consult your tax adviser.
13. Can I return this Contract after it has been delivered?
In many states, you may cancel your Contract by returning it to us within twenty
days after you receive it. In some states, however, this right to return period
may be longer or shorter, as provided by state law. If you return your Contract,
the Contract terminates and, in most states, we will pay you an amount equal to
your Payment. Since state laws differ as to the consequences of returning a
Contract, you should refer to your Contract for specific information about your
circumstances.
14. When does coverage under the Contract end?
Your Contract has a Guaranteed Death Benefit. Under this provision, if you do
not have any outstanding Indebtedness, your Contract will never lapse. Your
Contract will remain in force until payment of the Death Benefit or the Maturity
Date, unless you voluntarily surrender your Contract at an earlier date. If you
have outstanding Indebtedness, the Contract will enter a 61-day Grace Period if
on a Monthly Date the Surrender Value is insufficient to pay the Monthly
Deduction. The Contract will terminate at the end of the Grace Period, unless
you pay an amount sufficient to keep the Contract in force. The Contract also
will terminate on the Maturity Date, unless you select the Extended Maturity
Option.
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<PAGE>
15. Can I get an illustration to help me understand how Contract values change
with investment experience?
At your request we will furnish you with a free, personalized illustration of
Account Values, Surrender Values and Death Benefits. The illustration will be
personalized to reflect the proposed Insureds' age, sex, underwriting
classification, proposed initial Payment, and any available riders requested.
The illustrated Account Values, Surrender Values and Death Benefits will be
based on certain hypothetical assumed rates of return for the Variable Account.
Your actual investment experience probably will differ, and as a result the
actual values under the Contract at any time may be higher or lower than those
illustrated. The personalized illustrations will follow the methodology and
format of the hypothetical illustrations that we filed with the SEC in the
registration statement.
FEES AND EXPENSES
The following tables are designed to help you understand the fees and expenses
that you bear, directly or indirectly, as a Contract Owner. The first table
describes the Contract charges and deductions you directly bear under the
Contract. The second table describes the fees and expenses of the Portfolios
that you bear indirectly when you purchase a Contract. (See "Deductions and
Charges", beginning on page [37]).
Contract Charges and Deductions
Charges Deducted from Account Value
Monthly Cost of Insurance Charge:
<TABLE>
<S> <C>
Current Guaranteed
The lower of the amount Ranges from $.06 per $1,000
determined using (i) the of net amount at risk to $82.50
current asset-based cost of per $1,000 of net amount at
insurance rate or (ii) the risk (3)
applicable guaranteed cost
of insurance. The current
asset-based rate for Single
Life Contracts for the
Standard (NT)(1) rate class
is 0.45% annually of Account
Value for the first ten
Contract Years and 0.65%
annually thereafter. The
current asset-based rate for
Survivorship Contracts where
both Insureds are in the
Standard (NT) rate class is
[x.xx]% annually for the
first ten Contract Years and
[x.xx]% annually
thereafter.(2)
Contract Fee: $30.00 per year, deducted annually (4)
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<PAGE>
Monthly Fixed Account
Expense Charge: 0.48% annually of the average monthly Account Value in the
Fixed Account (0.04% per month) (5)
Transaction Charges
Transfer Fee: $25 per transfer (6)
Partial Withdrawal Fee: The lesser of $25 or 2% of the amount withdrawn
Maximum Withdrawal Charge: 9.75% of the initial Payment (7)
Charges Deducted from the Sub-Accounts
Annual Variable Account Charges:
Expense Charge: 1.65% of daily net assets in the Variable Account (8)
Federal Income Tax Charge: Currently none. (9)
</TABLE>
(1) The Standard (NT) rate class is our best rate class for Insureds who
have not used tobacco of any kind within the past twenty-four months.
(2) The asset-based cost of insurance rate differs depending on Contract type,
rating class, and history of tobacco use of the Insured(s). The asset-
based rates that we set will reflect our expectations as to mortality
experience under the Contracts and other relevant factors, such that the
aggregate actual cost of insurance charges paid under the Contracts will
compensate us for our aggregate mortality risks under the Contracts. In
our discretion, we may change the asset-based rate used in the current
cost of insurance formula. Even if we change the asset-based rate,
however, you will never be charged more than the amount determined using
the guaranteed cost of insurance tables in your Contract.
(3) The guaranteed cost of insurance charges are based on attained age, sex,
rating class, and history of tobacco use of the Insured. The net
amount at risk is the difference between the Death Benefit divided by
1.0028709 and the Account Value. See "Deductions and Charges - Monthly
Deduction - Cost of Insurance Charge," on pages [38-39].
(4) The Contract Fee is deducted annually on the Contract Anniversary. If you
surrender your Contract during a Contract Year, we will deduct the
Contract Fee from your surrender proceeds. We currently waive the Contract
Fee on Contracts with an Account Value of at least $50,000.
(5) Deducted monthly in an amount equal to 1/12 of the annual rate shown,
multiplied by the Account Value in the Fixed Account on the relevant
Monthly Date.
(6) We currently waive the Transfer Fee on all transfers. We reserve the right
in the future to charge the Transfer Fee on each transfer.
(7) This charge applies only upon withdrawals of the initial Payment. It does
not apply to withdrawals of any additional Payments paid under a Contract.
The Withdrawal Charge declines to zero percent after the seventh Contract
Year. It is imposed to cover a portion of our premium tax expenses and a
portion of the sales expense incurred by us in distributing the Contracts.
In any Contract Year, we will not charge any Withdrawal Charge on that
portion of your withdrawals equal to the greater of: (a) ten percent of
the Account Value, less any prior free partial withdrawals and preferred
loans since the most recent Contract Anniversary; or (b) earnings not
previously withdrawn. "Earnings", for this purpose, is defined on page
[40]. See "Deductions and Charges - Withdrawal Charge," page [39-41].
(8) Deducted each Valuation Period in an amount equal to 1/365 of the annual
rate shown, multiplied by the Account Value in the Variable Account on the
relevant Valuation Day, multiplied by the number of days in the relevant
Valuation Period.
(9) We currently do not assess a charge for federal income taxes that may be
attributable to the operations of the Variable Account. We reserve the
right to do so in the future. See "Deductions and Charges - Separate
Account Expense Charge", pages [37-38].
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<PAGE>
Portfolio Expenses(1)
(As a percentage of average net assets)
(after fee waivers and expense reimbursements, as indicated in the notes)
<TABLE>
<CAPTION>
TOTAL FUND TOTAL FUND
MANAGEMENT OTHER ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
<S> <C> <C> <C>
AIM V.I. Capital Appreciation 0.63% 0.05% 0.68%(2)
AIM V.I. International Equity 0.75% 0.18% 0.93%(2)
Dreyfus Stock Index 0.245% 0.035% 0.28%(3)
Dreyfus Capital Appreciation 0.55% 0.25% 0.80%(3)
Dreyfus Socially Responsible Growth 0.75% 0.07% 0.82%(3)
Colonial Small Cap Value 0.80% [0.20%] [1.00%](x.xx%)(4)
Colonial High Yield Securities 0.60% [0.20%] [0.80%](x.xx%)(4)
Colonial Strategic Income 0.65% 0.15% 0.80%(0.82%) (4)
Colonial U.S. Stock 0.80% 0.14% 0.94%
Liberty All-Star Equity 0.80% 0.20% 1.00%(1.45%) (4)
MFS Emerging Growth 0.75% 0.12% 0.87%
MFS Research 0.75% 0.13% 0.88%
MFS Utilities 0.75% 0.25% 1.00%(1.20%)(5)
MFS Growth with Income 0.75% 0.25% 1.00%(1.10%)(5)
Oppenheimer Bond 0.73% 0.05% 0.78%
Oppenheimer Growth & Income 0.75% 0.08% 0.83%
Stein Roe Balanced 0.45% 0.21% 0.66%
Stein Roe Growth Stock 0.50% 0.21% 0.71%
Stein Roe Money Market 0.35% 0.25% 0.60%
</TABLE>
(1) All Trust and Portfolio expenses are based on 1997 expenses, except
Colonial Small Cap Value and Colonial High Yield Securities. Since those
two Portfolios are newly formed in 1998, their Total Fund Other Expenses
are estimates. The expenses of the Colonial Small Cap Value Fund, Colonial
High Yield Securities Fund, Colonial Strategic Income Fund, Liberty
All-Star Equity Fund, MFS Utilities Series, and MFS Growth with Income
Series reflect the agreement of each Portfolio's adviser to reimburse
expenses above the limits shown in notes (3) and (5).
(2) AIM Advisors, Inc. ("AIM") may from time to time waive or reduce its fees.
Effective May 1, 1998, the AIM Portfolios reimburse AIM in an amount up to
0.25% of the average net asset value of each AIM Portfolio for expenses
incurred in providing or assuring that participating insurance companies
provide certain administrative services. Currently, the fee only applies
to the average net asset value of each Portfolio in excess of the net
asset value of each Portfolio as calculated on April 30, 1998.
(3) The Dreyfus Corporation ("Dreyfus") has undertaken to reduce its
management fee and/or reimburse the other expenses of the Dreyfus Stock
Index Fund if necessary to prevent the Portfolio's aggregate expenses from
exceeding 0.40% of the Portfolio's average net assets for the fiscal year.
Dreyfus may end this undertaking on at least 180 days prior notice. In
addition, Dreyfus and/or the subadvisers to the Dreyfus Portfolios may
from time to time waive receipt of their fees and/or voluntarily assume
certain expenses of these Portfolios. In the fiscal year ending December
31, 1997, neither Dreyfus nor the subadvisers waived any fee or reimbursed
expenses.
(4) Liberty Advisory Services Corp. has agreed until April 30, 1999, to
reimburse all expenses, including management fees, in excess of the
following percentage of the average annual net assets of each of the
Trust's eligible Portfolios, so long as such reimbursement would not
result in the Portfolio's inability to qualify as a regulated investment
company under the Internal Revenue Code: 1.00% for Colonial Small Cap
Value Fund, Liberty All-Star Equity, and Colonial U.S. Stock; and .80% for
Colonial Strategic Income and Colonial High Yield Securities. Each
percentage shown in parentheses is an estimate of what the total expenses
would be in the absence of expense reimbursement: for the Colonial Small
Cap Value Fund, [x.xx]%; for the Colonial High Yield Securities Fund,
[x.xx]%. for the Colonial Strategic Income Fund, .82%; and for the Liberty
All-Star Equity Fund, 1.45%.
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<PAGE>
(5) Massachusetts Financial Services Company has agreed to bear expenses for
these Portfolios, subject to reimbursement from these Portfolios, such
that their "Other Expenses" shall not exceed 0.25% of their average daily
net assets during the current fiscal year. Otherwise, the "Other Expenses"
and "Total Annual Expenses" of the MFS Utilities Portfolio would be 0.45%
and 1.20%, respectively, and the "Other Expenses" and "Total Annual
Expenses" of the MFS Growth with Income Portfolio would be 0.35% and
1.10%, respectively.
PURCHASE OF CONTRACT AND ALLOCATION OF PAYMENTS
Application for a Contract. You may apply to purchase a Contract by submitting a
written application to us through one of our authorized agents. We will not
issue Contracts to insure people who are older than age 85. Before we issue a
Contract, we will require you to submit evidence of insurability satisfactory to
us. Acceptance of your application is subject to our underwriting rules. We
reserve the right to reject your application for any lawful reason. If we do not
issue a Contract to you, we will return your Payment to you. We reserve the
right to change the terms or conditions of your Contract to comply with
differences in applicable state law. Variations from the information appearing
in this Prospectus due to individual state requirements are described in
supplements which are attached to this Prospectus as in endorsements to the
Contract, as appropriate.
In general, we will deliver your Contract when (1) we have received your initial
Payment and (2) we have determined that your application meets our underwriting
requirements. The Contract Date will be the effective date of insurance coverage
under your Contract. We use the Contract Date to determine Contract
Anniversaries, Contract Years, and Monthly Dates.
We will not accept your initial Payment with your application if the requested
Initial Death Benefit of your Contract exceeds our then-current limit. In other
cases, you may choose to pay the initial Payment with your application. If you
did not submit your initial Payment with your application, when we deliver your
Contract we will require you to pay sufficient Payment to place your insurance
in force.
Simplified underwriting. Under our current underwriting rules, which we may
change when and as we decide, proposed Insureds are eligible for simplified
underwriting without a medical examination, if the application responses and
initial payment meet our simplified underwriting standards. Simplified
underwriting is not available if the initial Payment exceeds the limits set in
our simplified underwriting standards.
Simplified underwriting also is not available if the Insured would be more than
80 years old on the Contract Date. For Survivorship Contracts, both Insureds
must meet our simplified underwriting requirements. Simplified underwriting
limits may vary by state.
If your application is approved through simplified underwriting, your Contract
will be effective and your life insurance coverage under the Contract will begin
on the date of your application. Your Contract Date will be the date your
application and initial payment are taken.
Full underwriting. If your application requires full underwriting and we approve
your application, your Contract will be effective as of the date that we receive
your initial Payment. If you submit your initial Payment with your application,
the effective date of your Contract will be the date of your application, which
will be designated your Contract's Contract Date. Otherwise, when we deliver
your Contract we will require you to pay sufficient Payment to place your
insurance in force. At that time, we also will provide you with a document
showing your Contract's effective date, which will be designated as the Conract
Date. While your application is in underwriting, if you have paid your initial
Payment we may provide you with temporary life insurance coverage in accordance
with the terms of our conditional receipt.
If we approve your application, you will earn interest on your Payment from the
Contract Date. We will also begin to deduct the Contract charges as of the
Contract Date. We will temporarily allocate your initial Payment to our Fixed
Account until we allocate it to the Sub-Accounts and the Fixed Account in
accordance with the procedures described in "Allocation of Payments" on page
[20] below.
If we reject your application, we will not issue you a Contract. We will return
any Payment you have made, adding interest as and at the rate required in your
State. We will not subtract any contract charges from the amount we refund to
you.
Payments. You must pay an initial Payment to purchase a Contract. The initial
Payment purchases a Death Benefit initially equal to your Contract's Initial
Death Benefit. The minimum initial Payment is $10,000. We may waive or change
this minimum. If you choose, you may pay additional Payments, subject to the
conditions described below.
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<PAGE>
You may pay additional Payments at any time and in any amount necessary to avoid
termination of your Contract. You may also pay additional Payments subject to
the following conditions:
(1) each additional Payment must be at least $1,000;
(2) the Payment will not disqualify your Contract as a life insurance
contract under the Tax Code.
We intend to require satisfactory evidence of insurability before we accept any
Payment which results in an increase in the Death Benefit. In the future, we may
waive this requirement.
Allocation of Payments. Initially, we will temporarily allocate your initial
Payment to the Fixed Account as of the Contract Date. We generally will then
reallocate that amount (including any interest) among the Sub-Accounts and the
Fixed Account in accordance with your instructions, on the twenty-fifth day
after the Delivery Date. This period may be longer or shorter, depending on the
length of the right of return period in your state, as it will always equal five
days plus the number of days in the right to return period in your state.
You must specify your allocation percentages in your Contract application.
Percentages must be in whole numbers and the total allocation must equal 100%.
We will allocate your subsequent Payments in those percentages, until you give
us new allocation instructions.
You initially may allocate your Account Value to up to ten Sub-Accounts and the
Fixed Account. Moreover, you may not allocate less than five percent of your
Account Value to any one option. You may add or delete Sub-Accounts and/or the
Fixed Account from your allocation instructions, but we will not execute
instructions that would cause your Account Value to be allocated to more than
ten Sub-Accounts at any one time. Your allocation to the Fixed Account, if any,
does not count against this limit. In the future we may change these limits.
We generally will allocate your additional Payments to the Sub-Accounts and the
Fixed Account as of the date your Payment is received in our Service Center. If
an additional Payment requires underwriting, however, we may delay allocation
until we have completed underwriting. We will follow the allocation instructions
in our file, unless you send us new allocation instructions with your payment.
If you have any outstanding Indebtedness, we will apply your additional payment
to your outstanding loan balance until it is fully repaid, unless you instruct
us otherwise in writing.
We will make all valuations in connection with the Contract, other than the
initial Payment and other Payments requiring underwriting, on the date a Payment
is received or your request for other action is received at our Service Center,
if that date is a Valuation Day. Otherwise we will make that determination on
the next succeeding day which is a Valuation Day.
Account Value. Your Account Value is the sum of the value of your interest in
the Sub-Accounts you have chosen, plus your Fixed Account balance, plus your
Loan Account balance. Your Account Value may increase or decrease daily to
reflect the performance of the Sub-Accounts you have chosen, the addition of
interest credited to the Fixed Account and the Loan Account, the addition of
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<PAGE>
Payments, and the subtraction of partial withdrawals and charges assessed. There
is no minimum guaranteed Account Value.
On the Contract Date, your Account Value will equal the initial Payment less the
Monthly Deduction for the first Contract Month.
On each Valuation Day, the value of your interest in a particular Sub-Account
will equal:
(1) The total value of your Accumulation Units in the Sub-Account; plus
(2) Any Payment received from you and allocated to the Sub-Account
during the current Valuation Period; plus
(3) Any Account Value transferred to the Sub-Account during the current
Valuation Period; minus
(4) Any Account Value transferred from the Sub-Account during the
current Valuation Period; minus
(5) Any amounts withdrawn by you (plus the applicable Withdrawal Charge
and withdrawal fee) from the Sub-Account during the current
Valuation Period; minus
(6) The portion of any Monthly Deduction allocated to the Sub-Account
during the current Valuation Period for the Contract Month following
the Monthly Date.
On each Valuation Day, your Fixed Account balance will equal:
(1) The Fixed Account balance on the previous Valuation Day; plus
(2) Any Payment allocated to it; plus
(3) Any Account Value transferred to it from the Sub-Accounts or the
Loan Account; plus
(4) Interest credited to it; minus
(5) Any Account Value transferred out of it; minus
(6) Any amounts withdrawn by you (plus the applicable Withdrawal
Charge); minus
(7) The portion of any Monthly Deduction allocated to the Fixed Account.
All values under the Contract equal or exceed those required by law. Detailed
explanations of methods of calculation are on file with the appropriate
regulatory authorities.
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Accumulation Unit Value. The Accumulation Unit Value for each Sub-Account will
vary to reflect the investment experience of the corresponding Portfolio and the
deduction of certain expenses. We will determine the Accumulation Unit Value for
each Sub-Account on each Valuation Day. A Sub-Account's Accumulation Unit Value
for a particular Valuation Day will equal the Sub-Account's Accumulation Unit
Value on the preceding Valuation Day multiplied by the Net Investment Factor for
that Sub-Account for the Valuation Period then ended. The Net Investment Factor
for each Sub-Account is: (1) divided by (2) minus (3), where: (1) is the sum of
(a) the net asset value per share of the corresponding Portfolio at the end of
the current Valuation Period and (b) the per share amount of any dividend or
capital gains distribution by that Portfolio, if the ex-divided date occurs in
that Valuation Period; (2) is the net asset value per share of the corresponding
Portfolio at the beginning of the Valuation Period; and (3) is an amount equal
to the Expense Charge imposed during the Valuation Period.
You should refer to the Prospectuses for the Portfolios which accompany this
Prospectus for a description of how the assets of each Portfolio are valued,
since that determination directly affects the investment experience of the
corresponding Sub-Account and, therefore, your Account Value.
Transfer of Account Value. While the Contract is in force before the Maturity
Date, you may transfer Account Value among the Fixed Account and Sub-Accounts in
writing or by telephone. You may not request a transfer of less than $250 from a
single Sub-Account, unless the amount requested is your entire balance in the
Sub-Account. If less than $500 would remain in a Sub- Account after a transfer,
we may require you to transfer the entire balance of the Sub-Account. We reserve
the right to change these minimums.
We currently are waiving the transfer fee. The Contract, however, permits us to
impose a $25 transfer fee per transfer.
You may not have Account Value allocated to more than ten Sub-Accounts at one
time. We will not perform a transfer that would cause your Contract to exceed
that limit. We may change this limit in the future.
As a general rule, we only make transfers on days when we and the NYSE are open
for business. If we receive your request on one of those days, we will make the
transfer that day. Otherwise, we will make the transfer on the first subsequent
day on which we and the NYSE are open. Transfers pursuant to a Dollar Cost
Averaging or Asset Rebalancing program will be made at the intervals you have
selected in accordance with the procedures and requirements we establish.
You may make transfers from the Fixed Account to the Sub-Accounts only during
the 60 days after each Contract Anniversary. You must submit your request no
later than the end of this 60-day period. In addition, in each Contract Year,
the largest amount that you may transfer out of the Fixed Account is the greater
of: (a) the amount transferred in the prior Contract Year; or (b) twenty percent
of the current Fixed Account balance. The Contract permits us to defer transfers
from the Fixed Account for up to six months from the date you ask us.
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<PAGE>
We will not charge a transfer fee on a transfer of all of the Account Value in
the Sub-Accounts to the Fixed Account.
Transfers Authorized by Telephone. You may make transfers by telephone, unless
you advise us in writing not to accept telephonic transfer instructions. The cut
off time for telephone transfer requests is 4:00 p.m. Eastern time. Timely
requests will be processed on that day at that day's price.
We use procedures that we believe provide reasonable assurance that telephone
authorized transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses. We may suspend, modify or terminate the telephone
transfer privilege at any time without notice.
Dollar Cost Averaging. Under our automatic Dollar Cost Averaging program, while
the Contract is in force you may authorize us to transfer a fixed dollar amount
at fixed intervals to the Sub-Accounts of your choice in accordance with the
procedures and requirements that we establish. The transfers will continue until
you instruct us to stop, or until your chosen source of transfer payments is
exhausted.
Your request to participate in this program will be effective when we receive
your completed application at our Service Center at the address given on the
first page of this Prospectus. Call or write us for a copy of the application
and additional information concerning the program. We may change, terminate,
limit or suspend Dollar Cost Averaging at any time.
The theory of dollar cost averaging is that by spreading your investment over
time, you may be able to reduce the effect of transitory market conditions on
your investment. In addition, because a given dollar amount will purchase more
units when the unit prices are relatively low rather than when the prices are
higher, in a fluctuating market, the average cost per unit may be less than the
average of the unit prices on the purchase dates. However, participation in this
program does not assure you of a greater profit from your purchases under the
program; nor will it prevent or necessarily reduce losses in a declining market.
Moreover, other investment programs, such as the Asset Rebalancing program
described below, may not work in concert with Dollar Cost Averaging. Therefore,
you should monitor your use of these programs, as well as other transfers or
withdrawals, while Dollar Cost Averaging is being used.
Asset Rebalancing. Asset Rebalancing allows you to readjust the percentage of
your Account Value allocated to each Sub-Account to maintain a pre-set level.
Over time, the variations in each Sub-Account's investment results will shift
the balance of your Account Value allocations. Under the Asset Rebalancing
feature, we will automatically transfer your Account Value, including new
Payments (unless you specify otherwise), back to the percentages you specify in
accordance with procedures and requirements that we establish. All of your
Account Value allocated to the Sub-Accounts must be included in an Asset
Rebalancing program. You may not include your Fixed Account balance in an Asset
Rebalancing program.
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You may request Asset Rebalancing when you apply for your Contract or by
submitting a completed written request to us at our Service Center at the
address given on the first page of this Prospectus. Please call or write us for
a copy of the request form and additional information concerning Asset
Rebalancing.
Asset Rebalancing is consistent with maintaining your allocation of investments
among market segments, although it is accomplished by reducing your Account
Value allocated to the better performing segments. Other investment programs,
such as the Dollar Cost Averaging program, may not work in concert with Asset
Rebalancing. Therefore, you should monitor your use of these programs, as well
as other transfers or withdrawals, while Asset Rebalancing is being used. We may
change, terminate, limit, or suspend Asset Rebalancing at any time.
THE INVESTMENT AND FIXED ACCOUNT OPTIONS
Variable Account Investments
Portfolios. Each of the Sub-Accounts invests in the shares of one of the
Portfolios. Each Portfolio is a separate investment series of an open-end
management investment company registered under the Investment Company Act of
1940. We briefly describe the Portfolios below. You should read the current
Prospectuses for the Portfolios for more detailed and complete information
concerning the Portfolios, their investment objectives and strategies, and the
investment risks associated with the Portfolios. If you do not have a Prospectus
for a Portfolio, contact us and we will send you a copy.
Each Portfolio holds its assets separate from the assets of the other
Portfolios, and each Portfolio has its own distinct investment objective and
policies. Each Portfolio operates as a separate investment fund, and the income,
gains, and losses of one Portfolio generally have no effect on the investment
performance of any other Portfolio.
The Portfolios which currently are the permissible investments of the Variable
Account under this Contract are separate series of AIM Variable Insurance Funds,
Inc. ("AIM Funds"), Liberty Variable Investment Trust ("Liberty Trust"), MFS
Variable Insurance Trust ("MFS Trust"), Oppenheimer Variable Account Funds
("Oppenheimer Funds"), and Stein Roe Variable Investment Trust ("Stein Roe
Trust"), and separately incorporated mutual funds and a single series of a
mutual fund managed by the Dreyfus Corporation (the "Dreyfus Portfolios"). The
investment objectives of the Portfolios are briefly described below.
Portfolios of AIM Funds
and Variable Account Sub-Accounts
AIM V.I. Capital Appreciation. Capital appreciation through investments in
common stocks, with emphasis on medium-sized and smaller emerging growth
companies.
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AIM V.I. International Equity. Long-term growth of capital by investing in
international equity securities, the issuers of which are considered by the
adviser to have strong earnings momentum.
Dreyfus Portfolios and
Variable Account Sub-Accounts
Dreyfus Stock Index Fund (Dreyfus Stock Index Sub-Account). Investment results
that correspond to the price and yield performance of publicly traded common
stocks in the aggregate, as represented by the Standard & Poor's 500 Composite
Stock Price Index.(1)
Dreyfus Variable Investment Fund, Capital Appreciation Portfolio (Dreyfus
Capital Appreciation Sub-Account). Long-term capital growth consistent with the
preservation of capital, with current income as a secondary objective, by
investing primarily in the common stocks of domestic and foreign issuers.
Dreyfus Socially Responsible Growth Fund, Inc. (Dreyfus Socially Responsible
Growth Sub-Account). Capital growth, with current income as a secondary goal,
by investing principally in common stocks, or securities convertible into common
stocks, of companies which, in the opinion of the Portfolio's management, not
only meet traditional investment standards, but also show evidence that they
conduct their business in a manner that contributes to the enhancement of the
quality of life in America.
Portfolios of Liberty Trust and
Variable Account Sub-Accounts
Colonial Small Cap Value Fund (Colonial Small Cap Value Sub-Account). Long-term
growth by investing primarily in smaller capitalization equity securities.
Colonial High Yield Securities Fund (Colonial High Yield Securities
Sub-Account). High current income and total return by investing primarily in
lower rated corporate debt securities. The Portfolio may invest up to 100% of
its assets in lower rated bonds (commonly referred to as "junk bonds") which are
regarded as speculative as to payment of principal and interest. Therefore, the
corresponding Sub-Account may not be suitable for all Contract Owners. Contract
Owners should carefully assess the risks associated with the Portfolio before
investing.
Colonial Strategic Income Fund (Colonial Strategic Income Sub-Account). A high
level of current income, as is consistent with prudent risk and maximizing total
return, by diversifying investments primarily in U.S. and foreign government and
lower rated corporate debt securities. The Portfolio may invest a substantial
portion of its assets in lower rated bonds (commonly referred to as "junk
bonds"). Therefore, the corresponding Sub-Account may not be suitable for all
Contract Owners. Contact Owners should carefully assess the risks associated
with the Portfolio before investing.
Colonial U.S. Stock Fund (Colonial U.S. Stock Sub-Account). Long-term capital
growth by investing primarily in large capitalization equity securities.
Liberty All-Star Equity Fund (Liberty All-Star Equity Sub-Account). Total
investment return, comprised of long-term capital appreciation and current
income, through investment primarily in a diversified portfolio of equity
securities.
- --------
(1)"Standard & Poor's 500", "S&P 500(R)", and "S&P 500 (R)" are trademarks
of the McGraw-Hill Companies Inc. and have been licensed for use by the
Portfolio. The Portfolio is not sponsored, endorsed, sold or promoted by S&P or
The McGraw-Hill Companies, Inc.
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Portfolios of MFS Trust
and Variable Account Sub-Accounts
MFS Emerging Growth Series (MFS Emerging Growth Sub-Account). Long-term growth
of capital by investing primarily in common stocks of companies that the adviser
believes are early in their life cycle but have the potential to become major
enterprises.
MFS Research Series (MFS Research Sub-Account). Long-term growth of capital and
future income by investing a substantial portion of the Portfolio's assets in
equity securities of companies believed to possess better than average prospects
for long-term growth. The Portfolio may invest up to twenty percent of its
assets in foreign securities that are not traded on a U.S. exchange.
MFS Utilities Series (MFS Utilities Sub-Account). Capital growth and current
income, by investing, under normal circumstances, at least 65% (but up to 100%
at the discretion of the adviser) of its assets in equity and debt securities of
both domestic and foreign companies in the utilities industry.
MFS Growth with Income Series (MFS Growth with Income Sub-Account). Reasonable
current income and long-term growth of capital and income by investing, under
normal market conditions, at least 65% of its assets in equity securities of
companies that are believed to have long-term prospects for growth and income.
This Portfolio may also invest up to 75% (and generally expects to invest not
more than fifteen percent) of its net assets in foreign securities that are not
traded on a U.S. exchange.
Portfolios of Oppenheimer Funds
and Variable Account Sub-Accounts
Oppenheimer Bond Fund (Oppenheimer Bond Sub-Account). High level of current
income by investing primarily in debt securities.
Oppenheimer Growth & Income Fund (Oppenheimer Growth & Income Sub-Account). High
total return (which includes growth in the value of its shares as well as
current income) from equity and debt securities. From time to time this Fund may
focus on small to medium capitalization common stocks, bonds, and convertible
securities.
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Portfolios of Stein Roe Trust and
Variable Account Sub-Accounts
Stein Roe Balanced Fund (Stein Roe Balanced Sub-Account). High total investment
return through investment in a changing mix of securities.
Stein Roe Growth Stock Fund (Stein Roe Growth Stock Sub-Account). Long-term
growth of capital through investment primarily in common stocks.
Stein Roe Money Market Fund (Stein Roe Money Market Sub-Account). High current
income from short-term money market instruments while emphasizing preservation
of capital and maintaining excellent liquidity.
Not all Sub-Accounts may be available under your Contract. You should contact
your representative for further information on the availability of the
Sub-Accounts.
AIM Advisors, Inc. ("AIM") is the investment adviser to each Portfolio of the
AIM Funds. AIM has operated as an investment adviser since 1976.
Liberty Advisory Services Corp. (formerly known as Keyport Advisory Services
Corp.), an affiliate of Liberty Life, is the manager for Liberty Trust and its
Portfolios. Colonial Management Associates, Inc. ("Colonial"), an affiliate of
Liberty Life, serves as sub-adviser for the Portfolios (except for the Liberty
All-Star Equity Fund). Colonial has provided investment advisory services since
1931. Liberty Asset Management Company, an affiliate of Liberty Life, serves as
sub-adviser for the Liberty All-Star Equity Fund and the current portfolio
managers are J.P. Morgan Investment Management Inc., Oppenheimer Capital,
Wilke/Thompson Capital Management Inc., Westwood Management Corp., and Boston
Partners Asset Management, L.P.
The Dreyfus Corporation ("Dreyfus") serves as investment adviser for each of the
Dreyfus Portfolios. Dreyfus has operated as an investment adviser since 1947.
Mellon Equity Associates, an affiliate of Dreyfus, serves as index fund manager
to the Dreyfus Stock Index Fund. Sarofim serves as sub-investment adviser to the
Dreyfus Capital Appreciation Fund. NCM Capital Management Group, Inc. serves as
sub-investment adviser to the Dreyfus Socially Responsible Growth Fund, Inc.
Massachusetts Financial Services Company ("MFS") is the investment adviser to
each Portfolio of the MFS Trust. MFS and its predecessor organizations have a
history of money management dating back to 1924 and the founding of the first
mutual fund in the United States.
Oppenheimer Funds, Inc. ("OFI") is the investment adviser to each Portfolio of
the Oppenheimer Funds. OFI has operated as an investment adviser since 1959.
Stein Roe & Farnham Incorporated ("Stein Roe") is the investment adviser for
each Portfolio of Stein Roe Trust. In 1986, Stein Roe was organized and
succeeded to the business of Stein Roe & Farnham, a partnership. Stein Roe is an
affiliate of Liberty Life. Stein Roe and its predecessor have provided
investment advisory and administrative services since 1932.
We do not promise that the Portfolios will meet their investment objectives.
Amounts you have allocated to Sub-Accounts may grow in value, decline in value,
or grow less than you expect, depending on the investment performance of the
Portfolios in which those Sub-Accounts invest. You bear the investment risk that
those Portfolios possibly will not meet their investment
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<PAGE>
objectives. You should carefully review the Portfolios' Prospectuses before
allocating amounts to the Sub-Accounts.
Each Portfolio is subject to certain investment restrictions and policies which
may not be changed without the approval of a majority of the shareholders of the
Portfolio. See the accompanying Prospectuses of the Portfolios for further
information.
We automatically reinvest all dividends and capital gains distributions from the
Portfolios in shares of the distributing Portfolio at their net asset value. The
income and realized and unrealized gains or losses on the assets of each
Sub-Account are separate and are credited to or charged against the particular
Sub-Account without regard to income, gains or losses from any other Sub-Account
or from any other part of our business. We will use the Payments you allocate to
a Sub-Account to purchase shares in the corresponding Portfolio and will redeem
shares in the Portfolios to meet Contract obligations or make adjustments in
reserves. The Portfolios are required to redeem their shares at net asset value
and to make payment within seven days.
Certain of the Portfolios sell their shares to separate accounts underlying both
variable life insurance and variable annuity contracts. It is conceivable that
in the future it may be unfavorable for variable life insurance separate
accounts and variable annuity separate accounts to invest in the same Portfolio.
Although neither we nor any of the Portfolios currently foresees any such
disadvantages either to variable life insurance or variable annuity contract
owners, each Portfolio's Board of Directors intends to monitor events in order
to identify any material conflicts between variable life and variable annuity
contract owners and to determine what action, if any, should be taken in
response thereto. If a Board of Directors were to conclude that separate
investment funds should be established for variable life and variable annuity
separate accounts, Contract Owners will not bear the attendant expenses.
Voting Rights. As a general matter, you do not have a direct right to vote the
shares of the Portfolios held by the Sub-Account to which you have allocated
your Account Value. Under current interpretations, however, you are entitled to
give us instructions on how to vote those shares on certain matters. We will
notify you when your instructions are needed and will provide proxy materials or
other information to assist you in understanding the matter at issue. We will
determine the number of votes for which you may give voting instructions as of
the record date set by the relevant Portfolio for the shareholder meeting at
which the vote will occur.
As a general rule, you are the person entitled to give voting instructions.
However, if you assign your Contract, the assignee may be entitled to give
voting instructions. Retirement plans may have different rules for voting by
plan participants.
If you send us written voting instructions, we will follow your instructions in
voting the Portfolio shares attributable to your Contract. If you do not send us
written instructions, we will vote the shares attributable to your Contract in
the same proportions as we vote the shares for which we have received
instructions from other Contract Owners. We will vote shares that we hold in the
same proportions as we vote the shares for which we have received instructions
from other Contract Owners.
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<PAGE>
We may, when required by state insurance regulatory authorities, disregard
Contract Owner voting instructions if the instructions require that the shares
be voted so as to cause a change in the sub-classification or investment
objective of one or more of the Portfolios or to approve or disapprove an
investment advisory contract for one or more of the Portfolios.
In addition, we may disregard voting instructions in favor of changes initiated
by Contract Owners in the investment objectives or the investment adviser of the
Portfolios if we reasonably disapprove of the proposed change. We would
disapprove a proposed change only if the proposed change is contrary to state
law or prohibited by state regulatory authorities or we reasonably conclude that
the proposed change would not be consistent with the investment objectives of
the Portfolio or would result in the purchase of securities for the Portfolio
which vary from the general quality and nature of investments and investment
techniques utilized by the Portfolio. If we disregard voting instructions, we
will include a summary of that action and our reasons for that action in the
next semi-annual financial report to you.
This description reflects our view of currently applicable law. If the law
changes or our interpretation of the law changes, we may decide that we are
permitted to vote the Portfolio shares without obtaining instructions from our
Contract Owners, and we may choose to do so.
Additions, Deletions, and Substitutions of Securities. If the shares of any of
the Portfolios are no longer available for investment by the Variable Account or
if, in our judgment, further investment in the shares of a Portfolio is no
longer appropriate in view of the purposes of the Contract, we may add or
substitute shares of another Portfolio or mutual fund for Portfolio shares
already purchased or to be purchased in the future by Payments under the
Contract. Any substitution will comply with the requirements of the 1940 Act.
We also reserve the right to make the following changes in the operation of the
Variable Account and the Sub-Accounts:
(a) to operate the Variable Account in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain
and continue any exemption from applicable laws;
(c) to transfer assets from one Sub-Account to another, or from any
Sub-Account to our general account;
(d) to add, combine, or remove Sub-Accounts in the Variable Account;
(e) to assess a charge for taxes attributable to the operation of the
Variable Account or for other taxes, as described in "Deductions and
Charges -- Separate Account Expense Charge" on pages [37-38] below;
and
(f) to change the way in which we assess other charges, as long as the
total other charges do not exceed the maximum guaranteed charges
under the Contracts.
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If we take any of these actions, we will comply with the then applicable legal
requirements.
The Fixed Account. The portion of the Contract relating to the Fixed Account is
not registered under the Securities Act of 1933 and the Fixed Account is not
registered as an investment company under the Investment Company Act of 1940.
Accordingly, neither the Fixed Account nor any interests in the Fixed Account
are subject to the provisions or restrictions of the 1933 Act or the 1940 Act,
and the disclosure regarding the Fixed Account has not been reviewed by the
staff of the Securities and Exchange Commission. The statements about the Fixed
Account in this prospectus may be subject to generally applicable provisions of
the federal securities laws regarding accuracy and completeness.
You may allocate part or all of your Payments to the Fixed Account. Under this
option, we guarantee the principal amount allocated to the Fixed Account and the
rate of interest that will be credited to the Fixed Account, as described below.
From time to time we will set a current interest rate applicable to Payments and
transfers allocated to the Fixed Account during a Contract Year. We guarantee
that the current rate in effect when a Payment or transfer to the Fixed Account
is made will apply to that amount until at least the next Contract Anniversary.
We may declare different rates for amounts that are allocated to the Fixed
Account at different times. We determine interest rates in accordance with
then-current market conditions and other factors.
The effective interest rate credited at any time to your Contract's Fixed
Account is the weighted average of all of the interest rates for your Contract.
The rates of interest that we set will never be less than the minimum guaranteed
interest rate shown in your Contract. We may credit interest at a higher rate,
but we are not obligated to do so.
During the 60 days after each Contract Anniversary, you may transfer all or part
of your Fixed Account Balance to the Sub-Accounts, subject to the requirements
and limits described in "Transfer of Account Value" on pages [21-22].
Amounts allocated to the Fixed Account become part of the general account of
Liberty Life. Liberty Life invests the assets of the general account in
accordance with applicable laws governing the investments of insurance company
general accounts.
We may delay payment of partial or full withdrawals from the Fixed Account for
up to 6 months from the date we receive your written withdrawal request. If we
defer payment for more than 30 days, we will pay interest (if required) on the
deferred amount at such rate as may be required by the applicable state or
jurisdiction.
CONTRACT BENEFITS AND RIGHTS
Death Benefit. While your Contract is in force, we will pay the Death Benefit
proceeds upon the death of the Insured or, if your Contract is a Survivorship
Contract, upon the death of the second Insured to die. We will pay the Death
Benefit proceeds to the named Beneficiary(ies) or, if none survives, to
contingent Beneficiary(ies). We will pay the Death Benefit proceeds in a lump
sum
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or apply them under an optional payment plan. The optional payment plans are
described in "Proceeds Options" on pages [34-35].
The Death Benefit proceeds payable to the Beneficiary equal the Death Benefit,
less any Indebtedness and less any due and unpaid charges. The proceeds may be
increased, if you have added a rider that provides an additional benefit. We
will determine the amount of the Death Benefit proceeds as of the end of the
Valuation Period during which we receive due proof of the Insured's death. We
will usually pay the Death Benefit proceeds within seven days after we have
received due proof of death and all other requirements we deem necessary have
been satisfied.
The Death Benefit will be the greater of: (a) the Initial Death Benefit or (b)
the Account Value multiplied by the applicable corridor percentage. We have set
forth the applicable corridor percentages in the Contract. They vary according
to the age of the Insured. We set the corridor percentages so as to seek to
ensure that the Contracts will qualify for favorable federal income tax
treatment. An increase in Account Value due to favorable investment experience
may therefore increase the Death Benefit above the Initial Death Benefit, and a
decrease in Account Value due to unfavorable investment experience may decrease
the Death Benefit (but not below the Initial Death Benefit).
EXAMPLES:
<TABLE>
<CAPTION>
================================================================================
Example A Example B
- --------------------------------------------------------------------------------
<S> <C> <C>
Initial Death Benefit $100,000 $100,000
Insured's Age 60 60
Account Value on Date of Death $80,000 $50,000
Applicable Corridor Percentage 130% 130%
Death Benefit $104,000 $100,000
================================================================================
</TABLE>
In Example A, the Death Benefit equals $104,000, i.e., the greater of $100,000
(the Initial Death Benefit) and $104,000 (the Account Value at the Date of Death
of $80,000, multiplied by the corridor percentage of 130%). This amount, less
any Indebtedness and unpaid charges, constitutes the Death Benefit proceeds that
we would pay to the Beneficiary.
In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000 (the
Initial Death Benefit) or $65,000 (the Account Value of $50,000 multiplied by
the corridor percentage of 130%).
Accelerated Death Benefit. You may request payment of a portion of the Death
Benefit as an Accelerated Death Benefit if either: (1) the Insured has a
Terminal Condition; or (2) the Insured is Chronically Ill, as these terms are
defined in the Contract. You generally may request an Accelerated Death Benefit
equal to up to the lesser of 90% of the Death Benefit (before subtracting any
Indebtedness) or $250,000. We will reduce the amount you request by a discount
for the early payment, a $100 processing fee, and the repayment of a pro rata
portion of your Indebtedness.
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You may choose for the Accelerated Death Benefit to be paid in a lump sum or in
installments, as described in the Contract.
If you request an Accelerated Death Benefit, the balance of the Death Benefit
(net of the amount previously requested) is payable upon the Insured's death.
You may request an Accelerated Death Benefit only once. Under Survivorship
Contracts, the Accelerated Death Benefit may not be requested until after the
death of one of the Insureds.
If your request for an Accelerated Death Benefit is based on the Insured's being
Chronically Ill, in some circumstances a portion of your Accelerated Death
Benefit may not qualify for exemption from federal income tax. Accordingly, you
should consult your tax adviser before requesting an Accelerated Death Benefit.
For more information, see "Accelerated Death Benefit", on page [47].
Optional Insurance Benefits. You may ask to add one or more riders to your
Contract to provide additional optional insurance benefits. We may require
evidence of insurability before we issue a rider to you. We will deduct the cost
of any riders as part of the Monthly Deduction. For more information concerning
what options we may offer, please ask your agent or contact us at 800-xxx- xxxx.
In our discretion we may offer riders or stop offering a rider at any time.
Contract Loans. While the Contract is in force, you may borrow money from us
using the Contract as the only security for your loan. Loans have priority over
the claims of any assignee or any other person. You may borrow up to 90% of the
Cash Value of your Contract as of the end of the Valuation Period in which we
receive your loan request. Any outstanding Indebtedness will count against that
limit. Thus, for example, if the Cash Value of your Contract was $100,000 and
you already had $50,000 in Indebtedness outstanding, you could borrow an
additional $40,000 ($100,000 x 90% - $50,000). The minimum loan amount is $250.
In addition, if you have named an irrevocable Beneficiary, you must also obtain
his or her written consent before we make a Contract Loan to you.
You may realize taxable income when you take a Contract Loan. In most instances,
a Contract is treated as a "modified endowment contract" for federal tax
purposes. As a result, Contract Loans are treated as withdrawals for tax
purposes, and the amount of the loan equal to any increase in your Account Value
may be treated as taxable income to you. In addition, you may also incur an
additional ten percent penalty tax. You should also be aware that interest on
Contract Loans is generally not deductible. On the other hand, although a
Contract Loan is treated as a withdrawal for tax purposes, it is treated
differently for Contract purposes. For example, under the Contract, a Contract
Loan, unlike a partial withdrawal, does not reduce the Initial Death Benefit.
Accordingly, before you take a Contract Loan, you should consult your tax
adviser and carefully consider the potential impact of a Contract Loan on your
rights and benefits under the Contract.
While the Contract remains in force, you may repay a Contract Loan in whole or
in part without any penalty at any time while the Insured is living.
The interest rate on Preferred Loans equals the minimum guaranteed interest rate
shown in your Contract; the interest rate on other Contract Loans will be two
percent per annum higher. We will treat
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as a Preferred Loan the portion of your loan equal in amount to (a) your Account
Value, minus (b) your total Payments, minus (c) your current preferred loan
balance, minus (d) any interest that has accrued on your Indebtedness since the
previous Contract Anniversary, plus (e) all prior partial withdrawals other than
withdrawals of earnings. Interest on Contract Loans accrues daily and is due on
each Contract Anniversary. If you do not pay the interest on a Contract Loan
when due, the unpaid interest will become part of the Contract Loan and will
accrue interest at the same rate.
When we make a Contract Loan to you, we will transfer to the Loan Account a
portion of the Account Value equal to the loan amount. We will take the
transfers pro rata from the Fixed Account and the Sub-Accounts, unless you
instruct us otherwise in writing. We will credit interest to the Loan Account at
the minimum guaranteed rate shown in your Contract. On each Contract
Anniversary, we will also transfer to the Loan Account an amount of Account
Value equal to the amount by which the Indebtedness exceeds the value of the
Loan Account.
If you purchase a Contract in exchange for another life insurance contract under
which a loan is outstanding, in our discretion we may permit you to continue
that loan under your Contract. We will advise you of the applicable interest
rate.
If you have any unpaid Indebtedness and your Surrender Value is insufficient to
pay a Monthly Deduction when due, your Contract will enter the Grace Period and
may terminate, as explained in the section entitled "Termination and Grace
Period," on pages [35-36]. If your Contract lapses while a Contract Loan is
outstanding and your Contract is not a MEC, you may owe taxes or suffer other
adverse tax consequences. Please consult a tax adviser for details.
