<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000.
REGISTRATION NOS. 333-90243
AND 811-6459
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 2 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 19 /X/
--------------
MERRILL LYNCH LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
MERRILL LYNCH LIFE INSURANCE
COMPANY
(NAME OF DEPOSITOR)
800 SCUDDERS MILL ROAD
SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(609) 282-1429
----------------
NAME AND ADDRESS OF AGENT FOR SERVICE: COPY TO:
BARRY G. SKOLNICK, ESQ. STEPHEN E. ROTH, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL KIMBERLY J. SMITH, ESQ.
MERRILL LYNCH LIFE INSURANCE COMPANY SUTHERLAND ASBILL & BRENNAN LLP
800 SCUDDERS MILL ROAD 1275 PENNSYLVANIA AVENUE, N.W.
PLAINSBORO, NEW JERSEY 08536 WASHINGTON, D.C. 20004-2415
<PAGE>
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC
OFFERING: AS SOON AS PRACTICABLE AFTER EFFECTIVENESS
OF THE REGISTRATION STATEMENT.
--------------------
TITLE OF SECURITIES BEING REGISTERED:
UNITS OF INTEREST IN A SEPARATE ACCOUNT UNDER FLEXIBLE PREMIUM INDIVIDUAL
DEFERRED VARIABLE ANNUITY CONTRACTS.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR 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 SAID SECTION 8(a),
SHALL DETERMINE.
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--------------------------------------------------------
<PAGE>
Part A, the Prospectus, is incorporated by reference to the Prospectus included
in Registrant's Pre-Effective Amendment No. 1 to Form N-4, Registration
No. 33-90243 filed on March 16, 2000.
Part B, the Statement of Additional Information, is incorporated by reference to
the Statement of Additional Information included in Registrant's Pre-Effective
Amendment No. 1 to Form N-4, Registration No. 33-90243 filed on March 16, 2000.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Financial Statements of Merrill Lynch Life Variable Annuity
Separate Account A as of December 31, 1999 and for the two years
ended December 31, 1999 and the Notes relating thereto appear in
the Statement of Additional Information.
(2) Financial Statements of Merrill Lynch Life Insurance Company for
the three years ended December 31, 1999 and the Notes relating
thereto appear in the Statement of Additional Information.
(b) Exhibits
(1) Resolution of the Board of Directors of Merrill Lynch Life
Insurance Company establishing the Merrill Lynch Life Variable
Annuity Separate Account A. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 10, 1996.)
(2) Not Applicable.
(3) Underwriting Agreement Between Merrill Lynch Life Insurance Company
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43773 Filed
December 10, 1996.)
(4)(a) Form of Contract for the Flexible Premium Individual Deferred
Variable Annuity. (Incorporated by Reference to Registrant's
Registration Statement on Form N-4, Registration No. 333-90243
Filed November 3, 1999.)
(b) Individual Retirement Annuity Endorsement. (Incorporated by
Reference to Registrant's Registration Statement on Form N-4,
Registration No. 333-90243 filed November 3, 1999.)
(c) Tax-Sheltered Annuity Endorsement. (Incorporated by Reference to
Registrant's Registration Statement on Form N-4, Registration
No. 333-90243 Filed November 3, 1999.)
(5) Form of Application for the Flexible Premium Individual Deferred
Variable Annuity. (Incorporated by Reference to Registrant's
Registration Statement on Form N-4, Registration No. 333-90243
Filed November 3, 1999.)
(6)(a) Articles of Amendment, Restatement and Redomestication of the
Articles of Incorporation of Merrill Lynch Life Insurance Company.
(Incorporated by Reference to Registrant's Post-Effective Amendment
No. 10 to Form N-4, Registration No. 33-43773 Filed December 10,
1996.)
(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance
Company. (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43773 Filed
December 10, 1996.)
(7) Not Applicable.
(8)(a) Amended General Agency Agreement. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 5 to Form N-4,
Registration No. 33-43773 Filed April 28, 1994.)
<PAGE>
(b) Indemnity Agreement Between Merrill Lynch Life Insurance Company
and Merrill Lynch Life Agency, Inc. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 10, 1996.)
(c) Management Agreement Between Merrill Lynch Life Insurance Company
and Merrill Lynch Asset Management, Inc. (Incorporated by Reference
to Registrant's Post- Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 10, 1996.)
(d) Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Variable Series Funds, Inc. Relating to Maintaining Constant
Net Asset Value for the Domestic Money Market Fund. (Incorporated
by Reference to Registrant's Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43773 Filed December 10, 1996.)
(e) Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Variable Series Funds, Inc. Relating to Valuation and
Purchase Procedures. (Incorporated by Reference to Registrant's
Post Effective Amendment No. 10 to Form N-4, Registration
No. 33-43773 Filed December 10, 1996.)
(f) Amended Service Agreement Between Merrill Lynch Life Insurance
Company and Merrill Lynch Insurance Group, Inc. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 5 to
Form N-4, Registration No. 33-43773 Filed April 28, 1994.)
(g) Reimbursement Agreement Between Merrill Lynch Asset Management,
L.P. and Merrill Lynch Life Agency, Inc. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 10, 1996.)
(h) Amendment to the Reimbursement Agreement Between Merrill Lynch
Asset Management, L.P. and Merrill Lynch Life Agency, Inc.
(Incorporated by Reference to Registrant's Registration Statement
on Form N-4, Registration No. 333-90243 Filed November 3, 1999.)
(i) Form of Participation Agreement Between Merrill Lynch Variable
Series Funds, Inc. and Merrill Lynch Life Insurance Company.
(Incorporated by Reference to Registrant's Post-Effective Amendment
No. 10 to Form N-4, Registration No. 33-43773 Filed December 10,
1996.)
(j) Amendment to the Participation Agreement Between Merrill Lynch
Variable Series Funds, Inc. and Merrill Lynch Life Insurance
Company. (Incorporated by Reference to Registrant's Registration
Statement on Form N-4, Registration No. 333-90243 Filed November 3,
1999.)
(k) Participation Agreement By And Among AIM Variable Insurance Funds,
Inc., AIM Distributors, Inc., and Merrill Lynch Life Insurance
Company. (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 11 to Form N-4, Registration No. 33-43773 Filed
April 23, 1997.)
(l) Amendment to the Participation Agreement By And Among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., and Merrill Lynch
Life Insurance Company. (Incorporated by Reference to Registrant's
Registration Statement on Form N-4, Registration No. 333-90243
Filed November 3, 1999.)
<PAGE>
(m) Form of Participation Agreement Among Merrill Lynch Life Insurance
Company, Alliance Capital Management L.P., and Alliance Fund
Distributors, Inc. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43773 Filed December 10, 1996.)
(n) Amendment to the Participation Agreement Among Merrill Lynch Life
Insurance Company, Alliance Capital Management L.P., and Alliance
Fund Distributors, Inc. dated May 1, 1997. (Incorporated by
Reference to Registrant's Registration Statement on Form N-4,
Registration No. 333-90243 Filed November 3, 1999.)
(o) Amendment to the Participation Agreement Among Merrill Lynch Life
Insurance Company, Alliance Capital Management L.P., and Alliance
Fund Distributors, Inc. dated June 5, 1998. (Incorporated by
Reference to Registrant's Registration Statement on Form N-4,
Registration No. 333-90243 Filed November 3, 1999.)
(p) Amendment to the Participation Agreement Among Merrill Lynch Life
Insurance Company, Alliance Capital Management L.P., and Alliance
Fund Distributors, Inc. dated July 22, 1999. (Incorporated by
Reference to Registrant's Registration Statement on Form N-4,
Registration No. 333-90243 Filed November 3, 1999.)
(q) Form of Participation Agreement Among MFS-Registered Trademark-
Variable Insurance Trust -SM- Merrill Lynch Life Insurance Company,
and Massachusetts Financial Services Company. (Incorporated by
Reference to Registrant's Post-Effective Amendment No 10 to
Form N-4, Registration No. 33-43773 Filed December 10, 1996.)
(r) Amendment to the Participation Agreement Among MFS-Registered
Trademark- Variable Insurance Trust -SM-, Merrill Lynch Life
Insurance Company, and Massachusetts Financial Services Company
dated May 1, 1997. (Incorporated by Reference to Registrant's
Registration Statement on Form N-4, Registration No. 333-90243
Filed November 3, 1999.)
(s) Form of Participation Agreement Among Merrill Lynch Life Insurance
Company and Hotchkis and Wiley Variable Trust. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 12 to
Form N-4, Registration No. 33-43773 Filed May 1, 1998.)
(t) Amendment to the Participation Agreement Among Merrill Lynch Life
Insurance Company and Hotchkis and Wiley Variable Trust.
(Incorporated by Reference to Registrant's Registration Statement
on Form N-4, Registration No. 333-90243 Filed November 3, 1999.)
(u) Form of Participation Agreement Between Davis Variable Account
Fund, Inc. and Merrill Lynch Life Insurance Company.
(v) Form of Participation Agreement Between Delaware Group Premium
Fund, Inc. and Merrill Lynch Life Insurance Company.
(w) Form of Participation Agreement Between PIMCO Variable Insurance
Trust and Merrill Lynch Life Insurance Company.
(x) Form of Participation Agreement Between Seligman Portfolios, Inc.
and Merrill Lynch Life Insurance Company.
(y) Form of Participation Agreement Between Van Kampen Life Investment
Trust and Merrill Lynch Life Insurance Company.
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the
legality of the
<PAGE>
securities being registered. (Incorporated by Reference to
Registrant's Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-4, Registration No. 333-90243 Filed March 16,
2000.)
(10)(a) Written Consent of Sutherland Asbill & Brennan LLP. (Incorporated
by Reference to Registrant's Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4, Registration No. 333-90243
Filed March 16, 2000.)
(b) Written Consent of Deloitte & Touche LLP, independent auditors.
(Incorporated by Reference to Registrant's Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-4, Registration
No. 333-90243 Filed March 16, 2000.)
(c) Written Consent of Barry G. Skolnick, Esq. (See Exhibit 9.)
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule of Performance Computations. (Incorporated by Reference to
Registrant's Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-4, Registration No. 333-90243 Filed March
16, 2000.)
(14)(a) Power of Attorney from Joseph E. Crowne, Jr. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43773 Filed March 2,1994.)
(b) Power of Attorney from David M. Dunford. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-43773 Filed March 2, 1994.)
(c) Power of Attorney from Barry G. Skolnick. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43773 Filed March 2, 1994.)
(d) Power of Attorney from Anthony J. Vespa. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-43773 Filed March 2, 1994.)
(e) Power of Attorney from Gail R. Farkas. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 8 to Form N-4,
Registration No. 33-43773 Filed April 25, 1996.)
Items 25-32 of Part C are incorporated by reference to Items 25-32 of Part C
included in Registrant's Pre-Effective Amendment No. 1 to Form N-4, Registration
No. 33-90243 filed on March 16, 2000.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Merrill Lynch Life Variable Annuity Separate Account A,
has caused this Pre-Effective Amendment No. 2 to the registration statement to
be signed on its behalf, in the City of Plainsboro, and the State of New Jersey,
on this 31st day of March, 2000.
Merrill Lynch Life Variable
Annuity Separate Account A
(Registrant)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
--------------------------------- --------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President
Merrill Lynch Life Insurance
Company (Depositor)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
--------------------------------- --------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President
As required by the Securities Act of 1933, this Pre-Effective Amendment
No. 2 to the registration statement has been signed by the following persons in
the capacities indicated on March 31, 2000.
SIGNATURE TITLE
-------------------- -------------
* Chairman of the Board, President and Chief
- ------------------------------- Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- ------------------------------- Financial Officer, Chief Actuary and
Joseph E. Crowne, Jr. Treasurer
<PAGE>
* Director, Senior Vice President, and Chief
- ------------------------------- Investment Officer
David M. Dunford
* Director and Senior Vice President
- -------------------------------
Gail R. Farkas
*By: /s/ BARRY G. SKOLNICK
- -------------------------------
Barry G. Skolnick In his own capacity as Director, Senior Vice
President, General Counsel, and Secretary
and as Attorney-In-Fact
<PAGE>
EXHIBIT LIST
Exhibit 8(u) Form of Participation Agreement Between Davis Variable
Account Fund, Inc. and Merrill Lynch Life Insurance Company
Exhibit 8(v) Form of Participation Agreement Between Delaware Group
Premium Fund, Inc. and Merrill Lynch Life Insurance Company
Exhibit 8(w) Form of Participation Agreement Between PIMCO Variable
Insurance Trust and Merrill Lynch Life Insurance Company
Exhibit 8(x) Form of Participation Agreement Between Seligman Portfolios,
Inc. and Merrill Lynch Life Insurance Company
Exhibit 8(y) Form of Participation Agreement Between Van Kampen Life
Investment Trust and Merrill Lynch Life Insurance Company
<PAGE>
Exhibit 8(u)
Form of Participation Agreement Between Davis Variable Account Fund, Inc.
and Merrill Lynch Life Insurance Company
<PAGE>
PARTICIPATION AGREEMENT
Among
DAVIS VARIABLE ACCOUNT FUND, INC.
DAVIS DISTRIBUTORS, LLC.
and
MERRILL LYNCH LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this __ day of ________, 2000, by
and among MERRILL LYNCH LIFE INSURANCE COMPANY (hereinafter the "Insurance
Company"), a Arkansas corporation, on its own behalf and on behalf of each
segregated asset account of the Insurance Company set forth on Schedule A hereto
as may be amended from time to time (each such account hereinafter referred to
as the "Account"), DAVIS VARIABLE ACCOUNT FUND, INC., a Maryland Corporation
(the "Company") and Davis Distributors, LLC., a Delaware Limited Liability
Company ("Davis Distributors").
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
variable annuity and life insurance contracts to be offered by separate accounts
of insurance companies which have entered into participation agreements
substantially similar to this Agreement ("Participating Insurance Companies")
and for qualified retirement and pension plans ("Qualified Plans"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "SEC"), granting Participating Insurance Companies and
their 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
<PAGE>
the extent necessary to permit shares of the Company to be sold to and held by
Qualified Plans and by variable annuity and variable life insurance separate
accounts of Participating Insurance Companies that may or may not be affiliated
with one another (the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Company has registered as an open-end management
investment company under the 1940 Act and the offering of its shares has been
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, Davis Distributors is duly registered as a broker-dealer 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"); and
WHEREAS, Davis Distributors is a wholly owned subsidiary of Davis
Selected Advisers, L.P. which is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities law; and
WHEREAS, the Insurance Company has registered under the 1933 Act, or
will register under the 1933 Act, certain variable annuity or variable life
insurance contracts identified on Schedule B to this Agreement, as amended from
time to time hereafter by mutual written agreement of all the parties hereto
(the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds
listed on Schedule C to this Agreement as amended from time to time, at net
asset value on behalf of each Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the
Insurance Company, the Company and Davis Distributors agree as follows:
ARTICLE I. SALE OF COMPANY SHARES
1.1. Davis Distributors agrees to sell to the Insurance Company those
shares of the Company which each Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Company or
its designee of the order for the shares of the Company. For purposes of this
Section 1.1, the Insurance Company, or its designee, shall be the designee of
the Company for
<PAGE>
receipt of such orders from the Accounts and receipt by such designee shall
constitute receipt by the Company; provided that the Company receives notice of
such order by 10:00 a.m., Eastern Time, on the next following Business Day. In
this Agreement, "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Company calculates its net asset
value pursuant to the rules of the SEC.
