PARTICIPATION AGREEMENT
AMONG
VANGUARD VARIABLE INSURANCE FUND
AND
THE VANGUARD GROUP, INC.
AND
VANGUARD MARKETING CORPORATION
AND
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
THIS AGREEMENT, made and entered into as of the ____ day of
___________, 2002, by and among VANGUARD VARIABLE INSURANCE FUND (hereinafter
the "Fund"), a Delaware business trust, THE VANGUARD GROUP, INC. (hereinafter
the "Sponsor"), a Pennsylvania corporation, VANGUARD MARKETING CORPORATION
(hereinafter the "Distributor"), a Delaware corporation, and THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES (hereinafter the "Company"), a New York
corporation, on its own behalf and on behalf of each segregated asset account of
the Company named in Schedule A hereto as may be amended from time to time (each
such account hereinafter referred to as the "Account").
WHEREAS, the Fund was organized to act as the investment vehicle for
variable life insurance policies and variable annuity contracts to be offered by
separate accounts of insurance companies which have entered into participation
agreements with the Fund and the Sponsor (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio," and representing the interest
in a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
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WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated December 19, 1995 (File No. 812-7659),
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 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 life insurance companies that may or may not be affiliated with one
another and qualified pension and retirement plans; and
WHEREAS, the assets of each Portfolio of the Fund are managed by
several entities (the "Advisers"), each of which is duly registered as an
investment adviser under the federal Investment Advisers Act of 1940 and any
applicable state securities laws; and
WHEREAS, the Company has established or will establish one or more
Accounts to fund certain variable life insurance policies (the "Variable
Insurance Products"), which Accounts and Variable Insurance Products are
registered under the 1940 Act and the 1933 Act, respectively; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for each Account on Schedule A hereto, to set aside
and invest assets attributable to the Variable Insurance Products; and
WHEREAS, the Distributor is a wholly-owned subsidiary of the Sponsor,
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 of the Portfolios on behalf
of each Account to fund the Variable Insurance Products and the Sponsor is
authorized to sell such shares to the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Sponsor and the Distributor agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Sponsor and the Distributor agree to sell to the Company
those shares of the Portfolios of the Fund listed on Schedule B which each
Account orders. In the case of any such order received by the Fund or its
designee on any Business Day prior to the time the net asset value of shares of
the Fund is determined (the close of trading on the New York Stock Exchange,
generally 4:00 p.m. Eastern time) (the "market close"), the order shall be
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accorded a trade date on the Fund's accounting system that is the date of
receipt of the order by the Fund or its designee. In the case of any such order
received by the Fund or its designee on any Business Day after the market close,
the order shall be accorded a trade date on the Fund's accounting system that is
the next Business Day. For purposes of this Section 1.1, the Company shall be
the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 8:30 a.m. Eastern time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange ("NYSE") is open for trading and on which the Fund calculates its
net asset value pursuant to the rules of the SEC.
1.2 The Fund, subject to the provisions of Article IX of this
Agreement, agrees to make its shares available indefinitely for purchase at the
applicable net asset value per share by the Company and its Accounts on those
days on which the Fund calculates its net asset value pursuant to the rules of
the SEC and the Fund shall use its best efforts to calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to sell shares of any Portfolio to any person including, but not limited
to, the Company, 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.
Further, it is acknowledged and agreed that the availability of shares of the
Fund shall be subject to the Fund's then current prospectus and statement of
additional information, federal and state securities laws and applicable rules
and regulations of the SEC and the NASD.
1.3 The Fund, the Sponsor and the Distributor agree that shares of
the Fund will be sold only to Participating Insurance Companies and their
separate accounts. No shares of any Portfolio will be sold to the general
public.
