EXHIBIT 8(aa)
PARTICIPATION AGREEMENT
AMONG
ML LIFE INSURANCE COMPANY OF NEW YORK,
▇▇▇▇▇▇▇▇▇▇▇ VARIABLE ACCOUNT FUNDS,
AND
OPPENHEIMERFUNDS, INC.
THIS AGREEMENT, dated as of the 1st day of March, 2005, by and among ML
Life Insurance Company of New York (the "Company"), a New York life insurance
company, on its own behalf and on behalf of each segregated asset account of the
Company set forth on Schedule A hereto as may be amended from time to time
(hereinafter referred to individually and collectively as the "Account"),
▇▇▇▇▇▇▇▇▇▇▇ Variable Account Funds (the "Fund"), a Massachusetts business trust,
and OppenheimerFunds, Inc. (the "Adviser"), a Colorado company.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance and variable annuity contracts (the
"Variable Insurance Products") to be offered by life insurance companies which
have entered into participation agreements with the Fund and Adviser
("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are divided into
several series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (the "SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Investment Company
Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, if and 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
(the "Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and each class of shares of the Portfolios is
registered under the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the Adviser serves as investment adviser to the Fund, is duly
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended;
WHEREAS, the Company has issued or will issue certain variable life
insurance and/or variable annuity contracts supported wholly or partially by the
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement;
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WHEREAS, the Account is duly established and maintained as a segregated
asset account under applicable state insurance law, duly established by the
Company, on the date shown for such Account on Schedule A hereto as it may be
amended from time to time by mutual written agreement, to set aside and invest
assets attributable to the aforesaid Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Fund is authorized to sell such shares to the
Account at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. Subject to Article X hereof, the Fund agrees to make available to the
Company for purchase on behalf of the Account, shares of those Designated
Portfolios listed on Schedule A to this Agreement, such purchases to be effected
at net asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, (i) Fund series (other than those listed on
Schedule A) in existence now or that may be established in the future will be
made available to the Company only as the Adviser may so provide, and (ii) the
Board of Trustees of the Fund (the "Board") may suspend or terminate the
offering of Fund shares of any Designated Portfolio or class thereof, if such
action is required by law or by regulatory authorities having jurisdiction or
if, in the sole discretion of the Board acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, suspension or
termination is in the best interests of the shareholders of such Designated
Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or
fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Company
shall not redeem Fund shares attributable to Contract owners except in the
circumstances permitted in Section 10.3 of this Agreement, and (ii) the Fund may
delay redemption of Fund shares of any Designated Portfolio to the extent
permitted by the 1940 Act, and any rules, regulations, or orders thereunder.
1.3. Purchase, Redemption and Exchange Procedures
(a) The Parties agree to communicate, process and settle purchase,
redemption and exchange transactions for Designated Portfolio shares (and the
settlement thereof) via the Fund/SERV and Networking systems of the National
Securities Clearing Corporation ("NSCC"). The Fund hereby appoints the Company
as an agent of the Fund for the limited purpose of receiving purchase and
redemption requests on behalf of the Account (but not with respect to any Fund
shares that may be held in the general account of the Company) for shares of
those Designated Portfolios
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made available hereunder, based on allocations of amounts to the Account or
subaccounts thereof under the Contracts and other transactions relating to the
Contracts or the Account. Receipt of any such request (or relevant transactional
information therefor) on any day the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules and
public interpretations thereunder by the staff of the SEC (a "Business Day") by
the Company as such limited agent of the Fund prior to the time that the Fund
ordinarily calculates its net asset value as described from time to time in the
Fund's prospectus and statement of additional information ("SAI") (which as of
the date of execution of this Agreement is generally 4:00 p.m. Eastern Time)
shall constitute receipt by the Fund on that same Business Day, provided in all
such cases that the Fund receives such request from the Company prior to 9:30
a.m. Eastern Time on the next following Business Day. Requests received by the
Company and time stamped after the close of trading on any Business Day or
received by the Fund after 9:30 a.m. Eastern Time on the next following Business
Day shall be treated as if received on the next following Business Day. The
Company warrants that all orders transmitted to the Fund by 9:30 a.m. Eastern
Time on a Business Day were received by the Company in proper form and time
stamped prior to the close of trading on the prior Business Day. "Fund/SERV"
shall mean NSCC's system for automated, centralized processing of mutual fund
purchase and redemption orders, settlement, and account registration.
"Networking" shall mean NSCC's system that allows mutual funds and life
insurance companies to exchange account level information electronically.