You may repay all or any part of any Contract Loan while the Contract is still
in effect. If you have a Contract Loan outstanding, we will treat any payment we
receive from you as a loan repayment, unless you instruct us otherwise in
writing. We will deduct an amount equal to your loan repayment from the Loan
Account and allocate your payment among the Sub-Accounts and the Fixed Account
on the same basis as additional Payments are allocated, unless you instruct us
otherwise.
A Contract Loan, whether or not repaid, will have a permanent effect on the
Account Value because the investment results of each Sub-Account and the
interest paid on the Fixed Account will apply only to the amounts remaining in
those accounts. The longer a loan is outstanding, the greater the effect is
likely to be. The effect could be favorable or unfavorable. If the Sub-Accounts
and/or Fixed Account earn more than the annual interest rate for amounts held in
the Loan Account, your Account Value will not increase as rapidly as it would if
you had not taken a Contract Loan. If the Sub-Accounts and/or Fixed Account earn
less than that rate, then your Account Value will be greater than it would have
been if you had not taken a Contract Loan. Also, if you do not repay a Contract
Loan, your Indebtedness will be subtracted from the Death Benefit and Surrender
Value otherwise payable.
Amount Payable on Surrender of the Contract. While your Contract is in force,
you may fully surrender your Contract. Upon surrender, we will pay you the
Surrender Value determined as of the day we receive your written request at our
Service Center. Your Contract will terminate on
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the day we receive your written request. We may require that you give us your
Contract document before we pay you the Surrender Value. Before we pay a full
surrender, you must provide us with tax withholding information.
The Surrender Value equals the Account Value, minus any applicable Withdrawal
Charge, minus the Contract Fee, minus any Indebtedness. We will determine the
Surrender Value as of the end of the Valuation Period during which we received
your request for surrender. We generally will pay you the Surrender Value of the
Contract within seven days of our receiving your complete written request or on
the effective surrender date you have requested, whichever is later. The
determination of the Withdrawal Charge is described on pages [39-40].
You may receive the Surrender Value in a lump sum or under any of the proceeds
options described in "Proceeds Options" on pages [34-35].
The tax consequences of surrendering the Contract are discussed in "Federal Tax
Considerations," beginning on page [44].
Partial Withdrawals. Beginning in the second Contract Year, you may receive a
portion of the Surrender Value by making a partial withdrawal from your
Contract. You must request the partial withdrawal in writing. Your request will
be effective on the date we receive it at our Service Center. Before we pay any
partial withdrawal, you must provide us with tax withholding information.
When you request a partial withdrawal, we will pay you the amount requested and
subtract the amount requested plus any applicable Withdrawal Charge and
withdrawal fee from your Account Value. We may waive the Withdrawal Charge on
some or all of your withdrawals. The determination of the Withdrawal Charge is
described on pages [39-41].
You may specify how much of your partial withdrawal you wish taken from each
Sub-Account. The amount requested from a specific Sub-Account may not exceed the
value of that option less any applicable Withdrawal Charge and withdrawal fee.
If you do not specify the option from which you wish to take your partial
withdrawal, we will take it pro rata from the Sub-Accounts and the Fixed
Account.
During the first Contract Year, you may not make any partial withdrawals. After
the first Contract Year, you may take partial withdrawals as often as you
choose. You may not, however, withdraw less than $250 at one time. In addition,
we may refuse to permit any partial withdrawal that would leave less than $500
in a Sub-Account from which the withdrawal was taken unless the entire
Sub-Account balance is withdrawn. If a partial withdrawal plus any applicable
Withdrawal Charge would reduce the Account Value to less than $10,000, we may
treat your request as a request to withdraw the total Account Value and
terminate your Contract. We may waive or change this limit.
A partial withdrawal will reduce the Initial Death Benefit under your Contract
as well as the Account Value. We will reduce the Initial Death Benefit
proportionately to the reduction in the Account Value caused by the partial
withdrawal.
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Withdrawals generally will be subject to income tax and a ten percent penalty
tax. The tax consequences of partial withdrawals are discussed in "Federal Tax
Considerations" beginning on page [44].
Systematic Withdrawal Program. You may enroll in our systematic withdrawal
program by sending a completed enrollment form to our Service Center at the
address shown on the first page of this Prospectus. We will pay systematic
withdrawals to you or a payee that you choose. Each systematic withdrawal
payment must be at least $250. We will take systematic withdrawal payments pro
rata from the Sub-Accounts and the Fixed Account, unless you instruct us
otherwise. We will treat systematic withdrawals in the same way as other partial
withdrawals in applying the Withdrawal Charge and the withdrawal fee. In our
discretion we may stop paying systematic withdrawals if your Account Value falls
below our current minimum. We reserve the right to modify or suspend the
systematic withdrawal program. In our discretion, any change may apply to
existing systematic withdrawal plans. Write us at the address shown on the first
page of this Prospectus or call us at 1-800-xxx-xxxx for more information about
our Systematic Withdrawal Program.
If you take payments under our systematic withdrawal program prior to age
59-1/2, you may be subject to a ten percent penalty tax, in addition to any
other tax liability you may have. Accordingly, you should consult a qualified
tax counselor before entering into a systematic withdrawal plan. For more
information, see "Federal Tax Considerations -- Tax Deferral During Accumulation
Period: Penalty Tax" on pages [47-48].
Proceeds Options. We will pay the Surrender Value or Death Benefit proceeds
under the Contract in a lump sum or under one of the proceeds options that we
then offer. The amount applied to a proceeds option must be at least $2,000 of
Account Value and result in installment payments of not less than $20. Unless we
consent in writing, the proceeds options described below are not available if
the payee is an assignee, administrator, executor, trustee, association,
partnership, or corporation. We will not permit surrenders or partial
withdrawals after payments under a proceeds option involving life contingencies
commence. We will transfer to our general account any amount placed under a
proceeds option and it will not be affected by the investment performance of the
Variable Account.
You may request a proceeds option by writing to us at our Service Center at the
address given on the first page of this Prospectus before the death of the
Insured. If you change the Beneficiary, the existing choice of proceeds option
will become invalid and you may either notify us that you wish to continue the
pre-existing choice of proceeds option or select a new one.
The following proceeds options are available under the Contract:
Option 1 - Interest. We will pay interest monthly on proceeds left with us. We
will credit interest to unpaid balances at a rate which we will declare
annually. We will never declare an effective annual rate of less than 3-1/2%.
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Option 2 - Fixed Amount. We will pay equal monthly installments until the
proceeds are exhausted. We will credit interest to unpaid balances at a rate
which we will declare annually. We will never declare an effective annual rate
of less than 3-1/2%.
Option 3 - Fixed Period. We will pay monthly installments for a period selected
by you of not more than 25 years.
Option 4 - Life Income, with or without a Guarantee Period. We will pay proceeds
in periodic payments to the payee for as long as the payee is alive. If no
Guarantee Period is selected, payments will stop when the payee dies. It is
possible for the payee to receive only one payment, if the payee dies before the
second payment is due. If a Guarantee Period is selected and the payee dies
before the end of the Guarantee Period, we will continue payments to a named
beneficiary until the end of the Guarantee Period. We offer Guarantee Periods of
ten years, fifteen years or twenty years. We base the payments on the 1983
Individual Annuity Mortality Table, adjusted to include ten years of mortality
improvement under Projection Scale G.
When we begin to make payments under Options 3 and 4, we will tell you the
amount of your installment payment. Your installment payment will never be less
than the amounts determined using the tables in the Contract. It may be higher.
In addition, we may agree to other proceeds option plans. Write or call us to
obtain information about them.
Termination and Grace Period. The Contract will terminate and life insurance
coverage will end when one of the following events first occurs:
(a) you surrender your Contract;
(b) the Contract reaches the Maturity Date;
(c) the Grace Period ends; or
(d) the Insured dies.
Your Contract will enter the Grace Period if on a Monthly Date the Surrender
Value is insufficient to pay the Monthly Deduction and you have any unpaid
Indebtedness. You will be given a 61-day Grace Period in which to pay an amount
sufficient enough additional to keep the Contract in force after the end of the
Grace Period.
At least 61 days before the end of the Grace Period, we will send you and any
assignee a notice telling you that you must pay at least the amount shown in the
notice by the end of the Grace Period to prevent your Contract from terminating.
The amount shown in the notice will be determined as provided in the Contract.
You may pay a larger amount if you wish. If you do not pay us the amount shown
in the notice before the end of the Grace Period, your Contract will end at the
end of the Grace Period.
The Contract will continue in effect through the Grace Period. If the Insured
dies during the Grace Period, we will pay a Death Benefit in accordance with
your instructions. However, we
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will reduce the proceeds by an amount equal to the Monthly Deductions due and
unpaid. See "Death Benefit," on page [30].
If you have no outstanding Indebtedness, your Contract will not lapse. Under the
Contract's Guaranteed Death Benefit provision, in that circumstance, if on a
Monthly Date the Surrender Value is not large enough to cover the full Monthly
Deduction, we will apply the remaining Surrender Value to partially pay the
Monthly Deduction and waive any insufficiency. Thereafter, we will waive all
future Monthly Deductions until the Surrender Value is sufficient to pay the
Monthly Deduction.
Maturity Benefit. If the Insured is still living and the Contract is in force on
the Maturity Date, we will pay you a Maturity Benefit. The Maturity Benefit will
equal the Surrender Value on the Maturity Date. The Maturity Date will be the
Contract Anniversary after the Insured's 100th birthday.
Reinstatement. If the Contract lapses during the life of the Insured, you may
apply for reinstatement of the Contract by paying us the reinstatement Payment.
You must request reinstatement within five years from the end of the Grace
Period and before the Maturity Date. The reinstatement Payment is equal to an
amount sufficient to cover three months of monthly deductions following the date
of reinstatement. If you choose, you may pay a larger amount. If Indebtedness
was outstanding at the time of lapse, you must either repay or reinstate the
loan before we will reinstate your Contract. In addition, you must provide
evidence of insurability satisfactory to us. The Account Value on the
reinstatement date will reflect the Account Value at the time of termination of
the Contract plus the Payment paid at the time of reinstatement. All Contract
charges will continue to be based on your original Contract Date. A Survivorship
Contract may be reinstated only if both Insureds are still alive, or if one
Insured is alive and the lapse occurred after the death of the first Insured.
Cancellation. In many states, you may cancel your Contract by returning it to us
within twenty days after you receive it. In some states, however, this right to
return period may be longer or shorter, as provided by state law. If you return
your Contract, the Contract terminates and, in most states, we will pay you an
amount equal to your Payment. We will pay the refund within seven days of
receiving your request. No Withdrawal Charge is imposed upon return of a
Contract within the right to return period. This right to return may vary in
certain states
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in order to comply with the requirements of state insurance laws and
regulations. Accordingly, you should refer to your Contract for specific
information about your circumstances.
Postponement of Payments. We may defer for up to fifteen days the payment of any
amount attributable to a Payment paid by check to allow the check a reasonable
time to clear. We ordinarily will pay any amount attributable to the Account
Value allocated to the Variable Account within seven days, except:
(1) whenever the New York Stock Exchange ("NYSE") is closed (other than
customary weekend and holiday closings);
(2) when trading on the NYSE is restricted or an emergency exists, as
determined by the SEC, so that disposal of the Variable Account's
investments or determination of the value of its net assets is not
reasonable practicable; or
(3) at any other time permitted by the SEC for your protection.
In addition, we may delay payment of Account Value in the Fixed Account for up
to six months or a shorter period if required by law. If we defer payment for
more than 30 days we will pay interest (if required) on the deferred amount at
such rate as may be required by the applicable state or jurisdiction.
DEDUCTIONS AND CHARGES
We assess charges and deductions under the Contracts against the Sub-Accounts
and the Account Value. Additional deductions and expenses are paid out of the
Portfolios' assets, as described in the Prospectuses of the Portfolios.
Separate Account Expense Charge. On each Valuation Day, we will take a deduction
from the Sub-Accounts to compensate Liberty Life for its expenses incurred in
connection with this Contract. This Expense Charge will be calculated at an
annual rate equivalent to 1.65% of average daily net assets of each Sub-Account,
as described in the table of Contract Charges and Deductions on pages [15-18].
The amount deducted will be determined on each Valuation Day.
The Separate Account Expense Charge, together with the Fixed Account Expense
Charge, is intended to cover all expenses under the Contract other than
distribution expenses, and the Cost of Insurance Charge and the other expenses
covered by the Monthly Deduction, which are charged for separately and described
below. Accordingly, the Expense Charges are intended to compensate us for
incurring the following expenses and assuming certain risks under the Contracts:
- a portion of state premium taxes and other state and local taxes;
- administrative expenses such as salaries, postage, telephone, office
equipment, and periodic reports;
- mortality and expense risk; and
- certain federal taxes and other expenses associated with the receipt
of Payments.
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The mortality risk assumed in relation to the Contract includes the risk that
the cost of insurance charges specified in the Contract will be insufficient to
meet claims and the risks under the Guaranteed Death Benefit. We also assume a
risk that, on the Monthly Date preceding the death of an Insured, the Death
Benefit will exceed the amount on which the cost of insurance charges were
based. The expense risk assumed is that expenses incurred in issuing and
administering the Contracts will exceed the administrative charges set in the
Contract.
We currently are not maintaining a provision for taxes attributable to the
operations of the Variable Account (as opposed to the federal tax related to the
receipt of Payments under the Contracts). In the future, however, we may make
such a charge. Charges for other taxes, if any, attributable to the Variable
Account or to this class of Contracts may also be made.
Monthly Deduction. Each month on the Monthly Date we will take a Monthly
Deduction from your Account Value. The Monthly Deduction will consist of a Cost
of Insurance Charge, a Contract Fee (when due), the Fixed Account Expense
Charge, and any charges for optional benefit riders. We deduct the Fixed Account
Expense Charge from your Fixed Account balance. We allocate the remainder of the
Monthly Deduction pro rata among your interests in the Sub-Accounts and your
Fixed Account balance.
Cost of Insurance Charge. The Cost of Insurance Charge is intended to pay for
the cost of providing life insurance coverage for the Insured. We guarantee that
this charge will not exceed the maximum Cost of Insurance Charge determined on
the basis of the rates shown in the mortality table guaranteed in the Contract.
The current Cost of Insurance Charge is the lesser of the applicable percentage
of the Account Value on the relevant Monthly Date or the applicable guaranteed
cost of insurance rate multiplied by the net amount at risk for that Contract
Month. Our current asset-based cost of insurance rate for the Single Life,
Standard Rating Class (NT) is 0.45% of Account Value annually for the first ten
Contract Years and 0.65% of Account Value annually thereafter. Rates for other
classes may differ based on the type of Contract and the rating class and
history of tobacco use of the Insured(s).
The net amount at risk is (a) - (b), where:
(a) is the Death Benefit on the first day of the Contract Month divided
by one plus the Guaranteed Monthly Equivalent Interest Rate shown in
your Contract; and
(b) the Account Value on that day before the deduction of the Monthly
Deduction for the Cost of Insurance.
Because your Account Value and the net amount for which we are at risk under
your Contract may vary monthly, your Cost of Insurance Charge is likely to
differ each month.
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The Cost of Insurance Charge covers our anticipated mortality costs for standard
and substandard risks. We determine the current cost of insurance rates, based
on our expectations as to our future mortality experience and other factors. We
guarantee, however, that we will never charge you a cost of insurance charge
higher than the amount determined using the guaranteed cost of insurance rates
shown in the Contract. We base our cost of insurance rates on the sex, issue
age, Contract Year, rating class, and history of tobacco use of the Insured.
However, we issue unisex polices in Montana. Our cost of insurance rates are
based on the 1980 Commissioners Standard Ordinary ("1980 CSO") Mortality Table
based on the Insured's sex, age last birthday, and history of tobacco use. Our
cost of insurance rates for unisex Contracts will never exceed a maximum based
on the 1980 CSO Table B assuming a blend of 80% male and 20% female lives.
Contract Fee. We charge a Contract Fee of $30.00 per year. We deduct the
Contract Fee on each Contract Anniversary. If you surrender your Contract during
a Contract Year, we will deduct the full Contract Fee from your surrender
proceeds. The Contract Fee is intended to compensate us for administrative
expenses such as salaries, postage, telephone, office equipment and periodic
reports. We currently waive the Contract Fee on a Contract, if the Account Value
is at least $50,000.
Fixed Account Expense Charge. On each Monthly Date we charge a Fixed Account
Expense Charge of 0.04% of the Account Value in the Fixed Account, which is
equivalent to an annual rate of 0.48% of the average monthly Account Value in
the Fixed Account. The Fixed Account Expense Charge is intended to cover state
premium taxes and administrative expenses.
Portfolio Expenses. You indirectly bear the charges and expenses of the
Portfolios whose shares are held by the Sub-Accounts to which you allocate your
Account Value. The Variable Account purchases shares of the Portfolios at net
asset value. Each Portfolio's net asset value reflects investment advisory fees
and administrative expenses already deducted from the Portfolio's assets. For a
summary of current estimates of these charges and expenses, see pages [15-17]
above. For more information concerning the investment advisory fees and other
charges against the Portfolios, see the Prospectuses and the statements of
additional information for the Portfolios, which are available upon request.
We may receive compensation from the investment advisers or administrators of
the Portfolios. Such compensation will be consistent with the services we
provide or the cost savings resulting from the arrangement and therefore may
differ between Portfolios.
Withdrawal Charge. If you surrender your Contract or take a partial withdrawal
during the first seven Contract Years, we may subtract a Withdrawal Charge from
the proceeds. The Withdrawal Charge will be calculated at the rate shown below.
If you surrender your Contract, the Withdrawal Charge will equal a percentage of
your initial Payment net of all previous withdrawal amounts on which you paid a
Withdrawal Charge. If you make a partial withdrawal from your Contract, the
Withdrawal Charge will equal a percentage of the amount withdrawn until your
total partial withdrawals on which you paid a Withdrawal Charge
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equals your initial Payment. Partial Withdrawals above that amount are not
subject to the Withdrawal Charge.
The rate used to determine the Withdrawal Charge depends on the year the
withdrawal is made. The Withdrawal Charge declines to zero percent after the
seventh Contract Year. The Withdrawal Charge is assessed at the following rates:
<TABLE>
<CAPTION>
Contract Withdrawal Contract Withdrawal
Year Charge Year Charge
<S> <C> <C> <C>
1 9.75% 5 7.25%
2 9.50% 6 5.00%
3 9.25% 7 4.75%
4 7.50% 8+ 0%
</TABLE>
We will waive the Withdrawal Charge on that portion of your withdrawals equal to
the greater of:
(a) ten percent of the Account Value less any prior free partial
withdrawals and preferred loans taken since the most recent Contract
Anniversary; or
(b) earnings not previously withdrawn. For this purpose, "earnings" will
equal the Account Value, minus the total Payments on your Contract,
minus all outstanding preferred loans, minus any interest that has
accrued on Indebtedness since the previous Contract Anniversary,
plus all prior partial withdrawals other than withdrawals of
earnings.
Additional Payments do not increase the amount of Withdrawal Charge you may be
required to pay. Only your initial Payment is used in our formula for
calculating Withdrawal Charges.
The Withdrawal Charge is imposed to cover our actual premium tax expenses and
sales expenses, which include agents' sales commissions and other sales and
distribution expenses. We expect to recover total premium tax expenses and sales
expenses of the Contracts over the life of the Contracts. However, to the extent
premium taxes and distribution costs are not recovered by the Withdrawal Charge,
we may make up any shortfall from the assets of our general account, which
includes funds derived from the daily deductions charged to the Sub-Accounts and
other fees and charges under the Contracts.
Medical Waiver of Withdrawal Charge. After the first Contract Year, we will
waive the Withdrawal Charge on all withdrawals under your Contract if on at
least 45 days of any continuous 60 day period beginning after the first Contract
Year any Insured or his or her spouse has a Qualifying Medical Stay, as defined
in the Contract. To obtain this waiver, you must apply in writing within 180
days of your initial eligibility. You may not claim this benefit if the medical
treatment is provided by a resident of your household or a member of your
immediate family. Additional restrictions may apply if the Insured's spouse had
a Qualifying Medical Stay within
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45 days before the Contract Date. We may require you to provide us with written
proof of your eligibility. This waiver is described in more detail in the
Contract.
Withdrawal Fee. We charge a withdrawal fee on any partial withdrawal after the
first in any Contract Year. The withdrawal fee will equal the lesser of $25 or
two percent of the amount of the partial withdrawal. The withdrawal fee does not
apply to full surrenders. The withdrawal fee is intended to compensate us for
our administrative costs in effecting a partial withdrawal.
Transfer Fee. We currently are not charging the transfer fee described in the
Contract. The Contract, however, permits us to charge a transfer fee of $25 per
transfer, including transfers under our Dollar Cost Averaging and Asset
Rebalancing Programs. We will notify you if we begin to charge this fee.
We will deduct the transfer fee from the Account Value remaining in the
Sub-Account or the Fixed Account from which the transfer was made. If that
amount is insufficient to pay the transfer fee, we will subtract it from the
transferred amount.
Special Provisions for Group or Sponsored Arrangements. Where permitted by state
insurance laws, Contracts may be purchased under group or sponsored
arrangements. We may reduce or waive the charges and deductions described above
for Contracts issued under these arrangements. Among other things, we may waive
Withdrawal Charges and deductions to employees, officers, directors, agents, and
immediate family members of the foregoing. We will reduce these charges and
deductions in accordance with our rules in effect when we approve the
application for a Contract. To qualify for a reduction, a group or sponsored
arrangement must satisfy our criteria as to, for example, the size of the group,
the expected number of participants and anticipated Payments from the group.
Generally, the sales contacts and effort, administrative costs and mortality
cost per Contract vary based on such factors as the size of the group or
sponsored arrangements, the purposes for which Contracts are purchased and
certain characteristics of the group's members. The amount of reduction and the
criteria for qualification will reflect the reduced sales effort and
administrative costs resulting from, and the different mortality experience
expected as a result of, sales to qualifying groups and sponsored arrangements.
From time to time, we may modify on a uniform basis both the amounts of
reductions and the criteria for qualification. Reductions in these charges will
not be unfairly discriminatory against any person, including the affected
Contact Owners and all other owners of all other contracts funded by the
Variable Account.
GENERAL CONTRACT PROVISIONS
Statements to Contract Owners. We will maintain all records relating to the
Variable Account and the Sub-Accounts. Each year we will send you a report
showing information concerning your Contract transactions in the past year and
the current status of your Contract. The report will include information such as
the Account Value as of the end of the current and the prior year, the current
Death Benefit, Surrender Value, Indebtedness, partial withdrawals, earnings,
Payments paid, and deductions made since the last annual report. We will also
include any information required by state law or regulation. If you ask us, we
will send you an additional report at any
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time. We may charge you up to $25 for this additional report. We will tell you
the current charge before we send you the report.
In addition, we will send you the financial statements of the Portfolios and
other reports as specified in the Investment Company Act of 1940, as amended. We
also will mail you confirmation notices or other appropriate notices of Contract
transactions quarterly or more frequently within the time periods specified by
law. Please give us prompt written notice of any address change. Please read
your statements and confirmations carefully and verify their accuracy and
contact us promptly with any question.
Limit on Right to Contest. In the absence of fraud, we may not contest the
insurance coverage under the Contract after the Contract has been in force for
two years after the Contract Date while the Insured is alive or for two years
after any increase in the Initial Death Benefit. The two year incontestability
period may vary in certain states to comply with the requirements of state
insurance laws and regulations.
In issuing a Contract, we rely on your application. Your statements in that
application, in the absence of fraud, are considered representations and not
warranties. We will not use any statement made in connection with the Contract
application to void the Contract or to deny a claim, unless that statement is a
part of the application or an amendment thereto.
Suicide. If the Insured commits suicide while sane or kills him- or herself
while insane within two years of the Contract Date, we are not required to pay
the full Death Benefit that would otherwise be payable. Instead, we will pay you
an amount equal to the Account Value less any Indebtedness, or the minimum
amount required by the state in which your Contract was issued, and the Contract
will end.
Misstatement as to Age and Sex. If the age or sex of the Insured is incorrectly
stated in the application, we will adjust any proceeds appropriately as
specified in the Contract.
Beneficiary. You name the original Beneficiary(ies) and Contingent
Beneficiary(ies) in the application for the Contract. You may change the
Beneficiary or Contingent Beneficiary at any time while the Insured is alive,
except irrevocable Beneficiaries and irrevocable Contingent Beneficiaries may
not be changed without their consent.
You must request a change of Beneficiary in writing. We will provide a form to
be signed and filed with us. Your request for a change in Beneficiary or
Contingent Beneficiary will take effect as of the date you signed the form after
we acknowledge receipt in writing. Until we acknowledge receipt of your change
instructions, we are entitled to rely on your most recent instructions in our
files. Accordingly, we are not liable for making a payment to the person shown
in our files as the Beneficiary or treating that person in any other respect as
the Beneficiary, even if instructions that we subsequently receive from you seek
to change your Beneficiaries effective as of a date before we made the payment
or took the action in question.
If you name more than one Beneficiary, we will divide the Death Benefit among
your Beneficiaries according to your most recent written instructions. If you
have not given us written instructions,
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we will pay the Death Benefit in equal shares to the Beneficiaries. If one of
the Beneficiaries dies before you, we will divide the Death Benefit among the
surviving Beneficiaries. If no Beneficiary is living, the Contingent Beneficiary
will be the Beneficiary. The interest of any revocable Beneficiary is subject to
the interest of any assignee. If no Beneficiary or Contingent Beneficiary is
living, the Beneficiary is the Contract Owner or the Contract Owner's estate.
Assignment. While the Insured is alive, you may assign your Contract as
collateral security. You must notify us in writing if you assign the Contract.
Until we receive notice from you, we are not liable for any action we may take
or payments we may make that may be contrary to the terms of your assignment. We
are not responsible for the validity of an assignment. Your rights and the
rights of the Beneficiary may be affected by an assignment. An assignment may
result in income tax and a ten percent penalty tax. You should consult your tax
adviser before assigning your Contract.
Creditors' Claims. To the extent permitting by law, no benefits payable under
this Contract will be subject to the claims of your or the Beneficiary's
creditors.
Dividends. We will not pay any dividend under the Contract.
Notice and Elections. To be effective, all notices and elections under the
Contract must be in writing, signed by you, and received by us at our Service
Center. Certain exceptions may apply. Unless otherwise provided in the Contract,
all notices, requests and elections will be effective when received at our
Service Center complete with all necessary information.
Modification. We reserve the right to modify the Contract without your express
consent, in the circumstances described in this Prospectus or as necessary to
conform to applicable law or regulation or any ruling issued by a governmental
agency. The provisions of the Contract will be construed so as to comply with
the requirements of Section 7702 of the Tax Code.
Survivorship Contracts. We offer Contracts on a single life and "last survivor"
basis. The Survivorship Contract operates almost identically to the Single Life
Contract. The primary difference is that the Survivorship Contract has two
Insureds and the Death Benefit is paid only upon the death of the last surviving
Insured. Other significant differences are:
(1) the cost of insurance charge differs because we base it on the
anticipated mortality of two Insureds and we do not pay the Death
Benefit until both Insureds have died;
(2) for a Survivorship Contract to qualify for simplified underwriting,
both Insureds must meet our standards;
(3) for a Survivorship Contract to be reinstated, both Insureds must be
alive on the date of reinstatement;
(4) under a Survivorship Contract, provisions regarding
incontestability, suicide, and misstatements of age or sex apply to
each Insured; and
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(5) the Accelerated Death Benefit is only available upon the Terminal
Illness or Chronic Illness of the surviving Insured, as these terms
are defined in the Contract.
FEDERAL TAX CONSIDERATIONS
NOTE: The following discussion is based upon our understanding of current
federal income tax law applicable to life insurance contracts in general. We
cannot predict the probability that any changes in those laws will be made.
Also, we do not guarantee the tax status of the contracts. You bear the complete
risk that the Contracts may not be treated as "life insurance contracts" under
federal income tax laws.
In addition, this discussion does not include a detailed description of the
federal income tax consequences of the purchase of these Contracts or any
discussion of special tax rules that may apply to certain purchase situations.
We also have not tried to consider any other possibly applicable state or other
tax laws, for example, the estate tax consequences of the Contracts. You should
seek tax advice concerning the effect on your personal tax liability of the
transactions permitted under the Contract, as well as any other questions you
may have concerning the tax status of the Contract or the possibility of changes
in the tax law.
Taxation of Liberty Life and the Variable Account. Liberty Life is taxed as a
life insurance company under Part I of Subchapter L of the Tax Code. The
operations of the Variable Account are taxed as part of the operations of
Liberty Life. Investment income and realized capital gains are not taxed to the
extent that they are applied under the Contracts.
Accordingly, we do not anticipate that Liberty Life will incur any federal
income tax liability attributable to the operation of the Variable Account (as
opposed to the federal tax related to the receipt of Payments under the
Contracts). Therefore, we are not making any charge or provision for federal
income taxes. However, if the tax treatment of the Variable Account is changed,
we may charge the Variable Account for its share of the resulting federal income
tax.
In several states, we may incur state and local taxes on the operations of the
Variable Account. We currently are not making any charge or provision for them
against the Variable Account. We do, however, use part of the Withdrawal Charge
to offset these taxes. If these taxes should be increased, we may make a charge
or provision for them against the Sub-Accounts. If we do so, the results of the
Sub-Accounts will be reduced.
Tax Status of the Contract. The Contract is structured to satisfy the definition
of a life insurance contract under the Tax Code. As a result, the Death Benefit
ordinarily will be fully excluded from the gross income of the Beneficiary. The
Death Benefit will be included in your gross estate for federal estate tax
purposes if the proceeds are payable to your estate. The Death Benefit will also
be included in your estate, if the Beneficiary is not your estate but you
retained incidents of ownership in the Contract. Examples of incidents of
ownership include the right to change Beneficiaries, to assign the Contract or
revoke an assignment, and to pledge the Contract or obtain a Contract Loan. If
you own and are the Insured under a Contract and if you transfer all incidents
of ownership in the Contract more than three years before your death, the Death
Benefit will not be included in your gross estate. State and local estate and
inheritance tax consequences may also apply.
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In addition, certain transfers of the Contract or Death Benefit, either during
life or at death, to individuals (or trusts for the benefit of individuals) two
or more generations below that of the transferor may be subject to the federal
generation-skipping transfer tax.
In the absence of final regulations or other pertinent interpretations of the
Tax Code, some uncertainty exists as to whether a substandard risk Contract will
meet the statutory definition of a life insurance contract. If a Contract were
deemed not to be a life insurance contract for tax purposes, it would not
provide most of the tax advantages usually provided by a life insurance
contract. We reserve the right to amend the Contracts to comply with any future
changes in the Tax Code, any regulations or rulings under the Tax Code and any
other requirements imposed by the Internal Revenue Service ("IRS").
In addition, you may use the Contract in various arrangements, including
non-qualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax adviser regarding the tax treatment of the proposed arrangement.
Diversification Requirements. Section 817(h) of the Tax Code requires that the
underlying assets of variable life insurance contracts be diversified. The Tax
Code provides that a variable life insurance contract will not be treated as a
life insurance contract for federal income tax purposes for any period and any
subsequent period for which the investments are not adequately diversified. If
the Contract were disqualified for this reason, you would lose the tax deferral
advantages of the Contract and would be subject to current federal income taxes
on all earnings allocable to the Contract.
The Tax Code provides that variable life insurance contracts such as the
Contract meet the diversification requirements if, as of the close of each
quarter, the underlying assets meet the diversification standards for a
regulated investment company, and no more than 55% of the total assets consist
of cash, cash items, U.S. Government securities and securities of other
regulated investment companies. For purposes of determining whether or not the
diversification standards of Section 817(h) of the Tax Code have been met, each
United States government agency or instrumentality is treated as a separate
issuer.
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The United States Treasury Department (the "Treasury Department") also has
issued regulations that establish diversification requirements for the
investment accounts underlying variable contracts such as the Contracts. These
regulations amplify the diversification requirements set forth in the Tax Code
and provide an alternative to the provision described above. Under these
regulations, an investment account will be deemed adequately diversified if: (1)
no more than 55% of the value of the total assets of the account is represented
by any one investment; (2) no more than 70% of the value of the total assets of
the account is represented by any two investments; (3) no more than 80% of the
value of the total assets of the account is represented by any three
investments; and (4) no more than 90% of the value of the total assets of the
account is represented by any four investments.
These diversification standards are applied to each Sub-Account of the Variable
Account by looking to the investments of the Portfolio underlying the
Sub-Account. One of our criteria in selecting the Portfolios is that their
investment managers intend to manage them in compliance with these
diversification requirements.
Owner Control. In certain circumstances, variable life insurance contract owners
will be considered the owners, for tax purposes, of separate account assets
underlying their contracts. In those circumstances, the contract owners could be
subject to taxation on the income and gains from the separate account assets.
In published rulings, the Internal Revenue Service has stated that a variable
insurance contract owner will be considered the owner of separate account
assets, if the owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. When the
diversification regulations were issued, the Treasury Department announced that
in the future, it would provide guidance on the extent to which variable
contract owners could direct their investments among Sub-Accounts without being
treated as owners of the underlying assets of the Variable Account. As of the
date of this Prospectus, no such guidance has been issued. We cannot predict
when or whether the Treasury Department will issue that guidance or what
position the Treasury Department will take. In addition, although regulations
are generally issued with prospective effect, it is possible that regulations
may be issued with retroactive effect.
The ownership rights under the Contract are similar in many respects to those
described in IRS rulings in which the contract owners were not deemed to own the
separate account assets. In some respects, however, they differ. For example,
under the Contract you have many more investment options to choose from than
were available under the contracts involved in the published rulings, and you
may be able to transfer Account Value among the investment options more
frequently than in the published rulings. Because of these differences, it is
possible that you could be treated as the owner, for tax purposes, of the
Portfolio shares underlying your Contract and therefore subject to taxation on
the income and gains on those shares. Moreover, it is possible that the Treasury
Department's position, when announced, may adversely affect the tax treatment of
existing Contracts. We therefore reserve the right to modify the Contract as
necessary to attempt to prevent you from being considered the owner for tax
purposes of the underlying assets.
The remainder of this discussion assumes that the Contract will be treated as a
life insurance contract for federal tax purposes.
Tax Treatment of Life Insurance Death Benefit Proceeds. In general, the amount
of the Death Benefit payable under a Contract is excludable from gross income
under the Tax Code. Certain transfers of the Contract, however, may result in a
portion of the Death Benefit being taxable.
If the Death Benefit is not received in a lump sum and is, instead, applied
under one of the proceeds options, payments generally will be prorated between
amounts attributable to the Death
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Benefit, which will be excludable from the Beneficiary's income, and amounts
attributable to interest (occurring after the insured's death), which will be
includable in the beneficiary's income.
Accelerated Death Benefit. In general, the tax treatment of an Accelerated Death
Benefit is the same as the treatment of Death Benefits, as described above.
However, where an Accelerated Death Benefit is based on the Insured's being
"Chronically Ill", the Tax Code limits the amount of the Accelerated Death
Benefit that will qualify for exclusion from federal income taxation. In some
circumstances, an Accelerated Death Benefit under the Contract may exceed these
limits, and the excess amount therefore may be taxable. Accordingly, if you are
considering requesting an Accelerated Death Benefit, you should first consult a
qualified tax adviser.
Tax Deferral During Accumulation Period. Under existing provisions of the Tax
Code, except as described below, any increase in your Account Value is generally
not taxable to you unless you receive or are deemed to receive amounts from the
Contract before the Insured dies. If you surrender your Contract, the Cash Value
(less any Contract Fee paid upon surrender) will be includable in your income to
the extent the amount received exceeds the "investment in the contract." The
"investment in the contract" generally is the total Payments and other
consideration paid for the Contract, less the aggregate amount received under
the Contract previously to the extent such amounts received were excludable from
gross income. Whether partial withdrawals (or other amounts deemed to be
distributed) from the Contract constitute income depends, in part, upon whether
the Contract is considered a "modified endowment contract" ("MEC") for federal
income tax purposes.
Contracts Which Are MECs
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Characterization of a Contract as a MEC. In general, this Contract will
constitute a MEC unless (1) it was received in exchange for another life
insurance contract which was not a MEC, (2) no Payments or other consideration
(other than the exchanged contract) are paid into the Contract during the first
7 Contract Years, and (3) there is no withdrawal or reduction in the death
benefit during the first 7 Contract Years. In addition, even if the Contract
initially is not a MEC, it may, in certain circumstances, become a MEC if there
is a later increase in benefits or any other "material change" of the Contract
within the meaning of the tax law.
Tax Treatment of Withdrawals, Loans, Assignments and Pledges under MECs. If your
Contract is a MEC, withdrawals from your Contract will be treated first as
withdrawals of income and then as a recovery of Payments. Thus, you may realize
taxable income upon a withdrawal if the Account Value exceeds the investment in
the Contract. You may also realize taxable income when you take a Contract Loan,
because any loan (including unpaid loan interest) under the Contract will be
treated as a withdrawal for tax purposes. In addition, if you assign or pledge
any portion of the value of your Contract (or agree to assign or pledge any
portion), the assigned or pledged portion of your Account Value will be treated
as a withdrawal for tax purposes. Before assigning, pledging, or requesting a
loan under a Contract which is a MEC, you should consult a qualified tax
adviser.
Penalty Tax. Generally, withdrawals (or the amount of any deemed withdrawals)
from a MEC are subject to a penalty tax equal to ten percent of the portion of
the withdrawal that is includable
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in income, unless the withdrawals are made: (1) after you reach age 59-1/2, (2)
because you have become disabled (as defined in the tax law), or (3) as
substantially equal periodic payments over your life or life expectancy (or the
joint lives or life expectancies of you and your beneficiary, as defined in the
tax law). Certain other exceptions to the ten percent penalty tax may apply.
Payments under our systematic withdrawal program possibly may not qualify for
the exception from penalty tax for "substantially equal periodic payments" which
is described above. Accordingly, this Contract may be inappropriate for Contract
Owners who expect to take substantially equal periodic payments prior to age
59-1/2. You should consult a qualified tax adviser before entering into a
systematic withdrawal plan.
Aggregation of Contracts. All life insurance contracts which are MECs and which
are purchased by the same person from us or any of our affiliates within the
same calendar year will be aggregated and treated as one contract for purposes
of determining the amount of a withdrawal (including a deemed withdrawal) that
is includable in taxable income.
Contracts Which Are Not MECs
- ----------------------------
Tax Treatment of Withdrawals Generally. If your Contract is not a MEC, the
amount of any withdrawal from the Contract will be treated first as a
non-taxable recovery of Payments and then as income from the Contract. Thus,
only the portion of a withdrawal that exceeds the investment in the Contract
immediately before the withdrawal will be includable in taxable income.
Certain Distributions Required by the Tax Law in the First 15 Contract Years. As
indicated above, the Tax Code limits the amount of Payments that may be made and
the Account Values that can accumulate relative to the Death Benefit. Where cash
distributions are required under the Tax Code in connection with a reduction in
benefits during the first 15 years after the Contract is issued (or if
withdrawals are made in anticipation of a reduction in benefits, within the
meaning of the Tax Code, during this period), some or all of such amounts may be
includable in taxable income.
Tax Treatment of Loans. If your Contract is not a MEC, a loan received under the
Contract generally will be treated as indebtedness for tax purposes, rather than
a withdrawal of Account Value. As a result, you will not realize taxable income
on any part of the loan as long as the Contract remains in force. If you
surrender your Contract, however, any outstanding loan balance will be treated
as an amount received by you as part of the Surrender Value. Accordingly, you
may be subject to taxation on the loan amount at that time. Moreover, if any
portion of your Contract Loan is a preferred loan, a portion of your Contract
Loan may be includable in your taxable income. Generally, you may not deduct
interest paid on loans under the Contract, even if you use the loan proceeds in
your trade or business.
Survivorship Contract. Although we believe that the Contract, when issued as a
Survivorship Contract, meets the definition of life insurance contract under the
Tax Code, the Tax Code does not directly address how it applies to Survivorship
Contracts. In the absence of final regulations or other guidance under the Tax
Code regarding this form of Contract, there is necessarily some uncertainty
whether a Survivorship Contract will meet the Tax Code's definition of a life
insurance
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contract. If you are considering purchasing a Survivorship Contract, you should
consult a qualified tax adviser.
If the Contract Owner is the last surviving Insured, the Death Benefit proceeds
will generally be includable in the Contract Owner's estate on his or her death
for purposes of the federal estate tax. If the Contract Owner dies and was not
the last surviving Insured, the fair market value of the Contract may be
included in the Contract Owner's estate. In general, the Death Benefit proceeds
are not included in the last surviving Insured's estate if he or she neither
retained incidents of ownership at death nor had given up ownership within three
years before death.
Treatment of Maturity Benefits and Extension of Maturity Date. At the Maturity
Date, we pay the Surrender Value to you. Generally, the excess of the Cash Value
(less any applicable Contract Fee) over your investment in the Contract will be
includable in your taxable income at that time.
Actions to Ensure Compliance with the Tax Law. We believe that the maximum
amount of Payments we intend to permit for the Contracts will comply with the
Tax Code definition of a life insurance contract. We will monitor the amount of
your Payments, and, if your total Payments during a Contract Year exceed those
permitted by the Tax Code, we will refund the excess Payments within 60 days of
the end of the Contract Year and will pay interest and other earnings (which
will be includable in taxable income) as required by law on the amount refunded.
We reserve the right to increase the Death Benefit (which may result in larger
charges under a Contract) or to take any other action deemed necessary to ensure
the compliance of the Contract with the federal tax definition of a life
insurance contract.
Federal Income Tax Withholding. We will withhold and remit to the federal
government a part of the taxable portion of withdrawals made under a Contract,
unless the Owner notifies us in writing at or before the time of the withdrawal
that he or she chooses not to have withholding. As Contract Owner, you will be
responsible for the payment of any taxes and early distribution penalties that
may be due on the amounts received under the Contract, whether or not you choose
withholding. You may also be required to pay penalties under the estimated tax
rules, if your withholding and estimated tax payments are insufficient to
satisfy your total tax liability.
Tax Advice. This summary is not a complete discussion of the tax treatment of
the Contract. You should seek tax advice from an attorney who specializes in tax
issues.
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DESCRIPTION OF LIBERTY LIFE AND THE VARIABLE ACCOUNT
Liberty Life Assurance Company of Boston. Liberty Life Assurance Company of
Boston was incorporated on September 17, 1963 as a stock life insurance company.
Its executive and administrative offices are located at 175 Berkeley Street,
Boston, Massachusetts 02117.
Liberty Life writes individual life insurance on both a participating and a
non-participating basis and group life and disability insurance and individual
and group annuity contracts on a non-participating basis. The variable life
insurance contracts described in this Prospectus are issued on a
non-participating basis. Liberty Life is licensed to do business in all states,
in the District of Columbia, and in Canada. We intend to market the Contracts
everywhere in the United States we conduct life insurance business. Liberty Life
has been rated "A" by A.M. Best and Company, independent analysts of the
insurance industry. The Best's A rating is in the second highest rating
category, which also includes a lower rating of A-. Best's Ratings merely
reflect Best's opinion as to the relative financial strength of Liberty Life and
Liberty Life's ability to meet its contractual obligations to its Contract
holders. The ratings are not intended to reflect the financial strength or
investment experience of the Variable Account. We may from time to time
advertise these ratings in our sales literature.
Liberty Life is a member of the Insurance Marketplace Standards Association
("IMSA"). Accordingly, we may use the IMSA logo and membership in IMSA in
advertisements. Being a member means that Liberty Life has chosen to participate
in IMSA's Life Insurance Ethical Market Conduct Program.
Liberty Life is an indirect wholly-owned subsidiary of Liberty Mutual Insurance
Company and Liberty Mutual Fire Insurance Company. Liberty Mutual Insurance
Company is a multi-line insurance and financial services institution.
Pursuant to a Guarantee Agreement dated [______________], Liberty Mutual, our
ultimate parent, unconditionally guarantees to us on behalf of and for the
benefit of Liberty Life and owners of life insurance contracts and annuity
contracts issued by Liberty Life that it will, on demand, make funds available
to us for the timely payment of contractual obligations under any insurance
policy or annuity contract issued by us, other than obligations funded by one of
our separate accounts. This guarantee covers our obligations under the Fixed
Account portion of the Contracts, and our obligation to pay a Death Benefit in
excess of the total Sub-Account Values. Liberty Mutual may terminate this
guarantee on notice to Liberty Life.
Liberty Life also acts as a sponsor for two other of its separate accounts that
are registered investment companies: Variable Account J and Variable Account K.
The officers and employees of Liberty Life are covered by a fidelity bond in the
amount of $70,000,000.
Officers and Directors of Liberty Life. Our directors and executive officers are
listed below, together with information as to their dates of election and
principal business occupations during the past five years (if other than their
present occupation). Where no dates are given, the person has held that position
for at least the past five years.
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Gary L. Countryman; Chairman of the Board, June 1998 to date; Chief Executive
Officer and Chairman of the Board, March 1987 to June 1998; Director, March
1981; Chairman of the Board, Liberty Mutual Insurance Company, April 1998 to
date; Chairman of the Board and Chief Executive Officer, Liberty Mutual
Insurance Company, April 1992 to April 1998.
Edmund F. Kelly; President and Chief Executive Officer, June 1998 to date;
President and Chief Administrative Officer, June 1995 to June 1998; Director,
July 1992 to date; President and Chief Executive Officer, Liberty Mutual
Insurance Company, April 1998 to date; President and Chief Operating Officer,
Liberty Mutual Insurance Company, April 1992 to April 1998.
Morton E. Spitzer; Executive Vice President, Chief Operating Officer -
Individual, July 1992 to date; Director, August 1995 to date.
Jean M. Scarrow; Executive Vice President, Chief Operating Officer - Group, and
Director, May 1997 to date; Vice President, Liberty Mutual Insurance Company,
June 1985 to May 1997.
A. Alexander Fontanes; Vice President, March 1992 to date; Director, August 1995
to date; Senior Vice President and Chief Investment Officer, Liberty Mutual
Insurance Company.
John B. Conners; Director, August 1995 to date; Executive Vice President and
Manager--Personal Market, Liberty Mutual Insurance Company.
J. Paul Condrin, III; Vice President and Director, April 1997 to date; Senior
Vice President and Chief Financial Officer, Liberty Mutual Insurance Company.
Christopher C. Mansfield; Director, August 1995 to date; Senior Vice President
and General Counsel, Liberty Mutual Insurance Company.
Andrew M. Girdwood, Jr.; Vice President, March 1984 to date.