1.2. The Company agrees to make its shares available for purchase at
the applicable net asset value per share by the Insurance Company and its
Accounts on those days on which the Company is required to calculate its Funds'
net asset values pursuant to rules of the SEC and the Company shall calculate
its Funds' net asset values on each day on which the New York Stock Exchange is
open for trading. Notwithstanding the foregoing, the directors of the Company
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 is, in the sole discretion of the
directors of the Company 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 that Fund.
1.3. The Company agrees that shares of the Company will be sold only to
Accounts of Participating Insurance Companies and to Qualified Plans. No shares
of any Fund will be sold to the general public.
1.4. The Company will not sell its shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Sections 2.4, 3.4, 3.5, and Article VII of this Agreement is in effect
to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request,
any full or fractional shares of the Company held by the Account, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Company or its designee of the request for redemption. For purposes of this
Section 1.5, the Insurance Company shall be the designee of the Company for
receipt of requests for redemption from each Account and receipt by that
designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 10:00 a.m., Eastern Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund listed on Schedule C to this Agreement, as amended from time to time,
and offered by the then-current prospectus of the Company in accordance with the
provisions of that prospectus.
1.7. Each purchase, redemption and exchange order placed by the
Insurance Company shall be placed separately for each Fund and shall not be
netted with respect to any Fund. However, with respect to payment of the
purchase price by the Insurance Company and of redemption proceeds by the
Company, the Insurance Company and the Company shall net purchase and redemption
orders with respect to each Fund and shall transmit one net payment for all of
the Funds. Payment shall be in federal funds transmitted by wire. In the event
of net purchase, the Insurance Company shall pay for the Funds' shares by 3:00
p.m. Eastern time on the next Business Day after an order to purchase shares
<PAGE>
is made in accordance with the provisions of Section 1.1 hereof. For the purpose
of Section 2.9, upon receipt by the Company of the wired federal funds, such
funds shall cease to be the responsibility of the Insurance Company and shall
become the responsibility of the Company. In the event of net redemption, the
Company shall pay the redemption proceeds by 3:00 p.m. Eastern time on the next
Business Day after an order to redeem the shares is made in accordance with the
provisions of Section 1.5 hereof. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, an emergency as defined by the SEC exists, or as
permitted by the SEC.
1.8. Issuance and transfer of the Company's shares will be by book
entry only. Stock certificates will not be issued to the Insurance Company or
any Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the closing net asset value per share for
each Fund available to the Insurance Company on a daily basis as soon as
reasonably practical after the closing net asset value per share is calculated
and shall use its best efforts to make those per-share net asset values
available by 6:30 p.m., Eastern Time. In the event that the Company is unable to
meet the 6:30 p.m. Eastern time stated herein, it shall provide additional time
for the Insurance Company to place orders for the purchase and redemption of
shares. Such additional time shall be equal to the additional time which the
Company takes to make the closing net asset value available to the Insurance
Company. In accordance with Section 8.3(a)(iii) hereof, if the Company provides
materially incorrect share net asset value information, the Company will make an
adjustment to the number of shares purchased or redeemed for the Account 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 to the Insurance Company promptly upon discovery.
<PAGE>
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.1. The Insurance Company represents, warrants and agrees that the
offerings of the Contracts are, or will be, registered under 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 applicable state insurance
suitability requirements. The Insurance Company further represents 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 prior to any issuance or
sale thereof as a segregated asset account under Arkansas insurance law and has
registered, or warrants and agrees that prior to any issuance or sale of the
Contracts it 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.
2.2. The Company warrants and agrees that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company warrants and agrees that it 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 Company 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 Company or Davis Distributors.
2.3. The Company represents that each Fund is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and warrants and agrees that it will maintain
each Fund's qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Insurance Company immediately upon having
a reasonable basis for believing that any Fund has ceased to so qualify or might
not so qualify in the future.
2.4. Subject to Section 2.3 and Article VI, the Insurance Company
represents that the Contracts are currently treated as annuity or life insurance
contracts under applicable provisions of the Code and warrants and agrees that
it will make all reasonable efforts to maintain such treatment and that it will
notify the Company and Davis Distributors 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 Company may elect to make payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1, the Company
undertakes to have a board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Company and Davis Distributors represent that the Company's
investment policies,
<PAGE>
fees, and expenses are and shall at all times remain in compliance with
applicable state securities laws, if any, and with the insurance laws of the
State of Arkansas and the Company and Davis Distributors represent that their
respective operations are and shall at all times remain in material compliance
with applicable state securities laws and with the insurance laws of the State
of Arkansas to the extent required to perform this Agreement. The Company and
Davis Distributors also represent that the Company will comply with any
additional state insurance law restrictions, as provided in writing by the
Insurance Company to the Company, including the furnishing of information not
otherwise available to the Insurance Company which is required by state
insurance law to enable the Insurance Company to obtain the authority needed to
issue the Contracts in any applicable state.
2.7. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and represents, warrants and
agrees that it does and will comply in all material respects with the 1940 Act
and the laws of the State of Maryland.
2.8. Davis Distributors represents that it is and warrants that it
shall remain duly registered as a broker-dealer under all applicable federal and
state securities laws and agrees that it shall perform its obligations for the
Company in compliance in all material respects with the laws of the State of New
Mexico and any applicable state and federal securities laws.
2.9. The Company and Davis Distributors represent and warrant that all
of their officers, employees, investment advisers, investment sub-advisers, and
other individuals or entities described in Rule 17g-1 under the 1940 Act dealing
with the money and/or securities of the Company are, and shall continue to be at
all times, covered by a blanket fidelity bond or similar coverage for the
benefit of the Company in an amount not less than the minimum coverage required
currently by Rule 17g-1 under the 1940 Act or related provisions as may be
promulgated from time to time. That fidelity bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
ARTICLE III. DISCLOSURE DOCUMENTS AND VOTING
3.1. Davis Distributors shall provide the Insurance Company (at the
Insurance Company's expense) with as many copies of the current prospectus for
each Fund listed on Schedule C herein as the Insurance Company may reasonably
request for distribution to prospective purchasers of contracts. Davis
Distributors shall also provide the Insurance Company (free of charge) with as
many copies of the current prospectus for each Fund listed on Schedule C herein
as the Insurance Company may reasonably request for distribution to existing
Contract owners whose Contracts are funded by shares of such Fund(s). If
requested by the Insurance Company in lieu thereof, the Company shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Company's expense, or, at the request of the Insurance Company, as a
diskette in the form sent to financial printers) and other assistance as is
reasonably necessary in order for the Insurance Company once each year (or more
frequently if the prospectus for the Company is amended) to have the prospectus
for the Contracts and the Company's prospectus printed together in one document.
<PAGE>
With respect to any prospectuses of the Funds that are printed in combination
with any one or more Contract prospectuses .(the "Prospectus Booklet"), the
costs of printing Prospectus Booklets for distribution to existing Contract
owners shall be prorated to the Company based on (a) the ratio of the number of
pages of the prospectuses for the Funds included in the Prospectus Booklet to
the number of pages in the Prospectus Booklet as a whole; and (b) the ratio of
the number of Contract owners with Contract value allocated to the Funds to the
total number of Contract owners; provided however, that the Insurance Company
shall bear all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Contracts not
funded by the Funds.
3.2. The Company's prospectus shall state that the Statement of
Additional Information for the Company (the "SAI") is available from the
Company, and Davis Distributors (or the Company), at its expense, shall print
and provide the SAI free of charge to the Insurance Company and to any owner of
a Contract or prospective owner who requests the SAI.
3.3. The Company, at its expense, shall provide the Insurance Company
with copies of its proxy material, reports to shareholders and other
communications to shareholders in such quantity as the Insurance Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares of each Fund in accordance with
instructions received from Contract owners; and
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of that
Fund 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. The
Insurance Company reserves the right to vote Company 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 Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule D
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligation under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Company will either
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or, as the Company currently
intends, comply with Section 16(c) of the 1940 Act as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the SEC's interpretation of
<PAGE>
the requirements of Section 16(a) with respect to periodic elections of
directors and with whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Insurance Company 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, Davis Selected Advisers, L.P.,
or Davis Distributors is named, at least five Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within five Business Days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the Company's registration statement, prospectus or
SAI, as that registration statement, prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the
Company, or in sales literature or other promotional material approved by the
Company or its designee or by Davis Distributors, except with the permission of
the Company or Davis Distributors.
4.3. The Company, Davis Distributors, or its designee shall furnish, or
shall cause to be furnished, to the Insurance Company or its designee, each
piece of sales literature or other promotional material in which the Insurance
Company or the Account is named at least five Business Days prior to its use. No
such material shall be used if the Insurance Company or its designee reasonably
objects to such use within five Business Days after receipt of that material.
4.4. The Company and Davis Distributors shall not give any information
or make any representations on behalf of the Insurance Company or concerning the
Insurance Company, any Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus or statement of additional information may be amended or supplemented
from time to time, or in published reports for any Account which are in the
public domain or approved by the Insurance Company for distribution to Contract
owners, or in sales literature or other promotional material approved by the
Insurance Company or its designee, except with the permission of the Insurance
Company.
4.5. The Company and Davis Distributors shall adopt and implement
procedures reasonably designed to ensure that information concerning the
Insurance Company, any of its affiliates, or the Contracts which is intended
only for use only by brokers or agents selling the shares (i.e., information
that is not intended for distribution to shareowners or prospective shareowners)
is so used, and neither the Insurance Company nor any of its affiliates shall be
liable for any losses, damages, or expenses relating to the improper use of such
broker only materials.
<PAGE>
4.6. The Insurance Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Company which is
intended only for use by brokers or agents selling the Contracts (i.e.
information that is not intended for distribution to Contract owners or
prospective Contract owners) is so used, and neither the Company nor Davis
Distributors shall be liable for any losses, damages, or expenses relating to
the improper use of such broker only materials. The parties hereto agree that
this section is not intended to designate or otherwise imply that the Insurance
Company is an underwriter or distributor of the Company's shares.
4.7. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or its
shares, contemporaneously with the filing of the document with the SEC, the
NASD, or other regulatory authorities.
4.8. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no-action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the SEC, the NASD, or other regulatory authorities.
4.9. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements,
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, shareholder
newsletters, 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, statements of
additional information, shareholder reports, and proxy materials.
4.10. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representative of the appropriate regulatory agencies, all records, data and
access to operating procedures that may be reasonably requested.
4.11. Davis Distributors agrees to provide the Insurance Company within
five (5) business days after the end of a calendar month, the following
information with respect to each Fund of the Company set forth on Schedule C,
each as of the last business day of such calendar month: the Fund's ten largest
portfolio holdings (based on the percentage of the Fund's net assets); the five
industry sectors in which the Fund's investments are most heavily weighted; the
relative proportion of the Fund's net assets invested in equity, bond, and cash
instruments, respectively; the five geographic regions (by country) in which the
Fund's investments are most heavily weighted; and year-to-date SEC standardized
performance data. In addition, Davis Distributors agrees to provide to the
Insurance
<PAGE>
Company, within fifteen (15) business days after the end of a calendar
quarter, the following information with respect to each Fund of the Company set
forth on Schedule C, each as of the last business day of such quarter: a market
commentary from the portfolio manager of such Fund; and a complete list of
portfolio holdings (which will not be audited or reconciled against the Fund's
books and records). Also, Davis Distributors agrees to provide to the Insurance
Company, with in fifteen (15) business days after a request is submitted to
Davis Distributors by the Insurance Company, the following information with
respect to each Fund of the Company set forth on Schedule A, each as of the date
or dates specified in such request; net asset value; net asset value per share;
and other Share information. Davis Distributors acknowledges that such
information may be furnished to the Insurance Company's internal or independent
auditors and to the insurance departments of the various jurisdictions in which
the Insurance Company does business.
ARTICLE V. FEES AND EXPENSES
5.1. The Company and Davis Distributors shall pay no fee or other
compensation to the Insurance Company under this agreement.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that any
offering of its shares is registered and that all of its shares are authorized
for issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Company or Davis Distributors, in accordance with
applicable state laws prior to their sale. The Company shall bear the cost of
registration and qualification of the Company's shares, preparation and filing
of the Company'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, the preparation of all statements and
notices required by any federal or state law, and all taxes on the issuance or
transfer of the Company's shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing to
Contract owners the Company's prospectus, proxy materials and reports.
ARTICLE VI. DIVERSIFICATION
6.1. The Company will comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5 relating to the diversification requirements for
variable annuity, endowment, modified endowment or life insurance contracts and
any amendments or other modifications to that Section or Regulation at all times
necessary to satisfy those requirements. In the event of a breach of this
Article VI by the Company, it will take all reasonable steps (a) to notify the
Insurance Company of such breach and (b) to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Regulation 1.817-5.
<PAGE>
6.2. The Company shall provide the Insurance Company or its designee
with reports certifying compliance with Section 817(h) diversification and
Subchapter M qualification requirements on a quarterly basis.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The directors of the Company will monitor each Fund for the
existence of any material irreconcilable conflict between the interests of the
variable Contract owners of all separate accounts investing in the Company and
the participants of all Qualified Plans investing in the Company. 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 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 Fund 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 a Participating Insurance
Company to disregard the voting instructions of variable contract owners. The
directors of the Company shall promptly inform the Insurance Company if they
determine that an irreconcilable material conflict exists and the implications
thereof. The directors of the Company shall have sole authority to determine
whether an irreconcilable material conflict exists and their determination shall
be binding upon the Insurance Company.
7.2. The Insurance Company and Davis Distributors each will report
promptly any potential or existing conflicts of which it is aware to the
directors of the Company. The Insurance Company and Davis Distributors each will
assist the directors of the Company in carrying out their responsibilities under
the Mixed and Shared Funding Exemptive Order, by providing the directors of the
Company with all information reasonably necessary for them to consider any
issues raised. This includes, but is not limited to, an obligation by the
Insurance Company to inform the directors of the Company whenever Contract owner
voting instructions are to be disregarded. These responsibilities shall be
carried out by the Insurance Company with a view only to the interests of the
Contract owners and by Davis Distributors with a view only to the interests of
Contract owners and Qualified Plan participants.
7.3. If it is determined by a majority of the directors of the Company,
or a majority of the directors who are not interested persons of the Company,
any of its Funds, or Davis Distributors (the "Independent Directors"), that a
material irreconcilable conflict exists, the Insurance Company and/or other
Participating Insurance Companies or Qualified Plans that have executed
participation agreements shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1) withdrawing the assets attributable to some
or all of the separate accounts from the Company or any Fund and reinvesting
those assets in a different investment medium, including (but not limited to)
another Fund of the Company, or submitting the question whether such segregation
should be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (E.G., annuity
contract
<PAGE>
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 variable contract owners the option of making such a
change; and (2) establishing a new registered management investment company or
managed separate account and obtaining any necessary approvals or orders of the
SEC in connection therewith.