(b) The Company shall pay for shares of each Designated Portfolio by
the scheduled close of federal funds transmissions on the same Business Day that
it notifies the Fund of a purchase request for such shares. Payment for
Designated Portfolio shares shall be in federal funds transmitted by wire from
the Settling Bank (on behalf of the Company) to NSCC (unless the Fund determines
and so advises the Company that sufficient proceeds are available from
redemption of shares of other Designated Portfolios effected pursuant to
redemption requests tendered by the Company on behalf of the Account). Upon
receipt by the Fund of federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
"Settling Bank" shall mean the entity appointed to perform such settlement
services on behalf of the Fund.
(c) Payment for Designated Portfolio shares redeemed by the Account
or the Company shall be made in federal funds transmitted by wire to the Company
on the next Business Day after the Fund is properly notified of the redemption
order of such shares (unless redemption proceeds are to be applied to the
purchase of shares of other Designated Portfolios in accordance with Section
1.3(b) of this Agreement), except that the Fund reserves the right to redeem
Designated Portfolio shares in assets other than cash and to delay payment of
redemption proceeds to the extent permitted under Section 22(e) of the 1940 Act
and any Rules thereunder, and in accordance with the procedures and policies of
the Fund as described in the then current prospectus and SAI. The Fund shall not
bear any responsibility whatsoever for the proper disbursement or crediting of
redemption proceeds by the Company; the Company alone shall be responsible for
such action.
(d) Any purchase or redemption request for Designated Portfolio
shares held or to be held in the Company's general account shall be effected at
the closing net asset value per share next determined after the Fund's receipt
of such request, provided that, in the case of a purchase
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request, payment for Fund shares so requested is received by the Fund in federal
funds prior to close of business for determination of such value, as defined
from time to time in the Fund Prospectus.
(e) The Fund offers certain Designated Portfolios with share classes
that impose redemption fees in certain circumstances ("Redemption Fee Funds")
and, with respect to such Redemption Fee Funds, the Company agrees to monitor
holding periods of Contract owners and to track such holding periods for
purposes of the Fund's assessment of redemption fees in conjunction with those
transactions specifically subject to such fees, subject to any reasonable
exceptions as set forth in the Redemption Fee Funds prospectuses and SAIs. The
Company shall maintain records supporting its calculations of redemption fees
payable to each Redemption Fee Fund and shall provide the Fund with access, to
or copies of, such records upon the reasonable request of the Fund. Company
shall calculate the amount of redemption fees payable to each Redemption Fee
Fund on a daily basis and such amount shall be netted against the redemption
proceeds payable by the Company.
(f) The Fund and the Fund's transfer agent may take such other
action (including, without limitation, rejecting specific purchase orders) as
they deem necessary to reduce, discourage or eliminate market timing activity.
The Company agrees to follow and adhere to the Fund's procedures on frequent
purchases, redemptions and exchanges, and to cooperate with the Fund and the
Adviser to assist in the implementation of the Fund's restrictions on purchase,
redemption and exchange activity that follows a pattern of excessive trading,
including but not limited to providing information on Contract owner
transactions, holdings and other information as may reasonably be requested by
the Fund, the Adviser or their duly authorized representatives.
1.4. The Fund shall use its best efforts to make the closing net asset
value per share for each Designated Portfolio available to the Company by 6:30
p.m. Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the closing net asset value per share for such Designated
Portfolio is calculated, and shall calculate such closing net asset value in
accordance with the Fund's Prospectus. In the event the Fund is unable to make
the 6:30 p.m. deadline 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 Fund takes to
make the closing net asset value available to the Company; the Company or its
agent shall notify the Fund's Transfer Agent by the 6:30 p.m. deadline stated
herein, if the Company's orders will be delayed on that basis. Neither the Fund,
any Designated Portfolio, the Adviser, nor any of their affiliates shall be
liable for any information provided to the Company pursuant to this Agreement
which information is based on incorrect information supplied by the Company or
any other Participating Insurance Company to the Fund or the Adviser. Any
material error in the calculation or reporting of the closing net asset value
per share shall be reported immediately upon discovery to the Company. In such
an event the Company shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct closing net asset value per share
and the Fund shall bear the cost of reimbursing any shareholder for the
difference in net asset value and shall not be required to reimburse the Company
for any reprocessing or administrative costs related to the correction of the
error. Any non-material error shall be corrected in the next Business Day's net
asset value per share. The Company shall credit the appropriate number of such
shares to each Account or the appropriate subaccounts of the Account. If the
Accounts have received cash in excess of what they are entitled, the Company
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will, when requested by the Fund and its Transfer Agent, and to the extent
practicable and permitted by law, debit or have debited the Account in the
amount of such excess, but only to the extent of any cash in the Account, and
repay it to the Fund. Upon the request of the Fund and its Transfer Agent, the
Company shall provide the name of the investor and other relevant information
concerning the Contract owner's brokerage account to assist the Fund and its
Transfer Agent in the collection from the Company's customer of any such excess
amount not repaid to the Fund.
