EXHIBIT (8)(k)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
AND
ML LIFE INSURANCE COMPANY OF NEW YORK,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
TABLE OF CONTENTS
Description Page
Section 1. Available Funds......................................... 2
1.1 Availability......................................... 2
1.2 Addition, Deletion or Modification of Funds.......... 2
1.3 No Sales to the General Public....................... 2
Section 2. Processing Transactions................................. 3
2.1 Timely Pricing and Orders............................ 3
2.2 Timely Payments...................................... 4
2.3 Applicable Price..................................... 4
2.4 Dividends and Distributions.......................... 4
2.5 Book Entry........................................... 5
Section 3. Costs and Expenses...................................... 5
3.1 General.............................................. 5
3.2 Parties To Cooperate................................. 5
Section 4. Legal Compliance........................................ 5
4.1 Tax Laws............................................. 5
4.2 Insurance and Certain Other Laws..................... 8
4.3 Securities Laws...................................... 8
4.4 Notice of Certain Proceedings and Other
Circumstances...................................... 9
4.5 MLLIC To Provide Documents; Information About AVIF... 10
4.6 AVIF To Provide Documents; Information About MLLIC... 11
Section 5. Mixed and Shared Funding................................ 13
5.1 General.............................................. 13
5.2 Disinterested Directors.............................. 13
5.3 Monitoring for Material Irreconcilable Conflicts..... 13
5.4 Conflict Remedies.................................... 14
5.5 Notice to MLLIC...................................... 15
5.6 Information Requested by Board of Directors.......... 16
5.7 Compliance with SEC Rules............................ 16
5.8 Other Requirements................................... 16
Section 6. Termination............................................. 16
6.1 Events of Termination................................ 16
6.2 Notice Requirement for Termination................... 18
6.3 Funds To Remain Available............................ 18
6.4 Survival of Warranties and Indemnifications.......... 19
6.5 Continuance of Agreement for Certain Purposes........ 19
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Description Page
Section 7. Parties To Cooperate Respecting Termination............. 19
Section 8. Assignment.............................................. 19
Section 9. Notices................................................. 19
Section 10. Voting Procedures...................................... 20
Section 12. Indemnification........................................ 21
12.1 Of AVIF and AIM by MLLIC............................. 21
12.2 Of MLLIC by AVIF and AIM............................. 23
12.3 Effect of Notice..................................... 26
12.4 Successors........................................... 26
Section 13. Applicable Law......................................... 26
Section 14. Execution in Counterparts.............................. 26
Section 15. Severability........................................... 26
Section 16. Rights Cumulative...................................... 27
Section 17. Headings............................................... 27
SCHEDULE A.......................................................... 29
SCHEDULE B.......................................................... 30
SCHEDULE C.......................................................... 31
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 18th day of December,
1996 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM");
and ML Life Insurance Company of New York, a New York life insurance company
("MLLIC"), on behalf of itself and each of its segregated asset accounts listed
in Schedule A hereto, as the parties hereto may amend from time to time (each,
an "Account," and collectively, the "Accounts") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the " 1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the " 1933 Act") and are currently sold to one or more
separate accounts of life insurance companies to fund benefits under variable
annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, AIM is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, AIM currently serves as the distributor for the Shares; and
WHEREAS, MLLIC will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, MLLIC will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, MLLIC will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt
therefrom), and the security interests deemed to be issued by the Accounts under
the Contracts will be registered as securities under the 1933 Act (or exempt
therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, MLLIC intends to purchase Shares in one or more of the Funds on
behalf of the Accounts to fund the Contracts;
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
---------------------------
1.1 AVAILABILITY.
------------
AVIF will make Shares of each Fund available to MLLIC for purchase and
redemption at net asset value and with no sales charges, subject to the terms
and conditions of this Agreement. The Board of Directors of AVIF may refuse to
sell Shares of any Fund to any person, or suspend or terminate the offering of
Shares of any Fund if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Directors
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, such action is deemed in the best interests of the
shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
-------------------------------------------
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
------------------------------
AVIF and AIM agree that Shares will be sold only to insurance
companies which have entered into participation agreements with AVIF and their
separate accounts, qualified pension and retirement plans and AIM or its
affiliates. MLLIC will not resell the Shares except to AVIF or its agents.
2
SECTION 2. PROCESSING TRANSACTIONS
-----------------------------------
2.1 TIMELY PRICING AND ORDERS.
-------------------------
(a) AVIF or its designated agent will use its best efforts to provide
MLLIC with the closing net asset value per Share for each Fund by 5:30 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean
any day on which (i) the New York Stock Exchange is open for regular trading,
(ii) AVIF calculates the Fund's net asset value pursuant to rules of the SEC,
and (iii) MLLIC is open for business.
(b) MLLIC will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. MLLIC will perform such Account processing the same Business Day, and
will place corresponding orders to purchase or redeem Shares with AV1F via
facsimile (with receipt confirmed in person by telephone) by 9:00 a.m. Central
Time the following Business Day; provided, however, that AVIF shall provide
additional time to MLLIC in the event that AVIF is unable to meet the 5:30 p.m.
time stated in paragraph (a) immediately above. Such additional time shall be
equal to the additional time that AVIF takes to make the net asset values
available to MLLIC.