Richard W. Hadley; Vice President, and Comptroller, June 1993 to date.
Richard B. Lassow; Vice President, September 1994 to date; Chief Actuary -
Individual Life, Connecticut Mutual Life Insurance Company, September 1989 to
June 1994.
Merrill J. Mack; Vice President, March 1986 to date.
John S. O'Donnell; Vice President, April 1991 to date.
Steven M. Sentler; Vice President, September 1994 to date; Second Vice
President, Travelers Insurance Company, December 1978 to November 1993.
John A. Tymochko; Vice President, March 1993 to date.
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Barry S. Gilvar; Secretary, August 1995 to date; Assistant Secretary, March 1993
to August 1995; Vice President and Secretary, Liberty Mutual Insurance Company.
Elliot J. Williams; Treasurer, April 1997 to date; Vice President and
Treasurer, Liberty Mutual Insurance Company.
Gerald H. Dolan; Assistant Treasurer, June 1996 to date; Assistant Controller
and Director Corporate Tax, Liberty Mutual Insurance Company.
Bernard Gillen; Assistant Treasurer, June 1996 to date; Director - Tax
Compliance, Liberty Mutual Insurance Company.
James W. Jakobek; Assistant Treasurer, September 1990 to date; Vice President
and Manager, Liberty Mutual Insurance Company.
Charlene Albanese; Assistant Secretary, December 1997 to date; Manager -
Individual Life Policy Services, Liberty Mutual Insurance Company, August 1998
to date; Assistant Manager Individual Life Policy Services, Liberty Mutual
Insurance Company, July 1997 to August 1998; Manager - Individual Life Policy
Services, Liberty Mutual Insurance Company, April 1991 to July 1997.
Diane S. Bainton; Assistant Secretary, November 1995 to date; Assistant
Secretary, Liberty Mutual Insurance Company.
Katherine Desiderio; Assistant Secretary, November 1995 to date; Hearing
Representative, Liberty Mutual Insurance Company.
James R. Pugh; Assistant Secretary, November 1995 to date; Senior Corporate
Counsel, Liberty Mutual Insurance Company.
Harvey Swedlove; Assistant Secretary, February 1997 to date; Vice President and
General Counsel, Liberty Canada Holdings, Ltd., January 1996 to date;
Consultant, Maris Management, Ltd., June 1994 to December 1995; Vice President
and General Counsel, Camrost Development Corporation, August 1987 to June 1994.
The business address of each of the foregoing officers and directors is 175
Berkeley Street, Boston, Massachusetts 02117.
Financial Information Concerning Liberty Life. You should consider the financial
statements for Liberty Life that are attached to the end of this Prospectus only
as bearing on the Company's ability to meet its obligations under the Contract.
They do not relate to the investment performance of the assets held in the
Variable Account.
Variable Account. LLAC Variable Account was originally established in 1998, as a
segregated asset account of Liberty Life. The Variable Account meets the
definition of a "separate account" under the federal securities laws and is
registered with the SEC as a unit investment trust under the Investment Company
Act of 1940. The SEC does not supervise the management of the Variable Account
or Liberty Life.
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We own the assets of the Variable Account, but we hold them separate from our
other assets. To the extent that these assets are attributable to the Account
Value of the Contracts offered by this Prospectus, these assets are not
chargeable with liabilities arising out of any other business we may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to the
Variable Account are credited to or charged against the Variable Account without
regard to our other income, gains, or losses. Our obligations arising under the
Contracts are general corporate obligations of Liberty Life.
The Variable Account is divided into Sub-Accounts. The assets of each
Sub-Account are invested in the shares of one of the Portfolios. We do not
guarantee the investment performance of the Variable Account, its Sub-Accounts
or the Portfolios. Values allocated to the Variable Account will rise and fall
with the values of shares of the Portfolios and are also reduced by Contract
charges. In the future, we may use the Variable Account to fund other variable
universal life insurance contracts. We will account separately for each type of
variable life insurance contract funded by the Variable Account.
Safekeeping of the Variable Account's Assets. We hold the assets of the Variable
Account. We keep those assets physically segregated and held separate and apart
from our general account assets. We maintain records of all purchases and
redemptions of shares of the Portfolios.
State Regulation of Liberty Life. We are subject to the laws of Massachusetts
and regulated by the Massachusetts Division of Insurance. Every year we file an
annual statement with the Division of Insurance covering our operations for the
previous year and our financial condition as of the end of the year. We are
inspected periodically by the Division of Insurance to verify our contract
liabilities and reserves. We also are examined periodically by the National
Association of Insurance Commissioners. Our books and records are subject to
review by the Division of Insurance at all times. We are also subject to
regulation under the insurance laws of every jurisdiction in which we operate.
YEAR 2000 MATTERS
We have been addressing Year 2000 matters since late 1995. We established a Year
2000 plan and we are now carefully examining all of our relevant internal
computing systems to identify areas that may need changes. We have started to
make the changes and have targeted December 31, 1998 as the expected completion
date. We also have established Year 2000 compliance standards for all new
internal systems. We intend to provide uninterrupted service to all of our
Contact Owners and customers.
We believe we will meet our timetable for any required changes and the Year 2000
issues will not pose significant operational problems for us.
We do not expect that the cost of addressing the Year 2000 issues will be
material to Liberty Life's financial condition or its results of operation.
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DISTRIBUTION OF CONTRACTS
Liberty Life Distributors LLC ("LLD") serves as distributor of the Contracts.
LLD is located at 100 Liberty Way, Dover New Hampshire 03820. LLD is our
wholly-owned subsidiary. It is registered as a broker-dealer under the
Securities Exchange Act of 1934, and is a member of the National Association of
Securities Dealers, Inc.
The Contracts described in this Prospectus are sold by registered
representatives of broker-dealers or bank employees who are licensed insurance
agents appointed by the Company, either individually or through an incorporated
insurance agency. LLD enters into selling agreements with the unaffiliated
broker-dealers and banks whose personnel participate in the offer and sale of
the Contracts. In some states, Contracts may be sold by representatives or
employees of banks which may be acting as broker-dealers without separate
registration under the Securities Exchange Act of 1934, pursuant to legal and
regulatory exceptions.
The maximum sales compensation payable by the Company is not more than seven
percent of the initial Payment plus 0.15% annually of the unloaned Account
Value. In addition, we may pay or permit other promotional incentives, in cash,
or credit or other compensation.
The distribution agreement with LLD provides for indemnification of LLD by
Liberty Life for liability to owners arising out of services rendered or
contracts issued.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Variable Account. Liberty
Life is engaged in routine law suits which, in our management's judgment, are
not of material importance to its total assets or material with respect to the
Variable Account.
LEGAL MATTERS
All matters of Massachusetts law pertaining to the Contract, including the
validity of the Contract and our right to issue the Contract under Massachusetts
law, have been passed upon by William J. O'Connell, Esq., Counsel. The law firm
of Jorden Burt Boros Cicchetti Berenson & Johnson, 1025 Thomas Jefferson St.,
Suite 400, East Lobby, Washington, D.C. 20007-5201, serve as special counsel to
Liberty Life with regard to the federal securities laws.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC, Washington, D.C., under the
Securities Act of 1933 as amended, with respect to the Contracts offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the registration statement and the exhibits filed as part of the registration
statement. You should refer to the registration statement and the exhibits for
further information concerning the Variable Account, Liberty Life, and the
Contracts. The descriptions in this Prospectus of the Contracts and other legal
instruments are summaries. You should refer to those instruments as filed for
their precise terms.
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EXPERTS
The consolidated financial statements for Liberty Life Assurance Company of
Boston as of December 31, 1997 and 1996 and for each of the three years in the
period ended December 31, 1997 and the related financial statement schedule
included in this Prospectus have been audited by Ernst & Young LLP, 200
Clarendon Street, Boston, Massachusetts, independent auditors, as stated in
their reports. We have included those financial statements and the supplemental
schedule in reliance upon the reports of Ernst & Young, LLP, given upon their
authority as experts in accounting and auditing. Actuarial matters included in
this Prospectus and the registration statement of which it is a part, including
the hypothetical Contract illustrations, have been examined by Douglas Wood,
FSA, MAAA, Actuary of the Company, and are included in reliance upon his opinion
as to their reasonableness.
FINANCIAL STATEMENTS
No financial statements are included for the Variable Account. It has not yet
commenced operations, has no assets or liabilities, and has received no income
or incurred any expense. The financial statements of Liberty Life that are
included should be considered only as bearing upon Liberty Life's ability to
meet its contractual obligations under the Contracts. Liberty Life's financial
statements do not bear on the investment experience of the assets held in the
Variable Account. The most current financial statements of Liberty Life are
those as of the end of the most recent fiscal year. Liberty Life represents that
there has been no adverse material changes in Liberty Life's financial position
or operations between the end of the most recent fiscal year and the date of
this Prospectus. [financial statements to be added by pre-effective amendment]
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PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, as amended, the undersigned Registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary and
periodic information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
REPRESENTATION AS TO FEES AND CHARGES
Liberty Life Assurance Company of Boston hereby represents that the fees
and charges deducted under the Modified Single Payment Variable Universal Life
Insurance Contracts hereby registered by this Registration Statement in the
aggregate are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Liberty Life Assurance Company
of Boston.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rule 6e-3(T) under the Investment Company
Act of 1940, as amended (the "1940 Act").
UNDERTAKING AS TO INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant, the Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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CONTENTS OF THIS REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
Facing Sheet
Cross-Reference Sheet
Prospectus consisting of ___ pages
Undertaking to File Reports
Undertaking As To Indemnification
Representation As To Fees and Charges
Representation Pursuant to Rule 6e-3(T)
Signature Pages
Exhibits
EXHIBIT LIST
1. Exhibits required by paragraph A of the instructions as to Exhibits of
Form N-8B-2
(1) Resolution of the Board of Directors of Liberty Life Assurance
Company of Boston authorizing establishment of LLAC Variable Account
(filed herewith)
(2) Custodian Agreement (not applicable)
(3) (a) Form of Distribution Agreement (filed herewith)
(b) Form of Broker-Dealer and General Agent Sales Agreement (filed
herewith)
(c) Schedule of Sales Commissions (filed herewith)
(4) Other Agreements between the depositor, principal underwriter, and
custodian with respect to Registrant or its securities (not
applicable)
(5) (a) Specimen Single Life Contract (filed herewith)
(b) Specimen Survivorship Agreement (filed herewith)
(6) (a) Articles of Incorporation of Liberty Life Assurance Company of
Boston, as amended(1)
(b) By-laws of Liberty Life Assurance Company of Boston(2)
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(7) Not applicable
(8) Form of Participation Agreements
(a) Form of Participation Agreement By and Among AIM Variable
Insurance Funds, Inc., _______ Life Insurance Company,
and ___________
(b) Form of Participation Agreement By and Among _______ Life
Insurance Company, Liberty Variable Investment Trust, and
Liberty Financial Investments, Inc.
(c) Form of Participation Agreement By and Among _______ Life
Insurance Company, Dreyfus Variable Investment Fund,
The Dreyfus Socially Responsible Growth Fund, Inc., and
Dreyfus Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock
Index Fund)
(d) Form of Participation Agreement By and Among MFS Variable
Insurance Trust, _____________________________, and
Massachusetts Financial Services Company
(e) Form of Participation Agreement By and Among Oppenheimer
Variable Account Funds, OppenheimerFunds, Inc., and
_______ Life Insurance Company
(f) Form of Participation Agreement By and Among Keyport
Financial Services Corp., _________, and Stein Roe Variable
Investment Trust
(9) Other Material Contracts (not applicable)
(10) (a) Specimen Application
(b) Specimen Application
(c) Specimen Variable Life Insurance Supplemental Application
2. Opinion and Consent of Counsel (to be filed by pre-effective amendment)
3. All financial statements omitted from the Prospectus (not applicable)
4. Not applicable
5. Financial Data Schedule (not applicable)
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6. Procedures memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) (to be filed by
pre-effective amendment)
7. Actuarial Opinion and Consent (to be filed by pre-effective amendment)
8. Consent of Independent Accountants (to be filed by pre-effective
amendment)
9. Illustrations
- --------
(1) Incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement of Variable Account J of Liberty Life Assurance Company
of Boston (File No. 333-29811; 811-08269), filed on or about July 17, 1997.
(2) Incorporated by reference to Registration Statement of Variable Account
J of Liberty Life Assurance Company of Boston (File No. 333-29811; 811-08269),
filed on or about June 18, 1997.
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SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant has duly caused this Registration Statement to be signed on
its behalf in the City of Boston, Commonwealth of Massachusetts, on the 21st day
of October, 1998.
LLAC VARIABLE ACCOUNT
(Registrant)
BY: LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
(Depositor)
By: /s/ Elliot J. Williams
------------------------------------
Elliot J. Williams
Treasurer
As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated:
<TABLE>
<S> <C> <C>
/s/ Gary L. Countryman
- ------------------------------
Gary L. Countryman Chairman of the Board October 21, 1998
/s/ Edmund F. Kelly
- ------------------------------ President, Chief Executive Officer
Edmund F. Kelly and Director October 21, 1998
/s/ Elliot J. Williams
- ------------------------------
Elliot J. Williams Treasurer October 21, 1998
/s/ J. Paul Condrin
- ------------------------------
J. Paul Condrin Director October 21, 1998
/s/ John B. Conners
- ------------------------------
John B. Conners Director October 21, 1998
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/s/ A. Alexander Fontanes
- ------------------------------
A. Alexander Fontanes Director October 21, 1998
- ------------------------------
Christopher C. Mansfield Director October __, 1998
/s/ Jean M. Scarrow
- ------------------------------
Jean M. Scarrow Director October 21, 1998
/s/ Morton E. Spitzer
- ------------------------------
Morton E. Spitzer Director October 21, 1998
</TABLE>
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EXHIBIT INDEX
1.(1) Resolution of the Board of Directors of Liberty Life Assurance
Company of Boston authorizing establishment of LLAC Variable Account
1.(3)(a) Form of Distribution Agreement
1.(3)(b) Form of Broker-Dealer and General Agent Sales Agreement
1.(3)(c) Schedule of Sales Commissions
1.(5) (a) Specimen Single Life Contract
(b) Specimen Survivorship Agreement
1.(8) Form of Participation Agreements
(a) Form of Participation Agreement By and Among AIM Variable
Insurance Funds, Inc., _______ Life Insurance Company,
and ___________
(b) Form of Participation Agreement By and Among _______ Life
Insurance Company, Liberty Variable Investment Trust, and
Liberty Financial Investments, Inc.
(c) Form of Participation Agreement By and Among _______ Life
Insurance Company, Dreyfus Variable Investment Fund,
The Dreyfus Socially Responsible Growth Fund, Inc., and
Dreyfus Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock
Index Fund)
(d) Form of Participation Agreement By and Among MFS Variable
Insurance Trust, _________________________________, and
Massachusetts Financial Services Company
(e) Form of Participation Agreement By and Among Oppenheimer
Variable Account Funds, OppenheimerFunds, Inc., and
____________ Life Insurance Company
(f) Form of Participation Agreement By and Among Keyport
Financial Services Corp., _______________________________, and
Stein Roe Variable Investment Trust
1.(10) (a) Specimen Application
(b) Specimen Application
(c) Specimen Variable Life Insurance Supplemental Application
9 Illustrations
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EXHIBIT 1.(1)
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Assistant Secretary's Certificate
---------------------------------
I, Diane S. Bainton, Assistant Secretary of Liberty Life Assurance Company of
Boston (the "Company"), do hereby certify that:
Attached is a true and complete copy of a resolution duly adopted by the
Board of Directors of the Company on July 10, 1998, and this resolution is
in full force and effect on the date hereof and has not been modified or
rescinded.
WITNESS my hand and the official seal of the Company on this 2nd day of
September, 1998.
[Seal] /s/Diane S. Bainton
(Seal) ------------------------
Diane S. Bainton
Assistant Secretary
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
Personally appeared before me the above named Diane S. Bainton, personally known
to me, who, being duly sworn, deposes and says that she executed the above
instrument and that the statements contained therein are true and correct to the
best of her information and belief.
Subscribed and sworn to before me this 2nd day of September, 1998.
/s/ Mary F. Gordon
(Seal) ------------------------
Notary Public
1
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LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
ACTION BY UNANIMOUS CONSENT OF DIRECTORS
WITHOUT A MEETING
July 10, 1998
Pursuant to Massachusetts General Laws Chapter 156B, Section 59 and the By-Laws
of the Corporation, the undersigned, being all of the Directors of Liberty Life
Assurance Company of Boston, hereby consent to the following action and adopt
the following votes as of the date first above written:
VOTED: That pursuant to the provision of section 132G of Chapter 175 of the
Massachusetts General Laws and any regulations promulgated thereunder by the
Massachusetts Commissioner of Insurance, the Board of Directors of Liberty Life
Assurance Company of Boston (the "Company") does hereby establish a separate
account to be known as "LLAC Variable Account" ("LLAC Variable Account") for the
purpose of allocating thereto any amounts paid to or held by the Company in
connection with the issuance of variable life insurance policies (the
"Policies"), including but not limited to, amounts held under optional
settlement modes;
VOTED: That the Chairman, the President, the Executive Vice President &
COO-Individual and the Treasurer, or any of them, (herein "Officers") be, and
they each hereby are, severally authorized and directed, in conjunction with the
Company's independent certified public accountants, legal counsel, independent
consultants and/or such others as they may deem appropriate, to take such
actions as they deem necessary or appropriate to receive approval of the
operation of LLAC Variable Account by the Massachusetts Commissioner of
Insurance;
VOTED: That the income, gains and losses, whether or not realized, from assets
allocated to LLAC Variable Account are in accordance with the issuance of any
variable life insurance policy, credited to or charged against such LLAC
Variable Account without regard to other income, gains or losses of the Company,
and, to the extent permitted by law, are not subject to the general claims of
creditors, including under circumstances of insolvency or rehabilitation;
VOTED: That LLAC Variable Account shall be divided into divisions and
subdivisions so that each division or subdivision may invest in the shares of
designated investment companies with the net premiums received under the
Policies as directed by the owners of said Policies;
VOTED: That the Investment Committee of the Board of Directors be, and it hereby
is, expressly authorized in its discretion and as it may deem appropriate from
time to time in accordance with applicable laws and regulations (a) to divide
LLAC Variable Account into one or more divisions or subdivisions, (b) to modify,
consolidate, or eliminate any such divisions or subdivisions, (c) to change the
designation of LLAC Variable Account to another designation, (d) to further
designate any divisions or subdivisions thereof, and (e) to take such other
action as may be required to further LLAC Variable Account's compliance with
applicable state and federal laws;
VOTED: That amounts allocated to LLAC Variable Account and any accumulations
thereon, or to any division of LLAC Variable Account, may be invested or
reinvested in any class of
2
<PAGE>
investments which may be authorized in the Policies, including, but not limited
to, shares of an investment company or companies established pursuant to the
Investment Company Act of 1940, as amended (the "1940 Act"), and regulations
promulgated thereunder, without regard to any requirements or limitations
prescribed by the laws of the Commonwealth of Massachusetts governing the
investments of life insurance companies' general investment account; provided,
that except with the approval of the Massachusetts Commissioner of Insurance, no
reserves for:
(a) benefits guaranteed as to amount and duration; and
(b) funds guaranteed as to principal amounts or stated rate of
interest shall be maintained in LLAC Variable Account
VOTED: That the Officers of the Company be, and they each hereby are, severally
authorized to invest cash in LLAC Variable Account or in any division thereof as
may be deemed necessary or appropriate to facilitate the commencement of LLAC
Variable Account's operations, including but not limited to compliance with
applicable tax laws, or to meet any minimum capital requirements under the 1940
Act and to transfer cash or securities from time to time between the Company's
general account and LLAC Variable Account as deemed necessary or appropriate so
long as such transfers are not prohibited by law and are consistent with the
terms of the Policies;
VOTED: That the Officers be, and they each hereby are, authorized and directed,
in conjunction with the Company's independent certified public accountants,
legal counsel, independent consultants or such others as they deem appropriate,
to take such action as they deem necessary or appropriate to:
(a) Register LLAC Variable Account as a unit investment trust under
the 1940 Act;
(b) Register the Policies and such amounts, which may be indefinite
amounts, as the Officers shall from to time to time deem
appropriate under the Securities Act of 1933, as amended (the
"1933 Act"); and
(c) Take all other action on behalf of LLAC Variable Account and on
behalf of the Company as sponsor and depositor, which in their
judgment may be necessary or appropriate in connection with the
offering of said Policies for sale and the operation of LLAC
Variable Account in order to comply with the 1940 Act, the
Securities Exchange Act of 1934, the 1933 Act and all other
applicable federal laws and regulations, including the filing of
any registration statements, amendments to registration
statements, notification of registration statements, any
undertakings, and any applications for exemptions from the 1940
Act, and any amendments thereto, the 1933 Act or other applicable
federal laws and regulations;
VOTED: That the President of the Company, and the Executive Vice President &
COO- Individual of the Company, are duly appointed as agents for service of
process under such registration statements and duly authorized to receive
communications and notices from the Securities and Exchange Commission with
respect thereto and exercise any powers given to such agents by the rules and
regulations under the 1933 Act and applicable state law;
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<PAGE>
VOTED: That the Officers be, and they each hereby are, authorized and directed
on behalf of LLAC Variable Account and on behalf of the Company to take any and
all actions that any of them may deem necessary or advisable in order to offer
and sell the Policies, including any registrations, filings and qualifications
of the Company, its officers, agents and employees, LLAC Variable Account and of
the Policies, under the insurance and securities laws of any state or any other
jurisdiction, and in connection therewith to prepare, execute, deliver and file
all such applications, reports, covenants, resolutions, applications for
exemptions, consents to service of process and other papers and instruments as
may be required under such laws, and to take any and all further actions which
said Officers or legal counsel for the Company may deem necessary or desirable
in order to maintain such registrations or qualifications for as long as said
Officers or legal counsel deem it to be in the best interest of LLAC Variable
Account and the Company;
VOTED: That any form of corporate resolution required by any state or other
jurisdiction in connection with any filing, registration, or approval as
contemplated in these resolutions is hereby adopted and the Officers be, and
they each hereby are, authorized to certify to the adoption thereof by this
Board;
VOTED: That the Officers be, and they each hereby are, authorized in the names
and on behalf of LLAC Variable Account and the Company to execute and file
irrevocable written consents to be used in such states and other jurisdictions
wherein such consents to service of process may be requisite under the insurance
or securities laws thereof in connection with such registration or qualification
of the Policies or LLAC Variable Account and to appoint the appropriate state or
public official, or such other person that may be specified by said insurance or
securities laws, as agents of LLAC Variable Account and of the Company for the
purpose of receiving and accepting process;
VOTED: That the Officers be, and they each hereby are, authorized to establish
procedures to the extent required, or deemed appropriate, and subject to the
limitations of applicable law, for providing a pass-through of voting rights for
owners of the Policies with respect to the shares of an investment company or
companies, attributable to them, owned by LLAC Variable Account;
VOTED: That the following general Standard of Suitability, which expresses the
policy of the Company with respect to determining the suitability for applicants
be adopted: No recommendations shall be made to a potential applicant to
purchase a variable life insurance product and no variable life insurance
product shall be issued in the absence of reasonable grounds to believe that the
purchase of same is not unsuitable for such applicant on the basis of
information furnished after reasonable inquiry of such applicant concerning the
applicant's insurance and investment objective, financial situation and needs,
and any other information known to the Company or to the sales representative
making the recommendations;
VOTED: That the Officers be, and they hereby are, authorized and directed, in
conjunction with the Company's independent certified public accountants, legal
counsel independent consultants or such others as they deem appropriate, to take
any and all action that any of them may deem necessary or advisable in order to
establish, and register with the Securities and Exchange Commission under the
1940 Act, any investment company(s) in whose securities LLAC Variable Account
will invest;
4
<PAGE>
VOTED: That the Officers be, and they each hereby are, authorized and directed
on behalf of LLAC Variable Account and on behalf of the Company to enter into
agreements with any investment company registered under the 1940 Act in whose
securities LLAC Variable Account will invest;
VOTED: That the Officers be, and they each hereby are, authorized and directed
to execute such agreement or agreements as they deem necessary or appropriate:
(a) With Liberty Life Financial Services, LLC. or any other qualified
entity, under which Liberty Life Financial Services, LLC. or such
other entity will be appointed principal underwriter and
distributor for the Policies; and
(b) With one or more qualified banks or other qualified entities
including the Company or any of its affiliates to provide
administrative and/or custodial service in connection with the
establishment and maintenance of LLAC Variable Account and the
design, issuance and administration of the Policies:
VOTED: That the following binding Standards of Conduct applicable to the
Company, its officers, directors, employees, and affiliates ("Persons") with
respect to the purchase and sale of investments of LLAC Variable Account be
adopted:
(1) No Person shall engage in any action or activity which the Person has
reason to believe could in any way conflict with LLAC Variable
Account's interest.
(2) No Person, directly or indirectly, shall, in connection with any
transaction, (a) employ any device, scheme or artifice to defraud LLAC
Variable Account (b) make to LLAC Variable Account any untrue
statement of a material fact or omit to state to LLAC Variable Account
a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading;
(c) engage in any act, practice or course of business which operates
or would operate as a fraud or deceit upon LLAC Variable Account or
(d) engage in any manipulative practice with respect to LLAC Variable
Account.
(3) No Person shall accept, directly or indirectly, any gift, favor,
service, or anything of value from any broker dealer or other person
which could be construed as being compensation for causing LLAC
Variable Account to engage in any transaction with such broker, dealer
or other person.
(4) Each Person shall keep confidential all information regarding past or
future transactions, investment programs and studies of LLAC Variable
Account except as may be required by applicable law or as approved by
the Company's Board of Directors; and
5
<PAGE>
FURTHER VOTED: That the Officers be, and they each hereby are, authorized and
directed on behalf of the Company to execute and deliver such agreements and
other documents and to do such acts and things as each of them may in their sole
discretion deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.
This writing shall be filed with the records of the meetings of the Directors of
the Company and shall for all purposes be treated as a vote taken at a meeting.
Signed by the following Directors:
J. Paul Condrin /s/ J. Paul Condrin
-------------------------------
John B. Conners /s/ John B. Conners
-------------------------------
Gary L. Countryman /s/ Gary L. Countryman
-------------------------------
A. Alexander Fontanes /s/ A. Alexander Fontanes
-------------------------------
Edmund F. Kelly /s/ Edmund F. Kelly
-------------------------------
Christopher C. Mansfield /s/ Christopher S. Mansfield
-------------------------------
Jean M. Scarrow /s/ Jean M. Scarrow
-------------------------------
Morton E. Spitzer /s/ Morton E. Spitzer
-------------------------------
6
Exhibit 1.(3)(a)
- --------------------------------------------------------------------------------
DISTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------
AGREEMENT, dated as of __________ __, 1998, by and among Liberty Life
Distributors LLC ("Distributor"), Liberty Life Assurance Company of Boston
("Liberty Life") and LLAC Variable Account of Liberty Life ("Variable Account").
W I T N E S S E T H
WHEREAS, the Variable Account is a separate account established and maintained
by Liberty Life pursuant to the laws of the Commonwealth of Massachusetts, under
which income, gains and losses, whether or not realized, from assets allocated
to the Variable Account, are credited to or charged against the Variable Account
without regard to other income, gains or losses of Liberty Life;
WHEREAS, the Variable Account is registered as an investment company under the
Investment Company Act of 1940, as amended ("1940 Act");
WHEREAS, Liberty Life intends to issue certain variable universal life insurance
contracts and may in the future issue additional forms of variable life
insurance contracts, whose net considerations may be allocated in whole or in
part to the Variable Account for investment, and may in the future issue
variable life insurance and variable annuity contracts, whose net considerations
may be allocated in whole or in part to other separate accounts maintained by
Liberty Life;
WHEREAS, Liberty Life proposes to make the variable life insurance contracts and
variable annuity contracts listed on Schedule A of this Agreement ("Contracts")
available for sale to suitable purchasers;
WHEREAS, the variable portions of the Contracts are registered under the
Securities Act of 1933 ("1933 Act");
WHEREAS, Distributor, a wholly-owned subsidiary of Liberty Life, is a
broker-dealer registered under the Securities Exchange Act of 1934 ("1934 Act")
and is a member of the National Association of Securities Dealers, Inc.
("NASD");
WHEREAS, the parties hereto desire to have Distributor act as principal
underwriter or distributor for the separate accounts of Liberty Life listed on
Schedule B of this Agreement ("Separate Accounts") to assume the
responsibilities set forth in this Agreement with respect to the distribution of
the Contracts, and Distributor desires to assume such responsibilities;
NOW, THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT AND AUTHORIZATION
a. Liberty Life authorizes Distributor to act, and Distributor agrees to
serve, as the principal underwriter for the Separate Accounts and as a
distributor of the Contracts in each state or other jurisdiction where the
Contracts may legally be sold. Distributor also is authorized and hereby
agrees to find purchasers for the Contracts, in each case acceptable to
Liberty Life.
b. Distributor is hereby authorized to enter into separate written agreements
("Selling Agreements"), on such terms and conditions as Distributor may
determine not to be inconsistent with this Agreement, with broker-dealers
("Selling Broker-Dealers") that agree to participate in the distribution
of, and to use their best efforts to solicit applications for, the
Contracts. The Selling Agreements shall be substantially in the form of the
Form of Selling Agreement attached as Exhibit A to this Agreement, or such
other form(s) as may be agreed upon by the parties. The Selling Agreements
shall provide that each Selling Broker-Dealer shall be required to assume
full
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responsibility for continued compliance by itself and its associated
persons (as defined in Section 3(a)(18) of the 1934 Act) with the NASD
Rules and applicable federal and state securities and insurance laws. Each
Selling Broker-Dealer and its registered representatives ("Agents")
soliciting applications for the Contracts shall be duly and appropriately
licensed, appointed by Liberty Life, registered and otherwise qualified for
the sale of the Contracts under the NASD Rules and federal and state
securities and insurance laws applicable to the offer and sale of the
Contracts.
c. Distributor shall provide each Selling Broker-Dealer with a copy of Liberty
Life's statement in support of the concepts in the Principles and Code of
Ethical Market Conduct of the Insurance Marketplace Standards Association
(the "IMSA Principles and Code"), and shall require each Selling
Broker-Dealer to agree to comply with that statement and to engage in
active and fair competition as contemplated by the IMSA Principles and
Code. Any supervision of the Selling Broker-Dealers required by applicable
law shall be performed by Distributor, and Distributor shall assume any
legal responsibilities of Liberty Life for the acts or omissions of any
Selling Broker-Dealer or its Agents.
d. Distributor will not publicly offer or seek purchasers for a Contract
unless and until the Registration Statement for that Contract is effective.
In addition, Distributor will not publicly offer or seek purchasers for a
Contract in a state or jurisdiction in which that Contract is not qualified
for sale under all applicable securities and insurance laws. Distributor
will use its best efforts to provide information and marketing assistance
to licensed insurance agents and broker/dealers on a continuing basis.
e. The variable insurance contracts covered by this Agreement are described on
Schedule A. The Separate Accounts covered by this Agreement are described
on Schedule B. Liberty Life in its sole discretion may amend Schedule A
from time to time to add or delete other classes of variable life insurance
or variable annuity contracts issued by Liberty Life and may amend Schedule
B to add or delete other Separate Accounts. The provisions of this
Agreement shall apply with equal force to such additional Contracts and
Separate Accounts unless the Contract requires otherwise.
f. Anything in this Agreement to the contrary notwithstanding, Liberty Life
shall retain the ultimate right of control over, and the responsibility
for, the issuance, servicing and marketing of the Contracts, including the
right to review and approve all advertising concerning the Contracts, to
suspend sales of the Contracts in any jurisdiction, to appoint and
discharge its agents authorized to sell the Contracts, and to refuse to
sell a Contract to any applicant for any reason whatsoever.
2. LICENSING AND APPOINTMENT OF ASSOCIATED PERSONS AND AGENTS
a. Distributor is authorized to recommend the appointment of its associated
persons ("Associated Persons") and the Selling Broker-Dealers and their
eligible Agents as agents of Liberty Life for the sale of Contracts.
Distributor shall not propose an Associated Person or Agent for appointment
unless such person is an "associated person" of Broker-Dealer (as defined
in Section 3(a)(18) of the 1934 Act), duly registered as a representative
of Distributor or a Selling Broker-Dealer, as appropriate, and duly
licensed as an insurance agent in the state(s) in which it is proposed that
such person engage in solicitation of sales of the Contracts. Distributor
shall be responsible for such Associated Persons' continuing compliance
with applicable securities registration requirements and state insurance
agent licensing laws. Each Selling Broker-Dealer shall be responsible for
its Agents' continuing compliance with applicable securities registration
requirements and state insurance agent licensing laws.
b. Distributor shall assist Liberty Life in the appointment of Agents under
applicable insurance laws to sell the Contracts. Distributor or the
sponsoring Selling Broker-Dealer, as appropriate, shall comply with Liberty
Life's requirements, including the General Letter of Recommendation
(attached as Exhibit B), in submitting licensing or appointment
documentation for Associated Persons and Agents. All such documentation
shall be submitted to Liberty Life or its designated agent licensing
administrator.
c. Liberty Life reserves the right to refuse to appoint any such designated
Associated Person or Agent and, once appointed, to terminate or refuse to
renew such appointment.
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d. The parties hereto recognize that any Associated Person or Agent selling
the Contracts as contemplated by this Agreement shall be acting as an
insurance agent of Liberty Life and that the obligations and rights of
Distributor to supervise such persons shall be limited to the extent
specifically described herein or required under applicable federal or state
securities laws or NASD Rules. Such Agents shall not be considered agents
or employees of Distributor, unless any contract between Distributor and
any such person specifically provides otherwise. Further, it is intended by
the parties hereto that such Associated Persons and Agents are and shall
continue to be considered to have a common law independent contractor
relationship with Liberty Life and not to be considered common law
employees of Liberty Life, unless any contract between Liberty Life and any
person selling the Contracts specifically provides otherwise.
3. SUPERVISION OF ASSOCIATED PERSONS
a. Distributor shall be fully responsible for carrying out all compliance and
supervisory obligations in connection with the distribution of the
Contracts, as required by the NASD Conduct Rules ("NASD Rules") and by
federal and any applicable state securities laws. Distributor shall assume
full responsibility for oversight of the securities activities of its
Associated Persons engaged directly or indirectly in the distribution of
the Contracts, and shall have the authority to require that disciplinary
action be taken with respect to the Associated Persons. Distributor agrees
to comply with Liberty Life's statement in support of the concepts in the
IMSA Principles and Code and to engage in active and fair competition as
contemplated by the IMSA Principles and Code.
b. Distributor is specifically charged with the responsibility of supervising
and reviewing its Associated Persons' use of sales literature and
advertising and all other communications with the public in connection with
the Contracts. No sales solicitation, including the delivery of
supplemental sales literature or other such materials, shall occur, be
delivered to or used with a prospective purchaser unless accompanied or
preceded by the appropriate then current prospectus, the then current
prospectus for the underlying funds funding the Contract, and where
required by state insurance law, the then current statement of additional
information.
c. Distributor shall execute any electronic or telephone orders only in
accordance with the current prospectus applicable to the Contracts and
agrees that Liberty Life will not be liable for any loss incurred as a
result of acting upon electronic or telephone instructions containing
unauthorized, incorrect or incomplete information received from Distributor
or its Associated Persons.
d. Upon request by Liberty Life, Distributor shall furnish appropriate records
or other documentation to evidence its diligent supervision of Associated
Persons.
e. If an Associated Person performs any unauthorized transaction with respect
to a Contract, Distributor shall bear sole responsibility, shall notify
Liberty Life and shall act to terminate such unauthorized activities.
f. If an Associated Person fails to meet Distributor's rules and standards,
Distributor shall notify Liberty Life and shall act to terminate any
violative conduct of such Associated Person relating to the Contracts.
4. SALES PROMOTION MATERIAL AND ADVERTISING
a. During the term of this Agreement, subject to the approval of Liberty Life,
Distributor will be responsible for providing and approving all
promotional, sales and advertising material to be used by Distributor and
Selling Broker-Dealers in connection with the offer and sale of Contracts.
Distributor will file such materials or will cause such materials to be
filed with the SEC and the NASD, and with any state securities regulatory
authorities, as required. Liberty Life reserves the right to require the
recall of any material approved by it at any time for any reason, and
Distributor shall promptly comply, and cause all Selling Broker-Dealers to
promptly comply, with any such request for the return of material and shall
not use such material thereafter.
b. Distributor will require that the Associated Persons and Agents use only
the effective current prospectuses, statements of additional information
("SAIs") and other materials authorized by Liberty Life for use in
soliciting
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the sale of the Contracts. Distributor is not authorized, and may not
authorize anyone else, to give any information or to make any
representation concerning Liberty Life, the Contracts, the Separate
Accounts or the funding media for the Contracts other than those contained
in the current materials authorized for use by Liberty Life. Distributor
and its Associated Persons may not modify or represent that they are
authorized to modify any such prospectus, SAI or other materials authorized
by Liberty Life for use in soliciting the sale of the Contracts.
5. OBLIGATIONS OF DISTRIBUTOR
a. All solicitations for the sale of Contracts will be made only by Associated
Persons and Agents who are registered representatives of Distributor or a
Selling Broker-Dealer and duly licensed insurance agents and appointed by
Liberty Life. Continued solicitation for the Contracts shall be contingent
upon the continuing qualification of such Associated Persons and Agents by
possession of the required licenses, appointments, and registrations.
Solicitation may only occur in those states in which Liberty Life is
admitted to do business and in which the Contracts have been approved for
sale by the appropriate regulatory authority.
b. All applications for the Contracts shall be made on application forms
supplied by Liberty Life or in a form otherwise satisfactory to Liberty
Life. All applications for Contracts shall be subject to acceptance or
rejection by Liberty Life in its sole discretion. If Liberty Life rejects
an application, it will return any premium paid by that applicant to such
applicant and promptly notify Distributor of such action. If a purchaser
exercises his or her free look right under a Contract, any amount to be
refunded as provided in such Contract will be so refunded to the purchaser
by or on behalf of Liberty Life and the relevant Separate Accounts(s) and
Liberty Life will promptly notify Distributor of such action.
c. All money payable in connection with the Contracts, whether as purchase
payments or otherwise, and whether paid by, or on behalf of any applicant
or contract owner, is the property of Liberty Life. Distributor shall
promptly transmit to Liberty Life any such payment received by it in
accordance with Liberty Life's administrative procedures without any
deduction or offset for any reason, unless there has been mutual
arrangement for net wire transmissions between Distributor and Liberty
Life. No cash payments shall be accepted by Distributor in connection with
the Contracts.
d. Before transmitting to Liberty Life applications or other documents
relating to Contracts sold by Associated Persons, Distributor shall review
such documents for completeness and correctness. Distributor promptly, but
in no case later than the end of the next business day following receipt by
Distributor or an Associated Person, shall forward completed applications
to Liberty Life in accordance with Liberty Life's administrative
procedures. Applications and payments shall be sent to Liberty Life at the
address shown on the application or such other address as Liberty Life may
specify from time to time. Checks, money orders or electronic transmissions
of funds in payment on any Contract shall be drawn to the order of "Liberty
Life Assurance Company of Boston".
e. Contracts issued on accepted applications shall be delivered to the
Contract owner according to procedures established by Liberty Life. If
Liberty Life forwards a Contract to Distributor for delivery, such Contract
shall be delivered to the Contract owner within five days after the issue
date of the Contract.
f. Distributor agrees to comply with the established rules and regulations of
Liberty Life now in effect or which may be established hereafter.
g. Distributor agrees to carry out its sales and administrative activities and
obligations under this Agreement in continuous compliance with the federal
and state laws and regulations, including those governing securities and
insurance related activities or transactions, as applicable. Distributor
shall notify Liberty Life immediately in writing if Distributor fails to
comply with any applicable law or regulation.
h. The costs of printing the prospectuses, SAIs and sales material used in
connection with the solicitation of applications for the Contracts shall be
borne by Liberty Life. Liberty Life shall provide Distributor with a
reasonable supply of such materials. Liberty Life shall make available to
Distributor copies of all financial
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statements and other documents that Distributor shall reasonably request
for use in connection with the distribution of the Contracts.
i. Distributor periodically shall furnish reports to Liberty Life as to the
sale of Contracts made pursuant to this Agreement.
6. BOOKS AND RECORDS
a. Distributor and Liberty Life shall each maintain and preserve, or cause to
be maintained and preserved such books and records concerning the offer and
sale of the Contracts as may be required by the SEC, the NASD and other
agencies having jurisdiction and that may be reasonably required to reflect
adequately the Contracts business conducted by each party. Each party shall
make such books and records reasonably available to the other party. The
parties shall promptly furnish each other with any reports and information
the other party may reasonably request for the purpose of meeting its
reporting and recordkeeping requirements under the insurance laws of any
state, under any applicable federal or state securities laws, rules or
regulations, or under the rules of the NASD.
b. Distributor and Liberty Life shall each submit to all regulators and
administrative bodies having jurisdiction over the sales of the Contracts,
present or future, any information, reports or other material that any such
body by reason of this Agreement may request or require pursuant to
applicable laws or regulations. In particular, without limiting the
foregoing, Liberty Life agrees that any books and records which it
maintains which are required to be maintained by Distributor under Rule
17a-3 or 17a-4 of the 1934 Act shall be subject to inspection by the SEC in
accordance with Section 17(a) of the 1934 Act.
c. Distributor and Liberty Life each agree and understand that all documents,
reports, records, books, files and other materials required under
applicable NASD regulations and federal and state securities laws relative
to the sale of Contracts shall be the property of Distributor, except that:
(a) any books and records maintained by Liberty Life that relate to sales
compensation shall be the joint property of Liberty Life and Distributor,
and (b) all such documents, reports, records, books, files and other
materials that are also required by applicable regulation or law to be
maintained by Liberty Life shall be the joint property of Distributor and
Liberty Life. All other documents, reports, records, books, files and other
materials maintained relative to this Agreement shall be the property of
Liberty Life. Upon the termination of this Agreement, all such material
shall be returned to the applicable party.
d. Subject to applicable SEC or NASD restrictions, Liberty Life, as agent for
Distributor, will send confirmations of Contract transactions to Contract
owners. Liberty Life will make such confirmations and records of
transactions available to Distributor upon request. Liberty Life also will
maintain Contract owner records on behalf of Distributor to the extent
permitted by applicable securities laws. Distributor and Liberty Life from
time to time during the term of this Agreement shall allocate among
themselves, subject to a right of further delegation, the administrative
responsibility for maintaining and preserving the books, records and
accounts kept in connection with the Contracts.
7. REPRESENTATIONS
a. Liberty Life represents and warrants to Distributor that:
(1) Liberty Life has filed a Registration Statement with the Commission for
each of the Contracts. Liberty Life has delivered to Distributor a copy of
each such Registration Statement. Liberty Life will deliver to Distributor
a copy of each amendment to any such Registration Statement promptly after
such amendment is filed with the SEC.
(2) The Registration Statements for the Contracts and any further
amendments or supplements thereto will, when they become effective, conform
in all material respects to the requirements of the 1933 Act and the 1940
Act, and the rules and regulations of the Commission under such Acts, and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statement
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or omission made in reliance upon and in conformity with information
furnished in writing to Liberty Life by Distributor expressly for use
therein.
(3) Liberty Life is validly existing as a stock life insurance company in
good standing under the laws of the Commonwealth of Massachusetts, with
power to own its properties and conduct its business as described in the
Prospectus. Liberty Life has been duly qualified for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business.
(4) The Contracts have been duly and validly authorized and when issued and
delivered with payment therefor as provided herein, will be duly and
validly issued and will conform to the description of such Contracts
contained in the Prospectuses relating thereto.
(5) The performance of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in a violation
of any of the provisions of or default under any statute, indenture,
mortgage, deed of trust, note agreement or other agreement or instrument to
which Liberty Life is a party or by which Liberty Life is bound (including
Articles of Incorporation, By-Laws, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over Liberty Life
or any of its properties).
(6) There are no material legal or governmental proceedings pending to
which Liberty Life or the Separate Accounts are a party or of which any
property of the Separate Accounts is the subject (other than as set forth
in the Prospectus relating to the Contracts), or litigation incident to the
kind of business conducted by Liberty Life which, if determined adversely
to Liberty Life would individually or in the aggregate have a material
adverse effect on the financial position, surplus or operations of Liberty
Life.
b. Distributor represents and warrants to Liberty Life that:
(1) Distributor is a broker/dealer duly registered with the SEC pursuant to
the 1934 Act, is a member in good standing of the NASD, and is in
compliance with the securities laws in those states in which it conducts
business as a broker/dealer.
(2) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation
of any of the terms or provisions of or constitute a default under any
statute, indenture, mortgage, deed of trust, note agreement or other
agreement or instrument to which Distributor is a party or by which it is
bound (including the Articles of Incorporation or Bylaws of Distributor or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over either Distributor or its property).
(3) To the extent that any statements made in the Registration Statement or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to Liberty Life by
Distributor expressly for use therein, such statements will, when they
become effective or are filed with the Commission, as the case may be,
conform in all material respects to the requirements of the 1933 Act and
the rules and regulations of the Commission thereunder, and will not
contain any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading.
8. INDEPENDENT CONTRACTOR
Distributor shall at all times function as and be deemed to be an independent
contractor and not as an employee of Liberty Life. Distributor will be under no
obligation to effectuate any particular number or dollar volume of sales of
Contracts, except to the extent Distributor deems advisable.
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9. COMPENSATION AND EXPENSES
a. Liberty Life shall compensate Distributor for its services under this
Agreement in accordance with the terms of Schedule B hereto, as it may be
amended from time to time. Distributor shall be fully responsible for
compensating the Associated Persons (as defined in Paragraph 2.a) for their
sales of the Contracts. At Distributor's request, Liberty Life will pay all
or a portion of the compensation due hereunder directly to the relevant
Associated Person in satisfaction of Distributor's obligation to compensate
such Associated Person.
b. Distributor shall be fully responsible for compensating the Selling
Broker-Dealers for their sales of the Contracts as provided in the Selling
Agreements. Distributor shall not be obligated to pay such compensation
with respect to a Contract until Distributor has received its compensation
with respect to such Contract from Liberty Life. At Distributor's request,
Liberty Life will pay all or a portion of the compensation due hereunder
directly to the relevant Selling Broker-Dealer in satisfaction of
Distributor's obligation to compensate such Selling Broker-Dealer.
c. Unless otherwise agreed in writing by Liberty Life, neither Distributor nor
any agent of Liberty Life nor any Selling Broker-Dealer shall have an
interest in any surrender charges, deductions or other fees payable to
Liberty Life.