1.5. The Fund shall furnish notice (by wire or telephone followed by
written confirmation) to the Company as soon as reasonably practicable of any
income dividends or capital gain distributions payable on any Designated
Portfolio shares. At this time the Company, on its behalf and on behalf of the
Account, hereby elects to receive all such dividends and distributions as are
payable on any Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Company reserves the right, on its behalf and on
behalf of the Account, to revoke this election and to receive all such dividends
and capital gain distributions in the form of cash. The Fund shall notify the
Company promptly of the number of Designated Portfolio shares so issued as
payment of such dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry only.
Stock certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Fund shares shall be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other insurance companies (subject to Section 1.8 hereof) and the cash value
of the Contracts may be invested in other investment companies. A funding
vehicle other than those listed on Schedule A to this Agreement may be made
available for the investment of the cash value of the Contracts, provided,
however, that the Company gives the Fund and the Adviser 45 days written notice
of its intention to make such other investment vehicle available as a funding
vehicle for the Contracts.
(b) The Company shall not, without prior notice to the Adviser
(unless otherwise required by applicable law), take any action to operate the
Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the Adviser
(unless otherwise required by applicable law), induce Contract owners to change
or modify the Fund or change the Fund's distributor or investment adviser.
(d) The Company shall not, without prior notice to the Fund,
induce Contract owners to vote on any matter submitted for consideration by the
shareholders of the Fund in a manner other than as recommended by the Board of
Trustees of the Fund.
1.8. The Adviser and the Fund shall sell Fund shares only to Participating
Insurance Companies and their separate accounts and to persons or plans
("Qualified Persons") that represent in writing to the Adviser and the Fund that
they qualify to purchase shares of the Fund under Section
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817(h) of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations thereunder without impairing the ability of the Account to consider
the portfolio investments of the Fund as constituting investments of the Account
for the purpose of satisfying the diversification requirements of Section
817(h). The Adviser and the Fund shall not sell Fund shares to any insurance
company or separate account (excluding any insurance company or separate account
currently invested in the Fund that is not contractually obligated to comply
with such requirements) unless an agreement complying with Article VI of this
Agreement is in effect to govern such sales, to the extent required. The Company
hereby represents and warrants that it and the Account are Qualified Persons.
The Fund reserves the right to cease offering shares of any Designated Portfolio
in the discretion of the Fund.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts (a) are, or
prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements and NASD Conduct Rules.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law, that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account under New York insurance laws, and that it (a) has
registered or, prior to any issuance or sale of the Contracts, will register the
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts and that it
will maintain such registration for so long as Contracts are outstanding unless
not required by applicable law, or alternatively (b) has not registered the
Account in proper reliance upon an exclusion from registration under the 1940
Act. The Company shall register and qualify the Contracts or interests therein
as securities in accordance with the laws of the various states only if and to
the extent deemed advisable by the Company.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance and for sale in compliance with applicable state and federal securities
laws, and that the Fund is and shall remain registered under the ▇▇▇▇ ▇▇▇. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares as required under this Agreement. The Fund shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund or the Adviser.
2.3. The Fund may make payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act. Prior to financing distribution expenses
pursuant to Rule 12b-1, the Fund shall have first adopted a plan pursuant to
Rule 12b-1 under the 1940 Act to finance distribution expenses. In the event the
Fund seeks to adopt a new plan pursuant to Rule 12b-1, the Company agrees to
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provide the Board with such information as it may reasonably request to support
the adoption of the plan.
2.4. The Fund represents that its investment policies, fees, and expenses
are and shall at all times remain in compliance with applicable state securities
laws. The Fund and Adviser represent that their operations are and shall at all
times remain in material compliance with applicable state securities laws to the
extent required to perform this Agreement. The Company shall notify the Fund and
Adviser in writing if the insurance laws of any state apply to the Fund, the
Adviser and/or Fund's investment policies, fees and expenses so the Fund and
Adviser may determine if they can comply with such state insurance law
requirements. In the event of such notification, the Fund and Adviser agree
that, except in those circumstances where such compliance is inconsistent with
any other laws or regulations applicable to the Fund or the Adviser or where the
Fund has advised the Company that its Board has determined that compliance with
a particular law is not in the best interest of the Fund's shareholders and has
provided the Company with written explanation regarding such determination, any
action required by state insurance law will be taken. The Fund and Adviser also
represent that they will furnish information not otherwise available to the
Company which is required by state insurance law to enable the Company to obtain
the authority needed to issue the Contracts in any applicable state, including
cooperating with the Company in any filing of sales literature for the
Contracts.