1.4 The Fund, the Sponsor and the Distributor will not sell Fund
shares to any Participating Insurance Company or its separate account unless an
agreement containing a provision substantially the same as Section 2.4 of
Article II of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by an Account. In the case of any
such request for redemption received by the Fund or its designee on any Business
Day prior to the market close, the request shall be accorded a trade date on the
Fund's accounting system that is the date of receipt of the request by the Fund
or its designee. In the case of any such request for redemption received by the
Fund or its designee on any Business Day after the market close, or on any
non-Business Day, the request shall be accorded a trade date on the Fund's
accounting system that is the next Business Day. For purposes of this Section
1.5, the
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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 Fund receives notice of such request for redemption by
8:30 a.m. Eastern time on the next following Business Day. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day would
require the Fund to dispose of Portfolio securities or otherwise incur
substantial additional costs, the Fund may determine to settle one or more
redemption transactions on a delayed basis, in which case proceeds shall be
wired to the Company within seven (7) days and the Fund shall notify the Company
of such a delay by 3:00 Eastern time on the same Business Day that the Company
transmits the redemption order to the Fund. Furthermore, notwithstanding the
foregoing, the Fund reserves the right to suspend redemption privileges or pay
redemptions in kind, as disclosed in the Fund's prospectus or statement of
additional information. The Fund agrees that any redemption by the Company of
less than $_________ shall be paid in cash, and if the Company provides the Fund
with at least three Business Days' advance notice of any redemption in an amount
greater than or equal to $__________, the Fund will pay such redemption in cash.
The Fund agrees to treat the Company like any other shareholder in similar
circumstances in making these determinations.
1.6 The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus and the accompanying statement of
additional information.
1.7 With respect to payment of the purchase price by the Company and
of redemption proceeds by the Fund, the Company and the Fund shall net all
purchase and redemption orders on a given Business Day and shall transmit one
net payment for all of the Portfolios in accordance with Section 1.8 hereof.
1.8 In the event of net purchases, the Company shall pay for Fund
shares by 4:00 p.m. Eastern time on the next Business Day after an order to
purchase the shares is received by the Company in accordance with the provisions
of Section 1.1 hereof. In the event of net redemptions, the Fund shall pay the
redemption proceeds by 4:00 p.m. Eastern time on the next Business Day after an
order to redeem the shares is received by the Company in accordance with the
provisions of Section 1.5 hereof. If net redemption proceeds are not received by
4:00 p.m. Eastern time on the next Business Day, the Fund will reimburse the
Company for all costs reasonably incurred as a result of the delay, including
interest on the amount of the delayed redemption proceeds at the federal funds
"offered" rate as published by The Wall Street Journal. Payment shall be in
federal funds transmitted by wire. For purposes of Section 2.12, upon receipt by
the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
If the Company fails to pay for Fund shares as required by this Section 1.8,
then the Fund shall be entitled to redeem the shares to cover the cost. The
Company shall be responsible for any shortfall between the purchase and the
redemption; the Fund shall be entitled to retain any gain.
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1.9 Issuance and transfer of a Fund's shares will be by book entry
only. Stock 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. The Fund shall furnish to
the Company the CUSIP number assigned to each Portfolio of the Fund identified
in Schedule B hereto.
1.10 The Fund shall provide the Company with at least one week's
advance notice of the occurrence of any of the actions identified below, and
will furnish specific information regarding any such action (including the
dividend or capital gain distribution rate) in advance, as practicable, but at
the latest same day notice (in each case to a previously designated
representative of the Company by telephone, followed by e-mailed confirmation)
of any income, dividends or capital gain distributions on the Fund's shares. The
Company hereby elects to receive all such income, dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
dividends and distributions.