10. NOTIFICATION OF CUSTOMER COMPLAINTS OR REGULATORY MATTER
a. Each party will promptly notify the other of any customer complaint or
notice of any regulatory investigation or proceeding received by such party
or their respective affiliates relating to the Contracts or any or
threatened or filed arbitration action or civil litigation arising out of
the offer or sale of the Contracts.
b. The parties shall cooperate fully in investigating and responding to any
such complaint, regulatory investigation or proceeding, arbitration, or
civil litigation, and in any settlement or trial of any actions arising out
of the conduct of business under this Agreement.
c. Any response by Distributor or Liberty Life to an individual customer
complaint will be sent to the other for approval at least five (5) business
days before it is sent to the customer, except that if a more prompt
response is required, the proposed response may be communicated by
telephone, facsimile or in person.
d. Distributor will include in each Selling Agreement a notification provision
comparable to this Paragraph 10 requiring the Selling Broker-Dealer (a) to
notify Distributor and Liberty Life promptly of any customer complaint or
notice of any regulatory investigation or proceeding received by the
Selling-Broker Dealer or its affiliates with respect to Distributor, any
Selling Broker-Dealer, or any agent or representative in connection with
any Contract and (b) to assist Liberty Life and Distributor in resolving
any complaint to the satisfaction of all parties.
e. Liberty Life shall promptly notify Distributor of:
(1) Any request by the SEC for any amendments or supplements to a
Contract's current prospectus or statement of additional information, other
than requests in the ordinary course of SEC review or registration
statements and amendments thereto prior to their effective date;
(2) Any request by the SEC for information that must be provided by
Distributor or any Selling Broker-Dealer, or any affiliated person of
Distributor or any Selling Broker-Dealer;
(3) The issuance by the SEC of any stop order with respect to a Contract's
Registration Statement or the initiation of any proceedings for that
purposes or for any other purpose relating to the registration and/or
offering of the Contracts; and
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(4) Any event as a result of which the prospectuses or any sales literature
for a Contract would include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading.
11. INDEMNIFICATION
a. Distributor shall indemnify and hold harmless Liberty Life, its affiliates,
officers, directors, employees and agents against any and all loss, claim,
damage, liability or expense (including reasonable attorneys' fees), joint
or several, insofar as such loss, claim, damage, liability or expense
arises out of or is based upon (i) any breach of this Agreement, any
applicable law or regulation, or any applicable rule of any self-regulatory
organization, by Distributor and/or any of its Associated Persons; or (ii)
any claim by any Associated Person of Distributor for commissions, service
fees, expense allowances or other compensation or remuneration of any type.
This indemnification will be in addition to any liability which Distributor
may otherwise have. This indemnity agreement will be in addition to any
liability which Distributor may otherwise have.
b. Liberty Life shall indemnify and hold harmless Distributor and its
affiliates, officers, directors, employees and agents against any and all
loss, claim, damage, liability or expense (including reasonable attorneys'
fees), joint or several, insofar as such loss, claim, damage, liability or
expense arises out of or is based upon any breach of this Agreement, any
applicable law or regulation, or any applicable rule of any self-regulatory
organization, by Liberty Life. This indemnification will be in addition to
any liability which the Liberty Life may otherwise have.
12. TERM OF AGREEMENT
a. This Agreement shall terminate automatically upon its assignment.
b. This Agreement may be terminated by any party hereto on not less than [60]
days' prior written notice to the other parties or by an agreement in
writing signed by all of the parties hereto.
c. This Agreement shall terminate at the option of Liberty Life upon
institution of formal proceedings against Distributor by the NASD or the
SEC, or if Distributor or any of its Associated Persons:
(1) employs any device, scheme, artifice, statement or omission to defraud
any person; or
(2) violates the provisions of this Agreement.
d. Upon termination of this Agreement, all authorizations, rights, and
obligations shall cease except the obligations to settle accounts
hereunder, including the settlement of monies due in connection with
Contracts in effect at the time of termination or issued pursuant to
applications received by Liberty Life prior to termination, and the
agreements contained in Paragraph 11.
13. MISCELLANEOUS
a. None of the parties hereto shall be liable to the other for any action
taken or omitted by it, or any of its officers, agents or employees, in
performing their respective responsibilities under this Agreement in good
faith and without negligence, willful misfeasance or reckless disregard of
such responsibilities.
b. Distributor will execute such papers and do such acts and things as shall
from time to time be reasonably requested by Liberty Life for the purpose
of (a) maintaining the registration of the interests under the Contracts
under the 1933 Act and the Separate Accounts under the 1940 Act, and (b)
qualifying and maintaining qualification of the Contracts for sale under
the applicable laws of any state.
14. NOTICE
All notices under this Agreement shall be given in writing and addressed as
follows:
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if to Distributor, to:
Liberty Life Distributors LLC
100 Liberty Way
Dover, New Hampshire 03820
Attention: President
if to Liberty Life or the Separate Accounts, to:
Liberty Life Assurance Company
of Boston
175 Berkeley Street
Boston, Massachusetts 02117
Attention: William J. O'Connell, Esq., Counsel
or to such other address as such party may hereafter specify in writing.
Each such notice shall be either hand delivered or transmitted by certified
United States mail, return receipt requested, and shall be effective upon
delivery.
15. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
16. ENTIRE AGREEMENT AND AMENDMENTS
This Agreement constitutes the entire agreement between the parties hereto and
may not be modified except in a written instrument executed by all parties
hereto.
17. CONSTRUCTION
This Agreement shall be subject to the provisions of the 1934 Act and, to the
extent applicable, the 1940 Act and the rules, regulations and rulings
thereunder and of the NASD, from time to time in effect, including such
exemptions from the 1940 Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
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18. GOVERNING LAW
This Agreement shall be interpreted in accordance with the laws of the
Commonwealth of Massachusetts, except to the extent those laws are inconsistent
with the federal securities laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials hereunto duly authorized, as of the day and
year first above written.
LIBERTY LIFE DISTRIBUTORS LLC
By:
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
By:
LLAC VARIABLE ACCOUNT
By: LIBERTY LIFE ASSURANCE COMPANY OF BOSTON as depositor
By:
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SCHEDULE A
----------
Contracts
Contract Name
Policy Form No.
<PAGE>
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SCHEDULE B
----------
Separate Accounts
LLAC Variable Account
<PAGE>
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SCHEDULE C
----------
Compensation
<PAGE>
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EXHIBIT A
Form of Selling Agreement
<PAGE>
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EXHIBIT B
General Letter of Recommendation
Distributor hereby certifies to Liberty Life that all the following requirements
will be fulfilled in conjunction with the submission by Distributor of
appointment papers for all applicants to become agents of Liberty Life
("Applicants"). Distributor will, upon request, forward proof of compliance with
same to Liberty Life in a timely manner.
1. We have on file a Form U-4 which was completed by each Applicant. We
have fulfilled all the necessary investigative requirements for the registration
of each Applicant as a registered representative, and each Applicant is
presently registered as an NASD registered representative. The above information
in our files indicates no fact or condition which would disqualify the Applicant
from receiving a license, and all the findings of all investigative information
is favorable.
2. We have made a thorough and diligent inquiry and investigation relative
to each Applicant's identity, residence, business reputation, and experience and
declare that each Applicant is personally known to us, has been examined by us,
is known to be of good moral character, has a good business reputation, is
reliable, is financially responsible and is worthy of appointment as a variable
contract agent of Liberty Life. This inquiry and background investigation has
included a credit and criminal check on each Applicant. Based upon our
investigation, we vouch for each Applicant and certify that each individual is
trustworthy, competent and qualified to act as an agent for Liberty Life and
hold himself out in good faith to the general public.
3. We certify that all educational requirements have been met for the
specific state in which each Applicant is requesting a license and that all such
persons have fulfilled the appropriate examination, education and training
requirements.
4. We hereby warrant that the Applicant is not applying for a license with
Liberty Life in order to place insurance chiefly or solely on his or her life or
property or on the lives, property or liability of relatives or associates.
5. We certify that each Applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or all risks
written by these Applicants, to the end that the insurance interest of the
public will be properly protected.
6. We will not permit any Applicant to transact insurance as an agent until
duly licensed and appointed by Liberty Life. No Applicants have been given an
insurance contract or furnished supplies, nor have any Applicants been permitted
to write, solicit business or act as an agent in any capacity, and they will not
be so permitted until the certificate of authority or license applied for is
received.
Exhibit 1.(3)(b)
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BROKER-DEALER AND GENERAL AGENT
SELLING AGREEMENT
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AGREEMENT, dated as of __________ __, 1998, by and among Liberty Life Assurance
Company of Boston ("Liberty Life"), Liberty Life Distributors LLC
("Distributor"), ("Broker-Dealer") and ("General Agent").
WHEREAS, Liberty Life issues certain insurance products and group and individual
insurance contracts/policies and certificates participating therein, some of
which may be deemed securities under the Securities Act of 1933 ("1933 Act");
and
WHEREAS, Distributor and Broker-Dealer are both broker-dealers registered with
the Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended ("1934 Act"), and members of the National Association of
Securities Dealers, Inc. ("NASD");
WHEREAS, Liberty Life has appointed Distributor as the distributor of the
Contracts specified in Schedule A;
WHEREAS Broker-Dealer is a broker/dealer engaged in the sale of securities and
other investment products; and
WHEREAS General Agent is an insurance agency licensed to sell variable life
insurance, and variable annuity contracts; and
WHEREAS, if General Agent and Broker-Dealer are the same person, the duties,
responsibilities, and privileges of General Agent under this Agreement shall be
undertaken by Broker-Dealer; and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:
1. PURPOSE
Broker-Dealer and General Agent desire to enter into an agreement with Liberty
Life and Distributor so as to have General Agent's sub-agents who are also
registered representatives of Broker-Dealer (the "Agents") appointed as agents
of Liberty Life for the purpose of selling the variable life insurance and
annuity contracts identified in Schedule A (the "Contracts").
2. APPOINTMENT AND AUTHORIZATION
Distributor hereby authorizes Broker-Dealer to solicit sales of the Contracts.
Liberty Life hereby appoints General Agent to solicit sales of the Contracts.
Broker-Dealer and General Agent accept such appointment and authorization, and
each agrees to use its best efforts to find purchasers of the Contracts
acceptable to Liberty Life. This appointment and authorization is non-exclusive.
Neither Broker-Dealer nor General Agent shall possess or exercise any authority
on behalf of the Distributor or Liberty Life other than the authority expressly
conferred by this Agreement.
3. LICENSING AND APPOINTMENT OF AGENTS
a. Broker-Dealer and General Agent are specifically authorized to designate
Agents proposed to be appointed as agents of Liberty Life to solicit
applications for the Contracts, to deliver the Contracts, and to collect
the first premium thereon in conformance with applicable state laws and
Liberty Life's rules and procedures. Broker-Dealer and General Agent shall
not propose an Agent for appointment unless such Agent is an "associated
person" of Broker-Dealer (as defined in Section 3(a)(8) of the 1934 Act),
duly registered as a representative of Broker-Dealer and duly licensed as
an insurance agent in the state(s) in which it is proposed that such Agent
engage in solicitation of sales of the Contracts. Broker-Dealer and General
Agent together shall be responsible for such
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Agents' continuing compliance with applicable securities registration
requirements and state insurance agent licensing laws.
b. Broker-Dealer and General Agent shall assist Liberty Life and Distributor
in the appointment of Agents under applicable insurance laws to sell the
Contracts. Broker-Dealer and General Agent shall comply with Liberty Life's
requirements, including the General Letter of Recommendation (attached as
Exhibit A) in submitting licensing or appointment documentation for Agents.
All such documentation shall be submitted by Broker-Dealer or General Agent
to Liberty Life or its designated agent licensing administrator.
c. Liberty Life agrees to pay the initial appointment fee required under
relevant state insurance laws to appoint Agents as agents of Liberty Life
for the sale of Contracts. General Agent will be responsible for paying all
other state insurance licensing fees with respect to the Agents, including
transfer fees and termination fees. Broker-Dealer shall be responsible for
all fees, including registration and examination fees, necessary to
maintain the Agents' continuing compliance with applicable securities
registration requirements.
d. Liberty Life reserves the right to refuse to appoint any such designated
Agent or, once appointed, to terminate or refuse to renew such Agent's
appointment.
4. SUPERVISION OF REPRESENTATIVES AND AGENTS
a. Broker-Dealer shall be responsible for training and supervision of all
Agents and other persons associated with Broker-Dealer who are involved
directly or indirectly in the offer or sale of the Contracts and all such
persons shall be subject to the control of Broker-Dealer with respect to
such person's activities in connection with the sale of Contracts. General
Agent shall be responsible for training and supervision of all Agents who
are involved directly or indirectly in the offer or sale of the Contracts
and for such Agents' compliance with applicable state insurance laws.
Broker-Dealer and General Agent each agree to comply with Liberty Life's
statement in support of the concepts in the Principles and Code of Ethical
Market Conduct of the Insurance Marketplace Standards Association (the
"IMSA Principles and Code"), as such statement may be amended from time to
time, and to engage in active and fair competition as contemplated by the
IMSA Principles and Code. A copy of Liberty Life's current statement in
support of the IMSA Principles and Code is attached as Exhibit C.
b. Broker-Dealer is specifically charged with the responsibility of
supervising and reviewing its Agents' use of sales literature and
advertising and all other communications with the public in connection with
the Contracts. No sales solicitation, including the delivery of
supplemental sales literature or other such materials, shall occur, be
delivered to or used with a prospective purchaser unless accompanied or
preceded by the appropriate then current prospectus, the then current
prospectus for the underlying funds funding the Contract, and where
required by state insurance law, the then current statement of additional
information.
c. Broker-Dealer shall execute any electronic or telephone orders only in
accordance with the current prospectus applicable to the Contracts and
agrees, that in consideration for the telephone transfer privileges,
Liberty Life will not be liable for any loss incurred as a result of acting
upon electronic or telephone instructions containing unauthorized,
incorrect or incomplete information received from Broker-Dealer or its
representatives.
d. Upon request by Liberty Life, Broker-Dealer and General Agent shall furnish
appropriate records or other documentation to evidence Broker-Dealer's and
General Agent's diligent supervision.
e. If an Agent performs any unauthorized transaction with respect to a
Contract, Broker-Dealer and General Agent shall bear sole responsibility,
shall notify Liberty Life, and shall act to terminate the sales activities
of such Agent relating to the Contracts.
f. If an Agent fails to meet Broker-Dealer's or General Agent's rules and
standards, Broker-Dealer or General Agent, as the case may be, shall notify
Liberty Life, and shall act to terminate the sales activities of such Agent
relating to the Contracts.
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5. SALES PROMOTION MATERIAL AND ADVERTISING
a. During the term of this Agreement, Distributor will be responsible for
providing and approving all promotional, sales and advertising material to
be used by Broker-Dealer and General Agent in connection with the offer and
sale of Contracts. Distributor will file such materials or will cause such
materials to be filed with the SEC and the NASD, and with any state
securities regulatory authorities, as required. Liberty Life and
Distributor reserve the right to require the recall of any material
approved by it at any time for any reason, and Broker-Dealer and General
Agent shall promptly comply with any such request and shall not use such
material thereafter.
b. Broker-Dealer, General Agent and Agents authorized to sell the Contracts
shall use only the effective current prospectuses, statements of additional
information ("SAIs") and other materials authorized by Liberty Life for use
in soliciting the sale of the Contracts. Distributor will provide the
Broker-Dealer and the General Agent, without charge, with as many copies of
the prospectuses for the Contract and the underlying investment funds as
may be reasonably requested. Upon receipt of updated documentation, the
Broker-Dealer and the General Agent will promptly discard or destroy all
copies of such material previously provided to them, except as needed to
maintain proper records. Liberty Life and Distributor reserve the right to
require the recall of any such material at any time for any reason, and
Broker-Dealer and General Agent shall promptly comply with any such request
and shall not use such material thereafter.
c. Broker-Dealer and General Agent are not authorized, and may not authorize
anyone else, to give any information or to make any representation
concerning Liberty Life, the Contracts, the Variable Account or the funding
media for the Contracts other than those contained in the current materials
authorized for use by Liberty Life. Broker-Dealer, General Agent, and
their Agents may not modify or represent that they are authorized to modify
any such prospectus, SAI or other materials authorized by Liberty Life for
use in soliciting the sale of the Contracts.
6. OBLIGATIONS OF BROKER-DEALER AND GENERAL AGENT
a. All solicitations for the Contracts will be made only by Agents who are
registered representatives of Broker-Dealer and duly licensed insurance
agents and appointed by Liberty Life. Continued solicitation for the
Contracts shall be contingent upon the continuing qualification of such
Agents by possession of the required licenses, appointments, and
registrations. Broker-Dealer and General Agent shall notify Distributor
immediately in writing if any Agent appointed by Liberty Life ceases to be
a registered representative of Broker-Dealer or ceases to be properly
licensed in any state. Solicitation may occur only in those states in which
Liberty Life is admitted to do business and in which the Contracts have
been approved for sale by the appropriate regulatory authority. Distributor
will notify Broker-Dealer and General Agent in writing of the states in
which each Contract has been approved for sale or no such approval is
required, and will update this information as needed.
b. All applications for Contracts will be made on application forms supplied
by Liberty Life. Broker-Dealer, General Agent and Agents shall not
recommend the purchase of a Contract to a prospective purchaser unless it
has reasonable grounds to believe that such purchase is suitable for the
prospective purchaser and is in accordance with applicable regulations of
any state insurance commission, the SEC and the NASD. While not limited to
the following, a determination of suitability shall be based on information
concerning the prospective purchaser's insurance and investment objectives
and financial situation and needs.
c. Broker-Dealer and General Agent shall review all applications for
completeness and correctness, as well as compliance with the suitability
standards specified above. Broker-Dealer will promptly, but in no case
later than the end of the next business day following receipt by
Broker-Dealer or an Agent, forward completed applications to Liberty Life
in accordance with Liberty Life's administrative procedures. Such
applications shall be accompanied by any premium payment received with such
applications, without deduction for any compensation, unless there has been
mutual arrangement for net wire transmissions between Distributor, Liberty
Life, and Broker-Dealer. Applications shall be sent to Liberty Life at the
address shown on the application or such other address as Liberty Life may
specify from time to time. Checks or money orders for the payment of
premiums shall be drawn to the order of "Liberty Life Assurance Company of
Boston". Neither Broker-Dealer nor General Agent has authority to deposit
or endorse checks payable to Liberty Life without the prior written
approval of Liberty Life.
Page 3 of 9
<PAGE>
- --------------------------------------------------------------------------------
Liberty Life has the right to reject any application for a Contract and
return any premium payment made in connection with the sale of the
Contracts.
d. Contracts issued on accepted applications shall be delivered to the
Contract Owner according to procedures established by Liberty Life. If
Liberty Life forwards a Contract to Broker-Dealer for delivery,
Broker-Dealer shall cause each such Contract to be delivered to the
Contract Owner within five days after the issue date of the Contract.
Broker-Dealer shall be liable to Liberty Life for any loss incurred by
Liberty Life (including consequential damages and regulatory penalties) as
a result of any delay by Broker-Dealer or a Representative in delivering a
Contract.
e. Broker-Dealer shall promptly pay any and all commissions and other
compensation due to its registered representatives in connection with the
sale of the Contracts.
f. Broker-Dealer and General Agent agree to comply with the established rules
and regulations of Liberty Life now in effect or which may be established
hereafter. Broker-Dealer and General Agent shall be responsible to
Distributor and Liberty Life for their and the Agents' acts and omissions.
g. Broker-Dealer and General Agent each agree to carry out their respective
sales and administrative activities and obligations under this Agreement in
continuous compliance with federal and state laws and regulations,
including those governing securities and insurance-related activities or
transactions, as applicable. Broker-Dealer and General Agent shall notify
Distributor and Liberty Life immediately in writing if Broker-Dealer and/or
General Agent fail to comply with any of the laws and regulations
applicable to either of them.
7. INDEPENDENT CONTRACTOR
Broker-Dealer, General Agent, and the Agents are performing the acts covered by
this Agreement in the capacity of independent contractors and not as an employee
of Liberty Life or Distributor. Broker-Dealer and General Agent shall be free
and independent to exercise their own judgment as to the persons from whom
insurance will be solicited as well as the time, place and manner of such
solicitation.
8. REPRESENTATIONS
a. Liberty Life, Distributor, Broker-Dealer and General Agent each represents
to one another that it and the officers signing below have full power and
authority to enter into this Agreement, and that this Agreement has been
duly and validly executed by it and constitutes a legal, valid and binding
agreement.
b. Distributor represents to Broker-Dealer that Distributor is registered as a
broker-dealer with the SEC under the 1934 Act and under the state
securities laws of each jurisdiction in which such registration is required
for underwriting the Contracts, and that it is a member of the NASD.
c. Broker-Dealer represents to Distributor that Broker-Dealer is, and at all
times when performing its functions and fulfilling its obligations under
this Agreement will be, registered with the SEC as a broker-dealer under
the 1934 Act and under the state securities laws of each jurisdiction in
which such registration is required for the sale of the Contracts, and a
member of the NASD. Broker-Dealer will notify Distributor in writing if any
such registration is terminated or suspended.
d. General Agent represents to Distributor and Liberty Life that General Agent
is, and at all times when performing its functions and fulfilling its
obligations under this Agreement, will be, a properly licensed insurance
agency in each jurisdiction in which such licensing is required for the
sale of the Contracts.
e. Liberty Life represents to Broker-Dealer that the Contracts, including any
variable account(s) supporting such Contracts, shall comply in all material
respects with the registration and other applicable requirements of the
1933 Act and the Investment Company Act of 1940, and the rules and
regulations thereunder, including the terms of any order of the SEC with
respect thereto.
Page 4 of 9
<PAGE>
- --------------------------------------------------------------------------------
f. Liberty Life represents to Broker-Dealer that the prospectuses included in
Liberty Life's Registration Statement for the Contracts, and in
post-effective amendments thereto, and any supplements thereto, as filed or
to be filed with the SEC, as of their respective effective dates, contain
or will contain in all material respects all statements and information
which are required to be contained therein by the 1933 Act and conform or
will conform in all material respects to the requirements thereof.
9. COMPENSATION
a. Broker-Dealer shall be paid compensation for the sale of Contracts as set
forth in Schedule B, attached hereto. The Compensation Schedule can be
changed prospectively by Distributor as of a specified date, provided such
date is at least ten days after the date the change is mailed to
Broker-Dealer's last known address. Any such change will apply only to
Contracts issued on or after the effective date of the change. Distributor
shall not be obligated to pay such compensation with respect to a Contract
until Distributor has received its compensation with respect to such
Contract from Liberty Life.
b. Compensation to the Agents for Contracts that they solicit and that are
issued by Liberty Life shall be governed by agreements between
Broker-Dealer and the Agents and payment thereof will be the
Broker-Dealer's exclusive responsibility. General Agent shall have no
interest in any compensation paid by Liberty Life to Distributor, now or
hereafter, in connection with the sale of any Contracts under this
Agreement.
c. Neither Broker-Dealer nor General Agent shall, directly or indirectly,
expend or contract for the expenditure of any funds of the Distributor or
Liberty Life. Broker-Dealer and General Agent shall each pay all expenses
incurred by each of them in the performance of this Agreement, unless
otherwise specifically provided for in this Agreement or Distributor shall
have agreed in advance in writing to share the cost of certain expenses.
d. If Liberty Life is required to refund premiums or return contract values
and waive surrender charges on any Contract for any reason, then
commissions will be adjusted with respect to said premiums or Contract as
set forth in the Commission Schedule, and any commission previously paid
for said premiums must be refunded to Liberty Life or Distributor.
Distributor shall have the right to offset any such refundable commission
against amounts otherwise payable by Distributor. Distributor agrees to
notify Broker-Dealer and General Agent within thirty days after it receives
notice from Liberty Life of any premium refund or a commission charge back.
10. NOTIFICATION OF CUSTOMER COMPLAINTS OR DISCIPLINARY PROCEEDINGS
a. Broker-Dealer and General Agent will promptly notify Distributor and
Liberty Life of any customer complaint or notice of any regulatory
investigation or proceeding received by Broker-Dealer, General Agent, or
their respective affiliates relating to the Distributor, Liberty Life, any
associated person of Distributor or Liberty Life, or the Contracts, or any
or threatened or filed arbitration action or civil litigation arising out
of solicitation of the Contracts.
b. Broker-Dealer and General Agent shall cooperate with Distributor and
Liberty Life in investigating and responding to any such complaint,
regulatory investigation or proceeding, arbitration, or civil litigation,
and in any settlement or trial of any actions arising out of the conduct of
business under this Agreement.
c. Any response by Broker-Dealer or General Agent to an individual customer
complaint will be sent to Liberty Life and Distributor for approval not
less than five (5) business days prior to it being sent to the customer,
except that if a more prompt response is required, the proposed response
may be communicated by telephone, facsimile or in person.
11. INDEMNIFICATION
a. Broker-Dealer and General Agent, jointly and severally, shall indemnify and
hold harmless Liberty Life, Distributor, and their respective affiliates,
officers, directors, employees and agents against any and all loss, claim,
Page 5 of 9
<PAGE>
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damage, liability or expense (including reasonable attorneys' fees), joint
or several, insofar as such loss, claim, damage, liability or expense
arises out of or is based upon any breach of this Agreement, any applicable
law or regulation, or any applicable rule of any self-regulatory
organization, by Broker-Dealer, General Agent, and/or any of the Agents.
This indemnification will be in addition to any liability which the
Broker-Dealer and General Agent may otherwise have.
b. Liberty Life and Distributor, jointly and severally, shall indemnify and
hold harmless Broker-Dealer, General Agent, and their respective
affiliates, officers, directors, employees and agents against any and all
loss, claim, damage, liability or expense (including reasonable attorneys'
fees), joint or several, insofar as such loss, claim, damage, liability or
expense arises out of or is based upon any breach of this Agreement, by
Liberty Life or the Distributor. This indemnification will be in addition
to any liability which Liberty Life and the Distributor may otherwise have.
12. ASSOCIATED INSURANCE AGENCY
Broker-Dealer and General Agent represent that they are in compliance with the
terms and conditions of no-action letters issued by the staff of the SEC with
respect to non-registration as a broker-dealer of an insurance agency associated
with a registered broker-dealer. Broker-Dealer and General Agent shall notify
Distributor immediately in writing if Broker-Dealer and/or such Agency fail to
comply with any such terms and conditions and shall take such measures as may be
necessary to comply with any such terms and conditions. If General Agent is the
same person as Broker-Dealer, this Paragraph 12 does not apply, and
Broker-Dealer shall undertake all the duties, responsibilities and privileges
under this Agreement.
13. FIDELITY BOND COVERAGE
Broker-Dealer represents that it and its directors, officers, employees, and
registered representatives are and shall be covered by a blanket fidelity bond,
issued by a reputable bonding company. This bond shall be maintained by Broker-
Dealer at Broker-Dealer's expense. Such bond shall be, at least, of the form,
type and amount required under the NASD Conduct Rules. Distributor may require
evidence, satisfactory to it, that such coverage is in force, and Broker-Dealer
shall give prompt written notice to Distributor of any cancellation or change of
coverage. Broker-Dealer assigns any proceeds received from the fidelity bonding
company to Liberty Life to the extent of its loss due to activities covered by
the bond, and to Distributor to the extent of its loss due to activities covered
by the bond. Failure to secure and maintain same shall be grounds for immediate
termination of this Agreement for cause.
14. CONFIDENTIALITY
Each party to this Agreement shall maintain the confidentiality of any client
list or any other proprietary information that it may acquire in the performance
of this Agreement and shall not use such information for any purpose unrelated
to the administration of the Contracts without the prior written consent of the
other parties.
15. TERMINATION
a. Any party may terminate this Agreement without cause upon thirty days
written notice to the other party at its last known business address.
b. This Agreement will terminate automatically if Broker-Dealer or General
Agent cease to have the requisite regulatory licenses.
c. This Agreement may be terminated by Liberty Life or Distributor for cause.
Termination for cause will become effective upon the mailing of a notice of
termination to Broker-Dealer's or General Agent's last known address, if
the reasons for the termination include conversion, fraud, embezzlement or
similar activity. Otherwise, a reasonable opportunity for cure will be
provided, and the termination will be effective at the end of the cure
period unless the grounds for termination have been corrected to Liberty
Life's and Distributor's satisfaction.
Page 6 of 9
<PAGE>
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d. This Agreement may be terminated immediately for cause upon an event of
default. Such termination shall be deemed to occur as of the date
immediately preceding the event of default. An "event of default" shall
occur when (i) the first of Broker-Dealer or General Agent files for
bankruptcy, or financial or corporate reorganization under federal or state
insolvency law, resulting in an impairment of such person's ability to
perform the services contemplated herein; or (ii) applicable laws or
regulations prohibit Broker-Dealer or General Agent from continued
marketing of the Contracts.
e. Failure of Liberty Life and/or Distributor to terminate this Agreement upon
knowledge of a cause shall not constitute a waiver of the right to
terminate at a later time for such cause. If this Agreement is terminated
for cause with no opportunity to cure as described above, all rights to
compensation which might otherwise be payable under this Agreement shall
cease and Broker-Dealer's right, title and interest in and to such
commissions and compensation shall be forever barred. If the parties
litigate this provision of the Agreement, the unsuccessful litigant shall
pay to the successful litigant all costs and expenses, including attorneys'
fees and court costs, incurred by the successful litigant at trial and on
appeal.
f. No provision of this Agreement shall continue in force after any
termination, other than Paragraphs 5, 11, 14, and 16.
16. ASSIGNMENT
This Agreement, or any compensation due hereunder, may not be assigned by any
party except by mutual consent of all other parties.
17. NON-WAIVER PROVISION
Failure of any party to terminate the Agreement for any of the causes set forth
in this Agreement will not constitute a waiver of that party's right to
terminate this Agreement at a later time for any of these causes.
18. AMENDMENTS
Except as stated in Paragraph 9.a., no amendment to this Agreement will be
effective unless it is in writing and signed by all the parties hereto.
19. BOOKS AND RECORDS
a. General Agent shall maintain such books and records concerning the
activities of the Agents as may be required by the appropriate insurance
regulatory agencies that have jurisdiction and that may be reasonably
required by Distributor to reflect adequately the Contracts business
processed through General Agent. Broker-Dealer represents that it maintains
and shall maintain appropriate books and records concerning the activities
of the Agents as are required by the SEC, the NASD and other agencies
having jurisdiction and that may be reasonably required by Distributor to
reflect adequately the Contracts business processed through Broker-Dealer.
General Agent and Broker-Dealer shall make such books and records available
to Distributor and/or Liberty Life at any reasonable time upon written
request by Distributor or Liberty Life.
b. The parties shall promptly furnish each other any reports and information
that another party may reasonably request for the purpose of meeting its
reporting and recordkeeping requirements under the insurance laws of any
state, under any applicable federal or state securities laws, rules or
regulations, or under the rules of the NASD.
20. NOTICE
a. In the event of sale, transfer or assignment or a controlling interest in
Broker-Dealer or General Agent, notice shall be provided in writing to
Distributor no less than thirty days prior to the closing date.
Page 7 of 9
<PAGE>
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b. All notices to Liberty Life and Distributor under this Agreement shall be
given in writing and addressed as follows:
<TABLE>
<S> <C>
Liberty Life Distributors LLC Liberty Life Assurance Company of Boston
100 Liberty Way 175 Berkeley Street
Dover, New Hampshire 03820 Boston, Massachusetts 02117
Attention: President Attention: William J. O'Connell, Esq., Counsel
</TABLE>
All notices to Broker-Dealer and General Agent shall be mailed to their
respective address shown on the signature page. All notices shall be either
hand delivered or transmitted by certified United States mail, return
receipt requested, and shall be effective upon delivery.
21. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
22. CONSTRUCTION
This Agreement shall be subject to the provisions of the 1934 Act and, to the
extent applicable, the 1940 Act and the rules, regulations and rulings
thereunder and of the NASD, from time to time in effect, including such
exemptions from the 1940 Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
Page 8 of 9
<PAGE>
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23. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<S> <C>
LIBERTY LIFE ASSURANCE COMPANY LIBERTY LIFE DISTRIBUTORS LLC
OF BOSTON
By: ________________________ By: __________________________
Title: _____________________ Title: _______________________
BROKER-DEALER GENERAL AGENT
____________________________ ______________________________
Name Name
____________________________ ______________________________
Street Address Street Address
____________________________ ______________________________
City, State & Zip City, State & Zip
By: ________________________ By: __________________________
Title: _____________________ Title: _______________________
</TABLE>
Page 9 of 9
<PAGE>
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EXHIBIT A
General Letter of Recommendation
The General Agent hereby certifies to Liberty Life that all the following
requirements will be fulfilled in conjunction with the submission by General
Agent of appointment papers for all applicants to become agents of Liberty Life
("Applicants"). The General Agent will, upon request, forward proof of
compliance with same to Liberty Life in a timely manner.
1. We have on file the appropriate state insurance department licensing
form and a Form U-4 which was completed by each Applicant. We have fulfilled all
the necessary investigative requirements for the registration of each Applicant
as a registered representative through our NASD member firm, and each Applicant
is presently registered as an NASD registered representative. The above
information in our files indicates no fact or condition which would disqualify
the Applicant from receiving a license, and all the findings of all
investigative information is favorable.
2. We have made a thorough and diligent inquiry and investigation relative
to each Applicant's identity, residence, business reputation, and experience and
declare that each Applicant is personally known to us, has been examined by us,
is known to be of good moral character, has a good business reputation, is
reliable, is financially responsible and is worthy of appointment as a variable
contract agent of Liberty Life. This inquiry and background investigation has
included a credit and criminal check on each Applicant. Based upon our
investigation, we vouch for each Applicant and certify that each individual is
trustworthy, competent and qualified to act as an agent for Liberty Life and
hold himself out in good faith to the general public.
3. We certify that all educational requirements have been met for the
specific state in which each Applicant is requesting a license and that all such
persons have fulfilled the appropriate examination, education and training
requirements.
4. We hereby warrant that the Applicant is not applying for a license with
Liberty Life in order to place insurance chiefly or solely on his or her life or
property or on the lives, property or liability of relatives or associates.
5. We certify that each Applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or all risks
written by these Applicants, to the end that the insurance interest of the
public will be properly protected.
6. We will not permit any Applicant to transact insurance as an agent until
duly licensed and appointed by Liberty Life. No Applicants have been given a
contract or furnished supplies, nor have any Applicants been permitted to write,
solicit business or act as an agent in any capacity, and they will not be so
permitted until the certificate of authority or license applied for is received.
<PAGE>
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EXHIBIT B
Statement in Support of IMSA Principles and Code
[to be inserted]
<PAGE>
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SCHEDULE A
----------
Contracts
<TABLE>
<S> <C>
Contract Name Policy Form No.
</TABLE>
<PAGE>
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SCHEDULE B
----------
Compensation
This schedule is attached to and made a part of the most current executed
Broker-Dealer and General Agent Selling Agreement (the "Agreement") between and
among Liberty Life Assurance Company of Boston ("Liberty Life"), Liberty Life
Distributors LLC ("Distributor"), ____________________ ("Broker-Dealer") and
_______________ ("General Agent").
The compensation for the variable life insurance and annuity products (the
"Contracts") referred to in the Agreement is as follows:
FOR SINGLE PAYMENT VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS, written on Form
SPV-9890 and SPV-9891, and any variations of these forms as may be required by
insurance regulatory authorities:
1. New Business Commission and Expense Reimbursement Allocation:
DISTRIBUTOR shall receive commissions of [7]% of the Initial Payment
and an expense reimbursement allowance of [0.15]% annually of the
unloaned Account Value for each Contract for which Broker-Dealer is the
broker-of-record.
However, no compensation shall be paid on Payment received from a Contract owner
when an existing life insurance or annuity contract issued by Liberty Life on
the same life has lapsed, been terminated or surrendered, been continued on a
nonforfeiture option, or been changed, modified or converted in any manner
within six months of the date of the application for the new Contract or twelve
months after the issue date of the new Contract, except to the extent that the
first year's annualized premium for the new Contract exceeds the first year's
annualized premium from the existing contract.
2. Return of Compensation in Specified Circumstances
The following rules regarding "chargebacks" shall apply in connection with
the offer and sale of Contracts under this Agreement:
a. In the event that:
i. a Payment is returned because Liberty Life rejects the
application for the Contract under which such Payment has been paid or
because the Payment, or the related application, is not timely received by
Liberty Life as required herein, or a refund is made because a purchaser
exercises his or her free look right under a Contract; or
ii. within the first twelve months after the date on which a
Contract was issued, the purchaser surrenders the Contract, or otherwise
rescinds the Contract, or the Contract lapses;
then, in any such event, Broker-Dealer shall not be entitled to any compensation
with respect to such Contract, and any and all compensation previously received
by Broker-Dealer based on all Payments paid into the Contract shall be repaid to
Distributor, and Broker-Dealer shall pay any loss incurred as a result of a
Payment being returned which was not timely received or for which an application
was not timely received by Liberty Life.
b. If and to the extent that any loans or partial withdrawals are made
with respect to any Contract during the first year after issuance, the
compensation due to Broker-Dealer shall be recomputed as though the amount of
the loan or partial withdrawal had never been paid as a Payment.
c. If and to the extent that a Contract is exchanged for another
contract during the first policy year of the Contract, the compensation due to
Broker-Dealer shall be recomputed as though the Contract had never been issued.
<PAGE>
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Distributor shall have the right to collect from Broker-Dealer or to withhold
from future payments of compensation due to Broker-Dealer under this Agreement
an amount equal to any reduction in compensation effected by this Schedule B, to
the extent permitted by applicable law; provided, however, that this option on
the part of Distributor shall not prevent both Distributor and Broker-Dealer or
either of them from pursuing any other means or remedies available to them to
recover such compensation. For purposes of this Schedule B, the payment of a
death benefit pursuant to the terms of a Contract shall not be deemed a
surrender or rescission by a purchaser.
Exhibit 1.(3)(c)
SCHEDULE B
----------
Compensation
This schedule is attached to and made a part of the most current executed
Broker-Dealer and General Agent Selling Agreement (the "Agreement") between and
among Liberty Life Assurance Company of Boston ("Liberty Life"), Liberty Life
Distributors LLC ("Distributor"), ____________________ ("Broker-Dealer") and
_______________ ("General Agent").
The compensation for the variable life insurance and annuity products (the
"Contracts") referred to in the Agreement is as follows:
FOR SINGLE PAYMENT VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS, written on Form
PSPV-9860 and PAA-9870, and any variations of these forms as may be required by
insurance regulatory authorities:
1. New Business Commission and Expense Reimbursement Allocation:
DISTRIBUTOR shall receive commissions of [7]% of the Initial
Payment and an expense reimbursement allowance of [0.15]%
annually of the unloaned Account Value for each Contract for
which Broker-Dealer is the broker-of-record.(1)
However, no compensation shall be paid on Payment received from a Contract owner
when an existing life insurance or annuity contract issued by Liberty Life on
the same life has lapsed, been terminated or surrendered, been continued on a
nonforfeiture option, or been changed, modified or converted in any manner
within six months of the date of the application for the new Contract or twelve
months after the issue date of the new Contract, except to the extent that the
first year's annualized premium for the new Contract exceeds the first year's
annualized premium from the existing contract.
2. Return of Compensation in Specified Circumstances
The following rules regarding "chargebacks" shall apply in connection
with the offer and sale of Contracts under this Agreement:
a. In the event that:
i. a Payment is returned because Liberty Life rejects
the application for the Contract under which such Payment has been paid
or because the Payment, or the related application, is not timely
received by Liberty Life as required herein, or a refund is made
because a purchaser exercises his or her free look right under a
Contract; or
ii. within the first twelve months after the date on
which a Contract was issued, the purchaser surrenders the Contract, or
otherwise rescinds the Contract, or the Contract lapses;
- -----------------
(1) Distributor may negotiate other commission schedules with a lower
initial commission and a higher expense reimbursement allowance rate. Under
these schedules, the annual expense reimbursement allowance rate may be
increased by 0.15% of Account Value for each 1% by which the commission rate is
lowered. These rates are the maximum rates Distributor intends to pay.
Distributor may negotiate commission schedules containing lower commission rates
and/or expense reimbursement allowance rates than those described above.
<PAGE>
Exhibit 1.(3)(c)
then, in any such event, Broker-Dealer shall not be entitled to any compensation
with respect to such Contract, and any and all compensation previously received
by Broker-Dealer based on all Payments paid into the Contract shall be repaid to
Distributor, and Broker-Dealer shall pay any loss incurred as a result of a
Payment being returned which was not timely received or for which an application
was not timely received by Liberty Life.
b. If and to the extent that any loans or partial withdrawals
are made with respect to any Contract during the first year after issuance, the
compensation due to Broker-Dealer shall be recomputed as though the amount of
the loan or partial withdrawal had never been paid as a Payment.
c. If and to the extent that a Contract is exchanged for
another contract during the first policy year of the Contract, the compensation
due to Broker-Dealer shall be recomputed as though the Contract had never been
issued.
Distributor shall have the right to collect from Broker-Dealer or to withhold
from future payments of compensation due to Broker-Dealer under this Agreement
an amount equal to any reduction in compensation effected by this Schedule C, to
the extent permitted by applicable law; provided, however, that this option on
the part of Distributor shall not prevent both Distributor and Broker-Dealer or
either of them from pursuing any other means or remedies available to them to
recover such compensation. For purposes of this Schedule C, the payment of a
death benefit pursuant to the terms of a Contract shall not be deemed a
surrender or rescission by a purchaser.
Exhibit 1.(5)(a)
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LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
A Member of the Liberty Mutual Group
- -------------------------------------------------------------------------------
Home Office: 175 Berkeley Street, P.O. Box 140, Boston, Massachusetts
02117-0140.
Service Center: 100 Liberty Way, Dover, New Hampshire 03820-5808
READ THIS INSURANCE CONTRACT CAREFULLY
RIGHT TO RETURN
This is a legal contract between You and the Company. If You are not satisfied,
You may return it to Us or Your agent within 20 days of its receipt and any
payment will be refunded.
Liberty Life Assurance Company of Boston, a stock Company, will pay the benefits
provided in this contract, subject to its terms and conditions. The CONTRACT
GUIDE on the inside of the front cover shows where the major contract provisions
can be found.
We have issued this modified single payment variable life insurance contract in
consideration of Your application and the receipt of Your Initial Payment.
THE AMOUNT AND DURATION OF THE DEATH BENEFIT AND OTHER VALUES PROVIDED BY THIS
CONTRACT ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, THE
FIXED ACCOUNT EARNINGS AND CONTRACT CHARGES. SEPARATE ACCOUNT VALUES ARE
VARIABLE AND MAY INCREASE OR DECREASE. THESE VALUES ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THE DEATH BENEFIT IS DESCRIBED ON PAGE 3.
Signed for the Company.
/s/ Barry S. Gilvar /s/ Edmund F. Kelly
SECRETARY PRESIDENT
CONTRACT DESCRIPTION
This is a MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT.
The Death Benefit is payable if the Insured dies while this contract is in force
and before the Maturity Date.
A Maturity Benefit is payable if the Insured is living on the Maturity Date.
Death Benefit and Account Value may vary with investment and earnings experience
and contract charges.
This contract is not eligible for Dividends.
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
CONTRACT ASSIGNMENT........................................................5
GUIDE CONTRACT CHARGES.................................................20
CONTRACT LOANS...................................................10
CONTRACT VALUES...................................................6
CONTRACT WITHDRAWAL..............................................11
DEATH BENEFIT.....................................................3
DEFINITIONS.......................................................2
GENERAL CONTRACT PROVISIONS.......................................5
GRACE PERIOD......................................................4
INCONTESTABILITY AND SUICIDE......................................6
MATURITY BENEFIT..................................................4
OWNER AND BENEFICIARY.............................................5
PAYMENT OF PROCEEDS..............................................15
PAYMENT OF PROCEEDS OPTIONS......................................15
REINSTATEMENT.....................................................4
SEPARATE ACCOUNT PROVISIONS.......................................9
PAYMENTS..........................................................4
TABLE OF GUARANTEED MONTHLY MAXIMUM
COST OF INSURANCE RATES.......................................18,19
TABLE OF WITHDRAWAL CHARGES......................................20
ANY ADDITIONAL AGREEMENTS, ENDORSEMENTS
AND A COPY OF THE APPLICATION APPEAR
AFTER PAGE.......................................................20
DEFINITIONS This is what We mean when We use the following words in Your
contract:
Accumulation Unit. An accounting unit of measurement which We use to
calculate the value of a sub-account.
Attained Age. The Insured's age on his or her last birthday.
Contract Date. The date when insurance coverage becomes effective.
Indebtedness. Any unpaid contract loan and unpaid loan interest.
Loan Account. An account established for amounts transferred from
the sub-accounts or the Fixed Account as security for outstanding
Indebtedness.
Monthly Date. The same day in each month as the Contract Date. The
day of the month on which the Monthly Deduction is taken from Your
Account Value.
Net Death Benefit. The Death Benefit, less any Indebtedness.
Proceeds. All or part of the amount payable under any provision of
this contract.
Written Request. A notice in writing, satisfactory to Us, placed on
file at Our Service Center.
Valuation Day. The day when a sub-account is valued. This occurs
every day We are open and the New York Stock Exchange is open for
trading.
Valuation Period. The time period between the close of business on
successive Valuation Days.
We, Our, Us, The Company. Liberty Life Assurance Company of Boston.
You, Your. The Owner of this contract, who may be someone other
than the Insured.
</TABLE>
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DEATH THE BENEFIT
BENEFIT If the Insured dies while this contract is in force, We will pay a
Death Benefit to the Beneficiary. The Death Benefit will be the
greater of:
[bullet] the Initial Death Benefit shown on the Contract Information
page; or
[bullet] a percentage, shown below, of the Account Value.
The Initial Death Benefit is reduced proportionately for partial
withdrawals (see page 11). We will reduce the Death Benefit by any
Indebtedness. The Death Benefit will be determined on the date We
receive proof, satisfactory to Us, of the Insured's death. The
applicable percentage is based upon the Insured's Attained Age.
<TABLE>
<CAPTION>
Attained Age Account Attained Age Account Attained Age Account Attained Age Account
Value % Value % Value % Value %
<S> <C> <C> <C> <C> <C> <C> <C>
40 & less 250 51 178 62 126 73 109
41 243 52 171 63 124 74 107
42 236 53 164 64 122 75-90 105
43 229 54 157 65 120 91 104
44 222 55 150 66 119 92 103
45 215 56 146 67 118 93 102
46 209 57 142 68 117 94-99 101
47 203 58 138 69 116 100 100
48 197 59 134 70 115
49 191 60 130 71 113
50 185 61 128 72 111
</TABLE>
GUARANTEED DEATH BENEFIT
The contract has a guaranteed Death Benefit equal to the Initial
Death Benefit. This guaranteed Death Benefit will be in effect until
the Maturity Date. The guaranteed Death Benefit is reduced
proportionately for partial withdrawals (see page 11). We will
reduce the guaranteed Death Benefit by any Indebtedness.