2.5. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.6. The Fund and the Adviser represent and warrant that all of their
trustees/directors, officers, employees, investment advisers, and other
individuals or entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.7. The Fund represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Code and the rules and regulations thereunder.
2.8. The Company represents and warrants that it: (a) has access to the
facilities of the NSCC, (b) has met and intends to take commercially reasonable
steps to continue to meet all of the requirements to participate in Fund/SERV
and Networking, and (c) intends to remain at all times in compliance with the
then current rules and procedures of NSCC, all to the extent necessary or
appropriate to facilitate such communications, processing, and settlement of
transactions for Designated Portfolio Shares.
2.9. The Company, the Fund and the Adviser undertake and agree to comply,
and to take full responsibility in complying with any and all applicable laws,
regulations, protocols and other
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requirements relating to money laundering, both United States and foreign,
including, without limitation, the International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001 (Title III of the USA Patriot Act),
hereinafter, collectively with the rules, regulations and orders promulgated
thereunder (the "Patriot Act") and any requirements and/or requests in
connection therewith, made by regulatory authorities, the Fund, the Company or
their duly appointed agents, either generally or in respect of a specific
transaction, and/or in the context of a "primary money laundering concern" as
defined in the Patriot Act. The Company, the Fund and the Adviser agree as a
condition precedent to any transaction taking or continuing to be in effect
under this Agreement, to comply with any and all anti-money laundering laws,
regulations, orders or requirements, and without prejudice to the generality of
the above, to provide regulatory authorities, the Fund and the Company, as
applicable, or their duly appointed agents, with all necessary reports and
information for the Fund or the Company, as applicable, or their agents to
fulfill their obligations, if any, under the Patriot Act for the purposes of the
Fund or the Company, as applicable, or other third parties complying with any
and all anti-money laundering requirements imposed by the Patriot Act,
including, without limitation, enhanced due diligence obligations, the filing of
Currency Transaction Reports and/or of Suspicious Activity Reports obligations,
and/or the sharing of information requirements. In the event reports and
information deemed satisfactory by the Fund or the Company, as applicable, are
not received within a reasonable time period from the date of the request, the
Fund or the Company, as applicable reserves the right to reject any transaction
and/or cease to transact with the Company and/or the Accounts or the Fund, as
applicable. Further, the Company, the Fund and the Adviser represent that they
have not received notice of, and to their knowledge, there is no basis for, any
claim, action, suit, investigation or proceeding that might result in a finding
that they are not or have not been in compliance with the Patriot Act, and the
rules and regulations promulgated thereunder.
2.10. The Company, the Fund and the Adviser each agree to notify the
others immediately upon having a reasonable basis for believing that any of
these representations and warranties are no longer true or accurate to a
material extent.
2.11. The Company shall maintain and enforce policies and procedures
reasonably designed to ensure that Designated Portfolio share orders transmitted
to the Fund are segregated by time of receipt in order to prevent share orders
from being executed at a price based on a previously determined net asset value.
2.12. The Company shall facilitate and cooperate with third-party audits
arranged by the Fund or the Adviser to evaluate the effectiveness of its
compliance controls.
2.13. The Company shall provide the Fund's chief compliance officer with
(i) direct access to its compliance personnel; and (ii) annual certifications of
the Company's internal controls, by the Company's Chief Compliance Officer,
especially as they relate to the policies and procedures described in section
2.11 hereof.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Adviser shall provide the Company with as many copies of the
Fund's current prospectus describing only the Designated Portfolios listed on
Schedule A as the Company may
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reasonably request. The Fund or the Adviser shall bear the expense of printing
copies of the current prospectus and profiles for the Funds that will be
distributed to existing Contract owners, and the Company shall bear the expense
of printing copies of the Fund's prospectus and profiles that are used in
connection with offering the Contracts issued by the Company. If requested by
the Company in lieu thereof, the Fund shall provide such documentation
(including a final copy of the new prospectus electronically or on diskette at
the Fund's or the Adviser'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 Fund is amended) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document. In such a case, the
printing costs shall be allocated to reflect the Fund's share of the total costs
for printing the Fund's prospectus for delivery to existing Contract owners
investing in the Designated Portfolios, determined according to the number of
pages of the Fund's respective portions of the documents.