(c) Each order to purchase or redeem Shares of each Fund will be
netted; provided, however, with respect to payment of the purchase price by
MLLIC and of redemption proceeds by AVIF, MLLIC and AVIF shall net purchase and
redemption orders and shall transmit one (1) net payment in accordance with
Section 2.2, below. Each order to purchase or redeem Shares of each Fund shall
be accompanied or followed by a statement (received no later than 10:00 a.m.
Central Time) specifying whether the order results from purchase payments,
transfers from another Subaccount, transfers to another Subaccount, surrenders,
partial withdrawals, routine withdrawals of charges, or requests for other
transactions under Policies (collectively, "Policy Transactions.") AVIF shall
confirm to MLLIC, in a form agreeable to both parties, as soon as practicable
(but AVIF shall use all reasonable efforts to provide same day notice) of the
number of shares and the net asset value per share of each Fund purchased or
sold each day by MLLIC.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), MLLIC shall be entitled to an
adjustment to the number of Shares purchased or redeemed to reflect the correct
net asset value per Share. Any material error in the calculation or reporting
of net asset value per Share, dividend or capital gain information shall be
reported promptly upon discovery to MLLIC. Materiality and reprocessing cost
reimbursement shall be determined in accordance with standards established by
the Parties as provided in Schedule B, attached hereto and incorporated herein.
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2.2 TIMELY PAYMENTS.
---------------
MLLIC will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment in federal
funds for net redemptions to an account designated by MLLIC by 1:00 p.m. Central
Time on the same day as the Order is placed, to the extent practicable, but in
any event within five (5) calendar days after the date the order is placed in
order to enable MLLIC to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE.
----------------
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that MLLIC receives prior
to the close of regular trading on the New York Stock Exchange on a Business Day
will be executed at the net asset values of the appropriate Funds next computed
after receipt by AVIF or its designated agent of the orders. For purposes of
this Section 2.3(a), MLLIC shall be the designated agent of AVIF for receipt of
orders relating to Contract transactions on each Business Day and receipt by
such designated agent shall constitute receipt by AVIF; provided that AVIF
receives notice of such orders by 9:00 a.m. Central Time on the next following
Business Day or such later time as computed in accordance with Section 2. l
(b)hereof.
(b) All other Share purchases and redemptions by MLLIC will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
---------------------------
MLLIC hereby elects to reinvest all dividends and capital gains
distributions in additional Shares of the corresponding Fund at the ax-dividend
date net asset values until MLLIC otherwise notifies AVIF in writing, it being
agreed by the Parties that the ax-dividend date and the payment date with
respect to any dividend or distribution will be the same Business Day. MLLIC
reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash. AVIF will use reasonable
efforts to furnish, or cause to be famished, notice by wire or telephone
(followed by written confirmation) on or prior to the payment date to MLLIC of
any income dividends or capital gain distributions payable on the Shares of any
Fund and will provide information with respect to the number of additional
Shares purchased as a result of any reinvestment of dividends.
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2.5 BOOK ENTRY.
----------
Issuance and transfer of AVIF Shares will be by book entry only.
Stock certificates will not be issued to MIMIC. Shares ordered from AVIF will
be recorded in an appropriate title for MLLIC, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
------------------------------
3.1 GENERAL.
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Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.
3.2 PARTIES TO COOPERATE.
--------------------
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, each Account's
prospectus, statement of additional information and any amendments or
supplements thereto (collectively, the "Account Prospectus"), each Fund's
prospectus, statement of additional information and any amendments or
supplements thereto (collectively, the "Fund Prospectus"), or other materials of
the Accounts or AVIF.
SECTION 4. LEGAL COMPLIANCE
----------------------------
4.1 TAX LAWS.
--------
(a) AVIF represents and warrants that each Fund is currently qualified
and will continue to qualify as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
AVIF will notify MLLIC immediately upon having a reasonable basis for believing
that a Fund has ceased to so qualify or that it might not so qualify in the
future.
(b) AVIF represents that it will comply and maintain each Fund's
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will
notify MLLIC immediately upon having a reasonable basis for believing that a
Fund has ceased to so comply or that a Fund might not so comply in the future.
In the event of a breach of this Section 4.1 (b) by AVIF, it will take all steps
to adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Section 1.817-5 of the regulations under the Code.