1.11 The Fund shall make the daily net asset value, dividend and
capital gain Information for each Portfolio available on a per share basis to
the Company as soon as reasonably practical after the information is calculated
(normally by 6:30 p.m. Eastern time) and shall use its best efforts to make such
net asset value per share available by 7:00 p.m. Eastern time on each Business
Day. Related to this obligation, the Fund shall provide a contact name or names
and telephone numbers of the persons responsible for providing daily net asset
value, dividend and capital gain information to the Company. In the event of an
error in the computation of the Fund's net asset value per share which, in
accordance with procedures adopted by the Fund's Board of Trustees consistent
with views expressed by the staff of the Securities and Exchange Commission
regarding appropriate error correction standards, as shall be in effect or
amended from time to time, requires adjustment to transactions previously
effected on behalf of an Account (a "Pricing Error"), Vanguard shall notify the
Company as soon as possible after discovery of the Pricing Error. Such
notification may be oral, but shall be confirmed promptly in writing. In such
event, Vanguard shall reimburse the Fund for any loss (without taking into
consideration any positive effect of such Pricing Error) and shall make
appropriate adjustments to the Accounts' accounts, which adjustments shall net
the impact of individual gains and losses; this will result in either a net
payment to an Account from Vanguard (in the event of net Account losses) or from
an Account to Vanguard (in the event of net Account gains). In addition, in the
event that the Pricing Error causes the Company to incur any direct costs for
re-processing accounts under an Account, such as preparing and mailing revised
statements, Vanguard shall reimburse the Company for all such reasonable costs
upon receipt from the Company of an invoice or other statement documenting such
costs in reasonable detail.
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ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company 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 each Account prior to any issuance or sale
thereof as a segregated asset account under Section ______ of the New York
Insurance Code; that it has and will maintain the capacity to issue all Variable
Insurance Products that may be sold; and that it is properly licensed, qualified
and in good standing to sell the Variable Insurance Products in all fifty states
and the District of Columbia.
2.2 The Company represents and warrants that the Variable Insurance
Products are registered under the 0000 Xxx.
2.3 The Company represents and warrants it has registered each
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as segregated investment accounts for the Variable Insurance
Products.
2.4 The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New York and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund, the
Distributor, or the Sponsor.
2.5 The Fund represents that it is qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain
qualification (under Subchapter M or any successor or similar provision) and
(ii) it will notify the Company immediately upon having a reasonable basis for
believing that it ceased to so qualify or that it might not so qualify in the
future. The Fund acknowledges that any failure to qualify as a Regulated
Investment Company will eliminate the ability of the subaccounts to avail
themselves of the "look through" provisions of Section 817(h) of the Code, and
that as a result the Variable Insurance Products will almost certainly fail to
qualify as endowment or life insurance contracts under Section 817(h) of the
Code.
2.6 The Company represents that the Variable Insurance Products will
be treated as endowment or life insurance contracts under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Sponsor immediately upon having a
reasonable basis for believing that the Variable Insurance Products have ceased
to be so treated or that they might not be so treated in the future.
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2.7 The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise.
2.8 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Sponsor represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of New York to the extent required to perform this Agreement.
2.9 The Distributor represents and warrants that it is duly
organized and has the authority to enter into this Agreement, and that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC and any necessary states. The Distributor further represents that it
will sell and distribute the Fund shares in accordance with the laws of the
State of New York and all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.10 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 and any applicable regulations
thereunder.
2.11 The Sponsor represents and warrants that the Advisers to the
Fund are, and the Sponsor shall use its best effort to cause the Advisers to
remain, duly registered in all material respects under all applicable federal
and state securities laws and to perform their obligations for the Fund in
compliance in all material respects with the laws of the State of New York and
any applicable state and federal securities laws.
2.12 The Fund and the Sponsor represent and warrant that all of
their trustees, directors, officers, employees, investment advisers, and other
individuals/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 required currently by Rule 17g-1 under the 1940 Act or other
applicable laws or regulations 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.
2.13 With respect to the Variable Insurance Products, which are
registered under the 1933 Act, the Company represents and warrants that:
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(a) AXA Advisors, LLC is the principal underwriter for each such
Account and any subaccounts thereof and is a registered
broker-dealer with the SEC under the 1934 Act;
(b) the shares of the Portfolios of the Fund are and will continue
to be the only investment securities held by the corresponding
subaccounts; and
(c) with regard to each Portfolio, the Company, if required by
law, on behalf of the corresponding subaccount, will:
(i) vote such shares held by it in the same proportion as
the vote of all other holders of such shares; and
(ii) refrain from substituting shares of another security
for such shares unless the SEC has approved such
substitution in the manner provided in Section 26 of
the 0000 Xxx.