On any Monthly Date when the Surrender Value is not sufficient to
cover the Monthly Deduction and the contract has no Indebtedness, We
will waive that insufficiency and waive all future Monthly
Deductions until the Surrender Value is sufficient to cover the
Monthly Deductions.
If the contract has Indebtedness and the Surrender Value is not
sufficient to pay the Monthly Deduction or Loan Interest, the
contract will enter the Grace Period. To keep the contract in force,
an amount at least as large as (A) plus (B) plus (C) must be
remitted, where:
(A) is the amount by which the Monthly Deduction is insufficient;
(B) is the next three Monthly Deductions; and
(C) is the net loan interest for the next 3 months (net loan
interest is contract loan interest charged less interest
credited on the loan balance).
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This remittance will be considered a loan repayment, unless
otherwise specified in writing. If the amount necessary to keep the
contract in force exceeds the outstanding Indebtedness, only the
Indebtedness is due. Once the Indebtedness has been repaid, all
future Monthly Deductions will be waived until the Surrender Value
is sufficient to cover the Monthly Deductions.
INTEREST ON DEATH BENEFIT
We will pay interest on any Death Benefit payable in one sum. The
interest rate will never be less than 3 1/2% per year from the date
of death to the date of payment, or the rate required by applicable
state law, if greater.
MATURITY MATURITY BENEFIT
BENEFIT We will pay a Maturity Benefit to You if the Insured is living and
this contract is in force on the Maturity Date, which is the
contract anniversary on or following the Insured's 100th birthday.
The amount of the Maturity Benefit is equal to the Surrender Value.
PAYMENTS INITIAL PAYMENT
The Initial Payment is shown on the Contract Information page and is
payable on or before delivery of the contract. The payment is
payable at Our Service Center or to an authorized agent. A copy of
Your application, signed by Us or Our authorized agent, is Your
receipt for Your Initial Payment.
SUBSEQUENT PAYMENTS
We will accept additional payments if:
[bullet] the payment is required to keep the contract in force; or
[bullet] the payment is at least $1,000 and the payment will not
disqualify this contract as a life insurance contract under
the Internal Revenue Code as it now exists or may later be
amended.
If We accept an additional payment, evidence of insurability
satisfactory to Us will be required if an increase in the Death
Benefit occurs as a result of such payment.
PAYMENT ALLOCATION
The Initial Payment will be allocated to the Fixed Account on the
date We receive the payment.
The Account Value of the Fixed Account will then be allocated to the
sub-accounts, in whole percentages, according to the payment
allocation specified in the application. We may delay such
allocation until after the expiration of the Right to Return period
stated on the front page of Your contract.
GRACE PERIOD
If the contract has Indebtedness and the Surrender Value is
insufficient to pay the Monthly Deduction or Loan Interest, a Grace
Period of 61 days will be permitted for a payment sufficient to
continue the contract in force. We will send a notice to You at Your
last known address requesting the amount due. If the required amount
is not received within 61 days, the contract will terminate without
value. If the Insured dies during a Grace Period, the Death Benefit
will be reduced by any Monthly Deductions or Loan Interest due but
not paid.
REINSTATEMENT
This contract may be reinstated within five years of the end of the
Grace Period and prior to the Maturity Date if We receive:
[bullet] Your Written Request to reinstate the contract;
[bullet] evidence of insurability satisfactory to Us; and
[bullet] a payment equal to at least three Monthly Deductions
following the effective date of reinstatement.
If the Indebtedness is not repaid, such Indebtedness will also be
reinstated.
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<PAGE>
LIFE LIFE INSURANCE QUALIFICATION
INSURANCE This contract is intended to qualify for treatment as a life
QUALI- insurance contract under the Internal Revenue Code as it now exists
FICATION or may later be amended. We reserve the right to amend this contract
to comply with future changes in the Code and its Regulations. Any
amendments will be made by an agreement approved by the proper
regulatory authorities. We will promptly provide You with a copy of
any amendment.
We reserve the right to refuse premium payments and to return those
premium payments, in whole or in part, if accepting them would
disqualify this contract from favorable tax treatment under the
Code. A premium payment will not be refused if the payment will
prevent the contract from terminating.
GENERAL YOUR CONTRACT
CONTRACT Your contract is issued in consideration of the application and the
PROVISIONS Initial Payment. All statements made in the application are
representations and not warranties. No statement made by or on
behalf of the Insured will be used by Us to contest this contract,
or defend a claim under it, unless it is in the application.
Any additional agreements are shown on the Contract Information
page. These agreements are attached to and made a part of this
contract. This contract and the application contain the entire
contract between You and Us.
WAIVER
Only an officer of the Company can waive or change any provision of
this contract, and only by means of a written instrument.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, any Proceeds
will be adjusted to that amount which the payments paid would have
purchased at the correct age and sex. Age refers to the Insured's
age last birthday on the Contract Date.
ASSIGNMENT
Your contract may be assigned. We will not be on notice of any
assignment until a duplicate of the original assignment is filed at
Our Service Center. We assume no responsibility for the validity or
effect of any assignment, and may rely solely on the assignee's
statement of interest.
CONTRACT ANNIVERSARY
Contract years and anniversaries will be computed from the Contract
Date.
OWNER AND OWNER
BENEFICIARY The Owner is as named in the application on the Contract Date, and
may be changed from time to time. Unless otherwise provided, the
ownership rights of an individual who dies before the Insured will
belong to the surviving joint owner, or if no joint owner, to the
executors or administrators of that individual's estate. The
ownership rights of a corporation, partnership or fiduciary will
belong to its successors or assigns.
During the Insured's lifetime, the rights and privileges stated in
this contract may be exercised only by the Owner.
BENEFICIARY
The Beneficiary is as named in the application on the Contract Date,
and may be changed from time to time. The interest of any
Beneficiary who dies before the Insured will terminate at the death
of that Beneficiary.
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<PAGE>
If no Beneficiary designation is in effect at the Insured's death,
or if there is no designated Beneficiary then living, You will be
the Beneficiary. However, if the Insured was the Owner, the
executors or administrators of the Insured's estate will be the
Beneficiary.
CHANGE OF OWNERSHIP OR BENEFICIARY
You may change the Owner or any Beneficiary by Written Request
during the Insured's lifetime. The change will take effect as of the
date the request is signed after We acknowledge receipt in writing,
whether or not You or the Insured is living at the time of
acknowledgment. The change will be subject to any assignment, and to
any payment made or action taken by Us before acknowledgment.
INCONTEST- INCONTESTABILITY AFTER TWO YEARS
ABILITY AND In the absence of fraud, this contract will be incontestable after
SUICIDE it has been in force during the Insured's lifetime;
[bullet] with respect to the Initial Death Benefit, for two years
from the Contract Date; and
[bullet] with respect to each increase in the Initial Death Benefit,
for two years from the effective date of that increase.
SUICIDE WITHIN TWO YEARS
If the Insured dies by suicide within two years from the Contract
Date, while sane or insane, the amount payable under this contract
will be limited to the greater of the Account Value less
Indebtedness or the minimum value required by the state where this
contract was issued for delivery.
CONTRACT ACCOUNT VALUE
VALUES Your Account Value on the Contract Date is equal to the Initial
Payment less the Monthly Deduction for the first contract month.
On each Monthly Date, Your Account Value equals:
[bullet] the sum of the value of Your Accumulation Units in the
sub-accounts; plus
[bullet] Your Account Value in the Fixed Account; plus
[bullet] the value of Your Loan Account, if any; minus
[bullet] the Monthly Deduction.
On each Valuation Day, other than a Monthly Date, Your Account Value
equals:
[bullet] the sum of the value of Your Accumulation Units in the
sub-accounts; plus
[bullet] Your Account Value in the Fixed Account; plus
[bullet] the value of Your Loan Account, if any.
CASH VALUE
A Withdrawal Charge will be subtracted from the Account Value to
determine the Cash Value. The Withdrawal Charges are shown on the
Contract Charges page.
SURRENDER VALUE
Your Surrender Value is equal to Your Cash Value, minus the Contract
Fee, and minus any Indebtedness.
ACCOUNT VALUE IN FIXED ACCOUNT
The Account Value in the Fixed Account on the Contract Date is equal
to the Initial Payment less the Monthly Deduction for the first
contract month.
On each Monthly Date, the Account Value in the Fixed Account is
equal to:
[bullet] the Account Value in the Fixed Account on the preceding
Monthly Date with one month's interest; plus
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<PAGE>
[bullet] the Account Values transferred to the Fixed Account since
the preceding Monthly Date and interest from the date the
Account Value is transferred to the Monthly Date; minus
[bullet] the Account Values transferred from the Fixed Account since
the preceding Monthly Date and interest from the date the
Account Value is transferred to the Monthly Date; minus
[bullet] all withdrawals from the Fixed Account since the preceding
Monthly Date plus interest from the date of the withdrawal
to the Monthly Date; minus
[bullet] the portion of the Monthly Deduction allocated to the
Account Value in the Fixed Account, to cover the contract
month following the Monthly Date.
On any date other than a Monthly Date, the Account Value will be
calculated on a consistent basis.
SUB-ACCOUNT VALUES
Amounts allocated to sub-accounts are applied to provide
Accumulation Units in each sub- account. An Accumulation Unit is
used to calculate the value of a sub-account. The number of
Accumulation Units credited to each sub-account is determined by
dividing the amount allocated to a sub-account by the dollar value
of one Accumulation Unit for such sub-account. The number of Your
Accumulation Units is not affected by any subsequent change in the
value of the units. The Accumulation Unit values in each sub-account
may increase or decrease daily.
SUB-ACCOUNT ACCUMULATION UNIT VALUE
The Accumulation Unit value for each sub-account will vary to
reflect the investment experience of the applicable sub-account and
will be determined on each Valuation Day by multiplying the
Accumulation Unit value of the particular sub-account on the
preceding Valuation Day by a net investment factor for that
sub-account for the Valuation Period then ended. The net investment
factor for each sub-account is equal to the net asset value per
share of the corresponding investment at the end of the Valuation
Period (plus the per share amount of any dividend or capital gain
distributions paid by that investment in the Valuation Period then
ended) divided by the net asset value per share of the corresponding
investment at the beginning of the Valuation Period, less the
Separate Account Expense Charge.
While We are not currently making a provision for current taxes, any
new taxes or increase in taxes attributable to the operations of the
Separate Account, We reserve the right to deduct such a charge from
the Accumulation Unit value.
SUB-ACCOUNT ACCUMULATION VALUE
Your accumulation value in any sub-account equals:
[bullet] the number of Your Accumulation Units in that sub-account
on the Valuation Day;
[bullet] multiplied by that sub-account's Accumulation Unit value on
the Valuation Day.
EMERGENCY PROCEDURE
With the exception of weekends or holidays, if a national stock
exchange is closed, or trading is restricted due to an existing
emergency as defined by the Securities and Exchange Commission (SEC)
so that We cannot value the sub-accounts, or as otherwise ordered by
the SEC, We may postpone all procedures which require valuation of
the sub-accounts until valuation is possible. Any provision of this
contract which specifies a Valuation Day will be superseded by the
emergency procedure.
COST OF INSURANCE
The Cost of Insurance is determined on the Monthly Date and is
computed as follows:
[bullet] Divide the Death Benefit on the first day of the contract
month by 1 plus the Guaranteed Monthly Equivalent Interest
Rate shown on the Contract Charges page;
[bullet] Reduce the result by the Account Value on that day before
computing the Monthly Deduction for the Cost of Insurance;
and
[bullet] Multiply the difference by the Cost of Insurance Rate for
that month divided by 1000.
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<PAGE>
COST OF INSURANCE RATE
The Cost of Insurance Rate is the rate applied to the insurance
under this contract to determine the Cost of Insurance. It is based
on the Attained Age, sex and rating classification of the Insured.
The Cost of Insurance Rate will not be greater than the guaranteed
rates shown in the Table of Guaranteed Monthly Maximum Cost of
Insurance Rates (see pages 18 and 19).
MONTHLY DEDUCTION
A Monthly Deduction is made for the Cost of Insurance, Contract Fee,
the Expense Charge on the Fixed Account and the cost of any
Additional Benefit Agreements. The Monthly Deduction for a contract
month will be calculated by adding:
[bullet] the Contract Fee, if due;
[bullet] the Expense Charge on the Fixed Account;
[bullet] the Cost of Insurance for the contract month; and
[bullet] the cost for the contract month of any Additional Benefit
Agreements.
The Expense Charge on the Fixed Account will be deducted from Your
Fixed Account balance. The remainder of the Monthly Deduction for a
contract month will be allocated among the Fixed Account and the
sub-accounts of the Separate Account in proportion to the Account
Value in each account. When determining these proportions, the
Account Values are used net of any Indebtedness at the beginning of
the month. The Monthly Deduction for each date that falls on a
contract anniversary also includes the Contract Fee.
CONTRACT FEE
On each contract anniversary, the Contract Fee shown on the Contract
Charges page will be deducted from the Fixed Account and the
sub-accounts in proportion to the Account Value in each account. The
Contract Fee is also deducted upon full surrender of the contract.
FIXED ACCOUNT EXPENSE CHARGE
On each Monthly Date, an expense charge equal to the monthly
equivalent of the annual rate as shown on the Contract Charges page
is deducted from the Fixed Account.
INTEREST RATES
The Guaranteed Interest Rate for the Fixed Account is shown on the
Contract Charges page. Interest rates are expressed as effective
annual rates. The rate is compounded daily and is used to calculate
Account Values of the Fixed Account. We may credit interest in
excess of the Guaranteed Interest Rate. Such excess interest will be
at Our sole discretion.
The Account Value allocated to the Fixed Account will be guaranteed
and the rate of interest will be guaranteed for at least the balance
of the contract year. We determine interest rates in accordance with
market conditions and other factors. We may change the rate
guaranteed on new allocations at any time. This may cause the
guaranteed interest rate on Account Values at the beginning of a
contract year to differ from the guaranteed rate on values
transferred in at a later date. Once We guarantee an interest rate
for an amount in the Fixed Account, We will not change it until the
end of the current guarantee period.
Interest on Indebtedness will be credited on each contract
anniversary at the Guaranteed Interest Rate for the Fixed Account,
as shown on the Contract Charges page.
BASIS OF VALUES
The method used in computing Account Values and reserves in the
Separate Account is in accordance with actuarial procedures that
recognize the variable nature of the Separate Account. A detailed
statement of the method of computing values has been filed with the
Insurance Department of the state in which this contract was issued
for delivery. All contract values are equal to or in excess of the
minimum values required and all comply with the laws of that state.
8
<PAGE>
SEPARATE SEPARATE ACCOUNT
ACCOUNT The assets of the Separate Account will be used to provide values
PROVISIONS and benefits under this contract and any similar policies. The
assets of the Separate Account are owned by Us and cannot be charged
with liabilities which may arise from any other business the Company
may conduct. The assets of the Separate Account are not part of Our
general account. We may transfer to Our general account any assets
of the Separate Account which exceed the reserves and other contract
liabilities of the account. Unless otherwise permitted by law, the
investment policy of the Separate Account will not be changed
without the express or deemed approval of the state where this
contract was issued for delivery.
INVESTMENT ALLOCATIONS
The Separate Account is divided into several sub-accounts. We use
amounts allocated to a sub- account to buy shares or units of the
investment option shown in the prospectus for that sub-account. The
Initial Payment initially is allocated to the Fixed Account.
Subsequently, the payment will be allocated as You requested in the
application. We may delay such allocation until after the expiration
of the Right to Return period stated on the front page of your
Contract.
SUBSTITUTION
We may substitute another underlying investment without Your
consent. Substitution would occur if We determine that the use of
such underlying investment is no longer possible or if We determine
it is no longer appropriate for the purposes of the contract. No
substitution will be made without notice to You and without the
prior approval of the SEC and the state where this contract was
issued for delivery, if required. Should a substitution, addition or
deletion occur, You will be allowed to select from the then current
sub-accounts and substitution may be made with respect to both
existing payments and the investment of future payments.
TRANSFERS
You may transfer Account Values among the sub-accounts or from the
sub-accounts into the Fixed Account, upon request. The value
transferred from any sub-account must be at least $250 or the entire
balance, if less. The Account Value remaining in a sub-account after
any transfer must be at least $500. If the balance remaining in a
sub-account as a result of a transfer is less than $500, we may
require You to transfer the entire balance.
Transfers may be subject to a transfer charge. This charge will not
exceed $25.
Transfers from the Fixed Account to the sub-accounts must occur
within 60 days after each contract anniversary. The largest amount
that may be transferred out in each contract year is the greater of
the amount transferred in the prior contract year or 20% of the
balance in the Fixed Account. A transfer of all of the Account Value
from the Separate Account to the Fixed Account will not be subject
to a transfer charge.
We may modify or terminate the transfer privilege at any time.
SEPARATE ACCOUNT EXPENSE CHARGE
On each Valuation Day, an expense charge equal to the daily
equivalent of the annual rate as shown on the Contract Charges page
is deducted proportionately from the sub-accounts.
REPORTS ANNUAL REPORT
At least once each year, We will send You a report which shows:
[bullet] the current Death Benefit;
[bullet] the current Account Value;
[bullet] the current Cash Value;
[bullet] the Payments paid;
[bullet] investment gain/loss;
[bullet] any Indebtedness;
[bullet] the Cost of Insurance;
[bullet] the Expense Charge;
9
<PAGE>
[bullet] the current Surrender Value; and
[bullet] any other information required by the state in which this
contract was issued for delivery.
ILLUSTRATION OF BENEFITS
During any contract year, We will provide You with one illustration
of hypothetical future Account Values and Death Benefits at any time
upon Written Request. We may charge a reasonable fee for any
subsequent illustrations during the same contract year. However, the
fee will not be greater than $25.
CONTRACT LOANS
LOANS Your contract has a Loan Value which is equal to 90% of the Cash
Value (see page 6) as of the date of the loan. Loans must be at
least $250. You may borrow the Loan Value by assigning this contract
to Us as security for the loan. The assignment form must be
satisfactory to Us. Loans may be made at any time while this
contract is in force. We may defer the granting of a loan for up to
6 months.
You may decide the proportions in which to allocate the contract
loan among the sub-accounts of the Separate Account. If You do not
specify the allocation, then the contract loan will be allocated
among the sub-accounts of the Separate Account and the Fixed Account
in proportion to the Account Value in each account. The Account
Value equal to the portion of the contract loan allocated to a
sub-account and the Fixed Account will be transferred from that
sub-account and the Fixed Account to the Loan Account and the
Account Value in that sub-account and the Fixed Account will be
reduced by the amount transferred. If loan interest is not paid when
due, an amount of Account Value equal to the loan interest will also
be transferred.
If on any contract anniversary, the contract's Indebtedness exceeds
the Account Value in the Loan Account, We will transfer Account
Value equal to the excess Indebtedness from the Fixed Account and
the sub-accounts of the Separate Account to the Loan Account as
security for the excess debt in the same manner as the original
loan.
PREFERRED LOAN
The amount available for a Preferred Loan is the earnings of the
contract since its inception.
Earnings equals (A) minus (B) minus (C) minus (D) plus (E); where
(A) is the Account Value;
(B) is total payments made;
(C) is the preferred loan balance;
(D) is accrued loan interest; and
(E) is all prior partial withdrawals in excess of earnings.
LOAN INTEREST
Interest on contract loans equals the Guaranteed Interest Rate For
the Fixed Account, as shown on the Contract Charges page, plus 2%.
Interest on Preferred Loans equals the Guaranteed Interest Rate For
the Fixed Account, as shown on the Contract Charges page. Interest
will accrue daily from the date of the loan, and is due on each
contract anniversary. Unpaid interest will be added to existing
Indebtedness, and will accrue interest at the same rate.
REPAYMENT
While this contract is in force during the Insured's lifetime, any
loan may be repaid in whole or in part. When a loan repayment is
made, the Account Value in the Loan Account will be reduced by the
loan repayment, and this amount will be allocated proportionately
among the Fixed Account and sub-accounts of the Separate Account.
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<PAGE>
CONTRACT CONTRACT WITHDRAWAL
WITHDRAWAL You may withdraw from this contract its full Surrender Value upon
Written Request at any time during the lifetime of the Insured. Upon
withdrawal of the full Surrender Value, this contract will
terminate.
You may also make a partial withdrawal under this contract. Partial
withdrawals must be at least $250. For any partial withdrawal after
the first in any contract year, We may charge a transaction fee of
the lesser of $25 or 2% of the amount of the partial withdrawal. You
may select the sub- accounts from which to deduct the amount of the
partial withdrawal. If You do not indicate where the funds will be
deducted from, the amount of the partial withdrawal will be deducted
on a pro rata basis from the sub-accounts and the Fixed Account. The
Initial Death Benefit is reduced on the date of the partial
withdrawal in the same proportion that the Account Value was
reduced. If a partial withdrawal less any applicable Withdrawal
Charge, as described below, reduces the Account Value to below Our
current minimum, then the withdrawal request will be treated as a
request to withdraw the full Surrender Value.
We may defer the payment of Your withdrawal from the Fixed Account
for up to 6 months.
WITHDRAWAL CHARGE
Unless waived by Us, a Withdrawal Charge will be deducted from the
Account Value in the event of a withdrawal.
For a full withdrawal, the Withdrawal Charge is calculated by
multiplying (B) by (C) and subtracting the product from (A), where:
(A) is the Initial Payment multiplied by the applicable percentage
rate from the Table of Withdrawal Charges;
(B) is each previous withdrawal charge collected; and
(C) is the Withdrawal Charge percentage in effect at the time of a
full withdrawal divided by the Withdrawal Charge percentage at
the time each withdrawal was made.
For a partial withdrawal, the Withdrawal Charge is calculated by
multiplying the applicable percentage rate from the Table of
Withdrawal Charges by the amount of the partial withdrawal. The
total of the Withdrawal Charges in a contract year may not be
greater than the applicable percentage rate from the Table of
Withdrawal Charges multiplied by the portion of the Initial Payment
not previously withdrawn as of the beginning of the Contract Year.
WAIVER OF WITHDRAWAL CHARGE
We will waive the Withdrawal Charge on that portion of a withdrawal
not exceeding the greater of:
[bullet] 10% of the Account Value less any prior partial withdrawals
and Preferred Loans taken during the contract year; or
[bullet] the earnings of the contract since its inception (see
page 10).
We will also waive the Withdrawal Charge in the event of a
Qualifying Medical Stay. To qualify for this waiver:
[bullet] the Insured must have a Qualifying Medical Stay which
begins after the first contract year and lasts at least 45
days during any continuous 60 day period; or
[bullet] the Insured's spouse must have a Qualifying Medical Stay
which begins after the first contract year and lasts at
least 45 days during any continuous 60 day period; and
[bullet] You must mail your Written Request for this waiver,
together with proof, satisfactory to Us, of the stay,
within 180 days of initial eligibility.
If the Insured's spouse had a Qualifying Medical Stay within 45 days
prior to the Contract Date, a waiver of the Withdrawal Charge will
not be considered for the Insured's spouse, until the later of:
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<PAGE>
[bullet] 6 months from the date of the last Qualifying Medical Stay;
or
[bullet] the first contract anniversary.
Qualifying Medical Stay means: 1) confinement in a Qualifying
Institution; and 2) treatment by a Qualifying Medical Professional.
Qualifying Institution means a licensed hospital or licensed skilled
or intermediate care nursing facility at which: 1) medical treatment
is available on a daily basis; and 2) daily medical records are kept
on each patient. It does not include: 1) a facility whose purpose is
to provide accommodations, board or personal care services to
individuals who do not need medical or nursing care; or 2) a place
mainly for rest.
A Qualifying Medical Professional is a legally qualified
practitioner of the healing arts who is: 1) acting within the scope
of his or her license; 2) not a resident of Your household; and 3)
not a member of Your immediate family (children, grandchildren,
parents, grandparents, siblings and their spouses).
Treatment means the rendering of medical care or advice related to a
specific medical condition. Treatment includes diagnosis and
subsequent care. It does not include routine monitoring unless
medically necessary.
ACCELERATED THE RECEIPT OF AN ACCELERATED DEATH BENEFIT MAY BE TAXABLE.
DEATH YOU SHOULD CONSULT YOUR PERSONAL TAX OR LEGAL ADVISOR BEFORE
BENEFIT APPLYING FOR THIS BENEFIT.
PROVISIONS
THE DEATH BENEFIT, ACCOUNT VALUE AND LOAN VALUE WILL BE REDUCED IF
AN ACCELERATED DEATH BENEFIT IS PAID.
ACCELERATED DEATH BENEFIT
If, while this contract is in force, We receive proof, satisfactory
to Us, that the Insured either:
(1) has a Terminal Condition; or
(2) is Chronically Ill;
We will pay a portion of the contract's Death Benefit to you as an
Accelerated Death Benefit.
The balance of the Death Benefit is payable upon the Insured's
Death. Only one Accelerated Death Benefit payment is payable under
this contract.
DEFINITION OF TERMINAL CONDITION
Terminal Condition means a medical condition which is expected to
result in the Insured's death within 24 months from the date of the
medical certification submitted to Us in connection with the
application for the Accelerated Death Benefit and from which there
is no reasonable prospect of recovery. Such Terminal Condition must
be certified by a physician who meets the definition of a physician
under Section 101(g) of the Internal Revenue Code.
DEFINITION OF CHRONICALLY ILL
Chronically ill means any Insured who has been certified by a
licensed health care practitioner within the last 12 months as:
(1) being unable to perform, without substantial assistance from
another individual, at least two activities of daily living for
a period of at least 90 days due to a loss of functional
capacity; or
(2) requiring substantial supervision to protect such individual
from threats to health and safety due to severe cognitive
impairment.
Such licensed health care practitioner must meet the definition of a
licensed health care practitioner under Section 7702B(c) of the
Internal Revenue Code.
12
<PAGE>
ACTIVITIES OF DAILY LIVING
The activities of daily living prescribed in item (1) above are:
[bullet] eating
[bullet] toileting
[bullet] transferring
[bullet] bathing
[bullet] dressing
[bullet] continence
AMOUNT OF ACCELERATED DEATH BENEFIT
We first calculate the Benefit Base, which equals the Death Benefit
as defined in the DEATH BENEFIT section of the contract (before
subtracting any Indebtedness).
We then calculate the Maximum Available Accelerated Death Benefit by
multiplying the Benefit Base by 90%.
You may elect all or a portion of this Maximum Available Accelerated
Death Benefit. However, the amount elected may not be less than
$10,000, nor greater than $250,000. Additionally, the Initial Death
Benefit for the contract remaining in force must be no less than
$10,000.
You will receive less than the amount you elect because We:
(1) discount the amount you receive because it is an early payment;
(2) deduct a processing fee not to exceed $100; and
(3) repay and reduce any Indebtedness by the percentage of Death
Benefit accelerated.
In discounting the amount you elect, We will assume that the Death
Benefit would have been paid 24 months after the date the
Accelerated Death Benefit is paid. The discount rate will equal the
greater of:
(1) the current yield on 90 day treasury bills; or
(2) the current maximum statutory adjustable contract loan interest
rate based on the greater of:
(a) Moody's Corporate Bond Yield Averages-Monthly Average
Corporates-published by Moody's Investors Services, Inc., or
any successor thereto for the calendar month ending two months
before the date of application for an accelerated payment; and
(b) the contract's Guaranteed Annual Interest Rate for the
Fixed Account rate plus 1%.
No Withdrawal Charge will apply when you receive an Accelerated
Death Benefit.
TERMINAL CONDITION OPTION
This option provides that the Accelerated Death Benefit will be paid
to you in equal monthly installments for 12 months. For each $1,000
of Accelerated Death Benefit, each payment will be at least $84.65.
This assumes an annual interest rate of 3.5%.
If the Insured dies before all the payments have been made, We will
pay the Beneficiary in one sum. The one sum payment will be the
present value of the payments that remain. We will compute the value
based on the interest rate We used to determine those payments.
If you do not want monthly payments, We will pay you the Accelerated
Death Benefit in one sum if you ask Us to, using the process
described in the Amount of Accelerated Death Benefit provision.
CHRONICALLY ILL PAYMENT OPTION
This option provides level monthly payments for the number of years
shown in the table that follows. For each $1,000 of Accelerated
Death Benefit, each payment will be at least the minimum amount
shown in the table. The table uses an annual interest rate of 3.5%;
We may use a higher rate.
13
<PAGE>
<TABLE>
<CAPTION>
ATTAINED PAYMENT MINIMUM MONTHLY
AGE OF PERIOD IN PAYMENT FOR EACH
INSURED YEARS $1,000 OF DISCOUNTED BENEFIT
<S> <C> <C>
64 and under 10 $9.83
65-67 8 $11.90
68-70 7 $13.38
71-73 6 $15.35
74-77 5 $18.12
78-81 4 $22.27
82-86 3 $29.19
87 and over 2 $43.05
</TABLE>
If the Insured dies before all the payments have been made, We will
pay the beneficiary in one sum. The one sum We pay will be the
present value of the payments that remain. We will compute the value
based on the interest rate We used to determine those payments.
If We agree, you may choose a longer payment period than that shown
in the table; if you do, monthly payments will be reduced so that
the present value of the payments is the same. We will use an
interest rate of at least 3.5%.
We reserve the right to set a maximum monthly benefit that We will
pay under this option. If We do so, it will be at least $5,000.
If you do not want monthly payments, We will pay you the Accelerated
Death Benefit in one sum if you ask Us to. Such payment will be
calculated as described in the Amount of Accelerated Death Benefit
provision with the exception of the period over which the payment
will be discounted. The lump sum payment will be discounted over a
period not less than the Payment Period in Years section of this
provision. If the Insured dies before the end of the discount
period, we will recalculate the Accelerated Benefit based upon the
number of years between the end of the discount period and the date
of death. The Beneficiary will be paid the difference between this
recalculated amount and the amount that was received, minus the
processing fee.
EFFECT ON THIS CONTRACT
When We pay the Accelerated Death Benefit, We will calculate a
percentage which equals:
(1) the amount you elect to receive (before any reductions); divided
by
(2) the Benefit Base.
We will reduce by that percentage:
(1) the Initial Death Benefit;
(2) the Account Value; and
(3) any Indebtedness.
Any future Monthly Deductions, Cost of Insurance charges, or
Withdrawal Charges will be based on the reduced amount of insurance.
Once We approve your claim, We will send you new Contract
Information page with these changes. The subsequent payment of a
Death Benefit or Maturity Benefit of this contract will constitute
full settlement of the obligations of this contract.
CONDITIONS
Your right to receive the Accelerated Death Benefit is subject to
the following conditions:
(1) We must receive evidence, satisfactory to Us, of the Insured's
eligibility for this Benefit. Evidence satisfactory to Us, may
include, but is not limited to:
[bullet] the records of the Insured's attending physician, including
a prognosis of the Insured;
[bullet] all pertinent facts concerning the Insured's health; and
[bullet] a medical examination of the Insured conducted by a
physician chosen by Us and at Our expense. If there is a
difference of opinion as to the prognosis of the Insured,
the opinion of a licensed physician, acceptable to both Us
and the Insured, will control.
(2) You must choose the option in writing in a form that meets Our
needs.
14
<PAGE>
(3) If you have assigned all or a portion of this contract, you must
also give Us a signed consent form from the assignee.
(4) All beneficiaries must consent in writing to the payment of the
Accelerated Death Benefit on the date the Benefit is requested.
(5) You must send Us the contract.
EXCEPTIONS
This Benefit will not be paid if:
(1) the Insured is required by a governmental agency to claim this
Benefit in order to apply for, receive, or continue a government
benefit or entitlement;
(2) the Insured is required by law to use this Benefit to meet the
claims of creditors, whether in bankruptcy or otherwise;
(3) all or part of the contract's Death Benefit must be paid to the
Insured's children or spouse or former spouse as part of a
divorce decree, separate maintenance or property settlement
contract; or
(4) the Insured is married and lives in a community property state,
unless the Insured's spouse has given Us signed written consent.
PAYMENT OF PAYMENT
PROCEEDS The Proceeds of this contract will be subject first to the interest
of an assignee, to whom payment will be made in one sum. We will pay
any remaining Proceeds to You before the Insured's death, and to the
Beneficiary after the Insured's death.
Payment to the Beneficiary will be made only if We receive proof,
satisfactory to Us, of the Insured's death. Unless otherwise
provided, payment will be made in equal shares to those
Beneficiaries entitled to receive the Proceeds.
DELAY OF PAYMENT
We will pay Surrender Values, withdrawals and contract loans
allocated to the Separate Account within seven days after We receive
Your Written Request. We will pay death Proceeds allocated to the
Separate Account within seven days, only after We receive Your
Written Request and receive proof, satisfactory to Us, of the
Insured's death. Payment may be delayed if:
[bullet] the New York Stock Exchange is closed on other than
customary weekend and holiday closings or trading on the
New York Stock Exchange is restricted as determined by the
SEC; or
[bullet] an emergency exists, as determined by the SEC, as a result
of which disposal of securities is not reasonably
practicable to determine the value of the sub-accounts; or
[bullet] the SEC, by order, permits postponement for the protection
of contract owners.
PAYMENT OF PAYMENT OF PROCEEDS OPTIONS
PROCEEDS The Proceeds may be applied under one of the following Options. An
OPTIONS Option must be selected by Written Request. You may select an Option
during the Insured's lifetime. If You have not selected an Option
before the Insured's death, the Beneficiary may choose one. We will
not permit surrenders or partial withdrawals after payments under a
proceeds option involving life contingencies commence.
THE OPTIONS
1. Interest. We will pay interest monthly on Proceeds left on
deposit with Us. We will declare the interest rate each year. It
will never be less than 3 1/2% a year.
2. Fixed Amount. We will pay equal monthly installments, first
payment immediately, until the Proceeds and the interest have been
exhausted. Interest will be credited on unpaid balances at the rate
which We will declare each year. It will never be less than 3 1/2%,
compounded annually.
3. Fixed Period. We will pay equal monthly installments, first
payment immediately, for not more than 25 years. The minimum amount
of each installment may be determined from the
15
<PAGE>
OPTION 3 TABLE on page 17. This Table is based on a guaranteed
interest rate of 3 1/2%, compounded annually.
4. Life Income. We will pay equal monthly installments, first
payment immediately, for the lifetime of the payee with or without a
guaranteed period. The minimum amount of each installment may be
determined from the OPTION 4 TABLE on page 17. This Table is based
on a guaranteed interest rate of 3 1/2%, compounded annually. The
guaranteed period selected may be: (1) 10 years; (2) 15 years; or
(3) 20 years.
5. Other Payment. We will pay the Proceeds in any other manner that
may be mutually agreed upon.
AVAILABILITY
No Option may be selected unless the amount to be applied is more
than $2,000 and will provide an installment payment of at least $20.
Unless We consent, these Options will not be available if the payee
is an assignee, administrator, executor, trustee, association,
partnership or corporation.
ADDITIONAL INTEREST
At our discretion, additional interest may be declared annually on
all Payment Options. This interest will lengthen the period under
Option 2, and increase the installment amounts under Options 3 and
4.
OPTION 3 TABLE
MINIMUM MONTHLY INSTALLMENT PAYMENT PER $1,000 APPLIED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Number Monthly Number Monthly Number Monthly Number Monthly Number Monthly
of Years Payment of Years Payment of Years Payment of Years Payment of Years Payment
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $84.65 6 $15.35 11 $9.09 16 $6.76 21 $5.56
- -----------------------------------------------------------------------------------------------------------------
2 43.05 7 13.38 12 8.46 17 6.47 22 5.39
- -----------------------------------------------------------------------------------------------------------------
3 29.19 8 11.90 13 7.94 18 6.20 23 5.24
- -----------------------------------------------------------------------------------------------------------------
4 22.27 9 10.75 14 7.49 19 5.97 24 5.09
- -----------------------------------------------------------------------------------------------------------------
5 18.12 10 9.83 15 7.10 20 5.75 25 4.96
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
OPTION 4 TABLE
MINIMUM MONTHLY INSTALLMENT PAYMENT PER $1,000 APPLIED
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
MALE FEMALE
------------------------------------------------------------------------------------------------------------------
No Guaranteed Guaranteed Guaranteed No Guaranteed Guaranteed Guaranteed
Guaranteed Period Period Period Guaranteed Period Period Period
Age Period 10 Years 15 Years 20 Years Age Period 10 Years 15 Years 20 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.45 $4.41 $4.36 $4.29 50 $4.11 $4.09 $4.07 $4.04
51 4.52 4.47 4.42 4.34 51 4.16 4.15 4.12 4.09
52 4.59 4.55 4.48 4.40 52 4.22 4.20 4.18 4.14
53 4.67 4.62 4.55 4.45 53 4.29 4.27 4.24 4.19
54 4.76 4.70 4.62 4.51 54 4.36 4.33 4.30 4.24
55 4.85 4.78 4.70 4.57 55 4.43 4.40 4.36 4.30
56 4.94 4.87 4.77 4.63 56 4.50 4.47 4.42 4.36
57 5.04 4.96 4.85 4.70 57 4.58 4.54 4.49 4.42
58 5.15 5.06 4.93 4.76 58 4.67 4.62 4.57 4.48
59 5.26 5.16 5.02 5.82 59 4.76 4.71 4.64 4.55
60 5.39 5.26 5.11 4.89 60 4.85 4.80 4.72 4.61
61 5.52 5.38 5.20 4.95 61 4.95 4.89 4.81 4.68
62 5.66 5.50 5.29 5.01 62 5.06 4.99 4.89 4.75
63 5.80 5.62 5.39 5.08 63 5.18 5.10 4.98 4.82
64 5.96 5.75 5.49 5.14 64 5.30 5.21 5.08 4.89
65 6.14 5.89 5.58 5.20 65 5.43 5.32 5.18 4.96
66 6.32 6.03 5.68 5.26 66 5.57 5.45 5.28 5.03
67 6.51 6.18 5.78 5.31 67 5.72 5.58 5.38 5.10
68 6.72 6.33 5.88 5.37 68 5.89 5.72 5.49 5.17
69 6.94 6.49 5.98 5.42 69 6.06 5.86 5.60 5.23
70 7.18 6.65 6.08 5.46 70 6.25 6.01 5.71 5.30
71 7.44 6.82 6.18 5.50 71 6.45 6.18 5.82 5.36
72 7.71 6.99 6.27 5.54 72 6.67 6.34 5.93 5.41
73 7.99 7.16 6.36 5.58 73 6.91 6.52 6.04 5.46
74 8.30 7.33 6.44 5.61 74 7.17 6.70 6.15 5.51
75 8.63 7.51 6.52 5.63 75 7.45 6.89 6.26 5.55
76 8.99 7.68 6.60 5.66 76 7.75 7.08 6.36 5.59
77 9.37 7.86 6.67 5.68 77 8.08 7.28 6.45 5.62
78 9.77 8.03 6.73 5.69 78 8.43 7.48 6.54 5.65
79 10.21 8.19 6.79 5.71 79 8.81 7.68 6.62 5.67
80 10.67 8.36 6.84 5.72 80 9.22 7.88 6.70 5.69
------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000 OF INSURANCE NET AMOUNT AT RISK
NON-TOBACCO
<TABLE>
<CAPTION>
Attained Monthly Cost of Attained Monthly Cost of Attained Monthly Cost of
Age Insurance Rate Age Insurance Rate Age Insurance Rate
Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 0.2193 0.1567 35 0.1442 0.1259 70 3.0703 1.8585
1 0.0859 0.0701 36 0.1517 0.1342 71 3.4033 2.0584
2 0.0826 0.0667 37 0.1617 0.1442 72 3.7600 2.3037
3 0.0809 0.0651 38 0.1726 0.1551 73 4.1934 2.5976
4 0.0776 0.0642 39 0.1843 0.1667 74 4.6701 2.9361
5 0.0734 0.6254 40 0.1984 0.1809 75 5.1801 3.3143
6 0.0692 0.0609 41 0.2134 0.1959 76 5.7192 3.7239
7 0.0651 0.0592 42 0.2293 0.2109 77 6.2835 4.1631
8 0.0626 0.0584 43 0.2468 0.2259 78 6.8762 4.6390
9 0.0617 0.0576 44 0.2660 0.2409 79 7.5161 5.1666
10 0.0626 0.0567 45 0.2876 0.2576 80 8.2238 5.7673
11 0.0676 0.0584 46 0.3110 0.2751 81 9.0181 6.4590
12 0.0767 0.0609 47 0.3360 0.2943 82 9.9157 7.2573
13 0.0892 0.0642 48 0.3635 0.3143 83 10.9129 8.1594
14 0.1034 0.0684 49 0.3935 0.3368 84 11.9904 9.1556
15 0.1134 0.0717 50 0.4277 0.3618 85 13.1242 10.2354
16 0.1234 0.0751 51 0.4669 0.3894 86 14.3000 11.3917
17 0.1309 0.0776 52 0.5120 0.4211 87 15.5000 12.6232
18 0.1359 0.0801 53 0.5637 0.4561 88 16.7191 13.9315
19 0.1392 0.0826 54 0.6213 0.4920 89 17.9749 15.3273
20 0.1401 0.0842 55 0.6855 0.5303 90 19.2858 16.8225
21 0.1384 0.0859 56 0.7556 0.5687 91 20.6825 18.4527
22 0.1359 0.0867 57 0.8299 0.6063 92 22.2180 20.2807
23 0.1326 0.0884 58 0.9125 0.6438 93 24.0437 22.4383
24 0.1292 0.0901 59 1.0052 0.6864 94 26.5035 25.2231
25 0.1251 0.0917 60 1.1088 0.7364 95 30.2074 29.2496
26 0.1226 0.0942 61 1.2240 0.7982 96 36.3581 35.7221
27 0.1209 0.0959 62 1.3569 0.8750 97 47.2118 46.8683
28 0.1201 0.0984 63 1.5073 0.9693 98 66.2071 66.0943
29 0.1201 0.1017 64 1.6745 1.0754 99 82.5000 81.6667
30 0.1209 0.1042 65 1.8577 1.1898
31 0.1234 0.1076 66 2.0559 1.3084
32 0.1267 0.1109 67 2.2685 1.4296
33 0.1317 0.1151 68 2.4996 1.5550
34 0.1376 0.1201 69 2.7560 1.6946
</TABLE>
Class A Guaranteed Monthly Maximum Insurance Rates are equal to 250% of the
Guaranteed Maximum Insurance Rates for the Standard Class.
18
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000 OF INSURANCE NET AMOUNT AT RISK
TOBACCO
<TABLE>
<CAPTION>
Attained Monthly Cost of Attained Monthly Cost of Attained Monthly Cost of
Age Insurance Rate Age Insurance Rate Age Insurance Rate
Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 0.2193 0.1567 35 0.2268 0.1676 70 4.7492 2.4376
1 0.0859 0.0701 36 0.2434 0.1817 71 5.1624 2.6722
2 0.0826 0.0667 37 0.2643 0.1984 72 5.6299 2.9596
3 0.0809 0.0651 38 0.2876 0.2176 73 6.1485 3.3017
4 0.0776 0.0642 39 0.3143 0.2384 74 6.7174 3.6920
5 0.0734 0.0626 40 0.3452 0.2635 75 7.3258 4.1186
6 0.0692 0.0609 41 0.3785 0.2901 76 7.9486 4.5725
7 0.0651 0.0592 42 0.4152 0.3168 77 8.5746 5.0471
8 0.0626 0.0584 43 0.4553 0.3435 78 9.2082 5.5490
9 0.0617 0.0576 44 0.4995 0.3702 79 9.8715 6.0962
10 0.0626 0.0567 45 0.5462 0.3985 80 10.5868 6.7098
11 0.0676 0.0584 46 0.5946 0.4277 81 11.3746 7.4070
12 0.0767 0.0609 47 0.6471 0.4578 82 12.2491 8.2009
13 0.0892 0.0642 48 0.7039 0.4903 83 13.1961 9.1191
14 0.1034 0.0684 49 0.7656 0.5262 84 14.1843 10.1164
15 0.1467 0.0801 50 0.8341 0.5645 85 15.1804 11.1778
16 0.1634 0.0842 51 0.9117 0.6054 86 16.1604 12.2952
17 0.1751 0.0884 52 0.9994 0.6521 87 17.1682 13.4579
18 0.1843 0.0926 53 1.0988 0.7039 88 18.2203 14.6722
19 0.1901 0.0951 54 1.2073 0.7565 89 19.2685 15.9376
20 0.1934 0.0976 55 1.3235 0.8107 90 20.3284 17.3441
21 0.1934 0.0992 56 1.4463 0.8641 91 21.4331 18.8626
22 0.1901 0.1017 57 1.5759 0.9142 92 22.7172 20.5523
23 0.1868 0.1042 58 1.7121 0.9635 93 24.3689 22.5437
24 0.1817 0.1067 59 1.8585 1.0161 94 26.6300 25.2231
25 0.1759 0.1092 60 2.0216 1.0787 95 30.2074 29.2496
26 0.1726 0.1134 61 2.2057 1.1572 96 36.3581 35.7221
27 0.1709 0.1167 62 2.4134 1.2583 97 47.2118 46.8683
28 0.1709 0.1209 63 2.6454 1.3811 98 66.2071 66.0943
29 0.1734 0.1259 64 2.8993 1.5182 99 82.5000 81.6667
30 0.1776 0.1317 65 3.1684 1.6628
31 0.1834 0.1367 66 3.4502 1.8100
32 0.1909 0.1426 67 3.7423 1.9522
33 0.2009 0.1501 68 4.0489 2.0961
34 0.2126 0.1584 69 4.3817 2.2526
</TABLE>
Class A Guaranteed Monthly Maximum Insurance Rates are equal to 250% of the
Guaranteed Maximum Insurance Rates for the Standard Class.
19
<PAGE>
CONTRACT CHARGES
Interest Rates
Guaranteed Annual Interest Rate For the Fixed Account [3.50%]
Guaranteed Monthly Equivalent Interest Rate [0.28709%]
Contract Charges
Contract Fee [$30.00] per year
Cost of Insurance as defined on page 7.
Fixed Account Expense Charge [0.48%] per year
Separate Account Expense Charge [1.65%] per year
Withdrawal Charge on Withdrawal as defined on page 11.
Table of Withdrawal Charges
This table applies to the Initial Payment in the event of a
Withdrawal in the first [7] contract years.