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(c) MLLIC agrees that if the Internal Revenue Service ("IRS") asserts
in writing in connection with any governmental audit or review of MLLIC or, to
MLLIC's knowledge, of any Policy owner, annuitant or participant under the
Policies (collectively, "Participants"), that any Fund has failed to comply with
the diversification requirements of Section 817(h) of the Code or MLLIC
otherwise becomes aware of any facts that could give rise to any claim against
AVIF or its affiliates as a result of such a failure or alleged failure:
(i) MLLIC shall promptly notify AVIF of such assertion or
potential claim;
(ii) MLLIC shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or
alleged failure;
(iii) MLLIC shall use its best efforts to minimize any liability
of AVIF or its affiliates resulting from such failure,
including, without limitation, demonstrating, pursuant to
Treasury Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was inadvertent;
(iv) MLLIC shall permit AVIF, its affiliates and their legal and
accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof)
with the IRS, any Participant or any other claimant
regarding any claims that could give rise to liability to
AVIF or its affiliates as a result of such a failure or
alleged failure; provided, however, that MLLIC will retain
control of the conduct of such conferences discussions,
proceedings, contests or appeals;
(v) any written materials to be submitted by MLLIC to the IRS,
any Participant or any other claimant in connection with any
of the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the IRS
pursuant to Treasury Regulations Section 1 .817-5(a)(2)),
(a) shall be provided by MLLIC to AVIF (together with any
supporting information or analysis) at least ten (10)
Business Days or such shorter period to which the Parties
hereto may agree prior to the day on which such proposed
materials are to be submitted, and (b) shall not be
submitted by MLLIC to any such person without the express
written consent of AVIF which shall not be unreasonably
withheld;
(vi) MLLIC shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of MLLIC) in order to
facilitate review by AVIF or its advisors of any written
submissions provided to it pursuant to the preceding clause
or its
6
assessment of the validity or amount of any claim against
its arising from such a failure or alleged failure;
(vii) MLLIC shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against AVIF or
its affiliates (a) compromise or settle any claim, (b)
accept any adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the express
written consent of AVIF or its affiliates, which shall not
be unreasonably withheld, provided that MLLIC shall not be
required, after exhausting all administrative penalties, to
appeal any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for
taking such appeal; and provided further that the costs of
any such appeal shall be borne equally by the Parties
hereto; and
(viii) AVIF and its affiliates shall have no liability as a result
of such failure or alleged failure if MLLIC fails to comply
with any of the foregoing clauses (i) through (vii), and
such failure could be shown to have materially contributed
to the liability.
Should AVIF or any of its affiliates refuse to give its written
consent to any compromise or settlement of any claim or liability hereunder,
MLLIC may, in its discretion, authorize AVIF or its affiliates to act in the
name of MLLIC in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall MLLIC have any liability resulting
from AVIFs refusal to accept the proposed settlement or compromise with respect
to any failure caused by AVIF. As used in this Agreement, the term "affiliates"
shall have the same meaning as "affiliated person" as defined in Section 2(a)(3)
of the 1940 Act.
(d) Subject to Sections 4.1(a) and 4.1(b) hereof, MLLIC represents
and warrants that the Contracts currently are and will be treated as annuity
contracts or life insurance contracts under applicable provisions of the Code
and that it will maintain such treatment; MLLIC will notify AVIF immediately
upon having a reasonable basis for believing that any of the Contracts have
ceased to be so treated or that they might not be so treated in the future.
(e) MLLIC represents and warrants that each Account is a "segregated
asset account" and that, subject to Sections 4.1 (a) and 4.1 (b) hereof,
interests in each Account are offered exclusively through the purchase of or
transfer into a "variable contract," within the meaning of such terms under
Section 817 of the Code and the regulations thereunder. MLLIC will continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
7
4.2 INSURANCE AND CERTAIN OTHER LAWS.
--------------------------------
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by MLLIC, including, the furnishing of information not otherwise available to
MLLIC which is required by state insurance law to enable MLLIC to obtain the
authority needed to issue the Contracts in any applicable state.
(b) MLLIC represents and warrants that (i) it is an insurance company duly
organized, validly existing and in good standing under the laws of the State of
New York and has full corporate power, authority and legal right to execute,
deliver and perform its duties and comply with its obligations under this
Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 4240 of the New York
Insurance Law and the regulations thereunder, and (iii) the Contracts comply in
all material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a Delaware corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
---------------
(a) MLLIC represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the extent
required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and New
York law, (iii) each Account is and will remain registered under the 1940 Act,
to the extent required by the 1940 Act, (iv) each Account does and will comply
in all material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required, (v) each Account's 1933 Act registration
statement relating to the Contracts, together with any amendments thereto, will
at all times comply in all material respects with the requirements of the 1933
Act and the rules thereunder, (vi) MLLIC will amend the registration statement
for its Contracts under the 1933 Act and for its Accounts under the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts or as may otherwise be required by applicable law, and (vii) each
Account Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
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(b) AVIF and AIM represent and warrant that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with all
applicable federal and state laws including, without limitation, the 1933 Act,
the 1934 Act, the 1940 Act and Maryland law, (ii) AVIF is and will remain
registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF
will amend the registration statement for its Shares under the 1933 Act and
itself under the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares, or as may be required by applicable law, (iv)
AVIF does and will comply in all material respects with the requirements of the
1940 Act and the rules thereunder, (v) AVIFs 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
-----------------------------------------------------
(a) AVIF and/or AIM will immediately notify MLLIC of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIFs registration statement under the 1933 Act or
AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIFs Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by MLLIC. AVIF and
AIM will make every reasonable effort to prevent the issuance, with respect to
any Fund, of any such stop order, cease and desist order or similar order and,
if any such order is issued, to obtain the lifting thereof at the earliest
possible time.
(b) MLLIC will immediately notify AVIF of (i) the issuance by any court or
regulatory body of any stop order, cease and desist order, or other similar
order with respect to each Account's registration statement under the 1933 Act
relating to the Contracts or each Account Prospectus, (ii) any request by the
SEC for any amendment to such registration statement or Account Prospectus that
may affect the offering of Shares of AVIF, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not
9
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. MLLIC will make every reasonable effort to
prevent the issuance of any such stop order, cease and desist order, or similar
order and, if any such order is issued, to obtain the lifting thereof at the
earliest possible time.
4.5 MLLIC TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
--------------------------------------------------
(a) MLLIC will provide to AVIF or its designated agent at least one (1)
complete copy of all SEC registration statements, Account Prospectuses, reports,
any preliminary and final voting instruction solicitation material, applications
for exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to each Account or the Contracts, contemporaneously with the
filing of such document with the SEC or other regulatory authorities.