2.14 The Fund represents that it 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
(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 SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
ARTICLE III. OFFERING DOCUMENTS AND REPORTS
3.1 The Fund, the Sponsor or their designee shall provide the
Company (at the Sponsor's expense) with as many copies of the Fund's current
prospectus as the Company may reasonably request. The Company shall provide a
copy of the Fund's prospectus to each Variable Insurance Product owner. If
requested by the Company in lieu thereof, the Fund or the Sponsor shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Fund's or the Sponsor'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 Variable
Insurance Products and the Fund's prospectus printed together in one document
(such printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the statement of
additional information for the Fund is available from the Sponsor (or in the
Fund's discretion, the prospectus shall state that the statement of additional
information is available from the Fund) and the Sponsor (or the Fund), at its
expense, shall print and provide such statement free of charge to the
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Company and to any owner of a Variable Insurance Product or prospective owner
who requests such statement.
3.3 The Fund, at its own expense, shall provide the Company with
copies of its reports to shareholders, other communications to shareholders,
and, if required by applicable law, proxy material and policy owner voting
instruction form, in such quantity as the Company shall reasonably require for
distributing to Variable Insurance Product owners. The Fund shall provide to the
Company the prospectuses and annual reports referenced in this Agreement within
fifteen (15) days prior to the Company's obligation to mail, and the Company
agrees to provide the Fund with advance notice of such date. If the documents
are not delivered to the Company within ten (10) days of the Company's
obligation to mail, the Fund shall reimburse the Company for any extraordinary
out-of-pocket costs (including, but not limited to, overtime for printing and
mailing).
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 in which the Fund, its Advisers or the Sponsor is named, at least ten
Business Days prior to its use. The Company may use such material in fewer than
ten Business Days if it receives the written consent of the Fund or its
designee. No such material shall be used if the Fund or its designee reasonably
objects to such use within ten Business Days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Variable Insurance Products other than the
information or representations contained in the registration statement or
prospectus for the Fund shares, as such registration statement and prospectus
may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional material
approved by the Fund or its designee or by the Sponsor, except with the
permission of the Fund or the Sponsor or the designee of either.
4.3 The Fund, Sponsor, Distributor or their designee shall furnish,
or shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company or an
Account is named at least ten Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within ten Business Days after receipt of such material.
4.4 The Fund, the Distributor and the Sponsor shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Variable Insurance Products other than the
information or representations contained in a prospectus for the Variable
Insurance Products, as such prospectus may be amended or supplemented from time
to time, or in published reports for each Account which
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are in the public domain or approved by the Company for distribution to Variable
Insurance Product owners, or in sales literature or other promotional material
approved by the Company or its designee, except with the permission of the
Company.
4.5 The Fund will provide to the Company at least one complete copy
of all registration statements, 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, prior to
or contemporaneously with the filing of each document with the SEC or other
regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy
of all prospectuses, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemption, requests
for no-action letters, and all amendments to any of the above, that relate to
the Variable Insurance Products or each Account, prior to or contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
4.7 The Company and the Fund shall also each promptly inform the
other of the results of any examination by the SEC (or other regulatory
authorities) that relates to the Variable Insurance Products, the Fund or its
shares, and the party that was the subject of the examination shall provide the
other party with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.8 The Fund and the Sponsor 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 prospectus for any Account. The Fund and
the Sponsor will cooperate with the Company so as to enable the Company to
solicit voting instructions from owners of Variable Insurance Products, to the
extent a solicitation is required by applicable law, or to make changes to its
prospectus in an orderly manner.