7.4. If a material irreconcilable conflict arises because of a decision
by the Insurance Company to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Insurance Company may be required, at the Company's election, to withdraw
the affected Account's investment in the Company and terminate this Agreement
with respect to that 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 Independent
Directors. Any such withdrawal and termination must take place within six (6)
months after the Company gives written notice that this provision is being
implemented, and, until the end of that six month period, the Company shall
continue to accept and implement orders by the Insurance Company for the
purchase (and redemption) of shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the directors of the Company inform the Insurance Company in writing that they
have determined that the state insurance regulator's 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 Independent
Directors. Until the end of the foregoing six month period, the Company shall
continue to accept and implement orders by the Insurance Company for the
purchase (and redemption) of shares of the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the
Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the 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 directors of the
Company determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Insurance Company will withdraw the
Account's investment in the Company and terminate this Agreement within six (6)
months after the directors of the Company inform the Insurance Company in
writing of the foregoing determination, provided, however, that the withdrawal
and termination shall be limited to the extent required by the material
irreconcilable conflict, as determined by a majority of the Independent
Directors.
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
<PAGE>
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 Company
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 those 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 those Sections are contained in the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each director, officer, employee or agent of the Company, 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
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Insurance 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, acquisition,
or redemption of the Company's shares or the Contracts 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, prospectus or statement of
additional information for the Contracts or contained in the
Contracts or sales literature 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 Insurance Company
by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information
for the Contracts or in the Contracts or sales literature (or
any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the Contracts
or shares of the Company;
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement,
<PAGE>
prospectus, statement of additional information or sales
literature of the Company not supplied by the Insurance
Company, or persons under its control) or wrongful conduct of
the Insurance Company or persons under its control, with
respect to the sale or distribution of the Contracts or
Company Shares;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information or
sales literature of the Company or any amendment thereof or
supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon and in
conformity with information furnished in writing to the
Company by or on behalf of the Insurance Company;
(iv) arise as a result of any failure by the Insurance Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance
Company in this Agreement or arise out of or result from any
other material breach of this Agreement by the Insurance
Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance 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 that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve
<PAGE>
the Insurance Company from any liability which it may have to the Indemnified
Party against whom the action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Insurance Company shall be entitled to participate, at
its own expense, in the defense of the action. The Insurance Company also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action; PROVIDED, HOWEVER, that if the Indemnified Party
shall have reasonably concluded that there may be defenses available to it which
are different from or additional to those available to the Insurance Company,
the Insurance Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Insurance
Company be liable for the fees and expenses of more than one counsel for
Indemnified Parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances). After notice from the Insurance Company to the
Indemnified Party of the Insurance Company's election to assume the defense
thereof, and in the absence of such a reasonable conclusion that there may be
different or additional defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurance Company will not be liable to that party under
this Agreement for any legal or other expenses subsequently incurred by the
party independently in connection with the defense thereof other than reasonable
costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Company's shares or the Contracts or
the operation of the Company.
8.2. INDEMNIFICATION BY DAVIS DISTRIBUTORS
8.2(a). Davis Distributors agrees to indemnify and hold harmless the
Insurance Company and each of its directors, officers, employees or agents, and
each person, if any, who controls the Insurance 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 Davis
Distributors) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale, acquisition
or redemption of the Company's shares or the Contracts 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, prospectus, statement of additional
information or sales literature of the Company (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
<PAGE>
the statement or omission or alleged statement or omission was
made in reliance upon and in conformity with information
furnished in writing to Davis Distributors or the Company by
or on behalf of the Insurance Company for use in the
registration statement, prospectus, or statement of additional
information for the Company or in sales literature (or any
amendment or supplement to any of the foregoing) or otherwise
for use in connection with the sale of the Contracts or
Company shares;
(ii) 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 for the
Contracts not supplied by Davis Distributors or persons under
its control) or wrongful conduct of the Company, Davis
Distributors or persons under their control, with respect to
the sale or distribution of the Contracts or shares of the
Company;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information or
sales literature 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 and in conformity with
information furnished to the Insurance Company by or on behalf
of the Company;
(iv) arise as a result of any failure by the Company or Davis
Distributors 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 requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by Davis
Distributors or the Company in this Agreement or arise out of
or result from any other material breach of this Agreement by
Davis Distributors or the Company;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b) Davis Distributors shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from the Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the
<PAGE>
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company or the Account, whichever is applicable.
8.2(c) Davis Distributors shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless the Indemnified Party shall have notified Davis Distributors 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 the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve Davis Distributors of its obligations hereunder except to the extent
that Davis Distributors has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party to notify Davis Distributors of
any such claim shall not relieve Davis Distributors 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, Davis Distributors will be entitled to
participate, at its own expense, in the defense thereof. Davis Distributors also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action; PROVIDED, HOWEVER, that if the Indemnified Party
shall have reasonably concluded that there may be defenses available to it which
are different from or additional to those available to Davis Distributors, Davis
Distributors shall not have the right to assume said defense, but shall pay the
costs and expenses thereof (except that in no event shall Davis Distributors be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from Davis Distributors to the Indemnified Party of
Davis Distributors' election to assume the defense thereof, and in the absence
of such a reasonable conclusion that there may be different or additional
defenses available to the Indemnified Party, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and Davis
Distributors will not be liable to that party under this Agreement for any legal
or other expenses subsequently incurred by that party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d) The Insurance Company agrees to notify Davis Distributors
promptly 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.
<PAGE>
8.3 INDEMNIFICATION BY THE COMPANY
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each of its directors, officers, employees and agents, and each
person, if any, who controls the Insurance 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, damages, liabilities (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of any
director(s) of the Company, are related to the operations of the Company or:
(i) arise as a result of any failure by the Company 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);
(ii) arise out of or result from any material breach of any
representation, warranty or agreement 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
(iii) 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 for
any Fund. With respect to net asset value information, the
Company will make a determination , in accordance with SEC
guidelines, as to whether an error has occurred. Any
correction of pricing errors shall be accomplished using the
least costly corrective action, as agreed to by the Company in
writing. In no event shall the Company be required to
reimburse for pricing errors caused by conditions beyond the
control of the Company or its agent, including, but not
limited to, Acts of God, fires, electrical or phone outages.
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company, the Company, Davis Distributors or the Account, whichever
is applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to
<PAGE>
any claim made against an Indemnified Party unless the 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 the Indemnified Party (or after the Indemnified Party
shall have received notice of such service on any designated agent).
Notwithstanding the foregoing, the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Company of its obligations
hereunder except to the extent that the Company has been prejudiced by such
failure to give notice. In addition, any failure by the Indemnified Party 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 the Indemnified Parties, the Company will be
entitled to participate, at its own expense, in the defense thereof. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; PROVIDED, HOWEVER, that if the Indemnified
Party shall have reasonably concluded that there may be defenses available to it
which are different from or additional to those available to the Company, the
Company shall not have the right to assume said defense, but shall pay the costs
and expenses thereof (except that in no event shall the Company be liable for
the fees and expenses of more than one counsel for Indemnified Parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances).
After notice from the Company to the Indemnified Party of the Company's election
to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable to that
party under this Agreement for any legal or other expenses subsequently incurred
by that party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Insurance Company and Davis Distributors agree promptly to
notify the Company of the commencement of any litigation or proceedings against
it or any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, the operation of the Account,
or the sale or acquisition of shares of the Company.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
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 any exemptions from those statutes, rules and regulations the SEC 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 X. TERMINATION
<PAGE>
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months 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 Insurance Company to the extent that shares of
Funds are not reasonably available to meet the requirements of the
Contracts as determined by the Insurance Company, provided, however,
that such a termination shall apply only to the Fund(s) not reasonably
available. Prompt written notice of the election to terminate for such
cause shall be furnished by the Insurance Company to the Company and
Davis Distributors; or
(c) at the option of the Company or Davis Distributors, in the event
that formal administrative proceedings are instituted against the
Insurance Company by the NASD, the SEC, an insurance commissioner or
any other regulatory body regarding the Insurance Company's duties
under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Company's shares,
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 Insurance
Company to perform its obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or Davis
Distributors by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body, provided, however, that the
Insurance 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 Company or Davis Distributors to
perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite authority to substitute
the shares of another investment company for the corresponding Fund
shares in accordance with the terms of the Contracts for which those
Fund shares had been selected to serve as the underlying investment
media. The Insurance Company will give at least 30 days' prior written
notice to the Company of the date of any proposed action to replace the
Company's shares; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such
law precludes the use of those shares as the underlying investment
media of the Contracts issued or to be issued by the Insurance Company;
or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the Insurance
Company reasonably believes that the Company may fail to so
<PAGE>
qualify; or
(h) at the option of the Insurance Company, if the Company fails to
meet the diversification requirements specified in Article VI hereof;
or
(i) at the option of either the Company or Davis Distributors, if (1)
the Company or Davis Distributors, respectively, shall determine, in
their sole judgment reasonably exercised in good faith, that the
Insurance Company has suffered a material adverse change in its
business or financial condition or is the subject of material adverse
publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of either the Company or Davis Distributors, (2) the Company
or Davis Distributors shall notify the Insurance Company in writing of
that determination and its intent to terminate this Agreement, and (3)
after considering the actions taken by the Insurance Company and any
other changes in circumstances since the giving of such a notice, the
determination of the Company or Davis Distributors shall continue to
apply on the sixtieth (60th) day following the giving of that notice,
which sixtieth day shall be the effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably
exercised in good faith, that either the Company or Davis
Distributors or Davis Selected Advisers, L.P. has suffered a
material adverse change in its business or financial condition or
is the subject of material adverse publicity and that material
adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Insurance
Company, (2) the Insurance Company shall notify the Company and
Davis Distributors in writing of the determination and its intent
to terminate the Agreement, and (3) after considering the actions
taken by the Company and/or Davis Distributors and any other
changes in circumstances since the giving of such a notice, the
determination shall continue to apply on the sixtieth (60th) day
following the giving of the notice, which sixtieth day shall be
the effective date of termination; or
(k) At the option of any party upon another party's failure to cure a
material breach of any provision of this Agreement within 30 days
after written notice thereof.
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. 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 the 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) or 10.1(j) of
this Agreement, the prior written notice shall
<PAGE>
be given in advance of the effective date of termination as required by
those 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, the prior written notice
shall be given at least ninety (90) days before the effective date of
termination; provided that any party may terminate this Agreement
immediately with respect to any Fund if such party reasonably
determines that continuing to perform under this Agreement would
violate any state or federal law.
10.4. Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement and for so long as the Company continues to exist,
the Company and Davis Distributors shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments from any other investment option to any
Fund, redeem investments in the Company and/or invest in the Company upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.4 shall not apply to any terminations under Article
VII and the effect of Article VII terminations shall be governed by Article VII
of this Agreement.
10.5. The Insurance Company shall not redeem Company shares
attributable to the Contracts (as opposed to Company shares attributable to the
Insurance Company's assets held in the Account) except (i) as necessary to
implement Contract-owner-initiated transactions, or (ii) as required by state
and/or federal laws or regulations or judicial or other legal precedent of
general application (a "Legally Required Redemption"), or (iii) upon 30 days
notice to the Company, as permitted by an order of the SEC pursuant to Section
26(b) of the 1940 Act, or (iv) as permitted under the terms of the Contract.
Upon request, the Insurance Company will promptly furnish to the Company and
Davis Distributors the opinion of counsel for the Insurance Company (which
counsel shall be reasonably satisfactory to the Company and Davis Distributors)
to the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Company:
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Attention: Thomas Tays, Vice President
<PAGE>
If to the Insurance Company:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Edward W. Diffin, Jr., Vice President and Senior Counsel
If to Davis Distributors:
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Attention: Thomas Tays, Vice President
ARTICLE XII. MISCELLANEOUS
12.1. 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 unless and until that information may come into the public
domain.
12.2. 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.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. 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.
12.5. 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 those authorities
reasonable access to its books and records in connection with any lawful
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. 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.
12.7. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns; provided, that no party
may assign this Agreement without the prior written consent of the others.
<PAGE>
12.8. Except as otherwise expressly provided in this Agreement, neither
the Company nor Davis Distributors, nor any affiliate thereof shall use any
trademark, trade name, service mark or logo of the Insurance Company or any of
its affiliates, or any variation of any such trademark, trade name, service mark
or logo, without the Insurance Company's prior written consent, the granting of
which shall be at the Insurance Company's sole option.
12.9. Except as otherwise expressly provided in this Agreement, neither
the Insurance Company nor any affiliate thereof shall use any trademark, trade
name, service mark or logo of the Company or Davis Distributors, or any
affiliates thereof, or any variation of any such trademark, trade name, service
mark or logo, without the Company's or Davis Distributor's prior written
consent, the granting of which shall be at the Company's and Davis Distributor's
sole option.
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 as of the date specified below.
Merrill Lynch Life Insurance Company
("Insurance Company")
By its authorized officer,
By:
-------------------------------------------
Title: Senior Vice President, General Counsel & Secretary
Date:
------------------------------------------
DAVIS VARIABLE ACCOUNT FUND
("Company")
By its authorized officer,
By:
-------------------------------------------
Title: Senior Vice President
Date:
------------------------------------------
DAVIS DISTRIBUTORS, LLC
("Davis Distributors")
By its authorized officer,
By:
-------------------------------------------
Title: President
Date:
------------------------------------------
<PAGE>
SCHEDULE A
ACCOUNTS
NAME OF ACCOUNT DATE OF RESOLUTION OF INSURANCE COMPANY'S
BOARD WHICH ESTABLISHED THE ACCOUNT
Merrill Lynch Life Variable Annuity Separate Account A 08/06/91
<PAGE>
SCHEDULE B
CONTRACTS
Merrill Lynch Retirement Power
<PAGE>
SCHEDULE C
TO
PARTICIPATION AGREEMENT
NAME OF FUND
Davis Value Portfolio
Dated: ___, 2000
<PAGE>
SCHEDULE D
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding
responsibilities for the handling of proxies relating to the Company by Davis
Distributors, the Company and the Insurance Company. The defined terms herein
shall have the meanings assigned in the Participation Agreement except that the
term "Insurance Company" shall also include the department or third party
assigned by the Insurance Company to perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by
Davis Distributors as early as possible before the date set by the
Company for the shareholder meeting to facilitate the establishment of
tabulation procedures. At this time Davis Distributors will inform the
Insurance Company of the Record, Mailing and Meeting dates. This will
be done verbally, with confirmation following promptly in writing,
approximately two months before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a
"tape run", or other activity, which will generate the names, addresses
and number of units which are attributed to each
contract-owner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this date
that could affect the status of the Customers' accounts of the Record
Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best efforts to call in
the number of Customers to Davis Distributors, as soon as possible, but no later
than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Insurance Company by the Company. Davis
Distributors must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed by the
Company).