(b) MLLIC will provide to AVIF or its designated agent at least one (1)
complete copy of each piece of sales literature or other promotional material in
which AVIF or any of its affiliates is named, at least ten (lo) Business Days
prior to its use or such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if AVIF or its designated
agent objects to such use within ten (10) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time to time,
agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to MLLIC in the manner required by Section 9 hereof.
(c) Neither MLLIC nor any of its affiliates, will give any information or
make any representations or statements on behalf of or concerning AVIF, AIM or
their respective affiliates in connection with the sale of the Contracts other
than (i) the information or representations contained in the registration
statement, including the AVIF Prospectus contained therein, relating to Shares,
as such registration statement and AVIF Prospectus may be amended or
supplemented from time to time; or (ii) in reports or proxy materials for AVIF;
or (iii) in published reports for AVIF that are in the public domain and
approved by AVIF for distribution; or (iv) in sales literature or other
promotional material approved by AVIF, except with the express written
permission of AVIF. The parties hereto agree that this Section 4.5 is not
intended to designate nor otherwise imply that MLLIC is an underwriter or
distributor of Shares of AVIF.
(d) MLLIC shall adopt and implement procedures reasonably designed to
ensure that information concerning AVIF, AIM and their respective affiliates
that is intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and none of AVIF, AIM or any of their respective
affiliates shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
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(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements and
sales literature as defined in applicable rules of the NASD, the 1933 Act or the
1940 Act, and educational or training materials or other communications
distributed or made generally available to some or all agents or employees.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT MLLIC.
--------------------------------------------------
(a) AVIF will provide to MLLIC at least one (1) complete copy of all SEC
registration statements, AVIF Prospectuses, reports, any preliminary and final
proxy material, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to AVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. AVIF shall provide MLLIC with as much notice as is
reasonably practicable of any proxy solicitation for a Fund and of any material
change in the Fund's Prospectus or registration statement, particularly any
change resulting in a change to the prospectus or registration statement
relating to the Contracts. Where such material changes are for consideration by
the Board of AVIF, such notice requirement of AVIF may be satisfied by providing
MLLIC with a copy of an agenda of the relevant Board of Directors meeting of
AVIF.
(b) AVIF will provide to MLLIC camera ready copies of all AVIF prospectuses
and printed copies, in an amount specified by MLLIC, of AVIF statements of
additional information, proxy materials, periodic reports to shareholders and
other materials required by law to be sent to Participants who have allocated
any Contract value to a Fund, all in accordance with the allocations specified
in Schedule C. AVIF will provide such copies to MLLIC in a timely manner so as
to enable MLLIC to print and distribute such materials within the time required
by law to be furnished to Participants.
(c) AVIF or AIM will provide to MLLIC or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which MLLIC, or any of its affiliates is named, or that refers to
the Contracts, at least ten (10) Days prior to its use or such shorter period as
the Parties hereto may, from time to time, agree upon. No such material shall
be used if MLLIC or its designated agent objects to such use within ten (10)
Business Days aver receipt of such material or such shorter period as the
Parties hereto may, from time to time, agree upon. MLLIC shall receive all such
sales literature until such time as it appoints a designated agent by giving
notice to AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning MLLIC or its
affiliates, each Account, or the Contracts other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Contracts, as such registration
statement and Account Prospectus may be amended or supplemented from time to
time; or (ii) in published reports for the Account or the Contracts
11
that are in the public domain and approved by MLLIC for distribution; or (iii)
in sales literature or other promotional material approved by MLLIC or its
affiliates, except with the express written permission of MLLIC.
(e) AIM shall adopt and implement procedures reasonably designed to ensure
that information concerning MLLIC, and its respective affiliates that is
intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither MLLIC, nor any of its respective affiliates
shall be liable for any losses, damages or expenses relating to the improper use
of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements and sales
literature as defined in applicable rules of the NASD, the 1933 Act or the 1940
Act, and educational or training materials or other communications distributed
or made generally available to some or all agents or employees.
(g) Except as otherwise expressly provided in this Agreement, neither AVIF,
its investment adviser, its principal underwriter, or any affiliate thereof
shall use any trademark, trade name, service xxxx or logo of MLLIC or any of its
affiliates, or any variation of any such trademark, trade name, service xxxx or
logo, without MLLIC's prior written consent, the granting of which shall be at
MLLIC's sole option. Except as otherwise expressly provided in this Agreement,
neither MLLIC nor any affiliate thereof shall use any trademark, trade name,
service xxxx or logo of AVIF, AIM or any of their respective affiliates, or any
variation of any such trademark, trade name, service xxxx or logo, without the
prior written consent of AVIF or AIM, the granting of which shall be at the sole
option of AVIF, AIM or such affiliate.
(h) AVIF and AIM agree to provide to MLLIC, as soon as available under
AIM's then applicable guidelines for release, the following information with
respect to each Fund, each as of the last Business Day of such calendar month:
the Fund's ten (10) largest portfolio holdings (based on percentage of the
Fund's net assets); the five (5) 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 broad
geographic regions as applicable, in which the Fund's investments are most
heavily weighted; and year-to-date SEC standard total return performance data.