<TABLE>
<CAPTION>
Contract Percentage Contract Percentage
Year Year
<S> <C> <C> <C>
[1 9.75% 5 7.25%
2 9.50% 6 5.00%
3 9.25% 7 4.75%
4 7.50% 8 and thereafter 0.00%]
</TABLE>
Mortality Table
1980 Commissioners Standard Ordinary Age Last Birthday Smoker or Non-smoker
The contract may end before the Maturity Date if the payments are not sufficient
to continue the contract to that date. If current values change, this will also
affect the benefits.
20
<PAGE>
- --------------------------------------------------------------------------------
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
A Member of the Liberty Mutual Group
- --------------------------------------------------------------------------------
CONTRACT DESCRIPTION
This is a MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT.
The Death Benefit is payable if the Insured dies while this contract is in force
and before the Maturity Date.
A Maturity Benefit is payable if the Insured is living on the Maturity Date.
Death Benefit and Account Value may vary with investment and earnings experience
and contract charges.
This contract is not eligible for dividends.
Exhibit 1.(5)(b)
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
- --------------------------------------------------------------------------------
LAST SURVIVOR This is a Joint and Last Survivor Benefit Agreement. The Death
DEATH BENEFIT Benefit for this Agreement is payable if the surviving Insured
AGREEMENT dies while the contract to which this Agreement is attached is
in force and before the Maturity Date. The surviving Insured is
the Insured who is living upon the death of the other Insured
under this contract. No Death Benefit is payable under the
contract upon the death of the first Insured. This Agreement is
nonparticipating and is not eligible for dividends.
This Agreement amends the following provisions of Your contract:
The Attained Age is an Insured's age on his or her last
birthday. The Maturity Date provision will be based upon the
Attained Age of the younger Insured.
THE BENEFIT
In determining the Death Benefit, the applicable percentage of
the Account Value is based upon the Attained Age of the younger
Insured.
REINSTATEMENT
You may reinstate Your contract subject to the Reinstatement
provision of the contract and if both Insureds are alive, or if
one Insured is alive and the lapse occurred after the death of
the first Insured.
MISSTATEMENT OF AGE OR SEX, ASSIGNMENT
The Misstatement of Age or Sex and Assignment provisions of Your
contract apply to either Insured.
OWNER
During the lifetime of both Insureds, the rights and privileges
stated in this contract may be exercised only by the Owner.
BENEFICIARY
The Beneficiary is as named in the application on the Contract
Date, and may be changed from time to time. The interest of any
Beneficiary who dies before the surviving Insured will terminate
at the death of that Beneficiary.
If no Beneficiary designation is in effect at the surviving
Insured's death, or if there is no designated Beneficiary then
living, You will be the Beneficiary. However, if the surviving
Insured was the Owner, the executors or administrators of the
Insured's estate will be the Beneficiary.
CHANGE OF OWNERSHIP OR BENEFICIARY
You may change the Owner or any Beneficiary by Written Request
during the lifetime of either Insured. The change will take
effect as of the date the request is signed after We acknowledge
receipt in writing, whether or not You or an Insured are living
at the time of acknowledgment. The change will be subject to any
assignment, and to any payment made or action taken by Us before
acknowledgment.
INCONTESTABILITY AFTER TWO YEARS
The Incontestability After Two Years provision of Your contract
applies to both Insureds.
Before the end of the second year from the Contract Date, We
will send a notice to You requesting notification of the death
of any Insured. Failure to notify Us of the death of either
Insured will not avoid a contest of this contract.
SUICIDE WITHIN TWO YEARS
The Suicide Within Two Years provision of Your contract applies
to either Insured.
<PAGE>
COST OF INSURANCE RATE
The Cost of Insurance Rate is based on the Attained Age, sex and
rating classification of both Insureds. The Guaranteed Monthly
Maximum Cost of Insurance Rates are replaced with page 3 of this
Agreement.
ACCELERATED DEATH BENEFIT
After the death of the first Insured, the Death Benefit may be
accelerated, subject to the conditions of the Accelerated Death
Benefit provision.
PAYMENT OF PROCEEDS
The Proceeds of this contract will be subject first to the
interest of an assignee, to whom payment will be made in one
sum. We will pay any remaining Proceeds to You before the
surviving Insured's death, and to the Beneficiary after the
surviving Insured's death.
Payment to the Beneficiary will be made only if We receive
proof, satisfactory to Us, of the death of both Insureds. Unless
otherwise provided, payment will be made in equal shares to
those Beneficiaries entitled to receive the Proceeds.
TERMINATION
This Agreement will terminate on the earliest of:
(1) the date of death of the surviving Insured;
(2) the date any Monthly Deduction, Cost of Insurance Charge or
premium due for the contract remains unpaid at the end of
its Grace Period; or
(3) the date the contract matures; is surrendered; or terminates
for any reason.
THIS AGREEMENT AND THE CONTRACT
This Agreement is made a part of your contract if We have listed
it on the Contract Information page.
EFFECTIVE DATE
This Agreement takes effect on the Contract Date shown on the
Contract Information page.
/s/ Edmund F. Kelly
PRESIDENT
2
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000 OF INSURANCE NET AMOUNT OF RISK
[MALE] [STANDARD] [NON-TOBACCO] ISSUE AGE [65] / [FEMALE] [STANDARD]
[NON-TOBACCO] ISSUE AGE [65]
<TABLE>
<CAPTION>
Attained Monthly Cost of Attained Monthly Cost of Attained Monthly Cost of
Age Insurance Rate Age Insurance Rate Age Insurance Rate
<S> <C> <C> <C> <C> <C>
0 - 35 - 70 0.5020
1 - 36 - 71 0.6663
2 - 37 - 72 0.8666
3 - 38 - 73 1.1163
4 - 39 - 74 1.4171
5 - 40 - 75 1.7732
6 - 41 - 76 2.1831
7 - 42 - 77 2.6479
8 - 43 - 78 3.1709
9 - 44 - 79 3.7616
10 - 45 - 80 4.4380
11 - 46 - 81 5.2163
12 - 47 - 82 6.1130
13 - 48 - 83 7.1314
14 - 49 - 84 8.2628
15 - 50 - 85 9.4909
16 - 51 - 86 10.8022
17 - 52 - 87 12.1851
18 - 53 - 88 13.6300
19 - 54 - 89 15.1452
20 - 55 - 90 16.7381
21 - 56 - 91 18.4406
22 - 57 - 92 20.3084
23 - 58 - 93 22.4784
24 - 59 - 94 25.2634
25 - 60 - 95 29.2770
26 - 61 - 96 35.7275
27 - 62 - 97 46.8583
28 - 63 - 98 66.0868
29 - 64 - 99 81.9135
30 - 65 0.0267
31 - 66 0.0884
32 - 67 0.1642
33 - 68 0.2559
34 - 69 0.3660
</TABLE>
For the purposes of this table, Attained Age is based upon the age of the
younger Insured.
3
Exhibit 1.(8)(a)
FORM OF
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
NAME OF UNDERWRITER OF VARIABLE CONTRACTS AND POLICIES
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Description
Section 1. Available Funds ...............................................................2
1.1 Availability..........................................................2
1.2 Addition, Deletion or Modification of Funds...........................2
1.3 No Sales to General Public............................................2
Section 2. Processing Transactions........................................................2
2.1 Timely Pricing and Orders.............................................2
2.2 Timely Payments.......................................................3
2.3 Applicable Price......................................................3
2.4 Dividends and Distributions...........................................4
2.5 Book Entry............................................................4
Section 3. Costs and Expenses.............................................................4
3.1 General...............................................................4
3.2 Parties To Cooperate..................................................4
Section 4. Legal Compliance...............................................................5
4.1 Tax Laws..............................................................5
4.2 Insurance and Certain Other Laws......................................7
4.3 Securities Laws.......................................................8
4.4 Notice of Certain Proceedings and Other Circumstances.................9
4.5 LIFE COMPANY To Provide Documents; Information
About AVIF.................................................9
4.6 AVIF To Provide Documents: Information About
LIFE COMPANY..............................................10
Section 5. Mixed and Shared Funding......................................................12
5.1 General..............................................................12
5.2 Disinterested Directors..............................................12
5.3 Monitoring for Material Irreconcilable Conflicts.....................12
5.4 Conflict Remedies....................................................13
5.5 Notice to LIFE COMPANY...............................................14
5.6 Information Requested by Board of Directors..........................15
5.7 Compliance with SEC Rules............................................15
5.8 Other Requirements...................................................15
Section 6. Termination...................................................................15
6.1 Events of Termination................................................15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Description Page
<S> <C>
6.2 Notice Requirement for Termination...................................16
6.3 Funds To Remain Available............................................17
6.4 Survival of Warranties and Indemnifications..........................17
6.5 Continuance of Agreement for Certain Purposes........................17
Section 7. Parties To Cooperate Respecting Termination...................................18
Section 8. Assignment....................................................................18
Section 9. Notices.......................................................................18
Section 10. Voting Procedures............................................................19
Section 11. Foreign Tax Credits..........................................................19
Section 12. Indemnification..............................................................19
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER..............................19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF..............................22
12.3 Effect of Notice.....................................................24
12.4 Successors...........................................................24
Section l3. Applicable Law...............................................................24
Section 14. Execution in Counterparts....................................................25
Section 15. Severability.................................................................25
Section 16. Rights Cumulative............................................................25
Section 17. Headings.....................................................................25
Section l8. Confidentiality..............................................................25
Section 19. Trademarks and Fund Names....................................................26
Section 20. Parties to Cooperate.........................................................27
</TABLE>
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ___________ day of ___________,
1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF");___________ Life Insurance Company, a [STATE] life
insurance company ("LIFE COMPANY"), on behalf of itself and each of its
segregated asset accounts listed in Schedule A hereto, as the parties hereto may
amend from time to time (each, an "Account," and collectively, the "Accounts");
and [NAME OF SEPARATE ACCOUNT UNDERWRITER], an affiliate of LIFE COMPANY and the
principal underwriter of the Contracts ("UNDERWRITER") (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the " 1933 Act") and are currently sold to one or more
separate accounts of life insurance companies to fund benefits under variable
annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount thereof
to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts,
each of which is registered as a unit investment trust investment company under
the 1940 Act (or exempt therefrom), and the security interests deemed to be
issued by the Accounts under the Contracts will be registered as securities
under the 1933 Act (or exempt therefrom); and
1
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section l. Available Funds
--------------------------
1.1 Availability.
AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges, subject to
the terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds
to provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
Section 2. Processing Transactions
----------------------------------
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to provide
LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean any
day on which (i) the New York Stock Exchange is
2
<PAGE>
open for regular trading, (ii) AVIF calculates the Fund's net asset value, and
(iii) LIFE COMPANY is open for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and
of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 Timely Payments.
LIFE COMPANY will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. AVIF will wire payment
for net redemptions to an account designated by LIFE COMPANY by 1:00 p.m.
Central Time on the same day as the Order is placed, to the extent practicable,
but in any event within five (5) calendar days after the date the order is
placed in order to enable LIFE COMPANY to pay redemption proceeds within the
time specified in Section 22(e) of the 1940 Act or such shorter period of time
as may be required by law.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 9:00 a.m. Central
3
<PAGE>
Time on the next following Business Day or such later time as computed in
accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 Dividends and Distributions.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only.
Stock certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF
will be recorded in an appropriate title for LIFE COMPANY, on behalf of its
Account.
Section 3. Costs and Expenses
-----------------------------
3.1 General.
Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear, or arrange for others to
bear, all expenses incident to its performance under this Agreement.
3.2 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
4
<PAGE>
Section 4. Legal Compliance
---------------------------
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and represents that it
will use its best efforts to qualify and to maintain qualification of each Fund
as a RIC. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and
to maintain each Fund's compliance with the diversification requirements set
forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations
under the Code. AVIF will notify LIFE COMPANY immediately upon having a
reasonable basis for believing that a Fund has ceased to so comply or that a
Fund might not so comply in the future. In the event of a breach of this Section
4.1 (b) by AVIF, it will take all reasonable steps to adequately diversify the
Fund so as to achieve compliance within the grace period afforded by Section
1.817-5 of the regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such
assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to
any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to
minimize any liability that may arise as a result
of such failure or alleged failure;
(iii) LIFE COMPANY shall use its best efforts to
minimize any liability of AVIF or its affiliates
resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was
inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates
and their legal and accounting advisors to
participate in any conferences, settlement
discussions or other administrative or judicial
proceeding or contests (including judicial
appeals thereof) with the IRS, any Participant or
any other claimant regarding any claims that
could give rise to liability to AVIF or its
affiliates as a result
5
<PAGE>
of such a failure or alleged failure; provided,
however, that LIFE COMPANY will retain control of
the conduct of such conferences discussions,
proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE
COMPANY to the IRS, any Participant or any other
claimant in connection with any of the foregoing
proceedings or contests (including, without
limitation, any such materials to be submitted to
the IRS pursuant to Treasury Regulations Section
1.817-5(a)(2)), (a) shall be provided by LIFE
COMPANY to AVIF (together with any supporting
information or analysis); subject to the
confidentiality provisions of Section 18, at
least ten (10) business days or such shorter
period to which the Parties hereto agree prior to
the day on which such proposed materials are to
be submitted, and (b) shall not be submitted by
LIFE COMPANY to any such person without the
express written consent of AVIF which shall not
be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates
and their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting
AVIF and its accounting and legal advisors to
review the relevant books and records of LIFE
COMPANY) in order to facilitate review by AVIF or
its advisors of any written submissions provided
to it pursuant to the preceding clause or its
assessment of the validity or amount of any claim
against its arising from such a failure or
alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim
of the IRS or any Participant that would give
rise to a claim against AVIF or its affiliates
(a) compromise or settle any claim, (b) accept
any adjustment on audit, or (c) forego any
allowable administrative or judicial appeals,
without the express written consent of AVIF or
its affiliates, which shall not be unreasonably
withheld, provided that LIFE COMPANY shall not be
required, after exhausting all administrative
penalties, to appeal any adverse judicial
decision unless AVIF or its affiliates shall have
provided an opinion of independent counsel to the
effect that a reasonable basis exists for taking
such appeal; and provided further that the costs
of any such appeal shall be borne equally by the
Parties hereto; and
(viii) AVIF and its affiliates shall have no liability
as a result of such failure or alleged failure if
LIFE COMPANY fails to comply with any of the
foregoing clauses (i) through (vii), and such
failure could be shown to have materially
contributed to the liability.
6
<PAGE>
Should AVIF or any of its affiliates refuse to give its written
consent to any compromise or settlement of any claim or liability hereunder,
LIFE COMPANY may, in its discretion, authorize AVIF or its affiliates to act in
the name of LIFE COMPANY in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all administrative or judicial
appeals thereof, and in that event AVIF or its affiliates shall bear the fees
and expenses associated with the conduct of the proceedings that it is so
authorized to control; provided, that in no event shall LIFE COMPANY have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act
(d) LIFE COMPANY represents and warrants that the Contracts currently
are and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
(a) AVIF will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of _______________ and has full corporate power, authority and legal
right to execute, deliver and perform its duties and comply with its obligations
under this Agreement, (ii) it has legally and validly established and maintains
each Account as a segregated asset account under Section __ of the
________________ Insurance Law and the regulations thereunder, and (iii) the
Contracts comply in all material respects with all other applicable federal and
state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal
7
<PAGE>
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
4.3 Securities Laws.
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
________________ law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale
in accordance with the laws of any state or other jurisdiction if and to the
extent reasonably deemed advisable by AVIF.
(d) AVIF 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 reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are
8
<PAGE>
and continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
coverage as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond includes
coverage for larceny and embezzlement and is issued by a reputable bonding
company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIFs registration statement under the 1933 Act or
AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIFs Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 LIFE COMPANY To Provide Documents; Information About AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
9
<PAGE>
(b) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which AVIF or any of its affiliates is named, at least
five (5) Business Days prior to its use or such shorter period as the Parties
hereto may, from time to time, agree upon. No such material shall be used if
AVIF or its designated agent objects to such use within five (5) Business Days
after receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. AVIF hereby designates AIM as the entity to
receive such sales literature, until such time as AVIF appoints another
designated agent by giving notice to LIFE COMPANY in the manner required by
Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, 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,
(e.g., on-line networks such as the Internet or other electronic messages),
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, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents; Information About LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy
of all SEC registration statements, AVIF Prospectuses, reports, any preliminary
and final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above,
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that relate to AVIF or the Shares of a Fund, contemporaneously with the filing
of such document with the SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready or computer
diskette copies of all AVIF prospectuses and printed copies, in an amount
specified by LIFE COMPANY, of AVIF statements of additional information, proxy
materials, periodic reports to shareholders and other materials required by law
to be sent to Participants who have allocated any Contract value to a Fund. AVIF
will provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE
COMPANY, as the case may be, to print and distribute such materials within the
time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective affiliates
is named, or that refers to the Contracts, at least five (5) Business Days prior
to its use or such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if LIFE COMPANY or its designated
agent objects to such use within five (5) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time to time,
agree upon. LIFE COMPANY shall receive all such sales literature until such time
as it appoints a designated agent by giving notice to AVIF in the manner
required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information
or make any representations or statements on behalf of or concerning LIFE
COMPANY, each Account, or the Contracts other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Contracts, as such registration
statement and Account Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in the public domain
and approved by LIFE COMPANY for distribution; or (iii) in sales literature or
other promotional material approved by LIFE COMPANY or its affiliates, except
with the express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars,
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<PAGE>
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, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
-----------------------------------
5.1 General.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bonafide resignation of any director, then the operation of this condition shall
be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the
existence of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a
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"material irreconcilable conflict" is not defined by the 1940 Act or the rules
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other 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 Fund are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Directors or a majority of the Disinterested Directors
that a material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all
of the Accounts from AVIF or any Fund and
reinvesting such assets in a different investment
medium, including another Fund of AVIF, or
submitting the question whether such segregation
should be implemented to a vote of all affected
Participants and, as appropriate, segregating the
assets of any particular group (e.g., annuity
13
<PAGE>
Participants, life insurance Participants or all
Participants) that votes in favor of such
segregation, or offering to the affected
Participants the option of making such a change;
and
(ii) establishing a new registered investment company
of the type defined as a "management company" in
Section 4(3) of the 1940 Act or a new separate
account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of shares of
AVIF
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
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LIFE COMPANY and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
Section 6. Termination
----------------------
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with respect to
the Fund upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be
15
<PAGE>
based, have a material likelihood of imposing material adverse consequences on
the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIF's obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, LIFE COMPANY reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material likelihood of imposing
material adverse consequences on LIFE COMPANY, or the Subaccount corresponding
to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (ii) such law precludes
the use of such Shares as an underlying investment medium of the Contracts
issued or to be issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions, or
if LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if LIFE
COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and until
the Party terminating this Agreement gives prior written notice to the other
Party to this Agreement of its intent to terminate, and such notice shall set
forth the basis for such termination. Furthermore:
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<PAGE>
(a) in the event that any termination is based upon the provisions of
Sections 6.1 (a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1 (b) or 6. l (c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1 (d), 6. l (f), 6.l (g), 6. l (h) or 6. l (i) hereof, such prior
written notice shall be given as soon as possible within twenty-four (24) hours
after the terminating Party learns of the event causing termination to be
required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), 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 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of
this Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1 (b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
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<PAGE>
Section 7. Parties To Cooperate Respecting Termination
------------------------------------------------------
The Parties hereto agree to cooperate and give reasonable assistance
to one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1 (a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
Section 8. Assignment
---------------------
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
Section 9. Notices
------------------
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
LIFE COMPANY
Street Address
City, State, Zip Code
Facsimile
Attn: [NAME OF PERSON]
UNDERWRITER
Street Address
City, State, Zip Code
Facsimile
Attn: [NAME OF PERSON]
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<PAGE>
Section 10. Voting Procedures
-----------------------------
Subject to the cost allocation procedures set forth in Section 3
hereof, LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, AVIF 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 SEC may promulgate with respect thereto.
Section 11. Foreign Tax Credits
-------------------------------
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax
Section 12. Indemnification
---------------------------
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF,
its affiliates, and each person, if any, who controls AVIF or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for purposes of
this Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY
and UNDERWRITER) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which
19
<PAGE>
the Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus,
the Contracts, or sales literature or advertising
for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission
to state therein a material fact required to be
stated therein or necessary to make the
statements therein not misleading; provided, that
this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or
omission or such alleged statement or omission
was made in reliance upon and in conformity with
information furnished to LIFE COMPANY or
UNDERWRITER by or on behalf of AVIF for use in
any Account's 1933 Act registration statement,
any Account Prospectus, the Contracts, or sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares
(or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other
statements or representations (other than
statements or representations contained in AVIF's
1933 Act registration statement, AVIF Prospectus,
sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of
LIFE COMPANY, UNDERWRITER or their respective
affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of LIFE COMPANY, UNDERWRITER
or their respective affiliates or persons under
their control (including, without limitation,
their employees and "persons associated with a
member," as that term is defined in paragraph (q)
of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the
Contracts or Shares: or
(iii) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing,
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 AVIF or
its affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates for
use in AVIF's 1933 Act
20
<PAGE>
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing;
or
(iv) arise as a result of any failure by LIFE COMPANY
or UNDERWRITER to perform the obligations,
provide the services and furnish the materials
required of them under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by LIFE
COMPANY or UNDERWRITER in this Agreement or arise
out of or result from any other material breach
of this Agreement by LIFE COMPANY or UNDERWRITER;
or
(v) arise as a result of failure by the Contracts
issued by LIFE COMPANY to qualify as annuity
contracts or life insurance contracts under the
Code, otherwise than by reason of any Fund's
failure to comply with Subchapter M or Section
817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
shall have notified LIFE COMPANY and UNDERWRITER in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the action 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 LIFE COMPANY and UNDERWRITER of any
such action shall not relieve LIFE COMPANY and UNDERWRITER from any liability
which they may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.1. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, LIFE
COMPANY and UNDERWRITER shall be entitled to participate, at their own expense,
in the defense of such action and also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from LIFE
COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or
UNDERWRITER's election to assume the defense thereof, the Indemnified Party will
cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY nor
UNDERWRITER will be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
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12.2 Of LIFE COMPANY and UNDERWRITER by AVIF.
(a) Except to the extent provided in Sections 12.2 (c), 12.2 (d) and
12.2 (e), below, AVIF agrees to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law, or otherwise; provided, the Account owns shares of the Fund and insofar as
such losses, claims, damages. liabilities or actions:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
AVIF's 1933 Act registration statement, AVIF Prospectus or
sales literature or advertising of AVIF (or any amendment
or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to AVIF
or its affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, or
in sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising for
the Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
AVIF or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF or its affiliates or persons under its
control (including, without limitation, their employees and
"persons associated with a member" as that term is defined
in Section (q) of Article I of the NASD By-Laws), in
connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if
such statement or omission was made
22
<PAGE>
in reliance upon and in conformity with information
furnished to LIFE COMPANY, UNDERWRITER or their respective
affiliates by or on behalf of AVIF for use in any Account's
1933 Act registration statement, any Account Prospectus,
sales literature or advertising covering the Contracts, or
any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made
by AVIF in this Agreement or arise out of or result from
any other material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2 (c), 12.2 (d) and
12.2 (e) hereof, AVIF agrees to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of
AVIF;) or actions in respect thereof (including, to the extent reasonable, legal
and other expenses) to which the Indemnified Parties may become subject directly
or indirectly under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or indirectly result
from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that LIFE COMPANY reasonably deems necessary or appropriate as a result
of the noncompliance.
(c) AVIF shall not be liable under this Section 12.2 with respect to
any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of such Indemnified Party's reckless disregard of its obligations and
duties (i) under this Agreement, or (ii) to LIFE COMPANY, UNDERWRITER, each
Account or Participants
(d) AVIF shall not be liable under this Section 12.2 with respect to
any action against an Indemnified Party unless the Indemnified Party shall have
notified AVIF in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action 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 AVIF of any such action shall not relieve AVIF from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, AVIF
will be
23
<PAGE>
entitled to participate, at its own expense, in the defense of such action and
also shall be entitled to assume the defense thereof (which shall include,
without limitation, the conduct of any ruling request and closing agreement or
other settlement proceeding with the IRS), with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from AVIF to such Indemnified Party of AVIF's election
to-assume the defense thereof, the Indemnified Party will cooperate fully with
AVIF and shall bear the fees and expenses of any additional counsel retained by
it, and AVIF will not be liable to such Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
(e) In no event shall AVIF be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12. l (c) or 12.2 (d) above of participation in or
control of any action by the indemnifying Party will in no event be deemed to be
an admission by the indemnifying Party of liability, culpability or
responsibility, and the indemnifying Party will remain free to contest liability
with respect to the claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
Section 13. Applicable Law
--------------------------
This Agreement will be construed and the provisions hereof
interpreted under and in accordance with Maryland law, without regard for that
state's principles of conflict of laws.
24
<PAGE>
Section 14. Execution in Counterparts
-------------------------------------
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
Section 15. Severability
------------------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
-----------------------------
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, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
--------------------
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
Section 18. Confidentiality
---------------------------
AVIF acknowledges that the identities of the customers of LIFE
COMPANY or any of its affiliates (collectively, the "LIFE COMPANY Protected
Parties" for purposes of this Section 18), information maintained regarding
those customers, and all computer programs and procedures or other information
developed by the LIFE COMPANY Protected Parties or any of their employees or
agents in connection with LIFE COMPANY's performance of its duties under this
Agreement are the valuable property of the LIFE COMPANY Protected Parties. AVIF
agrees that if it comes into possession of any list or compilation of the
identities of or other information about the LIFE COMPANY Protected Parties'
customers, or any other information or property of the LIFE COMPANY Protected
Parties, other than such information as may be independently developed or
compiled by AVIF from information supplied to it by the LIFE COMPANY Protected
Parties' customers who also maintain accounts directly with AVIF, AVIF will hold
such information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with LIFE
COMPANY's prior written consent; or (b) as required by law or judicial process.
LIFE COMPANY acknowledges that the identities of the customers of AVLF or any of
its affiliates (collectively, the "AVLF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers
25
<PAGE>
or any other information or property of the AVLF Protected Parties, other than
such information as may be independently developed or compiled by LIFE COMPANY
from information supplied to it by the AVLF Protected Parties' customers who
also maintain accounts directly with LIFE COMPANY, LIFE COMPANY will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with AVIF's
prior written consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 18 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
-------------------------------------
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate
of AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to LIFE COMPANY (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to
use the AIM licensed marks in connection with LlFE COMPANY's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates ( the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
(c) The licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing the
licensor's licensed marks. The licensor's approvals shall not be unreasonably
withheld.
(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor,
26
<PAGE>
when requesting reconsideration of a prior approval, shall assume the reasonable
expenses of withdrawing and replacing such disapproved materials. The licensee
shall obtain the prior written approval of the licensor for the use of any new
materials developed to replace the disapproved materials, in the manner set
forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to
the best of the knowledge of the licensee, the licensor's licensed marks are
valid and enforceable trademarks and/or service marks and that such licensee
does not own the licensor's licensed marks and claims no rights therein other
than as a licensee under this Agreement; (ii) agrees never to contend otherwise
in legal proceedings or in other circumstances; and (iii) acknowledges and
agrees that the use of the licensor's licensed marks pursuant to this grant of
license shall inure to the benefit of the licensor.
Section 20. Parties to Cooperate
--------------------------------
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: _________________________________ By: ________________________________
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
27
<PAGE>
LIFE INSURANCE COMPANY, on behalf
of itself and its separate accounts
Attest: _________________________________ By: ________________________________
Name: __________________________________ Name: ______________________________
Title: __________________________________ Title: _____________________________
SEPARATE ACCOUNT UNDERWRITER
Attest: _________________________________ By: ________________________________
Name: __________________________________ Name: ______________________________
Title: __________________________________ Title: _____________________________
28
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
[bullet] AIM VARIABLE INSURANCE FUNDS, INC.
[LIST OF APPLICABLE PORTFOLIOS]
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
29
<PAGE>
SCHEDULE B
[bullet] AIM VARIABLE INSURANCE FUNDS, INC.
AIM ____________________________________ Fund
[bullet] AIM and Design
[AIM Logo]
30
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
Life Company AVIF
- -------------------------------------------------------------------------------------
<S> <C>
preparing and filing the Account=s preparing and filing the Fund=s
registration statement registration statement
- -------------------------------------------------------------------------------------
text composition for Account text composition for Fund
prospectuses and supplements prospectuses and supplements
- -------------------------------------------------------------------------------------
text alterations of prospectuses text alterations of prospectuses
(Account) and supplements (Account) (Fund) and supplements (Fund)
- -------------------------------------------------------------------------------------
printing Account and Fund prospectuses a camera ready Fund prospectus
and supplements
- -------------------------------------------------------------------------------------
text composition and printing Account text composition and printing Fund
SAIs SAIs
- -------------------------------------------------------------------------------------
mailing and distributing Account SAIs mailing and distributing Fund SAIs to
to policy owners upon request by policy owners upon request by policy
policy owners owners
- -------------------------------------------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal
Securities Laws and to prospective
purchasers
- -------------------------------------------------------------------------------------
text composition (Account), printing, text composition of annual and
mailing, and distributing annual and semi-annual reports (Fund)
semi-annual reports for Account (Fund
and Account as, applicable)
- -------------------------------------------------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction statements and voting instruction
solicitation materials to proxy owners solicitation materials to policy
with respect to proxies related to the owners with respect to proxies
Account related to the Fund
- -------------------------------------------------------------------------------------
preparation, printing and distributing
sales material and advertising
relating to the Funds, insofar as such
materials relate to the Contracts and
filing such materials with an
obtaining approval from, the SEC, the
NASD, any state insurance regulatory
authority, and any other appropriate
regulatory authority, to the extent
required
- -------------------------------------------------------------------------------------
</TABLE>
39558
31
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
1
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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 1940 Act.
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
5
<PAGE>
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 1940 Act.
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
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(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:
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(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
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(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
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(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
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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.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to LFII:
Liberty Financial Investments, Inc.
One Financial Center
Boston, Massachusetts 02111
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:
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Schedule A
Individual and group variable annuity contracts and certificates.
Individual variable life contracts.
39575.2
21
Exhibit 1.(8)(c)
FORM OF
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the ______ day of_____________, 1998,
between ______________, a life insurance company organized under the laws of the
State of ___________ ("Insurance Company"), and each of DREYFUS VARIABLE
INVESTMENT FUND; THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; AND DREYFUS
LIFE AND ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX FUND) (each a
"Fund").
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors or Trustees, as the case
may be, of a Fund, which has the responsibility for management and
control of the Fund.
1.3 "Business Day" shall mean any day for which a Fund calculates net
asset value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity or life insurance contract
that uses any Participating Fund (as defined below) as an underlying
investment medium. Individuals who participate under a group Contract
are "Participants."
1.6 "Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company (as defined below).
1.7 "Disinterested Board Members" shall mean those members of the Board
of a Fund that are not deemed to be "interested persons" of the Fund,
as defined by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates,
including Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company) that offers variable annuity and/or variable life
insurance contracts to the public and that has entered into an
agreement with one or more of the Funds.
1.10 "Participating Fund" shall mean each Fund, including, as applicable,
any series thereof, specified in Exhibit A, as such Exhibit may be
amended from time to time by agreement of the parties hereto, the
shares of which are available to serve as the underlying investment
medium for the aforesaid Contracts.
<PAGE>
1.11 "Prospectus" shall mean the current prospectus and statement of
additional information of a Fund, as most recently filed with the
Commission.
1.12 "Separate Account" shall mean ___________, a separate account
established by Insurance Company in accordance with the laws of the
State of ______________.
1.13 "Software Program" shall mean the software program used by a Fund for
providing Fund and account balance information including net asset
value per share. Such Program may include the Lion System. In
situations where the Lion System or any other Software Program used
by a Fund is not available, such information may be provided by
telephone. The Lion System shall be provided to Insurance Company at
no charge.
1.14 "Insurance Company's General Account(s)" shall mean the general
account(s) of Insurance Company and its affiliates that invest in a
Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b)
it has legally and validly established the Separate Account pursuant
to the ____________ Insurance Code for the purpose of offering to the
public certain individual and group variable annuity and life
insurance contracts; (c) it has registered the Separate Account as a
unit investment trust under the Act to serve as the segregated
investment account for the Contracts; and (d) the Separate Account is
eligible to invest in shares of each Participating Fund without such
investment disqualifying any Participating Fund as an investment
medium for insurance company separate accounts supporting variable
annuity contracts or variable life insurance contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will
be described in a registration statement filed under the Securities
Act of 1933, as amended ("1933 Act"); (b) the Contracts will be
issued and sold in compliance in all material respects with all
applicable federal and state laws; and (c) the sale of the Contracts
shall comply in all material respects with state insurance law
requirements. Insurance Company agrees to notify each Participating
Fund promptly of any investment restrictions imposed by state
insurance law and applicable to the Participating Fund.
2.3 Insurance Company represents and warrants that the income, gains and
losses, whether or not realized, from assets allocated to the
Separate Account are, in accordance with the applicable Contracts, to
be credited to or charged against such Separate Account without
regard to other income, gains or losses from assets allocated to any
other accounts of Insurance Company. Insurance Company represents and
warrants that the assets of the Separate Account are and will be kept
separate from Insurance Company's General Account and any other
separate
2
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accounts Insurance Company may have, and will not be charged with
liabilities from any business that Insurance Company may conduct or
the liabilities of any companies affiliated with Insurance Company.
2.4 Each Participating Fund represents that it is registered with the
Commission under the Act as an open-end, management investment
company and possesses, and shall maintain, all legal and regulatory
licenses, approvals, consents and/or exemptions required for the
Participating Fund to operate and offer its shares as an underlying
investment medium for Participating Companies.
2.5 Each Participating Fund represents that it is currently qualified as
a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (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 Insurance
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.
2.6 Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life
insurance policies or annuity contracts, whichever is appropriate,
under applicable provisions of the Code, and that it will make every
effort to maintain such treatment and that it will notify each
Participating Fund and Dreyfus 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. Insurance Company
agrees that any prospectus offering a Contract that is a "modified
endowment contract," as that term is defined in Section 7702A of the
Code, will identify such Contract as a modified endowment contract
(or policy).
2.7 Each Participating Fund agrees that its assets shall be managed and
invested in a manner that complies with the requirements of Section
817(h) of the Code.
2.8 Insurance Company agrees that each Participating Fund shall be
permitted (subject to the other terms of this Agreement) to make its
shares available to other Participating Companies and
Contractholders.
2.9 Each Participating Fund represents and warrants that any of its
directors, trustees, officers, employees, investment advisers, and
other individuals/entities who deal with the money and/or securities
of the Participating Fund are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the
benefit of the Participating Fund in an amount not less than that
required by Rule 17g-1 under the Act. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by
a reputable bonding company.
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2.10 Insurance Company represents and warrants that all of its employees
and agents who deal with the money and/or securities of each
Participating Fund are and shall continue to be at all times covered
by a blanket fidelity bond or similar coverage in an amount not less
than the coverage required to be maintained by the Participating
Fund. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for
the investment of certain amounts in shares of each Participating
Fund.
3.2 Each Participating Fund agrees to make its shares available for
purchase at the then applicable net asset value per share by
Insurance Company and the Separate Account on each Business Day
pursuant to rules of the Commission. Notwithstanding the foregoing,
each Participating Fund may refuse to sell its shares to any person,
or suspend or terminate the offering of its shares, if such action is
required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of its Board, acting in good faith and in
light of its fiduciary duties under federal and any applicable state
laws, necessary and in the best interests of the Participating Fund's
shareholders.
3.3 Each Participating Fund agrees that shares of the Participating Fund
will be sold only to (a) Participating Companies and their separate
accounts or (b) "qualified pension or retirement plans" as determined
under Section 817(h)(4) of the Code. Except as otherwise set forth in
this Section 3.3, no shares of any Participating Fund will be sold to
the general public.
3.4 Each Participating Fund shall use its best efforts to provide closing
net asset value, dividend and capital gain information on a per-share
basis to Insurance Company by 6:00 p.m. Eastern time on each Business
Day. Any material errors in the calculation of net asset value,
dividend and capital gain information shall be reported immediately
upon discovery to Insurance Company. Non-material errors will be
corrected in the next Business Day's net asset value per share.
3.5 At the end of each Business Day, Insurance Company will use the
information described in Sections 3.2 and 3.4 to calculate the unit
values of the Separate Account for the day. Using this unit value,
Insurance Company will process the day's Separate Account
transactions received by it by the close of trading on the floor of
the New York Stock Exchange (currently 4:00 p.m. Eastern time) to
determine the net dollar amount of each Participating Fund's shares
that will be purchased or redeemed at that day's closing net asset
value per share. The
4
<PAGE>
net purchase or redemption orders will be transmitted to each
Participating Fund by Insurance Company by 11:00 a.m. Eastern time on
the Business Day next following Insurance Company's receipt of that
information. Subject to Sections 3.6 and 3.8, all purchase and
redemption orders for Insurance Company's General Accounts shall be
effected at the net asset value per share of each Participating Fund
next calculated after receipt of the order by the Participating Fund
or its Transfer Agent.
3.6 Each Participating Fund appoints Insurance Company as its agent for
the limited purpose of accepting orders for the purchase and
redemption of Participating Fund shares for the Separate Account.
Each Participating Fund will execute orders at the applicable net
asset value per share determined as of the close of trading on the
day of receipt of such orders by Insurance Company acting as agent
("effective trade date"), provided that the Participating Fund
receives notice of such orders by 11:00 a.m. Eastern time on the next
following Business Day and, if such orders request the purchase of
Participating Fund shares, the conditions specified in Section 3.8,
as applicable, are satisfied. A redemption or purchase request that
does not satisfy the conditions specified above and in Section 3.8,
as applicable, will be effected at the net asset value per share
computed on the Business Day immediately preceding the next following
Business Day upon which such conditions have been satisfied in
accordance with the requirements of this Section and Section 3.8.
Insurance Company represents and warrants that all orders submitted
by the Insurance Company for execution on the effective trade date
shall represent purchase or redemption orders received from
Contractholders prior to the close of trading on the New York Stock
Exchange on the effective trade date.
3.7 Insurance Company will make its best efforts to notify each
applicable Participating Fund in advance of any unusually large
purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of a Participating
Fund's shares, Insurance Company will pay for such purchases by
wiring Federal Funds to the Participating Fund or its designated
custodial account on the day the order is transmitted. Insurance
Company shall make all reasonable efforts to transmit to the
applicable Participating Fund payment in Federal Funds by 12:00 noon
Eastern time on the Business Day the Participating Fund receives the
notice of the order pursuant to Section 3.5. Each applicable
Participating Fund will execute such orders at the applicable net
asset value per share determined as of the close of trading on the
effective trade date if the Participating Fund receives payment in
Federal Funds by 12:00 midnight Eastern time on the Business Day the
Participating Fund receives the notice of the order pursuant to
Section 3.5. If payment in Federal Funds for any purchase is not
received or is received by a Participating Fund after 12:00 noon
Eastern time on such Business Day, Insurance Company shall promptly,
upon each applicable Participating Fund's request, reimburse the
respective Participating Fund for any charges, costs, fees, interest
or other expenses incurred by the Participating Fund in connection
with any advances to, or borrowings or overdrafts by, the
Participating Fund, or any similar expenses incurred by the
Participating Fund, as a result of portfolio transactions effected by
5
<PAGE>
the Participating Fund based upon such purchase request. If Insurance
Company's order requests the redemption of any Participating Fund's
shares valued at or greater than $1 million dollars, the
Participating Fund will wire such amount to Insurance Company within
seven days of the order.
3.9 Each Participating Fund has the obligation to ensure that its shares
are registered with applicable federal agencies at all times.
3.10 Each Participating Fund will confirm each purchase or redemption
order made by Insurance Company. Transfer of Participating Fund
shares will be by book entry only. No share certificates will be
issued to Insurance Company. Insurance Company will record shares
ordered from a Participating Fund in an appropriate title for the
corresponding account.
3.11 Each Participating Fund shall credit Insurance Company with the
appropriate number of shares.
3.12 On each ex-dividend date of a Participating Fund or, if not a
Business Day, on the first Business Day thereafter, each
Participating Fund shall communicate to Insurance Company the amount
of dividend and capital gain, if any, per share. All dividends and
capital gains shall be automatically reinvested in additional shares
of the applicable Participating Fund at the net asset value per share
on the ex-dividend date. Each Participating Fund shall, on the day
after the ex-dividend date or, if not a Business Day, on the first
Business Day thereafter, notify Insurance Company of the number of
shares so issued.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Each Participating Fund shall provide monthly statements of account
as of the end of each month for all of Insurance Company's accounts
by the fifteenth (15th) Business Day of the following month.
4.2 Each Participating Fund shall distribute to Insurance Company copies
of the Participating Fund's Prospectuses, proxy materials, notices,
periodic reports and other printed materials (which the Participating
Fund customarily provides to its shareholders) in quantities as
Insurance Company may reasonably request for distribution to each
Contractholder and Participant.
4.3 Each Participating Fund will provide to Insurance Company at least
one complete copy of all registration statements, Prospectuses,
reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the
Participating Fund or its shares, contemporaneously with the filing
of such document with the Commission or other regulatory authorities.
6
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4.4 Insurance Company will provide to each Participating Fund at least
one copy of all registration statements, Prospectuses, reports, proxy
statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or the
Separate Account, contemporaneously with the filing of such document
with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to each Participating Fund for all expenses and costs of
the Participating Fund, including but not limited to management fees,
administrative expenses and legal and regulatory costs, will be made
in the determination of the Participating Fund's daily net asset
value per share so as to accumulate to an annual charge at the rate
set forth in the Participating Fund's Prospectus. Excluded from the
expense limitation described herein shall be brokerage commissions
and transaction fees and extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of any Participating Fund or expenses relating to the
distribution of its shares. Insurance Company shall pay the following
expenses or costs:
a. Such amount of the production expenses of any Participating Fund
materials, including the cost of printing a Participating Fund's
Prospectus, or marketing materials for prospective Insurance
Company Contractholders and Participants as Dreyfus and Insurance
Company shall agree from time to time.
b. Distribution expenses of any Participating Fund materials or
marketing materials for prospective Insurance Company
Contractholders and Participants.
c. Distribution expenses of any Participating Fund materials or
marketing materials for Insurance Company Contractholders and
Participants.
Except as provided herein, all other expenses of each Participating
Fund shall not be borne by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of (i) the amended order dated
December 31, 1997 of the Securities and Exchange Commission under
Section 6(c) of the Act with respect to Dreyfus Variable Investment
Fund and Dreyfus Life and Annuity Index Fund, Inc.; and (ii) the
order dated February 5, 1998 of the Securities and Exchange
Commission under Section 6(c) of the Act with respect to The Dreyfus
Socially Responsible Growth Fund, Inc. and
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Dreyfus Investment Portfolios, and, in particular, has reviewed the
conditions to the relief set forth in each related Notice. As set
forth therein, if Dreyfus Variable Investment Fund, Dreyfus Life and
Annuity Index Fund, Inc., The Dreyfus Socially Responsible Growth
Fund, Inc. or Dreyfus Investment Portfolios is a Participating Fund,
Insurance Company agrees, as applicable, to report any potential or
existing conflicts promptly to the respective Board of Dreyfus
Variable Investment Fund, Dreyfus Life and Annuity Index Fund, Inc.,
The Dreyfus Socially Responsible Growth Fund, Inc. and/or Dreyfus
Investment Portfolios, and, in particular, whenever contract voting
instructions are disregarded, and recognizes that it will be
responsible for assisting each applicable Board in carrying out its
responsibilities under such application. Insurance Company agrees to
carry out such responsibilities with a view to the interests of
existing Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists
with regard to Contractholder investments in a Participating Fund,
the Board shall give prompt notice to all Participating Companies and
any other Participating Fund. If the Board determines that Insurance
Company is responsible for causing or creating said conflict,
Insurance Company shall at its sole cost and expense, and to the
extent reasonably practicable (as determined by a majority of the
Disinterested Board Members), take such action as is necessary to
remedy or eliminate the irreconcilable material conflict. Such
necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Participating Fund and reinvesting such assets in another
Participating Fund (if applicable) or a different investment
medium, or submitting the question of whether such segregation
should be implemented to a vote of all affected Contractholders;
and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a
decision by Insurance Company to disregard Contractholder voting
instructions and said decision represents a minority position or
would preclude a majority vote by all Contractholders having an
interest in a Participating Fund, Insurance Company may be required,
at the Board's election, to withdraw the investments of the Separate
Account in that Participating Fund.
6.4 For the purpose of this Article, a majority of the Disinterested
Board Members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will any Participating Fund be required to bear the expense of
establishing a new funding medium for any Contract. Insurance Company
shall not be required by this Article to establish a new funding
medium for any Contract if an offer to do so has been declined by
vote of a majority of the Contractholders materially adversely
affected by the irreconcilable material conflict.
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6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or any Participating Fund taken or omitted as a
result of any act or failure to act by Insurance Company pursuant to
this Article VI, shall relieve Insurance Company of its obligations
under, or otherwise affect the operation of, Article V.
ARTICLE VII
VOTING OF PARTICIPATING FUND SHARES
7.1 Each Participating Fund shall provide Insurance Company with copies,
at no cost to Insurance Company, of the Participating Fund's proxy
material, reports to shareholders and other communications to
shareholders in such quantity as Insurance Company shall reasonably
require for distributing to Contractholders or Participants.
Insurance Company shall:
(a) solicit voting instructions from Contractholders or Participants
on a timely basis and in accordance with applicable law;
(b) vote the Participating Fund shares in accordance with
instructions received from Contractholders or Participants; and
(c) vote the Participating Fund shares for which no instructions have
been received in the same proportion as Participating Fund shares
for which instructions have been received.
Insurance Company agrees at all times to vote its General Account
shares in the same proportion as the Participating Fund shares for
which instructions have been received from Contractholders or
Participants. Insurance Company further agrees to be responsible for
assuring that voting the Participating Fund shares for the Separate
Account is conducted in a manner consistent with other Participating
Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of each applicable Participating Fund and Dreyfus, solicit,
induce or encourage Contractholders to (a) change or supplement the
Participating Fund's current investment adviser or (b) change,
modify, substitute, add to or delete from the current investment
media for the Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 Each Participating Fund or its underwriter shall periodically furnish
Insurance Company with the following documents, in quantities as
Insurance Company may reasonably request:
a. Current Prospectus and any supplements thereto; and
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b. Other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities that
shall have the requisite licenses to solicit applications for the
sale of Contracts. No representation is made as to the number or
amount of Contracts that are to be sold by Insurance Company.