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
4. During this time, Davis Distributors will develop and produce the
Notice of Proxy and the Proxy Statement (one document). Printed and
folded notices and statements will be sent to Insurance Company for
insertion into envelopes. Contents of envelope sent to customers by
Insurance Company will include:
a. Voting Instruction Card(s)
<PAGE>
b. One proxy notice and statement (one document)
c. Return envelope addressed to the Insurance Company or
its tabulation agent
d. "Urge buckslip" - optional, but recommended.
(This is a small,
single sheet of paper that requests Contract owners
to vote as quickly as possible and that their vote is
important. One copy will be supplied by the Company.)
e. Cover letter - optional, supplied by Insurance
Company and reviewed and approved in advance by Davis
Distributors.
5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date, and in no event later
than 3 business days before mail date. Individual in charge at
Insurance Company reviews and approves the contents of the mailing
package to ensure correctness and completeness. Copy of this approval
sent to Davis Distributors.
6. Package mailed by the Insurance Company.
* The Company MUST allow at least a 15-day solicitation time
to the Insurance Company as the shareowner. (A 5-week period
is recommended.) Solicitation time is calculated as calendar
days from (but NOT including) the meeting, counting backwards.
7. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often-used procedure is to sort cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure.
8. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to the Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible Card
is disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Such mutilated or illegible Cards are "hand verified,"
I.E., examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
9. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur.
This may entail a recount.
10. The actual tabulation of votes is done in units and then converted to
shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of SHARES.)
Davis Distributors must review and approve tabulation format.
11. Final tabulation in shares is verbally given by the Insurance Company
to Davis Distributors on
<PAGE>
the day of the meeting not later than 1:00 p.m. Eastern time. Davis
Distributors may request an earlier deadline if required to calculate
the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be
required from the Insurance Company as well as an original copy of the
final vote. Davis Distributors will provide a standard form for each
Certification.
13. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged
or if otherwise necessary for legal, regulatory, or accounting
purposes, Davis Distributors will be permitted reasonable access to
such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing. For this purpose, signatures transmitted by
facsimile will be acceptable.
<PAGE>
Exhibit 8(v)
Form of Participation Agreement Between Delaware Group Premium Fund, Inc.
and Merrill Lynch Life Insurance Company
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MERRILL LYNCH LIFE INSURANCE COMPANY
DELAWARE GROUP PREMIUM FUND
AND
DELAWARE DISTRIBUTORS, LP
THIS AGREEMENT, dated as of the _____ day of _________, 2000, by and
among Merrill Lynch Life Insurance Company (the "Company"), an Arkansas 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 (each account hereinafter referred to as the "Account"), Delaware
Group Premium Fund (the "Fund"), a Delaware business trust, and Delaware
Distributors, LP (the "Underwriter"), a Delaware limited partnership .
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 insurance
companies which have entered into participation agreements with the Fund and
Underwriter ("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 shares of the Portfolios are registered under the
Securities Act of 1933, as amended (the "1933 Act");
<PAGE>
WHEREAS, Delaware Management Company (the "Adviser"), which serves as
investment adviser to the Fund, is duly registered as an investment adviser
under the federal 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;
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, 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"); 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 Underwriter 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 Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund has granted to the Underwriter exclusive authority to
distribute the Fund's shares, and has agreed to instruct, and has so instructed,
the Underwriter to make available to the Company for purchase on behalf of the
Account Fund shares of those Designated Portfolios selected by the Underwriter.
Pursuant to such authority and instructions, and subject to Article X hereof,
the Underwriter 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
Underwriter 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
<PAGE>
federal and any applicable state laws, suspension or termination is necessary in
the best interests of the Fund and its shareholders.
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 AND REDEMPTION PROCEDURES
(a) The Fund hereby appoints the Company as designee 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
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 ("NYSE") is open
for trading and on which the Fund calculates its net asset value ("NAV")
pursuant to its prospectus and the rules of the SEC (a "Business Day") by the
Company as such designee of the Fund prior to the time that the Fund ordinarily
calculates its NAV as described from time to time in the Fund Prospectus (which
as of the date of execution of this Agreement is close of trading of the NYSE,
generally 4:00 p.m. Eastern Time) shall constitute receipt by the Fund on that
same Business Day, provided that the Fund receives notice of such request by 11
a.m. Eastern Time on the next following Business Day.
(b) The Company shall pay for shares of each Designated
Portfolio on the same day that it notifies the Fund of a purchase request for
such shares. Payment for Designated Portfolio shares shall be made in federal
funds transmitted to the Fund by wire to be received by the Fund by 4:00 p.m.
Eastern Time on the day the Fund is notified of the purchase request for
Designated Portfolio shares (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 of federal funds so wired,
such funds shall cease to be the responsibility of the Company and shall become
the responsibility 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 or any other designated person to be received by the Company by 4:00
p.m. Eastern Time on the same day 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
<PAGE>
1.3(b) of this Agreement), except that the Fund reserves the right 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. 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.
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 provide notice on the next Business Day pursuant to section 1.3(a) of
orders received prior to the calculation of the Fund's NAV on the preceding
Business Day. 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.
Neither the Fund, any Designated Portfolio, the Underwriter, 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
Underwriter. 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 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 correcting such errors. Any
error of a lesser amount shall be corrected in the next Business Day's net asset
value per share. In no event, however, shall the Fund be liable for material
errors in calculating or reporting NAV where such errors are the result of
information supplied or failed to be supplied by the Company or persons under
its control.
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. 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 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.
<PAGE>
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 Underwriter 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
Underwriter (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
Underwriter (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
(unless otherwise required by applicable law), 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 Underwriter and the Fund shall sell Fund shares only to
Participating Insurance Companies and their separate accounts and to persons or
plans ("Qualified Persons") that communicate to the Underwriter and the Fund
that they qualify to purchase shares of the Fund under Section 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 Underwriter and the Fund shall not sell Fund shares to any insurance company
or separate account 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
<PAGE>
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, that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under
Arkansas 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, 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, duly authorized for
issuance and sold in compliance with applicable state and federal securities
laws and that the Fund is and shall remain registered under the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
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 will have the Board, a majority of
whom are not interested persons of the Fund, formulate and approve a plan
pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund and Distributor represent that the Fund's investment
policies, fees, and expenses are and shall at all times remain
in compliance with applicable state securities laws, if any,
and such insurance laws as the Company may notify the Fund in
writing from time to time, and the Fund and Distributor
represent that their respective operations are and shall at
all times remain in material compliance with applicable state
securities laws and with such insurance laws as the Company
may notify the Fund in writing from time to time to the extent
required to perform this Agreement. The Fund and Distributor
agree that the Fund will comply with any state insurance law
restrictions, as provided in writing by the Company to the
Fund, including the furnishing of 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.
2.5. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
<PAGE>
2.6. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with any applicable state and federal securities laws.
2.7. The Fund and the Underwriter 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.
2.8. 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.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter 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 reasonably request. The Fund or the Underwriter
shall bear the expense of printing copies of the current prospectus and profiles
for the Contracts 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 on diskette at
the Fund'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 (such printing for existing Contract owners to
be at the Fund's or Underwriter's expense). With respect to any prospectuses of
the funds that are printed in combination with any one or more Contract
prospectus (the "Prospectus Booklet"), the costs of printing Prospectus Booklets
for distribution to existing Contract owners shall be prorated to the Company
based on (a) the ratio of the number of pages of the prospectus for the Funds
included in the Prospectus Booklet to the number of pages in the Prospectus
Booklet as a whole; and (b) the ratio of the number of the Contract owners with
Contract value allocated to the Funds to the total number of Contract owners;
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 Contracts not funded by the Funds.
3.2. The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available, and the Underwriter
(or the Fund), at its expense,
<PAGE>
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 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 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 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 or the Underwriter is named. No such material
shall be used if the Fund or its designee objects to such sales literature or
promotional material within five 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
<PAGE>
Adviser or the Underwriter 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 or the Underwriter 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 by
the Underwriter, except with the permission of the Fund or the Underwriter.
4.3. The Fund and the Underwriter, or their 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 if the Company objects to such
sales literature or promotional material within five 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 Underwriter 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 and the Underwriter shall adopt and implement procedures
reasonably designed to ensure that information concerning the Company, any of
its affiliates, or the Contracts which is intended only for use by brokers or
agents selling the shares (I.E., information that is not intended for
distribution to shareowners or prospective shareowners) is so used, and neither
the Company nor any of its affiliates shall be liable for any losses, damages,
or expenses relating to the improper use of such broker only materials.
4.6. The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Funds which is intended only
for use by brokers or agents selling the Contracts (I.E., information that is
not intended for distribution to Contract owners or prospective Contract owners)
is so used, and neither the Fund nor Underwriter shall be liable for any losses,
damages, or expenses relating to the improper use of such broker only materials.
<PAGE>
The parties hereto agree that this section is not intended to designate or
otherwise imply that the Company is an underwriter or distributor of the Fund's
shares.
4.7. 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 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.
4.8. 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 Underwriter any complaints received from the
Contract owners pertaining to the Fund or the Designated Portfolio.
4.9. 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 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 its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.10. 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 Company, as applicable or any affiliate of
the Fund or Company, as applicable: 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.
4.11. The Fund agrees to provide to the Company, within fifteen (15)
Business Days after the end of a calendar Quarter, the following information
with respect to each Portfolio of
<PAGE>
the Fund set forth on Schedule A, each as of the last Business Day of such
calendar Quarter: the Portfolio's ten largest portfolio holdings (based on the
percentage of the Portfolio's net assets); the five industry sectors in which
the Portfolio's investments are most heavily weighted; the relative proportion
of the Portfolio's net assets invested in equity, bond, and cash instruments,
respectively; and year-to-date NAV performance data. Also, the Fund agrees to
provide to the Company, within fifteen (15) Business Days after a request is
submitted to the Fund by the Company, the following information with respect to
each Portfolio of the Fund set forth on Schedule A, each as of the date or dates
specified in such request: net asset value; net asset value per Share; and other
reasonable Share information. The Fund acknowledges that such information may be
furnished to the Company's internal or independent auditors and to the insurance
departments of the various jurisdictions in which the Company does business.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Fund or Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. Currently, no such payments are
contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses 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, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the 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 that
the Contracts will be treated as 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 and will continue to comply with
<PAGE>
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) take all
reasonable steps to 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 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 make every effort to maintain such treatment, and that it
will notify the Fund and the Underwriter 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.
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 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.
<PAGE>
7.2. The Company will 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 under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever Contract owner voting instructions
are disregarded.
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.
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.
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.
<PAGE>
7.6. For purposes of Section 7.3 through 7.6 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 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
<PAGE>
8.1(a). The Company agrees to indemnify and hold harmless the
Fund and the Underwriter and each of their trustees/directors and officers, and
each person, if any, who controls the Fund or Underwriter 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 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 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
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 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 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 and in conformity with information furnished to
the Fund by or on behalf of the Company; or
(iv) arise 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 and
<PAGE>
including the failure to provide timely and accurate purchase
and redemption information to the Fund); 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; 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 UNDERWRITER
8.2(a). The Underwriter 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 Underwriter) or litigation
(including legal and other
<PAGE>
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 prospectus or SAI or
sales literature 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 Underwriter or 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 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 for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct
of the Fund or Underwriter 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 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 and in
conformity with information furnished to the Company by or on
behalf of the Fund or the Underwriter; or
(iv) arise as a result of any material failure by the Fund or
the Underwriter 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
Underwriter in this Agreement or arise out of or
<PAGE>
result from any other material breach of this Agreement by the
Fund or the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance 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 Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
The Company agrees promptly to notify the Underwriter 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,
<PAGE>
claims, expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any material failure by the Fund 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
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund; or
(iii) 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,
unless such incorrect or untimely calculation or reporting is
a result of information which the Company or persons under its
control has provided or failed to provide to the Fund.
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 Underwriter or the
Account, whichever is applicable.
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.
<PAGE>
8.3(d). The Company and the Underwriter 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,
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 six (6)
months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
Fund and the Underwriter based upon the Company's
determination that shares of the Fund are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter 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 Underwriter 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
<PAGE>
Account, or the purchase of the Fund's shares;
provided, however, that the Fund or Underwriter
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
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the
Fund or Underwriter 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 Fund or Underwriter to perform its obligations
under this Agreement; or
(f) termination by the Company by written notice to the
Fund and the Underwriter 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; or
(g) termination by the Fund or Underwriter 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 Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter 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 Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund, Adviser, or the Underwriter 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
(j) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter 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
<PAGE>
provision of this Agreement; provided, however,
any termination under this Section 10.l(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 Underwriter 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.
(m) at the option of any party upon another party's
failure to cure a material breach of any provision of
this Agreement within 30 days after written notice
thereof.
10.2. Notwithstanding any termination of this Agreement, the Fund and
the Underwriter shall, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Underwriter requests that the Company seek an order pursuant to Section 26(b) of
the 1940 Act to permit the substitution of other securities for the shares of
the Designated Portfolios. The Underwriter agrees to split the cost of seeking
such an order, and the Company agrees that it shall reasonably cooperate with
the Underwriter 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 Underwriter). 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 Underwriter, 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
<PAGE>
Underwriter 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 Underwriter
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: Delaware Group Premium Fund
Attention: Christopher H. Price
1818 Market Street
Philadelphia, PA 19103
If to the Company: Barry G. Skolnick, Esq.
Senior Vice President and General Counsel
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, NJ 08536
If to Underwriter: Delaware Distributors, L.P.
Attention: Christopher H. Price
1818 Market Street
Philadelphia, PA 19103
ARTICLE XII. MISCELLANEOUS
12.1. 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 Underwriter 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.
<PAGE>
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 Arkansas 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
Arkansas variable annuity laws and regulations and any other applicable law or
regulations.
12.7. 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.
12.8. 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, except where such assignments do not result in an actual change in
control of the party.
12.9. Except as otherwise expressly provided in this Agreement, neither
the Fund nor Underwriter, nor any affiliate thereof shall use any trademark,
trade name, service mark or logo of the Company or any of its affiliates, or any
variation of any such trademark, trade name, service mark or logo, without the
Company's prior written consent, the granting of which shall be at the Company's
sole option.
<PAGE>
12.10. Except as otherwise expressly provided in this Agreement,
neither the Company nor any of its affiliates shall use any trademark, trade
name, service mark or logo of the Fund or Underwriter, or any affiliates
thereof, or any variation of any such trademark, trade name, service mark or
logo, without the Fund's or Underwriter's prior written consent, the granting of
which shall be at the Fund's or Underwriter's sole option.
<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 below.
MERRILL LYNCH LIFE INSURANCE COMPANY
By its authorized officer
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
DELAWARE GROUP PREMIUM FUND
By its authorized officer
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
DELAWARE DISTRIBUTORS, INC.
(General Partner) on behalf
of Delaware Distributors, L.P.