In addition, AVIF and AIM agree to provide to MLLIC, as soon as available under
AIM's then applicable guidelines for release, the following information with
respect to each Fund, each as of the last Business Day of such quarter: a market
commentary from the portfolio manager of such Fund; a complete list of the
Fund's portfolio holdings; and access to the portfolio manager of such Fund at
such portfolio manager's primary office location for up to thirty (30) minutes
per calendar quarter for purposes of preparing audio and video tapes relating to
the Fund's management and performance (subject to the provisions of this
Agreement). Also, AVIF and AIM agree to provide to MLLIC, within fifteen (15)
Business Days after a request is submitted to AVIF or
12
AIM by MLLIC, the following information with respect to each Fund, each as of
the date or dates specified in such request: net asset value; net asset value
per Share; and other Share information as may be reasonably requested. AVIF and
AIM acknowledge that such information may be furnished to MLLIC's internal or
independent auditors, and to the insurance departments of the various
jurisdictions in which MLLIC does business.
SECTION 5. MIXED AND SHARED FUNDING
------------------------------------
5.1 GENERAL.
-------
The SEC has granted an order ("Order") to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with MLLIC, and
trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to the Order granted to AVIF. AVIF hereby notifies MLLIC that it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
-----------------------
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualify cation, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
------------------------------------------------
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). MLLIC agrees to inform the Board of Directors of AVIF of the existence
of or any potential for any such material irreconcilable conflict of which it is
aware. The concept of a "material irreconcilable conflict" is not defined by
the 1940 Act or the rules
13
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting
instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions
of Plan participants.
MLLIC will assist the Board of Directors in carrying out its
responsibilities by providing the Board of Directors with all information
reasonably necessary for the Board of Directors to consider any issue raised,
including information as to a decision by MLLIC to disregard voting instructions
of Participants. MLLIC's responsibilities in connection with the foregoing
shall be carried out with a view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
-----------------
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, MLLIC will, if it is a Participating
Insurance Company for which a material irreconcilable conflict is relevant, at
its own expense and to the extent reasonably practicable (as determined by a
majority of the Disinterested Directors), take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict, which steps may
include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate,
segregating the assets of any
14
particular group (e.g., annuity Participants, life insurance
Participants or all Participants) that votes in favor of such
segregation, or offering to the affected Participants the option
of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of MLLIC's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, MLLIC may be
required, at AVIF's election, to withdraw each Account's investment in AVIF or
any Fund. No charge or penalty will be imposed as a result of such withdrawal.
Any such withdrawal must take place within six (6) months after AVIF gives
notice to MLLIC that this provision is being implemented, and until such
withdrawal AVIF shall continue to accept and implement orders by MLLIC for the
purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to MLLIC conflicts with the majority
of other state regulators, then MLLIC will withdraw each Account's investment in
AVIF within six (6) months after AVIF's Board of Directors informs MLLIC that it
has determined that such decision has created a material irreconcilable
conflict, and until such withdrawal AVIF shall continue to accept and implement
orders by MLLIC for the purchase and redemption of Shares of AVIF. No charge or
penalty will be imposed as a result of such withdrawal.
(d) MLLIC agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
MLLIC will not be required by the terms hereof to establish a new funding medium
for any Contracts if an offer to do so has been declined by vote of a majority
of Participants materially adversely affected by the material irreconcilable
conflict.
5.5 NOTICE TO MLLIC.
---------------
AVIF will promptly make known in writing to MLLIC the Board of Directors'
determination of the existence of a material irreconcilable conflict, a
description of the facts that give rise to such conflict and the implications of
such conflict.
15
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
-------------------------------------------
MLLIC and AVIF (or its investment adviser) will at least annually submit to
the Board of Directors of AVIF such reports, materials or data as the Board of
Directors may reasonably request so that the Board of Directors may fully carry
out the obligations imposed upon it by the provisions hereof or any exemptive
order granted by the SEC to permit Mixed and Shared Funding, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying Participating Insurance
Companies and Participating Plans of a conflict, and determining whether any
proposed action adequately remedies a conflict, will be properly recorded in the
minutes of the Board of Directors or other appropriate records, and such minutes
or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
-------------------------
If, at any time during which AVIF is serving as an investment medium for
variable life insurance contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-
2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect
to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 OTHER REQUIREMENTS.