4.9 For purposes of this Article IV, the phrase "sales literature
and other promotional material" includes, but is not limited to, sales
literature (i.e., any written communication distributed or made generally
available to customers, including brochures, circulars, research reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published articles), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and prospectuses, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and Sponsor shall pay no fee or other compensation to
the Company
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under this Agreement. Nothing herein shall prevent the parties hereto from
otherwise agreeing to perform, and arranging for appropriate compensation for,
other services relating to the Fund and or to the Accounts.
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 fees and 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,
all taxes on the issuance or transfer of the Fund's shares.
5.3 The Fund shall bear the expenses of printing, and the Company
shall bear the expenses of distributing, the Fund's prospectus (including any
supplements thereto) to owners of Variable Insurance Products issued by the
Company, unless the Fund is required by applicable law to distribute the Fund's
prospectus to Variable Insurance Product owners, in which case the Fund shall
bear the expenses of such distribution. The Fund shall bear the expenses of
printing and distributing the Fund's proxy materials (to the extent such proxy
solicitation is required by law) and reports to owners of Variable Insurance
Products.
ARTICLE VI. DIVERSIFICATION
6.1 The Fund will at all times invest money from the Variable
Insurance Products in such a manner as to ensure that the Variable Insurance
Products will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund and the Sponsor represent and warrant that each Portfolio of the Fund will
meet the diversification requirements of Section 817(h) of the Code and Treasury
Regulation 1.817-5, relating to the diversification requirements for endowment
or life insurance contracts and any amendments or other modifications to such
Section or Regulations, as if those requirements applied directly to each such
Portfolio. In the event of a breach of this Article VI by the Fund, it will take
all reasonable steps (a) to notify Company of such breach and (b) to adequately
diversify, each Portfolio of the Fund so as to achieve compliance within the
grace period afforded by Regulation 817-5.
6.2 The Fund and the Sponsor represent that each Portfolio will
elect to be qualified as a Regulated Investment Company under Subchapter M of
the Code and they will maintain such qualification (under Subchapter M or any
successor or similar provision).
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ARTICLE VII. POTENTIAL CONFLICTS
Each Portfolio of the Fund offers its shares to insurance company
separate accounts that fund both annuity and life insurance contracts. Because
of differences in tax treatment or other considerations, the interest of various
owners of insurance products participating in the Fund might at some time be in
conflict. The Fund's Board of Trustees will monitor for any material conflicts
and determine what action, if any, should be taken.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification by the Company
(a) The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if
any, who controls the Fund within the meaning of Section 15 of the 1933
Act, the Sponsor and the Distributor (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 Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement or prospectus
for the Variable Insurance Products or contained in
the contract or policy or sales literature for the
Variable Insurance Products (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Fund, the Distributor
or the Sponsor for use in the registration statement
or prospectus for the Variable Insurance Products or
in the contract or policy sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Variable Insurance
Products or the Fund shares; or
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(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, or statements or representations made herein
by the Fund, the Distributor or the Sponsor) or
unlawful conduct of the Company or persons under its
control, with respect to the sale or distribution of
the Variable Insurance Products 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, or sales
literature of the Fund (or any amendment 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 statement or omission
was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or
(iv) result from any failure by the Company to provide the
services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any material breach of this Agreement by the
Company;
as limited by and in accordance with the provisions of Section 8.1(b)
and 8.1(c) hereof.
(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 obligations and duties under this Agreement or to the
Fund, whichever is applicable.
(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
13
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on a
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 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 a 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.
(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 Variable
Insurance Products or the operation of the Fund.