By its authorized officer
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
SCHEDULE A
Dated:________________, 1999
<PAGE>
Exhibit 8(w)
Form of Participation Agreement Between PIMCO Variable Insurance Trust and
Merrill Lynch Life Insurance Company
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MERRILL LYNCH LIFE INSURANCE COMPANY
PIMCO VARIABLE INSURANCE TRUST,
AND
PIMCO FUNDS DISTRIBUTORS LLC
THIS AGREEMENT, dated as of the 3rd day of April, 2000 by and among
Merrill Lynch Life Insurance Company, (the "Company"), an Arkansas 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 (each account hereinafter referred to as the "Account"), PIMCO
Variable Insurance Trust (the "Fund"), a Delaware business trust, and PIMCO
Funds Distributors LLC (the "Underwriter"), a Delaware limited liability
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 insurance
companies which have entered into participation agreements with the Fund and
Underwriter ("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 dated February 9, 1998, (File
No. 812-10822) 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 shares of the Portfolios are registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, Pacific Investment Management Company (the "Adviser"), which
serves as investment adviser to the Fund, is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940, as amended;
<PAGE>
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;
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, 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"); 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 Underwriter 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 Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Fund has granted to the Underwriter exclusive
authority to distribute the Fund's shares, and has agreed to instruct, and has
so instructed, the Underwriter to make available to the Company for purchase on
behalf of the Account Fund shares of those Designated Portfolios selected by the
Underwriter. Pursuant to such authority and instructions, and subject to Article
X hereof, the Underwriter 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 Underwriter 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 necessary 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 AND REDEMPTION PROCEDURES
-2-
<PAGE>
(a) The Fund hereby appoints the Company as
designee 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 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 of the SEC (a
"Business Day") by the Company as such designee 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 Prospectus (which as of the
date of execution of this Agreement is 4:00 p.m. Eastern Time) shall
constitute receipt by the Fund on that same Business Day, provided
that the Fund receives notice of such request by 9:30 a.m. Eastern
Time on the next following Business Day.
(b) The Company shall pay for shares of each
Designated Portfolio on the same Business Day that it notifies the Fund
of a purchase request for such shares. Payment for Designated Portfolio
shares shall be made in federal funds transmitted to the Fund by wire
to be received by the Fund by 4:00 p.m. Eastern Time (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). If federal funds are not received on time, such
funds will be invested, and Designated Portfolio shares purchased
thereby will be issued, as soon as practicable and the Company shall
promptly, upon the Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowing or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of
portfolio transactions effected by the Fund based upon such purchase
request. Upon receipt of federal funds so wired, such funds shall cease
to be the responsibility of the Company and shall become the
responsibility 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 or any other designated person to
be received by the Company by 4:00 p.m. Eastern Time on the same day
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
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. 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.
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 7:00 p.m. Eastern Time each Business Day , and in any event, as soon
as reasonably practicable after the net asset value per share for such
Designated Portfolio is calculated, and shall calculate such net asset value in
accordance with the Fund's Prospectus. In the event the Fund is unable to make
the 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. Neither the Fund, any Designated
Portfolio, the Underwriter, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which information
is based on
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incorrect information supplied by the Company or any other Participating
Insurance Company to the Fund or the Underwriter.
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. 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 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.
Funding vehicles other than those listed on Schedule A to this Agreement may be
available for the investment of the cash value of the Contracts, provided,
however, the Company gives the Fund and the Underwriter 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
Underwriter (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 Underwriter (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 (unless otherwise required by applicable law), 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 Underwriter and the Fund shall sell Fund shares
only to Participating Insurance Companies and their separate accounts and to
persons or plans ("Qualified Persons") that communicate to the Underwriter and
the Fund that they qualify to purchase shares of the Fund under Section 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 Underwriter and the Fund shall not sell Fund shares to any insurance
company or separate account 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.
1.9 The Fund will provide notice of any material error in
calculation of net asset value per share, dividend or capital gain information
of a Designated Portfolio as soon as
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reasonably practical after discovery thereof. Any such notice will state for
each day for which an error occurred, the incorrect price, the correct price,
and the reason for the price change. The Fund will make the Company and the
Account whole for any payments or adjustments to the number of shares in the
Account that are reasonably demonstrated to be required as a result of pricing
errors.
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. 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 Arkansas 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, 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, duly
authorized for issuance and sold in compliance with applicable state and federal
securities laws and that the Fund is and shall remain registered under the 1940
Act. The Fund shall amend the registration statement for its shares under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund or the Underwriter.
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 will have the Board, a
majority of whom are not interested persons of the Fund, formulate and approve a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4 The Fund and Underwriter represent that the Fund's
investment policies, fees, and expenses are and shall at all times remain in
compliance with applicable state securities laws, if any, and the Fund and
Underwriter represent that their respective 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 Fund and Underwriter also
represent that the Fund will comply with any additional state insurance law
restrictions, as provided in writing by the Company to the Fund, including the
furnishing of 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.
2.5 The Fund represents that it is lawfully organized and
validly existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the 1940 Act.
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2.6 The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute the
Fund shares in accordance with any applicable state and federal securities laws.
2.7 The Fund and the Underwriter 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.
2.8 The Company represents and warrants that it will
maintain a blanket fidelity bond or similar coverage issued by a reputable
insurance company in an amount appropriate to the Company's obligations under
this Agreement.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING 3.1 The Underwriter shall
provide the Company with as many copies of the Fund's current prospectus
(describing only the Designated Portfolios listed on Schedule A) or, to the
extent permitted, the Fund's profiles as the Company may reasonably request. The
Fund shall bear the expense of printing copies of the current prospectus and
profiles for the Contracts 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
on diskette at the Fund'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 or profile printed together in one document (the payment
of such printing costs to be governed by the provisions of Section 5.3 of this
Agreement).
3.2 The Fund's prospectus shall state that the current
Statement of Additional Information ("SAI") for the Fund is available, and the
Underwriter (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. The Company shall provide prior written notice
of any proposed modification of such information, which notice will describe the
manner in which the Company proposes to modify the information, and agrees that
it may not modify the substance of such information without the prior consent of
the Fund.
3.4 The Fund, 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 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
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(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 reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act, as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors or trustees and with
whatever rules the SEC may promulgate with respect thereto.
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 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 or the Underwriter
is named. No such material shall be used if the Fund or its designee objects to
such sales literature or promotional material within five 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 Underwriter 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 or the Underwriter in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or prospectus or SAI for the Fund shares, as such registration
statement 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 or by the
Underwriter, except with the permission of the Fund or the Underwriter or the
designee of either.
4.3 The Fund and the Underwriter, or their 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, and the Company will use its best efforts to review
such sales literature or promotional material 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 Underwriter 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, 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
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literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5 The Fund and the Underwriter shall adopt and
implement procedures reasonably designed to ensure that information concerning
the Company, any of its affiliates, or the Contracts which is intended only for
use by brokers or agents selling the shares (i.e., information that is not
intended for distribution to shareowners or prospective shareowners) is so used,
and neither the Company nor any of its affiliates shall be liable for any
losses, damages, or expenses relating to the improper use of such broker only
materials.
4.6 The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Fund which is
intended only for use by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to contract owners or
prospective contract owners) is so used, and neither the Fund nor the
Underwriter shall be liable for any losses, damages, or expenses relating to the
improper use of such broker only materials. The parties hereto agree that this
section is not intended to designate or otherwise imply that the Company is an
underwriter or distributor of the Fund's shares.
4.7 The Fund 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
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.
4.8 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 Underwriter any
complaints received from the Contract owners pertaining to the Fund or the
Designated Portfolio.
4.9 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 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 its
prospectus or registration statement, in an orderly manner. The Fund will make
reasonable efforts to attempt to have changes affecting Contract prospectuses
become effective simultaneously with the annual updates for such prospectuses.
4.10 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,
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proxy materials, and any other communications distributed or made generally
available with regard to the Fund.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and the Underwriter shall pay no fee or
other compensation to the Company under this Agreement, except that if the Fund
or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Fund or Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. Currently, no such payments are
contemplated.
5.2 All expenses incident to performance by the Fund
under this Agreement shall be paid by the Fund. The Fund shall see to it that
all its shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the Fund,
in accordance with applicable state laws prior to their sale. The Fund shall
bear the expenses 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, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3 With respect to any prospectuses of the Designated
Portfolios that are printed in combination with any one or more Contract
prospectus (the "Prospectus Booklet"), the costs of printing Prospectus Booklets
for distribution to existing Contract owners shall be prorated to the Fund based
on (a) the ratio of the number of pages of the prospectuses for the Designated
Portfolios included in the Prospectus Booklet to the number of pages in the
Prospectus Booklet as a whole; and (b) the ratio of the number of Contract
owners with Contract value allocated to the Designated Portfolios to the total
number of Contract owners; 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 Contracts not funded by the
Fund. The Company shall bear the expenses of distributing the Fund's proxy
materials and periodic reports to Contract owners.
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ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1 The Fund will invest its assets in such a manner as
to ensure that the Contracts will be treated as annuity or life insurance
contracts, whichever is appropriate, under the Code and the regulations issued
there under (or any successor provisions). Without limiting the scope of the
foregoing, each Designated Portfolio has complied 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 take all
reasonable steps (a) to notify the Company of such breach and (b) 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 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 a 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 upon request.
6.4 Subject to Section 6.1 and Section 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 make every effort to maintain such
treatment, and that it will notify the Fund and the Underwriter 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.
ARTICLE VII. POTENTIAL CONFLICTS
The following provisions shall apply only upon issuance of the Mixed
and Shared Funding Order and the sale of shares of the Fund to variable life
insurance separate accounts, and then only to the extent required under the 1940
Act.
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
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.
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7.2 The Company will 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 under the Mixed and Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever Contract
owner voting instructions are disregarded.
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.
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.
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 Section 7.3 through 7.6 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 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.
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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
8.1(a). The Company agrees to indemnify and hold
harmless the Fund and the Underwriter and each of their trustees/directors and
officers, and each person, if any, who controls the Fund or Underwriter 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 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 the Contracts or sales literature 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 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 of
the Fund not supplied by the Company or persons under
its control) or wrongful conduct of the Company or
its agents or persons
-12-
<PAGE>
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 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 and in conformity
with information furnished to the Fund by or on
behalf of the Company; or
(iv) arise 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 Article VI of
this Agreement); or
(v) arise out of or result from any material
breach of any representation and/or warranty made by
the Company in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Company;
as limited by and in accordance with the provisions of Sections 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.
-13-
<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 Fund shares or the Contracts
or the operation of the Fund.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter 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 Underwriter) 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
prospectus or SAI or sales literature 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 Underwriter or Fund by or on behalf
of the Company for use in the registration statement,
prospectus or SAI for the Fund or in sales literature
(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 for
the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the
Fund or Underwriter 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 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 and in conformity with information furnished to
the Company by or on behalf of the Fund or the
Underwriter; or
(iv) arise as a result of any failure by the Fund
or the Underwriter 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 Article VI of
this Agreement); or
-14-
<PAGE>
(v) arise out of or result from any material
breach of any representation and/or warranty made by
the Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under
this indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance 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 Underwriter shall not be liable under
this indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have 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 Underwriter of any such claim shall not relieve the Underwriter 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 Underwriter will be
entitled to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Underwriter
to such party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
The Company agrees promptly to notify the Underwriter
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 as a result of any failure by the Fund
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 Article
VI of this Agreement); or
-15-
<PAGE>
(ii) arise out of or result from any material
breach of any representation and/or warranty made by
the Fund in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Fund; or
(iii) 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 Underwriter or the
Account, whichever is applicable.
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 Underwriter 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 Delaware.
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 (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.
-16-
<PAGE>
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 six (6)
months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
Fund and the Underwriter based upon the Company's
determination that shares of the Fund are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter 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 Underwriter 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; provided, however,
that the Fund or Underwriter 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
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the
Fund or Underwriter 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 Fund or Underwriter to perform its obligations
under this Agreement; or
(f) termination by the Company by written notice to the
Fund and the Underwriter 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 Article VI hereof, or if the Company reasonably
believes that such Portfolio may fail to so qualify
or comply; or
(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the Contracts
fail to meet the qualifications specified in Article
VI hereof; or
(h) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter 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,
-17-
<PAGE>
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 Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund, Adviser, or the Underwriter 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
(j) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter the written notice specified in
Section 1.7(a)(ii) 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)(ii)
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 Underwriter 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.
(m) at the option of any party upon another party's
failure to cure a material breach of any provision of
this Agreement within 30 days after written notice
thereof.
10.2 Notwithstanding any termination of this Agreement,
the Fund and the Underwriter shall, at the option of the Company, continue to
make available additional shares of the Fund pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"), unless the Underwriter requests that the Company seek an order
pursuant to Section 26(b) of the 1940 Act to permit the substitution of other
securities for the shares of the Designated Portfolios. The Underwriter agrees
to split the cost of seeking such an order, and the Company agrees that it shall
reasonably cooperate with the Underwriter 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 Underwriter). 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 Underwriter, 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
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<PAGE>
(iv) as permitted under the terms of the Contract. Upon request, the Company
will promptly furnish to the Fund and the Underwriter 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 Underwriter 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: PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
If to the Company: Merrill Lynch Life Insurance Company
800 Scudders Mill Road PCC2I
Plainsboro, NJ 08536
If to Underwriter: PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
ARTICLE XII. MISCELLANEOUS
12.1 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 Underwriter 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.
-19-
<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 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 Arkansas 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
annuity operations of the Company are being conducted in a manner consistent
with the Arkansas variable annuity laws and regulations and any other applicable
law or regulations.
12.7 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.
12.8 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.
12.9 The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared
under statutory accounting principles) and
annual report (prepared under generally
accepted accounting principles) containing
the Designated Portfolios, filed with any
state or federal regulatory body or
otherwise made available to the public, as
soon as practicable and in any event within
90 days after the end of each fiscal year;
and
(b) any registration statement containing the
Designated Portfolios (without exhibits) and
financial reports of the Company containing
the Designated Portfolios, filed with the
Securities and Exchange Commission or any
state insurance regulatory, as soon as
practicable after the filing thereof.
12.10 Except as otherwise expressly provided in this
Agreement, neither the Fund nor the Underwriter, nor any affiliate thereof shall
use any trademark, trade name, service mark or logo of the Company or its
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without the Company's prior written consent, the granting of which shall
be at the Company's sole option.
Except as otherwise provided in this Agreement, neither the
Company nor any of its affiliates shall use any trademark, trade name, service
mark or logo of the Fund or the Underwriter, or any affiliates thereof, or any
variation of any such trademark, trade name, service mark or logo, without the
Fund's or Underwriter's prior written consent, the granting of which shall be at
the Fund's or the Underwriter's sole option.
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<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 below.
MERRILL LYNCH LIFE INSURANCE COMPANY:
By its authorized officer
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Date:
-------------------------------
PIMCO VARIABLE INSURANCE TRUST
By its authorized officer
By:
-------------------------------
Name: Brent R. Harris
-------------------------------
Title: Chairman
-------------------------------
Date:
-------------------------------
PIMCO FUNDS DISTRIBUTORS LLC
By its authorized officer
By:
-------------------------------
Name: Newton B. Schott, Jr.