------------------
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
-----------------------
6.1 EVENTS OF TERMINATION.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any Party upon six (6) months advance written notice
to the other Parties; or
(b) at the option of AVIF upon institution of formal proceedings against
MLLIC or its affiliates by the NASD, the SEC, any state insurance regulator or
any other regulatory body regarding MLLIC's obligations under this Agreement or
related to the sale of the
16
Contracts, the operation of each Account, or the purchase of Shares, if, in each
case, AVIF reasonably determines that such proceedings, or the facts on which
such proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of MLLIC upon institution of formal proceedings against
AVIF, AIM, or their respective affiliates by the NASD, the SEC, or any state
insurance regulator or any other regulatory body regarding AVIFs or AIM's
obligations under this Agreement or related to the operation or management of
AVIF or the purchase of AVIF Shares, if, in each case, MLLIC reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on MLLIC, the Accounts, or the Subaccount corresponding to the Fund with respect
to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by MLLIC; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of MLLIC if the Fund ceases to qualify as a RIC under
Subchapter M of the Code or under successor or similar provisions, or if MLLIC
reasonably believes that the Fund may fail to so qualify; or
(g) at the option of MLLIC if the Fund fails to comply with Section 817(h)
of the Code or with successor or similar provisions, or if MLLIC reasonably
believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by MLLIC cease to qualify
as annuity contracts or life insurance contracts under the Code (other than by
reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the
Code) or if interests in an Account under the Contracts are not registered,
where required, and, in all material respects, are not issued or sold in
accordance with any applicable federal or state law; or
(i) upon another Party's failure to cure a material breach of any provision
of this Agreement within thirty (30) days after written notice thereof; or
(j) at the option of MLLIC upon receipt of any necessary regulatory
approvals to substitute the shares of another investment company for Shares of
the corresponding Fund in accordance with the terms of the Contracts for which
those Fund Shares serve as underlying funding media. MLLIC will give written
notice to AVIF immediately upon filing an application for substitution to
substitute Shares of a Fund; or
17
(k) at the option of AVIF or AIM by written notice to MLLIC if either AVIF
or AIM shall conclude, in its sole judgment exercised in good faith, that MLLIC
or the principal underwriter for the Contracts 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
(l) at the option of MLLIC by written notice to AVIF or AIM, if MLLIC shall
conclude in its sole judgment exercised in good faith, that AVIF and/or AIM 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
(m) upon the assignment of this Agreement, unless made with the written
consent specified in Section 8 hereof.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
----------------------------------
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6. l(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.l(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.l(f), 6. l(g), 6.l(h), or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required;
and
(d) in the event that any termination is based upon the provisions of
Sections 6.l(k), 6.1 (1) or 6.l(m) hereof, such prior written notice shall be
given as soon as possible, but, in any event, at least fifteen (15) days in
advance of the effective date of termination.
6.3 FUNDS TO REMAIN AVAILABLE.
-------------------------
Except (a) as necessary to implement Participant-initiated transactions,
(b) as required by state insurance laws or regulations, (c) as required pursuant
to Section 5 of this
18
Agreement, or (d) with respect to any Fund as to which this Agreement has been
terminated pursuant to Section 6.1(j) hereof, MLLIC shall not (i) redeem AVIF
Shares attributable to the Contracts (as opposed to AVIF Shares attributable to
MLLIC's assets held in each Account), or (ii) prevent Participants from
allocating payments to or transferring amounts form a Fund that was otherwise
available under the Contracts, until ninety (90) days after MLLIC shall have
notified AVIF of its intention to do so.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
-------------------------------------------
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
---------------------------------------------
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1 (a), 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h), 6.1(i),
6.1(j), 6.1(k), 6.1(1), or 6.1(m) hereof, this Agreement shall nevertheless
continue in effect as to any Shares of that Fund that are outstanding as of the
date of such termination (the "Initial Termination Date"). This continuation
shall extend to the later of the date as of which an Account owns no Shares of
the affected Fund or a date (the "Final Termination Date") six (6) months
following the Initial Termination Date, except that MLLIC may, by written notice
adjust said six (6) month period in the case of a termination made at its
option.
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
-------------------------------------------------------
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto. Such steps may include combining the affected
Account with another Account, substituting other mutual fund shares for those of
the affected Fund, or otherwise terminating participation by the Contracts in
such Fund.
SECTION 8. ASSIGNMENT
----------------------
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
-------------------
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the
19
following addresses and facsimile numbers, or such other persons, addresses or
facsimile numbers as the Party receiving such notices or communications may
subsequently direct in writing:
Xxxxxxx Xxxxx Insurance Group, Inc.
Administrative Offices
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attn.: Xxxxx X. Xxxxxxxx, Esq.
AIM Variable Insurance Funds, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn.: Xxxxx X. Xxxxxx, Esq.
A I M Distributors, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn.: Mr. W. Xxxx Xxxxxxxxxx
SECTION 10. VOTING PROCEDURES
------------------------------
Subject to the cost allocation procedures set forth in Schedule C hereto,
pursuant to Section 3 hereof, MLLIC will distribute all proxy material furnished
by AVIF to Participants to whom passthrough voting privileges are required to be
extended and will solicit voting instructions from Participants. MLLIC will
vote Shares in accordance with timely instructions received from Participants.
MLLIC will vote Shares that are (a) not attributable to Participants to whom
passthrough voting privileges are extended, or (b) attributable to Participants,
but for which no timely instructions have been received, in the same proportion
as Shares for which said instructions have been received from Participants, so
long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for Participants. Subject to applicable
law, neither MLLIC nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. MLLIC reserves the right to
20
vote shares held in any Account in its own right, to the extent permitted by
law. MLLIC shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding Order obtained by AVIF. AVIF will notify MLLIC of any changes of
interpretations or amendments to the Mixed and Shared Funding Order it has
obtained. AVIF will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, AVIF either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
--------------------------------
AVIF agrees to consult in advance with MLLIC concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