3.2. The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available, and the Adviser (or
the Fund), at its expense, shall provide a reasonable number of copies of such
SAI free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3. The Fund shall provide the Company with information regarding the
Fund's expenses, which information may include a table of fees and related
narrative disclosure for use in any prospectus or other descriptive document
relating to a Contract.
3.4. The Fund, at its or the Adviser's 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 distributing to Contract owners.
3.5. The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such portfolio for
which instructions have been received,
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 or to the
extent otherwise required by law. The Company will vote Fund shares held in any
segregated asset account, as well as any shares owned by the Company, in the
same proportion as Fund shares of such portfolio for which voting instructions
have been received from Contract owners, to the extent permitted by law.
3.6. Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by
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the Mixed and Shared Funding Exemptive Order and consistent with any reasonable
standards that the Fund may adopt and provide in writing.
ARTICLE IV. Sales Material and Information
4.1. 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 that the Company develops and in which the Fund (or a Designated
Portfolio thereof) or the Adviser is named. No such material shall be used until
approved by the Fund or its designee. The Fund or its designee will be deemed to
have approved such sales literature or promotional material unless the Fund or
its designee objects or provides comment to the Company within ten Business Days
after receipt of such material. The Fund or its designee reserves the right to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund (or a Designated Portfolio thereof) or
the Adviser or the Adviser is named, and no such material shall be used if the
Fund or its designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
profiles or prospectus or SAI for the Fund shares, as such registration
statement and profiles and prospectus or SAI may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee,
except with the permission of the Fund or the Adviser or the designee of either.
4.3. The Fund or its designee, shall furnish, or cause to be furnished, to
the Company, each piece of sales literature or other promotional material that
it develops and in which the Company, and/or its Account, is named. No such
material shall be used until approved by the Company. The Company will be deemed
to have approved such sales literature or promotional material unless the
Company objects or provides comment to the Fund, the Adviser, or their designee
within ten Business Days after receipt of such material. The Company reserves
the right to reasonably object to the continued use of any such sales literature
or other promotional material in which the Company and/or its Account is named,
and no such material shall be used if the Company so objects.
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement and prospectus (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), or SAI for the Contracts, as such
registration statement, prospectus, or SAI may be amended or supplemented from
time to time, or in published reports for the Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, profiles, prospectuses, SAIs, reports, proxy
statements, sales literature and other
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promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or its
shares, promptly after the filing of such document(s) with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Adviser any complaints received from the Contract
owners pertaining to the Fund or the Designated Portfolio.
4.7. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio
and of any material change in the Fund's registration statement, particularly
any material change resulting in a change to the registration statement or
prospectus for any Account. The Fund will work with the Company so as to enable
the Company to solicit proxies from Contract owners, or to make changes to the
Company's prospectus or registration statement, in an orderly manner.
4.8. For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: 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, 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, proxy materials, and any other communications
distributed or made generally available with regard to the Fund.
ARTICLE V. Fees and Expenses
5.1. Except as otherwise provided in this Agreement, each Party shall bear
all expenses incident to the performance of its obligations under this
Agreement. The Fund shall see to it that all its shares are registered and
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, the Fund's proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and Fund reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all Fund level
statements and notices required by any federal or state law and all taxes on the
issuance or transfer of the Fund's shares.
11
5.2. The Company shall bear the expenses of distributing the Fund's
prospectus to owners of Contracts issued by the Company and of distributing the
Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1. The Fund will invest its assets in such a manner as to ensure the
Contracts will be treated as variable annuity or life insurance contracts,
whichever is appropriate, under the Code and the regulations issued thereunder
(or any successor provisions). Without limiting the scope of the foregoing, each
Designated Portfolio has complied with and will continue to comply with Section
817(h) of the Code and Treasury Regulation Section 1.817-5, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts, and any amendments or
other modifications or successor provisions to such Section or Regulations. In
the event of a breach of this Article VI by the Fund, it will (a) notify the
Company of such breach and (b) immediately take all necessary steps to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
6.2. The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will maintain
such qualification (under Subchapter M or any successor or similar provisions)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future. The Fund acknowledges that compliance with Subchapter M is an
essential element of compliance with Section 817(h).
6.3. The Fund shall provide the Company or its designee with reports
certifying compliance with the aforesaid Section 817(h) diversification and
Subchapter M qualification requirements on a quarterly basis.