-------------------------------
Title: Executive Vice President
-------------------------------
Date:
-------------------------------
8194921.doc 12/31/97
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<PAGE>
Schedule A
PIMCO VARIABLE INSURANCE TRUST PORTFOLIOS:
Total Return Bond Portfolio
SEGREGATED ASSET ACCOUNTS:
Merrill Lynch Life Variable Annuity Separate Account A (established
August 6, 1991).
<PAGE>
Exhibit 8(x)
Form of Participation Agreement Between Seligman Portfolios, Inc.
and Merrill Lynch Life Insurance Company
<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 3rd day of April, 2000, between Seligman
Portfolios, Inc., an open-end management investment company organized as a
Maryland Corporation (the "Fund"), Seligman Advisors, Inc., a Delaware
corporation (the "Distributor") and Merrill Lynch Life Insurance Company, a life
insurance company organized under the laws of the State of Arkansas (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Account").
W I T N E S S E T H :
WHEREAS, the Fund is a registered open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has filed a currently effective registration statement to offer and sell its
shares under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Fund desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Fund (the "Participating Insurance
Companies"); and
WHEREAS, the shares of the Fund are divided into several series of
shares, each series representing an interest in a particular managed portfolio
of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has applied for an order from the Securities and
Exchange Commission ("SEC") granting Participating Insurance Companies (as
defined in the Fund's application for such order) and their separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of 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 and certain qualified pension and
retirement plans (the "Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
and is a member in good standing of The National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Distributor currently serves as the distributor of the
Fund's shares; and
<PAGE>
WHEREAS, the Company has registered or will register certain variable
life insurance policies and/or variable annuity contracts under the 1933 Act
(the "Contracts"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
ARTICLE I.
SALE OF FUND SHARES
1.1. The Fund shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Fund (or its designee), as established in accordance with the
provisions of the then current prospectus of the Portfolio or Portfolios. Shares
of a particular Portfolio of the Fund shall be ordered in such quantities and at
such times as determined by the Company to be necessary to meet the requirements
of the Contracts. The Directors of the Fund (the "Directors") 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 Directors
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 Portfolio.
1.2. The Fund will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Fund (or its designee) of the request
for redemption, as established in accordance with the provisions of the then
current prospectus of the Fund.
1.3. For the purposes of Sections 1.1 and 1.2, the Fund hereby appoints
the Company as its designee for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Fund
provided that (i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and (ii) the Fund receives notice of such orders by 10:00 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.
<PAGE>
1.4. For purposes of determining payment for purchase orders and
redemption orders, all such orders will be netted. Net purchase orders that are
transmitted to the Fund in accordance with Section 1.3 shall be paid for by the
Company by 2:00 p.m. EST on the same Business Day that the Fund receives notice
of the order. Net redemption orders that are transmitted to the Fund in
accordance with Section 1.3 shall be paid for by the Fund by 2:00 p.m. EST on
the same Business Day that the Fund receives notice of the order, to the extent
practicable, and in any event the Fund shall make such payment within five
calendar days after the date the order is transmitted to the Fund in accordance
with Section 1.3 or such shorter period of time as may be required by law.
Payments shall be made in federal funds transmitted by wire.
1.5. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6. The Fund shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Fund shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall us its
best efforts to make such net asset value per share available by 6 p.m. New York
time.
1.8. The Fund agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Fund shares will be used only for the purposes of funding the Contracts and
Accounts listed in Schedule A, as amended from time to time.
1.9. The Fund and the Company agree that they shall amend any provision
of this Agreement to the extent that it is inconsistent with any condition
imposed by the SEC in the Exemptive Order.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Fund shall prepare and be responsible for filing with the SEC
and any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Fund.
The Fund shall bear the cost of registration and qualification of its shares,
preparation and filing of the documents listed in this section 2.1 and all taxes
to which an issuer is subject on the issuance and transfer of its shares.
<PAGE>
2.2. At the option of the Company, the Fund or the Distributor shall
either (i) provide the Company with as many copies of the Fund's or the relevant
Portfolio's current prospectus, statement of additional information, annual
reports, semi-annual reports and other shareholder communications, including any
amendments or supplements to any of the foregoing ("Fund Documents"), as the
Company shall reasonably request; or (ii) provide the Company with a camera
ready copy of such documents in a form suitable for printing. The Fund or the
Distributor shall provide the Company with a copy of the Fund's statement of
additional information in a form suitable for duplication by the Company. The
Fund shall provide the Company with copies of any Fund-sponsored proxy materials
in such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3. The Fund shall bear the costs of printing and distributing Fund
Documents and any Fund-sponsored proxy-materials to existing Contract owners
whose Contracts are funded by the Fund's shares. The Company shall bear the
costs of printing and distributing the Fund Documents to prospective purchasers
of Contracts for which the Fund is serving or is to serve as an investment
vehicle. With respect to any prospectuses of the Portfolios that are printed in
combination with any one or more Contract prospectus (the "Prospectus Booklet"),
the costs of printing Prospectus Booklets for distribution to existing Contract
owners shall be prorated to the Fund based on (a) the ratio of the number of
pages of the prospectuses for the Portfolios included in the Prospectus Booklet
to the number of pages in the Prospectus Booklet as a whole; and (b) the ratio
of the number of Contract owners with Contract value allocated to the Portfolios
to the total number of Contract owners; 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 Contracts not
funded by the Portfolios. The Company shall bear the costs of distributing proxy
materials (or similar materials such as voting solicitation instructions) that
are not sponsored by the Fund to Contract owners. The Company assumes sole
responsibility for ensuring that all such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 (a) The Company agrees and acknowledges that the Fund's manager, J.
& W. Seligman & Co. Incorporated ("Seligman"), is the sole owner of the name and
mark "Seligman" and that all use of any designation comprised in whole or part
of Seligman (a "Seligman Mark") under this Agreement shall inure to the benefit
of Seligman. Except as provided in section 2.5, the Company shall not use any
Seligman Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of
Seligman. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Seligman Mark(s) as soon as reasonably practicable.
(b) The Fund and the Distributor agree and acknowledge that
the Company and its affiliates are the sole owner or owners of the name and the
mark "Merrill Lynch" and that all use of any designation comprised in whole or
part of Merrill Lynch (a "Merrill Lynch Mark") under this Agreement shall inure
to the benefit of Merrill Lynch. Except as provided in section 2.5, neither the
Fund nor the Distributor shall use any Merrill Lynch Mark on its own behalf or
<PAGE>
on behalf of the Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating to the Accounts or
Contracts without the prior written consent of Merrill Lynch, subject to the
last sentence of this Section 2.4(b). Upon termination of this Agreement for any
reason, the Fund and the Distributor shall cease all use of any Merrill Lynch
Mark(s) as soon as reasonably practicable, subject to the last sentence of this
Section 2.4(b). Nothing in this Section 2.4(b) shall prohibit the Distributor
from using any Merrill Lynch Mark in any documents or materials to the extent
that such use is permitted under any other agreement by and between the
Distributor and any affiliate of the Company or has been authorized by any such
affiliate of the Company.
2.5. (a) The Company shall furnish, or cause to be furnished, to
the Fund or the Distributor a copy of each Contract prospectus or statement of
additional information in which the Fund or Seligman is named prior to the
filing of such document with the SEC. The Company shall furnish, or shall cause
to be furnished, to the Fund or its designee, each piece of advertising, sales
literature or other promotional material in which the Fund, the Portfolios or
Seligman is named, at least ten Business Days prior to its use. No such material
shall be used if the Fund or the Distributor reasonably objects to such use
prior to such use.
(b) The Distributor will provide to the Company, within
fifteen (15) Business Days after the end of a calendar quarter, or as soon
thereafter as is reasonably practicable, the following information with respect
to each Portfolio as of the last day of such calendar quarter: the Portfolio's
ten largest portfolio holdings (based on the percentage of the Portfolio's net
assets); the five industry sectors in which the Portfolio's investments are most
heavily weighted; and year-to-date SEC standardized performance data. In
addition, the Distributor agrees to provide to the Company, within fifteen (15)
Business Days after a request is submitted to the Distributor by the Company,
the following information with respect to each Portfolio, each as of the date or
dates specified in such request: net asset value and net asset value per Share.
The Distributor acknowledges that such information may be furnished to the
Company's internal or independent auditors and to the insurance departments of
the various jurisdictions in which the Company does business. The information
referred to in this Section 2.5(b) will only be used in Company advertisements,
sales literature or other promotional material in accordance with Section
2.5(a).
(c) The Distributor shall furnish, or cause to be furnished,
to the Company a copy of each Fund or Portfolio prospectus or statement of
additional information in which the Company is named prior to the filing of such
document with the SEC. The Distributor shall furnish, or shall cause to be
furnished, to the Company each piece of advertising, sales literature or other
promotional material in which the Company is named, at least ten Business Days
prior to its use. No such material shall be used if the Company reasonably
objects to such use prior to such use.
2.6. The Company shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund or Seligman in
connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Fund shares (as such registration statement
<PAGE>
and prospectus may be amended or supplemented from time to time), reports of the
Fund, Fund-sponsored proxy statements, or in any advertisements, sales
literature or other promotional material approved by the Fund or the
Distributor, except as required by legal process or regulatory authorities or
with the written permission of the Fund or the Distributor.
2.7. Neither the Fund nor the Distributor shall give any information or
make any representations or statements on behalf of the Company, or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company for distribution including advertisements, sales
literature or other promotional materials, except as required by legal process
or regulatory authorities or with the written permission of the Company.
2.8. 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 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.
2.9. 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 Distributor any complaints received from the
Contract owners pertaining to the Fund or the Portfolios.
2.10. The Fund 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 Fund's registration statement, particularly any 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 its prospectus or
registration statement, in an orderly manner.
2.11. For purposes of this Article II, 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, or to the
Company, as the case may be: 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
<PAGE>
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees of
the Company, and registration statements, prospectuses, SAIs, shareholder
reports, proxy materials, and any other communications distributed or made
generally available to customers or the public with regard to the Fund.
2.12. The Distributor shall adopt and implement procedures reasonably
designed to ensure that information concerning the Company, any of its
affiliates, or the Contracts which is intended only for use only by brokers or
agents selling the shares (I.E., information that is not intended for
distribution to shareowners or prospective shareowners) is so used, and neither
the Company nor any of its affiliates shall be liable for any losses, damages,
or expenses relating to the improper use of such broker only materials.
2.13. The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Fund which is intended only
for use by brokers or agents selling the Contracts (I.E., information that is
not intended for distribution to Contract owners or prospective Contract owners)
is so used, and neither the Fund nor the Distributor shall be liable for any
losses, damages, or expenses relating to the improper use of such broker only
materials. The parties hereto agree that this section is not intended to
designate or otherwise imply that the Company is an underwriter or distributor
of the Fund's shares.
2.14. The Fund hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which Contracts are offered disclosure
regarding the potential risks of mixed- and shared-funding.
2.15. So long as, and to the extent that the SEC interprets the 1940
Act to require pass-through voting privileges for variable
policyowners, the Company will provide pass-through voting
privileges to owners of policies whose cash values are
invested, through the Accounts, in shares of the Fund. The
Fund shall require all Participating Insurance Companies to
calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate
voting privileges in the manner established by the Fund. With
respect to each Account, the Company will vote shares of the
Fund held by the Account and for which no timely voting
instructions for policyowners are received as well as shares
it owns that are held by that Account, in the same proportion
as those shares for which voting instructions are received.
Subject to applicable law, the Company and its agents will in
no way recommend or oppose or interfere with the solicitation
of proxies for Fund shares held by Contract owners without the
prior written consent of the Fund, which consent may be
withheld in the Fund's sole discretion.
2.16 The Company shall establish and disclose to Contract owners a
reasonable policy designed to discourage frequent and
disruptive purchases and redemptions of Fund shares by
Contract owners and shall cooperate with the Fund to minimize
the impact on the Fund of such transactions.
<PAGE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of
Arkansas and that it has legally and validly established each Account as a
segregated asset account under such law on the date set forth in Schedule A.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each 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.
3.3. The Company represents that it has full power and authority under
applicable law and has taken all actions necessary, to enter into this
Agreement. The Company represents and warrants that the Contracts will be
registered under the 1933 Act prior to any issuance or sale of the Contracts;
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
3.4. The Fund represents and warrants that it is duly organized and
validly existing under the laws of the State of Maryland.
3.5. The Fund represents and warrants that the Fund shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Fund shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Fund shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall make notice or other filings in
accordance with the laws of the various states only if and to the extent deemed
necessary by the Fund.
3.6. The Fund represents that it has full power and authority under
applicable law and has taken all actions necessary, to enter into this
Agreement.
3.7. The Distributor represents and warrants that it is duly organized
and validly existing under the laws of the State of Delaware.
3.8. The Distributor represents that it has full power and authority
under applicable law and has taken all actions necessary, to enter into this
Agreement.
3.9. The Fund and the Distributor represent that the Fund's investment
policies, fees, and expenses are and shall at all times remain in compliance
with applicable state securities laws, if any. The Fund and the Distributor
represent that their respective operations are and shall at all times remain in
material compliance with applicable state securities laws, if any. The Fund and
Distributor also represent that the Fund or the Distributor, as the case may be,
will comply with
<PAGE>
any state insurance law restrictions, as provided in writing by the Company
to the Fund or the Distributor, as the case may be, including the furnishing
of 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.
3.10. The Fund will invest its assets in such a manner as to ensure
that the Contracts will be treated as 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
Portfolio has complied 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 Section 3.7 by the Fund, it will (a) take all
reasonable steps to 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 Section 1.817-5.
3.11. 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
use its best efforts to 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).
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that the Fund's shares may be made
available for investment to other Participating Insurance Companies and
qualified pension and retirement plans ("Qualified Plans"). In such event, the
Directors will monitor the Fund for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies and of Qualified Plans. 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 Directors shall promptly inform the Company
if they determine that an irreconcilable material conflict exists and the
implications thereof.
4.2. The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Directors. The Company will assist the
Directors in carrying out their
<PAGE>
responsibilities under the Exemptive Order by providing the Directors with all
information reasonably necessary for the Directors to consider any issues raised
including, but not limited to, information as to a decision by the Company to
disregard Contact owner voting instructions.
4.3 If it is determined by a majority of the Directors, or a majority
of its disinterested Directors, that a material irreconcilable conflict exists
that affects the interests of Contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its expense and to the extent reasonably practicable (as determined
by the Directors) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (i) withdrawing the
assets allocable to some or all of the 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 of whether
or not 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., variable annuity contract owners or variable life insurance contract
owners that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (ii) 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 affected Account if
requested by the Fund's Directors, terminate this Agreement with respect to such
Account within six months after the Directors inform the Company in writing that
it has 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 Directors. Until the end of
such 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
affected Account's investment in the Fund and, if requested by the Fund's
Directors, terminate this Agreement with respect to such Account within six
months after the Directors inform 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 Directors. Until the end of such 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.
4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of
<PAGE>
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Directors determine 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 Directors 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
Directors.