Insurance Company shall make reasonable efforts to market the
Contracts and shall comply with all applicable federal and state laws
in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to
each applicable Participating Fund or its designee, each piece of
sales literature or other promotional material in which the
Participating Fund, its investment adviser or the administrator is
named, at least fifteen Business Days prior to its use. No such
material shall be used unless the Participating Fund or its designee
approves such material. Such approval (if given) must be in writing
and shall be presumed not given if not received within ten Business
Days after receipt of such material. Each applicable Participating
Fund or its designee, as the case may be, shall use all reasonable
efforts to respond within ten days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of a Participating Fund or
concerning a Participating Fund in connection with the sale of the
Contracts other than the information or representations contained in
the registration statement or Prospectus of, as may be amended or
supplemented from time to time, or in reports or proxy statements
for, the applicable Participating Fund, or in sales literature or
other promotional material approved by the applicable Participating
Fund.
8.5 Each Participating Fund shall furnish, or shall cause to be
furnished, to Insurance Company, each piece of the Participating
Fund's sales literature or other promotional material in which
Insurance Company or the Separate Account is named, at least fifteen
Business Days prior to its use. No such material shall be used unless
Insurance Company approves such material. Such approval (if given)
must be in writing and shall be presumed not given if not received
within ten Business Days after receipt of such material. Insurance
Company shall use all reasonable efforts to respond within ten days
of receipt.
8.6 Each Participating Fund shall not, in connection with the sale of
Participating Fund shares, give any information or make any
representations on behalf of Insurance Company or concerning
Insurance Company, the Separate Account, or the Contracts other than
the information or representations contained in a registration
statement or prospectus for the Contracts, as may be amended or
supplemented from time to time, or in published reports for the
Separate Account that are in the public domain or approved by
Insurance Company for distribution to Contractholders or
Participants, or in sales literature or other promotional material
approved by Insurance Company.
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8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, 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
(such as any written communication distributed or made generally
available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or
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, registration statements, prospectuses,
statements of additional information, shareholder reports and proxy
materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc.
rules, the Act or the 1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless each
Participating Fund, Dreyfus, each respective Participating Fund's
investment adviser and sub-investment adviser (if applicable), each
respective Participating Fund's distributor, and their respective
affiliates, and each of their directors, trustees, officers,
employees, agents and each person, if any, who controls or is
associated with any of the foregoing entities or persons within the
meaning of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of Section 9.1), against any and all losses, claims, damages
or liabilities joint or several (including any investigative, legal
and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any
claim asserted) for which the Indemnified Parties may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect to thereof) (i) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in information furnished by
Insurance Company for use in the registration statement or Prospectus
or sales literature or advertisements of the respective Participating
Fund or with respect to the Separate Account or Contracts, 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; (ii) arise
out of or as a result of conduct, statements or representations
(other than statements or representations contained in the Prospectus
and sales literature or advertisements of the respective
Participating Fund) of Insurance Company or its agents, with respect
to the sale and distribution of Contracts for which the respective
Participating Fund's shares are an underlying investment; (iii) arise
out of the wrongful conduct of Insurance Company or persons under its
control with respect to the sale or distribution of the Contracts or
the respective Participating Fund's shares; (iv) arise out of
Insurance Company's incorrect calculation and/or untimely reporting
of net purchase or redemption orders; or (v) arise out of any breach
by Insurance Company of a material term of this Agreement or as a
result of any failure by Insurance Company to provide the services
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and furnish the materials or to make any payments provided for in
this Agreement. Insurance Company will reimburse any Indemnified
Party in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that with
respect to clauses (i) and (ii) above Insurance Company will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue
statement or omission or alleged omission made in such registration
statement, prospectus, sales literature, or advertisement in
conformity with written information furnished to Insurance Company by
the respective Participating Fund specifically for use therein. This
indemnity agreement will be in addition to any liability which
Insurance Company may otherwise have.
9.2 Each Participating Fund severally agrees to indemnify and hold
harmless Insurance Company and each of its directors, officers,
employees, agents and each person, if any, who controls Insurance
Company within the meaning of the 1933 Act against any losses,
claims, damages or liabilities to which Insurance Company or any such
director, officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) (1)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration
statement or Prospectus or sales literature or advertisements of the
respective Participating Fund; (2) arise out of or are based upon the
omission to state in the registration statement or Prospectus or
sales literature or advertisements of the respective Participating
Fund any material fact required to be stated therein or necessary to
make the statements therein not misleading; or (3) arise out of or
are based upon any untrue statement or alleged untrue statement of
any material fact contained in the registration statement or
Prospectus or sales literature or advertisements with respect to the
Separate Account or the Contracts and such statements were based on
information provided to Insurance Company by the respective
Participating Fund; and the respective Participating Fund will
reimburse any legal or other expenses reasonably incurred by
Insurance Company or any such director, officer, employee, agent or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however,
that the respective Participating Fund will not be liable in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission or
alleged omission made in such registration statement, Prospectus,
sales literature or advertisements in conformity with written
information furnished to the respective Participating Fund by
Insurance Company specifically for use therein. This indemnity
agreement will be in addition to any liability which the respective
Participating Fund may otherwise have.
9.3 Each Participating Fund severally shall indemnify and hold Insurance
Company harmless against any and all liability, loss, damages, costs
or expenses which Insurance Company may incur, suffer or be required
to pay due to the respective Participating Fund's (l) incorrect
calculation of the daily net asset value, dividend rate or capital
gain distribution rate; (2) incorrect reporting of the daily net
asset value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain distribution
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<PAGE>
rate; provided that the respective Participating Fund shall have no
obligation to indemnify and hold harmless Insurance Company if the
incorrect calculation or incorrect or untimely reporting was the
result of incorrect information furnished by Insurance Company or
information furnished untimely by Insurance Company or otherwise as a
result of or relating to a breach of this Agreement by Insurance
Company.
9.4 Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under this Article, notify the indemnifying party
of the commencement thereof. The omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability under this Article IX, except to the extent that the
omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of
the failure to give such notice. In case any such action is brought
against any indemnified party, and it notified the indemnifying party
of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, assume
the defense thereof, with counsel satisfactory to such indemnified
party, and to the extent that the indemnifying party has given notice
to such effect to the indemnified party and is performing its
obligations under this Article, the indemnifying party shall not be
liable for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than
reasonable costs of investigation. Notwithstanding the foregoing, in
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX.
The provisions of this Article IX shall survive termination of this
Agreement.
9.5 Insurance Company shall indemnify and hold each respective
Participating Fund, Dreyfus and sub-investment adviser of the
Participating Fund harmless against any tax liability incurred by the
Participating Fund under Section 851 of the Code arising from
purchases or redemptions by Insurance Company's General Accounts or
the account of its affiliates.
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ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.
10.2 This Agreement shall terminate without penalty:
a. As to any Participating Fund, at the option of Insurance
Company or the Participating Fund at any time from the date
hereof upon 180 days' notice, unless a shorter time is
agreed to by the respective Participating Fund and
Insurance Company;
b. As to any Participating Fund, at the option of Insurance
Company, if shares of that Participating Fund are not
reasonably available to meet the requirements of the
Contracts as determined by Insurance Company. Prompt notice
of election to terminate shall be furnished by Insurance
Company, said termination to be effective ten days after
receipt of notice unless the Participating Fund makes
available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. As to a Participating Fund, at the option of Insurance
Company, upon the institution of formal proceedings against
the Participating Fund by the Commission, National
Association of Securities Dealers or any other regulatory
body, the expected or anticipating ruling, judgment or
outcome of which would, in Insurance Company's reasonable
judgment, materially impair that Participating Fund's
ability to meet and perform the Participating Fund's
obligations and duties hereunder. Prompt notice of election
to terminate shall be furnished by Insurance Company with
said termination to be effective upon receipt of notice;
d. As to a Participating Fund, at the option of each
Participating Fund, upon the institution of formal
proceedings against Insurance Company by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in the Participating
Fund's reasonable judgment, materially impair Insurance
Company's ability to meet and perform Insurance Company's
obligations and duties hereunder. Prompt notice of election
to terminate shall be furnished such Participating Fund
with said termination to be effective upon receipt of
notice;
e. As to a Participating Fund, at the option of that
Participating Fund, if the Participating Fund shall
determine, in its sole judgment reasonably exercised in
good faith, that Insurance Company has suffered a material
adverse change in its business or financial condition or is
the subject of material adverse publicity and such material
adverse change or material adverse publicity is like to
have a material adverse impact
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<PAGE>
upon the business and operation of that Participating Fund
or Dreyfus, such Participating Fund shall notify Insurance
Company in writing of such determination and its intent to
terminate this Agreement, and after considering the actions
taken by Insurance Company and any other changes in
circumstances since the giving of such notice, such
determination of the Participating Fund shall continue to
apply on the sixtieth (60th) day following the giving of
such notice, which sixtieth day shall be the effective date
of termination;
f. As to a Participating Fund, upon termination of the
Investment Advisory Agreement between that Participating
Fund and Dreyfus or its successors unless Insurance Company
specifically approves the selection of a new Participating
Fund investment adviser. Such Participating Fund shall
promptly furnish notice of such termination to Insurance
Company;
g. As to a Participating Fund, in the event that Participating
Fund's shares are not registered, issued or sole in
accordance with applicable federal law, or such law
precludes the use of such shares as the underlying
investment medium of Contracts issued or to be issued by
Insurance Company. Termination shall be effective
immediately as to that Participating Fund only upon such
occurrence without notice;
h. At the option of a Participating Fund upon a determination
by its Board in good faith that it is no longer advisable
and in the best interests of shareholders of that
Participating Fund to continue to operate pursuant to this
Agreement. Termination pursuant to this Subsection (h)
shall be effective upon notice by such Participating Fund
to Insurance Company of such termination;
i. At the option of a Participating Fund if the Contracts
cease to qualify as annuity contracts of life insurance
policies, as applicable, under the Code, or if such
Participating Fund reasonably believes that the Contracts
may fail to so qualify;
j. At the option of any party to this Agreement, upon another
partys breach of any material provision of this Agreement;
k. At the option of a Participating Fund, if the Contracts are
not registered, issued or sold in accordance with
applicable federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the
written consent of every other non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f
or 10.2k herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
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<PAGE>
10.3 Notwithstanding any termination of this Agreement pursuant to Section
10.2 hereof, each Participating Fund and Dreyfus may, at the option
of the Participating Fund, continue to make available additional
shares of that Participating Fund for as long as the Participating
Fund desires pursuant to the terms and conditions of this Agreement
as provided below, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if that
Participating Fund and Dreyfus so elect to make additional
Participating Fund shares available, the owners of the Existing
Contracts or Insurance Company, whichever shall have legal authority
to do so, shall be permitted to reallocate investments in that
Participating Fund, redeem investments in that Participating Fund
and/or invest in that Participating Fund upon the making of
additional purchase payments under the Existing Contracts. In the
event of a termination of this Agreement pursuant to Section 10.2
hereof, such Participating Fund and Dreyfus, as promptly as is
practicable under the circumstances, shall notify Insurance Company
whether Dreyfus and that Participating Fund will continue to make
that Participating Fund's shares available after such termination. If
such Participating Fund shares continue to be made available after
such termination, the provisions of this Agreement shall remain in
effect and thereafter either of that Participating Fund or Insurance
Company may terminate the Agreement as to that Participating Fund, as
so continued pursuant to this Section 10.3, upon prior written notice
to the other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Participating Fund, need
not be for more than six months.
10.4 Termination of this Agreement as to any one Participating Fund shall
not be deemed a termination as to any other Participating Fund unless
Insurance Company or such other Participating Fund, as the case may
be, terminates this Agreement as to such other Participating Fund in
accordance with this Article X.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement, except for the
addition or deletion of any Participating Fund as specified in
Exhibit A, shall be made by agreement in writing between Insurance
Company and each respective Participating Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the
following addresses:
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Insurance Company: ____________________________________
_________________________________
_________________________________
Attn: ___________________________
Participating Funds: [Name of Fund]
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue
New York, New York 10166
Attn: Vice President and Assistant Secretary
with copies to: [Name of Fund]
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Attn: Mark N. Jacobs, Esq.
Lawrence B. Stoller, Esq.
Stroock & Stroock & Lavan
180 Maiden Lane
New York, New York 10038-4982
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of each Fund by the
undersigned officer of the Fund in his capacity as an officer of the
Fund. The obligations of this Agreement shall only be binding upon
the assets and property of the Fund and shall not be binding upon any
director, trustee, officer or shareholder of the Fund individually.
It is agreed that the obligations of the Funds are several and not
joint, that no Fund shall be liable for any amount owing by another
Fund and that the Funds have executed one instrument for convenience
only.
LAW
14.1 This Agreement shall be construed in accordance with the internal
laws of the State of New York, without giving effect to principles of
conflict of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
[NAME OF INSURANCE COMPANY]
By:________________________
Its:________________________
Attest:_______________________
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
(d/b/a DREYFUS STOCK INDEX FUND)
By:________________________
Its:________________________
Attest:_______________________
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
By:________________________
Its:________________________
Attest:_____________________
DREYFUS VARIABLE INVESTMENT FUND
By:________________________
Its:________________________
Attest:____________________
18
<PAGE>
EXHIBIT A
LIST OF PARTICIPATING FUNDS
39555
19
Exhibit 1.(8)(d)
FORM OF
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ______ day of ____ 199_, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), __________, a/an ______ corporation (the "Company") on its own behalf
and on behalf of each of the segregated asset accounts of the Company set forth
in Schedule A hereto, as may be amended from time to time (the "Accounts"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interest in a particular managed
pool of securities and other assets:
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and it the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding
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Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, __________, 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 one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of
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the Shares 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 interest
of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles III and VII of this
Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy owners on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m.
New York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the
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<PAGE>
Shares. The Company hereby elects to receive all such dividends and
distributions as are payable on a Portfolio's Shares in additional
Shares of that Portfolio. The Trust shall notify the Company of the
number of Shares so issued as payment of such dividends and
distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
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 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established
the Account as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Policies, will
register the Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statements under the 1933 Act
for the Policies and the registration statements under the 1940 Act for
the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only
if and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having
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<PAGE>
a reasonable basis for believing that the Policies have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that _____________, 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 __________ will sell and distribute such policies in
accordance in all material respects with all applicable state and
federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the 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
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
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
necessary by the Trust.
2.5. MFS 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 Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. 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 respects with the 1940 Act and
any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state securities laws
other than the securities laws of The Commonwealth of Massachusetts and
that it is exempt from registration as an investment adviser under the
securities laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
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ARTICLE III. PROSPECTUS AND PROXY STATEMENTS, VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the 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 each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus
in a "camera ready" or diskette format, the Trust shall be responsible
for providing the prospectus in the format in which it or MFS 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 prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
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3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as 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 will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote 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 holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust and
MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
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, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS,
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or their respective designees reasonably objects to such use within
three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information 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, MFS or their respective designees, except with the permission of
the Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy owners or prospective Policy
owners) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials.
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
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other 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 for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the
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Trust or its Shares, prior to or contemporaneously with the filing of
such document with the SEC or other regulatory authorities. The Company
and the Trust shall also each promptly inform the other of the results
of any examination by the SEC (or other regulatory authorities) that
relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, 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), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
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5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if
those requirements applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
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insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable
to some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Trust, or submitting to a
vote of all affected contract owners whether to withdraw assets from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. 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 Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Trust and/or
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the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rule 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this
Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or 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 expenses (including reasonable counsel fees) to which
any Indemnified Party 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 Shares or the Policies and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Policies or contained in the Policies or sales
literature or other promotional material for the
Policies (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 reasonable reliance upon and in
conformity with information furnished to the Company
or its designee by or on behalf of the Trust or MFS
for use in the registration statement, prospectus or
statement of additional information for the Policies
or in the Policies or sales literature or other
promotional material (or any amendment or supplement)
or otherwise for use in connection with the sale of
the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material of the Trust not supplied by the Company or
its designee, or persons under its control and on
which the Company has
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reasonably relied) or wrongful conduct of the Company
or persons under its control, with respect to the
sale or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional 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 statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Trust by or on
behalf of the Company; or
(d) 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; or
(e) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act, and any agents or employees of
the foregoing (each an "Indemnified Party," or 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 expenses (including reasonable counsel fees) to which
any Indemnified Party 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 Shares or the Policies and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the Trust
(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 statement 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 reasonable reliance upon and in
conformity with information
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furnished to the Trust, MFS, the Underwriter or their
respective designees by or on behalf of the Company
for use in the registration statement, prospectus or
statement of additional information for the Trust or
in sales literature or other promotional material for
the Trust (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by the Trust,
MFS, the Underwriter or any of their respective
designees or persons under their respective control
and on which any such entity has reasonably relied)
or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of
the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Accounts or relating to
the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statement or statements
therein not misleading, if such statement or omission
was made in reliance upon information furnished to
the Company by or on behalf of the Trust, MFS or the
Underwriter; or
(d) arise out of or result from any material breach of
any representation and/or warranty made by the Trust
in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to
comply with the diversification requirements
specified in Article VI of this Agreement) or arise
out of or result from any other material breach of
this Agreement by the Trust; or
(e) arise out of or result from the materially incorrect
or untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate; or
(f) arise as a result of any failure by the Trust to
provide the services and furnish the materials under
the terms of the Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification provisions
contained in this Agreement to any individual or entity, including without
limitation, the Company, or any Participating Insurance Company or any Policy
holder, with respect to any losses, claims, damages, liabilities or expenses
that arise out of or result from (i) a breach of any representation, warranty,
and/or covenant made by the Company hereunder or by any Participating Insurance
Company under
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an agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by the Company or any Participating Insurance
Company to maintain its segregated asset account (which invests in any
Portfolio) as a legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust under the
provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by
the Company or any Participating Insurance Company to maintain its variable
annuity and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance, endowment
or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the indemnification
provisions contained in this Agreement with respect to any losses, claims,
damages, liabilities or expenses to which an Indemnified Party would otherwise
be subject by reason of such Indemnified Party's willful misfeasance, willful
misconduct, 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.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5. of
notice of commencement of any action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this section,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any Indemnified Party otherwise than under this section. In case any
such action is brought against any Indemnified Party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party. After
notice from the indemnifying party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its respective
officers, directors, trustees, employees or 1933 Act control persons in
connection with the Agreement, the issuance or sale of the Policies, the
operation of the Accounts, or the sale or acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
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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.
9.2. 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 and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or one, some,
or Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing, the
Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
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<PAGE>
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying investment
media. The Company will give thirty (30) days' prior written
notice to the Trust of the Date of any proposed vote or other
action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or is
the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and, if
applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for cause
or for no cause.
11.4. Except as necessary to implement Policy owner initiated transactions, or
as required by state insurance laws or regulations, the Company shall not redeem
the Shares attributable to the Policies (as opposed to the Shares attributable
to the Company's assets held in the Accounts), and the Company shall not prevent
Policy owners from allocating payments to a Portfolio that was otherwise
available under the Policies, until thirty (30) days after the Company shall
have notified the Trust of its intention to do so.
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11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this Agreement,
for all Policies in effect on the effective date of termination of this
Agreement (the "Existing Policies"), except as otherwise provided under Article
VII of this Agreement. Specifically, without limitation, the owners of the
Existing Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the Trust
upon the making of additional purchase payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
-----------------------------
-----------------------------
-----------------------------
Facsimile No.: ( )
--- ------------
Attn:
------------------------
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
- 18 -
<PAGE>
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. 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.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. 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.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. 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.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
- 19 -
<PAGE>
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 above.
---------------------------------------
By its authorized officer,
By:
------------------------------------
Title:
-----------------------------------
MFS VARIABLE INSURANCE TRUST,
on behalf of the Portfolios
By its authorized officer and not individually,
By:
-----------------------------------
James R. Bordewick, Jr. OR Stephen E. Cavan
Assistant Secretary OR Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By:
-------------------------------------
Jeffrey L. Shames OR Arnold D. Scott
Chairman and Chief Executive Officer OR
Senior Vice President
- 20 -
<PAGE>
As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
- ------------------------------------------------ --------------------------------- ------------------------------------------------
<S> <C> <C>
</TABLE>
- 21 -
Exhibit 1.(8)(e)
FORM OF
PARTICIPATION AGREEMENT
Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMER FUNDS, INC.
and
LIFE INSURANCE COMPANY
THIS AGREEMENT (the "Agreement"), made and entered into as of the
____ day of ____________ l99_ by and among _____________________ Life Insurance
Company (hereinafter the "Company"), on its own behalf and on behalf of each
separate account of the Company named in Schedule 1 to this Agreement, as may be
amended from time to time by mutual consent (hereinafter collectively the
"Accounts"), Oppenheimer Variable Account Funds (hereinafter the "Fund") and
OppenheimerFunds, Inc. (hereinafter the "Adviser ").
WHEREAS, the Fund is an open-end management investment company and is
available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies and variable annuity contracts (collectively, the "Variable Insurance
Products") offered by insurance companies (hereinafter "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio", and each representing the
interests in a particular managed pool of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated July 16, 1986 File No. 812-6324) 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 l5(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Mixed and Shared Funding Exemptive Order")
<PAGE>
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");
WHEREAS, the Adviser is duly registered as an investment adviser
under the federal Investment Advisers Act of 1940;
WHEREAS, the Company has registered or will register certain variable
annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be duly organized, validly existing
segregated asset accounts, established by resolution of the Board of Directors
of the Company, to set aside and invest assets attributable to the aforesaid
variable contracts (the Contract(s) and the Account(s) covered by the Agreement
are specified in Schedule 2 attached hereto, as may be modified by mutual
consent from time to time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless an exemption from registration
is available);
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 3 attached hereto
as may be modified by mutual consent from time to time), on behalf of the
Accounts to fund the Contracts named in Schedule 2, as may be amended from time
to time by mutual consent, and the Fund is authorized to sell such shares to
unit investment trusts such as the Accounts at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the Fund,
the Adviser and the Company agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the Fund
which the Company orders on behalf of the Account, 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 the 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 each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives written (or facsimile) notice of
such order by 9:30 a.m. New York time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
2
<PAGE>
1.2. The Company shall pay for Fund shares on the next Business Day
after it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire or by a credit for
any shares redeemed.
1.3. The Fund agrees to make Fund shares available for purchase at
the applicable net asset value per share by the Company for their separate
Accounts listed in Schedule 1 on those days on which the Fund calculates its net
asset value pursuant to rules of the SEC; provided, however, that the Board of
Trustees of the Fund (hereinafter the "Trustees") 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 Trustees, acting in
good faith and in light of their fiduciary duties under federal and any
applicable state laws, in the best interests of the shareholders of any
Portfolio.
1.4. The Fund agrees to redeem, upon 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 the request for redemption. For purposes of this Section 1.4,
the Company shall be the designee of the Fund for receipt of requests for
redemption and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives written (or facsimile) notice of such request
for redemption by 9:30 a.m. New York time on the next following Business Day.
Payment shall be made within the time period specified in the Fund's prospectus
or statement of additional information, in federal funds transmitted by wire to
the Company's account as designated by the Company in writing from time to time.
1.5. The Company shall pay for the Fund shares on the next Business
Day after an order to purchase shares is made in accordance with the provisions
of Section 1.4 hereof. Payment shall be in federal funds transmitted by wire
pursuant to the instructions of the Fund's treasurer or by a credit for any
shares redeemed.
1.6. The Company agree to purchase and redeem the shares of the
Portfolios named in Schedule 3 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information. The
Company shall not permit any person other than a Contract owner to give
instructions to the Company which would require the Company to redeem or
exchange shares of the Fund.
ARTICLE II. Sales Material. Prospectuses and Other Reports
2.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within ten Business Days after receipt of such
material. "Business Day" shall mean any day in which the New York Stock Exchange
is open for trading and in which the Fund calculates its net asset value
pursuant to the rules of the Securities and Exchange Commission.
3
<PAGE>
2.2. 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 the Contracts other than the information or
representations contained in the registration 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 sale literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
2.3. For purposes of this Article II, the phrase "sales literature or
other promotional material" means 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 billboard
or electronic media), and sales literature (such as brochures, circulars, market
letters and form letters), distributed or made generally available to customers
or the public.
2.4. The Fund shall provide a copy of its current prospectus within a
reasonable period of its filing date, and provide other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is supplemented or amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense). The Adviser shall be
permitted to review and approve the typeset form of the Fund's Prospectus prior
to such printing.
2.5. The Fund or the Adviser shall provide the Company with either:
(i) a copy of the Fund's proxy material, reports to shareholders, other
information relating to the Fund necessary to prepare financial reports, and
other communications to shareholders for printing and distribution to Contract
owners at the Company's expense, or (ii) camera ready and/or printed copies, if
appropriate, of such material for distribution to Contract owners at the
Company' expense, within a reasonable period of the filing date for definitive
copies of such material. The Adviser shall be permitted to review and approve
the typeset form of such proxy material and shareholder reports prior to such
printing provided such materials have been provided within a reasonable period.
ARTICLE III. Fees and Expenses
3.1. The Fund and Adviser shall pay no fee or other compensation to
the Company under this agreement, and the Company shall pay no fee or other
compensation to the Fund or Adviser, except as provided herein.
3.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. 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 advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law.
4
<PAGE>
3.3. The Company shall bear the expenses of typesetting, printing and
distributing the Fund's prospectus, proxy materials and reports to owners of
Contracts issued by the Company.
3.4. In the event the Fund adds one or more additional Portfolios and
the parties desire to make such Portfolios available to the respective Contract
owners as an underlying investment medium, a new Schedule 3 or an amendment to
this Agreement shall be executed by the parties authorizing the issuance of
shares of the new Portfolios to the particular Account. The amendment may also
provide for the sharing of expenses for the establishment of new Portfolios
among Participating Insurance Companies desiring to invest in such Portfolios
and the provisions of funds as the initial investment in the new Portfolios.
ARTICLE IV. Potential Conflicts
4.1. The Board of Trustees of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the Contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
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 contract owners; or (f) a decision
by an insurer to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
4.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. The Company agrees to be bound by the responsibilities
of a participating insurance companies as set forth in the Mixed and Shared
Funding Exemptive Order, including without limitation the requirement that the
Company report any potential or existing conflicts of which it is aware to the
Board. The Company will assist the Board in carrying out its responsibilities in
monitoring such conflicts under the Mixed and Shared Funding Exemptive Order, by
providing the Board in a timely manner 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 Contract owner
voting instructions are disregarded and by confirming in writing, at the Fund's
request, that the Company are unaware of any such potential or existing material
irreconcilable conflicts.
4.3. If it is determined by a majority of the Board, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall, at its 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 irreconcilable material conflict, up to an
including: (1) withdrawing the assets allocable to some or all of the separate
accounts from the Fund
5
<PAGE>
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 vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of the six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
4.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the Account's investment in the Fund and terminate this Agreement
within six months after the Board informs the Company in writing that it has
determined that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund,
subject to applicable regulatory limitation.
4.6. For purposes of Sections 4.3 through 4.6 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
Contracts. The Company shall not be required by Section 4.3 to establish a new
funding medium for Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the particular Account's investment in the Fund and
terminate this Agreement within six (6) months after the Board informs 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 members of the Board.
6
<PAGE>
ARTICLE V. Applicable Law
5.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
5.2. 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
Securities and Exchange Commission may grant (including, but not limited to, the
Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE VI. Termination
6.1 This Agreement shall terminate with respect to some or all
Portfolios:
(a) at the option of any party upon six month's advance
written notice to the other parties;
(b) at the option of the Company to the extent that shares
of Portfolios are not reasonably available to meet the requirements of its
Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt notice of the
election to terminate for such cause and an explanation of such cause shall be
furnished by the Company; or
(c) as provided in Article IV
6.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 6.1(a) may be exercised for
cause or for no cause.
ARTICLE VII. 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 to the
other party.
If to the Fund:
Oppenheimer Variable Account Funds
c/o Oppenheimer Funds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: Legal Department
7
<PAGE>
If to the Adviser:
OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: General Counsel
If to the Company:
ARTICLE VIII. Miscellaneous
8.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts 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 without the express written consent
of the affected party until such time as it may come into the public domain.
8.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.5. Each party hereto shall cooperate with, and promptly notify each
other party and all appropriate governmental authorities (including without
limitation the Securities and Exchange Commission, the National Association of
Securities Dealers, Inc. and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
8.6. The rights, remedies and obligations contained in this Agreement
are cumulative addition to any and all rights, remedies and obligations, at law
or in equity, which the parties entitled to under state and federal laws.
8.7. It is understood by the parties that this Agreement is not an
exclusive in any respect.
8.8. The Company and the Adviser each understand and agree that the
obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Adviser each represent that it has notice
8
<PAGE>
and are in hereto are arrangement of the provisions of the Declaration of Trust
of the Fund disclaim mg shareholder liability for acts or obligations of the
Fund.
8.9. This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.
8.10. This Agreement sets forth the entire agreement between the
parties and supersedes all prior communications, agreements and understandings,
oral or written, between the parties regarding the subject matter hereof.
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 as of the date specified
below.
_________LIFE INSURANCE COMPANY
By: ________________________________________
Title: _____________________________________
Date: ______________________________________
OPPENHEIMER VARIABLE ACCOUNT FUNDS
By: ________________________________________
Title: _____________________________________
Date: ______________________________________
OPPENHEIMERFUNDS, INC.
By: ________________________________________
Title: _____________________________________
Date: ______________________________________
9
<PAGE>
SCHEDULE 1
10
<PAGE>
SCHEDULE 2
Portfolios of Oppenheimer Variable Account Funds:
11
<PAGE>
SCHEDULE 3
39553.2
12
Exhibit 1.(8)(f)
FORM OF
PARTICIPATION AGREEMENT
AMONG
KEYPORT FINANCIAL SERVICES CORP.,
-------------
and
STEINROE VARIABLE INVESTMENT TRUST
This Agreement, made and entered into as of this _____ day of ________,
1998 by and among __________________________________ (the "Company"), on
its own behalf and on behalf of its Separate Accounts, each of which is a
segregated asset account of the Company, SteinRoe Variable Investment Trust (the
"Trust"), and Keyport Financial Services Corp. ("KFSC").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, "Variable Insurance Products") to be offered by
insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares (such series being hereinafter referred to individually as a
"Series" or collectively as the "Series"); and
WHEREAS, the Trust relies on an order from the Securities and Exchange
Commission ("SEC"), dated July 1, 1988 (File No. 812-7044), granting life
insurance companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (the "1940 Act") and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder to the extent necessary to
permit shares of the Trust to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Stein Roe & Farnham Incorporated. ("Stein Roe") is duly
registered as an investment adviser under the Advisers Act and applicable state
securities laws; and provides certain administrative services; and
WHEREAS, Liberty Investment Services, Inc. ("LIS") serves as transfer
agent to the Trust; and
<PAGE>
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 1940 and 1933
Acts that exempt certain separate accounts and Variable Insurance Products from
the registration requirements of the Acts in connection with the sale of
Variable Insurance Products under certain tax-advantaged retirement programs,
described in Article II., Section 2.12. and as provided for by Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, KFSC is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Trust on behalf of
each Separate Account to fund certain Variable Insurance Products and KFSC is
authorized to sell such shares to unit investment trusts such as each Separate
Account at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust and KFSC agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. KFSC 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., LIS
shall be the designee of the Trust for receipt of such orders from each Separate
Account and receipt by such designee shall constitute receipt by the Trust.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and any other day on which the trust calculates its net asset value
pursuant to the rules of the SEC.
1.2. The Trust will make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Separate
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall use reasonable efforts to
calculate such net asset value on each Business Day. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Trustees") may refuse to
sell shares of any Series to any person, or suspend or terminate the offering of
shares of any Series if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Trustees,
acting in good
<PAGE>
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such Series.
1.3. The Trust and KFSC agree that shares of the Trust will be sold
only to Participating Insurance Companies and their Separate Accounts. No shares
of any Series will be sold to the general public.
1.4. The Trust and KFSC will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles I., III., V., VII. and Sections 2.5. and
2.12. of Article II. of this Agreement is in effect to govern such sales.
1.5. The Trust will redeem for cash, at the 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., Stein Roe shall be the designee of
the Trust for receipt of requests for redemption for each Separate Account.
Subject to the applicable rules and regulations, if any, of the SEC,
the Trust may pay the redemption price for shares of any Series in whole or in
part by a distribution in kind of securities from the portfolio of the Trust
allocated to such Series in lieu of money, valuing such securities at their
value employed for determining net asset value governing such redemption price,
and selecting such securities in a manner the Trustees may determine in good
faith to be fair and equitable.
1.6. The Trust may suspend the redemption of any full or fractional
shares of the Trust (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or (b)
during which trading on the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) disposal by the
Trust of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for the Trust fairly to determine the value of its net
assets; or (3) for such other periods as the SEC may by order permit for the
protection of shareholders of the Trust.
1.7. The 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 "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 hereafter by mutual written agreement of all the parties
hereto (the "Contracts"), shall be invested in the Trust, in such other trusts
advised by Stein Roe as may be mutually agreed to in writing by the parties
hereto, or in the Company's general account, 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 KFSC
forty-five (45) days written notice of its intention to make such other
investment
<PAGE>
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 KFSC prior
to its signing this Agreement; or (d) the Trust or KFSC consents 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 made in accordance with the
provisions of Section 1.1. hereof. Payment shall be in federal funds transmitted
by wire, or may otherwise be provided by separate agreement.
1.9. Issuance and transfer of the Trusts' shares will be by book entry
only. Stock certificates will not be issued to either the 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 LIS, 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 its designee,
LIS, of the number of shares so issued as payment of such income, dividends and
distributions.
1.11. The Trust shall make the net asset value per share for each
Series available to the 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., 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 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 each Separate Account as a segregated asset account under the
applicable state insurance laws and have registered or, prior to any issuance or
sale of the Contracts, will register each Separate Account as a unit investment
trust in accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts, to the extent required by the 1940 Act.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act to 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
<PAGE>
the 1940 Act to the extent required by the 1940 Act. The Trust shall amend the
registration statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Trust shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Trust or KFSC.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Code and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the 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 they will make every effort to maintain such treatment and
that it will notify the Trust and KFSC immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Trust currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future consistent with
applicable law. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Trust undertakes to have its Trustees, a majority of
whom are not interested persons of the Trust, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Trust represents that it is currently in compliance and shall at
all times remain in compliance with the applicable insurance laws of the
domiciliary states of the Participating Insurance Companies to the extent that
the Participating Insurance Company advises the Trust, in writing, of such laws
or any changes in such laws.
2.7. KFSC represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. KFSC further
represents that it will sell and distribute the Trust shares in accordance with
the laws of the Commonwealth of Massachusetts and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Trust represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material aspects with the 1940 Act.
2.9. The Trust represents and warrants that Stein Roe is and shall
remain duly registered as an investment adviser in all material aspects under
all applicable federal and state securities laws and that Stein Roe shall
perform its obligations for the Trust in compliance in all material respects
<PAGE>
with the applicable laws of the Commonwealth of Massachusetts and any applicable
state and federal securities laws.
2.10. The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities having
access to securities or funds of the Trust are and shall continue to be at all
times covered by a joint fidelity bond in an amount not less than three million
seven hundred fifty thousand dollars ($3,750,000) with no deductible amount. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable fidelity insurance company.
2.11. The 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 ten million dollars ($10,000,000) with no
deductible amount. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable fidelity insurance company.
2.12. The Company represents and warrants that it will not, without the
prior written consent of KFSC, purchase Trust shares with Separate Account
assets derived from the sale of Contracts to individuals or entities which
qualify under current or future state or federal law for any type of tax
advantage (whether by a reduction or deferral of, deduction or exemption from,
or credit against income or otherwise). Examples of such types of funds under
current law include: any tax-advantaged retirement program, whether maintained
by an individual, employer, employee association or otherwise (including,
without limitation, retirement programs which qualify under Sections 401(a),
401(k), 403(a), 403(b), 408 and 457 of the Code), and any retirement programs
maintained for employees of the Government of the United States or by the
government of any state or political subdivision thereof, or by any agency or
instrumentality of any of the foregoing.
2.13. The Company represents and warrants that it will not transfer or
otherwise convey shares of the Trust, without the prior written consent of KFSC.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. KFSC shall provide the 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 KFSC and the Trust, at its expense, shall provide final copy of
such SAI to KFSC for duplication and
<PAGE>
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. Participating
Insurance Companies shall be responsible for assuring that each of their
Separate Accounts participating in the Trust calculates voting privileges in a
manner consistent with the standards to be provided in writing to the
Participating Insurance Companies.
3.5. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders. The Trust reserves the right to take all
actions, including but not limited to, the dissolution, merger, and sale of all
assets of the Trust upon the sole authorization of its Trustees, to the extent
permitted by the laws of the Commonwealth of Massachusetts and the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. The 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 Stein Roe, or any sub-adviser ("Sub-Adviser"), or
KFSC is named, at least fifteen (15) days prior to its use. No such material
shall be used if the Trust or its designee object to such use within fifteen
(15) days after receipt of such material.
4.2. The 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 KFSC, except with the permission of the Trust or KFSC or the
designee of either.
<PAGE>
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designees, each piece of sales literature or
other promotional material in which the Company and/or its Separate Account(s),
are named at least fifteen (15) days prior to its use. No such material shall be
used if the Company or its designee objects to such use within fifteen (15) days
after receipt of such material.
4.4. The Trust and KFSC shall not give any information or make any
representations or statements on behalf of the 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 use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters seminar texts, reprints or excerpts of any
other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, SAIs, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust and KFSC shall pay no fee or other compensation to the
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
KFSC may make payments to the Company or to the underwriter for the Variable
Insurance Products if and in amounts agreed to by KFSC in writing and such
payments will be made out of existing fees payable to KFSC by the Trust for this
purpose. No
<PAGE>
such payments shall be made by the Trust. Currently, no such plan pursuant to
Rule 12b-1 or payments are contemplated.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Trust, in
accordance with applicable state laws prior to their sale. The Trust shall bear
the expenses of registration and qualification of the Trust's shares,
preparation and filing of the Trust's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, setting in type and
printing the proxy materials and reports to shareholders (including the costs of
printing a prospectus that constitutes an annual report), the preparation of all
statements and notices required by any federal or state law, and all taxes on
the issuance or transfer of the Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
proxy materials and reports to Owners.
ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Variable
Insurance Products in such a manner as to ensure that, insofar as such
investment is required to assure such treatment, the Variable Insurance Products
will be treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Trust will at all
times comply with Section 817(h) of the Code and the Treasury Regulations
thereunder relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments or other modifications
to such Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Trust for the existence of 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 Company if they
determine that a material irreconcilable conflict exists and the implications
thereof.
7.2. The Company will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 7.1. which may
give rise to such a conflict) of which they are aware to the Trustees. The
Company will assist the Trustees in carrying out their responsibilities under
the Shared Funding Exemptive Order, by providing the Trustees with all
information
<PAGE>
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 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
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 foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and termination must
take place within six (6) months after the Trust gives written notice that this
provision is being implemented, and until the end of that six (6) month period
KFSC and Trust shall continue to accept and implement orders by 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 (6) 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 (6) month period, KFSC 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.
<PAGE>
In the event that 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.
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
<PAGE>
(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
(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.
<PAGE>
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 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:
(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, KFSC or each Separate
Account, whichever is applicable.
8.2.(c). The Trust shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have served upon such Indemnified
Party (or after such Indemnified party shall have received notice of such
service on any designated agent), but failure to notify the Trust of any such
claim shall not relieve the Trust from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and
<PAGE>
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 KFSC agree promptly to notify the
Trust of the commencement of any litigation or proceedings against them or any
of their respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts provided, however, that if such laws or any of the provisions of
this Agreement conflict with applicable provisions of the 1940 Act, the latter
shall control.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year advance
written notice to the other parties; provided, however such notice shall not be
given earlier than one (1) year following the date of this Agreement; or
(b) at the option of 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 the
Company; or
(c) at the option of the Trust in the event that formal
administrative proceedings are instituted against the Company or KFSC 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 judgement 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 KFSC to
perform its obligations under its underwriting agreement with the Trust; or
<PAGE>
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Trust by the NASD, the
SEC, or any state securities or insurance department or any other regulatory
body, provided, however, that the Company determines in its sole judgement
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Trust to perform its obligations
under this Agreement; or
(e) with respect to a Separate Account, upon requisite
authority to substitute the shares of another investment company for shares of
the corresponding Series of the Trust in accordance with the terms of the
Variable Insurance Products for which those Series shares had been selected to
serve as the underlying investment media. The Company will give thirty (30)
days' prior written notice to the Trust of the date of any proposed action to
replace the Trust shares; or
(f) at the option of 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 secified in Article VI. hereof; or
(i) at the option of either the Trust or KFSC, if (1) the
Trust or KFSC, respectively, shall determine, in its sole judgement 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 such material adverse publicity will have a material adverse
impact upon the business and operations of either the Trust or KFSC, (2) the
Trust or KFSC shall notify 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 KFSC shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which sixtieth (60th)
day shall be the effective date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good faith, that either
the Trust or KFSC has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and such
material adverse publicity will have a material adverse impact upon the business
and operations of the Company, (2) the Company shall notify the Trust and KFSC
in writing of such determination and its intent to terminate the Agreement, and
(3) after considering the actions taken by the Trust and/or KFSC and any other
changes in circumstances since the giving of such notice, such determination
shall continue to apply on the sixtieth (60th) day following the giving of such
notice, which sixtieth (60th) day shall be the effective date of termination; or
<PAGE>
(k) at the option of either the Trust or KFSC, if the Company
gives the Trust and KFSC the written notice specified in Section 10.3.(a).
hereof and at the time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided, however any
termination under this Section 10.1.(k). shall be effective forty-five (45) days
after the notice specified in 10.3.(a). was given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10. 1.(a). may be exercised for any
reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to terminate
which notice shall set forth the basis for such termination.
Furthermore,
(a) in the event that any termination is based upon the
provisions of Article VII., or the provision of Section 10.1(a)., 10.1(i).,
10.1(l). or 10.1.(k). of this Agreement, such prior written notice shall be
given in advance of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1.(c). or 10.1.(d). of this Agreement, such prior
written notice shall be given at least ninety (90) days before the effective
date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust and KFSC shall at the option of 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 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's 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 KFSC the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Trust and KFSC) to the effect that any redemption pursuant to clause (ii) above
is a Legally Required Redemption. Furthermore, except in cases where permitted
under the terms of the Variable Insurance Products, the Company shall not
prevent Owners from allocating payments to a Series that was otherwise available
under the Variable Insurance Products without first giving the Trustee or KFSC
ninety (90) days notice of their intention to do so.
<PAGE>
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to the Company:
____________________________________
____________________________________
____________________________________
Attention: General Counsel
If to KFSC:
Keyport Financial Services, Corp.
125 High Street
Boston, Massachusetts 02110
Attention: Secretary
ARTICLE XII. Miscellaneous
12.1. All persons dealing with Trust must look solely to the property
of the Trust for the enforcement of any claims against the Trust hereunder and
otherwise understand that neither the Trustees, officers, agents or shareholders
of the Trust have any personal liability for any obligations entered into by or
on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each Party hereto shall treat as confidential the names and addresses
of the Owners and all information reasonably identified as confidential in
writing be any other party hereto and, except as permitted by this Agreement,
shall not disclose, disseminate or utilize such names and addresses and other
confidential information until such time as it may come into the public domain
without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
<PAGE>
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be effected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, the Internal Revenue Service and state insurance regulators) and shall
permit such authorities reasonable access to its books and records in connection
with any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.7. The Trust and KFSC agree that to the extent any advisory or other
fees received by the Trust, KFSC, or Stein Roe 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 provision of Section 8.2.(b). of this and 8.2.(c). shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Trust under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligation, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
<PAGE>
________________________________________
By its authorized officer,
By:
Title:
Date:
STEINROE VARIABLE INVESTMENT TRUST
By its authorized officer,
By:
Title:
Date:
KEYPORT FINANCIAL SERVICES CORP.
By its authorized officer,
By:
Title:
Date:
<PAGE>
Schedule A
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON [contract#####]
APPLICATION FOR MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE
AND CONTRACT INFORMATION
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Plan: |_| Single Life 2.
|_| Single Life w/Last Survivor Benefit Agreement Initial Payment $______________
Additional Agreements
________________________________________ Initial Death Benefit $______________
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3. INSURED A 4. INSURED B
- ---------------------------------------------- ----------------------------------------------
First MI Last First MI Last
- ---------------------------------------------- ----------------------------------------------
Street Street
- ---------------------------------------------- ----------------------------------------------
City State Zip City State Zip
- ---------------------------------------------- ----------------------------------------------
Telephone Number (home) (work) Telephone Number (home) (work)
- ------------------------------------------------------------------ -----------------------------------------------------------------
3A. 4A.
Birth Date ________________ Age ______ Birth Date ________________ Age ______
Place of Birth ________________ |_| Male |_| Female Place of Birth ________________ |_| Male |_| Female
- ---------------------- ------------------- ---------------------- -------------------
Social Security Number Occupation Social Security Number Occupation
- ------------------------------------------------------------------------------------------------------------------------------------
5. Will this contract replace any existing life insurance policy or annuity
contract in this or any other company?
Yes |_| No |_| If yes, please list company name and policy/contract
number(s).
Company name: ____________________ Policy/Contract Number __________________
- ------------------------------------------------------------------------------------------------------------------------------------
OWNER(S) (If other than proposed Insured(s))
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
6. Name Address
- -------------------------------------------------------
Tax ID/Social Security Number
- ------------------------------------------------------------------------------------------------------------------------------------
If payor is other than owner: Payor Address
Name:
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
BENEFICIARY All designated beneficiaries will be considered primary
beneficiaries, sharing equally, unless otherwise indicated.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.
Name Relationship Primary Contingent Name Relationship Primary Contingent
(To Insured) % % (To Insured) % %
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
PAYMENT ALLOCATION Allocations must total 100%. The minimum percentage allocation is [5%] and must be in whole numbers.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
8. If chosen do not complete allocation percentages below.
ASSET ALLOCATION MODEL _____________________ Asset Allocation Models are rebalanced quarterly.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
8A. 8B.
FIXED ACCOUNT _____% First Year Fixed Account Guaranteed Interest Rate _______ %
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8C.
SUB-ACCOUNTS Please make no more than [10] selections.