8.2 Indemnification by the Sponsor
(a) The Sponsor 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
1933Act (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
Sponsor) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related
to the sale or acquisition of the Fund's shares or the Variable
Insurance Products 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
14
reliance upon and in conformity with information
furnished to the Sponsor or Fund 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 thereto) or
otherwise for use in connection with the sale of the
Variable Insurance Products 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 for the
Variable Insurance Products not supplied by the
Sponsor or the Distributor or persons under their
control) or unlawful conduct of the Fund, the
Distributor, the Advisers or persons under their
control, with respect to the sale or distribution of
the Variable Insurance Products 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 or sales
literature covering the Variable Insurance Products
(or any amendment or supplement thereto), or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement or statements
therein not misleading, if such statement or
omission was made in reliance upon information
furnished to the Company by or on behalf of the
Fund, the Sponsor or the Distributor; or
(iv) result from any failure by the Sponsor or the Fund
to provide the services and furnish the materials
under the terms of this Agreement (including a
failure to comply with the diversification
requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Sponsor or the Fund in this Agreement or arise out
of or result from any other material breach of this
Agreement by the Sponsor or the Fund;
as limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
(b) The Sponsor 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
15
willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement or to the Company or the Accounts, whichever is applicable.
(c) The Sponsor 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
Sponsor 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 any such service on any designated
agent), but failure to notify the Sponsor of any such claim shall not
relieve the Sponsor 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 any case any such action
is brought against the Indemnified Parties, the Sponsor will be
entitled to participate, at its own expense, in the defense thereof.
The Sponsor also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Sponsor to such party of the Sponsor'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 Sponsor will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by each party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d) The Company agrees promptly to notify the Sponsor 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
Variable Insurance Products or the operation of each Account.
8.3 Indemnification by the Fund
(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, damages, liabilities
(including amounts paid in settlement with the written consent of the
Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law
or otherwise, insofar as such losses, claims damages, liabilities or
expenses (or action in respect thereof) or settlements resulting from
the gross negligence, bad faith or willful misconduct of the Board or
any member thereof, are related to the operations of the Fund and:
16
(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 to
comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b)
and 8.3(c) hereof.
(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 Sponsor or each Account, whichever is applicable.
(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
or 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
independently in connection with the defense thereof other than
reasonable costs of litigation.
(d) The Company and the Sponsor agree promptly to notify the
Fund 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
17
Variable Insurance Products, with respect to the operation of an
Account, or the sale or acquisition of shares of the Fund.
8.4 Indemnification by the Distributor
(a) The Distributor 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 8.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Sponsor) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related
to the sale or acquisition of the Fund's shares or the Variable
Insurance Products 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
Distributor or the Fund 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 thereto) or otherwise for
use in connection with the sale of the Variable
Insurance Products 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 for the
Variable Insurance Products not supplied by the
Distributor or persons under its control) or unlawful
conduct of the Fund, the Advisers or persons under
their control, with respect to the sale or
distribution of the Variable Insurance Products or
Fund shares; or
18
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus or sales
literature covering the Variable Insurance Products
(or any amendment or supplement thereto), or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement or statements therein
not misleading, if such statement or omission was
made in reliance upon information furnished to the
Company by or on behalf of the Fund or the
Distributor; or
(iv) result from any failure by the Distributor or the
Fund 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
Distributor or the Fund in this Agreement or arise
out of or result from any other material breach of
this Agreement by the Distributor of the Fund;
as limited by and in accordance with the provisions of Sections 8.4(b)
and 8.4(c) hereof.
(b) The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise
be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the
Company or the Accounts, whichever is applicable.
(c) The Distributor 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
Distributor 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 any such service on any
designated agent), but failure to notify the Distributor of any such
claim shall not relieve the Distributor 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 any
case any such action is brought against the Indemnified Parties, the
Distributor will be entitled to participate, at its own expense, in the
defense thereof. The Sponsor also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in
19
the action. After notice from the Distributor to such party of the
Distributor's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Distributor will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by each party independently in connection with the defense
thereof other than reasonable costs of investigation.
(d) The Company agrees promptly to notify the Distributor 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 Variable Insurance Products or the operation of each account.