----------------------------
12.1 OF AVIF AND AIM BY MLLIC.
-------------------------
(a) Except to the extent provided in Sections 12.1 (b) and 12.l(c), below,
MLLIC agrees to indemnify and hold harmless AVIF, its affiliates (including
AIM), and each person, if any, who controls AIM or its affiliates within the
meaning of Section 15 of the 1933 Act, and each of their respective directors
and officers, (collectively, the "Indemnified Parties" for purposes of this
Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of MLLIC) or
actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or actions are related to the sale or acquisition of AVIF's
Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein
21
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
MLLIC by or on behalf of AVIF or AIM for use in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising or otherwise for
use in connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of MLLIC or its affiliates and on
which such persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of MLLIC or its affiliates or
persons under their control (including, without limitation, their
employees and "Associated Persons," as that term is defined in
Section (q) of Article I of the NASD's By-Laws), in connection
with the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF or its affiliates by or on behalf
of MLLIC or its affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by MLLIC to perform the
obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
MLLIC in this Agreement or arise out of or result from any other
material breach of this Agreement by MLLIC; or
(v) arise as a result of failure by the Contracts issued by MLLIC to
qualify as annuity contracts or life insurance contracts under
the Code, otherwise than by reason of any Fund's failure to
comply with Subchapter M or Section 817(h) of the Code.
22
(b) MLLIC shall not be liable under this Section 12.1 with respect to any
losses, claims, damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties or by
reason of that Indemnified Party's reckless disregard of obligations or duties
(i) under this Agreement, or (ii) to AVIF.
(c) MLLIC shall not be liable under this Section 12.1 with respect to any
action against an Indemnified Party unless AVIF or AIM shall have notified MLLIC
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the action shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify MLLIC of
any such action shall not relieve MLLIC from any liability which they may have
to the Indemnified Party against whom such action is brought otherwise than on
account of this Section 12.1. Except as otherwise provided herein, in case any
such action is brought against an Indemnified Party, MLLIC shall be entitled to
participate, at its own expense, in the defense of such action and also shall be
entitled to assume the defense thereof, with counsel approved by the Indemnified
Party named in the action, which approval shall not be unreasonably withheld.
After notice from MLLIC to such Indemnified Party of MLLIC's election to assume
the defense thereof, the Indemnified Party will cooperate fully with MLLIC and
shall bear the fees and expenses of any additional counsel retained by it, and
MLLIC will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 OF MLLIC BY AVIF AND AIM.
------------------------
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless MLLIC, its
affiliates, and each person, if any, who controls MLLIC or its affiliates within
the meaning of Section 15 of the 1933 Act and each of their respective directors
and officers, (collectively, the "Indemnified Parties" for purposes of this
Section 12.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of AVIF and/or
AIM) or actions in respect thereof (including, to the extent reasonable, legal
and other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law, or otherwise; insofar as such losses,
claims, damages, liabilities or actions are related to the sale or acquisition
of AVIFs Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus or sales literature
or advertising of AVIF (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, that this agreement to
23
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to AVIF or its affiliates by or on behalf of MLLIC or
its affiliates for use in AVIF's 1933 Act registration statement,
AVIF Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF
or AIM or their respective affiliates and on which such-persons
have reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF or AIM or their respective affiliates or persons
under their control (including, without limitation, their
employees and "Associated Persons" as that term is defined in
Section (q) of Article I of the NASD By-Laws), in connection with
the sale or distribution of the Contracts or AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to MLLIC or its affiliates by or on behalf
of AVIF or AIM for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any material
breach of any representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other material
breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement
24
thereof with the written consent of AVIF) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses) to which the
Indemnified Parties may become subject directly or indirectly under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or actions directly or indirectly result from or arise out of the failure of any
Fund to operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of
the Code and regulations thereunder, including, without limitation, any income
taxes and related penalties, rescission charges, liability under state law to
Participants asserting liability against MLLIC pursuant to the Contracts, the
costs of any ruling and closing agreement or other settlement with the IRS, and
the cost of any substitution by MLLIC of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that MLLIC reasonably deems necessary or appropriate as a result of the
noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to MLLIC, each Account
or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at their own expense, in the defense of such action and also shall be entitled
to assume the defense thereof (which shall include, without limitation, the
conduct of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from AVIF and/or AIM to such Indemnified Party of AVIF's and/or AIM's election
to assume the defense thereof, the Indemnified Party will cooperate fully with
AVIF and AIM and shall bear the fees and expenses of any additional counsel
retained by it, and neither AVIF nor AIM will be liable to such Indemnified
Party under this Agreement for any legal or other expenses subsequently incurred
by such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
(e) In no event shall either AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any individual or
entity, including, without
25
limitation, MLLIC or any other Participating Insurance Company or any
Participant, with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any representation,
warranty, and/or covenant made by MLLIC hereunder or by any Participating
Insurance Company under an agreement containing substantially similar
representations, warranties and covenants; (ii) the failure by MLLIC or any
Participating Insurance Company to maintain its segregated asset account (which
invests in any Fund) as a legally and validly established segregated asset
account under applicable state law and as a duly registered unit investment
trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii)
subject to compliance by AVIF with Sections 4.1(a) and 4.1(b) hereof, the
failure by MLIC or any Participating Insurance Company to maintain its variable
annuity or life insurance contracts (with respect to which any Fund serves as an
underlying funding vehicle) as annuity contracts or life insurance contracts
under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.l(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 SUCCESSORS.
----------
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
---------------------------
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
--------------------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
-------------------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
26
SECTION 16. RIGHTS CUMULATIVE
------------------------------
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
---------------------
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
SECTION 18. PARTIES TO COOPERATE
---------------------------------
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
------------------------------------------
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized of
fleers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
-------------------------- ----------------------------
Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Assistant Secretary Title: President
27
A I M DISTRIBUTORS, INC.