6.4. Subject to Sections 6.1 and 6.2, the Company represents that the
Contracts are currently, and at the time of issuance shall be, treated as life
insurance or annuity insurance contracts, under applicable provisions of the
Code, and that it will maintain such treatment, and that it will notify the Fund
and the Adviser immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The 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 (or any successor or similar provision), shall identify such contract as a
modified endowment contract. In addition, the Company represents and warrants
that the Account is a "segregated asset account" and that interests in the
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. The Company will use every effort to
continue to meet such definitional requirements, and it will notify the Fund and
the Adviser 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.
The Company represents and warrants that it will not purchase Fund shares with
assets derived from tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
12
6.5. The Company agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of the
Company or, to the Company's knowledge, of any Contract owner, that any
Designated Portfolio has failed to comply with the diversification requirements
of Section 817(h) of the Code or the Company otherwise becomes aware of any
facts that could give rise to any claim against the Fund or Adviser as a result
of such a failure or alleged failure:
(a) The Company shall promptly notify the Fund and the Adviser of such
assertion or potential claim;
(b) The Company shall consult with the Fund and the Adviser as to how to
minimize any liability that may arise as a result of such failure or
alleged failure;
(c) The Company shall use its best efforts to minimize any liability of
the Fund or the Adviser resulting from such failure;
(d) Any written materials to be submitted by the Company to the IRS, any
Contract owner 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) shall be provided by the Company to the Fund and the
Adviser (together with any supporting information or analysis)
within at least two (2) business days prior to submission;
(e) The Company shall provide the Fund and the Adviser with such
cooperation as the Fund and the Adviser shall reasonably request
(including, without limitation, by permitting the Fund and the
Adviser to review the relevant books and records of the Company) in
order to facilitate review by the Fund and the Adviser of any
written submissions provided to it or its assessment of the validity
or amount of any claim against it arising from such failure or
alleged failure; and
(f) The Company shall not with respect to any claim of the IRS or any
Contract owner that would give rise to a claim against the Fund and
the Adviser (i) compromise or settle any claim; (ii) accept any
adjustment on audit, or (iii) forgo any allowable administrative or
judicial appeals, without the express written consent of the Fund
and the Adviser, which shall not be unreasonably withheld, provided
that the Company shall not be required to appeal any adverse
judicial decision unless the Fund or the Adviser shall have provided
an opinion of counsel to the effect that a reasonable basis exists
for taking such an appeal; and further provided that the Fund or the
Adviser shall bear the expenses, including reasonable attorney's
fees, incurred by the Company in complying with this part (f) of
section 6.5 hereof.
ARTICLE VII. Potential Conflicts
7.1. 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
13
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.
7.2. 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 Company 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 their 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 is unaware of any such potential or existing
material irreconcilable conflicts.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested members, 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 Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected 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. The
Company's obligations under this section shall not be dependent on whether other
Participating Insurance Companies fulfill a similar obligation.
7.4. 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 with respect to each Account; 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 that 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
14
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 Account's investment in the Fund and terminate this Agreement with
respect to such Account 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.
7.6. For purposes of Sections 7.3 through 7.5 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 7.3 to establish a new
funding medium for the Contract 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 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.
7.7. If and to the extent the Mixed and Shared Funding Exemption Order or
any amendment thereto contains terms and conditions different from Sections 3.4,
3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with the Mixed and Shared Funding Exemptive Order,
and Sections 3.4, 3.5, 3.6, 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 the Mixed and Shared Funding
Exemptive Order or any amendment thereto. 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 Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 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
15
8.1(a). The Company agrees to indemnify and hold harmless the Fund and the
Adviser and each of its trustees/directors and officers, and each person, if
any, who controls the Fund or Adviser within the meaning of Section 15 of the
1933 Act or who is under common control with the Adviser (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
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statements of any material fact contained in the registration
statement, prospectus (which shall include a written description of
a Contract that is not registered under the 1933 Act), or SAI for
the Contracts or contained in sales literature and other promotional
materials for the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement, prospectus or SAI
for the Contracts or in the Contracts or sales literature or other
promotional materials (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI, or sales literature or
other promotional materials of the Fund not supplied by the Company
or persons under its control) or wrongful conduct of the Company or
its agents or persons under the Company's authorization or control,
with respect to the sale or distribution of the Contracts or Fund
Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, SAI, or sales literature or other promotional materials
of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon information furnished in writing to the Fund by or on
behalf of the Company; or
(iv) arise out of or as a result of any material failure by the
Company to provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the qualification
requirements specified in Section 6.4 of this Agreement); or
16
(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; or
as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1
(c) hereof.