4.7. The Company and Seligman shall at least annually submit to the
Directors such reports, materials or data as the Directors may reasonable
request so that the Directors may fully carry out the duties imposed upon them
by the Exemptive Order, and said reports, materials and data shall be submitted
more frequently if deemed appropriate by the Directors.
4.8. 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 Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then 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.
ARTICLE V.
INDEMNIFICATION
5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Fund, the Distributor, and each of their Directors,
officers, employees and agents and each person, if any, who controls the Fund or
the Distributor within the meaning of Section 15 of the 1933 Act (collectively,
the "Seligman Indemnified Parties" for purposes of this Article V) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses"), to which the Seligman Indemnified Parties
may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in any advertising, sales literature or other
promotional literature generated or approved by the Company on behalf
of the Contracts or Accounts (or any amendment or supplement to any of
the foregoing) (collectively, "Company Documents" for the purposes of
this Article V), 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 indemnity shall not apply as to any Seligman
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was
<PAGE>
accurately derived from written information furnished to the Company by
or on behalf of the Fund or the Distributor for use in Company
Documents or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Fund Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, or subject to its
authorization or supervisions with respect to the sale or acquisition
of the Contracts or Fund shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Fund Documents
as defined in Section 5.2(a) 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 in reliance upon and accurately derived
from written information furnished to the Fund or the Distributor by or
on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) 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.
5.2 INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act (collectively, the "Company Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Fund) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Company Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses:
(a) 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 Fund (or any amendment or
supplement thereto), (collectively, "Fund Documents" for the purposes
of this Article V), 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 indemnity shall not apply as to any
Company Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Fund or the
Distributor by or on behalf of the Company for use in Fund Documents or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
<PAGE>
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Fund or
persons under its control, or subject to its authorization or
supervision with respect to the sale or acquisition of the Contracts or
Fund shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading if such statement or omission was made
in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Fund; or
(d) arise out of or result from any failure by the Fund to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund.
5.3 INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to
indemnify and hold harmless each of the Company Indemnified Parties against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor) or expenses (including
the reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Company Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in any
advertising, sales literature or other promotional literature generated
or approved by the Fund or the Distributor on behalf of the Fund or any
of the Portfolios (collectively, "Fund Sales Documents" for the
purposes of this Article V), 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 indemnity shall not apply as
to any Company Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the Fund or
the Distributor by or on behalf of the Company for use in Fund Sales
Documents or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Distributor
or persons under its control, or
<PAGE>
subject to its authorization or supervision with respect to the sale or
acquisition of the Contracts or Fund shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading if such statement or omission was made
in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Distributor; or
(d) arise out of or result from any failure by the Distributor
to provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Distributor.
5.3. Neither the Company, the Fund nor the Distributor shall be liable
under the indemnification provisions of sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against a Seligman Indemnified Party
or a Company Indemnified Party (collectively, the "Indemnified Parties") that
arise from such Indemnified Party's willful misfeasance, bad faith or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
5.4. Neither the Company, the Fund nor the Distributor shall be liable
under the indemnification provisions of sections 5.1 or 5.2, as applicable, with
respect to any claim made against any Indemnified Party unless such Indemnified
Party shall have notified the other party in writing within a reasonable time
after the summons, or other first written notification, giving information of
the nature of the claim shall have been served upon or otherwise received by
such Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent), but
failure to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of sections 5.1 and 5.2.
5.5. In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified 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>
5.6 The obligations imposed on the Fund and the Distributor pursuant
to sections 5.2 shall be several obligations of the Fund and the Distributor,
respectively.
ARTICLE VI.
TERMINATION
6.1 This Agreement may be terminated by either party:
(a) for any reason by six months' advance written notice delivered to
the other party; or
(b) by the Company by written notice to the Fund and the Distributor
based upon the Company's determination that shares of the Fund
are not reasonably available to meet the requirements of the
Contracts; or
(c) by the Company by written notice to the Fund and the Distributor
in the event shares of any of the Portfolios 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) by the Fund or the Distributor 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; provided, however, that the Fund or the Distributor
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
(e) by the Company in the event that formal administrative proceedings
are instituted against the Fund or the Distributor 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 Fund or the Distributor to perform
its obligations under this Agreement; or
(f) by the Company by written notice to the Fund and the Distributor
with respect to any 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 3.10 and 3.11
hereof, or if the Company reasonably believes that such Portfolio
may fail to so qualify or comply; or
<PAGE>
(g) by either the Fund or the Distributor by written notice to the
Company, if either one or both of the Fund or the Distributor
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
(h) by the Company by written notice to the Fund and the Distributor,
if the Company shall determine, in its sole judgment exercised in
good faith, that the Fund or the Distributor 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) by the Company upon any substitution of the shares of another
investment company or series thereof for shares of a 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 the Distributor of the date of substitution; or
(j) by any party in the event that the Fund's Board of Directors
determines that a material irreconcilable conflict exists as
provided in Article V; or
(k) at the option of any party upon another party's failure to cure a
material breach of any provision of this Agreement within 30 days
after written notice thereof.
6.2. Notwithstanding any termination of this Agreement pursuant to
Section 6.2 (other than a termination pursuant to Section 6.2(j)), the Fund
shall, at the option of the Company, continue to make available additional
shares of the Fund (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement (the "Initial Termination Date"), provided that the Company
continues to pay the costs set forth in section 2.3. This continuation shall
extend to the later of the date as of which an Account owns no shares of the
affected Portfolio or a date six months following the Initial Termination Date,
except that the Company may, by written notice, adjust said six month period in
the case of a termination made at its option.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.15 shall survive the
termination of this Agreement as long as shares of the Fund are held on behalf
of the Contract owners in accordance with section 6.2.
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 in writing
to the other party.
<PAGE>
If to the Fund:
100 Park Avenue
New York, New York 10017
Attention: General Counsel, Law & Regulation
If to the Company:
800 Scudders Mill Road - PCC 2I
Plainsboro, New Jersey 08536
Attention: General Counsel
ARTICLE VIII.
MISCELLANEOUS
8.1. 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.
8.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 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.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of New York. Each
party hereto unconditionally submits to the jurisdiction of any New York state
court or federal court of the United States sitting in New York City, and any
appellate court thereof, in any action or proceeding arising out of or relating
to this Agreement.
8.5 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 Director, officer, agent or holder of shares of
beneficial interest of the Fund shall be personally liable for any such
liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
National Association of Securities Dealers 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.
<PAGE>
8.7. 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.
8.8. The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
8.11 This Agreement constitutes the entire contract between the parties
relating to the subject matter hereof and supersedes any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Seligman Portfolios, Inc.
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
Seligman Advisors, Inc.
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
Merrill Lynch Life Insurance Company
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Names of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- --------------------
Merrill Lynch Life Variable Annuity Merrill Lynch Retirement Power
Separate Account A - 8/6/91
<PAGE>
Exhibit 8(y)
Form of Participation Agreement Between Van Kampen Life Investment Trust and
Merrill Lynch Life Insurance Company
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
AND
MERRILL LYNCH LIFE INSURANCE COMPANY
DATED AS OF
[ ], 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. Fund Shares 4
ARTICLE II Representations and Warranties 6
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 7
ARTICLE IV. Sales Material and Information 9
ARTICLE V Reserved 10
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 12
ARTICLE IX. Applicable Law 16
ARTICLE X. Termination 16
ARTICLE XI. Notices 18
ARTICLE XII. Foreign Tax Credits 19
ARTICLE XIII. Miscellaneous 19
SCHEDULE A Separate Accounts and Contracts 22
SCHEDULE B Participating Life Investment Trust Portfolios 23
SCHEDULE C Proxy Voting Procedures 24
2
<PAGE>
PARTICIPATION AGREEMENT
Among
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
and
MERRILL LYNCH LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the [ ] day of [ ], 2000 by
and among MERRILL LYNCH LIFE INSURANCE COMPANY (hereinafter the "Company"), a
Arkansas corporation, on its own behalf and on behalf of each separate account
of the Company set forth on Schedule A hereto as may be amended from time to
time (each such account hereinafter referred to as the "Account"), and VAN
KAMPEN LIFE INVESTMENT TRUST (hereinafter the "Fund"), a Delaware business
trust, VAN KAMPEN FUNDS INC. (hereinafter the "Underwriter"), a Delaware
corporation, and VAN KAMPEN ASSET MANAGEMENT INC. (hereinafter the "Adviser"), a
Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to enter
into participation agreements with the Fund and the Underwriter (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 19, 1990 (File No. 812-7552), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act") and Rules 6e-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 product separate accounts of both affiliated
and unaffiliated life insurance companies (hereinafter the "Shared Funding
Exemptive Order"); and
3
<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"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Fund; and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a
member in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Underwriter is authorized to sell such shares to each such Account at net
asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Underwriter and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund and the Underwriter agree to make available for purchase
by the Company shares of the Portfolios and shall execute orders placed for each
Account on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Fund and Underwriter for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order by 11:00 a.m.
Eastern Standard time on the next following Business Day. Notwithstanding the
foregoing, the Company shall use its best efforts to provide the Fund with
notice of such orders by 10:15 a.m. Eastern Standard 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 Securities and Exchange Commission, as set
forth in the Fund's prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
4
<PAGE>
1.2. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies for their Variable Insurance
Products. No shares of any Portfolio will be sold to the general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
which afford the Company substantially the same protections currently provided
by Sections 2.1, 2.4, 2.9, 3.4 and Article VII of this Agreement is in effect to
govern such sales.
1.4. The Fund and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of 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 from each Account and receipt
by such designee shall constitute receipt by the Fund; provided that the
Underwriter receives notice of such request for redemption on the next following
Business Day in accordance with the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the Company,
under which amounts may be invested in the Fund are listed on Schedule A
attached hereto and incorporated herein by reference, as such Schedule A may be
amended from time to time by mutual written agreement of all of the parties
hereto. The Company will give the Fund and the Underwriter sixty (60) days
written notice of its intention to make available in the future, as a funding
vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on the next Business Day
at 4:00 p.m. Eastern Standard time after an order to purchase Portfolio shares
is made in accordance with the provisions of Section 1.1 hereof. Payment shall
be in federal funds transmitted by wire. In the event of net redemptions, the
Portfolio shall pay the redemption proceeds in federal funds transmitted by wire
on the next Business Day at 4:00 p.m. Eastern Standard time after an order to
redeem Portfolio shares is made in accordance with the provisions of Section 1.4
hereof. Notwithstanding the foregoing, if the payment of redemption proceeds on
the next Business Day would require the Portfolio to dispose of Portfolio
securities or otherwise incur substantial additional costs, and if the Portfolio
has determined to settle redemption transactions for all shareholders on a
delayed basis, proceeds shall be wired to the Company within five (5) days and
the Portfolio shall notify in writing the person designated by the Company as
the recipient for such notice of such delay by 4:00 p.m. Eastern Standard time
on the same Business Day that the Company transmits the redemption order to the
Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Underwriter shall use its best efforts to furnish same day
notice by 6:30 p.m. Eastern Standard time (by wire or telephone, followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such dividends and capital gain distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such dividends and capital
gain distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
5
<PAGE>
1.9. The Underwriter shall make the closing net asset value per share
of each Portfolio available to the Company on a daily basis as soon as
reasonably practical after the closing net asset value per share is calculated
and shall use its best efforts to make such net asset value per share available
by 6:00 p.m. Eastern Standard time. In the event that Underwriter is unable to
meet the 6:00 p.m. time stated immediately above, then Underwriter shall provide
the Company with additional time to notify Underwriter of purchase or redemption
orders pursuant to Sections 1.1 and 1.4, respectively, above. Such additional
time shall be equal to the additional time that Underwriter takes to make the
closing net asset values available to the Company.
1.10. If Underwriter provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Fund shares purchased or redeemed to
reflect the correct net asset value per share. The determination of the
materiality of any net asset value pricing error shall be based on the SEC's
recommended guidelines regarding such errors. The correction of any such errors
shall be made at the Company level pursuant to the SEC's recommended guidelines.
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 the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued and sold in
compliance with all applicable federal and state laws and regulations. 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 each Account prior to any issuance or sale thereof as a
segregated asset account under the Arkansas Insurance Code and the regulations
thereunder and has registered or, prior to any issuance or sale of the
Contracts, will register and will maintain the registration of each Account as a
unit investment trust in accordance with and to the extent required by the
provisions of the 1940 Act and the regulations thereunder to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Fund and the Underwriter represent and warrant that Fund
shares sold pursuant to this Agreement shall be registered under the 1933 Act
and the regulations thereunder to the extent required by the 1933 Act, duly
authorized for issuance in accordance with the laws of the State of Delaware and
sold in compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940 Act
and the regulations thereunder to the extent required by the 1940 Act. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund.
2.3. The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that the Fund will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that each will notify the Company immediately upon having
a reasonable basis for believing that the Fund has ceased to so qualify or that
the Fund might not so qualify in the future.
6
<PAGE>
2.4. Subject to Section 2.3 and Article V!, the Company represents that
each Account is and will continue to be a "segregated account" under applicable
provisions of the Code and that each Contract is and will be treated as a
"variable contract" under applicable provisions of the Code and that it will
make every effort to maintain such treatment and that it will notify the Fund
immediately upon having a reasonable basis for believing that the Account or
Contract has ceased to be so treated or that they might not be so treated in the
future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a 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.
2.6. The Fund and the Distributor represent that the Fund's investment
policies, fees, and expenses are and shall at all times remain in compliance
with such applicable state securities law, if any, and such insurance laws as
the Company may notify the Fund in writing from time to time, and the Fund and
Distributor represent that their respective operations are and shall at all
times remain in material compliance with such applicable state securities laws
and with such insurance laws as the Company may notify the Fund in writing from
time to time to the extent required to perform this Agreement. The Fund and
Distributor agree that the Fund will use its best efforts to comply with any
applicable state insurance law restrictions, as provided in writing by the
Company to the Fund, which is required by state insurance law to enable the
Company to obtain the authority needed to issue the Contracts in any applicable
state. The Fund and Distributor agree to furnish such information, which is not
otherwise available to the Company, that is necessary and required by applicable
state insurance law to enable the Company to obtain the authority needed to
issue the Contracts in any applicable state.
2.7. The Fund and the Adviser represent that the Fund is duly organized
and validly existing under the laws of the State of Delaware and that the Fund
does and will comply in all material respects with the 1940 Act.
2.8. The Underwriter represents and warrants that it is and shall
remain duly registered under all applicable federal and state laws and
regulations and that it will perform its obligations for the Fund and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY
STATEMENTS; VOTING
3.1. The Fund shall provide the Company with as many printed copies of
the Portfolio's current prospectus and statement of additional information as
the Company may reasonably request. If requested by the Company in lieu of
providing printed copies the Fund shall provide camera-ready film or computer
diskettes containing the Portfolio's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Contracts and the prospectus for the Portfolios
printed together in one document or separately. The Company may elect to print
the prospectus for the Portfolios and/or its statement of
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additional information in combination with other fund companies' prospectuses
and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2., all expenses
of preparing, setting in type and printing and distributing Fund prospectuses
and statements of additional information shall be the expense of the Company.