Attest: By:
----------------------- -------------------------
Name: Xxxxx X. Xxxxxx Name: W. Xxxx Xxxxxxxxxx
----------------------- -------------------------
Title: Assistant Secretary Title: Senior Vice President
----------------------- -------------------------
ML LIFE INSURANCE COMPANY OF
NEW YORK, on behalf of itself and its
separate accounts
Attest: By:
----------------------- --------------------------
Name: Xxxxxx X. Xxxxxx, Xx. Name: Xxxxx X. Xxxxxxxx
----------------------- --------------------------
Vice President Senior Vice President
Title: and Senior Counsel Title: and General Counsel
----------------------- --------------------------
28
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
-----------------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
-------------------------------------
ML of New York Variable Annuity Separate Account A
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
-----------------------------------------
Xxxxxxx Xxxxx Funds Retirement Plus Variable Annuity
29
SCHEDULE B
AIM's Pricing Error Policies
Determination of Materiality
----------------------------
In the event that AIM discovers an error in the calculation of the Fund's net
asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered
immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following
thresholds are applied:
a. If the amount of the difference in the erroneous net asset value and
the correct net asset value is less than .5% of the correct net asset
value, AIM will reimburse the affected Fund to the extent of any loss
resulting from the error. No other adjustments shall be made.
b. If the amount of the difference in the erroneous net asset value and
the correct net asset value is .5% of the correct net asset value or
greater, then AIM will determine the impact of the error to the
affected Fund and shall reimburse such Fund (and/or MLLIC, as
appropriate, such as in the event that the error was not discovered
until after MLLIC processed transactions using the erroneous net asset
value) to the extent of any loss resulting from the error. To the
extent that an overstatement of net asset value per share is detected
quickly and MLLIC has not mailed redemption checks to Participants,
MLLIC and AIM agree to examine the extent of the error to determine
the feasibility of reprocessing such redemption transaction (for
purposes of reimbursing the Fund to the extent of any such
overpayment).
Reprocessing Cost Reimbursement
-------------------------------
To the extent a reprocessing of Participant transactions is required pursuant to
paragraph (b), above, AIM shall reimburse MLLIC for MLLIC's reprocessing costs
in the amount of $3.00 per contract affected by $10 or more.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board of Directors. AIM agrees to use its best efforts to notify MLLIC at least
five (5) days prior to any such meeting of the Board of Directors of AVIF to
consider such proposed changes.
30
SCHEDULE C
EXPENSE ALLOCATIONS
--------------------------------------------------------------------------------
Description MLLIC AIM/AVIF
--------------------------------------------------------------------------------
Registration
------------
Prepare and file Account registration Fund registration
registration statements/1/ statements statements
Payment of fees Account fees Fund fees
--------------------------------------------------------------------------------
Prospectuses
------------
Typesetting Account Prospectuses Fund Prospectuses
Account Prospectuses, Fund Prospectuses
Printing and Fund Prospectuses distributed to existing
(but not for existing Participants/2/
Participants)
--------------------------------------------------------------------------------
SAIs
----
Typesetting Account SAIs Fund SAIs
Printer Account SAIs Fund SAIs
--------------------------------------------------------------------------------
Supplements (to
---------------
Prospectuses or SAIs
--------------------
Typesetting and Printing Account Supplements, Fund Supplements to
and Fund Supplements existing Participants/2/
(but not for existing
Participants)
--------------------------------------------------------------------------------
--------------------------
/1/Includes all filings and costs necessary to keep registrations
current and effective; including, without limitation, filing Forms N-SAR and
Rule 24F-2 Notices as required by law.
/2/With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated as
between AIM/AVIF on the one hand and MLLIC on the other based on (a) the ratio
of the number of page of the combined prospectus, report, or other document; and
(b) the ratio of the number of Participants who invest in all Funds of AVIF to
the total number of Participants.
31
--------------------------------------------------------------------------------
Description MLLIC AIM/AVIF
--------------------------------------------------------------------------------
Financial Reports
-----------------
Typesetting Account Reports Fund Reports to
existing
Participants/2/
Printing Account Reports, and Fund
Reports (not to existing
Participants)
--------------------------------------------------------------------------------
Mailing and Distribution
------------------------
To Contract owners Account and Fund
Prospectuses, SAIs,
Supplements and Reports
To Offerees Account and Fund
Prospectuses, SAIs,
Supplements and Reports
--------------------------------------------------------------------------------
Proxies
-------
Typesetting, printing and Account and Fund Proxies Fund Proxies where
mailing of proxy where the matters the matters submitted
solicitation materials submitted are solely are solely
and voting instruction Account-related Fund-related
solicitation materials
and tabulation of proxies Account Proxies even
to Participants where the matters
submitted are solely
Fund-related
--------------------------------------------------------------------------------
Other (Sales-Related)
---------------------
Contract owner Account-related items and
communication Fund-related items
Distribution Policies
Administration Account (Policies)
--------------------------------------------------------------------------------
--------------------------
/2/With respect to any AVIF material printed in combination with any non-
AVIF materials, total costs of typesetting and printing shall be prorated as
between AIM/AVIF on the one hand and MLLIC on the other based on (a) the ratio
of the number of page of the combined prospectus, report, or other document; and
(b) the ratio of the number of Participants who invest in all Funds of AVIF to
the total number of Participants.
32