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 gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
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 it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
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 Fund shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by the Adviser
8.2(a). The Adviser agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or profile or
17
prospectus or SAI or sales literature or other promotional materials
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Adviser or the Fund by
or on behalf of the Company for use in the registration statement,
profile, prospectus or SAI for the Fund or in sales literature or
other promotional materials (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI or sales material or other
promotional materials for the Contracts not supplied by the Adviser
or persons under its control) or wrongful conduct of the Fund or
Adviser or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, SAI or sales literature or other promotional materials
covering the Contracts or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished in writing
to the Company by or on behalf of the Fund or the Adviser; or
(iv) arise as a result of any failure by the Fund or the Adviser to
provide the services and furnish the materials under the terms of
this Agreement (including a failure of the Fund, whether
unintentional or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified in
Sections 6.1 and 6.2 of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the Adviser in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Fund or the Adviser; or
(vi) 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;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
18
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Adviser 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 Adviser 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 Adviser of any
such claim shall not relieve the Adviser 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 Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser'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 Adviser 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.
8.2(d). The Indemnified Party agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or profile or prospectus or SAI or sales literature or
other promotional materials of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading,
19
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Adviser or the Fund by or on
behalf of the Company for use in the registration statement,
profile, prospectus or SAI for the Fund or in sales literature or
other promotional materials (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI, SAI or other promotional
materials for the Contracts not supplied by the Adviser or persons
under its control) or wrongful conduct of the Fund or Adviser or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained any Fund materials 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 Fund or
the Adviser; or
(iv) arise as a result of any failure by the Fund or the Adviser to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification and
other qualification requirements specified in Sections 6.1 and 6.2
of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the Adviser in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Fund or the Adviser; or
(vi) 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;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Adviser or the Account, whichever is applicable.
20
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have 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 Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Adviser agree promptly to notify the Fund of
the commencement of any litigation or proceeding against it or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
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 State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, the
Securities and Exchange Act of 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, any Mixed and
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith. If, in the future, the Mixed and Shared
Funding Exemptive Order should no longer be necessary under applicable law, then
Article VII shall no longer apply.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to some
or all Designated Portfolios, by three (3) months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Adviser based upon the Company's determination that shares
of the Fund are not reasonably available to meet the
requirements of the Contracts; or
21
(c) termination by the Company by written notice to the Fund and
the Adviser in the event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Fund or the Adviser in the event that
formal administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance Commissioner or
like official of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of any Account, or
the purchase of the Fund's shares; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
the Adviser by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, regarding
the duties of the Fund or the Adviser under this Agreement or
related to the operation of the Fund or the Adviser; or
(f) termination by the Company by written notice to the Fund and
the Adviser with respect to any Designated Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to comply with
the Section 817(h) diversification requirements specified in
Sections 6.1 and 6.2 hereof, or if the Company reasonably
believes that such Portfolio may fail to so qualify or comply
and provides a basis for such reasonable belief; or
(g) termination by the Fund or Adviser by written notice to the
Company in the event that the Contracts fail to meet the
qualifications specified in Section 6.4 hereof; or
(h) termination by either the Fund or the Adviser by written
notice to the Company, if either one or both of the Fund or
the Adviser respectively, 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
(i) termination by the Company by written notice to the Fund and
the Adviser, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund, Adviser, or
the Adviser has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
22
(j) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser the
written notice specified in Section 1.7(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(j)
shall be effective forty-five days after the notice specified
in Section 1.7(a) was given; or
(k) termination by the Company upon any substitution of the shares
of another investment company or series thereof for shares of
a Designated Portfolio of the Fund in accordance with the
terms of the Contracts, provided that the Company has given at
least 45 days prior written notice to the Fund and Adviser of
the date of substitution; or
(l) termination by any party in the event that the Fund's Board of
Trustees determines that a material irreconcilable conflict
exists as provided in Article VII; or
(m) termination by any non-defaulting Party hereto in the event of
a material breach of this Agreement by any Party hereto (the
"defaulting Party") other than as described in 10.1(a)-(l);
provided, that the non-defaulting Party gives written notice
thereof to the defaulting Party, with copies of such notice to
all other non-defaulting Parties.