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, and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1 Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60)
days' advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
and the Sponsor 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 Variable Insurance Products;
or
(c) termination by the Company by written notice to the Fund
and the Sponsor 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 media of the Variable
Insurance Products issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Sponsor with respect to any Portfolio in the event that such
Portfolio ceases to qualify
20
as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify (in the event of such
termination, the Company shall withdraw all assets allocable to the
separate accounts from the Portfolio and shall reinvest such assets in
a different investment medium, including, but not limited to, another
Portfolio of the Fund as soon as reasonably practicable after such
termination); or
(e) termination by the Company by written notice to the Fund
and the Sponsor with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements as specified
in Article VI hereof (in the event of such termination, the Company
shall withdraw all assets allocable to the separate accounts from the
Portfolio and shall reinvest such assets in a different investment
medium, including, but not limited to, another Portfolio of the Fund as
soon as reasonably practicable after such termination); or
(f) termination by the Fund, the Sponsor, or the Distributor
by written notice to the Company, if any of the Fund, the Sponsor, or
the Distributor shall determine, in its sole judgment exercised in good
faith, that the Company and/or its affiliated companies has suffered a
material adverse change in its business, operations, or financial
condition since the date of this Agreement or is the subject of
material adverse publicity; or
(g) termination by the Company by written notice to the Fund
and the Sponsor, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund, the Sponsor, or the
Distributor has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or
is the subject of material adverse publicity.
10.2 Notwithstanding any termination of this Agreement, the Fund
and the Sponsor shall, at the option of the Company, continue to make available
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Variable Insurance Products in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts.
10.3 The Company shall not redeem Fund shares attributable to the
Variable Insurance Products (as opposed to Fund shares attributable to the
Company's assets held in the Accounts) except (a) as necessary to implement
Variable Insurance Products owner initiated or approved transactions, or (b) as
required by state and/or federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a "Legally Required
Redemption"). Upon request, the Company will promptly furnish to
21
the Fund and the Sponsor the opinion of counsel for the Company (which counsel
shall be reasonably satisfactory to the Fund and the Sponsor) to the effect that
any redemption pursuant to clause (b) above is a Legally Required Redemption.
Furthermore, except in cases described in Sections 10.1(d) and 10.1(e) or where
permitted under the terms of the Variable Insurance Products, the Company shall
not prevent owners of Variable Insurance Products from allocating payments to a
Portfolio that was otherwise available under the Variable Insurance Products
without first giving the Fund or the Sponsor 90 days' notice of its intention to
do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Fund: Vanguard Variable Insurance Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
If to the Sponsor: The Vanguard Group, Inc.
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: R. Xxxxxxx Xxxxxx
If to the Distributor: Vanguard Marketing Corporation
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: R. Xxxxxxx Xxxxxx
If to the Company: The Equitable Life Assurance Society of the
United States
ARTICLE XII. MISCELLANEOUS
12.1 It is understood and stipulated that neither the shareholders
of any Portfolio nor the officers or trustees of the Fund shall be personally
liable hereunder.
12.2 Subject to the requirements of the legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Variable Insurance Products and all
information reasonably identified as confidential in
22
writing by any other party hereto and, except as permitted by this Agreement,
shall not (unless it has obtained the express written consent of the affected
party) disclose, disseminate or utilize such names and addresses and other
confidential information until such time as it may 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 this
Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each 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.
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 cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's Annual Financial Statement on Statutory
Basis as soon as practical and in any event within 90 days after the
end of each fiscal year; and
(b) any registration statement, prospectus or other
materials distributed in connection with the sale of the Variable
Insurance Products to the extent such registration statement,
prospectus or other materials reference the Fund.
12.10 This Agreement, including any Schedule hereto, may be amended
or modified only by written instrument, executed by duly authorized officers of
the parties.
23
24
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.
VANGUARD VARIABLE INSURANCE FUND
By: ____________________________________
Name: __________________________________
Title: _________________________________
THE VANGUARD GROUP, INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
VANGUARD MARKETING CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: ____________________________________
Name: __________________________________
Title: _________________________________
25
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account Contracts Funded by Separate Account
------------------------ ------------------------------------
26
SCHEDULE B
PORTFOLIOS
The following Portfolios of the Vanguard Variable Insurance Funds shall
be made available as investments underlying the Variable Insurance Products:
Equity Index Portfolio
27