<TABLE>
<S> <C> <C> <C> <C> <C>
[AIM VI Capital Appreciation] % [Dreyfus Stock Index] % [Oppenheimer Bond] %
----- ----- ------
[AIM VI International Equity] % [Dreyfus Capital Appreciation] % [Oppenheimer Growth & Income] %
----- ----- ------
[Dreyfus Socially Responsible
[Colonial Small Cap Value] % Growth] %
----- -----
[Colonial High Yield [Stein Roe Balanced] %
Securities] % [MFS VIT Emerging Growth] % [Stein Roe Growth Stock] %
----- ----- ------
[Colonial Strategic Income] % [MFS VIT Research] % [Stein Roe Money Market] %
----- ----- ------
[Colonial U.S. Stock] % [MFS VIT Utilities] %
----- -----
[Liberty All-Star Equity] % [MFS VIT Growth with Income] % [Other] %
----- ----- ------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
SPV-9890-APP [copy 1 to Liberty Life] [copy 2 to agent] [copy 3 to client]
</TABLE>
<PAGE>
<TABLE>
[contract#####]
UNDERWRITING INFORMATION Please answer Yes or No, circle all that apply and
provide details as requested.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSURED A INSURED B
----------------- ----------------
9. Has the insured been: Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
A. Hospitalized or surgically treated within the last 2 years for heart disease? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
B. Treated within the last 5 years for cancer? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
C. Diagnosed with or treated by a member of the medical profession for: stroke
or other cerebrovascular disease, diabetes treated with insulin, kidney disease
(not to include bladder or prostate), Alzheimer's disease or other
neurological disorder, liver disease, organ transplant, Acquired Immunodeficiency Syndrome
(AIDS) or AIDS Related Complex (ARC), alcohol or drug abuse? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
D. Turned down, cancelled or refused renewal of life or health insurance? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INSURED A INSURED B
----------------- ----------------
10. Has the insured been: Yes No Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
A. Diagnosed with or treated within the last 10 years for: heart disease or
arrhythmia, blood pressure treated with medication, vascular or circulatory
disease, fainting spells, emphysema or other chronic lung or respiratory
disorder, cancer, diabetes, Crohn's disease, regional enteritis, ulcerative
colitis, or chronic gastritis? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
B. Unable to work or perform regular activities for more than 7 consecutive days
within the past 6 months because of sickness or injury? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
C. Hospitalized for any reason within the last 6 months? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
D. Charged an extra rate for life or health insurance? |_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
CLASS DETERMINATION INSURED A INSURED B
----------------- -----------------
Standard |_| Standard |_|
Class A |_| Class A |_|
- ------------------------------------------------------------------------------------------------------------------------------------
11. Has the Insured used tobacco of any kind within the last 24 months? Yes |_| Yes |_|
No |_| No |_|
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
12. Provide full details here for questions 9 and 10 answered "Yes." Please
include date of onset, any medications taken, treatment received, names of
hospitals and treating physicians.
- ------------------------------------------------------------------------------------------------------------------------------------
Ques. Name of Proposed Details/Conditions/ Onset Recovery Name & Address of Physicians &
No. Insured Complications Mo/Yr Mo/Yr Hospitals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUITABILITY
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE READ CAREFULLY Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13. Did you receive the current prospectus for the life contract applied for? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
14. Do you understand that the contract values including the Death Benefit may
increase or decrease, depending on the investment performance of the sub-accounts? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
15. Do you understand that the contract may lapse only if the surrender value
becomes insufficient to cover the Monthly Deductions? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
16. Do you understand that the initial payment may be held in the Fixed Account
until after your Right to Return period expires? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
17. Do you believe that this contract is consistent with your insurance needs and financial objectives? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL REQUESTS Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
18. Is Dollar Cost Averaging elected? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
19. Is Account Rebalancing elected? (Do not complete if an Asset Allocation Model is used.) |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
20. Please indicate if you refuse Telephone Transfer privileges. |_|
- ------------------------------------------------------------------------------------------------------------------------------------
If you answered Yes to questions 18 and 19, applicable administrative
form(s) must be completed and submitted for your elections to be effective.
- ------------------------------------------------------------------------------------------------------------------------------------
THE AMOUNT AND DURATION OF THE DEATH BENEFIT AND OTHER VALUES PROVIDED BY THIS
CONTRACT ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, THE
FIXED ACCOUNT EARNINGS AND CONTRACT CHARGES. SEPARATE ACCOUNT VALUES ARE
VARIABLE AND MAY INCREASE OR DECREASE. THESE VALUES ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
SPV-9890-APP [copy 1 to Liberty Life] [copy 2 to agent] [copy 3 to client]
</TABLE>
<PAGE>
SIGNATURES [contract#####]
AUTHORIZATION TO OBTAIN INFORMATION
I AUTHORIZE any licensed physician, medical practitioner, hospital, clinic,
other medical or medically-related facility, insurance or reinsuring company,
the Medical Information Bureau, Inc. (MIB), consumer reporting agency, employer
or former employer to give Liberty Life Assurance Company of Boston (Liberty),
its employees and reinsurers any information about my: physical or mental
condition, character, general reputation, habits, finances, insurance history;
occupation; and hobbies. I also authorize Liberty to obtain an investigative
consumer report on me. This authorization applies to all types of information,
including but not limited to information regarding HIV infection, AIDS, mental
health and substance abuse.
I AM AWARE that Liberty will use this information to determine if I am eligible
for insurance or for benefits under an in force policy/contract. I am aware that
Liberty may give this information to: its reinsurers, the MIB; other persons or
entities that perform services related to my application or claim; or as may be
authorized or required by law.
I AGREE that this form shall be valid for 30 months from the date below. I agree
that a copy will be as valid as this original.
I HAVE received the Notice of Information Practices and the notices required by
the Federal Fair Credit Reporting Act and MIB.
LIVING BENEFIT DISCLOSURE ACKNOWLEDGEMENT
I acknowledge that Liberty's Accelerated Death Benefit is available under this
contract and I have read the disclosure pertaining to Liberty's Living Benefit.
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER (TIN) CERTIFICATION
By signing this application, the named Owner certifies under penalties of
perjury that: (1) the TIN shown on Questions 3 and 4 of this application is
correct, and (2) that I am not subject to backup withholding either because I
have not been notified that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding. (if you are
subject to backup withholding, cross out item 2 above).
INSURING AGREEMENT
I/we declare that all statements and answers given in this application are true
and complete to the best of my/our knowledge and belief. I/we also agree that
they will form the basis for, and be a part of, any contract of insurance issued
by the Company. I/we also agree that: No sales representative has the authority
to determine insurability, waive any rights or requirements of the Company, or
make or modify any contract of insurance. No information obtained by any such
person will bind the Company unless set out in writing in a part of the
application.
<TABLE>
<S> <C>
- ---------------------------------------------- ------------------------------------------------
Signature of Insured A Signature of Insured B
- ---------------------------------------------- ------------------------------------------------
Signature of Joint Owner Signature of Owner if Other than Insured(s)
Dated at --------------- on ------------------ ------------------------------------------------
City and State Contract Date Signature of Registered Representative
</TABLE>
<TABLE>
<CAPTION>
AGENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
To the best of your knowledge, will the Bank Name/GA Branch
contract applied for replace any existing
life insurance or annuity in this or any
other company? Yes |_| No |_|
- ------------------------------------------------------------------------------------------------------------------------------------
Agent Name FAX Number Agent License Number
- ------------------------------------------------------------------------------------------------------------------------------------
Agent Signature Telephone Number Split Commissions Yes |_| No |_|
_____% to Name:
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OFFICE USE ONLY
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------------------
SPV-9890-APP [copy 1 to Liberty Life] [copy 2 to agent] [copy 3 to client]
</TABLE>
Exhibit 1.(10)(b)
LIBERTY LIFE ASSURANCE COMPANY
OF BOSTON
175 Berkeley Street, Boston, Massachusetts 02117
LIBERTY
MUTUAL [LOGO]
Application for Life Insurance
- --------------------------------------------------------------------------------
AGENT'S CHECKLIST:
- -----------------
[bullet] USE BLACK INK. Do not use a high lighter
[bullet] Verify that all questions have been answered, and all necessary
signatures are present. Corrections must be initialed by the applicant.
[bullet] Collect modal premium if permitted by amount and underwriting
information. Complete a Payment Identification slip. Have check made out to
Liberty Life Assurance Company of Boston. If one check is collected for multiple
applications, specify how the check is to be divided.
[bullet] If premium is collected, give applicant Conditional Receipt. Explain
conditions for coverage to take effect.
[bullet] Give applicant Notice of Information Practices.
[bullet] Complete any required supplemental forms (e.g. replacement, HIV
testing consent, etc.)
[bullet] Attach check and supplemental forms to application with a single
staple.
- --------------------------------------------------------------------------------
<PAGE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Part 1 PLA-9663 APPLICATION FOR LIFE INSURANCE
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Primary Insured (First, MI, Last): [ ] Male [ ] Female 11. Joint/Additional Insured (First, MI, Last) [ ] Male
[ ] Female
----------------------------------------------------------------------
12. If Additional Insured: Amount of Insurance: $____________
Type:____________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
2. Marital Status: [ ] Single [ ] Married [ ] Sep. 13. Marital Status: [ ] Single [ ] Married [ ] Sep.
[ ] Div. [ ] Widowed [ ] Div. [ ] Widowed
- -----------------------------------------------------------------------------------------------------------------------------------
3. Former name if changed in past 5 years: 14. Former name if changed in past 5 years:
- -----------------------------------------------------------------------------------------------------------------------------------
4. Date of Birth (month/day/year): 15. Date of Birth (month/day/year):
- -----------------------------------------------------------------------------------------------------------------------------------
5. Birthplace (state, or country if not U.S.): 16. Birthplace (state, or country if not U.S.):
- -----------------------------------------------------------------------------------------------------------------------------------
6. Social Security Number: 17. Social Security Number:
- -----------------------------------------------------------------------------------------------------------------------------------
7. Home 18. Home
Address: Address:
[ ] Same as
Primary Insured: Phone: ( )
Phone: ( )
- -----------------------------------------------------------------------------------------------------------------------------------
8. Primary Insured's beneficiaries (provide full name 19. Joint/Additional Insured's beneficiaries (provide full
and relationship to the Primary Insured): name and relationship to Joint/Additional Insured):
Primary Beneficiary Primary Beneficiary
& Relationship: & Relationship
Contingent Beneficiary Contingent Beneficiary
& Relationship: & Relationship
- -----------------------------------------------------------------------------------------------------------------------------------
9. [ ] Yes [ ] No Have you used any form of 20. [ ] Yes [ ] No Have you used any form of
tobacco, or a nicotine substitute (e.g. gum, tobacco, or a nicotine substitute (e.g. gum,
patch), within the past 12 months? patch), within the past 12 months?
- -----------------------------------------------------------------------------------------------------------------------------------
10. a) Height: ___ft ____in b) Weight: ______lbs. 21. a) Height: ___ft ____in b) Weight: ______lbs.
- -----------------------------------------------------------------------------------------------------------------------------------
Family & Children's Protection
"Children" means all children, step-children, and legally adopted children of
the Primary Insured who have not reached their 18th birthday.
Insurance will not be provided on any child until 15 days after birth.
- -----------------------------------------------------------------------------------------------------------------------------------
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
Birth date Actual
22. Name (First, MI, Last) Mo/Day/Yr Age Birthplace (state, country) Height Weight
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
Spouse
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
Child
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
Child
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
Child
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
Child
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
Child
- ---------- ---------------------------- --------------- -------- ------------------------------- ----------- -------------
23. Special Instructions Other Requests:
[ ] Backdate / / to save age
[ ] Make coverage effective / /
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
PART 1 PLAN OF INSURANCE / OWNER / PAYOR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
24. Plan of Insurance [ ] Individual or [ ] Joint 33. [ ] Yes [ ] No Is the insurance applied for intended
to replace or change in whole or in part any existing
[ ] Whole Life [ ] Universal Life life insurance or annuity, including U.S. Government
[ ] Life Paid up at 65 [ ] Year Level R&C Term Life Ins., in this or another company? If Yes,
[ ] 20-Pay Life complete applicable Replacement forms.
[ ] Extra Value Life [ ] Monthly Decreasing Term Company ______________________ Policy # _________________
______ Years @ _______%
[ ] Other ________________________________ Company ______________________ Policy # _________________
- -----------------------------------------------------------------------------------------------------------------------------------
25. Amount of insurance (base policy); $_______________ 34. Term Conversion Request:
- ---------------------------------------------------------- Please Convert: [ ] 100% or [ ] Only $_______________________
of Term Policy # or Term Rider on policy #____________________
26. Initial Modal Premium: $________________ per If partial conversion, remainder of policy or rider should:
[ ] Year [ ] Payroll Deduction
[ ] Half-Year Acct #: ____________________ [ ] remain in force or [ ] be canceled
[ ] Quarter Client #: __________________
[ ] Monthly PAC [ ] weekly [ ] semi-monthly
[ ] Other [ ] bi-weekly [ ] monthly
_______________ [ ] other ______________
- -----------------------------------------------------------------------------------------------------------------------------------
27. Additional deposit: $___________________ If the Primary Insured is also the Owner and Payor, you
may skip to Part 1A.
- -----------------------------------------------------------------------------------------------------------------------------------
28. Death Benefit Option (UL only): 35. Owner's name and relationship to Primary Insured (If no
[ ] Option 1 (face amount includes cash value) Owner is designated, the Primary Insured will be the
[ ] Option 2 (cash value is in addition to face amount) Owner):
- -----------------------------------------------------------------------------------------------------------------------------------
29. Dividend Option: 36. Owners Social Security
Number (Tax ID Number):
[ ] Paid-up Additions [ ] Cash
[ ] Accumulate at Interest ____________________ ---------------------------------------------------------------
[ ] Reduce Premiums ___________________________
37. Owner's
- --------------------------------------------------------------- Mailing
Address:
30. [ ] Yes [ ] No Is Accelerated Death Benefit
(Liberty's Living Benefit) requested?
[ ] Same as Primary Insured
- ----------------------------------------------------------------
31. [ ] Yes [ ] No If available, is Automatic Premium
Loan Requested?
- -----------------------------------------------------------------------------------------------------------------------------------
32. Additional Benefits & Riders: 38. Payor (If no Payor is designated, the Owner will be the Payor.
For Payroll Deduction, the employee must be designated as
Payor.)
[ ] a) Waiver of Premium
[ ] b) Guaranteed Insurability __________________ units [ ] Primary Insured [ ] Owner (if other than Primary
[ ] c) Accidental Death $________________________ Insured)
[ ] d) Additional Insured
Number of Additional Insureds: ___________
[ ] e) _________ - Year Level R&C Term $_________
[ ] f) Monthly Decreasing Term $__________________ -----------------------------------------------------------------
______ Years @ ___%
[ ] g) Family Protection: _______________________ units 39. Payor's Social Security
[ ] h) Children's Protection: ___________________ units Number (Tax ID Number):
[ ] i) Other: ___________________________________
[ ] j) Other: ___________________________________ -----------------------------------------------------------------
[ ] k) Other: ___________________________________
40. Payor's
Billing
Address:
Same as:
[ ] Owner
[ ] Primary Insured
-----------------------------------------------------------------
Complete questions #41 through 43 if Payor Benefit is applied for.
-----------------------------------------------------------------
41. Payor's Date of Birth (month/day/year) / /
-----------------------------------------------------------------
42. Birthplace (state, or country if not U.S.):
-----------------------------------------------------------------
43. a) Height: _______ ft. ________ b) Weight: __________ lbs.
- -----------------------------------------------------------------------------------------------------------------------------------
44. Home Office Endorsements (Not to be used where prohibited by Statute or Insurance Department ruling):
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1A UNDERWRITING INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Answer for all persons proposed for insurance under any plan or benefit. Provide complete details to all "Yes" answers.
- ------------------------------------------------------------------------------------------------------------------------------------
1. Has any proposed insured: Yes No
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
a) ever had any application for life, health or accident insurance declined, postponed, or not approved as [ ] [ ]
applied for?
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
b) been convicted of, or are they currently charged with, 3 or more moving violations within the past 2 years? [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
c) been convicted of, or are they currently charged with, reckless driving or driving under the influence of [ ] [ ]
alcohol or drugs, within the past 5 years
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
2. Has any proposed insured been treated for or diagnosed as having any of the following diseases or symptoms
within the past 10 years Yes No
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
a) chest pain, heart murmur, high blood pressure, arrhythmia, stroke, transient ischemic attack (TIA), or any [ ] [ ]
other disease or disorder of the heart or circulatory system?
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
b) cancer, tumor, leukemia, or lymphoma? [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
c) emphysema or other chronic obstructive lung disease? [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
d) diabetes, ulcerative colitis, Crohn's disease, liver or kidney disease? [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
e) epilepsy, paralysis, multiple sclerosis, or other nervous system disorder? [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
f) anemia or other disease or disorder of the blood or immune system? [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
3. Is any proposed insured currently disabled, or have they been unable to work or perform regular activities for [ ] [ ]
more than 7 consecutive calendar days in the past 12 months?
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
4. Has any proposed insured: Yes No
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
a) had, within the past 5 years, abnormal results on any: blood test, urinalysis, electrocardiogram, X-ray, CT [ ] [ ]
or MRI scan, or other diagnostic test?
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
b) been advised to have a diagnostic test or surgery which has not been performed? (Does not include dental [ ] [ ]
work)
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
c) within the past 10 years used narcotics, barbiturates, hallucinogenic drugs, amphetamines, cocaine, or [ ] [ ]
taken drugs intravenously except as prescribed by a licensed physician; or received treatment or counseling
for alcohol or drug abuse?
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
d) been diagnosed as having or been treated for Human Immunodeficiency Virus (HIV) infection by a member of [ ] [ ]
the medical profession?
- ---------------------------------------------------------------------------------------------------------------------- ------ ------
5. Does any proposed insured have a family history (parents, grandparents, or siblings) of Huntington's Chorea or [ ] [ ]
polycystic kidney disease?
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Details Provide full details here for Questions 1 through 11 answered "Yes":
<TABLE>
<CAPTION>
Ques. Name of Details/ Onset Recovery Time Name & Address of
No. Proposed Insured Conditions & Complications Mo/Yr Mo/Yr Disabled Physicians & Hospitals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
- --------- ---------------------- -------------------------------- ----------- ----------- ----------- ------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1B UNDERWRITING INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Answer for all persons proposed for insurance under any plan or benefit. Provide
complete details to all "Yes" answers. Yes No
- --------------------------------------------------------------------------------------------------------------------- ------- ------
6. Does any proposed insured have a family history (parents or siblings) of diabetes, heart disease, or cancer [ ] [ ]
appearing prior to age 60?
- --------------------------------------------------------------------------------------------------------------------- ------- ------
7. Other than the last visit to the personal physician listed below, has any proposed insured been treated by any [ ] [ ]
doctor or other practitioner, or been a patient in any hospital, clinic, or similar institution within the
past 5 years?
- --------------------------------------------------------------------------------------------------------------------- ------- ------
8. Has any proposed insured lost more than 10 pounds in the past 12 months? If yes, state cause and change in [ ] [ ]
weight.
- --------------------------------------------------------------------------------------------------------------------- ------- ------
9. Has any proposed insured been treated for or diagnosed as having any of the
following diseases or conditions within the past 10 years: Yes No
- --------------------------------------------------------------------------------------------------------------------- ------- ------
a) mental or emotional disorder? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
b) bronchitis, pneumonia, asthma or other respiratory disorder? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
c) lupus or other connective tissue disease? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
d) disease or disorder of the reproductive organs, urinary tract or digestive system? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
e) sexually transmitted disease? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
f) any other illnesses, disease or injury within the past 5 years? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
10. Does any proposed insured: Yes No
- --------------------------------------------------------------------------------------------------------------------- ------- ------
a) fly or have they flown within the past 3 years, as a pilot or student pilot? If "Yes", complete an [ ] [ ]
Aviation Questionnaire:
- --------------------------------------------------------------------------------------------------------------------- ------- ------
b) participate in, or within the past 2 years have they participated in, motor sports (land or water), [ ] [ ]
mountain climbing, skydiving, parachuting, hang gliding or scuba diving? If "Yes", complete a Hazardous
Sports Questionnaire.
- --------------------------------------------------------------------------------------------------------------------- ------- ------
c) intend to live or travel outside the U.S. or Canada? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
d) have any other applications for life insurance currently pending? [ ] [ ]
- --------------------------------------------------------------------------------------------------------------------- ------- ------
11. Has any proposed insured been convicted within the past 5 years of, or are they currently charged with, a [ ] [ ]
felony?
- ------------------------------------------------------------------- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Additional Information regarding the Primary Insured Additional Information regarding the Joint/Additional Insured
- ------------------------------------------------------------------- ----------------------------------------------------------------
<S> <C>
12. Name and [ ] None 19. Name and [ ] None
address of address of
personal personal
physician: physician:
Telephone: ( ) Telephone: ( )
- ------------------------------------------------------------------- ----------------------------------------------------------------
b) Date and reason last consulted: [ ] N/A b) Date and reason last consulted: [ ] N/A
- ------------------------------------------------------------------- ----------------------------------------------------------------
c) Treatment given and medication prescribed [ ] N/A c) Treatment given and medication prescribed [ ] N/A
- ------------------------------------------------------------------- ----------------------------------------------------------------
13. List all medications currently prescribed: [ ] N/A 20. List all medications currently prescribed: [ ] N/A
- ------------------------------------------------------------------- ----------------------------------------------------------------
14. Primary Insured's occupation, including specific duties: 21. Joint/Additional Insured's occupation, including specific
duties:
- ------------------------------------------------------------------- ----------------------------------------------------------------
15. Employer 22. Employer
& Address: & Address:
Phone: ( ) How long? Phone: ( ) How long?
- ------------------------------------------------------------------- ----------------------------------------------------------------
16. Earned Income: $________ Other Income: $___________ 23. Earned Income: $________ Other Income: $___________
Sources of Other Income: Sources of Other Income:
- ------------------------------------------------------------------- ----------------------------------------------------------------
17. Life Insurance in force: $________________ 24. Life Insurance in force: $_________________
- ------------------------------------------------------------------- ----------------------------------------------------------------
Total Accidental Death Benefit: $____________________ Total Accidental Death Benefit: $___________________
- ------------------------------------------------------------------ -----------------------------------------------------------------
18. Driver's license #: ______________ State: ________________ 25. Driver's license #: _______________ State: ________________
- ------------------------------------------------------------------- ----------------------------------------------------------------
</TABLE>
<PAGE>
SIGNATURES
Any person who knowingly, and with intent to injure, defraud or deceive any
insurance company, files a statement of claim containing any false, incomplete
or misleading information may be subject to criminal or civil penalties.
INSURING AGREEMENT
I declare that all statements and answers given in all Parts of this Application
are true and complete to the best of my knowledge and belief. I agree that they
will form the basis for, and be a part of, any contract of insurance issued by
the Company. I also agree that:
(a) No sales Representative or Medical Examiner has the authority to:
(1) determine insurability; (2) waive any rights or requirements of
the Company; or (3) make or modify any contract of insurance. No
information obtained by any such person will bind the Company unless
set out in writing in a Part of this Application.
(b) No insurance will take effect on the basis of this Application
unless: (1) the full first premium has been paid; and (2) the policy
has been delivered to and accepted by the Applicant during the
continued insurability of all persons proposed for insurance.
However, if the Conditional Receipt having the same serial number as
this Application is issued, insurance may take effect earlier under
that Receipt.
(c) No change as to age, amount, benefits, classification, or plan of
insurance will take effect unless agreed to in writing by the
Applicant. However, acceptance of any policy issued on the basis of
this Application will be a ratification by the Applicant of any
other corrections, modifications, or additions made by the Company
in Question #44 above.
CONDITIONAL RECEIPT AGREEMENT
If a Conditional Receipt has been given to the Applicant, then the undersigned
Applicant hereby also declares that he or she: (1) has read the Conditional
Receipt and the Insuring Agreement in the Application; (2) understands that the
payment of a premium with the Application does not necessarily mean that
insurance takes effect immediately; and (3) agrees to all terms, conditions, and
limits of the Conditional Receipt. $________ has been paid in exchange for the
Conditional Receipt bearing the same number as this application.
LIVING BENEFIT AGREEMENT (ACCELERATED DEATH BENEFIT)
If I have requested Liberty's Living Benefit, I acknowledge that I have received
the written disclosure for this benefit.
AUTHORIZATION TO OBTAIN INFORMATION
I AUTHORIZE any licensed physician, medical practioner, hospital, clinic, other
medical or medically-related facility, insurance or reinsuring company, the
Medical Information Bureau, Inc. (MIB), consumer reporting agency, employer or
former employer to give to Liberty Life Assurance Company of Boston (Liberty),
its employees and reinsurers any information about my: physical or mental
condition character; general reputation; habits; finances; insurance history;
occupation; and hobbies. I also authorize Liberty to obtain an investigative
consumer report on me. This authorization applies to all types of information,
including but not limited to information regarding HIV infection, AIDS, mental
health and substance abuse. I AM AWARE that Liberty will use this information to
determine if I am eligible for insurance or for benefits under an in-force
policy. I am aware that Liberty may give this information to: its reinsurers;
the MIB; other persons or entities that perform services related to my
application or claim; or as may be authorized or required by law. I AGREE that
this form shall be valid for 30 months from the date below. I agree that a copy
will be as valid as this original. I MAY ASK for a copy of this form. I HAVE
RECEIVED the Notice of Information Practices and the notices required by the
Federal Fair Credit Reporting Act and MIB.
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER (TIN) CERTIFICATION
By signing this application, the named Owner certifies under penalties of
perjury that: (1) the TIN shown on Part 1 of this application is correct, and
(2) that I am not subject to backup withholding either because I have not been
notified that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service has notified
me that I am no longer subject to backup withholding. (If you are subject to
backup withholding, cross out item 2 above). The Internal Revenue Service does
not require your consent to any provision of this document other than the
certifications required to avoid backup withholding.
<TABLE>
<S> <C> <C> <C> <C> <C>
Dated at: ____________________ _____________ on ______________ ___________________________________
City State Date Signature of Witness-Licensed Agent
</TABLE>
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ---------------------------------------------------- ----------------------------
Signature of Primary Insured, or Signature of Signature of Joint/Additional Insured, or Signature of Owner if other
parent or guardian for Primary Insured under Signature of parent or guardian for Joint/Additional than Primary or
Actual age 15 (16 in CA., 18 in PA.) Insured under actual age 15 (16 in CA., 18 in PA.) Joint/Additional Insured
- ---------------------------------------------- ---------------------------------------------------- ----------------------------
Signature of Spouse when Family Protection is Signature of Payor when Payor Benefit Signature of Applicant if not
applied for applied for Insured or Owner
</TABLE>
<PAGE>
PREAUTHORIZED CHECK PLAN
<TABLE>
<S> <C>
[ ] Debit on Issue Day* [ ] Debit on the day of your choice (1-28) ______________________________________________________
*If the issue day is the 29th, 30th or 31st of the month, debits will occur on the first day of the following month.
Payor Name (print exactly as shown on Bank records) _______________________________________________________________________________
(Payor/Depositor shown on check must also be listed as Payor in Part 1 of this application.)
Bank Name _________________________________________________________________________________________________________________________
Bank Address ______________________________________________________________________________________________________________________
Bank Telephone # __________________________________________________________________________________________________________________
</TABLE>
The undersigned authorizes and requests Liberty Life Assurance Company of Boston
(herein called the Company) to effect payment for the monthly policy amount
owned by the policyowner to the Company each month by initiating debit entries
to the undersigned's account at the financial institution indicated above.
Should any of these electronic debits be returned by the payor's bank for
insufficient funds, we will immediately redeposit (three days later) for the
amount due. If it is returned a second time we will electronically debit the
following month for the NEW amount due. If both attempts fail in the second
month, the sales representative will be notified and the policy's PAC plan will
be terminated. No premium is considered paid until the electronic debit has been
accepted by the bank.
It is understood that this agreement may be terminated at any time by written
notification from either party to the other. Any such termination shall be
effective only after notification has been received and the Company has had a
reasonable opportunity to act on it.
Date: _______________________ Payor Signature ________________________________
- --------------------------------------------------------------------------------
Tape a Voided CHECK here.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
SALES REPRESENTATIVE'S STATEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. If other than normal new business, please check all that 7. How was this sale initiated?
apply:
[ ] Applicant initiated sale [ ] Phone solicitation by
[ ] Exercising Guaranteed Insurability Option for agent
policy #
[ ] Bill Stuffer [ ] Referral
[ ] Review Special Class rating for policy #
[ ] Death claim proceeds [ ] Reply card
[ ] Face increase for policy #
[ ] Direct Mail response [ ] Service Call
[ ] Additional benefits for policy #
[ ] Other (please specify) [ ] Walk-in
[ ] Other:
Policy #
- ------------------------------------------------------------------- ----------------------------------------------------------------
2. Application #'s of family members or business partners being 8. Has an exam been requested for:
submitted simultaneously: __________________________________ [ ] Yes [ ] No Primary Insured
____________________________________________________________ [ ] Yes [ ] No Joint/Additional Insured
Paramed __________________________________
Paramed Phone # ( ) ____________________
Other ____________________________________
- ------------------------------------------------------------------- ----------------------------------------------------------------
3. [ ] Yes [ ] No Was the Fair Credit reporting Act Notice/ 9. [ ] Yes [ ] No Are you aware of any information which
Medical Information Bureau Notice given to the proposed suggests that any proposed Insured may not qualify as a
Insureds? Standard Risk? (If Yes, do not accept a premium deposit
or issue a Conditional Receipt, and explain in a separate
memo).
- ------------------------------------------------------------------- ----------------------------------------------------------------
4. [ ] Yes [ ] No Were State Cost Disclosure Requirements 10. [ ] Yes [ ] No Was an interpreter used? If "Yes":
met? A.) Name of interpreter and relationship to applicant
B) What language was used? __________________
- ------------------------------------------------------------------- ----------------------------------------------------------------
5. If any proposed Insured is actual age 15 or less (16 in CA, 11. If application has been submitted with premium at standard
18 in PA): rates and insured qualifies for preferred rates: (check one)
(a) [ ] Yes [ ] No Does child reside with parent who
signed Insuring Agreement and Medical Authorization? Apply excess premium to increase policy face amount to:
If No, with whom does child live? ________________________ [ ] maximum submitted premium will purchase
[ ] new face amount of $___________________
(b) List amounts of insurance in force or currently applied
for on: Father: $ __________________ Leave face amount as applied for and:
Mother: $ _____________________ [ ] apply excess premium to pay future premiums, or for
All Siblings (age and amount:) U.L. to contract fund.
___________________________________________ [ ] refund excess premium.
___________________________________________
Other: _________________________________________________
- -------------------------------------------------------------------
6. [ ] Yes [ ] No Is the applicant a Liberty policyholder?
[ ] Auto [ ] Home [ ] Life [ ] Business Lines [ ] Other
- ------------------------------------------------------------------- ----------------------------------------------------------------
</TABLE>
CERTIFICATION OF SALES REPRESENTATIVE
I declare that, to the best of my knowledge, the policy applied for [ ] does [ ]
does not involve replacement of existing life insurance of annuity as defined in
the applicable regulation. (If this replaces or rewrites in whole or in part
another Liberty Life Assurance Company of Boston policy, give that policy
number: ____________________.) I know of no condition affecting the insurability
of the proposed Insured(s) not fully set forth herein. I recommend acceptance
without qualification except as stated in Question 9 above. Any information
entered by me on this Application has been recorded truly and accurately as
supplied by the Applicant.
<TABLE>
<S> <C> <C>
$
- ---------------------------- ----------------------------------------------------- -------------------------
Date Sales Representative's Signature Cash Received
- ------------------------------------------------------------------------------------------------------------------------------------
Office/Agency Name: Office/Agency #:
- ------------------------------------------------------------------------------------------------------------------------------------
Representative's Name (Print): Sales Rep #:
- ------------------------------------------------------------------------------------------------------------------------------------
Comments:
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
VARIABLE LIFE INSURANCE SUPPLEMENTAL APPLICATION
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. PLAN |_| Single Premium Single Life Variable Life Insurance |_| Single Premium Last Survivor Variable Benefit Agreement
|_| Flexible Premium Single Life Variable Life Insurance |_| Other ______________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2. INSURED A First MI Last Date of Birth Social Security Number
/ / - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3. INSURED B First MI Last Date of Birth Social Security Number
/ / - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAYMENT ALLOCATION Allocations must total 100%. The minimum percentage allocation is [5%] and must be in whole numbers.
- ------------------------------------------------------------------------------------------------------------------------------------
4. If chosen do not complete allocation percentages below.
ASSET ALLOCATION MODEL _________________________________ Asset Allocation Models are rebalanced quarterly.
- ------------------------------------------------------------------------------------------------------------------------------------
4A. FIXED ACCOUNT _____%
- ------------------------------------------------------------------------------------------------------------------------------------
4B. SUB-ACCOUNTS Please make no more than [10] selections.
<S> <C> <C> <C> <C> <C>
[AIM VI Capital Appreciation] % [Dreyfus Stock Index] % [Oppenheimer Bond] %
----- ----- ------
[AIM VI International Equity] % [Dreyfus Capital Appreciation] % [Oppenheimer Growth & Income] %
----- ----- ------
[Dreyfus Socially Responsible
[Colonial Small Cap Value] % Growth] %
----- -----
[Colonial High Yield [Stein Roe Balanced] %
Securities] ------
% [MFS VIT Emerging Growth] % [Stein Roe Growth Stock] %
----- ----- ------
[Colonial Strategic Income] % [MFS VIT Research] % [Stein Roe Money Market] %
----- ----- ------
[Colonial U.S. Stock] % [MFS VIT Utilities] %
----- -----
[Liberty All-Star Equity] % [MFS VIT Growth with Income] % [Other] %
----- ----- ------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SPECIAL REQUESTS Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5. Is Dollar Cost Averaging elected? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
6. Is Account Rebalancing elected? (Do not complete if an Asset Allocation Model is used.) |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
7. Please indicate if you refuse Telephone Transfer privileges. |_|
- ------------------------------------------------------------------------------------------------------------------------------------
If you answered Yes to questions 5 and 6, applicable administrative
form(s) must be completed and submitted for your elections to be effective.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUITABILITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PLEASE READ CAREFULLY Yes No
- ------------------------------------------------------------------------------------------------------------------------------------
8. Did you receive the current prospectus for the life contract applied for? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
9. Do you understand that the contract values including the Death Benefit may
increase or decrease, depending on the investment performance of the sub-accounts? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
10. Do you understand that the contract may lapse only if the surrender value
becomes insufficient to cover the Monthly Deductions? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
11. Do you understand that the initial payment may be held in the Fixed Account
until after your Right to Return period expires? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
12. Do you believe that this contract is consistent with your insurance needs and financial objectives? |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE AMOUNT AND DURATION OF THE DEATH BENEFIT AND OTHER VALUES PROVIDED BY THIS
CONTRACT ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, THE
FIXED ACCOUNT EARNINGS AND CONTRACT CHARGES. SEPARATE ACCOUNT VALUES ARE
VARIABLE AND MAY INCREASE OR DECREASE. THESE VALUES ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
I/we, the Owner(s), declare that the statements and answers in this supplemental
application are complete and true to the best of my/our knowledge and belief and
agree that they will become part of any contract of insurance issued by the
Company.
<TABLE>
<S> <C>
- ------------------------------------------- -------------------------------------------
Signature of Insured Signature of Insured B
- ------------------------------------------- -------------------------------------------
Signature of Joint Owner Signature of Owner if Other than Insured(s)
Dated at ----------------- on ------------- --------------------------------------------
City and State Date Signature of Registered Representative
PLA-98120 [copy 1 to Liberty Life] [copy 2 to agent] [copy 3 to client]
</TABLE>
EXHIBIT 9
ILLUSTRATIONS OF ACCOUNT VALUES,
SURRENDER VALUES AND
DEATH BENEFITS
The following tables have been prepared to help show how values under Single
Life and Survivorship Contracts change with investment experience. The tables
illustrate how Account Values, Surrender Values, and Death Benefits under a
Contract issued on an Insured of a given age would vary over time if the
hypothetical gross investment rates of return on the Portfolios' assets were a
uniform, gross, after tax, annual rate of 0%, 6%, and 12%. If the hypothetical
gross investment rate of return averages 0%, 6%, or 12%, but fluctuates over or
under those averages throughout the years, the Account Values, Surrender Values
and Death Benefits may be different.
The amounts shown for the Account Value, Surrender Value and Death Benefit as of
each Contract Anniversary reflect the fact that the net investment return on the
assets held in the Sub-Accounts is lower than the gross after-tax return on the
assets held in the Portfolios, as a result of expenses paid by the Portfolios
and charges levied against the Sub-Accounts. The values shown reflect a daily
charge to the Sub-Accounts of 1.65% of average daily net assets to compensate
Liberty Life for its expenses incurred and for assuming mortality and expense
risks under the Contracts. In addition, the net investment returns also reflect
the deduction of the Portfolio investment advisory fees and other Portfolio
expenses (x.xx%, the arithmetic average of the actual and estimated fees and
expenses, including any caps or reimbursements). The tables also reflect
applicable charges including an annual Contract Fee of $30.00 per year, and
monthly charges for providing insurance protection. However, no Contract Fee is
deducted in any year in which the Account Value exceeds $50,000. For each
hypothetical gross investment rate of return, tables are provided reflecting
current and guaranteed cost of insurance charges. The current cost of insurance
charge for Single Life Contracts, Standard class (NT) is equal to the lesser of
(a) 0.45% annually of the Account Value for the first ten Contract Years and
0.65% annually of Account Value thereafter or (b) the guaranteed cost of
insurance charge. The current cost of insurance charges for Survivorship
Contracts, Standard class (NT) is equal to the lesser of (a) 0.xx% annually of
the Account Value for the first ten Contract Years and 0.xx% annually of Account
Value thereafter or (b) the guaranteed cost of insurance charge. After deduction
of these amounts (other than the cost of insurance charges), hypothetical gross
average investment rates of return of 0%, 6% and 12% correspond to approximate
net annual investment rates of return of - x.xx%, x.xx% and x.xx%, respectively.
Guaranteed cost of insurance rates vary by issue age (or attained age in the
case of increases in Initial Death Benefit), sex, rating class and Contract Year
and, therefore, cost of insurance charges are not reflected in the approximate
net annual investment rate of return stated above.
The tables illustrate the Account Values, Surrender Values, and Death Benefits
that would result based upon the hypothetical investment rates of return if no
Payment other than the indicated initial Payment is paid, if the entire initial
Payment is allocated to the Variable Account, and if no Contract loans are
taken. The tables also assume that no partial withdrawals or transfers have been
made.
Values are shown for Contracts which are issued to standard class Insureds.
Values for Contracts issued on a basis involving a higher mortality risk would
result in lower Account Values, Surrender Values and Death Benefits than those
illustrated. Females generally have a more favorable guaranteed rate structure
than males.
Where the Surrender Value shown in an illustration is zero, the Death Benefit
shown is the Minimum Guaranteed Death Benefit. If a Contract Loan is outstanding
in this situation, the Contract may lapse in accordance with the Grace Period
provisions.
The tables reflect the fact that no charges for Federal, state or other income
taxes are currently made against the Variable Account. If such a charge is made
in the future, it will take a higher gross rate of return than illustrated to
produce the net after-tax returns shown in the tables.
Upon request, Liberty Life will furnish a comparable illustration based on the
proposed Insured's age, sex, underwriting classification, proposed initial
Payment, and any available riders requested.
A-1
<PAGE>
SINGLE LIFE
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
MALE STANDARD NON-TOBACCO ISSUE AGE 65
$30,000 INITIAL PAYMENT
$60,252 INITIAL DEATH BENEFIT
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
Single 0% Hypothetical 6% Hypothetical 12% Hypothetical
Payment Gross Investment Return Gross Investment Return Gross Investment Return
Plus ------------------------------ ---------------------------- -----------------------------
Contract Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
- -------- -------- ------- --------- ----- ------- --------- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2 [to be provided by pre-effective amendment]
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO CONTRACT LOANS HAVE BEEN MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED ON
ACCOUNT VALUE ACCUMULATION TEST.
(5) WHEN THE SURRENDER VALUE IS ZERO, THE DEATH BENEFIT SHOWN IS THE GUARANTEED
DEATH BENEFIT. IF A CONTRACT LOAN WERE OUTSTANDING WHEN THE SURRENDER VALUE
IS ZERO, THE CONTRACT MIGHT LAPSE IN ACCORDANCE WITH THE GRACE PERIOD
PROVISIONS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE
FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY LIBERTY LIFE ASSURANCE COMPANY OF BOSTON THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-2
<PAGE>
SINGLE LIFE
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
MALE STANDARD NON-TOBACCO ISSUE AGE 65
$30,000 INITIAL PAYMENT
$60,252 INITIAL DEATH BENEFIT
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
Single 0% Hypothetical 6% Hypothetical 12% Hypothetical
Payment Gross Investment Return Gross Investment Return Gross Investment Return
Plus ------------------------------ ---------------------------- -----------------------------
Contract Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
- -------- -------- ------- --------- ----- ------- --------- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2 [to be provided by pre-effective amendment]
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO CONTRACT LOANS HAVE BEEN MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED ON
ACCOUNT VALUE ACCUMULATION TEST.
(5) WHEN THE SURRENDER VALUE IS ZERO, THE DEATH BENEFIT SHOWN IS THE GUARANTEED
DEATH BENEFIT. IF A CONTRACT LOAN WERE OUTSTANDING WHEN THE SURRENDER VALUE
IS ZERO, THE CONTRACT MIGHT LAPSE IN ACCORDANCE WITH THE GRACE PERIOD
PROVISIONS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE
FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY LIBERTY LIFE ASSURANCE COMPANY OF BOSTON THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-3
<PAGE>
SINGLE LIFE
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
FEMALE STANDARD NON-TOBACCO ISSUE AGE 65
$30,000 INITIAL PAYMENT
$69,093 INITIAL DEATH BENEFIT
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
Single 0% Hypothetical 6% Hypothetical 12% Hypothetical
Payment Gross Investment Return Gross Investment Return Gross Investment Return
Plus ------------------------------ ---------------------------- -----------------------------
Contract Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
- -------- -------- ------- --------- ----- ------- --------- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2 [to be provided by pre-effective amendment]
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO CONTRACT LOANS HAVE BEEN MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED ON
ACCOUNT VALUE ACCUMULATION TEST.
(5) WHEN THE SURRENDER VALUE IS ZERO, THE DEATH BENEFIT SHOWN IS THE GUARANTEED
DEATH BENEFIT. IF A CONTRACT LOAN WERE OUTSTANDING WHEN THE SURRENDER VALUE
IS ZERO, THE CONTRACT MIGHT LAPSE IN ACCORDANCE WITH THE GRACE PERIOD
PROVISIONS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE
FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY LIBERTY LIFE ASSURANCE COMPANY OF BOSTON THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-4
<PAGE>
SINGLE LIFE
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
FEMALE STANDARD NON-TOBACCO ISSUE AGE 65
$30,000 INITIAL PAYMENT
$69,093 INITIAL DEATH BENEFIT
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
Single 0% Hypothetical 6% Hypothetical 12% Hypothetical
Payment Gross Investment Return Gross Investment Return Gross Investment Return
Plus ------------------------------ ---------------------------- -----------------------------
Contract Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
- -------- -------- ------- --------- ----- ------- --------- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2 [to be provided by pre-effective amendment]
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO CONTRACT LOANS HAVE BEEN MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED ON
ACCOUNT VALUE ACCUMULATION TEST.
(5) WHEN THE SURRENDER VALUE IS ZERO, THE DEATH BENEFIT SHOWN IS THE GUARANTEED
DEATH BENEFIT. IF A CONTRACT LOAN WERE OUTSTANDING WHEN THE SURRENDER VALUE
IS ZERO, THE CONTRACT MIGHT LAPSE IN ACCORDANCE WITH THE GRACE PERIOD
PROVISIONS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE
FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY LIBERTY LIFE ASSURANCE COMPANY OF BOSTON THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-5
<PAGE>
SURVIVORSHIP
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
MALE STANDARD NON-TOBACCO ISSUE AGE 65
FEMALE STANDARD NON-TOBACCO ISSUE AGE 65
$30,000 INITIAL PAYMENT
$84,579 INITIAL DEATH BENEFIT
VALUES--GUARANTEED COST OF INSURANCE
<TABLE>
<CAPTION>
Single 0% Hypothetical 6% Hypothetical 12% Hypothetical
Payment Gross Investment Return Gross Investment Return Gross Investment Return
Plus ------------------------------ ---------------------------- -----------------------------
Contract Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
- -------- -------- ------- --------- ----- ------- --------- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2 [to be provided by pre-effective amendment]
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO CONTRACT LOANS HAVE BEEN MADE.
(2) VALUES REFLECT CURRENT COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED ON
ACCOUNT VALUE ACCUMULATION TEST.
(5) WHEN THE SURRENDER VALUE IS ZERO, THE DEATH BENEFIT SHOWN IS THE GUARANTEED
DEATH BENEFIT. IF A CONTRACT LOAN WERE OUTSTANDING WHEN THE SURRENDER VALUE
IS ZERO, THE CONTRACT MIGHT LAPSE IN ACCORDANCE WITH THE GRACE PERIOD
PROVISIONS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE
FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY LIBERTY LIFE ASSURANCE COMPANY OF BOSTON THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-6
<PAGE>
SURVIVORSHIP
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
MALE STANDARD NON-TOBACCO ISSUE AGE 65
FEMALE STANDARD NON-TOBACCO ISSUE AGE 65
$30,000 INITIAL PAYMENT
$84,579 INITIAL DEATH BENEFIT
VALUES--CURRENT COST OF INSURANCE
<TABLE>
<CAPTION>
Single 0% Hypothetical 6% Hypothetical 12% Hypothetical
Payment Gross Investment Return Gross Investment Return Gross Investment Return
Plus ------------------------------ ---------------------------- -----------------------------
Contract Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
- -------- -------- ------- --------- ----- ------- --------- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2 [to be provided by pre-effective amendment]
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO CONTRACT LOANS HAVE BEEN MADE.
(2) VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS.
(4) DEATH BENEFIT REFLECTS CURRENT INTERNAL REVENUE CODE REQUIREMENTS BASED ON
ACCOUNT VALUE ACCUMULATION TEST.
(5) WHEN THE SURRENDER VALUE IS ZERO, THE DEATH BENEFIT SHOWN IS THE GUARANTEED
DEATH BENEFIT. IF A CONTRACT LOAN WERE OUTSTANDING WHEN THE SURRENDER VALUE
IS ZERO, THE CONTRACT MIGHT LAPSE IN ACCORDANCE WITH THE GRACE PERIOD
PROVISIONS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER AND ACTUAL EXPENSES. THE DEATH BENEFIT, ACCOUNT VALUE AND SURRENDER VALUE
FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR
BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY LIBERTY LIFE ASSURANCE COMPANY OF BOSTON THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-7