10.2. Notwithstanding any termination of this Agreement, other than as a
result of a failure by the Fund to meet the diversification requirements of
Section 817(h) of the Code, the Fund and the Adviser shall, at the option of the
Company, continue to make available additional shares of the Fund pursuant to
the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"), unless the Adviser requests that the Company seek an
order pursuant to Section 26(c) of the 1940 Act to permit the substitution of
other securities for the shares of the Designated Portfolios. The Adviser agrees
to split the cost of seeking such an order, and the Company agrees that it shall
reasonably cooperate with the Adviser and seek such an order upon request.
Specifically, the owners of the Existing Contracts may be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the existing
Contracts (subject to any such election by the Adviser). The parties agree that
this Section 10.2 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. The parties further agree that this Section 10.2 shall not apply to
any terminations under Section 10.1 (g) of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (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"), (iii) upon 45 days
prior written notice to the Fund and
23
Adviser, as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act, but only if a substitution of other securities for the shares of the
Designated Portfolios is consistent with the terms of the Contracts, or (iv) as
permitted under the terms of the Contract. Upon request, the Company will
promptly furnish to the Fund and the Adviser reasonable assurance that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contacts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Adviser 45 days notice of its intention to do so.
10.4. Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
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 Fund:
▇▇▇▇▇▇▇▇▇▇▇ Variable Account Funds
c/o OppenheimerFunds, Inc.
Two World Financial Center
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Legal Department
If to the Company:
ML Life Insurance Company of New York
1300 ▇▇▇▇▇▇▇ ▇▇▇▇▇ Dr., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Legal Department
If to the Adviser:
OppenheimerFunds, Inc.
Two World Financial Center
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
24
ARTICLE XII. Miscellaneous
12.1. The Company is hereby expressly put on notice of the limitations of
liability as set forth in the Declarations of Trust of the Fund. All persons
dealing with the Fund must look solely to the property of the Fund, and in the
case of a series company, the respective Designated Portfolios listed on
Schedule A hereto as though each such Designated Portfolio had separately
contracted with the Company and the Adviser for the enforcement of any claims
against the Fund. The parties agree that neither the Board, officers, agents or
shareholders of the Fund assume any personal liability or responsibility for
obligations entered into by or on behalf of the Fund.
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 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 such information has come into the
public domain.
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 affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request, in order to ascertain whether the variable contract
operations of the Company are being conducted in a manner consistent with the
New York variable annuity laws and regulations and any other applicable law or
regulations.
12.7. 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
(i) this Agreement and (ii) by Title V, Subtitle A of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act
and by regulations adopted thereunder by regulators having jurisdiction over the
parties hereto, 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.
25
12.8 Each party shall treat as confidential all information of the other
party which the parties agree in writing is confidential ("Confidential
Information"). Except as permitted by this Agreement or as required by
appropriate governmental authority (including, without limitation, the SEC, the
NASD, or state securities and insurance regulators) the receiving party shall
not disclose or use Confidential Information of the other party before it enters
the public domain, without the express written consent of the party providing
the Confidential Information.
12.9 The parties to this Agreement acknowledge and agree that all
liabilities of the Fund arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Fund and that no trustee/director, officer, agent or holder of shares of
beneficial interest of the Fund shall be personally liable for any such
liabilities.
12.10 The parties to this Agreement agree that the assets and liabilities
of each Designated Portfolio of the Fund are separate and distinct from the
assets and liabilities of each other Designated Portfolio. No Designated
Portfolio shall be liable or shall be charged for any debt, obligation or
liability of any other Designated Portfolio.
12.11. 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.
12.12. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
26
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.
ML LIFE INSURANCE COMPANY OF NEW YORK:
By its authorized officer
By: __________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
Title: Vice President & Senior Counsel
Date: _______________________________
▇▇▇▇▇▇▇▇▇▇▇ VARIABLE ACCOUNT FUNDS
By its authorized officer
By: _______________________________
Title: _______________________________
Date: _______________________________
OPPENHEIMERFUNDS, INC.
By its authorized officer
By: _______________________________
Title: _______________________________
Date: _______________________________
27
SCHEDULE A
CONTRACT DESIGNATION AND FORM NUMBER
▇▇▇▇▇▇▇ ▇▇▇▇▇ Investor Choice - Investor Series
Form MLNYVA-010
SEPARATE ACCOUNT
ML of New York Variable Annuity Separate Account A - Established 8/14/91
DESIGNATED FUNDS
▇▇▇▇▇▇▇▇▇▇▇ Variable Account Funds - Service Class
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇(▇)/▇▇
▇▇▇▇▇▇▇▇▇▇▇ Capital Appreciation Fund/VA
▇▇▇▇▇▇▇▇▇▇▇ Main Street Small Cap Fund(R)/VA
Dated: March 1, 2005
A-1