For prospectuses and statements of additional information provided by the
Company to its existing owners of Contracts in order to update disclosure as
required by the 1933 Act and/or the 1940 Act, the cost of setting in type,
printing and distributing shall be borne by the Fund. If the Company chooses to
receive camera-ready film or computer diskettes in lieu of receiving printed
copies of the Portfolio's prospectus and/or statement of additional information,
the Fund shall bear the cost of typesetting to provide the Fund's prospectus
and/or statement of additional information to the Company in the format in which
the Fund is accustomed to formatting prospectuses and statements of additional
information, respectively, and the Company shall bear the expense of adjusting
or changing the format to conform with any of its prospectuses and/or statements
of additional information. In such event, the Fund will reimburse the Company in
an amount equal to the product of x and y where x is the number of such
prospectuses distributed to owners of the Contracts, and y is the Fund's per
unit cost of printing the Fund's prospectuses. The same procedures shall be
followed with respect to the Fund's statement of additional information. The
Fund shall not pay any costs of typesetting, printing and distributing the
Fund's prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and statements of additional information, which are
covered in Section 3.2(a) above) to shareholders in such quantity as the Company
shall reasonably require for distributing to Contract owners. The Fund shall not
pay any costs of distributing such proxy-related material, reports to
shareholders, and other communications to prospective Contract owners.
3.2(c). The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or distributing
any of the foregoing documents other than those actually distributed to existing
Contract owners.
3.2(d) The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
3.2(e) All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Underwriter, the Company or such other person as the Fund may
designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Contract Owners to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
8
<PAGE>
(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 Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section 16(c)
of the 1940 Act (although the Fund is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund, the Underwriter or their designee, each piece of sales literature or other
promotional material prepared by the Company or any person contracting with the
Company in which the Fund, the Adviser or the Underwriter is named, at least
seven Business Days prior to its use. No such material shall be used if the
Fund, the Adviser, the Underwriter or their designee reasonably objects to such
use within seven Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the Company
shall 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 Fund prospectus, as such registration statement or Fund prospectus
may be amended or supplemented from time to time, or in reports to shareholders
or proxy statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee, except with the permission of the
Fund or its designee.
4.3. The Fund shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material prepared by the Fund in which the Company or its Accounts, are named at
least seven Business Days prior to its use. No such material shall be used if
the Company or its designee reasonably objects to such use within seven Business
Days after receipt of such material.
4.4. Neither the Fund nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement or prospectus may be amended or
9
<PAGE>
supplemented from time to time, or in published reports or solicitations for
voting instruction for each 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 Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Fund which is intended only
for use by brokers or agents selling the Contracts (i.e. information that is not
intended for distribution to contract owners or prospective contract owners) is
so used, and neither the Fund nor the Underwriter shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials. The parties hereto agree that this section is not intended to
designate or otherwise imply that the Company is an underwriter or distributor
of the Fund's shares.
4.6 The Fund and Underwriter shall adopt and implement procedures
reasonably designed to ensure that information concerning the Company which is
intended only for use by brokers or agents selling the shares (i.e. information
that is not intended for distribution to shareowners or prospective shareowners)
is so used, and neither the Fund nor the Underwriter shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials. The parties hereto agree that this section is not intended to
designate or otherwise imply that the Company is an underwriter or distributor
of the Fund's shares.
4.7. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.8. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in an Account or Contract, contemporaneously with the filing of such document
with the Securities and Exchange Commission or other regulatory authorities.
4.9. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: 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, statements of additional information, shareholder
reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1 The Adviser will maintain the assets of The Fund in compliance with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such
10
<PAGE>
Section or Regulations. In the event the Fund ceases to so qualify, the
Adviser will take all reasonable steps (a) to notify Company of such event
and (b) to adequately diversify the Fund so as to achieve compliance within
the grace period afforded by Regulation 817-5.
6.2 The Fund shall provide the Company or its designee with reports
certifying compliance with Section 817(h) diversification and Subchapter M
qualification requirements on a quarterly basis.
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 investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract owners and variable life insurance contract owners;
or (f) a decision by a Participating Insurance Company 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 will report any potential or existing material
irreconcilable conflict of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever contract
owner voting instructions are disregarded.
7.3. 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 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 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 policy
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. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
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 affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); 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. No charge or penalty will be
11
<PAGE>
imposed as a result of such withdrawal. The Company agrees that it bears the
responsibility to take remedial action in the event of a Board determination of
an irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests of
Contract owners.
7.5. For purposes of Sections 7.3 through 7.4 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 through 7.4 to
establish a new funding medium for the 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.
7.6. 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) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then 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.
7.7 Each of the Company and the Adviser shall at least annually submit
to the Board such reports, materials or data as the Board may reasonably request
so that the Board may fully carry out the obligations imposed upon them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. All reports received by the Board of potential or existing conflicts,
and all Board action with regard to determining the existence of a conflict,
notifying Participating Insurance Companies of a conflict, and determining
whether any proposed action adequately remedies a conflict, shall be properly
recorded in the minutes of the Board or other appropriate records, and such
minutes or other records shall be made available to the Securities and Exchange
Commission upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund, the
Underwriter and each member of their respective Board and officers and each
person, if any, who controls the Fund within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
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
Fund's shares or the Contracts 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 Contracts or contained in the Contracts or
sales literature 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
12
<PAGE>
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 or prospectus for the
Contracts or in the Contracts or sales literature (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 or sales literature of the Fund
not supplied by the Company, or persons under its
control and other than statements or representations
authorized by the Fund or the Underwriter) or
unlawful conduct of the Company or persons under its
control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or
sales literature 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 statement
or statements therein not misleading, if such a
statement or omission was made in reliance upon and
in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
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 the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense thereof. 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.
13
<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
this Agreement, the issuance or sale of the Fund shares or the Contracts, or the
operation of the Fund.
8.2. INDEMNIFICATION BY UNDERWRITER
8.2(a). The Underwriter agrees, with respect to each Portfolio that it
distributes, 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 Underwriter) 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 Fund's shares that it distributes or
the Contracts 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 prospectus
or sales literature 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 Fund
or the Underwriter by or on behalf of the Company for
use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Portfolio 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 or sales literature for the
Contracts not supplied by the Fund, the Underwriter
or persons under their respective control and other
than statements or representations authorized by the
Company) or unlawful conduct of the Fund or
Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts
or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or
sales literature 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 and in conformity with
information furnished to the Company by or on behalf
of the Fund or the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the
materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the
14
<PAGE>
Underwriter; as limited by and in accordance with the
provisions of Section 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter 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 or the operation of each Account.
8.3. INDEMNIFICATION BY THE ADVISER
8.3(a). The Adviser agrees to 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 (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.3) 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, 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 operations of the
Adviser or 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 prospectus
or sales literature 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, the Fund or the Underwriter by or on behalf
of the Company for use in the registration statement
or prospectus for the Fund or in sales literature (or
any
15
<PAGE>
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or
Portfolio 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 or sales literature for the
Contracts not supplied by the Fund, the Adviser or
persons under its control and other than statements
or representations authorized by the Company) or
unlawful conduct of the Fund, the Adviser or persons
under their control, with respect to the sale or
distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or
sales literature 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 and in conformity with
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 Adviser to
provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the 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, including
without limitation any failure by the Fund to comply
with the conditions of Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.3(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 Parties, 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.
8.3(d). The Company agrees to promptly notify the Adviser 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 each Account, or the sale or
acquisition of shares of the Adviser.
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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 State of Delaware.
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
Securities and Exchange Commission 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 continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio
based upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company, said
termination to be effective ten (10) days after receipt of
notice; or
(c) termination by the Company by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio
in the event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment medium of the Contracts issued or to
be issued by the Company. The terminating party shall give
prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio
in the event that such Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision; or
(e) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund, the Adviser or the
Underwriter by written notice to the Company, if either one or
more of the Fund, the Adviser or the Underwriter, shall
determine, in its or their sole judgment exercised in good
faith, that the Company and/or their affiliated companies 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, provided that the Fund, the Adviser or the
Underwriter will give the Company sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Fund, the Adviser or the
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Underwriter shall continue to apply on the 60th day since
giving of such notice, then such 60th day shall be the
effective date of termination; or
(g) termination by the Company by written notice to the Fund,
the Adviser and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good faith, that
either the Fund, the Adviser, the Underwriter, or their
affiliate companies 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, provided that the Company will give the
Fund, the Adviser and the Underwriter sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Fund, the Adviser or
the Underwriter and any other changes in circumstances since
the giving of such notice, the determination of the Company
shall continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund, the Adviser or the Underwriter by
written notice to the Company, if the Company gives the Fund,
the Adviser and the Underwriter the written notice specified
in Section 1.5 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(h) shall be effective sixty (60) days
after the notice specified in Section 1.5 was given; or
(i) termination by any party upon the other party's breach of
any representation in Section 2 or any material provision of
this Agreement, which breach has not been cured to the
satisfaction of the terminating party within thirty (30) days
after written notice of such breach is delivered to the Fund
or the Company, as the case may be;
(j) termination by the Fund, Adviser or Underwriter by written
notice to the Company in the event an Account or Contract is
not registered or sold in accordance with applicable federal
or state law or regulation, or the Company fails to provide
pass-through voting privileges as specified in Section 3.4;
(k) termination by the Fund, Underwriter or 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 operation of any Account, or
the purchase of the Fund's shares; provided, however, that the
Fund, Underwriter or Adviser 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;
(l) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund,
Underwriter or Adviser by the NASD, the SEC, or any relevant
state securities or insurance department or any other relevant
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 Fund, Underwriter or
Adviser to perform its obligations under this Agreement; or
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(m) termination by the Company upon any substitution of the
shares of another investment company or series thereof for
share of a Portfolio of the Fund in accordance with the terms
of the Contracts, provided that the Company has given at 30
days prior written notice to the Fund, Underwriter and Adviser
of the date of filing of a substitution application with the
SEC.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund 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 such
further sale of Fund shares is proscribed by law, regulation or applicable
regulatory body, or unless the Fund determines that liquidation of the Fund
following termination of this Agreement is in the best interests of the Fund and
its shareholders. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the Fund,
redemption of investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing Contracts. 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.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, 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 90 days notice of its intention to do so.
ARTICLE XI. NOTICES
11.1 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:
Van Kampen Life Investment Trust
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: James J. Boyne
If to Underwriter:
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: James J. Boyne
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If to Adviser:
Van Kampen Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: James J. Boyne
If to the Company:
Merrill Lynch Life Insurance Company
800 Scudders Mill Road-PCC 2I
Plainsboro, NJ 08536
Attention: Edward W. Diffin, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
12.1. The Fund and Adviser agree to consult in advance with the Company
concerning whether any series of the Fund qualifies to provide a foreign tax
credit pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. Each of the
Company, Adviser and Underwriter acknowledges and agrees that, as provided by
Article 8, Section 8.1, of the Fund's Agreement and Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of the Fund and its
Portfolios shall not personally be bound by or liable for matters set forth
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder. A Certificate of Trust
referring to the Fund's Agreement and Declaration of Trust is on file with the
Secretary of State of Delaware.
13.2. 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 until such time as it may come into
the public domain without the express written consent of the affected party.
13.3. 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.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. 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.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit
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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.
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. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party (within the meaning of the Investment Advisers Act
of 1940, as amended) without the prior written consent of all parties hereto
13.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, upon the Fund's request, copies of the certain reports,
including but not limited to:
(a) the Company's annual statement (prepared
under statutory accounting principles) and annual
report (prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
after the request but in no event later than 90 days
after the end of each fiscal year;
(b) the Company's June 30th quarterly
statements (statutory), as soon as practical after
the request, but in no later than 45 days following
such period;
(c) any financial statement, proxy
statement, notice or report of the Company that may
be relevant to parties' interest in this Agreement,
sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
13.10 Except as otherwise expressly provided in this Agreement, neither
the Fund, Underwriter, Adviser, nor any affiliate thereof shall use any
trademark, trade name, service mark or logo of the Company or any of its
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without the Company's prior written consent, the granting of which shall
be at the Company's sole option.
13.11 Except as otherwise expressly provided in this Agreement, neither
the Company nor any of its affiliate shall use any trademark, trade name,
service mark or logo of the Company or any of its affiliates, or any variation
of any such trademark, trade name, service mark or logo, without the Fund's,
Underwriter's or Adviser's prior written consent, the granting of which shall be
at the Fund's, Underwriter's or Adviser's sole option.
13.12 The Fund agrees to provide to the Company, within fifteen (15)
Business Days after the end of a calendar month, the following information with
respect to each Portfolio set forth on Schedule A, each as of the last Business
Day of such calendar month: the Portfolio's ten largest portfolio holdings
(based on the percentage of the Portfolio's net assets); the five industry
sectors in which the Portfolio's investments are most heavily weighted; the
relative proportion of the Portfolio's net assets invested in equity, bond, and
cash instruments, respectively; and year-to-date SEC standardized performance
data. In addition, the Fund agrees to provide within fifteen (15) Business Days
after the end of a calendar quarter, the following information with respect to
each Portfolio set forth on Schedule A, each of the last Business Day of such
quarter: a market commentary from the portfolio manager of such Portfolio. Also,
the Fund agrees to provide the Company, within fifteen (15) Business Days after
a request is submitted to the Fund by the Company, the following information
with respect to each Portfolio set forth on Schedule A, each as of the date or
dates specified in such request; net asset value and net asset value per Share.
The Fund acknowledges that such information may be furnished to the Company's
internal or
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independent auditors and to the insurance departments of the various
jurisdictions in which the Company does business.
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 as of the date specified above.
MERRILL LYNCH LIFE INSURANCE COMPANY on behalf of itself and each of its
Accounts named in Schedule A hereto, as amended from time to time
By:
-----------------------------------------------
Name:
Title:
VAN KAMPEN LIFE INVESTMENT TRUST
By:
-----------------------------------------------
Stephen Boyd
Executive Vice President
VAN KAMPEN FUNDS INC.
By:
-----------------------------------------------
Patrick Woelfel
Senior Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By:
-----------------------------------------------
Stephen Boyd
President
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SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- -----------------------------------------------------------------------
Merrill Lynch Life Variable Annuity Merrill Lynch Retirement Power
Separate Account A [8/6/91] Form ML-VA-003
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SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
Emerging Growth Portfolio
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SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates.
This will be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, address and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to the Fund, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent shares)
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
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5. During this time, the Fund will develop, produce, and the Fund will pay
for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid
for by the Company). Contents of envelope sent to Customers by the
Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g.,
mutilated, illegible) of the procedure are "hand verified," (i.e.,
examined as to why they did not complete the system). Any questions on
those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
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12. The actual tabulation of votes is done in units (or equivalent shares)
which is then converted to shares. (It is very important that the fund
receives the tabulations stated in terms of a percentage and the number
of shares.) The Fund must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 A.M. Houston time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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